424B3 1 d179334d424b3.htm 424B3 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-257176

 

PROXY STATEMENT/PROSPECTUS

 

LOGO   PTK Acquisition Corp.

PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS

OF

PTK ACQUISITION CORP.

 

 

PROSPECTUS FOR UP TO 14,375,000 ORDINARY SHARES,

18,160,000 WARRANTS,

AND 9,080,000 ORDINARY SHARES UNDERLYING WARRANTS

OF

VALENS SEMICONDUCTOR LTD.

 

 

The board of directors of PTK Acquisition Corp., a Delaware corporation (“PTK”), has unanimously approved the business combination agreement (“Business Combination Agreement”), dated as of May 25, 2021, by and among PTK, Valens Semiconductor Ltd., a company organized under the laws of the State of Israel (the “Company” or “Valens”) and Valens Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”). Pursuant to the Business Combination Agreement, Merger Sub will merge with and into PTK, with PTK surviving the merger (the “Business Combination”). As a result of the Business Combination, and upon consummation of the Business Combination and the other transactions contemplated by the Business Combination Agreement (the “Transactions”), PTK will become a wholly owned subsidiary of the Company, with the securityholders of PTK becoming securityholders of the Company.

Prior to the effective time of the Business Combination (the “Effective Time”), Valens intends to (a) have each of its preferred shares issued and outstanding at the end of the date immediately prior to the Effective Time converted into and become one Valens ordinary share effective as of the end of such date (the “Preferred Share Conversion”), and (b) effect a reverse stock split to cause the implied value of the outstanding Valens ordinary shares as of the Measurement Time (as defined below) to equal $10.00 per share based on a valuation methodology that values Valens equity prior to closing at $850 million plus Cash (as defined herein) plus Aggregate Vested Company Equity Awards Exercise Price (as defined herein) minus Indebtedness (as defined herein) in each case as of 5:00 P.M. Eastern Time on the later of (i) the date of PTK’s stockholder meeting and (ii) a date that is three business days prior to the Closing (the “Measurement Time”) (the “Total Deal Value”)) (the “Stock Split” and, together with the Preferred Share Conversion, the “Capital Restructuring”). The consideration to be issued to securityholders of PTK will be adjusted if the Capital Restructuring is not effected or if the Capital Restructuring results in a price per Valens ordinary share other than $10.00.

Pursuant to the Business Combination Agreement and assuming the Stock Split has occurred, at the Effective Time, (a) each share of PTK common stock, par value $0.0001 per share (“PTK Common Stock”), outstanding immediately prior to the Effective Time will be exchanged for one Valens ordinary share, (b) each warrant of PTK entitling the holder to purchase one-half share of PTK Common Stock per warrant at a price of $11.50 per whole share (each, a “PTK warrant”) outstanding immediately prior to the Effective Time will be assumed by Valens and will become one Valens warrant, with the number of Valens ordinary shares underlying the Valens warrants and the exercise price of such Valens warrants subject to adjustment in accordance with the Business Combination Agreement in the event of a stock split, share dividend or distribution, or any change in Valens’ share capital by reason of any split-up reverse stock split, recapitalization, combination, reclassification, exchange of shares, in each case after giving effect to the Capital Restructuring.

Concurrently with the execution of the Business Combination Agreement, Valens and certain accredited investors, including PTK’s sponsor (the “PIPE Investors”), entered into a series of subscription agreements (“Subscription Agreements”), providing for the purchase by the PIPE Investors at the Effective Time of an


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aggregate of 12,500,000 Valens ordinary shares (“PIPE Shares”) at a price per share of $10.00 (assuming the Capital Restructuring has been effected), for gross proceeds to Valens of $125.0 million (collectively, the “PIPE Financing”). The closing of the PIPE Financing is conditioned upon the consummation of the Transactions.

This proxy statement/prospectus covers the Valens ordinary shares and Valens warrants issuable to the securityholders of PTK as described above. Accordingly, we are registering up to an aggregate of 14,375,000 Valens ordinary shares, 18,160,000 Valens warrants, and 9,080,000 Valens ordinary shares issuable upon the exercise of the warrants. We are not registering the Valens ordinary shares currently owned by the Valens securityholders or issuable to the PIPE Investors.

Proposals to approve the Business Combination Agreement and the other matters discussed in this proxy statement/prospectus will be presented at the special meeting of PTK stockholders scheduled to be held on September 28, 2021 in virtual format.

Although Valens is not currently a public reporting company, following the effectiveness of the registration statement of which this proxy statement/prospectus is a part and the closing of the Business Combination, Valens will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Valens intends to apply for listing of the Valens ordinary shares and Valens warrants on the NYSE under the proposed symbols “VLN” and “VLNW”, respectively, to be effective at the consummation of the Business Combination. It is a condition of the consummation of the Transactions that the Valens ordinary shares are approved for listing on the NYSE (subject only to official notice of issuance thereof and round lot holder requirements). While trading on the NYSE is expected to begin on the first business day following the date of completion of the Business Combination, there can be no assurance that Valens’ securities will be listed on the NYSE or that a viable and active trading market will develop. See “Risk Factors” beginning on page 11 for more information.

Valens will be an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, and is therefore eligible to take advantage of certain reduced reporting requirements otherwise applicable to other public companies.

Valens will also be a “foreign private issuer” as defined in the Exchange Act and will be exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, Valens’ officers, directors and principal shareholders will be exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act. Moreover, Valens will not be required to file periodic reports and financial statements with the U.S. Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

The accompanying proxy statement/prospectus provides PTK stockholders with detailed information about the Business Combination and other matters to be considered at the special meeting of PTK. We encourage you to read the entire accompanying proxy statement/prospectus, including the Annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 11 of the accompanying proxy statement/prospectus.

None of the Securities and Exchange Commission, the Israel Securities Authority or any state securities commission has approved or disapproved of the securities to be issued in connection with the Business Combination, or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated August 27, 2021, and is first being mailed to PTK stockholders on or about August 31, 2021.


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Notice of Special Meeting of Stockholders

of PTK Acquisition Corp.

To Be Held on September 28, 2021

TO THE STOCKHOLDERS OF PTK ACQUISITION CORP.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of PTK Acquisition Corp., a Delaware corporation (“PTK”), will be held at 10 a.m. Eastern Time, on September 28, 2021 (the “special meeting”). Due to health concerns stemming from the COVID-19 pandemic, and to support the health and well-being of our stockholders, the special meeting will be a virtual meeting. You are cordially invited to attend and participate in the special meeting online by visiting https://www.cstproxy.com/ptkacquisition/2021. The special meeting will be held for the following purposes:

1.    Proposal No. 1 — The Business Combination Proposal — to consider and vote upon a proposal to approve and adopt the Business Combination Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A, and the transactions contemplated therein, including the Business Combination whereby Valens Merger Sub, Inc., a Delaware corporation (“Merger Sub”), will merge with and into PTK, with PTK surviving the merger as a wholly owned subsidiary of Valens Semiconductor Ltd., a company organized under the laws of Israel (“Valens”) (the “Business Combination Proposal”);

2.    Proposal No. 2 — The Adjournment Proposal — to consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, if the parties are not able to consummate the Business Combination (the “Adjournment Proposal”).

We also will transact any other business as may properly come before the special meeting or any adjournment or postponement thereof.

The items of business listed above are more fully described elsewhere in the proxy statement/prospectus. Whether or not you intend to attend the special meeting, we urge you to read the attached proxy statement/prospectus in its entirety, including the annexes and accompanying financial statements, before voting. IN PARTICULAR, WE URGE YOU TO CAREFULLY READ THE SECTION IN THE PROXY STATEMENT/PROSPECTUS ENTITLED “RISK FACTORS.”

Only holders of record of shares of PTK common stock, par value $0.0001 per share (“PTK Common Stock”), at the close of business on September 7, 2021 (the “record date”) are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements of the special meeting.

After careful consideration, PTK’s board of directors has determined that each of the proposals listed is fair to and in the best interests of PTK and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” each of the proposals set forth above. When you consider the recommendations of PTK’s board of directors, you should keep in mind that PTK’s directors and officers may have interests in the Business Combination that conflict with, or are different from, your interests as a stockholder of PTK. See the section entitled “Proposal One — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

The closing of the Business Combination is conditioned on approval of the Business Combination Proposal. If this proposal is not approved and the applicable closing condition in the Business Combination Agreement is not waived, the remaining proposal will not be presented to stockholders for a vote. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

All PTK stockholders are cordially invited to attend the special meeting, which will be held virtually over the Internet at https://www.cstproxy.com/ptkacquisition/2021. To ensure your representation at the special meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible.


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If you are a holder of record of PTK Common Stock on the record date, you may also cast your vote at the special meeting. If your PTK Common Stock is held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the special meeting, obtain a proxy from your broker or bank.

A complete list of PTK stockholders of record entitled to vote at the special meeting will be available for ten days before the special meeting at the principal executive offices of PTK for inspection by stockholders during business hours for any purpose germane to the special meeting.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting virtually or not, please complete, sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in ”street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly voted and counted.

If you have any questions or need assistance voting your PTK Common Stock, please contact Okapi Partners at (212) 297-0720. Questions can also be sent by email to info@okapipartners.com. This notice of special meeting is and the proxy statement/prospectus relating to the Business Combination will be available at https://www.cstproxy.com/ptkacquisition/2021.

Thank you for your participation. We look forward to your continued support.

 

   

By Order of the Board of Directors

   

Ker Zhang

Secretary and Director

August 27, 2021

IF YOU RETURN YOUR SIGNED PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

ALL HOLDERS (THE “PUBLIC STOCKHOLDERS”) OF SHARES OF PTK COMMON STOCK ISSUED IN PTK’S INITIAL PUBLIC OFFERING (THE “PUBLIC SHARES”) HAVE THE RIGHT TO HAVE THEIR PUBLIC SHARES REDEEMED FOR CASH IN CONNECTION WITH THE PROPOSED BUSINESS COMBINATION. PUBLIC STOCKHOLDERS ARE NOT REQUIRED TO AFFIRMATIVELY VOTE FOR OR AGAINST THE BUSINESS COMBINATION PROPOSAL, TO VOTE ON THE BUSINESS COMBINATION PROPOSAL AT ALL, OR TO BE HOLDERS OF RECORD ON THE RECORD DATE IN ORDER TO HAVE THEIR SHARES REDEEMED FOR CASH.

THIS MEANS THAT ANY PUBLIC STOCKHOLDER HOLDING PUBLIC SHARES MAY EXERCISE REDEMPTION RIGHTS REGARDLESS OF WHETHER THEY ARE EVEN ENTITLED TO VOTE ON THE BUSINESS COMBINATION PROPOSAL.

TO EXERCISE REDEMPTION RIGHTS, HOLDERS MUST TENDER THEIR STOCK TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY, PTK’S TRANSFER AGENT, NO LATER THAN TWO (2) BUSINESS DAYS PRIOR TO THE SPECIAL MEETING.

YOU MAY TENDER YOUR STOCK BY EITHER DELIVERING YOUR STOCK CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DEPOSIT WITHDRAWAL AT CUSTODIAN SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “SPECIAL MEETING OF PTK STOCKHOLDERS — REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.


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TABLE OF CONTENTS

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS

     ii  

INDUSTRY AND MARKET DATA

     ii  

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

     ii  

SELECTED DEFINITIONS

     iii  

QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION AND THE SPECIAL MEETING

     vi  

SUMMARY

     1  

RISK FACTORS

     11  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS; MARKET, RANKING AND OTHER INDUSTRY DATA

     55  

SPECIAL MEETING OF PTK STOCKHOLDERS

     57  

PROPOSAL ONE—THE BUSINESS COMBINATION PROPOSAL

     63  

PROPOSAL TWO—THE ADJOURNMENT PROPOSAL

     81  

THE BUSINESS COMBINATION AGREEMENT

     82  

AGREEMENTS ENTERED INTO IN CONNECTION WITH THE BUSINESS COMBINATION AGREEMENT

     93  

INFORMATION ABOUT THE COMPANIES

     96  

PTK’S BUSINESS

     97  

VALENS’ BUSINESS

     103  

PTK’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     118  

VALENS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     124  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     145  

MANAGEMENT FOLLOWING THE BUSINESS COMBINATION

     159  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     176  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

     179  

CERTAIN MATERIAL ISRAELI TAX CONSIDERATIONS

     194  

DESCRIPTION OF VALENS ORDINARY SHARES

     201  

DESCRIPTION OF VALENS WARRANTS

     210  

VALENS ORDINARY SHARES ELIGIBLE FOR FUTURE SALE

     212  

COMPARISON OF RIGHTS OF VALENS SHAREHOLDERS AND PTK STOCKHOLDERS

     214  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF PTK, VALENS AND THE COMBINED COMPANY

     222  

FUTURE SHAREHOLDER PROPOSALS AND NOMINATIONS

     228  

APPRAISAL RIGHTS

     228  

STOCKHOLDER COMMUNICATIONS

     228  

LEGAL MATTERS

     228  

EXPERTS

     228  

DELIVERY OF DOCUMENTS TO SHAREHOLDERS

     228  

ENFORCEABILITY OF CIVIL LIABILITY

     229  

TRANSFER AGENT AND REGISTRAR

     230  

WHERE YOU CAN FIND MORE INFORMATION

     230  

INDEX TO FINANCIAL STATEMENTS

     F-1  

ANNEX A—BUSINESS COMBINATION AGREEMENT

     A-1  

ANNEX B—FORM OF AMENDED AND RESTATED ARTICLES OF ASSOCIATION OF VALENS

     B-1  


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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms a part of a registration statement on Form F-4 filed with the Securities and Exchange Commission, or SEC, by Valens, constitutes a prospectus of Valens under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the Valens ordinary shares to be issued to PTK stockholders in connection with the Business Combination, as well as the warrants to acquire Valens ordinary shares to be issued to PTK warrant holders and the Valens ordinary shares underlying such warrants. This document also constitutes a proxy statement of PTK under Section 14(a) of the Exchange Act, and the rules thereunder, and a notice of meeting with respect to the special meeting of PTK stockholders to consider and vote upon the proposals to adopt the Business Combination Agreement, to adjourn the meeting, if necessary, to permit further solicitation of proxies because there are not sufficient votes to adopt the Business Combination Agreement.

Unless otherwise indicated or the context otherwise requires, all references in this proxy statement/prospectus to the terms “Valens” and the “Company” refer to Valens Semiconductor Ltd., together with its subsidiaries. All references in this proxy statement/prospectus to “PTK” refer to PTK Acquisition Corp.

INDUSTRY AND MARKET DATA

Unless otherwise indicated, information contained in this proxy statement/prospectus concerning Valens’ industry and the regions in which it operates, including Valens’ general expectations and market position, market opportunity, market share and other management estimates, is based on information obtained from various independent publicly available sources and other industry publications, surveys and forecasts. Valens has not independently verified the accuracy or completeness of any third-party information. Similarly, internal surveys, industry forecasts and market research, which Valens believes to be reliable based upon its management’s knowledge of the industry, have not been independently verified. While Valens believes that the market data, industry forecasts and similar information included in this proxy statement/prospectus are generally reliable, such information is inherently imprecise. In addition, assumptions and estimates of Valens’ future performance and growth objectives and the future performance of its industry and the markets in which it operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those discussed under the headings “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements; Market, Ranking and Other Industry Data” and “Valens’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this proxy statement/prospectus.

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

This document contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this proxy statement/prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

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SELECTED DEFINITIONS

Aggregate Vested Company Equity

Awards Exercise Price

means the aggregate amount that would be paid to Valens if all vested options to purchase Valens ordinary shares were exercised in full immediately prior to the Effective Time (without giving effect to any “net” exercise or similar concept).

 

Aggregate Transaction Proceeds

means an amount equal to (a) the aggregate cash proceeds available for release to PTK from PTK’s trust account in connection with the transactions contemplated by the Business Combination Agreement (after, for the avoidance of doubt, giving effect to all of the SPAC Redemptions (as defined herein) but before release of any other funds), plus (b) the aggregate proceeds to be received by Valens in connection with the Closing from the PIPE Financing, minus (c) the aggregate amount of balance sheet liabilities of PTK, whether or not such liabilities are due and payable as of such time (excluding any PTK transaction expenses), which shall include any deferred underwriting commissions.

 

Ancillary Documents

means the Sponsor Letter Agreement (as defined herein), the Subscription Agreements (as defined herein), the Support Agreements (as defined herein), the Investors’ Rights Agreement (as defined herein), the Valens Warrant Agreement (as defined herein), and each other agreement, document, instrument and/or certificate contemplated by the Business Combination Agreement executed or to be executed in connection with the transactions contemplated thereby.

 

Cash

means (i) the cash on hand (including petty cash), cash in current accounts (including checking and savings accounts and money market accounts), cash in short-term deposit or similar accounts (including interest accrued with respect thereto), money orders, certified checks, checks and drafts received from third parties and not yet deposited and cleared, and cash equivalents (including negotiable or other readily marketable securities and short term investments or any short-term Indebtedness issued or guaranteed by the government of the United States or the State of Israel), but excluding any restricted cash, plus (ii) Valens transaction expenses paid by Valens prior to the Closing, plus (iii) any PTK transaction expenses paid by Valens prior to Closing, if any.

 

Company Equity Award

means, as of any determination time, each Valens option and each other award to any current or former director, manager, officer, employee, individual independent contractor or other service provider of Valens or its subsidiaries of rights of any kind to receive any equity security of Valens or its subsidiaries under any Company Equity Plan or otherwise that is outstanding.

 

Company Equity Plan

means, collectively, Valens’ 2007 Option Plan, the Company’s 2012 Option Plan and the U.S. Sub-Plan of the Company’s 2012 Option Plan, and each other plan that provides for the award to any current or former director, manager, officer, employee, individual independent contractor or other service provider of Valens or its subsidiaries of

 

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rights of any kind to receive Equity Securities of Valens or its subsidiaries or benefits measured in whole or in part by reference to equity securities of Valens or its subsidiaries.

 

DGCL

means the Delaware General Corporation Law, as amended.

 

Exchange Act

means the Securities Exchange Act of 1934, as amended.

 

Founder Shares

means the 2,875,000 shares of PTK common stock, par value $0.0001 per share, of PTK held by the Sponsor, which were acquired for an aggregate purchase price of $25,000 prior to the PTK IPO.

 

GAAP

means accounting principles generally accepted in the United States of America.

 

Indebtedness

means, as of any time, without duplication, with respect to any Person, the outstanding principal amount of, accrued and unpaid interest on, fees, expenses and other payment obligations (including any prepayment penalties, premiums, costs, breakage, termination fees or other amounts payable upon the discharge thereof) arising under or in respect of (a) indebtedness for borrowed money or indebtedness issued or incurred in substitution or exchange for indebtedness for borrowed money, (b) other obligations evidenced by any note, bond, debenture or other debt security, (c) obligations for the deferred and unpaid purchase price of property, assets or services, including “earn-outs” and “seller notes” (but excluding any amounts payable under purchase orders made in the ordinary course of business, including any trade payables), (d) reimbursement and other obligations with respect to letters of credit, bank guarantees, bankers’ acceptances or other similar instruments, in each case, solely to the extent drawn, (e) leases (other than operating leases) required to be capitalized under GAAP, (f) derivative, hedging, swap, cap, collar, foreign exchange or similar arrangements, including all obligations or unrealized losses of Valens and its subsidiaries pursuant to hedging or foreign exchange arrangements, or (g) any of the obligations of any other person of the type referred to in clauses (a) through (f) above guaranteed by such person or secured by any assets of such Person, whether or not such Indebtedness has been assumed by such Person.

 

PCAOB

means the Public Company Accounting Oversight Board.

 

private placement warrants

means the warrants PTK sold to Sponsor via private placement in connection with the PTK IPO.

 

Securities Act

means the Securities Act of 1933, as amended.

 

Sponsor

means PTK Holdings LLC, a Delaware limited liability company.

 

PTK IPO

means the initial public offering of PTK, which was consummated on July 15, 2020.

 

Transactions

means the transactions contemplated by the Business Combination Agreement and the Ancillary Documents.

 

units

means the 10,000,000 units sold as part of the PTK IPO and the 1,500,000 units sold to the underwriter following the exercise of its over-allotment option, each consisting of one share of PTK common stock and one-half of one redeemable PTK warrant.

 

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Valens preferred shares

means, collectively, the redeemable convertible preferred shares composed of Series A, Series B1, Series B2, Series C, Series D and Series E preferred shares of Valens, in each case NIS 0.01 par value per share.

 

Valens warrants

means the warrants to be received by warrant holders of PTK in exchange for PTK warrants pursuant to the Business Combination Agreement.

 

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QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION AND

THE SPECIAL MEETING

The questions and answers below highlight only selected information set forth elsewhere in this proxy statement/prospectus and only briefly address some commonly asked questions about the special meeting and the proposals to be presented at the special meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that may be important to PTK stockholders. PTK stockholders are urged to carefully read this entire proxy statement/prospectus, including the annexes and the other documents referred to herein, to fully understand the proposed Business Combination and the voting procedures for the special meeting.

Q: Why am I receiving this proxy statement/prospectus?

A: PTK and Valens have agreed to a business combination under the terms of the Business Combination Agreement that is described in this proxy statement/prospectus. A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A, and PTK encourages its stockholders to read it in its entirety. PTK’s stockholders are being asked to consider and vote upon a proposal to approve the Business Combination Agreement, which, among other things, provides for Merger Sub to be merged with and into PTK with PTK surviving the Business Combination as a wholly owned subsidiary of Valens, and the other Transactions contemplated by the Business Combination Agreement. See “Proposal One — The Business Combination Proposal.”

Q: Are there any other matters being presented to stockholders at the meeting?

A: In addition to voting on the Business Combination Proposal, the stockholders of PTK will vote on the following proposal:

 

   

To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, if the parties are not able to consummate the Business Combination for any reason. See the section of this proxy statement/prospectus titled “Proposal Two — The Adjournment Proposal.”

PTK will hold the special meeting of its stockholders to consider and vote upon this proposal. This proxy statement/prospectus contains important information about the proposed Business Combination and the other matters to be acted upon at the special meeting. Stockholders should read it carefully.

The vote of stockholders is important. Regardless of how many shares you own, you are encouraged to vote as soon as possible after carefully reviewing this proxy statement/prospectus.

Q: Why is PTK providing stockholders with the opportunity to vote on the Business Combination?

A: Pursuant to the PTK Charter, PTK is required to provide stockholders with an opportunity to have their shares of PTK Common Stock redeemed for cash, either through a stockholder meeting or tender offer. Due to the structure of the Transactions, PTK is providing this opportunity through a stockholder vote.

Q: Why am I receiving this proxy statement/prospectus if I only own PTK warrants?

A: The PTK warrants will become exercisable following the Business Combination and will entitle holders to purchase Valens ordinary shares, as described in more detail herein. This proxy statement/prospectus includes important information about Valens and the business of Valens and its subsidiaries following the closing of the Business Combination. Because holders of PTK warrants will be entitled to purchase Valens ordinary shares after the closing of the Business Combination, we urge you to read the information contained in this proxy statement/prospectus carefully.

 

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Q: What will happen to PTK’s securities upon consummation of the Business Combination?

A: PTK’s units, PTK Common Stock and the PTK warrants are currently listed on the NYSE under the symbols PTK.U, PTK and PTK WS, respectively. PTK’s securities will cease trading upon consummation of the Business Combination. If you own PTK units, immediately prior to the consummation of the Business Combination your PTK units will split into the underlying shares of PTK Common Stock and PTK warrants, and you will receive Valens ordinary shares in exchange for your PTK Common Stock and Valens warrants in exchange for your PTK warrants as described herein. Valens intends to apply for listing of the Valens ordinary shares and Valens warrants on the NYSE under the proposed symbols “VLN” and “VLNW,” respectively, to be effective upon the consummation of the Business Combination. While trading on the NYSE is expected to begin on the first business day following the consummation of the Business Combination, there can be no assurance that Valens’ securities will be listed on the NYSE or that a viable and active trading market will develop. See “Risk Factors — Risks Related to the Combined Company Following the Business Combination” for more information.

Q: Why is PTK proposing the Business Combination?

A: PTK was organized to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses or entities.

On July 15, 2020, PTK consummated the PTK IPO of units, with each unit consisting of one share of its PTK Common Stock and one PTK warrant, raising total gross proceeds of approximately $115,000,000. Simultaneously with the closing of the PTK IPO, PTK consummated the sale of 6,800,000 private placement warrants at a price of $0.50 per warrant in a private placement to the Sponsor, generating gross proceeds of $3,400,000. Further, upon the consummation of the PTK IPO, 600,000 additional private placement warrants were issued to the Sponsor as a result of the conversion of a promissory note in the amount of $300,000, which the Sponsor and its affiliates had loaned to PTK to cover expenses related to its initial public offering. Subsequently, pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed to cancel 740,000 warrants to purchase an aggregate of 370,000 shares of Valens ordinary shares effective as of the Closing. The net proceeds from the IPO and private placement, $115,000,000 in the aggregate, were placed in a trust account (the “Trust Account”) established for the benefit of PTK’s public stockholders. Since the PTK IPO, PTK’s activity has been limited to the evaluation of business combination candidates.

PTK believes Valens is a company with an appealing market opportunity and growth profile, a strong position in its industry and a compelling valuation. As a result, PTK believes that the Business Combination will provide PTK stockholders with an opportunity to participate in the ownership of a company with significant growth potential. See the section entitled “Proposal One — The Business Combination Proposal — PTK’s Board of Directors’ Reasons for the Business Combination and Recommendation of the Board of Directors.”

Q: Did PTK’s board of directors obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

A: No. PTK’s board of directors did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. Accordingly, investors will be relying solely on the judgment of PTK’s board of directors and its advisors in valuing Valens and will be assuming the risk that the PTK board of directors may not have properly valued the business. However, PTK’s officers and directors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and have substantial experience with mergers and acquisitions. Furthermore, in analyzing the Business Combination, PTK’s board of directors conducted significant due diligence on Valens. Based on the foregoing, PTK’s board of directors concluded that its members’ collective experience and backgrounds, together with the experience and sector expertise of PTK’s advisors, enabled it to make the necessary analyses and determinations regarding the Business Combination, including that the Business Combination was fair from a financial perspective to its stockholders and that Valens’ fair market value was at least 80% of the assets held in the Trust

 

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Account (excluding the deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the agreement to enter into the Business Combination. Additionally, concurrently with the execution of the Business Combination Agreement, the PIPE Investors entered into the Subscription Agreements, which provides for the purchase by the PIPE Investors at the Effective Time of an aggregate of 12,500,000 PIPE Shares for gross proceeds to Valens of $125.0 million.

There can be no assurance, however, that PTK’s board of directors was correct in its assessment of the Business Combination. For a complete discussion of the factors utilized by PTK’s board of directors in approving the Business Combination, see the section entitled “Proposal One — The Business Combination Proposal.”

Q: Do I have redemption rights?

A: If you are a holder of public shares, you have the right to demand that PTK redeem such shares for a pro rata portion of the cash held in PTK’s Trust Account, calculated as of two business days prior to the consummation of the Business Combination. We sometimes refer to these rights to demand redemption of the public shares as “redemption rights.”

Notwithstanding the foregoing, a holder of public shares, together with any affiliate of his or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to 20% or more of the public shares. Accordingly, all public shares in excess of 20% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be converted.

Under the PTK Charter, the Business Combination may not be consummated if PTK has net tangible assets of less than $5,000,001 either immediately prior to or upon consummation of the Business Combination after taking into account the redemption for cash of all public shares properly demanded to be redeemed by holders of public shares. Pursuant to the Business Combination Agreement, the Company shall not be obligated to consummate the Transactions unless such Transactions will yield to the Company at least $215,000,000 Aggregate Transaction Proceeds, before the payment of any Valens transaction expenses and PTK transaction expenses.

Q: How do I exercise my redemption rights?

A: A holder of public shares may exercise redemption rights regardless of whether it votes for or against the Business Combination Proposal or does not vote on such proposal at all, or if it is a holder of public shares on the record date. If you are a holder of public shares and wish to exercise your redemption rights, you must demand that PTK convert your public shares into cash and deliver your public shares to PTK’s transfer agent electronically using The Depository Trust Company’s Deposit/Withdrawal at Custodian (“DWAC”) System no later than two (2) business days prior to the special meeting. Any holder of public shares seeking redemption will be entitled to a full pro rata portion of the amount then in the Trust Account (which, for illustrative purposes, was $115,000,000, or $10 per share, as of the record date), less any owed but unpaid taxes on the funds in the Trust Account. Such amount will be paid promptly upon consummation of the Business Combination. There are currently no owed but unpaid income taxes on the funds in the Trust Account.

Any request for redemption, once made by a holder of public shares, may be withdrawn at any time prior to the time the vote is taken with respect to the Business Combination Proposal at the special meeting. If you deliver your shares for redemption to PTK’s transfer agent and later decide prior to the special meeting not to elect redemption, you may request that PTK’s transfer agent return the shares (physically or electronically). You may make such request by contacting PTK’s transfer agent at the address listed at the end of this section.

Any written demand of redemption rights must be received by PTK’s transfer agent at least two (2) business days prior to the vote taken on the Business Combination Proposal at the special meeting. No demand for redemption will be honored unless the holder’s stock has been delivered (either physically or electronically) to the transfer agent.

 

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If you are a holder of public shares (including through the ownership of PTK units) and you exercise your redemption rights, it will not result in the loss of any PTK warrants that you may hold (including those contained in any units you hold). Your whole warrants will become exercisable to purchase one-half of a Valens ordinary share following consummation of the Business Combination; provided, however, that such warrants are out of the money when the PTK Common Stock trades below $11.50. Please see “Questions and Answers about the Business Combination and the Special Meeting—Q. What percentage of the combined company will be owned by PTK stockholders who elect not to redeem their shares?” on page x for additional information with respect to the effect of redemptions under the No Redemption, Interim and Maximum Redemption scenarios as well as the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

Q: Do I have appraisal rights if I object to the proposed Business Combination?

A: Under Section 262 of the General Corporation Law of the State of Delaware, the holders of PTK Common Stock and PTK warrants will not have appraisal rights in connection with the Business Combination.

Q: What happens to the funds deposited in the Trust Account after consummation of the Business Combination?

A: The net proceeds of the PTK IPO, together with the full exercise of the over-allotment option by the underwriter and a portion of the amount raised from the private placement of PTK warrants for a total of $115,000,000, was placed in the Trust Account immediately following the PTK IPO. After consummation of the Business Combination, the funds in the Trust Account will be used to pay, on a pro rata basis, holders of the public shares who exercise redemption rights, to pay fees and expenses incurred in connection with the Business Combination (including aggregate fees of approximately $4.0 million to the underwriter of the PTK IPO as deferred underwriting commissions) and for working capital and general corporate purposes.

Q: What happens if a substantial number of public stockholders vote in favor of the Business Combination Proposal and exercise their redemption rights?

A: PTK’s public stockholders may vote in favor of the Business Combination and still exercise their redemption rights, although they are not required to vote in any way to exercise such redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the Trust Account and the number of public stockholders are substantially reduced as a result of redemptions by public stockholders. To the extent that there are fewer public shares and public stockholders, the trading market for Valens ordinary shares may be less liquid than the market was for PTK prior to the Transactions and Valens may not be able to meet the listing standards of a national securities exchange. In addition, to the extent of any redemptions, fewer funds from the Trust Account would be available to Valens to be used in its business following the consummation of the Business Combination. Pursuant to the Business Combination Agreement, the Company shall not be obligated to consummate the Transactions unless such Transactions will yield to the Company at least $215,000,000 Aggregate Transaction Proceeds, before the payment of any Valens transaction expenses and PTK transaction expenses.

Q: What happens if the Business Combination is not consummated?

A: If PTK does not complete the Business Combination with Valens for whatever reason, PTK would search for another target business with which to complete a business combination. If PTK does not complete the Business Combination with Valens or another business combination by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter), PTK must redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to an amount then held in the Trust Account (net of interest that may be used by the Company to pay income taxes or other taxes) divided by the number of outstanding public shares. The Sponsor and PTK’s officers and directors have waived their redemption rights with respect to their Founder Shares in the event a business combination is not effected in the required time period, and, accordingly, their Founder Shares will be worthless. Additionally, in the event of such liquidation, there will be no distribution with respect to PTK’s outstanding warrants. Accordingly, the warrants will expire worthless.

 

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Q: How do the Sponsor and the officers and directors of PTK intend to vote on the proposals?

A: The Sponsor, as well as PTK’s officers and directors, beneficially own and are entitled to vote an aggregate of approximately 20.0% of the outstanding PTK Common Stock. These holders have agreed to vote their shares in favor of the Business Combination Proposal. These holders have also indicated that they intend to vote their shares in favor of all other proposals being presented at the meeting. In addition to the shares of PTK Common Stock held by the Sponsor and PTK’s officers and directors, PTK would need 4,312,501 shares, or approximately 37.5%, of the 11,500,000 public shares to be voted in favor of the Business Combination Proposal and other proposals in order for them to be approved (assuming all outstanding shares are voted on each proposal).

Q: What percentage of the combined company will be owned by PTK stockholders who elect not to redeem their shares?

A: After the completion of the Business Combination and Transactions, PTK’s stockholders will own a significantly smaller percentage of the combined company than they currently own of PTK. Consequently, PTK’s stockholders, as a group, will have reduced ownership and voting power in the combined company compared to their ownership and voting power in PTK.

Assuming that no holder of PTK Common Stock exercises redemption rights as described in this proxy statement/prospectus (and including Sponsor shares that are subject to forfeiture, as described in the Sponsor Letter Agreement), at the Closing existing Valens shareholders would hold approximately 74% of the issued and outstanding ordinary shares of the combined company and current stockholders of PTK would hold approximately 14% of the issued and outstanding ordinary shares of the combined company (including the Sponsor, who would hold approximately 3% of the outstanding ordinary shares of the combined company). This is based on (i) the Capital Restructuring having been effected, (ii) 12,500,000 Valens ordinary shares having been issued to the PIPE Investors, (iii) 11,500,000 Valens ordinary shares having been issued to holders of shares of PTK Common Stock, (iv) 2,875,000 Valens ordinary shares (including the Forfeiture Shares) having been issued to the Sponsor of PTK, (v) 77,746,052 Valens ordinary shares issued and outstanding held by the existing shareholders of Valens, for a total of 104,621,052 Valens ordinary shares issued and outstanding immediately after the Closing, assuming the Stock Split has occurred based on an assumed stock split ratio. Assuming further that all outstanding 6,660,000 private placement warrants (which are out of the money when the PTK Common Stock trades below $11.50 per share) are exercised, former PTK Common Stockholders (other than Sponsor) will incur additional dilution of 3,330,000 shares and would hold approximately 11% of the issued and outstanding ordinary shares of the combined company.

Assuming that 50% of the outstanding PTK Common Shares are redeemed by holders of PTK Common Stock, at the Closing, existing Valens shareholders would hold approximately 78% of the issued and outstanding ordinary shares of the combined company and current stockholders of PTK would hold approximately 9% of the issued and outstanding ordinary shares of the combined company (including the Sponsor, who would hold approximately 3% of the outstanding ordinary shares of the combined company). This is based on the (i) the Capital Restructuring having been effected, (ii) 12,500,000 Valens ordinary shares having been issued to the PIPE Investors, (iii) 5,750,000 Valens ordinary shares having been issued to holders of shares of PTK Common Stock, (iv) 2,875,000 Valens ordinary shares having been issued to the Sponsor of PTK, (v) 77,746,052 Valens ordinary shares issued and outstanding held by the existing shareholders of Valens, for a total of 98,871,052 Valens ordinary shares issued and outstanding immediately after the Closing, assuming the Stock Split has occurred based on an assumed stock split ratio. Assuming further that all outstanding 6,660,000 private placement warrants (which are out of the money when the PTK Common Stock trades below $11.50 per share) are exercised, former PTK Common Stockholders (other than Sponsor) will incur additional dilution of 3,330,000 and would hold approximately 6% of the issued and outstanding ordinary shares of the combined company.

Assuming, conversely, that the maximum number of shares of PTK Common Stock are redeemed, at the Closing existing Valens shareholders would hold approximately 83% of the issued and outstanding ordinary shares of the combined company and current stockholders of PTK would hold approximately 4% of the issued and outstanding ordinary shares of the combined company (including the Sponsor, who would hold approximately 3% of the

 

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outstanding ordinary shares of the combined company). This is based on the: (i) 1,000,000 Valens ordinary shares having been issued to holders of shares of PTK Common Stock, (ii) the Capital Restructuring having been effected, (iii) 12,500,000 Valens ordinary shares having been issued to the PIPE Investors, (iv) 2,875,000 Valens ordinary shares (including the Forfeiture Shares) having been issued to holders of shares of PTK Common Stock, (v) 77,746,052 Valens ordinary shares expected to be issued and outstanding held by the existing shareholders of Valens, for a total of 94,121,052 Valens ordinary shares expected to be issued and outstanding immediately after the Closing, assuming the Stock Split has occurred based on an assumed stock split ratio. Assuming further that all outstanding 6,660,000 private placement warrants (which are out of the money when the PTK Common Stock trades below $11.50 per share) are exercised, former PTK Common Stockholders (other than Sponsor) will incur additional dilution of 3,330,000 shares and would hold approximately 1% of the issued and outstanding ordinary shares of the combined company.

Q: What factors did PTK’s board consider in evaluating the Business Combination?

A: PTK’s board of directors considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Business Combination Agreement and the transactions contemplated thereby, including, but not limited to:

 

   

Massive Structural Growth in the Automotive Market. PTK’s board of directors noted the market opportunity for Valens, as the global automotive semiconductor TAM is expected to reach $68B by 2026, and Valens automotive Serviceable Available Market (SAM) is expected to reach $8B by 2026;

 

   

Strong Take-Ups by a Leading OEM and Robust Customer Pipeline. PTK’s board of directors noted that Valens has strong take-ups by a leading OEM with a robust customer pipeline, as its products are deployed widely in Mercedes models and are being sold currently to other auto Tier-1s, and was additionally awarded 2023 start of production projects, as well as actively collaborating with leading players to integrate A-PHY-compliant chipsets into next generation ADAS platforms;

 

   

Leveraging Leadership Position in Audio-Video Connectivity. PTK’s board of directors noted Valens’ leadership position in audio-video connectivity, including the fact that Valens currently serves top audio-video players, and that Valens has a well-defined roadmap to expand its audio-video offering to strengthen its market leadership position;

 

   

Experienced Leadership Team with a Proven Track Record. Valens is led by an experienced management team in Valens’ industry;

 

   

Stockholder Liquidity. The obligation in the Business Combination Agreement to have ordinary shares of Valens issued as consideration listed on the NYSE, a major U.S. stock exchange, which PTK’s board of directors believes has the potential to offer stockholders greater liquidity;

 

   

Attractive Valuation. PTK’s board of directors believes Valens’ implied valuation following the Business Combination relative to the current valuations experienced by comparable publicly traded companies in the vehicle data services sector is favorable for PTK;

 

   

Due Diligence. PTK’s due diligence examinations of Valens and discussions with Valens’ management and financial and legal advisors;

 

   

Lock-Up. Certain equityholders of Valens have agreed to be subject to a one-hundred and eighty (180) day lockup in respect of their Valens ordinary shares;

 

   

Other Alternatives. PTK’s board of directors believes, after a thorough review of other business combination opportunities reasonably available to PTK, that the Business Combination represents the best potential business combination for PTK and the most attractive opportunity for PTK’s management to accelerate its business plan based upon the process utilized to evaluate and assess other potential combination targets, and PTK’s board of directors’ belief that such process has not presented a better alternative; and

 

   

Negotiated Transaction. The financial and other terms of the Business Combination Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s-length negotiations between PTK and Valens.

 

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PTK’s board of directors also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:

 

   

Industry Cyclicality; COVID-19. The cyclicality of the semiconductor industry generally, and the effects of health epidemics, such as the recent global COVID-19 pandemic specifically, on Valens’ operations;

 

   

Competition. Competition in the semiconductor industry, and the failure to introduce new technologies and products in a timely manner to compete successfully against competitors;

 

   

Lack of Integration Risk. Any difficulty selling Valens’ products if customers do not design its products into their product offerings;

 

   

Dependence on Design Wins. Valens’ dependence on winning selection processes and that Valens may not generate timely or sufficient net sales or margins from those wins;

 

   

Limited Operating History. Valens’ limited operating history makes evaluating its business and future prospects difficult and the need to update Valens’ financial systems and operations necessary for a public company;

 

   

Benefits Not Achieved. The risk that the potential benefits of the Business Combination may not be fully achieved or may not be achieved within the expected timeframe;

 

   

Redemption Risk. The potential that a significant number of PTK stockholders elect to redeem their shares prior to the consummation of the merger and pursuant to PTK’s existing charter, which would potentially make the merger more difficult or impossible to complete;

 

   

Stockholder Vote. The risk that PTK’s stockholders may fail to provide the respective votes necessary to effect the merger;

 

   

Closing Conditions. The fact that the completion of the merger is conditioned on the satisfaction of certain closing conditions that are not within PTK’s control;

 

   

Litigation. The possibility of litigation challenging the merger or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the merger;

 

   

No Third-Party Valuation. The risk that PTK did not obtain a third-party valuation or fairness opinion in connection with the merger;

 

   

Liquidation of PTK. The risks and costs to PTK if the merger is not completed, including the risk of diverting management focus and resources from other business combination opportunities, which could result in PTK being unable to effect a business combination by January 15, 2022;

 

   

PTK Stockholders Receiving Minority Position. The fact that existing PTK stockholders will hold a minority position in the combined company; and

 

   

Fees and Expenses. The fees and expenses associated with completing the merger.

Q: What interests do the Sponsor and the current officers and directors of PTK have in the Business Combination?

A: In considering the recommendation of PTK’s board of directors to vote in favor of the Business Combination, stockholders should be aware that, aside from their interests as stockholders, the Sponsor and certain of PTK’s directors and officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders generally. PTK’s directors were aware of and considered these interests, among other matters, in evaluating the Business Combination, in recommending to stockholders that they approve the Business Combination and in agreeing to vote their shares in favor of the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination. These interests include, among other things, the fact that:

 

   

If the Business Combination with Valens or another business combination is not consummated by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the

 

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PTK charter), PTK will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and PTK’s board of directors, dissolving and liquidating. In such event, the 2,875,000 Founder Shares held by the Sponsor, which were acquired by the Sponsor for $25,000, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Such shares had an aggregate market value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021. On the other hand, if the Business Combination is consummated, each outstanding share of PTK Common Stock will be converted into one Valens ordinary share.

 

   

The Sponsor has spent $25,000 to purchase 2,875,000 Founder shares and $3,400,000 to purchase 6,800,000 private placement warrants from PTK for $0.50 per private warrant. Additionally, the Sponsor was issued 600,000 additional private placement warrants as a result of the conversion of a promissory note in the amount of $300,000, which the Sponsor and its affiliates had loaned to PTK to cover expenses related to its initial public offering. Subsequently, pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed to cancel 740,000 warrants to purchase an aggregate of 370,000 shares of Valens ordinary shares effective as of the Closing (the “Cancelled Warrants”). The Founder Shares had an aggregate value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021 and the private placement warrants (excluding the Cancelled Warrants) had an aggregate market value of $2.6 million based upon the closing price of $0.40 per warrant on the NYSE on August 27, 2021. The Founder Shares and the private placement warrants will become worthless if PTK does not consummate a business combination by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter).

 

   

If PTK is unable to complete a business combination within the required time period, the Sponsor will be liable under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by PTK for services rendered or contracted for or products sold to PTK. If PTK consummates a business combination, on the other hand, PTK will be liable for all such claims.

 

   

The Sponsor and PTK’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on PTK’s behalf, such as identifying and investigating possible business targets and business combinations. However, if PTK fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, PTK may not be able to reimburse these expenses if the Business Combination or another business combination is not completed by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter). As of August 27, 2021, the Sponsor and PTK’s officers and directors and their affiliates had incurred approximately $500,000 of unpaid reimbursable expenses

 

   

The Business Combination Agreement provides for the continued indemnification of PTK’s current directors and officers and the continuation of directors and officers liability insurance covering PTK’s current directors and officers.

 

   

PTK’s Sponsor, officers and directors (or their affiliates) may make loans from time to time to PTK to fund certain capital requirements. If the Business Combination is not consummated, any such loans will not be repaid and will be forgiven except to the extent there are funds available to PTK outside of the Trust Account.

 

   

Ker Zhang will be a member of the board of directors of Valens following the closing of the Business Combination and, therefore, in the future Mr. Zhang will receive any cash fees, stock options or stock awards that the board of directors of Valens determines to pay to its non-executive directors.

 

   

PTK’s Sponsor has agreed to invest an aggregate amount of $4.0 million to purchase 400,000 Valens ordinary shares in connection with the PIPE Financing to be completed at the closing of the Business Combination.

 

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The Sponsor will benefit financially from the completion of any business combination even if the stock price declines after the Business Combination, generating a negative return for other shareholders. The Sponsor will lose substantially all of its investment in PTK and will not be reimbursed for any out-of pocket expenses if an initial business combination is not completed prior to January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK charter). Thus, if the proposed Business Combination with Valens is not consummated, PTK may seek to complete a business combination with a less favorable target company or on terms less favorable to PTK stockholders rather than choose to dissolve and liquidate.

 

   

The Sponsor paid an aggregate of $25,000 for 2,875,000 Founder Shares, which had an aggregate market value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021. If the proposed Business Combination with Valens is consummated, the Sponsor may still earn a positive rate of return on its investment, even if other stockholders experience a negative rate of return in post-Business Combination.

Q: When do you expect the Business Combination to be completed?

A: It is currently anticipated that the Business Combination will be consummated promptly following the PTK special meeting, which is set for September 28, 2021; however, such meeting could be adjourned or postponed to a later date, as described above. The Closing is also subject to the approval of the holders of Valens ordinary shares and Valens preferred shares, as well as other customary closing conditions. For a description of the conditions for the completion of the Business Combination, see the section entitled “The Business Combination Agreement — Conditions to Closing of the Transactions.”

Q: What do I need to do now?

A: PTK urges you to carefully read and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a stockholder and/or a warrant holder of PTK. Stockholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.

Q: When and where will the special meeting take place?

A: The special meeting will be held on September 28, 2021, at 10 a.m., Eastern Time, solely over the Internet by means of a live audio webcast. You may attend the special meeting webcast by accessing the web portal located at https://www.cstproxy.com/ptkacquisition/2021 and following the instructions set forth below. Stockholders participating in the special meeting will be able to listen only and will not be able to speak during the webcast. However, in order to maintain the interactive nature of the special meeting, virtual attendees will be able to:

 

   

vote via the web portal during the special meeting webcast; and

 

   

submit questions or comments to PTK’s directors and officers during the special meeting.

Stockholders may submit questions or comments during the meeting through the special meeting webcast by typing in the “Submit a question” box.

Q: How do I attend the Special Meeting?

A: Due to health concerns stemming from the COVID-19 pandemic and to support the health and well-being of PTK’s stockholders, the special meeting will be held virtually. To register for and attend the special meeting, please follow these instructions as applicable to the nature of your ownership of PTK Common Stock:

 

   

Shares Held of Record. If you are a record holder, and you wish to attend the virtual special meeting, go to https://www.cstproxy.com/ptkacquisition/2021, enter the control number you received on your proxy card or notice of the meeting and click on the “Click here to register for the online meeting” link

 

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at the top of the page. Immediately prior to the start of the special meeting, you will need to log back into the meeting site using your control number.

 

   

Shares Held in Street Name. If you hold your shares in “street” name, which means your shares are held of record by a broker, bank or nominee, and you who wish to attend the virtual special meeting, you must obtain a legal proxy from the stockholder of record and e-mail a copy (a legible photograph is sufficient) of your proxy to proxy@continentalstock.com no later than 72 hours prior to the special meeting. Holders should contact their bank, broker or other nominee for instructions regarding obtaining a proxy. Holders who e-mail a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the special meeting. You will receive an e-mail prior to the meeting with a link and instructions for entering the special meeting. “Street” name holders should contact Continental Stock Transfer on or before September 25, 2021.

Stockholders will also have the option to listen to the special meeting by telephone by calling:

 

   

Within the U.S. and Canada: (888) 965-8995 (toll-free)

 

   

Outside of the U.S. and Canada: (415) 655-0243 (standard rates apply)

The passcode for telephone access: 76716177#. You will not be able to vote or submit questions unless you register for and log in to the special meeting webcast as described above.

Q: How do I vote?

A: If you are a holder of record of PTK Common Stock on the record date, you may vote by virtually attending the special meeting and submitting a ballot via the special meeting webcast or by submitting a proxy for the special meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. If you hold your shares in “street name,” you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly voted and counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the virtual special meeting and vote through the web portal, obtain a legal proxy from your broker, bank or nominee.

Q: If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

A: Your broker, bank or nominee can vote your shares without receiving your instructions on “routine” proposals only. Your broker, bank or nominee cannot vote your shares with respect to ”non-routine” proposals unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee.

The Business Combination Proposal and the Adjournment Proposal are non-routine proposals. Accordingly, your broker, bank or nominee may not vote your shares with respect to these proposals unless you provide voting instructions.

Q: May I change my vote after I have mailed my signed proxy card?

A: Yes. Stockholders of record may send a later-dated, signed proxy card to PTK’s transfer agent at the address set forth below so that it is received prior to the vote at the special meeting or virtually attend the special meeting and submit a ballot through the web portal during the special meeting webcast. Stockholders of record also may revoke their proxy by sending a notice of revocation to PTK’s transfer agent, which must be received prior to the vote at the special meeting. If you hold your shares in “street name,” you should contact your broker, bank or nominee to change your instructions on how to vote. If you hold your shares in “street name” and wish to virtually attend the special meeting and vote through the web portal, you must obtain a legal proxy from your broker, bank or nominee.

 

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Q: What constitutes a quorum for the special meeting?

A: A quorum is the minimum number of shares of PTK Common Stock that must be present to hold a valid meeting. A quorum will be present at the PTK special meeting if a majority of the voting power of the issued and outstanding shares of PTK Common Stock entitled to vote at the meeting are represented at the virtual special meeting or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.

Q: What stockholder vote thresholds are required for the approval of each proposal brought before the special meeting?

 

   

Business Combination Proposal — The approval of the Business Combination Proposal will require the affirmative vote of the holders of a majority of the votes cast by the then outstanding shares of PTK Common Stock present and entitled to vote at the special meeting. Abstentions will have no effect on the Business Combination Proposal. Brokers are not entitled to vote on the Business Combination Proposal absent voting instructions from the beneficial holder and, consequently, broker non-votes will have no effect on the Business Combination Proposal. The Transactions will not be consummated if PTK has less than $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act) immediately upon consummation of the Transactions.

 

   

Adjournment Proposal — The approval of the Adjournment Proposal will require the affirmative vote of the holders of a majority of the shares of PTK Common Stock present and entitled to vote at the special meeting. Abstentions will have the same effect as a vote “against” on the Adjournment Proposal. Broker non-votes will have no effect on the Adjournment Proposal.

Q: What happens if I fail to take any action with respect to the special meeting?

A: If you fail to take any action with respect to the meeting and the Business Combination is approved by the PTK stockholders and consummated, you will become a shareholder and/or warrant holder of Valens.

If you fail to take any action with respect to the special meeting and the Business Combination is not approved, you will continue to be a stockholder and/or warrant holder of PTK, as applicable, and PTK will continue to search for another target business with which to complete an initial business combination. If PTK does not complete an initial business combination by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter), PTK must cease all operations except for the purpose of winding up, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to an amount then held in the Trust Account (net of interest that may be used by the Company to pay income taxes or other taxes), and as promptly as reasonably possible following such redemption, subject to the approval of PTK’s remaining stockholders and its board of directors, dissolve and liquidate.

Q: What should I do with my share and/or warrant certificates?

A: Warrant holders and those stockholders who do not elect to have their shares of PTK Common Stock redeemed for a pro rata share of the Trust Account should wait for instructions from PTK’s transfer agent regarding what to do with their certificates. PTK stockholders who exercise their redemption rights must deliver their share certificates to PTK’s transfer agent (either physically or electronically) no later than two (2) business days prior to the special meeting as described above.

Upon consummation of the Transactions, the PTK warrants, by their terms, will entitle holders to purchase shares of Valens. Therefore, warrant holders need not deliver their warrants to PTK or Valens at that time.

 

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Q: What should I do if I receive more than one set of voting materials?

A: Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your shares of PTK Common Stock.

Q: Who can help answer my questions?

A: If you have questions about the Business Combination or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact the proxy solicitor at

www.cstproxy.com/ptkacquisition/2021.

Okapi Partners

1212 Avenue of the Americas, 24th Floor New York, NY 10036

Banks and Brokerage Firms, Please Call: (212) 297-0720

Shareholders and All Others Call Toll-Free: (855) 305-0857

Attention: Christian Jacques

E-mail: info@okapipartners.com

You may also obtain additional information about PTK from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of public shares and you intend to seek redemption of your shares, you will need to deliver your shares (either physically or electronically) to PTK’s transfer agent at the address below at least two (2) business days prior to the vote at the special meeting. If you have questions regarding the certification of your position or delivery of your stock, please contact:

Mr. Mark Zimkind

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, New York 10004

E-mail: mzimkind@continentalstock.com

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. You should carefully read the entire proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus, including the annexes, to fully understand the Business Combination Agreement, the Business Combination and the other matters being considered at the special meeting of PTK stockholders. For additional information, see “Where You Can Find More Information” beginning on page 223. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

The Parties to the Business Combination

Valens Semiconductor Ltd.

Valens is a leading provider of semiconductor products, pushing the boundaries of connectivity by enabling long-reach, high-speed video and data transmission for the professional audio-video and automotive industries. Valens’ Emmy® award-winning HDBaseT technology is the leading standard in the professional audio-video market, with tens of millions of Valens chipsets integrated into thousands of HDBaseT-enabled products. Valens technology for Automotive is a key enabler of the evolution of autonomous driving, providing chipsets that support Advanced Driver-Assistance Systems (“ADAS”), Automated Driving Systems (“ADS”), infotainment, telecommunications and basic connectivity. Valens’ underlying technology has been selected by the MIPI Alliance as the basis for the new standard for high-speed automotive video connectivity.

The mailing address of Valens’ principal executive office is 8 Hanagar St. POB 7152, Hod Hasharon 4501309, Israel and its telephone number is +(972) 9-762-6900.

PTK Acquisition Corp.

PTK was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. PTK was incorporated under the laws of the State of Delaware on August 19, 2019. In October 2019, PTK issued 2,875,000 shares of common stock to PTK Holdings LLC, for an aggregate purchase price of $25,000. In addition, PTK has issued to PTK Holdings LLC 6,800,000 private warrants.

On July 15, 2020, PTK consummated the PTK IPO of 11,500,000 units, which included the exercise in full of the underwriters’ option to purchase an additional 1,500,000 units to cover over-allotments, with each unit consisting of one share of PTK Common Stock and one redeemable warrant, with each whole warrant entitling the holder to purchase one-half share of PTK Common Stock at a price of $11.50 per whole share, exercisable on the later of (i) the completion of an initial business combination and (ii) 12 months from the PTK IPO (the “Public Warrants”). Simultaneously with the closing of the PTK IPO, the Company consummated the sale of 6,800,000 warrants at a price of $0.50 per private placement warrant in a private placement to the Sponsor and thereafter issued another 600,000 private warrants to the Sponsor, that resulted from the conversion of a $300,000 promissory note, such that in total, PTK issued to the Sponsor an aggregate amount of 7,400,000 warrants (the “Private Warrants”). Each Private Warrant is identical to the Public Warrants sold except the Private Warrants will, in connection with the consummation of the Business Combination, be amended such that they are non-redeemable and may be exercised on a cashless basis.

PTK’s units, the PTK Common Stock and the PTK warrants are listed on the NYSE under the symbols PTK.U, PTK and PTK WS, respectively.

The mailing address of PTK’s principal executive office is 4601 Wilshire Boulevard, Suite 240, Los Angeles, California 90010, and its telephone number is (213) 625-8886.


 

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Valens Merger Sub, Inc.

Valens Merger Sub, Inc. (“Merger Sub”) is a newly formed Delaware corporation and a wholly owned subsidiary of Valens. Merger Sub was formed solely for the purpose of effecting the Transactions and has not carried on any activities other than those in connection with the Transactions. The address and telephone number for Merger Sub’s principal executive offices are the same as those for Valens.

The Business Combination Agreement (page 79)

The terms and conditions of the merger of Merger Sub with and into PTK, with PTK surviving the merger as a wholly owned subsidiary of Valens are contained in the Business Combination Agreement, which is attached as Annex A to this proxy statement/prospectus. We encourage you to read the Business Combination Agreement carefully, as it is the legal document that governs the Business Combination.

Merger Consideration

Prior to the Effective Time, Valens will effect (a) the Preferred Share Conversion and (b) the Stock Split.

The pro forma equity valuation of the Company upon consummation of the Transactions is estimated to be approximately $1.16 billion, assuming no redemptions. We estimate that, upon consummation of the Transactions, assuming none of PTK’s public stockholders demand redemption (“SPAC Redemptions”) pursuant to PTK’s amended and restated certificate of incorporation (“PTK Charter”), the securityholders of Valens will own approximately 74% of the outstanding Valens ordinary shares and the securityholders of PTK and certain accredited investors purchasing PIPE Shares will own the remaining Valens ordinary shares.

Pursuant to the Business Combination Agreement and assuming the Preferred Share Conversion and the Stock Split have occurred, at the Effective Time (a) each share of PTK common stock, par value $0.0001 per share (“PTK Common Stock”), outstanding immediately prior to the Effective Time will be exchanged for one Valens ordinary share (b) each warrant of PTK entitling the holder to purchase one-half share of PTK Common Stock per warrant at a price of $11.50 per whole share (each, a “PTK warrant”) outstanding immediately prior to the Effective Time will be assumed by Valens and will become a Valens warrant entitling the holder to purchase one-half share of Valens ordinary shares, with the number of Valens ordinary shares underlying the Valens warrants and the exercise price of such Valens warrants subject to adjustment in accordance with the Business Combination Agreement in the event of a stock split, share dividend or distribution, or any change in Valens’ share capital by reason of any split-up reverse stock split, recapitalization, combination, reclassification, exchange of shares, in each case less any applicable withholding taxes.

Agreements Entered Into in Connection with the Business Combination Agreement (page 90)

Subscription Agreements

Concurrently with the execution of the Business Combination Agreement, Valens entered into subscription agreements (each, a “Subscription Agreement” and collectively, the “Subscription Agreements”) with certain parties subscribing for Valens ordinary shares, pursuant to which the PIPE Investors have agreed to subscribe for and purchase from Valens, and Valens has agreed to sell to the PIPE Investors, an aggregate of 12,500,000 Valens ordinary shares at a purchase price of $10.00 per share, for an aggregate purchase price of $125.0 million, which price per share and aggregate purchase price assume that Valens has effected the Stock Split prior to the Effective Time. The obligations to consummate the transactions contemplated by the Subscription Agreements are conditioned upon, among other things, the consummation of the transactions contemplated by the Business Combination Agreement.


 

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The Subscription Agreements provide that Valens is required to file with the SEC, within thirty (30) calendar days after the Closing, a registration statement registering the resale of the shares of Valens ordinary shares to be issued to any such investor and to use its commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof but no later than the earlier of (i) the 60th calendar day (or 90th calendar day if the SEC notifies Valens that it will “review” such registration statement) following the Closing and (ii) the 10th business day after the date Valens is notified (orally or in writing, whichever is earlier) by the SEC that such registration statement will not be “reviewed” or will not be subject to further review.

Company Transaction Support Agreements

Concurrently with the execution of the Business Combination Agreement, holders of a majority of Valens’ outstanding shares and at least 65% of Valens’ outstanding preferred shares entered into agreements (the “Transaction Support Agreements”) pursuant to which they agreed with PTK and Valens to (i) appear at a shareholder meeting called by Valens for the purpose of approving the Business Combination and other transactions contemplated by the Business Combination, for the purpose of establishing a quorum, (ii) execute a written consent in favor of the Business Combination and against all other action that would reasonably be expected to materially impede the Business Combination, (iii) not to solicit, initiate, encourage, or facilitate certain alternate business combinations, (iv) vote, consent or approve any other consent or other approval that may be required under Valens’ governing documents or otherwise sought in furtherance of the transactions contemplated by the Business Combination, and (v) not to transfer, assign, or sell their respective shares, except to certain permitted transferees, prior to the consummation of the Transactions. In addition, Primerose Development Group Ltd, one of PTK’s public stockholders, has also agreed to vote 1,000,000 of its shares in favor of the Business Combination Proposal and not redeem such shares in connection with the Business Combination.

Investors’ Rights Agreement

Concurrently with the execution of the Business Combination Agreement, Valens, the Sponsor and certain securityholders of Valens entered into the second amended and restated investors’ rights agreement (the “Investors’ Rights Agreement”) pursuant to which, following completion of the Transactions, Valens agreed to register for resale upon demand certain Valens ordinary shares that are held by the parties thereto from time to time. In certain circumstances, various parties to the Investors’ Rights Agreement will also be entitled to customary piggyback registration rights, in each case subject to certain limitations set forth in the Investors’ Rights Agreement. In addition, the Investors’ Rights Agreement provides that Valens will pay certain expenses relating to such registrations and indemnify the securityholders against certain liabilities. The rights granted under the Investors’ Rights Agreement supersede any prior registration, qualification, or similar rights of the parties with respect to Valens securities, and all such prior agreements shall be terminated.

Additionally, under the Investors’ Rights Agreement, each of the securityholders of Valens party thereto (other than the Sponsor) have agreed not to transfer its Valens ordinary shares, except to certain permitted transferees, beginning on the closing date of the Business Combination and continuing for a period of one hundred eighty (180) days thereafter. The Sponsor has agreed not to transfer any Valens ordinary shares, Sponsor Warrants or Valens ordinary shares underlying the Sponsor Warrants held by the Sponsor (including the Forfeiture Shares but excluding any shares issued in connection with the Sponsor’s investment in the PIPE Financing) (the “Sponsor Lock-Up Shares”), except to certain permitted transferees, beginning on the closing date of the Business Combination and continuing until the earlier of (i) one hundred eighty (180) days thereafter and (ii) when Valens completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all Valens shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Separately, the articles of association of Valens will be amended and restated as of the consummation of the Business Combination. Pursuant to such amendment, each securityholder of Valens as of immediately prior to such


 

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amendment will be restricted from transferring its Valens ordinary shares, except to certain permitted transferees, beginning on the date of such amendment and continuing for a period of one hundred eighty (180) days thereafter.

Valens Warrant Agreement

Upon the closing of the Business Combination, Valens, PTK and Continental Stock Transfer & Trust Company (“Continental”) will enter into a warrant agreement (the “Valens Warrant Agreement”). Such agreement will amend and restate that certain Warrant Agreement, dated as of July 14, 2020, between PTK and Continental (the “Existing Warrant Agreement”), to provide for the assignment by PTK of all its rights, title and interest in the outstanding warrants of PTK to Valens and to amend the terms of the private placement warrants such that they remain, following the consummation of the Transactions contemplated by the Business Combination Agreement, exercisable on a cashless basis at any time at the holder’s option and are not redeemable regardless of the holder’s identity. Pursuant to the Valens Warrant Agreement, all PTK warrants under the Existing Warrant Agreement will no longer be exercisable for shares of PTK Common Stock, but instead will be exercisable for Valens ordinary shares.

Sponsor Support Agreement

Concurrently with the execution of the Business Combination Agreement, the Sponsor entered into a letter agreement (the “Sponsor Support Agreement”) in favor of Valens and PTK, pursuant to which it has agreed to (i) vote all shares of common stock of PTK beneficially owned by it in favor of the Business Combination and each other proposal related to the Business Combination proposed by the PTK board of directors at the meeting of PTK shareholders called to approve the Business Combination, (ii) appear at such shareholder meeting for the purpose of establishing a quorum, (iii) vote all such shares against any action that would reasonably be expected to materially impede, interfere with, delay, postpone, or adversely affect the Business Combination or any of the other transactions contemplated by the Business Combination Agreement, and (iv) not to transfer, assign, or sell such shares, except to certain permitted transferees, prior to the consummation of the Transactions. Additionally, pursuant to an existing letter agreement between the Sponsor and PTK, the Sponsor has agreed not to redeem any shares of common stock of PTK in connection with the Business Combination.

Pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed, with respect to the ordinary shares of Valens to be received by it in connection with the Business Combination, not to transfer:

 

   

287,500 of such shares (the “Initial Earnout Shares”) until the date on which the closing price of the ordinary shares exceeds $12.00 per share for any 20 trading days within any 30-day trading period commencing after the Closing, subject to forfeiture if such price target is not satisfied within three years following the Closing;

 

   

359,375 of such shares (the “Secondary Earnout Shares”) until the date on which the closing price of the ordinary shares exceeds $12.50 per share for any 20 trading days within any 30-day trading period commencing after the Closing, subject to forfeiture if such price target is not satisfied within three years following the Closing; and

 

   

359,375 of such shares (the “Tertiary Earnout Shares” and together with the Initial Earnout Shares and the Secondary Earnout Shares, the “Earnout Shares”) until the date on which the closing price of the ordinary shares exceeds $15.00 per share for any 20 trading days within any 30-day trading period commencing after the Closing, subject to forfeiture if such price target is not satisfied within four years following the Closing.

In the event of a Valens change in control transaction within three years following the Closing, fifty percent of the Earnout Shares to the extent not earlier released will be released from such transfer restrictions if the effective price per share to be received by Valens shareholders in such change in control transaction is at least $11.25 per share.


 

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In the event of a Valens change in control transaction within four years following the Closing, one hundred percent of the Earnout Shares to the extent not earlier released will be released from such transfer restrictions if the effective price per share to be received by Valens shareholders in such change in control transaction is at least $12.50 per share.

In addition, pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed to cancel 740,000 warrants to purchase an aggregate of 370,000 shares of Valens ordinary shares effective as of the Closing.

The Adjournment Proposal

If PTK is unable to consummate the Business Combination at the time of the special meeting for any reason, the chairman presiding over the special meeting may submit a proposal to adjourn the special meeting to a later date or dates, if necessary. See the section of this proxy statement/prospectus titled “Proposal Two—The Adjournment Proposal.”

Date, Time and Place of Special Meeting of PTK’s Stockholders

The special meeting will be held at 10 a.m., Eastern Time, on September 28, 2021, via live webcast at https://www.cstproxy.com/ptkacquisition/2021, or such other date, time and place to which such meeting may be adjourned, to consider and vote upon the proposals.

Voting Power; Record Date

PTK stockholders will be entitled to vote or direct votes to be cast at the special meeting if they owned PTK Common Stock at the close of business on September 7, 2021, which is the record date for the special meeting. PTK stockholders will have one vote for each share of PTK Common Stock owned at the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. PTK warrants do not have voting rights. On August 27, 2021, there were 14,375,000 shares of PTK Common Stock outstanding, of which 11,500,000 were public shares with the rest being held by the initial stockholders and their respective affiliates (including the Sponsor).

Redemption Rights

Pursuant to the PTK Charter, a holder of public shares may demand that PTK convert such shares into cash if the Business Combination is consummated; provided that PTK may not consummate the Business Combination if it has less than $5,000,001 of net tangible assets either immediately prior to or upon consummation of the Business Combination. Holders of public shares will be entitled to receive cash for these shares only if they deliver their shares to PTK’s transfer agent no later than two (2) business days prior to the special meeting. Holders of public shares do not need to affirmatively vote on the Business Combination Proposal or be a holder of such public shares as of the record date to exercise conversion rights. If the Business Combination is not consummated, these shares will not be converted into cash. If a holder of public shares properly demands conversion, delivers his, her or its shares to PTK’s transfer agent as described above, and the Business Combination is consummated, PTK will convert each public share into a full pro rata portion of the Trust Account, calculated as of two (2) business days prior to the date of the special meeting. It is anticipated that this would amount to approximately $10.00 per share. If a holder of public shares exercises his, her or its conversion rights, then it will be exchanging its shares of PTK Common Stock for cash and will not become a shareholder of Valens. See the section of this proxy statement/prospectus titled “Special Meeting of PTK Stockholders — Conversion Rights” for a detailed description of the procedures to be followed if you wish to convert your shares into cash.

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Appraisal Rights

PTK stockholders and PTK warrant holders do not have appraisal rights in connection with the Transactions under the DGCL. See the section of this proxy statement/prospectus titled “Special Meeting of PTK Stockholders—Appraisal Rights.”

PTK’s Board of Directors’ Reasons for the Business Combination

PTK’s board of directors, in evaluating the Business Combination, consulted with PTK’s management and financial and legal advisors. In reaching its unanimous resolution (i) that the Business Combination Agreement and the transactions contemplated thereby are advisable and in the best interests of PTK and its stockholders and (ii) to recommend that the stockholders adopt the Business Combination Agreement and approve the Business Combination and the transactions contemplated thereby, PTK’s board of directors considered a range of factors, including, but not limited to, the factors discussed in the section referenced below. In light of the number and wide variety of factors considered in connection with its evaluation of the Business Combination, PTK’s board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination and supporting its decision. PTK’s board of directors viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of PTK’s reasons for the Business Combination and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Statement Regarding Forward-Looking Statements; Market, Ranking and Other Industry Data.”

In approving the Business Combination, PTK’s board of directors determined not to obtain a fairness opinion. The officers and directors of PTK have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and background and sector expertise enabled them to make the necessary analyses and determinations regarding the Business Combination. In addition, PTK’s officers and directors have substantial experience with mergers and acquisitions.

PTK’s board of directors considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Business Combination Agreement and the transactions contemplated thereby. PTK’s board of directors also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination.

PTK’s board of directors concluded that the potential benefits that it expected PTK and its stockholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, PTK’s board of directors unanimously determined that the Business Combination Agreement and the Business Combination contemplated therein were advisable, fair to and in the best interests of PTK and its stockholders. See the section of this proxy statement/prospectus titled ”Proposal One—The Business Combination Proposal—PTK’s Board of Directors’ Reasons for the Business Combination and Recommendation of the Board of Directors.”

Interests of PTK’s Directors and Officers in the Business Combination

In considering the recommendation of PTK’s board of directors to vote in favor of approval of the Business Combination Proposal, stockholders should keep in mind that the Sponsor and PTK’s directors and executive officers have interests in such proposals that are different from, or in addition to, those of PTK’s stockholders generally. In particular:

 

   

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the PTK Charter), PTK will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and PTK’s board of directors, dissolving and liquidating. In such event, the 2,875,000 Founder Shares, which were acquired by the Sponsor for $25,000, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Such shares had an aggregate market value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021. On the other hand, if the Business Combination is consummated, each outstanding share of PTK Common Stock will be converted into one Valens ordinary share, subject to adjustment described herein.

 

   

The Sponsor has spent $25,000 to purchase 2,875,000 Founder Shares and $3,400,000 to purchase 6,800,000 private placement warrants from PTK for $0.50 per private warrant. Additionally, the Sponsor was issued 600,000 additional private placement warrants as a result of the conversion of the promissory note in the amount of $300,000 which the Sponsor and its affiliates had loaned PTK to cover expenses related to its initial public offering. Subsequently, pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed to cancel 740,000 warrants to purchase an aggregate of 370,000 shares of Valens ordinary shares effective as of the Closing. The Founder Shares had an aggregate value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021 and the private placement warrants (excluding the Cancelled Warrants) had an aggregate market value of $3.0 million based upon the closing price of $0.40 per warrant on the NYSE on August 27, 2021. The Founder Shares and the private placement warrants will become worthless if PTK does not consummate a business combination by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter).

 

   

If PTK is unable to complete a business combination within the required time period, the Sponsor will be liable under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by PTK for services rendered or contracted for or products sold to PTK. If PTK consummates a business combination, on the other hand, PTK will be liable for all such claims.

 

   

The Sponsor and PTK’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on PTK’s behalf, such as identifying and investigating possible business targets and business combinations. However, if PTK fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, PTK may not be able to reimburse these expenses if the Business Combination or another business combination is not completed by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter). As of August 27, 2021, the Sponsor and PTK’s officers and directors and their affiliates had incurred approximately $500,000 of unpaid reimbursable expenses.

 

   

The Business Combination Agreement provides for the continued indemnification of PTK’s current directors and officers and the continuation of directors and officers liability insurance covering PTK’s current directors and officers.

 

   

PTK’s Sponsor, officers and directors (or their affiliates) may make loans from time to time to PTK to fund certain capital requirements. If the Business Combination is not consummated, any such loans will not be repaid and will be forgiven except to the extent there are funds available to PTK outside of the Trust Account.

 

   

Ker Zhang will be a member of the board of directors of Valens following the closing of the Business Combination and, therefore, in the future Mr. Zhang will receive any cash fees, stock options or stock awards that Valens’ board of directors determines to pay to its non-executive directors.


 

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PTK’s Sponsor has agreed to invest an aggregate amount of $4.0 million to purchase 400,000 Valens ordinary shares in connection with the PIPE Financing to be completed at the closing of the Business Combination.

 

   

The Sponsor will benefit financially from the completion of any business combination even if the stock price declines after the Business Combination, generating a negative return for other shareholders. The Sponsor will lose substantially all of its investment in PTK and will not be reimbursed for any out-of pocket expenses if an initial business combination is not completed prior to January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK charter). Thus, if the proposed Business Combination with Valens is not consummated, PTK may seek to complete a business combination with a less favorable target company or on terms less favorable to PTK stockholders rather than choose to dissolve and liquidate.

 

   

The Sponsor paid an aggregate of $25,000 for 2,875,000 Founder Shares, which had an aggregate market value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021. If the proposed Business Combination with Valens is consummated, the Sponsor may still earn a positive rate of return on its investment, even if other stockholders experience a negative rate of return in post-Business Combination.

Recommendation to PTK Stockholders

PTK’s board of directors has determined that each of the proposals outlined above is fair to and in the best interests of PTK and its stockholders and recommended that PTK stockholders vote “FOR” the business combination proposal and “FOR” the adjournment proposal, if presented.

Material U.S. Federal Income Tax Considerations (page 173)

For a description of material U.S. federal income tax consequences of the Business Combination, the exercise of redemption rights in respect of shares of PTK Common Stock and the ownership and disposition of Valens ordinary shares and/or Valens warrants, please see “Material U.S. Federal Income Tax Considerations”.

Certain Material Israeli Tax Considerations (page 189)

For a description of certain material Israeli tax consequences of the ownership and disposition of Valens ordinary shares and/or Valens warrants, please see “Certain Material Israeli Tax Considerations”.

Anticipated Accounting Treatment

The Transaction is comprised of a series of transactions pursuant to the Business Combination Agreement, as described elsewhere in this proxy statement/prospectus. For accounting purposes, the Transaction will be effectuated by three main steps:

 

  1.

The conversion of outstanding Valens preferred shares into Valens ordinary shares, and thereafter the Stock Split of Valens ordinary shares such that each such ordinary share has an implied value of $10.00 per share as of an agreed measurement time shortly prior to Closing (and valuing Valens equity as of such agreed measurement time at the Total Deal Value).

 

  2.

The merger of PTK with Merger Sub results in the exchange of shares held by PTK shareholders with newly issued shares of Valens. The merger is not within the scope of ASC 805 (“Business Combinations”) because PTK does not meet the definition of a business in accordance with ASC 805. The merger will be accounted for as a recapitalization; as such, any difference between the fair value of Valens ordinary shares issued and the fair value of PTK’s identifiable net assets should be recorded as


 

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  additional paid-in capital. For purposes of the unaudited pro forma condensed combined financial information, it is assumed that the fair value of each individual Valens ordinary share issued to PTK stockholders is equal to the fair value of each individual Valens shareholder resulting from the Total Deal Value assigned to Valens in the Business Combination Agreement.

 

  3.

As part of the Transactions, PTK Private Warrants will be amended such that there will be no change in their terms (including as to lack of redemption and cashless exercise) based on the identity of the holder thereof. Accordingly, such warrants will be classified as equity.

 

  4.

35% of the Valens ordinary shares that the PTK Sponsor will receive in respect of its PTK common stock, will be subject to forfeiture if certain price targets for the Valens ordinary shares are not achieved within a certain period of time after the Effective Time or if an M&A Transaction does not occur at a certain minimum price (the “Forfeiture Shares”). Such Forfeiture Shares will be classified as a liability and presented at fair value, although they are considered outstanding shares and are entitled to voting rights and distributions.

 

  5.

The Subscription Agreements related to the PIPE, which were executed concurrently with the Business Combination Agreement, will result in the issuance of Valens ordinary shares, leading to an increase in share capital and share premium.

Comparison of Rights of Stockholders of PTK and Shareholders of Valens (page 209)

If the Business Combination is successfully completed, holders of PTK Common Stock will become holders of Valens ordinary shares and their rights as shareholders will be governed by Valens’ organizational documents. There are also differences between the laws governing PTK, a Delaware corporation, and Valens, an Israeli company. Please see “Comparison of Rights of Valens Shareholders and PTK Stockholders” for more information.

Emerging Growth Company

Each of PTK and Valens is, and consequently, following the Business Combination, Valens will be, an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, Valens will be eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find Valens’ securities less attractive as a result, there may be a less active trading market for Valens’ securities and the prices of Valens’ securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Valens has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, Valens, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of Valens’ financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.


 

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Valens will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the date on which Valens ordinary shares were offered in exchange for PTK Common Stock in connection with the Transactions, (b) in which Valens has total annual gross revenue of at least $1.07 billion, or (c) in which Valens is deemed to be a large accelerated filer, which means the market value of Valens’ common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which Valens has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

Regulatory Matters

The Business Combination is not subject to any federal or state regulatory requirement or approval, except for filings with the State of Delaware necessary to effectuate the Business Combination.

Summary Risk Factors

You should consider all the information contained in this proxy statement/prospectus in deciding how to vote for the proposals presented in this proxy statement/prospectus. In particular, you should consider the risk factors described under “Risk Factors”. Such risks include, but are not limited to:

 

   

The cyclicality of the semiconductor industry;

 

   

The effects of health epidemics, such as the recent global COVID-19 pandemic;

 

   

Competition in the semiconductor industry, and the failure to introduce new technologies and products in a timely manner to compete successfully against competitors;

 

   

If Valens fails to adjust its supply chain volume due to changing market conditions or fails to estimate its customers’ demand;

 

   

Disruptions in relationships with any one of Valens’ key customers;

 

   

Any difficulty selling Valens’ products if customers do not design its products into their product offerings;

 

   

Valens’ dependence on winning selection processes;

 

   

Even if Valens succeeds in winning selection processes for its products, Valens may not generate timely or sufficient net sales or margins from those wins;

 

   

Sustained yield problems or other delays in the manufacturing process of products;

 

   

If PTK’s stockholders fail to properly demand redemption rights, they will not be entitled to convert their PTK Common Stock into a pro rata portion of the Trust Account;

 

   

The fact that PTK’s board of directors did not obtain a third-party fairness opinion in determining whether or not to proceed with the Business Combination;

 

   

The financial and other interests of PTK’s board of directors may have influenced PTK’s board of directors’ decision to approve the Business Combination;

 

   

The Valens securities to be received by PTK’s securityholders as a result of the Business Combination will have different rights from PTK securities, and PTK’s stockholders will have a reduced ownership and voting interest of Valens after consummation of the Business Combination; and

 

   

The other matters described in the section titled “Risk Factors”.


 

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RISK FACTORS

If the Business Combination is completed, Valens will operate in a market environment that is difficult to predict and that involves significant risks, many of which will be beyond its control. You should carefully consider the risks described below before voting your shares. Additional risks and uncertainties not presently known to Valens and PTK or that they do not currently believe are important to an investor, if they materialize, also may adversely affect the Business Combination. If any of the events, contingencies, circumstances or conditions described in the following risks actually occur, Valens’ business, financial condition or results of operations could be seriously harmed. If that happens, the trading price of Valens ordinary shares or, if the Business Combination is not consummated, PTK Common Stock could decline, and you may lose part or all of the value of any Valens ordinary shares or, if the Business Combination is not consummated, you may lose part or all of the value of any shares of PTK Common Stock that you hold.

Risks Related to Valens Following the Business Combination

Any of the following risk factors could cause Valens’ actual results to differ materially from anticipated results. These risks and uncertainties are not the only ones that Valens faces.

Risks Related to Valens’ Business and Industry

The semiconductor industry is highly cyclical.

The semiconductor industry is highly cyclical and is characterized by short product life cycles and wide fluctuations in product supply and demand. The industry has, from time to time, experienced significant downturns, often connected with, or in anticipation of, excess manufacturing capacity worldwide, maturing product cycles of both semiconductor companies’ and their customers’ products and declines in general economic conditions. Cyclical downturns can result from a variety of market forces including constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand.

The industry has experienced downturns in the past and may experience such downturns in the future. For example, the industry experienced a significant downtown in connection with the most recent global recession in 2008, and further experienced a downturn from 2019 to 2020, which may be prolonged as a result of the economic impact of the COVID-19 pandemic. These downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices.

Recent downturns in the semiconductor industry have been attributed to a variety of factors, including the COVID-19 pandemic, trade disputes among the United States and China, weakness in demand in certain markets, supply chain capacity challenges and pricing for semiconductors across applications and excess inventory. Recent downturns have directly impacted our business, as has been the case with many other companies, suppliers, distributors and customers in the semiconductor industry and other industries around the world, and any prolonged or significant future downturns in the semiconductor industry could have a material adverse effect on our business, financial condition and results of operations.

Conversely, significant upturns can cause us to be unable to satisfy demand in a timely and cost-efficient manner and could result in increased competition for access to third-party foundry and assembly capacity. In the event of such an upturn, we may not be able to procure adequate capacity within our semiconductor supply chains, resources and raw materials, some of which are single-sourced or locate suitable third-party suppliers or other third-party subcontractors to respond effectively to changes in demand for our existing products, all of which may lead to extended lead-times beyond our standard lead time and may impact our ability to obtain future design wins, while potentially increasing order cancellations. If the availability of those materials and supplies is interrupted, we may not be able to find suitable replacements and, as a result, our business, financial condition and results of operations could be materially and adversely affected.

 

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Downturns or volatility in general economic conditions could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Our net sales, gross margin, and profitability depend significantly on general economic conditions and the demand for products in the markets in which our customers compete. Weaknesses in the global economy and financial markets, including the current weaknesses resulting from the ongoing COVID-19 pandemic, have led to, and any adverse changes in general domestic and global economic conditions that may occur in the future, including any recession, economic slowdown or disruption of credit markets, may also lead to, lower demand for products that incorporate our solutions, particularly in the automotive and audio-video markets. A decline in end-user demand can affect our customers’ demand for our products, the ability of our customers to obtain credit and otherwise meet their payment obligations. Our net sales, financial condition and results of operations could be negatively affected by such actions. Volatile and/or uncertain economic conditions can adversely impact sales, gross margin and profitability and make it difficult for us to accurately forecast and plan our future business activities. To the extent we incorrectly plan for favorable economic conditions that do not materialize or take longer to materialize than expected, we may face oversupply of our products relative to customer demand. Conversely, if we underestimate customer demand, we may manufacture products that we may not be able to sell. As a result, we would have excess inventory, which could result in losses. To the extent that our sales, profitability and strategies are negatively affected by downturns or volatility in general economic conditions, our business, financial condition and results of operations may be materially and adversely affected. In addition, any disruption in the credit markets, including as a result of the current COVID-19 pandemic, could impede our access to capital, which could be further adversely affected if we are unable to obtain or maintain favorable credit ratings. If we have limited access to additional financing sources, we may be required to defer capital expenditures or seek other sources of liquidity, which may not be available to us on acceptable terms or at all. Similarly, if our suppliers face challenges in obtaining credit or other financial difficulties, they may be unable to provide the materials we need to manufacture our products. All of these factors related to global economic conditions, which are beyond our control, could adversely impact our business, financial condition, results of operations and liquidity.

The effects of health epidemics, such as the recent global COVID-19 pandemic, have had and could in the future have an adverse impact on our revenue, our employees and results of operations.

Our business and operations have been and could in the future be adversely affected by health epidemics, such as the global COVID-19 pandemic. The COVID-19 pandemic and efforts to control its spread have curtailed the movement of people, goods and services worldwide, including in the regions in which we and our clients and partners operate, and are significantly impacting economic activity and financial markets. During 2020, we noticed a negative impact from COVID-19 on some of our customers’ demand, particularly with respect to end users’ audio-video and multimedia products that are used in public areas and for public events. In addition, many automotive companies decreased or paused their manufacturing in early 2020 as a response to COVID, which negatively impacted our revenue and results of operations. In addition, our customers’ businesses or cash flows have been and may continue to be negatively impacted by COVID-19, which may continue to lead them to seek adjustments to payment terms or delay making payments or default on their payables, any of which may impact the timely receipt and/or collectability of our receivables.

Our operations are subject to a range of external factors related to the COVID-19 pandemic that are not within our control. We have taken precautionary measures intended to minimize the risk of the spread of the virus to our employees, customers, and the communities in which we operate. A wide range of governmental restrictions has also been imposed on our employees’ and customers’ physical movement to limit the spread of COVID 19. There can be no assurance that precautionary measures, whether adopted by us or imposed by others, will be effective, and such measures could negatively affect our sales, marketing, business development activities and client service efforts, delay and lengthen our sales cycles, decrease our employees’ and clients’ productivity, or create operational or other challenges especially with respect to extended supply lead times, any of which could harm our business and results of operations.

 

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Although there are effective vaccines for COVID-19 that have been approved for use, distribution of vaccines did not begin until late 2020, and a majority of the public will likely not be able to be vaccinated until later in 2021. In addition, new strains of the virus have appeared, which may complicate treatment and vaccination programs. Accordingly, concerns remain regarding additional surges of COVID-19 and the economic impact thereof, all of which may impact our future results of operations and financial condition.

The economic uncertainty caused by the COVID-19 pandemic may continue to make it difficult for us to forecast revenue and operating results and to make decisions regarding operational cost structures and investments. We have committed, and we plan to continue to commit, resources to grow our business, including to expand our international presence, employee base, and technology development, and such investments may not yield anticipated returns, particularly if worldwide business activity continues to be impacted by COVID-19. The duration and extent of the impact from the COVID-19 pandemic depend on future developments that cannot be accurately predicted at this time, and if we are not able to respond to and manage the impact of such events effectively, our business may be harmed. 

Events beyond our control could have an adverse effect on our business, financial condition, results of operations and cash flows.

Our ability to make, transport and sell products in coordination with our suppliers, customers, distributors and third-party manufacturers or other subcontractors is critical to our success. Damage or disruption to our supply, manufacturing, supply chain or distribution capabilities resulting from weather, freight carrier availability, any potential effects of climate change, natural disaster, disease, fire, explosion, cyber-attacks, terrorism, pandemics, epidemics or other outbreaks of infectious disease, strikes, civil unrest, repairs or enhancements at facilities manufacturing or distribution of our products or other reasons could impair our ability to manufacture, sell our products, and to deliver products to our customers on a timely basis or at all.

Similarly, over demand on existing supply chain manufacturing lines as well as disruptions in the operations of our key suppliers or in the services provided by contract manufacturers, including disruptions due to natural disasters, materials shortages or other disruptions, or by the transition by us to other suppliers or third-party manufacturers could lead also to supply chain problems and otherwise impair or delay our ability to deliver products to our customers on a timely basis or at all. Additionally, we do not have long-term agreements for the materials and supplies used in our business, which could make it more difficult to obtain such materials and supplies.

Other companies in our industry may be affected differently by natural disasters or other disruptions depending on the location of their suppliers, operations and customers. In addition, many of our competitors are larger companies with more substantial financial and other resources and, as a result, may be better able to plan for, withstand or otherwise mitigate the effects of any such disruption. While we may take steps to plan for or address the occurrence of any such event, we cannot guarantee that we will be successful. If we fail to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, it could adversely affect our business, financial condition, results of operations and cash flows and/or require additional resources to restore our supply chain.

Any downturn in the automotive or audio-video markets could significantly harm our financial results.

Approximately 6% and 94% of our total net sales in fiscal year 2020 are attributable to our automotive products or audio-video products, respectively. This concentration of sales as well as current government-imposed restrictions on businesses, operations and travel due to the COVID-19 pandemic and the related economic uncertainty have impacted demand in many global markets exposing us to the risks associated with such markets as follows:

 

   

Audio Video market: During 2020, we noticed a negative impact from the COVID-19 pandemic on some of our Audio Video customers’ demand, particularly with respect to end users’ audio-video and multimedia products that are used in public areas and for public events. However, at the same time, we

 

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did receive an increase in demand for high-speed connectivity products driven by a need for products and infrastructure to support trends that emerged from the impact of the COVID-19 pandemic such as working from home, hybrid educational models and remote healthcare.

 

   

Automotive market: Automotive sales generally correlate with economic conditions and consumer spending. A downturn in the automotive market could delay automakers’ plans to introduce new vehicles with these features, which would negatively impact the demand for our products and our ability to grow our business. In addition, many automotive manufacturers were forced to suspend manufacturing operations and have only recently resumed production. While demand in the automotive industry is dependent on a number of factors, automotive manufacturers expect the impact of COVID-19 to be highly dependent on its duration and severity. The foregoing impacts and other adverse effects on the automotive industry could have a material adverse effect on our business, financial condition and results of operations, as well as our ability to execute our growth strategy.

The semiconductor industry is highly competitive. If we fail to introduce new technologies and products in a timely manner, this could adversely affect our business.

The semiconductor industry is highly competitive and characterized by constant and rapid technological change, short product lifecycles (in certain cases), significant price erosion and evolving standards. Our ability to compete in this industry depends on many factors, including our ability to identify emerging markets and technology trends in an accurate and timely manner, introduce new and innovative technologies and products, implement advanced manufacturing technologies at a sustainable pace, maintain the performance and quality of our products, and manufacture our products in a cost-effective manner, as well as our competitors’ performance and general economic and industry market conditions.

The success of our business depends to a significant extent on our ability to develop new technologies and products that are ultimately successful in the market. The costs related to the research and development necessary to develop new technologies and products are significant and any reduction of our research and development budget could harm our competitiveness. Meeting evolving industry requirements and introducing new products to the market in a timely manner and at prices that are acceptable to our customers are significant factors in determining our competitiveness and success. Given the long development cycle of semiconductor products, commitments to develop new products must be made well in advance of any resulting sales, and technologies and standards may change during development, potentially rendering our products outdated or uncompetitive before their introduction. If we are unable to successfully develop new products, our revenues may decline substantially.

Moreover, some of our competitors are well-established entities, are larger than us and have greater resources than we do. If these competitors increase the resources they devote to developing and marketing their products, we may not be able to compete effectively. Any consolidation among our competitors could enhance their product offerings and financial resources, further strengthening their competitive position. In addition, some of our competitors operate in narrow business areas relative to us, allowing them to concentrate their research and development efforts directly on products and services for those areas, which may give them a competitive advantage. As a result of these competitive pressures, we may face declining sales volumes or lower prevailing prices for our products, and we may not be able to reduce our total product costs in line with these declining revenues. If any of these risks materialize, they could have a material adverse effect on our business, financial condition and results of operations.

The semiconductor industry is characterized by significant price erosion, especially after a product has been on the market for a significant period of time.

The products we develop and sell are subject to rapid declines in average selling prices over the life of the products. Product life cycles can be relatively short, and as a result, products tend to be replaced by more technologically advanced substitutes on a regular basis. In turn, demand for older technology falls, causing the

 

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price at which such products can be sold to drop, in some cases precipitously. Additionally, competitors may be able to quickly introduce new products to compete with our products, and sometimes competitors will anticipate our entry into a market and start to lower the prices on their products before our entry. To the extent we are unable to reduce the prices of our products and remain competitive, our net sales will likely decline, resulting in further pressure on our gross margins, which could have a material adverse effect on our business, financial condition and results of operations and our ability to grow our business.

In order to continue profitably supplying our products, we must reduce our production costs in line with the lower revenues we can expect to receive per unit. Usually, this must be accomplished through improvements in process technology and production efficiencies. If we cannot advance our process technologies or improve our efficiencies to a degree sufficient to maintain required margins, we will no longer be able to make a profit from the sale of these products. Additionally, we may not be able to cease production of such products, either due to contractual obligations or for customer relationship reasons, and as a result may be required to bear a loss on such products. We cannot guarantee that competition in our core product markets will not lead to price erosion, lower revenue growth rates and lower margins in the future. Should reductions in our manufacturing costs fail to keep pace with reductions in market prices for the products we sell, this could have a material adverse effect on our business, financial condition and results of operations.

Failure to adjust our supply chain volume due to changing market conditions or failure to estimate our customers’ demand could adversely affect our net sales and could result in additional charges for obsolete or excess inventories or non-cancelable purchase commitments.

We make significant decisions, including determining the levels of business that we will seek and accept, production schedules, levels of reliance on outsourced contract manufacturing, personnel needs and other resource requirements, based on our estimates of customer requirements. The short-term nature of the commitments by many of our customers and the possibility of rapid changes in demand for their products reduces our ability to accurately estimate future requirements of our customers. On occasion, our customers may require rapid increases in production, which can challenge our resources. We may not have sufficient capacity at any given time to meet our customers’ demands. Conversely, downturns in the semiconductor industry have in the past caused and may in the future cause our customers to significantly reduce the solutions or the amount of products ordered from us. Because many of our sales, research and development, and manufacturing expenses are relatively fixed, a reduction in customer demand may decrease our gross margins and operating income.

In addition, we base many of our operating decisions, and enter into purchase commitments, on the basis of anticipated net sales trends which are highly unpredictable. Some of our purchase commitments are not cancelable, and in some cases we are required to recognize a charge representing the amount of material purchased or ordered which exceeds our actual requirements. These non-cancelable purchase commitments could reduce our ability to adjust our inventory to address declining market demands. If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges. If net sales in future periods fall substantially below our expectations, or if we fail to accurately forecast changes in demand mix, we could again be required to record substantial charges for obsolete or excess inventories or non-cancelable purchase commitments.

Moreover, during a market upturn, we may not be able to purchase sufficient supplies or components to meet increasing product demand, which could prevent us from taking advantage of opportunities and reduce our net sales. In addition, a supplier could discontinue a component necessary for our design, extend lead times, limit supply or increase prices due to capacity constraints or other factors. Our failure to adjust our supply chain volume or estimate our customers’ demands could have a material adverse effect on our net sales, business, financial condition and results of operations.

 

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Disruptions in our relationships with any one of our key customers could adversely affect our business.

Approximately 40% of our 2020 revenues were derived from our top three customers, that purchase products from us based on short term purchase orders that reflect the demand they have from their end customers. We cannot guarantee that we will be able to generate similar levels of revenues from our largest customers in the future. Should one or more of these customers substantially reduce their purchases from us, this could have a material adverse effect on our business, financial condition and results of operations.

Our customers continued success will depend in large part on growth within the markets for our automotive and audio-video solutions and products and their success within such markets. Demand in these markets fluctuates significantly, driven by consumer spending, consumer preferences, the development of new technologies and prevailing economic conditions. Factors affecting these markets could seriously harm our customers and, as a result, harm us, including:

 

   

the effects of catastrophic and other disruptive events at our customers’ offices or facilities including, but not limited to, natural disasters, telecommunications failures, cyber-attacks, terrorist attacks, pandemics, epidemics or other outbreaks of infectious disease, including the current COVID-19 pandemic, breaches of security or loss of critical data;

 

   

increased costs associated with potential disruptions to our customers’ supply chain and other manufacturing and production operations; the deterioration of our customers’ financial condition;

 

   

delays and project cancellations as a result of design flaws in the products developed by our customers; the inability of customers to dedicate the resources necessary to promote and commercialize their products;

 

   

the inability of our customers to adapt to changing technological demands resulting in their products becoming obsolete; and

 

   

the failure of our customers’ products to achieve market success and gain broad market acceptance.

Any slowdown in the growth of these end markets could adversely affect our financial results.

We will have difficulty selling our products if customers do not design our products into their product offerings.

Our products are not sold directly to the end-users, but are components of other products. Our products are generally incorporated into our customers’ products at the design stage. As a result, we rely on our customers to select our products from among alternative offerings to be designed into the products they sell. If they do not include our products in their designs, we will have difficulty selling our products. Even after a customer designs our products into the products it sells, the customer is not obligated to purchase our products, nor can we guarantee that the customer is not using competitive products. In addition, the customer can choose at any time to reduce or discontinue their use of our products, for example, if its own products are not commercially successful, or for any other reason. In addition, we often incur significant expenditures on the development of a new product without any assurance that our product will be designed into our customers’ products. Once a customer designs a competitor’s product into its product offering, it becomes significantly more difficult for us to sell our products to that customer because changing suppliers involves significant cost, time, effort and risk for the customer. Our customers may not continue to design our products into their products or we might not be able to convert any such design into actual sales, either of which could materially and adversely affect our results of operations.

If we are unable to manage our growth effectively, our business and financial results may be adversely affected.

To continue to grow, we must continue to expand our operational, engineering, accounting and financial systems, procedures, controls and other internal management systems. This may require substantial managerial

 

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and financial resources, and our efforts in this regard may not be successful. Our current systems, procedures and controls may not be adequate to support our future operations. Unless our growth results in an increase in our revenues that is proportionate to the increase in our costs associated with this growth, our operating margins and profitability will be adversely affected. If we fail to adequately manage our growth effectively, improve our operational, financial and management information systems, or effectively train, motivate and manage our new and future employees, it could adversely affect our business, financial condition and results of operations.

The estimates of market opportunity and growth forecasts included in this disclosure may prove to be inaccurate.

Market opportunity estimates and growth forecasts are inherently uncertain. Our estimates regarding the expected growth in our served available markets are based on our experience, as well as internal research and industry forecasts, which are subject to a number of estimates and assumptions. While we believe our assumptions and the data underlying our estimates to be reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our estimates regarding the size and expected growth rates of our served available markets may prove to be incorrect. If our served available markets are smaller than we have estimated, our sales growth and/or market share may fail to reach the levels implied by these estimates.

Our quarterly net sales and operating results are difficult to predict accurately and may fluctuate significantly from period to period. As a result, we may fail to meet the expectations of investors, which could cause our share price to decline.

We operate in a highly dynamic industry and our future operating results could be subject to significant fluctuations, particularly on a quarterly basis. Our quarterly net sales and operating results have fluctuated significantly in the past and may continue to vary from quarter to quarter due to a number of factors, many of which are not within our control. Although some of our customers provide us with rolling forecasts of their future requirements for our products, a significant percentage of our net sales in each fiscal quarter is dependent on sales that are booked and shipped during that fiscal quarter, and are typically attributable to a large number of orders from diverse customers and markets. As a result, accurately forecasting our operating results in any fiscal quarter is difficult. If our operating results do not meet the expectations of securities analysts and investors, our share price may decline.

Additional factors that can contribute to fluctuations in our operating results include:

 

   

the rescheduling, increase, reduction or cancellation of significant customer orders;

 

   

the timing of customer qualification of our products and commencement of volume sales by our customers of systems that include our products;

 

   

the timing and amount of research and development and sales and marketing expenditures;

 

   

the rate at which our present and future customers and end users adopt our technologies in our target end markets;

 

   

the timing and success of the introduction of new products and technologies by us and our competitors, and the acceptance of our new products by our customers;

 

   

our ability to anticipate changing customer product requirements; our gain or loss of one or more key customers;

 

   

the availability, cost and quality of materials and components that we purchase from third-party vendors and any problems or delays in the manufacturing, testing or delivery of our products;

 

   

the availability of production capacity at our third-party facilities or other third-party subcontractors and other interruptions in the supply chain, including as a result of materials shortages, bankruptcies or other causes;

 

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supply constraints for and changes in the cost of the other components incorporated into our customers’ products;

 

   

our ability to reduce the manufacturing costs of our products;

 

   

fluctuations in manufacturing yields;

 

   

the changes in our product mix or customer mix;

 

   

the timing of expenses related to the acquisition of technologies or businesses;

 

   

product rates of return or price concessions in excess of those expected or forecasted;

 

   

the emergence of new industry standards;

 

   

product obsolescence;

 

   

unexpected inventory write-downs or write-offs;

 

   

costs associated with litigation over intellectual property rights and other litigation;

 

   

the length and unpredictability of the purchasing and budgeting cycles of our customers;

 

   

loss of key personnel or the inability to attract qualified engineers;

 

   

the quality of our products and any remediation costs;

 

   

adverse changes in economic conditions in various geographic areas where we or our customers do business;

 

   

the general industry conditions and seasonal patterns in our target end markets, particularly the automotive market and the audio-video market;

 

   

other conditions affecting the timing of customer orders or our ability to fill orders of customers subject to export control or economic sanctions; and

 

   

geopolitical events, such as war, threat of war or terrorist actions, or the occurrence of pandemics, epidemics or other outbreaks of disease, including the current COVID-19 pandemic, or natural disasters, and the impact of these events on the factors set forth above.

We may experience a delay in generating or recognizing revenues for a number of reasons. For example, open backlogs at the beginning of each quarter are typically lower than expected net sales for that quarter and are generally cancelable or reschedulable with minimal notice. Accordingly, we depend on obtaining orders during each quarter for shipment in that quarter to achieve our net sales objectives and failure to fulfill such orders by the end of a quarter may adversely affect our operating results. Furthermore, our customer agreements typically provide that the customer may delay scheduled delivery dates and cancel orders within specified timeframes without significant penalty. In addition, we maintain an infrastructure of facilities and human resources in several locations around the world and have a limited ability to reduce the expenses required to maintain such infrastructure. Because we base our operating expenses on anticipated revenue trends and a high percentage of our expenses are fixed in the short term, any delay in generating or recognizing forecasted net sales or changes in levels of our customers’ forecasted demand could materially and adversely impact our business, financial condition and results of operations. Due to our limited ability to reduce expenses, in the event our revenues decline or our forecasted net sales do not meet our expectations, it is likely that in some future quarters our operating results will decrease from the previous quarter or fall below the expectations of securities analysts and investors. As a result of these factors, our operating results may vary significantly from quarter to quarter. Accordingly, we believe that period-to-period comparisons of our results of operations should not solely be relied upon as indications of future performance. Any shortfall in net sales or net income from a previous quarter or from levels expected by the investment community could cause a decline in the trading price of our share.

 

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We depend on winning selection processes, and failure to be selected could adversely affect our business in those market segments.

One of our business strategies is to participate in and win competitive bid selection processes to develop products for use in our customers’ equipment and products. These selection processes can be lengthy and require us to incur significant design and development expenditures, with no guarantee of winning a contract or generating revenues. Incurrence of such significant expenditures, failure to win new design projects and delays in developing new products with anticipated technological advances or in commencing volume shipments of these products may have an adverse effect on our business. This risk is particularly pronounced in markets where there are only a few potential customers and in the automotive market, where, due to the longer design cycles involved, failure to win a design-in could prevent access to a customer for several years. Our failure to win a sufficient number of these bids could result in reduced revenues and hurt our competitive position in future selection processes because we may not be perceived as being a technology or industry leader, each of which could have a material adverse effect on our business, financial condition and results of operations.

Even if we succeed in winning selection processes for our products, we may not generate timely or sufficient net sales or margins from those wins and our financial results could suffer.

After incurring significant design and development expenditures, a substantial period of time generally elapses before we generate meaningful net sales relating to such product, if at all, particularly with respect to the automotive industry. The reasons for this delay include, among other things, the following:

 

   

changing customer requirements, resulting in an extended development cycle for the product;

 

   

delay in the ramp-up of volume production of the customer’s products into which our solutions are designed;

 

   

delay or cancellation of the customer’s product development plans;

 

   

competitive pressures to reduce our selling price for the product;

 

   

the discovery of design flaws, defects, errors or bugs in the products;

 

   

lower than expected customer acceptance of the solutions designed for the customer’s products;

 

   

lower than expected acceptance of our customers’ products; and

 

   

higher manufacturing costs than anticipated.

If we do not continue to win selection processes for our products in the short term, then we may not be able to achieve expected net sales levels associated with these winnings. If we experience delays in achieving such sales levels, our operating results could be adversely affected. Moreover, even if a customer selects our product, we cannot guarantee that this will result in any sales of our products, as the customer may ultimately change or cancel its product plans, or our customer’s efforts to market and sell its product may not be successful.

If we fail in a timely and cost-effective manner to develop new product features or new products that address customer preferences and achieve market acceptance, our operating results could be adversely affected.

Our customers are constantly seeking new products with more features and functionality at a lower cost, and our success relies heavily on our ability to continue to develop and market to our customers new and innovative products and improvements of existing products. In order to respond to new and evolving customer demands, achieve strong market share and keep pace with new technological, processing and other developments, we must constantly introduce new and innovative products into the market. Although we strive to respond to customer preferences and industry expectations in the development of our products, we may not be successful in developing, introducing or commercializing any new or enhanced products on a timely basis or at all. Further, if initial sales volumes for new or enhanced products do not reach anticipated levels within the time periods we

 

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expect, we may be required to engage in additional marketing efforts to promote such products and the costs of developing and commercializing such products may be higher than we predict. Moreover, new and enhanced products may not perform as expected. We may also encounter lower manufacturing yields and longer delivery schedules in commencing volume production of new products that we introduce, which could increase our costs and disrupt our supply of such products.

A fundamental shift in technologies, the regulatory climate or demand patterns and preferences in our existing product markets or the product markets of our customers or end-users could make our current products obsolete, prevent or delay the introduction of new products or enhancements to our existing products or render our products irrelevant to our customers’ needs. If our new product development efforts fail to align with the needs of our customers, including due to circumstances outside of our control like a fundamental shift in the product markets of our customers and end users or regulatory changes, our business, financial condition and results of operations could be materially and adversely affected.

The development of our products is highly complex. New and enhanced products require substantial financial and other resources to research and development. Occasionally, we have experienced delays in completing the development and introduction of new products and product enhancements, and we could experience delays in the future. Unanticipated problems in developing products could also divert substantial research and development and engineering resources, which may impair our ability to develop new products and enhancements and could substantially increase our costs. Even if we introduce new and enhanced products to the market, we may not be able to achieve market acceptance of these products in a timely manner or at all.

Our competitive position could be adversely affected if we are unable to meet customers’ quality requirements.

Suppliers in the semiconductor industry must meet increasingly stringent quality standards of certain original equipment manufacturers and customers, particularly for automotive and audio-video applications. While our quality performance to date has generally met these requirements, we may experience problems in achieving acceptable quality results in the manufacture of our products, particularly in connection with the production of new products or adoption of a new manufacturing process. Our failure to achieve acceptable quality levels could adversely affect our business results.

Changes in industry standards could limit our ability to sell our products and force us to write down our inventory.

The markets for semiconductors are characterized by rapidly evolving industry standards. We must continuously develop new products or upgrade our existing products to keep pace with these evolving standards. Changes in industry standards, or the development of new industry standards, may make our products less competitive or obsolete. Our products comprise only a component of an automotive vehicle or a part of an electronic device. All components of these end products must uniformly comply with industry standards (if any) in order to operate efficiently together. We depend on companies that provide other components of the end products to support prevailing industry standards. Many of these companies are significantly larger and more influential in driving industry standards than we are. Some industry standards may not be widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers or end users. If larger companies do not support the same industry standards that we do, or if competing standards emerge, market acceptance of our products could be adversely affected, which would harm our business.

Because it is not practicable to develop products that comply with all current standards and new standards that may be adopted in the future, our ability to compete effectively will depend on our ability to select industry standards that will be widely adopted by the market and to design our products to support those relevant industry standards. We may be required to invest significant effort and to incur significant expense to redesign our products to address relevant standards, and we may lose market share if we do not redesign our products quickly enough. If our products do not meet relevant industry standards that are widely adopted for a significant period of time, our results of operations, business, and prospects would be adversely affected.

 

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If we encounter sustained yield problems or other delays in the manufacturing process of our products, we may lose sales and damage our customer relationships.

The manufacture of our products, including the fabrication of semiconductor microchip, and the assembly and testing of our products, involve highly complex processes. For example, difficulties in the microchip fabrication process or other factors can cause a substantial portion of the components on a microchip to be nonfunctional. These problems may be difficult to detect at an early stage of the manufacturing process and often are time-consuming and expensive to correct. From time to time, we have experienced problems achieving acceptable yields at our third-party facilities, resulting in delays in the availability of components. Moreover, an increase in the rejection rate of products during the quality control process before, during or after manufacture and/or shipping of such products, results in lower yields and margins. In addition, changes in manufacturing processes required as a result of changes in product specifications, changing customer needs and the introduction of new product lines have historically significantly reduced our manufacturing yields, resulting in low or negative margins on those products. Poor manufacturing yields over a prolonged period of time could adversely affect our ability to deliver our products on a timely basis and harm our relationships with customers, which could materially and adversely affect our business, financial condition and results of operations.

Our ability to raise capital in the future may be limited and could prevent us from executing our growth strategy.

Our ability to operate and expand our business depends on the availability of adequate capital, which in turn depends on cash flow generated by our business and the availability of debt, equity or other applicable financing arrangements. However, we cannot assure you that our existing resources will be sufficient to meet our future liquidity needs. We may require additional capital to respond to business opportunities, challenges, acquisitions or other strategic transactions and/or unforeseen circumstances. The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on numerous factors, including: market acceptance of our products; the need to adapt to changing technologies and technical requirements; the existence of opportunities for expansion; and access to and availability of sufficient management, technical, marketing and financial personnel.

If our capital resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity securities or debt securities or obtain debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our shareholders. Additional debt would result in increased expenses and could result in covenants that would restrict our operations and our ability to incur additional debt or engage in other capital-raising activities. We have not made arrangements to obtain additional financing and there is no assurance that financing, if required, will be available in amounts or on terms acceptable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow and support our business and respond to business opportunities and challenges could be significantly limited.

We are exposed to a variety of financial risks, including currency risk, interest rate risk, liquidity risk, commodity price risk, credit risk and other non-insured risks, which may have an adverse effect on our financial results.

We are a global company and, as a direct consequence, movements in the financial markets may impact our financial results. We are exposed to a variety of financial risks, including currency fluctuations, interest rate risk, liquidity risk, commodity price risk and credit risk and other noninsured risks. If we create debt, the rating thereof by major rating agencies may further improve or deteriorate. As a result, our additional borrowing capacity and financing costs may be impacted. Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to perform upon their agreed payment obligations. Credit risk is present within our trade receivables. Such exposure is reduced through ongoing credit evaluations of the financial conditions of our customers and by adjusting payment terms and credit limits when appropriate. We invest

 

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available cash and cash equivalents with various financial institutions and are in that respect exposed to credit risk with these counterparties. Cash is invested and financial transactions are concluded where possible with financial institutions with a strong credit rating. If we are unable to successfully manage these risks, they could have a material adverse effect on our business, financial condition and results of operations.

We may pursue acquisitions and investments in new businesses, products or technologies, joint ventures and other strategic transactions, which may not be successful and could disrupt our business and divert financial and management resources from more productive uses.

If we identify appropriate opportunities, we may acquire or invest in technologies, businesses or assets that are strategically important to our business or form alliances with key players in the semiconductor industry to further expand our business. If we decide to pursue a strategy of selective acquisitions, we may not be successful in identifying suitable acquisition opportunities or completing such transactions. Our competitors may be more effective in executing and closing acquisitions in competitive bid situations than us. Our ability to enter into and complete acquisitions may be restricted by, or subject to, various approvals under U.S. law and Israeli law or may not otherwise be possible, may result in a possible dilutive issuance of our securities, or may require us to seek additional financing. We also may experience difficulties integrating acquired operations, technology, and personnel into our existing business and operations. Completed acquisitions may also expose us to potential risks, including risks associated with unforeseen or hidden liabilities, the diversion of resources from our existing business, and the potential loss of, or harm to, relationships with our employees as a result of our integration of new businesses. In addition, following completion of an acquisition, our management and resources may be diverted from their core business activities due to the integration process, which diversion may harm the effective management of our business. Furthermore, it may not be possible to achieve the expected level of any synergy benefits on integration and/or the actual cost of delivering such benefits may exceed the anticipated cost. Any of these factors may have an adverse effect on our competitive position, results of operations and financial condition.

We may have difficulty attracting, motivating and retaining executives and other key employees.

Our success depends to a large extent upon the continued services of our executive officers, managers and skilled personnel, including our development engineers. Generally, our employees are not bound by obligations that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. Given these limitations, we may not be able to continue to attract, retain and motivate qualified personnel necessary for our business.

Uncertainty about the effect of the merger may also impair Valens’ ability to attract, retain and motivate key personnel. Employee retention may be particularly challenging during the pendency of the merger, as employees of Valens may experience uncertainty about their future roles with the combined business. Additionally, Valens’ officers and employees own ordinary shares of Valens and/or have vested share options and, if the merger is consummated (and in the case of vested options, if such vested options are exercised prior to consummation of the merger), are therefore entitled to a portion of the merger consideration, the payment of which could provide sufficient financial incentive for certain officers and employees to no longer pursue employment with the combined business. In some of the fields in which Valens operate, there are only a limited number of people in the job market who possess the requisite skills and it may be increasingly difficult for the combined company to hire personnel over time. If key employees of PTK or Valens depart because of issues relating to the uncertainty and difficulty of integration, financial incentives or a desire not to become employees of the combined business, the combined company may have to incur significant costs in identifying, hiring and retaining replacements for departing employees, which could reduce the combined company’s ability to realize the anticipated benefits of the merger. The loss of services of any key personnel or the inability to hire new personnel with the requisite skills could restrict the ability of the combined company to develop new products or enhance existing products in a timely matter, to sell products to customers or to manage the business of the combined company effectively.

 

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We may not be able to adequately protect or enforce our intellectual property rights, which could harm our competitive position.

Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property. We will primarily rely on patent, copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods, to protect its proprietary technologies and processes. It is difficult and costly to monitor the use of our intellectual property. It is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose, illegally or otherwise, the combined company’s proprietary technologies and processes, despite efforts by the combined company to protect its proprietary technologies and processes. Moreover, the semiconductor industry is generally subject to high turnover of employees, so the risk of trade secret misappropriation may be amplified. If any of our trade secrets are subject to unauthorized disclosure or are otherwise misappropriated by third parties, our competitive position may be materially and adversely affected. The failure to identify any violations of our intellectual property rights could materially and adversely affect our business, financial condition and result of operations and hurt our competitive advantage.

While we will hold a significant number of patents, there can be no assurances that any additional patents will be issued. Even if new patents are issued, the claims allowed may not be sufficiently broad to protect the combined company’s technology. In addition, any of Valens’ existing patents, and any future patents issued to the combined company, may be challenged, invalidated or circumvented, either in connection with the merger or otherwise. As such, any rights granted under these patents may not provide the combined company with meaningful protection or commercial advantage.

In addition, the protection afforded under the patent and other intellectual property laws of one country may not be the same as that in other countries. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the U.S. This means, for example, that our right to exclusively commercialize a product in those countries where we have patent rights for that product can vary on a country-by-country basis. We also may not have the same scope of patent protection in every country where we do business. If the combined company’s patents do not adequately protect its technology, competitors may be able to offer products similar to the combined company’s products. The combined company’s competitors may also be able to develop similar technology independently or design around its patents.

Our ability to compete successfully depends in part on our ability to commercialize our products without infringing intellectual property rights of others.

To the same extent that we seek to protect our technology and inventions with patents and trade secrets, our competitors and other third parties do the same for their technology and inventions. We have no means of knowing the content of patent applications filed by third parties until they are published. It is also difficult and costly to continuously monitor the intellectual property portfolios of our competitors to ensure our technologies do not violate the intellectual property rights of any third parties.

The semiconductor industry is ripe with patent assertion entities and is characterized by frequent litigation regarding patent and other intellectual property rights. From time to time, we receive communications from third parties that allege that our products or technologies infringe their patent, copyrights, trademark or other intellectual property rights. As a public company with an increased profile and visibility, we may receive similar communications in the future. Lawsuits or other proceedings resulting from allegations of infringement could subject us to significant liability for damages, invalidate our proprietary rights and adversely affect our business. Defending these proceedings may be costly and time consuming and may divert the attention of management and key personnel from other business issues. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks.

 

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In the event that any third-party succeeds in asserting a valid claim against us or any of our customers, we could be forced to do one or more of the following:

 

   

discontinue selling, importing or using certain technologies that contain the allegedly infringing intellectual property which could cause us to stop manufacturing certain products;

 

   

seek to develop non-infringing technologies, which may not be feasible;

 

   

incur significant legal expenses;

 

   

pay substantial monetary damages to the party whose intellectual property rights we may be found to be infringing; and/or

 

   

we or our customers could be required to seek licenses to the infringed technology that may not be available on commercially reasonable terms, if at all.

If a third party causes us to discontinue the use of any of our technologies, the combined company may be required to design around those technologies. This could be costly and time consuming and could have an adverse effect on our financial results. Any significant impairments of our intellectual property rights from any litigation we face could materially and adversely impact our business, financial condition, results of operations and our ability to compete in our industry.

We may be subject to disruptions or breaches of our information technology systems that could irreparably damage our reputation and our business, expose us to liability and materially and adversely affect our results of operations.

We are subject to a number of legal requirements, contractual obligations and industry standards regarding security, data protection and privacy and any failure to comply with these requirements, obligations or standards could have an adverse effect on our reputation, business, financial condition and operating results.

In conducting our business, we routinely collect and store sensitive data, including proprietary technology and information about our business and our customers, suppliers and business partners, including proprietary technology and information owned by our customers. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. We may be subject to disruptions or breaches of our secured network caused by computer viruses, illegal hacking, criminal fraud or impersonation, acts of vandalism or terrorism or employee error. Our security measures, those of our third-party suppliers, or our customers may not detect or prevent such security breaches. The costs to us to reduce the risk of or alleviate cyber security breaches and vulnerabilities could be significant. Any type of security breach, attack or misuse of data, whether experienced by us or an associated third party, could harm our reputation or deter existing or prospective customers from using our products and applications, increase our operating expenses in order to contain and remediate the incident, expose us to unbudgeted or uninsured liability, disrupt our operations, divert management focus away from other priorities, increase our risk of regulatory scrutiny, result in the imposition of penalties and fines under state, federal and foreign laws or by payment networks and adversely affect our continued payment network registration and financial institution sponsorship. Moreover, any such compromise of our information security could result in the misappropriation or unauthorized publication of our confidential business or proprietary information or that of other parties with which we do business, an interruption in our operations, the unauthorized transfer of cash or other of our assets, the unauthorized release of customer or employee data or a violation of privacy or other laws. Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products, or that otherwise exploit any security vulnerabilities, and any such attack, if successful, could expose us to liability to customer claims. Any of the foregoing could irreparably damage our reputation and business, which could have a material adverse effect on our results of operations.

 

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There may exist deficiencies in control system and disclosure procedures that could adversely affect the accuracy and reliability of our periodic reporting.

Prior to the merger, Valens was a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting.

Upon the completion of the merger, we will become a public company in the United States and be subject to the periodic reporting requirements of the SEC, including, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting as of December 31, 2021. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company.” The combined company will have designed disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. However, despite the disclosure and compliance procedures, there may from time to time exist deficiencies in our control systems that could adversely affect the accuracy and reliability of our periodic reporting. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. Imperfections in our periodic reporting could create uncertainty regarding the reliability of our results of operations and financial results, which in turn could have a material adverse impact on our reputation or share price. Furthermore, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

Risks Related to Laws and Regulation

Our global business requires us to comply with laws and regulations in countries across the world and exposes us to international business risks that could adversely affect our business.

We are subject to environmental, labor, health, safety and other laws and regulations in Israel, the United States and other jurisdictions in which we operate. We are also required to obtain environmental permits and other authorizations or licenses from governmental authorities for certain of our operations and have to protect our intellectual property worldwide. In the jurisdictions where we operate, we need to comply with differing standards and varying practices of regulatory, tax, judicial and administrative bodies.

The business environment is also subject to many uncertainties, including the following international business risks:

 

   

negative economic developments in economies around the world and the instability of governments, currently for example the sovereign debt situation in certain European countries;

 

   

Social and political instability in a number of countries around the world, including the recent developments in the Middle East, and also including the threat of war, terrorist attacks in the United States or in EMEA, epidemics or civil unrest;

 

   

pandemics or national and international environmental, nuclear or other disasters, which may adversely affect our workforce, as well as our local suppliers and customers;

 

   

adverse changes in governmental policies, especially those affecting trade and investment;

 

   

foreign currency exchange, in particular with respect to the U.S. dollar, and transfer restrictions, in particular in Greater China; and

 

   

threats that our operations or property could be subject to nationalization and expropriation.

 

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No assurance can be given that we have been or will be at all times in complete compliance with the laws and regulations to which we are subject or that we have obtained or will obtain the permits and other authorizations or licenses that we need. If we violate or fail to comply with laws, regulations, permits and other authorizations or licenses, we could be fined or otherwise sanctioned by regulators. In addition, if any of the international business risks were to materialize or become worse, they could also have a material adverse effect on our business, financial condition and results of operations.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, across different markets where we conduct our business. Our actual or perceived failure to comply with such obligations could harm our business.

In Israel, the United States and other jurisdictions in which we operate, we are subject to various laws and related regulations. If we are found to have breached any laws or regulations in any such jurisdiction, we may be subject to enforcement actions that require us to change our business practices in a manner which may negatively impact our revenue, as well as expose us to litigation, fines, civil and/or criminal penalties and adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business in a manner that harms our financial position.

As part of our business development, we collect information about individuals, also referred to as personal data, and other potentially sensitive and/or regulated data from our customers. Laws and regulations in Israel, the United States and around the world restrict how personal information is collected, processed, stored, used and disclosed, as well as set standards for its security, implement notice requirements regarding privacy practices, and provide individuals with certain rights regarding the use, disclosure and sale of their protected personal information.

For example, in the United States, various federal and state regulators, including governmental agencies like the Federal Trade Commission, or the FTC, have adopted, or are considering adopting, laws and regulations concerning privacy and data protection. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act of 2018, or the CCPA, which increases privacy rights for California residents and imposes obligations on companies that process their personal information (including device identifiers, IP addresses, cookies and geo-location), came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. Additionally, voters approved a new privacy law, the California Privacy Rights Act, or the CPRA, in the November 2020 election. Effective starting on January 1, 2023, the CPRA will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information. State laws are changing rapidly and there is discussion in Congress of a new comprehensive federal data privacy law to which we would become subject if it is enacted.

Internationally, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information. For example, the GDPR, which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data (including online identifiers and location data). EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data. In particular, the GDPR includes obligations and restrictions concerning the

 

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consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area or the United Kingdom, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.

In addition, in Israel, the Privacy Protection Law, 5741-1981 (“PPL”), and the regulations enacted thereunder, including the Privacy Protection Regulations (Data Security), 5777-2017 (“Data Security Regulations”), as well as guidelines issued by the Israeli Privacy Protection Authority, and Amendment No. 40 to the Communications Law (Telecommunications and Broadcasting), 5742-1982, impose obligations with respect to the manner certain personal data is processed, maintained, transferred, disclosed, accessed and secured. Failure to comply with the PPL, its regulations and guidelines issued by the Israeli Privacy Protection Authority may expose us to administrative fines, civil claims (including class actions) and in certain cases criminal liability. Current pending legislation may result in a change of the current enforcement measures and sanctions and may also require us to modify the manner personal data is collected, processed and maintained by us. The Israeli Privacy Protection Authority may initiate administrative inspection proceedings, from time to time, without any suspicion of any particular breach of the PPL, as it has done in the past with respect to dozens of Israeli companies in various business sectors. In addition, to the extent that any administrative supervision procedure is initiated by the Israeli Privacy Protection Authority and reveals certain irregularities with respect to our compliance with the PPL, in addition to our exposure to administrative fines, civil claims (including class actions) and in certain cases criminal liability, we may also need to take certain remedial actions to rectify such irregularities, which may increase our costs.

Restrictions on the collection, use, sharing or disclosure of personal information or additional requirements and liability for security and data integrity could require us to modify our solutions and features, possibly in a material manner, could limit our ability to develop new products and features and could subject us to increased compliance obligations and regulatory scrutiny. Our failure to comply with applicable laws and regulations, or to protect personal data, could result in enforcement or litigation action against us, including fines, sanctions, penalties, judgments, imprisonment of our officers and public censure, claims for damages by consumers and other affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse impact on our business, financial condition and results of operations.

Failure to comply with the Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade control laws could subject us to penalties and other adverse consequences.

We have extensive international operations and a substantial portion of our business, particular with respect to our manufacturing processes, is conducted outside of the United States. Our operations are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), as well as the anti-corruption and anti-bribery laws in the countries where we do business. The FCPA prohibits covered parties from offering, promising, authorizing or giving anything of value, directly or indirectly, to a “foreign government official” with the intent of improperly influencing the official’s act or decision, inducing the official to act or refrain from acting in violation of lawful duty, or obtaining or retaining an improper business advantage. The FCPA also requires publicly traded companies to maintain records that accurately and fairly represent their transactions, and to have an adequate system of internal accounting controls. In addition, other applicable anti-corruption laws prohibit bribery of domestic government officials, and some laws that may apply to our operations prohibit commercial bribery, including giving or receiving improper payments to or from non-government parties, as well as so-called “facilitation” payments. In addition, we are subject to U.S. and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control.

 

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Though we maintain policies, internal controls and other measures reasonably designed to promote compliance with applicable anticorruption and anti-bribery laws and regulations, and certain safeguards designed to ensure compliance with U.S. trade control laws, our employees or agents may nevertheless engage in improper conduct for which we might be held responsible. Any violations of these anti-corruption or trade controls laws, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt our operations, involve significant management distraction, and lead to significant costs and expenses, including legal fees. If we, or our employees or agents acting on our behalf, are found to have engaged in practices that violate these laws and regulations, we could suffer severe fines and penalties, profit disgorgement, injunctions on future conduct, securities litigation, bans on transacting government business, delisting from securities exchanges and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our reputation, our net sales or our share price could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery or trade control laws and regulations.

Environmental laws and regulations may expose us to liability, and such liability and compliance with these laws and regulations may adversely affect our business.

The semiconductor industry is subject to a variety of international, federal, state, local and non-U.S. laws and regulations governing pollution, environmental protection and occupational health and safety, including those relating to the release, storage, use, discharge, handling, generation, transportation, disposal, and labeling of, and human exposure to, hazardous and toxic materials, product composition, and the investigation and cleanup of contaminated sites, including sites we currently or formerly owned or operated, due to the release of hazardous materials, regardless of whether we caused such release. We are also required to obtain environmental permits from governmental authorities for certain of our operations. We cannot assure you that we have been or will be at all times in complete compliance with such laws, regulations and permits. Failure to comply with such laws and regulations could subject us to civil or criminal costs, obligations, sanctions or property damage or personal injury claims, or suspension of our facilities’ operating permits. In addition, we may be strictly liable for joint and several costs associated with investigation and remediation of sites at which we have arranged for the disposal of hazardous wastes if such sites become contaminated, even if we fully comply with applicable environmental laws and regulations. Compliance with current or future environmental and occupational health and safety laws and regulations could restrict our ability to expand our business or require us to modify processes or incur other substantial expenses which could harm our business.

In the event of an incident involving hazardous materials, we could be liable for damages and such liability could exceed the amount of any liability insurance coverage and the resources of our business. In addition, in the event of the discovery of contaminants or the imposition of clean up obligations for which we are responsible, we may be required to take remedial or other measures which could have a material adverse effect on our business, financial condition and results of operations. In response to environmental concerns, some customers and government agencies impose requirements for the elimination and/or labeling of hazardous substances, such as lead (which is widely used in soldering connections in the process of semiconductor packaging and assembly), in electronic equipment, as well as requirements related to the take-back of products discarded by customers. Environmental and occupational health and safety laws and regulations have tended to become more stringent over time, causing a need to redesign technologies, imposing greater compliance costs and increasing risks and penalties associated with violations, which could seriously harm our business.

Scientific examination of, political attention to and rules and regulations on issues surrounding the existence and extent of climate may result in an increase in the cost of production due to increase in the prices of energy and introduction of energy or carbon tax. A variety of regulatory developments have been introduced that focus on restricting or managing the emission of carbon dioxide, methane and other greenhouse gasses. Enterprises may need to purchase at higher costs new equipment or raw materials with lower carbon footprints. These developments and further legislation that is likely to be enacted could affect our operations negatively.

 

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Changes to tax laws or regulations in Israel, the United States and other jurisdictions expose us to tax uncertainties and could adversely affect our results of operations or financial condition.

As a multinational business, operating in multiple jurisdiction such as Israel, the United States, the EU, Japan and China, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. Changes to tax laws or regulations in the jurisdictions in which we operate, or in the interpretation of such laws or regulations, could, significantly increase our effective tax rate and reduce our cash flow from operating activities, and otherwise have a material adverse effect on our financial condition. Changes to tax laws or regulations in the jurisdictions in which we operate, or in the interpretation of such laws or regulations, could, significantly increase our effective tax rate and reduce our cash flow from operating activities, and otherwise have a material adverse effect on our financial condition. Since a significant portion of our operations are located in Israel, changes in tax laws or regulations in Israel could significantly affect our operating results. Further changes in the tax laws of foreign jurisdictions could arise, in particular, as a result of different initiatives undertaken by the Organization for Economic Co-operation and Development (the “OECD”). Any changes in the OECD policy or recommendations, if adopted, could increase tax uncertainty and may adversely affect our provision for income taxes and increase our tax liabilities. In addition, other factors or events, including business combinations and investment transactions, changes in the valuation of our deferred tax assets and liabilities, adjustments to taxes upon finalization of various tax returns or as a result of deficiencies asserted by taxing authorities, increases in expenses not deductible for tax purposes, changes in available tax credits, changes in transfer pricing methodologies, other changes in the apportionment of our income and other activities among tax jurisdictions, and changes in tax rates, could also increase our effective tax rate.

We are subject to regular review and audit by Israeli and other foreign tax authorities. Although we believe our tax estimates are reasonable, the authorities in these jurisdictions could review our tax returns and impose additional taxes, interest, linkage and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could materially affect our income tax provision, net income, or cash flows in the period or periods for which such determination and settlement is made. We may also be liable for taxes in connection with businesses we acquire. Our determinations are not binding on any taxing authorities, and accordingly the final determination in an audit or other proceeding may be materially different than the treatment reflected in our tax provisions, accruals and returns. An assessment of additional taxes because of an audit could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Transfer pricing rules may adversely affect our corporate income tax expense.

Many of the jurisdictions in which we conduct business have detailed transfer pricing rules, which require contemporaneous documentation establishing that all transactions with non-resident related parties be priced using arm’s length pricing principles. The tax authorities in these jurisdictions could challenge our related party transfer pricing policies and as a consequence the tax treatment of corresponding expenses and income. International transfer pricing is an area of taxation that depends heavily on the underlying facts and circumstances and generally involves a significant degree of judgment. If any of these tax authorities were to be successful in challenging our transfer pricing policies, we may be liable for additional corporate income tax, and penalties and interest related thereto, which may have a significant impact on our results of operations and financial condition.

Proposed changes to the U.S. tax system, if enacted, could have a material adverse effect on our ongoing liability for U.S. corporate tax.

The Biden administration has proposed a number of changes to the U.S. tax system. The proposals include changes to the U.S. corporate tax system that would increase U.S. corporate tax rates, impose a corporate minimum book tax, and double the tax rate on and make other tax changes to GILTI earned by foreign subsidiaries. Additionally, the proposals include changes to the anti-inversion rules that prevent U.S. companies

 

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from inverting, including by strengthening the rules to treat a foreign acquiring corporation as a U.S. company based on a reduced 50 percent continuing ownership threshold.

Many aspects of the proposals are unclear or undeveloped. We are unable to predict which, if any, U.S. tax reform proposals will be enacted into law, and what effects any enacted legislation might have on our liability for U.S. tax.

Changes in government trade policies, including the imposition of tariffs and export restrictions, could limit our ability to sell our products to certain customers or demand from certain customers, which may materially and adversely affect our sales and results of operations.

The U.S. government has in the past made public statements indicating possible significant changes in U.S. trade policy and have taken certain actions that may impact U.S. trade policy, including imposing new or increased tariffs on certain goods imported into the United States. Since our current products are manufactured outside the United States, such changes, if adopted, could have a disproportionate impact on our business and make our products more expensive and less competitive in the U.S. market. Furthermore, changes in U.S. trade policy could trigger retaliatory actions by affected countries, which could impose restrictions on our ability to do business in or with affected countries or prohibit, reduce or discourage purchases of our products by foreign customers, leading to increased costs of components contained in our products, increased costs of manufacturing our products, and higher prices for our products in foreign markets. For example, there are risks that the Chinese government may, among other things, require the use of local suppliers in place of non-Chinese suppliers like us, compel companies that do business in China to partner with local companies to conduct business and provide incentives to government-backed local customers to buy from local suppliers. Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to decline, which could materially and adversely impact our business, financial condition and results of operations. The U.S. or foreign governments may take administrative, legislative or regulatory action that could materially interfere with our ability to sell products in certain countries and/or to certain customers, particularly in China. We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and China or other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. The institution of trade tariffs both globally and between the United States and China specifically carries the risk of negatively impacting China’s overall economic condition, which could have negative repercussions for our business.

We will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.

Products developed and manufactured in Israel and other locations are subject to export controls of the applicable nation. Obtaining export licenses can be difficult, costly and time-consuming and we may not always be successful in obtaining necessary export licenses, and our failure to obtain required import or export approval for our products or limitations on our ability to export or sell our products imposed by these laws may harm our international and domestic revenues. Noncompliance with these laws could have negative consequences, including government investigations, penalties and reputational harm. The absence of comparable restrictions on competitors in other countries may adversely affect our competitive position. Failure to obtain export licenses for our products or having one or more of our customers be restricted from receiving exports from us could significantly reduce our net sales and materially and adversely affect our business, financial condition and results of operations.

Changing foreign exchange rates may have an adverse effect on our financial results.

We have operations and assets in Israel, the United States and other foreign jurisdictions. We prepare our consolidated financial statements in U.S. dollars, but a portion of our expenditures are denominated in Israeli new shekel and other currencies. We therefore must translate our foreign assets, liabilities, revenue and expenses into U.S. dollars at applicable exchange rates. Consequently, fluctuations in the value of Israeli new shekel and other foreign currencies relative to the U.S. dollar may negatively affect the value of these items in our financial

 

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statements. Additionally, currency exchange rates have been especially volatile in the recent past, and these currency fluctuations may make it difficult for us to predict our results of operations. To the extent we fail to manage our foreign currency exposure adequately, we may suffer losses in the value of our net foreign currency investment, and our business, financial condition, results of operations and cash flows may be negatively affected.

Risks Related to Being a Public Company

Valens will incur increased costs as a result of operating as a public company, and its management will devote substantial time to new compliance initiatives.

Upon the completion of the Business Combination, Valens will become a public company subject to reporting requirements in the United States, and it will incur significant legal, accounting and other expenses that it did not incur as a private company, and these expenses may increase even more after Valens is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. As a public company, Valens will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and the NYSE. Valens’ management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, Valens expects these rules and regulations to substantially increase its legal and financial compliance costs and to make some activities more time-consuming and costly. For example, Valens expects these rules and regulations to make it more difficult and more expensive for it to obtain director and officer liability insurance and it may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. Valens cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. The impact of these requirements could also make it more difficult for Valens to attract and retain qualified persons to serve on its board of directors, its board committees or as executive officers.

The listing of Valens securities on the New York Stock Exchange will not benefit from the process undertaken in connection with an underwritten initial public offering, which could result in diminished investor demand, inefficiencies in pricing and a more volatile public price for Valens’ securities.

Valens will apply to list the Valens ordinary shares and Valens warrants on the NYSE under the symbols “VLN” and “VLNW,” respectively, to be effective at Closing. Unlike an underwritten initial public offering of the Valens securities, the initial listing of Valens’ securities as a result of the Business Combination will not benefit from the following:

 

   

the book-building process undertaken by underwriters that helps to inform efficient price discovery with respect to opening trades of newly listed securities;

 

   

underwriter support to help stabilize, maintain or affect the public price of the new issue immediately after listing; and

 

   

underwriter due diligence review of the offering and potential liability for material misstatements or omissions of fact in a prospectus used in connection with the securities being offered or for statements made by its securities analysts or other personnel.

The lack of such a process in connection with the listing of Valens’ securities could result in diminished investor demand, inefficiencies in pricing and a more volatile public price for Valens’ securities during the period immediately following the listing than in connection with an underwritten initial public offering.

A market for Valens’ securities may not develop or be sustained.

Following the Business Combination, the price of Valens’ securities may fluctuate significantly due to general market and economic conditions. An active trading market for Valens’ securities following the Business Combination may not develop as expected or, if developed, it may not be sustained. In addition, the price of Valens’ securities after the Business Combination can vary due to general economic conditions and forecasts, Valens’ general business condition and the release of Valens’ financial reports. Additionally, if Valens’ securities

 

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become delisted from the NYSE and are quoted on the OTC Bulletin Board (an inter-dealer automated quotation system for equity securities that is not a national securities exchange), the liquidity and price of Valens’ securities may be more limited than if Valens was quoted or listed on the NYSE, the NYSE or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

Valens’ internal controls over financial reporting may not be effective and its independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on Valens’ business and reputation.

After the Business Combination, Valens will continue to carry out its business and will be subject to the reporting requirements of the Securities Act, the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the NYSE. Valens expects that the requirements of these rules and regulations will continue to increase its legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on its personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that Valens maintain effective disclosure controls and procedures and internal control over financial reporting. Valens is continuing to develop and refine its disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by it in the reports that it will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to Valens’ principal executive and financial officers.

Valens’ current controls and any new controls that it develops may become inadequate because of changes in conditions in its business. Further, weaknesses in Valens’ internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect Valens’ operating results or cause it to fail to meet its reporting obligations and may result in a restatement of Valens’ financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations. Since the Company is an “emerging growth company,” as defined in the Securities Act, as modified by the Jumpstart Business Startups Act of 2012 (the “JOBS Act”), it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in Valens’ reported financial and other information.

In order to maintain and improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, Valens has expended and anticipates that it will continue to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of its internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase Valens’ operating costs and could materially and adversely affect its ability to operate its business. In the event that Valens’ internal controls are perceived as inadequate or that it is unable to produce timely or accurate financial statements, investors may lose confidence in Valens’ operating results and the stock price of Valens may decline. In addition, if Valens is unable to continue to meet these requirements, it may not be able to obtain or maintain listing on the NYSE.

Valens independent registered public accounting firm is not required to formally attest to the effectiveness of its internal control over financial reporting until after Valens is no longer an emerging growth company. At such time, Valens’ independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which Valens’ controls are documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on Valens’ business and operating results.

 

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Risks Relating to Our Incorporation and Location in Israel

Conditions in Israel could adversely affect our business.

We are incorporated under the laws of the State of Israel, and our principal offices are located in Israel. Accordingly, political, economic and geo-political instability in Israel may affect our business.

Several countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or geo-political instability in the region continues or increases. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or significant downturn in the economic or financial condition of Israel, could adversely affect our business.

Investors’ rights and responsibilities as our shareholders will be governed by Israeli law, which differs in some respects from the rights and responsibilities of shareholders of non-Israeli companies.

We were incorporated under Israeli law and the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S. and other non-Israeli corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger of the company and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an office holder in the company has a duty to act in fairness towards the company. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.

Provisions of Israeli law and our amended and restated articles of association to be effective upon the closing of the Business Combination may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.

Provisions of Israeli law and our amended and restated articles of association to be effective upon the closing of the Business Combination could have the effect of delaying or preventing a change in control and may make it more difficult for a third-party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares. Among other things:

 

   

Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased;

 

   

Israeli corporate law requires special approvals for certain transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions;

 

   

Israeli corporate law does not provide for shareholder action by written consent for public companies, thereby requiring all shareholder actions to be taken at a general meeting of shareholders;

 

   

our amended and restated articles of association to be effective upon the closing of the Business Combination divide our directors into three classes, each of which is elected once every three years;

 

   

our amended and restated articles of association to be effective upon the closing of the Business Combination generally require a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision dividing our directors into three classes, requires a vote of the holders of 65% of the total voting power of our shareholders;

 

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our amended and restated articles of association to be effective upon the closing of the Business Combination do not permit a director to be removed except by a vote of the holders of at least 65% of the total voting power of our shareholders; and

 

   

our amended and restated articles of association to be effective upon the closing of the Business Combination provide that director vacancies may be filled by our board of directors.

Further, Israeli tax considerations may make potential transactions undesirable to us or some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including, a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.

Our amended and restated articles of association to be effective upon the closing of the Business Combination provide that unless the Company consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between the Company and its shareholders under the Companies Law and the Israeli Securities Law, which could limit our shareholders’ ability to brings claims and proceedings against, as well as obtain favorable judicial forum for disputes with the Company, its directors, officers and other employees.

Unless we agree otherwise, the competent courts of Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law. Such exclusive forum provision in our amended and restated articles of association will not relieve the Company of its duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders of the Company will not be deemed to have waived the Company’s compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors or other employees which may discourage lawsuits against the Company, its directors, officers and employees. The foregoing exclusive forum provision is intended to apply to claims arising under Israeli law and would not apply to claims for which the federal courts would have exclusive jurisdiction, whether by law (as is the case under the Exchange Act) or pursuant to our amended and restated articles of association, including claims under the Securities Act for which there is a separate exclusive forum provision in our amended and restated articles of association. However, the enforceability of similar forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under the Securities Act) in other companies’ organizational documents has been challenged in legal proceedings and there is uncertainty as to whether courts would enforce the exclusive forum provisions in our amended and restated articles of association. If a court were to find the choice of forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations.

Our amended and restated articles of association to be effective upon the closing of the Business Combination provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims arising under the Securities Act which may impose additional litigation costs on our shareholders.

Our amended and restated articles of association to be effective upon the closing of the Business Combination provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any claims arising under the Securities Act or the federal forum provision in our amended and

 

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restated articles of association (the “Federal Forum Provision”). While the Federal Forum Provision does not restrict the ability of our shareholders to bring claims under the Securities Act, nor does it affect the remedies available thereunder if such claims are successful, we recognize that it may limit shareholders’ ability to bring a claim in the judicial forum that they find favorable and may increase certain litigation costs which may discourage the filing of claims under the Securities Act against the Company, its directors and officers. However, the enforceability of similar forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under the Securities Act) in other companies’ organizational documents has been challenged in legal proceedings and there is uncertainty as to whether courts would enforce the exclusive forum provisions in our amended and restated articles of association. If a court were to find the choice of forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations.

We have received Israeli government grants for certain research and development activities. The terms of those grants require us to satisfy specified conditions as defined in Israel’s Encouragement of Research, Development and Technological Innovation in Industry Law, 5744-1984 (the “Innovation Law”).

We received Israeli government grants for certain of our research and development activities. When a company develops know-how, technology or products using grants from the Israel Innovation Authority of the Israeli Ministry of Economy and Industry (formerly known as Office of Chief Scientist) (“IIA”), the terms of these grants and the Innovation Law restrict the transfer or license of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any transfer or license to third parties inside or outside of Israel of know how or for the transfer outside of Israel of manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals, in the future, while in the past the Company did receive approvals of requests submitted by it according to the Innovation Law, including for the manufacturing of Company products outside of Israel. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development outside of Israel.

The transfer or license of IIA-supported technology or know-how outside of Israel and the transfer of manufacturing of IIA-supported products, technology or know-how outside of Israel, may require payment to the IIA of amounts which are determined taking into consideration the following elements: (i) the value of the transferred or licensed technology or know-how; (ii) our research and development expenses; (iii) the amount of IIA accumulated grants. Over the years, Valens has received various grants from the IIA in the total amount of $6 million, out of which the latest grants in the amount of $2.05 million were received from the IIA in 2016; (iv) accumulated revenue-based royalties already paid by the Company; and (v) the time that has passed since the completion of IIA supported period and other factors. These restrictions and requirements for payment may impair our ability to sell, license or otherwise transfer our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. Furthermore, despite the fact that as of December 31, 2019 the Company paid in full all the grants received from the IIA, Valens remains subject to the restrictions and obligations under the Innovation Law described above, and the net consideration available to our shareholders in certain transactions (such as a merger or similar change of control transaction) involving the transfer outside of Israel of technology or know-how developed with IIA funding may be reduced by any amounts that we may be required to pay to the IIA.

If Valens or any of its subsidiaries are characterized as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes, U.S. investors may suffer adverse tax consequences.

A non-U.S. corporation generally will be treated as a PFIC for U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income (including cash). For purposes

 

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of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and capital gains. Based on the current and anticipated composition of the income, assets and operations of Valens and its subsidiaries, Valens does not believe it will be treated as a PFIC for the taxable year that includes the Business Combination. However, there can be no assurances in this regard or any assurances that Valens will not be treated as a PFIC in any future taxable year. Moreover, the application of the PFIC rules is subject to uncertainty in several respects, and Valens cannot assure you that the Internal Revenue Services (the “IRS”) will not take a contrary position or that a court will not sustain such a challenge by the IRS.

Whether Valens or any of its subsidiaries are a PFIC for any taxable year is a factual determination that depends on, among other things, the composition of Valens’ income and assets, and the value of its and its subsidiaries’ shares and assets. Changes in the composition of the income or assets of Valens and its subsidiaries may cause Valens to be or become a PFIC for the current or subsequent taxable years. Whether Valens is treated as a PFIC for U.S. federal income tax purposes is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to significant uncertainty.

If Valens is a PFIC for any taxable year, a U.S. investor who owns Valens ordinary shares may be subject to adverse tax consequences and may incur certain information reporting obligations. For a further discussion, see “Material U.S. Federal Income Tax Considerations—U.S. Holders—Passive Foreign Investment Company Rules.” U.S. investors who own Valens ordinary shares and/or Valens warrants are strongly encouraged to consult their own advisors regarding the potential application of these rules to Valens and the ownership of Valens ordinary shares and/or Valens warrants.

If a U.S. investor is treated for U.S. federal income tax purposes as owning at least 10% of the Valens ordinary shares, such U.S. investor may be subject to adverse U.S. federal income tax consequences.

For U.S. federal income tax purposes, if a U.S. investor who is a U.S. person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of the Valens ordinary shares, such U.S. investor may be treated as a “United States shareholder” with respect to Valens, or any of its non-U.S. subsidiaries, if Valens or such subsidiary is a “controlled foreign corporation.” A non-U.S. corporation is considered a controlled foreign corporation if more than 50% of (1) the total combined voting power of all classes of stock of such corporation entitled to vote, or (2) the total value of the stock of such corporation is owner, or is considered as owned by applying certain constructive ownership rules, by United States shareholders on any day during the taxable year of such non-U.S. corporation. If Valens has one or more U.S. subsidiaries, certain of Valens’ non-U.S. subsidiaries could be treated as a controlled foreign corporation regardless of whether Valens is treated as a controlled foreign corporation (although there are recently promulgated final and currently proposed Treasury regulations that may limit the application of these rules in certain circumstances).

Certain United States shareholders of a controlled foreign corporation may be required to report annually and include in their U.S. federal taxable income their pro rata share of the controlled foreign corporation’s “Subpart F income” and, in computing their “global intangible low-taxed income,” “tested income” and a pro rata share of the amount of certain U.S. property (including certain stock in U.S. corporations and certain tangible assets located in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign corporation makes any distributions. The amount includable by a United States shareholder under these rules is based on a number of factors, including potentially, but not limited to, the controlled foreign corporation’s current earnings and profits (if any), tax basis in the controlled foreign corporation’s assets, and foreign taxes paid by the controlled foreign corporation on its underlying income. Failure to comply with these reporting obligations (or related tax payment obligations) may subject such United States shareholder to significant monetary penalties and may extend the statute of limitations with respect to such United States shareholder’s U.S. federal income tax return for the year for which reporting (or payment of tax) was due. Valens cannot provide any assurances that it will assist U.S. investors in determining whether Valens or any of its non-U.S. subsidiaries are treated as a controlled foreign

 

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corporation for U.S. federal income tax purposes or whether any U.S. investor is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations if Valens, or any of its non-U.S. subsidiaries, is treated as a controlled foreign corporation for U.S. federal income tax purposes. U.S. investors who hold 10% or more of the combined voting power or value of Valens ordinary shares are strongly encourage to consult their own advisors regarding the U.S. tax consequences of owning or disposing of Valens ordinary shares.

Certain tax benefits that may be available to Valens, if obtained by Valens, would require it to continue to meet various conditions and may be terminated or reduced in the future, which could increase Valens’ costs and taxes.

Valens may be eligible for certain tax benefits provided to “Preferred Technological Enterprises” under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, referred to as the Investment Law. If Valens obtains tax benefits under the “Preferred Technological Enterprises” regime then, in order to remain eligible for such tax benefits, it will need to continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended. If these tax benefits are reduced, cancelled or discontinued, Valens’ Israeli taxable income may be subject to the Israeli corporate tax rate of 23% in 2021 and thereafter. Additionally, if Valens increases its activities outside of Israel through acquisitions, for example, its activities might not be eligible for inclusion in future Israeli tax benefit programs. See “Certain Material Israeli Tax Considerations.”

It may be difficult to enforce a U.S. judgment against Valens, its officers and directors in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on Valens’ officers and directors.

Most of Valens’ directors or officers are not residents of the United States and most of their and Valens’ assets are located outside the United States. Service of process upon Valens or its non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against Valens or its non-U.S. directors and executive officers may be difficult to obtain within the United States, although our amended and restated articles of association to be effective upon the closing of the Business Combination provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims arising under the Securities Act. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against Valens or its non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against Valens or its non-U.S. officers and directors.

Moreover, among other reasons, including but not limited to, fraud or absence of due process, or the existence of a judgment which is at variance with another judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel. For more information, see “Enforceability of Civil Liabilities.”

Risks Related to Ownership of the Combined Company’s Shares

The Valens Articles and Israeli law could prevent a takeover that shareholders consider favorable and could also reduce the market price of Valens ordinary shares.

Certain provisions of Israeli law and the Valens Articles could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire Valens or for Valens’ shareholders to elect different individuals to its board of directors, even if doing so would be beneficial to its shareholders, and may limit the price that investors may be willing to pay in the future for the Valens ordinary shares. For example,

 

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Israeli corporate law regulates mergers and requires that a tender offer be effected when certain thresholds of percentage ownership of voting power in a company are exceeded (subject to certain conditions). Further, Israeli tax considerations may make potential transactions undesirable to Valens or to some of its shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. See the section titled “Certain Material Israeli Tax Considerations—Taxation of our shareholders.”

Valens has never declared or paid any cash dividends on its shares. Valens does not intend to pay dividends for the foreseeable future. It currently intends to retain all available funds and any future earnings for use in the operation of its business and does not anticipate paying any dividends on the Valens ordinary shares in the foreseeable future. Consequently, you may be unable to realize a gain on your investment except by selling sell such shares after price appreciation, which may never occur.

Valens’ board of directors has sole discretion whether to pay dividends. If Valens’ board of directors decides to pay dividends, the form, frequency, and amount will depend upon its future, operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that its directors may deem relevant. The Israeli Companies Law, 5759-1999 (the “Companies Law”) imposes restrictions on Valens’ ability to declare and pay dividends. See the section titled “Description of Valens ordinary shares—Dividend and Liquidation Rights for additional information. Payment of dividends may also be subject to Israeli withholding taxes. See the section titled “Certain Material Israeli Tax Considerations” for additional information.

The Valens ordinary shares and Valens warrants may not be listed on a national securities exchange after the Business Combination, which could limit investors’ ability to make transactions in such securities and subject Valens to additional trading restrictions.

Valens intends to apply to have the Valens ordinary shares and Valens warrants approved for listing on the NYSE after the consummation of the Business Combination. Valens will be required to meet certain initial listing requirements to be listed, including having a minimum number of round lot shareholders. Valens may not be able to meet the initial listing requirements in connection with the Business Combination. Further, even if the Valens ordinary shares and Valens warrants are so listed, Valens may be unable to maintain the listing of such securities in the future. If Valens fails to meet the initial listing requirements and the NYSE does not list the Valens ordinary shares and Valens warrants (and the related closing condition with respect to the listing of the Valens ordinary shares is waived by the parties), Valens could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for the Valens ordinary shares and Valens warrants;

 

   

a reduced level of trading activity in the secondary trading market for the Valens ordinary shares and Valens warrants;

 

   

a limited amount of news and analyst coverage for Valens;

 

   

a decreased ability to issue additional securities or obtain additional financing in the future; and

 

   

Valens’ securities would not be “covered securities” under the National Securities Markets Improvement Act of 1996, which is a federal statute that prevents or pre-empts the states from regulating the sale of certain securities, including securities listed on the NYSE, in which case Valens’ securities would be subject to regulation in each state where Valens offers and sells securities.

The market price and trading volume of the Valens ordinary shares may be volatile and could decline significantly following the Business Combination.

The stock markets, including the NYSE on which Valens intends to list the Valens ordinary shares and Valens warrants to be issued in the Business Combination under the symbol “VLN,” and “VLNW,” respectively, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for the Valens ordinary shares and Valens warrants following

 

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the Business Combination, the market price of the Valens ordinary shares and Valens warrants ordinary shares may be volatile and could decline significantly. In addition, the trading volume in the Valens ordinary shares and Valens warrants may fluctuate and cause significant price variations to occur. If the market price of the Valens ordinary shares and Valens warrants ordinary shares declines significantly, you may be unable to resell your shares or warrants at or above the market price of the ordinary shares Valens ordinary shares and Valens warrants as of the date immediately following the consummation of the Business Combination. Valens and PTK cannot assure you that the market price of the Valens ordinary shares and Valens warrants ordinary shares will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:

 

   

the realization of any of the risk factors presented in this proxy statement/prospectus;

 

   

actual or anticipated differences in Valens’ estimates, or in the estimates of analysts, for Valens’ revenues, earnings, results of operations, level of indebtedness, liquidity or financial condition;

 

   

additions and departures of key personnel;

 

   

failure to comply with the requirements of the NYSE;

 

   

failure to comply with the Sarbanes-Oxley Act or other laws or regulations;

 

   

future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases, of PTK’s securities including due to the expiration of contractual lock-up agreements;

 

   

publication of research reports about Valens;

 

   

the performance and market valuations of other similar companies;

 

   

failure of securities analysts to initiate or maintain coverage of Valens, changes in financial estimates by any securities analysts who follow Valens or Valens’ failure to meet these estimates or the expectations of investors;

 

   

new laws, regulations, subsidies, or credits or new interpretations of existing laws applicable to Valens;

 

   

commencement of, or involvement in, litigation involving Valens;

 

   

broad disruptions in the financial markets, including sudden disruptions in the credit markets;

 

   

speculation in the press or investment community;

 

   

actual, potential or perceived control, accounting or reporting problems;

 

   

changes in accounting principles, policies and guidelines; and

 

   

other events or factors, including those resulting from infectious diseases, health epidemics and pandemics (including the ongoing COVID-19 public health emergency), natural disasters, war, acts of terrorism or responses to these events.

In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert Valens’ management’s attention and resources, which could have a material adverse effect on us.

If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about Valens, its business, or its market, or if they change their recommendations regarding the Valens ordinary shares adversely, then the price and trading volume of the Valens ordinary shares could decline.

The trading market for the Valens ordinary shares will be influenced by the research and reports that industry or financial analysts publish about its business. Valens does not control these analysts, or the content and opinions included in their reports. As a new public company, Valens may be slow to attract research coverage and the analysts who publish information about the Valens ordinary shares will have relatively little experience with Valens, which could affect their ability to accurately forecast Valens’ results and make it more

 

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likely that Valens fails to meet their estimates. In the event Valens obtains industry or financial analyst coverage, if any of the analysts who cover Valens issues an inaccurate or unfavorable opinion regarding it, Valens’ share price would likely decline. In addition, the share prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If Valens’ financial results fail to meet, or significantly exceed, its announced guidance or the expectations of analysts or public investors, analysts could downgrade the Valens ordinary shares or publish unfavorable research about it. If one or more of these analysts cease coverage of Valens or fail to publish reports on it regularly, Valens’ visibility in the financial markets could decrease, which in turn could cause its share price or trading volume to decline.

Valens’ failure to meet the continued listing requirements of the NYSE could result in a delisting of its Securities.

If, after listing, Valens fails to satisfy the continued listing requirements of the NYSE such as the corporate governance requirements or the minimum closing bid price requirement, the NYSE may take steps to delist its securities. Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting, Valens can provide no assurance that any action taken by it to restore compliance with listing requirements would allow its securities to become listed again, stabilize the market price or improve the liquidity of its securities, prevent its securities from dropping below the NYSE minimum bid price requirement or prevent future non-compliance with the NYSE’s listing requirements. Additionally, if Valens’ securities are not listed on, or become delisted from, the NYSE for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of Valens’ securities may be more limited than if it were quoted or listed on the NYSE or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

Valens will qualify as an emerging growth company within the meaning of the Securities Act, and if Valens takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make Valens’ securities less attractive to investors and may make it more difficult to compare Valens’ performance with other public companies.

Valens is eligible to be treated as an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies. Valens intends to take advantage of this extended transition period under the JOBS Act for adopting new or revised financial accounting standards.

For as long as Valens continues to be an emerging growth company, it may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, its shareholders may not have access to certain information that they may deem important. Valens could be an emerging growth company for up to five years, although circumstances could cause it to lose that status earlier, including if its total annual gross revenue exceeds $1.07 billion, if it issues more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time it is a “large accelerated filer” under U.S. securities laws.

Valens cannot predict if investors will find Valens ordinary shares less attractive because it may rely on these exemptions. If some investors find Valens ordinary shares less attractive as a result, there may be a less active trading market for Valens ordinary shares and Valens’ share price may be more volatile. Further, there is no guarantee that the exemptions available to Valens under the JOBS Act will result in significant savings. To the extent that Valens chooses not to use exemptions from various reporting requirements under the JOBS Act, it will incur additional compliance costs, which may impact Valens’ financial condition.

 

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We are a foreign private issuer and, as a result, are not subject to U.S. proxy rules but are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. issuer.

Because we qualify as a foreign private issuer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and although we follow Israeli laws and regulations with regard to such matters, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including: (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers will be required to file their annual report on Form 20-F by 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, even though we are contractually obligated and intend to make interim reports available to our shareholders, copies of which we are required to furnish to the SEC on a Form 6-K, and even though we are required to file reports on Form 6-K disclosing whatever information we have made or are required to make public pursuant to Israeli law or distribute to our shareholders and that is material to our company, you may not have the same protections afforded to shareholders of companies that are United Sates domestic issuers.

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2022. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the New York Stock Exchange. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.

As we are a “foreign private issuer” and follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all New York Stock Exchange corporate governance requirements.

As a foreign private issuer, we have the option to follow certain home country corporate governance practices rather than those of the New York Stock Exchange, provided that we disclose the requirements we are not following and describe the home country practices we are following. We intend to rely on this “foreign private issuer exemption” with respect to the New York Stock Exchange rules requiring shareholder approval. We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all New York Stock Exchange corporate governance requirements.

 

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Risks Related to the Business Combination

PTK may not have sufficient funds to consummate the Business Combination.

As of March 31, 2021, PTK had approximately $177,972 available to it outside the Trust Account to fund its working capital requirements. If PTK is required to seek additional capital, it would need to borrow funds from the Sponsor, its management team or other third parties to operate or it may be forced to liquidate. None of such persons is under any obligation to advance funds to PTK in such circumstances. Any such advances would be repaid only from funds held outside the Trust Account or from funds released to PTK upon completion of the Business Combination. If PTK is unable to consummate the Business Combination because it does not have sufficient funds available, PTK will be forced to cease operations and liquidate the Trust Account. Consequently, PTK’s public stockholders may receive less than $10 per share and their warrants will expire worthless.

If PTK’s stockholders fail to properly demand redemption rights, they will not be entitled to convert their PTK Common Stock into a pro rata portion of the Trust Account.

PTK stockholders holding public shares may demand that PTK convert their public shares into a pro rata portion of the Trust Account, calculated as of two (2) business days prior to the special meeting. To demand redemption rights, PTK stockholders must deliver their shares (either physically or electronically) to PTK’s transfer agent no later than two (2) business days prior to the special meeting. Any stockholder who fails to properly demand redemption rights by delivering his, her or its shares will not be entitled to convert his, her or its shares into a pro rata portion of the Trust Account. See the section of this proxy statement/prospectus titled “Special Meeting of PTK Stockholders—Redemption Rights” for the procedures to be followed if you wish to convert your shares to cash.

The Business Combination remains subject to conditions that PTK cannot control and if such conditions are not satisfied or waived, the Business Combination may not be consummated.

The Business Combination is subject to a number of conditions, including the condition that PTK have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-5(g)(1) of the Exchange Act) either immediately prior to or upon consummation of the Business Combination, that there is no legal prohibition against consummation of the Business Combination, that the Valens ordinary shares be approved for listing on the NYSE subject only to official notice of issuance thereof and the requirement to have a sufficient number of round lot holders, receipt of securityholder approvals, continued effectiveness of the registration statement of which this proxy statement/prospectus is a part, the truth and accuracy of PTK’s and Valens’ representations and warranties made in the Business Combination Agreement, the non-termination of the Business Combination Agreement and consummation of certain ancillary agreements. There are no assurances that all conditions to the Business Combination will be satisfied or that the conditions will be satisfied in the time frame expected.

If the conditions to the Business Combination are not met (and are not waived, to the extent waivable), either PTK or Valens may, subject to the terms and conditions of the Business Combination Agreement, terminate the Business Combination Agreement. See the section of this proxy statement/prospectus titled “The Business Combination Agreement—Termination.”

The exercise of PTK’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in PTK’s stockholders’ best interest.

In the period leading up to the closing of the Business Combination, events may occur that, pursuant to the Business Combination Agreement, would require PTK to agree to amend the Business Combination Agreement, to consent to certain actions taken by Valens or to waive rights that PTK is entitled to under the Business Combination Agreement. Waivers may arise because of changes in the course of Valens’ business, a request by

 

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Valens to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on Valens’ business and would entitle PTK to terminate the Business Combination Agreement. In any of such circumstances, it would be at PTK’s discretion, acting through its board of directors, to grant its consent or waive those rights. The existence of the financial and personal interests of the directors and officers described in the following risk factors may result in a conflict of interest on the part of one or more of the directors or officers between what he or they may believe is best for PTK and what he or they may believe is best for himself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, PTK does not believe there will be any changes or waivers that PTK’s directors and officers would be likely to make after stockholder approval of the Business Combination Proposal has been obtained. While certain changes could be made without further stockholder approval, PTK will circulate a new or amended proxy statement/prospectus and resolicit PTK’s stockholders if changes to the terms of the Business Combination that would have a material impact on its stockholders or represent a fundamental change in the proposals being voted upon.

Future resales of the Valens ordinary shares issued in connection with the Business Combination may cause the market price of Valens to drop significantly, even if Valens’ business is doing well.

Concurrently with the execution of the Business Combination Agreement, Valens, certain equityholders of Valens and certain equityholders of PTK entered into the Investors’ Rights Agreement, providing such stockholders with customary demand registration rights and piggyback registration rights with respect to registration statements filed by Valens after the closing. Under the Investors’ Rights Agreement, the securityholders of Valens party thereto (other than the Sponsor) have agreed not to transfer its Valens ordinary shares, except to certain permitted transferees, beginning on the closing date of the Business Combination and continuing for a period of one hundred eighty (180) days thereafter. The Sponsor has agreed not to transfer the Sponsor Lock-Up Shares, except to certain permitted transferees, beginning on the closing date of the Business Combination and continuing until the earlier of (i) one hundred eighty (180) days thereafter and (ii) when Valens completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all Valens shareholders having the right to exchange their ordinary shares for cash, securities or other property. See the section of this proxy statement/prospectus titled “Agreements Entered Into in Connection with the Business Combination—Investors’ Rights Agreement.”

Separately, the articles of association of Valens will be amended and restated as of the consummation of the Business Combination. Pursuant to such amendment, each securityholder of Valens as of immediately prior to such amendment will be restricted from transferring its Valens ordinary shares, except to certain permitted transferees, beginning on the date of such amendment and continuing for a period of one hundred eighty (180) days thereafter.

Upon expiration of the applicable lockup period and upon the effectiveness of any registration statement Valens files pursuant to the above-referenced Investors’ Rights Agreement, in a registered offering of securities pursuant to the Securities Act or otherwise in accordance with Rule 144 under the Securities Act, the Valens shareholders may sell large amounts of Valens ordinary shares and warrants in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of the Valens ordinary shares or the Valens warrants or putting significant downward pressure on the price of the Valens ordinary shares or warrants. Additionally, downward pressure on the market price of the Valens ordinary shares or Valens warrants likely will result from sales of Valens ordinary shares issued in connection with the exercise of warrants. Further, sales of Valens ordinary shares or warrants upon expiration of the applicable lockup period could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. Short sales of Valens ordinary shares or warrants could have a tendency to depress the price of the Valens ordinary shares or the Valens warrants, respectively, which could increase the potential for short sales.

 

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Additionally, through the Subscription Agreements, Valens has agreed with the PIPE Investors, including the Sponsor, to register the PIPE Shares on a resale registration statement following the closing of the Transactions. These shares will be freely tradable without restriction or further registration under the Securities Act, unless the shares are held by any of PTK’s “affiliates” as such term is defined in Rule 144 under the Securities Act. This additional liquidity in the market for Valens ordinary shares may lead to downward pressure on the market price of the Valens ordinary shares.

We cannot predict the size of future issuances of Valens ordinary shares or warrants or the effect, if any, that future issuances and sales of shares of Valens ordinary shares or warrants will have on the market price of the Valens ordinary shares or warrants. Sales of substantial amounts of Valens ordinary shares (including those shares issued in connection with the Business Combination), or the perception that such sales could occur, may adversely affect prevailing market prices of Valens ordinary shares or warrants.

PTK’s board of directors did not obtain a third-party fairness opinion in determining whether or not to proceed with the Business Combination.

PTK’s board of directors did not obtain a third-party fairness opinion in connection with their determination to approve the Business Combination. In analyzing the Business Combination, PTK’s board of directors and management conducted due diligence on Valens and researched the industry in which Valens operates and concluded that the Business Combination was fair to and in the best interest of PTK and its stockholders. Accordingly, investors will be relying solely on the judgment of PTK’s board of directors and management in valuing Valens’ business, and PTK’s board of directors and management may not have properly valued such business. The lack of a third-party fairness opinion may lead an increased number of stockholders to vote against the proposed Business Combination or demand redemption of their shares for cash, which could potentially impact PTK’s ability to consummate the Business Combination or adversely affect Valens’ liquidity following the consummation of the Business Combination.

PTK and Valens will incur significant transaction and transition costs in connection with the Business Combination.

PTK and Valens have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Transactions and operating as a public company following the consummation of the Transactions. All expenses incurred in connection with the Business Combination, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs or paid by Valens following the Closing.

Subsequent to the completion of the Business Combination, Valens may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and its ordinary share price, which could cause you to lose some or all of your investment.

Although PTK has conducted extensive due diligence on Valens, there is no assurance that this diligence surfaced all material issues that may be present in Valens’ business, that it has uncovered all material issues through a customary amount of due diligence, or that factors outside of Valens’ business and outside of its control will not later arise. As a result of these factors, the Valens may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in its reporting losses. Even if PTK’s due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with PTK’s preliminary risk analysis. Even though these charges may be non-cash items and would not have an immediate impact on Valens’ liquidity, the fact that Valens reports charges of this nature could contribute to negative market perceptions of it or its securities. Accordingly, any stockholders who choose to remain shareholders following the Business Combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value.

 

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The Valens securities to be received by PTK’s securityholders as a result of the Business Combination will have different rights from PTK securities.

Following completion of the Business Combination, PTK’s securityholders will no longer be securityholders of PTK but will instead be securityholders of Valens. There will be important differences between current rights as a PTK securityholder and rights as a Valens securityholder. See “Comparison of Rights of Valens Shareholders and PTK Stockholders” for a discussion of the different rights associated with the Valens securities.

PTK’s stockholders will have a reduced ownership and voting interest after consummation of the Business Combination and will exercise less influence over management.

After the completion of the Business Combination and Transactions, PTK’s stockholders will own a smaller percentage of Valens than they currently own of PTK. At the Closing, existing Valens shareholders would hold approximately 74% of the issued and outstanding Valens ordinary shares and current stockholders of PTK (including the Sponsor) would hold approximately 14% of the issued and outstanding Valens ordinary shares (assuming no holder of PTK Common Stock exercises redemption rights as described in this proxy statement/prospectus and including Sponsor shares that are subject to forfeiture, as described in the Sponsor Letter Agreement). Consequently, PTK’s stockholders, as a group, will have reduced ownership and voting power in the combined company compared to their ownership and voting power in PTK.

Valens may issue additional Valens ordinary shares or other equity securities without seeking approval of the Valens shareholders, which would dilute your ownership interests and may depress the market price of the Valens ordinary shares.

Upon consummation of the Business Combination, Valens will have warrants outstanding to purchase up to an aggregate of 9,080,000 Valens ordinary shares. Further, Valens may choose to seek third party financing to provide additional working capital for the Valens business, in which event Valens may issue additional equity securities. Following the consummation of the Business Combination, Valens may also issue additional Valens ordinary shares or other equity securities of equal or senior rank in the future for any reason or in connection with, among other things, future acquisitions, the redemption of outstanding warrants or repayment of outstanding indebtedness, without shareholder approval, in a number of circumstances.

The issuance of additional Valens ordinary shares or other equity securities of equal or senior rank would have the following effects:

 

   

Valens’ existing shareholders’ proportionate ownership interest in Valens will decrease;

 

   

the amount of cash available per share, including for payment of dividends in the future, may decrease;

 

   

the relative voting strength of each previously outstanding Valens ordinary share may be diminished; and

 

   

the market price of the Valens ordinary shares may decline.

Even if we consummate the Business Combination, there is no guarantee that the Valens warrants will ever be in the money, and they may expire worthless and the terms of PTK’s warrants may be amended.

The exercise price for the Valens warrants will be $11.50 per whole ordinary share, with each Valens warrant exercisable for one-half Valens ordinary share. Upon consummation of the Business Combination, each PTK warrant will become one Valens warrant, and the exercise price and number of shares issuable upon exercise of such warrants may change if the Capital Restructuring is not effected or does not result in a price per Valens ordinary share of $10.00. There is no guarantee that the Valens warrants, following the Business Combination, will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

 

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PTK’s current directors’ and executive officers’ affiliates own shares of PTK Common Stock and private placement warrants that will be worthless if the Business Combination is not approved. Such interests may have influenced their decision to approve the Business Combination.

If the Business Combination or another business combination is not consummated by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter), PTK will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, the 2,875,000 shares of PTK Common Stock held by the Sponsor, which is affiliated with certain of PTK’s directors and officers and other certain officers, that were acquired for an aggregate purchase price of $25,000 prior to the PTK IPO, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Further, the Sponsor purchased an aggregate of 7,400,000 private placement warrants at a price of $0.50 per warrant, for an aggregate purchase price of $3,700,000. The private placement warrants will become worthless if PTK does not consummate a business combination by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter). On the other hand, if the Business Combination is consummated, each outstanding share of PTK Common Stock will convert into one Valens ordinary share, subject to adjustment described herein, at the closing and each outstanding PTK warrant will become a Valens warrant. Such shares and warrants had an aggregate market value of $28.5 million and $3.0 million, respectively, based upon the closing price of $9.90 per share and $0.40 per warrant on the NYSE on August 27, 2021.

In addition, the Sponsor agreed to invest in Valens as part of the PIPE Financing, which investment will not take place if the Business Combination is not approved. These financial interests may have influenced the decision of PTK’s directors and officers to approve the Business Combination and to continue to pursue the Business Combination. In considering the recommendations of PTK’s board of directors to vote for the Business Combination Proposal and other proposals, its stockholders should consider these interests. See the section of this proxy statement/prospectus titled “Proposal One—The Business Combination Proposal—Interests of Certain Persons in the Transactions.”

The Sponsor, an affiliate of current officers and directors of PTK, is liable to ensure that proceeds of the Trust Account are not reduced by vendor claims in the event the Business Combination is not consummated. Such liability may have influenced PTK’s board of directors’ decision to pursue the Business Combination and PTK’s board of directors’ decision to approve it.

If the Business Combination or another business combination is not consummated by PTK on or before January 15, 2022, the Sponsor, an affiliate of current officers and directors of PTK, will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by PTK for services rendered or contracted for or for products sold to PTK, but only if such a vendor or target business has not executed a waiver agreement. If PTK consummates a business combination, on the other hand, PTK will be liable for all such claims. PTK has no reason to believe that the Sponsor will not be able to fulfill its indemnity obligations to PTK.

These obligations of the Sponsor may have influenced PTK’s board of directors’ decision to pursue the Business Combination with Valens or PTK’s board of directors’ decision to approve the Business Combination. In considering the recommendations of PTK’s board of directors to vote for the Business Combination Proposal and other proposals, stockholders should consider these interests. See the section of this proxy statement/prospectus titled “Proposal One—The Business Combination Proposal—Interests of Certain Persons in the Transactions.”

 

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PTK’s directors may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to PTK’s public stockholders in the event a business combination is not consummated.

If proceeds in the Trust Account are reduced below $10.00 per public share and the Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, PTK’s independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While PTK currently expects that its independent directors would take legal action on PTK’s behalf against the Sponsor to enforce the Sponsor’s indemnification obligations, it is possible that PTK’s independent directors in exercising their business judgment may choose not to do so in any particular instance. If PTK’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to PTK’s public stockholders may be reduced below $10.00 per share.

Activities taken by existing PTK stockholders to increase the likelihood of approval of the Business Combination Proposal and other proposals could have a depressive effect on the PTK Common Stock.

At any time prior to the special meeting, during a period when they are not then aware of any material nonpublic information regarding PTK or its securities, PTK, the Sponsor, PTK’s officers and directors, Valens, the Valens officers and directors and/or their respective affiliates may purchase PTK Common Stock from institutional and other investors who vote, or indicate an intention to vote, against the Business Combination Proposal, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of PTK Common Stock or vote their shares of PTK Common Stock in favor of the Business Combination Proposal. The purpose of such purchases and other transactions would be to increase the likelihood of approval of the Business Combination Proposal by the holders of a majority of the outstanding shares of PTK Common Stock and ensure that PTK has in excess of $5,000,001 of net assets to consummate the Business Combination where it appears that such requirement would otherwise not be met. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares owned by the Sponsor for nominal value. Entering into any such arrangements may have a depressive effect on the PTK Common Stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares of PTK Common Stock at a price lower than market and may therefore be more likely to sell the PTK Common Stock he owns, either prior to or immediately after the special meeting.

In addition, if such purchases are made, the public “float” of the Valens ordinary shares following the Business Combination and the number of beneficial holders of Valens securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of Valens securities on the NYSE or another national securities exchange or reducing the liquidity of the trading market for the Valens ordinary shares.

The Business Combination may be completed even though material adverse effects may result from the announcement of the Business Combination, industry-wide changes and other causes.

In general, either PTK or Valens may refuse to complete the Business Combination if there is a material adverse effect affecting the other party between the signing date of the Business Combination Agreement and the planned closing. However, certain types of changes do not permit either party to refuse to consummate the Business Combination, even if such change could be said to have a material adverse effect on Valens or PTK, including the following events (except, in certain cases where the change has a disproportionate effect on a party):

 

   

changes generally affecting the economy and the financial or securities markets, including the COVID-19 pandemic;

 

   

the outbreak or escalation of war or any act of terrorism, civil unrest or natural disasters;

 

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changes (including changes in law) or general conditions in the industry in which the party operates;

 

   

changes in GAAP, or the authoritative interpretation of GAAP;

 

   

changes that are generally applicable to the industries or markets in which Valens operates;

 

   

changes attributable to the public announcement or pendency of the Transactions or the execution or performance of the Business Combination Agreement;

 

   

any failure by Valens to meet, or changes to, any internal or published budgets, projections, forecasts, estimates or predictions; or

 

   

any hurricane, tornado, flood, earthquake, tsunami, natural disaster, mudslides, wild fires, explosions, epidemics, pandemics (including COVID-19), acts of God or other natural disasters or comparable events.

Furthermore, PTK or Valens may waive the occurrence of a material adverse effect affecting the other party. If a material adverse effect occurs and the parties still consummate the Business Combination, the market trading price of the Valens ordinary shares and Valens warrants may suffer.

Delays in completing the Business Combination may substantially reduce the expected benefits of the Business Combination.

Satisfying the conditions to, and completion of, the Business Combination may take longer than, and could cost more than, PTK expects. Any delay in completing or any additional conditions imposed in order to complete the Business Combination may materially adversely affect the benefits that PTK expects to achieve from the Business Combination.

PTK and Valens have no history operating as a combined company. The unaudited pro forma condensed combined financial information may not be an indication of Valens’ financial condition or results of operations following the Business Combination, and accordingly, you have limited financial information on which to evaluate Valens and your investment decision.

Valens has a limited operating history and Valens and PTK have no prior history as a combined entity and their operations have not been previously managed on a combined basis. The unaudited pro forma condensed combined financial information contained in this proxy statement/prospectus has been prepared using the consolidated historical financial statements of PTK and Valens, and is presented for illustrative purposes only and should not be considered to be an indication of the results of operations including, without limitation, future revenue, or financial condition of PTK following the Business Combination. Certain adjustments and assumptions have been made regarding PTK after giving effect to the Business Combination. Valens and PTK believe these assumptions are reasonable, however, the information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments are difficult to make with accuracy. These assumptions may not prove to be accurate, and other factors may affect PTK’s results of operations or financial condition following the consummation of the Business Combination. For these and other reasons, the historical and pro forma condensed combined financial information included in this proxy statement/prospectus does not necessarily reflect Valens’ results of operations and financial condition and the actual financial condition and results of operations of Valens following the Business Combination may not be consistent with, or evident from, this pro forma financial information.

The projections and forecasts presented in this proxy statement/prospectus may not be an indication of the actual results of the transaction or Valens’ future results.

This proxy statement/prospectus contains projections and forecasts prepared by Valens. None of the projections and forecasts included in this proxy statement/prospectus have been prepared with a view toward

 

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public disclosure other than to certain parties involved in the Business Combination or toward complying with SEC guidelines or GAAP. The projections and forecasts were prepared based on numerous variables and assumptions which are inherently uncertain and may be beyond the control of Valens and PTK and exclude, among other things, transaction-related expenses. Important factors that may affect actual results and results of Valens’ operations following the Business Combination, or could lead to such projections and forecasts not being achieved include, but are not limited to: client demand for Valens’ products, an evolving competitive landscape, rapid technological change, margin shifts in the industry, regulation changes in a highly regulated environment, successful management and retention of key personnel, unexpected expenses and general economic conditions. As such, these projections and forecasts may be inaccurate and should not be relied upon as an indicator of actual past or future results.

If PTK is unable to complete the Business Combination or another business combination by January 15, 2022 (or such other date as approved by PTK stockholders through approval of an amendment to the PTK Charter), PTK will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, PTK public stockholders may only receive $10 per share (or less than such amount in certain circumstances) and PTK warrants will expire worthless.

If PTK is unable to complete the Business Combination or another business combination within the required time period, PTK will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to PTK to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding PTK public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of PTK’s remaining stockholders and its board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to PTK’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, PTK public stockholders may only receive $10 per share, and PTK warrants will expire worthless. In certain circumstances, PTK public stockholders may receive less than $10 per share on the redemption of their shares.

If the Business Combination is not completed, potential target businesses may have leverage over PTK in negotiating a business combination, PTK’s ability to conduct due diligence on a business combination as it approaches its dissolution deadline may decrease, and it may have insufficient working capital to continue to pursue potential target businesses, each of which could undermine its ability to complete a business combination on terms that would produce value for PTK stockholders.

Any potential target business with which PTK enters into negotiations concerning an initial business combination will be aware that, unless PTK amends its existing charter to extend its life and amend certain other agreements it has entered into, then PTK must complete its initial business combination by January 15, 2022. Consequently, if PTK is unable to complete this Business Combination, a potential target business may obtain leverage over it in negotiating an initial business combination, knowing that if PTK does not complete its initial business combination with that particular target business, it may be unable to complete its initial business combination with any target business. This risk will increase as PTK gets closer to the timeframe described above. In addition, PTK may have limited time to conduct due diligence and may enter into its initial business combination on terms that it would have rejected upon a more comprehensive investigation. Additionally, PTK may have insufficient working capital to continue efforts to pursue a business combination.

 

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In the event of liquidation by PTK, third parties may bring claims against PTK and, as a result, the proceeds held in the Trust Account could be reduced and the per-share liquidation price received by stockholders could be less than $10 per share.

Under the terms of the PTK Charter, PTK must complete the Business Combination or another business combination by January 15, 2022 (unless such date is extended by PTK’s stockholders) or PTK must cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, third parties may bring claims against PTK. Although PTK has obtained waiver agreements from certain vendors and service providers it has engaged and owes money to, and the prospective target businesses it has negotiated with, whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the Trust Account notwithstanding such agreements. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the Trust Account could be subject to claims which could take priority over those of PTK’s public stockholders. If PTK is unable to complete a business combination within the required time period, the Sponsor has agreed that it will be liable to PTK if and to the extent any claims by a vendor for services rendered or products sold to it, or a prospective target business with which it has discussed entering into a transaction agreement, reduces the amount of funds in the Trust Account to below $10.00 per public share, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under PTK’s indemnity of the underwriter of the initial public offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. Furthermore, the Sponsor will not be liable to public stockholders and instead will only have liability to PTK. PTK has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and, therefore, the Sponsor may not be able to satisfy those obligations. PTK has not asked the Sponsor to reserve for such eventuality. Therefore, the per-share distribution from the Trust Account in such a situation may be less than the approximately $115,000,000 estimated to be in the Trust Account as of two business days prior to the special meeting date, due to such claims.

Additionally, if PTK is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, or if PTK otherwise enters compulsory or court supervised liquidation, the proceeds held in the Trust Account could be subject to applicable bankruptcy law and may be included in its bankruptcy

PTK’s stockholders may be held liable for claims by third parties against PTK to the extent of distributions received by them.

If PTK is unable to complete the Business Combination or another business combination within the required time period, PTK will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to PTK to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding PTK public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of PTK’s remaining stockholders and its board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to PTK’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. PTK cannot assure you that it will properly assess all claims that may be potentially brought against PTK. As a result, PTK’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of its stockholders may extend well beyond the third anniversary of the date of distribution. Accordingly, PTK cannot assure you that third parties will not seek to recover from its stockholders amounts owed to them by PTK.

 

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Additionally, if PTK is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by PTK’s stockholders. Because PTK intends to distribute the proceeds held in the Trust Account to its public stockholders promptly after the expiration of the time period to complete a business combination, this may be viewed or interpreted as giving preference to its public stockholders over any potential creditors with respect to access to or distributions from its assets. Furthermore, PTK’s board of directors may be viewed as having breached their fiduciary duties to its creditors and/or may have acted in bad faith, and thereby exposing itself and PTK to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors. PTK cannot assure you that claims will not be brought against it for these reasons.

PTK may be a target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Business Combination from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into business combination agreements or similar agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on PTK’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the Transactions, then that injunction may delay or prevent the Transactions from being completed. Currently, PTK is not aware of any securities class action lawsuits or derivative lawsuits being filed in connection with the Transactions.

The Sponsor has agreed to vote in favor of the Business Combination, regardless of how PTK’s public stockholders vote.

The Sponsor owns and is entitled to vote an aggregate of approximately 20% on an as-converted basis of the outstanding PTK Common Stock. These holders have agreed to vote their shares in favor of the Business Combination Proposal. These holders have also indicated that they intend to vote their shares in favor of all other proposals being presented at the meeting. Accordingly, it is more likely that the necessary stockholder approval for the Business Combination Proposal and the other proposals will be received than would be the case if these holders agreed to vote their Founder Shares in accordance with the majority of the votes cast by PTK’s public stockholders. In addition, Primerose Development Group Ltd., one of PTK’s public stockholders, has also agreed to vote 1,000,000 of its shares in favor of the Business Combination Proposal and not redeem such shares in connection with the Business Combination.

The ongoing COVID-19 pandemic may adversely affect PTK’s and Valens’ ability to consummate the Transactions.

The COVID-19 pandemic has resulted in governmental authorities worldwide implementing numerous measures to contain the virus, including travel restrictions, quarantines, shelter-in-place orders and business limitations and shutdowns. More generally, the pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial markets. The pandemic may also amplify many of the other risks described in this proxy statement/prospectus.

PTK and Valens may be unable to complete the Transactions if continued concerns relating to COVID-19 restrict travel and limit the ability to have meetings with potential investors or the Valens personnel. The extent to which COVID-19 impacts PTK’s and Valens’ ability to consummate the Transactions will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extended period of time, PTK’s and Valens’ ability to consummate the Transactions may be materially adversely affected.

 

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The Business Combination may not qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) or may be taxable under Section 367(a) of the Code, potentially causing U.S. investors who own PTK Common Stock and/or PTK warrants to recognize gain or loss for U.S. federal income tax purposes.

It is intended that (i) the Business Combination qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and (ii) any transfer of PTK Common Stock by a U.S. investor pursuant to the Business Combination qualify for an exception to Section 367(a)(1) of the Code as of the Effective Time (other than with respect to any such investor that would own, actually or constructively, 5% or more (by vote or value) of the outstanding Valens ordinary shares immediately after the Business Combination and that fails to enter into a valid “gain recognition agreement” with respect to the transferred PTK Common Stock) (collectively, the “Intended Tax Treatment”). The parties intend to report the Business Combination in a manner consistent with the Intended Tax Treatment to the extent permitted by law. However, there are significant factual and legal uncertainties as to whether the Business Combination will qualify for the Intended Tax Treatment. For example, under Section 368(a) of the Code, the acquiring corporation must continue, either directly or indirectly through certain controlled corporations, either a significant line of the acquired corporation’s historic business or use a significant portion of the acquired corporation’s historic business assets in a business. However, there is an absence of guidance directly on point as to how the provisions of Section 368(a) of the Code apply in the case of an acquisition of a corporation with only investment-type assets, such as PTK. Moreover, Section 367(a) of the Code and the applicable Treasury regulations promulgated thereunder provide that where a U.S. investor exchanges stock in a U.S. corporation for stock in a non-U.S. corporation in a transaction that would otherwise qualify as a reorganization within the meaning of Section 368(a) of the Code, the U.S. investor is required to recognize gain, but not loss, realized on such exchange unless certain requirements are met. There are significant factual and legal uncertainties concerning the determination of certain of these requirements. Moreover, the closing of the Business Combination is not conditioned upon the receipt of an opinion of counsel that the Business Combination will qualify for the Intended Tax Treatment, and neither PTK nor Valens intends to request a ruling from the IRS regarding the U.S. federal income tax treatment of the Business Combination. Accordingly, no assurance can be given that the IRS will not challenge the Intended Tax Treatment or that a court will not sustain a challenge by the IRS.

If, as of the Closing Date, any requirement for Section 368(a) of the Code is not met or the IRS at a later date successfully challenges the Intended Tax Treatment, then a U.S. investor who owns PTK Common Stock and/or PTK warrants would recognize gain or loss in an amount equal to the difference, if any, between the fair market value (as of the Closing Date) of Valens ordinary shares and/or Valens warrants received in the Business Combination, over such U.S. investor’s tax basis in the corresponding PTK Common Stock and/or PTK warrants surrendered by such U.S. investor in the Business Combination. Any gain or loss so recognized would generally be long-term capital gain or loss if the U.S. Holder had held the PTK securities for more than one year (or short-term capital gain otherwise). Long-term capital gains of non-corporate U.S. Holders (including individuals) currently are eligible for preferential U.S. federal income tax rates. It is unclear, however, whether the redemption rights with respect to the PTK securities described herein may suspend the running of the applicable holding period for this purpose. If the running of the holding period for the PTK securities is suspended, then non-corporate U.S. holders may not be able to satisfy the one-year holding period requirement for long-term capital gain treatment, in which case any gain on a sale or taxable disposition of the shares or warrants would be subject to short-term capital gain treatment and would be taxed at regular ordinary income tax rates. However, the deductibility of capital losses is subject to limitations. A U.S. Holder’s holding period in the Valens ordinary shares and/or Valens warrants received in the Business Combination, if any, would not include the holding period for the PTK securities surrendered in exchange therefor. In the case of a U.S. Holder that holds PTK securities with differing tax bases and/or holding periods, which generally occurs when blocks of shares are purchased at different times or for different amounts, these tax basis and holding period rules must be applied separately to each identifiable block of PTK securities.

If the Business Combination qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, but any requirement for Section 367(a) of the Code is not satisfied, then a U.S. investor who owns PTK

 

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Common Stock would recognize gain (but not loss) in an amount equal to the excess, if any, of the fair market value as of the Closing Date of Valens ordinary shares (and, if the U.S. investor’s PTK warrants are converted into Valens warrants, the fair market value of the Valens warrants) received in the Business Combination, over such U.S. investor’s tax basis in the corresponding PTK Common Stock and/or PTK warrants surrendered by such U.S. investor in the Business Combination.

U.S. investors who own PTK Common Stock and/or PTK warrants are urged to consult their own tax advisors to determine the tax consequences if the Business Combination does not qualify for the Intended Tax Treatment.

The IRS may not agree that Valens should be treated as a non-U.S. corporation for U.S. federal income tax purposes.

Under current U.S. federal income tax law, a corporation generally will be considered to be a U.S. corporation for U.S. federal income tax purposes if it is created or organized in the United States or under the law of the United States or of any State. Accordingly, under generally applicable U.S. federal income tax rules, Valens, which is incorporated and tax resident in Israel, would generally be classified as a non-U.S. corporation for U.S. federal income tax purposes. Section 7874 of the Code and the Treasury regulations promulgated thereunder, however, contain specific rules that may cause a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes. If it were determined that Valens is treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury regulations promulgated thereunder, Valens would be liable for U.S. federal income tax on its income in the same manner as any other U.S. corporation and certain distributions made by Valens to Non-U.S. Holders (as defined in “Material U.S. Federal Income Tax Considerations”) of Valens may be subject to U.S. withholding tax.

As more fully described in the section titled “Material U.S. Federal Income Tax Considerations—U.S. Federal Income Tax Treatment of Valens—Tax Residence of Valens for U.S. Federal Income Tax Purposes,” based on the terms of the Business Combination and certain factual assumptions, Valens does not currently expect to be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code after the Business Combination. However, the application of Section 7874 of the Code is complex, subject to detailed regulations (the application of which is uncertain in various respects and would be impacted by changes in such U.S. Treasury regulations with possible retroactive effect) and subject to certain factual uncertainties, some of which must be finally determined after the completion of the Business Combination. Accordingly, there can be no assurance that the IRS will not challenge the status of Valens as a non-U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code or that such challenge would not be sustained by a court.

If the IRS were to successfully challenge under Section 7874 of the Code Valens’ status as a non-U.S. corporation for U.S. federal income tax purposes, Valens and certain Valens shareholders may be subject to significant adverse tax consequences, including a higher effective corporate income tax rate on Valens and the application of U.S. withholding taxes on dividends paid on Valens ordinary shares to non-U.S. shareholders, subject to reduction under an applicable income tax treaty.

See “Material U.S. Federal Income Tax Considerations—U.S. Federal Income Tax Treatment of Valens—Tax Residence of Valens for U.S. Federal Income Tax Purposes” for a more detailed discussion of the application of Section 7874 of the Code to Valens. Investors should consult their own tax advisors regarding the application of Section 7874 of the Code to the Business Combination and the tax consequences to Valens and its shareholders if the classification of Valens as a non-U.S. corporation is not respected.

Risks Related to the Adjournment Proposal

If the Adjournment Proposal is not approved, PTK’s board of directors will not have the ability to adjourn the special meeting to a later date.

If, at the special meeting, the chairman presiding over the special meeting determines that it would be in the best interests of PTK to adjourn the special meeting to give PTK more time to consummate the Business

 

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Combination for whatever reason (such as if the Business Combination Proposal is not approved, or if PTK would have net tangible assets of less than $5,000,001 either immediately prior to or upon the consummation of the Transactions, or if additional time is needed to fulfil other closing conditions), the chairman presiding over the special meeting will seek approval to adjourn the special meeting to a later date or dates. If the Adjournment Proposal is not approved, the chairman will not have the ability to adjourn the special meeting to a later date in order to solicit further votes. In such event, the Business Combination would not be completed.

Risks Related to Redemption

The ability of PTK public stockholders to exercise redemption rights with respect to a large number of PTK Shares could increase the probability that the Business Combination would be unsuccessful and that you would have to wait for liquidation in order to redeem PTK stock.

Pursuant to the Business Combination Agreement, the Company shall not be obligated to consummate the Transactions unless such Transactions will yield to the Company at least $215,000,000 Aggregate Transaction Proceeds, before the payment of any Valens transaction expenses and PTK transaction expenses. If the Business Combination is not consummated, you would not receive your pro rata portion of the Trust Account until the Trust Account is liquidated. If you are in need of immediate liquidity, you could attempt to sell your PTK Shares in the open market; however, at such time PTK Shares may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with PTK’s redemption until PTK liquidates or you are able to sell your PTK Shares in the open market.

Public stockholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 20% of the public shares.

A public stockholder, together with any affiliate or any other person with whom such stockholder is acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 20% of the public shares. Accordingly, if you hold more than 20% of the public shares and the Business Combination Proposal is approved, you will not be able to seek redemption rights with respect to the full amount of your shares and may be forced to hold the shares in excess of 20% or sell them in the open market. PTK cannot assure you that the value of such excess shares will appreciate over time following a business combination or that the market price of PTK Shares will exceed the per-share redemption price.

There is no guarantee that a PTK stockholder’s decision to redeem its shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.

There is no assurance as to the price at which an PTK stockholder may be able to sell its Valens ordinary shares in the future following the completion of the Transactions or shares with respect to any alternative business combination. Certain events following the consummation of any initial business combination, including the Transactions, may cause an increase in the share price, and may result in a lower value realized now than a stockholder of PTK might realize in the future had the stockholder not redeemed his, her or its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of the public shares after the consummation of any initial business combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement/prospectus. A stockholder should consult the stockholder’s tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS; MARKET, RANKING AND OTHER INDUSTRY DATA

This proxy statement/prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this proxy statement/prospectus, including statements regarding Valens’, PTK’s or the combined company’s future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential” or the negative of these terms or other similar expressions. Forward-looking statements include, without limitation, Valens’ or PTK’s expectations concerning the outlook for their or the combined company’s business, productivity, plans and goals for future operational improvements and capital investments, operational performance, future market conditions or economic performance and developments in the capital and credit markets and expected future financial performance, as well as any information concerning possible or assumed future results of operations of the combined company as set forth in the sections of this proxy statement/prospectus titled “Proposal One—The Business Combination Proposal—PTK’s Board of Directors’ Reasons for the Business Combination and Recommendation of Its Board of Directors.” Forward-looking statements also include statements regarding the expected benefits of the proposed Business Combination between Valens and PTK.

Forward-looking statements involve a number of risks, uncertainties and assumptions, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:

 

   

The cyclicality of the semiconductor industry;

 

   

The effects of health epidemics, such as the recent global COVID-19 pandemic;

 

   

Competition in the semiconductor industry, and the failure to introduce new technologies and products in a timely manner to compete successfully against competitors;

 

   

If Valens fails to adjust its supply chain volume due to changing market conditions or fails to estimate its customers’ demand;

 

   

Disruptions in relationships with any one of Valens’ key customers;

 

   

Any difficulty selling Valens’ products if customers do not design its products into their product offerings;

 

   

Valens’ dependence on winning selection processes;

 

   

Even if Valens succeeds in winning selection processes for its products, Valens may not generate timely or sufficient net sales or margins from those wins;

 

   

Sustained yield problems or other delays in the manufacturing process of products;

 

   

If PTK’s stockholders fail to properly demand redemption rights, they will not be entitled to convert their PTK Common Stock into a pro rata portion of the Trust Account;

 

   

PTK’s board of directors did not obtain a third-party fairness opinion in determining whether or not to proceed with the Business Combination;

 

   

The financial and other interests of PTK’s board of directors may have influenced PTK’s board of directors’ decision to approve the Business Combination;

 

   

The Valens securities to be received by PTK’s securityholders as a result of the Business Combination will have different rights from PTK securities and PTK’s stockholders will have a reduced ownership and voting interest of the combined company after consummation of the Business Combination; and

 

   

The other matters described in the section titled “Risk Factors”.

 

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In addition, the Business Combination is subject to the satisfaction of the conditions to the completion of the Business Combination set forth in the Business Combination Agreement and the absence of events that could give rise to the termination of the Business Combination Agreement, the possibility that the Business Combination does not close, and risks that the proposed Business Combination disrupts current plans and operations and business relationships, or poses difficulties in attracting or retaining employees for Valens.

Valens and PTK caution you against placing undue reliance on forward-looking statements, which reflect current beliefs and are based on information currently available as of the date a forward-looking statement is made. Forward-looking statements set forth herein speak only as of the date of this proxy statement/prospectus. Neither Valens nor PTK undertakes any obligation to revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs. In the event that any forward-looking statement is updated, no inference should be made that Valens or PTK will make additional updates with respect to that statement, related matters, or any other forward-looking statements. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from forward-looking statements, including discussions of significant risk factors, may appear, up to the consummation of the Business Combination, in PTK’s public filings with the SEC or, upon and following the consummation of the Business Combination, in Valens’ public filings with the SEC, which are or will be (as appropriate) accessible at www.sec.gov, and which you are advised to consult. For additional information, please see the section titled “Where You Can Find More Information.

Market, ranking and industry data used throughout this proxy statement/prospectus, including statements regarding market size and technology adoption rates, is based on the good faith estimates of Valens’ management, which in turn are based upon Valens’ management’s review of internal surveys, independent industry surveys and publications, and other third party research and publicly available information. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While Valens is not aware of any misstatements regarding the industry data presented herein, its estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and “Valens’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this proxy statement/prospectus.

 

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SPECIAL MEETING OF PTK STOCKHOLDERS

General

PTK is furnishing this proxy statement/prospectus to its stockholders as part of the solicitation of proxies by its board of directors for use at the special meeting of PTK stockholders and at any adjournment or postponement thereof. This proxy statement/prospectus provides you with information you need to know to be able to vote or instruct your vote to be cast at the special meeting.

Date, Time and Place of Special Meeting of PTK’s Stockholders

The special meeting will be held on September 28, 2021, at 10 a.m., Eastern Time, solely over the Internet by means of a live audio webcast. You may attend the special meeting webcast by accessing the web portal located at https://www.cstproxy.com/ptkacquisition/2021 and following the instructions set forth on your proxy card.

Purpose of the PTK Special Meeting

At the special meeting, PTK is asking its stockholders:

 

1.

Proposal No. 1 — The Business Combination Proposal — to consider and vote upon a proposal to approve and adopt the Business Combination Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A, and the transactions contemplated therein, including the Business Combination;

 

2.

Proposal No. 2 — The Adjournment Proposal — to consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, if the parties are not able to consummate the Business Combination.

Recommendation of PTK’s Board of Directors

PTK’s board of directors has determined that each of the proposals outlined above is fair to and in the best interests of PTK and its stockholders and recommended that PTK stockholders vote “FOR” the Business Combination Proposal and “FOR” the Adjournment Proposal, if presented.

Record Date; Persons Entitled to Vote

PTK Stockholders will be entitled to vote or direct votes to be cast at the special meeting if they owned shares of PTK Common Stock at the close of business on September 7, 2021, which is the record date for the special meeting. Stockholders will have one vote for each share of PTK Common Stock owned at the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. PTK’s warrants do not have voting rights. On August 27, 2021, there were 14,375,000 shares of PTK Common Stock outstanding, of which 11,500,000 were public shares.

Quorum

A quorum is the minimum number of shares of PTK Common Stock that must be present to hold a valid meeting. A quorum will be present at the PTK special meeting if a majority of the voting power of the issued and outstanding shares of PTK Common Stock entitled to vote at the meeting are represented at the virtual special meeting or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.

 

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Vote Required

The proposals to be presented at the special meeting will require the following votes:

Business Combination Proposal — The approval of the Business Combination Proposal will require the affirmative vote of the holders of a majority of the votes cast by the then outstanding shares of PTK Common Stock present and entitled to vote at the special meeting. Abstentions will have no effect on the Business Combination Proposal. Brokers are not entitled to vote on the Business Combination Proposal absent voting instructions from the beneficial holder and, consequently, broker non-votes will have no effect on the Business Combination Proposal. The Transactions will not be consummated if PTK has less than $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) either immediately prior to or upon consummation of the Transactions.

Adjournment Proposal — The approval of the Adjournment Proposal will require the affirmative vote of the holders of a majority of the shares of PTK Common Stock present and entitled to vote at the special meeting. Abstentions will have the same effect as a vote “against” on the Adjournment Proposal. Broker non-votes will have no effect on the Adjournment Proposal.

Voting Your Shares

If you are a holder of record of PTK Common Stock, there are two ways to vote your shares of PTK Common Stock at the special meeting:

 

   

By Mail. You may vote by proxy by completing the enclosed proxy card and returning it in the postage-paid return envelope. If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted “FOR” all of the proposals in accordance with the recommendation of PTK’s board of directors. Proxy cards received after a matter has been voted upon at the special meeting will not be counted.

 

   

In Person. You may attend the special meeting webcast and vote electronically using the ballot provided to you during the webcast. You may attend the special meeting webcast by accessing the web portal located at https://www.cstproxy.com/ptkacquisition/2021 and following the instructions set forth on your proxy card. See “Questions and Answers about the Business Combination and the Special Meeting —When and where will the special meeting take place?” for more information.

Revoking Your Proxy

If you are a holder of record of PTK Common Stock and you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

 

   

you may send another proxy card to PTK’s secretary with a later date so that it is received prior to the vote at the special meeting or attend the live webcast of the special meeting and vote electronically;

 

   

you may notify PTK’s secretary in writing, prior to the vote at the special meeting, that you have revoked your proxy; or

 

   

you may attend the live webcast of the special meeting and vote electronically or revoke your proxy electronically, although your attendance alone will not revoke any proxy that you have previously given.

If you hold your PTK Common Stock in “street name,” you may submit new instructions on how to vote your shares by contacting your broker, bank or other nominee.

 

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Who Can Answer Your Questions About Voting Your Shares

If you are a PTK stockholder and have any questions about how to vote or direct a vote in respect of your shares of PTK Common Stock, you may call Okapi Partners, PTK’s proxy solicitor, at (855) 305-0857.

Redemption Rights

Holders of public shares may seek to redeem their shares for cash, regardless of whether they vote for or against, or whether they abstain from voting on, the Business Combination Proposal. Any stockholder holding public shares may demand that PTK redeem such shares for a full pro rata portion of the Trust Account (which, for illustrative purposes, was $10.00 per share as of August 27, 2021), calculated as of two (2) business days prior to the anticipated consummation of the merger. If a holder properly seeks redemption as described in this section and the merger with Valens is consummated, PTK will redeem these shares for a pro rata portion of funds deposited in the Trust Account and the holder will no longer own these shares following the merger.

Notwithstanding the foregoing, a holder of public shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than 20% of the public shares. Accordingly, all public shares in excess of 20% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed for cash.

Holders of Founder Shares will not have redemption rights with respect to such shares.

Holders may demand redemption by delivering their stock, either physically or electronically using Depository Trust Company’s DWAC System, to PTK’s transfer agent prior to the vote at the Special Meeting. If you hold the shares in “street name,” you will have to coordinate with your broker to have your shares certificated or delivered electronically. Certificates that have not been tendered (either physically or electronically) in accordance with these procedures will not be redeemed for cash. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming stockholder. In the event the proposed merger is not consummated this may result in an additional cost to stockholders for the return of their shares.

PTK’s transfer agent can be contacted at the following address:

Continental Stock Transfer & Trust Company

1 State Street — 30th Floor

New York, New York 10004

Attn: Mark Zimkind

Email: mzimkind@continentalstock.com

Any request to redeem such shares, once made, may be withdrawn at any time up to the vote on the Business Combination Proposal. Furthermore, if a holder of a public share delivered its certificate in connection with an election of its redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it may simply request that the transfer agent return the certificate (physically or electronically).

If the merger is not approved or completed for any reason, then PTK’s public stockholders who elected to exercise their redemption rights will not be entitled to redeem their shares for a full pro rata portion of the Trust Account, as applicable. In such case, PTK will promptly return any shares delivered by public holders. If PTK would be left with less than $5,000,001 of net tangible assets as a result of the holders of public shares properly demanding redemption of their shares for cash, PTK will not be able to consummate the merger.

 

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The closing price of PTK Common Stock on August 27, 2021, was $9.90. The cash held in the Trust Account on such date was approximately $115 million ($10.00 per public share). Prior to exercising redemption rights, stockholders should verify the market price of PTK Common Stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. PTK cannot assure its stockholders that they will be able to sell their shares of PTK Common Stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in its securities when its stockholders wish to sell their shares.

If a holder of public shares exercises his, her or its redemption rights, then he, she or it will be exchanging its shares of PTK Common Stock for cash and will no longer own those shares. You will be entitled to receive cash for these shares only if you properly demand redemption no later than the close of the vote on the Business Combination Proposal by delivering your stock certificate (either physically or electronically) to PTK’s transfer agent prior to the vote at the Special Meeting, and the merger is consummated.

For a detailed discussion of the material U.S. federal income tax considerations for stockholders with respect to the exercise of these redemption rights, see “Material U.S. Federal Income Tax Consequences — U.S. Holders Exercising Redemption Rights with Respect to PTK Common Stock” beginning on page 179. The consequences of a redemption to any particular stockholder will depend on that stockholder’s particular facts and circumstances. Accordingly, you are urged to consult your tax advisor to determine your tax consequences from the exercise of your redemption rights, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws in light of your particular circumstances.

Appraisal Rights

PTK stockholders and holders of PTK warrants do not have appraisal rights in connection with the Transactions under the DGCL.

Proxy Solicitation Costs

PTK is soliciting proxies on behalf of its board of directors. This solicitation is being made by mail but also may be made by telephone. PTK and its directors, officers and employees may also solicit proxies online. PTK will file with the SEC all scripts and other electronic communications as proxy soliciting materials. PTK will bear the cost of the solicitation.

PTK has hired Okapi Partners to assist in the proxy solicitation process. PTK will pay to Okapi Partners a fee of $40,000, plus disbursements.

PTK will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. PTK will reimburse them for their reasonable expenses.

Other Matters

As of the date of this proxy statement/prospectus, PTK’s board of directors does not know of any business to be presented at the special meeting other than as set forth in the notice accompanying this proxy statement/prospectus. If any other matters should properly come before the special meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.

 

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Interests of PTK’s Officers and Directors in the Transactions

In considering the recommendation of PTK’s board of directors to vote in favor of approval of the Business Combination Proposal, stockholders should keep in mind that the Sponsor and PTK’s directors and executive officers have interests in such proposals that are different from, or in addition to, those of PTK’s stockholders generally. In particular:

 

   

If the Business Combination with Valens or another business combination is not consummated by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter), PTK will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and PTK’s board of directors, dissolving and liquidating. In such event, the 2,875,000 Founder Shares, which were acquired by the Sponsor for $25,000, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Such shares had an aggregate market value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021. On the other hand, if the Business Combination is consummated, each outstanding share of PTK Common Stock will be converted into one Valens ordinary share, subject to adjustment described herein.

 

   

The Sponsor has spent $25,000 to purchase 2,875,000 Founder Shares and $3,400,000 to purchase 6,800,000 private placement warrants from PTK for $0.50 per private warrant. Additionally, the Sponsor was issued 600,000 additional private placement warrants as a result of the conversion of the promissory note in the amount of $300,000 which the Sponsor and its affiliates had loaned PTK to cover expenses related to its initial public offering. Subsequently, pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed to cancel 740,000 warrants to purchase an aggregate of 370,000 shares of Valens ordinary shares effective as of the Closing. The Founder Shares had an aggregate value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021 and the private placement warrants (excluding the Cancelled Warrants) had an aggregate market value of $3.0 million based upon the closing price of $0.40 per warrant on the NYSE on August 27, 2021. The Founders Shares and the private placement warrants will become worthless if PTK does not consummate a business combination by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter).

 

   

If PTK is unable to complete a business combination within the required time period, the Sponsor will be liable under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by PTK for services rendered or contracted for or products sold to PTK. If PTK consummates a business combination, on the other hand, PTK will be liable for all such claims.

 

   

The Sponsor and PTK’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on PTK’s behalf, such as identifying and investigating possible business targets and business combinations. However, if PTK fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, PTK may not be able to reimburse these expenses if the Business Combination or another business combination is not completed by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter). As of August 27, 2021, the Sponsor and PTK’s officers and directors and their affiliates had incurred approximately $500,000 of unpaid reimbursable expenses.

 

   

The Business Combination Agreement provides for the continued indemnification of PTK’s current directors and officers and the continuation of directors and officers liability insurance covering PTK’s current directors and officers.

 

   

PTK’s Sponsor, officers and directors (or their affiliates) may make loans from time to time to PTK to fund certain capital requirements. If the Business Combination is not consummated, any such loans

 

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will not be repaid and will be forgiven except to the extent there are funds available to PTK outside of the Trust Account.

 

   

Ker Zhang will be a member of the board of directors of Valens following the closing of the Business Combination and, therefore, in the future Mr. Zhang will receive any cash fees, stock options or stock awards that Valens’ board of directors determines to pay to its non-executive directors.

 

   

PTK’s Sponsor has agreed to invest an aggregate amount of $4.0 million to purchase 400,000 Valens ordinary shares in connection with the PIPE Financing to be completed at the closing of the Business Combination.

 

   

The Sponsor will benefit financially from the completion of any business combination even if the stock price declines after the Business Combination, generating a negative return for other shareholders. The Sponsor will lose substantially all of its investment in PTK and will not be reimbursed for any out-of pocket expenses if an initial business combination is not completed prior to January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK charter). Thus, if the proposed Business Combination with Valens is not consummated, PTK may seek to complete a business combination with a less favorable target company or on terms less favorable to PTK stockholders rather than choose to dissolve and liquidate.

 

   

The Sponsor paid an aggregate of $25,000 for 2,875,000 Founder Shares, which had an aggregate market value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021. If the proposed Business Combination with Valens is consummated, the Sponsor may still earn a positive rate of return on its investment, even if other stockholders experience a negative rate of return in post-Business Combination.

Purchases of PTK Shares

At any time prior to the special meeting, during a period when they are not then aware of any material nonpublic information regarding PTK or its securities, the Sponsor, PTK’s officers and directors, Valens, Valens shareholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the Business Combination Proposal, or execute agreements to purchase shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of PTK Common Stock or vote their shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements to consummate the Business Combination where it appears that such requirements would otherwise not be met. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and, with Valens’ consent, the transfer to such investors or holders of shares or warrants owned by the Sponsor for nominal value.

Entering into any such arrangements may have a depressive effect on PTK Common Stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he owns, either prior to or immediately after the special meeting.

If such transactions are effected, the consequence could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the Business Combination Proposal and other proposals and would likely increase the chances that such proposals would be approved. No agreements dealing with the above arrangements or purchases have been entered into as of the date of this proxy statement/prospectus by the Sponsor, PTK officers and directors, Valens, Valens shareholders or any of their respective affiliates. PTK will file a Current Report on Form 8-K to disclose arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or the satisfaction of any closing conditions. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

 

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PROPOSAL ONE—THE BUSINESS COMBINATION PROPOSAL

The following is a discussion of the proposed Business Combination and the Business Combination Agreement. This is a summary only and may not contain all of the information that is important to you. This summary is subject to, and qualified in its entirety by reference to, the Business Combination Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A. PTK stockholders are urged to read this entire proxy statement/prospectus carefully, including the Business Combination Agreement, for a more complete understanding of the Business Combination.

General

Transaction Structure

The Business Combination Agreement provides for the merger of Merger Sub with and into PTK, with PTK surviving the Business Combination as a wholly owned subsidiary of Valens.

Pro Forma Capitalization

The pro forma equity valuation of Valens upon consummation of the Transactions is estimated to approximately $1.16 billion, assuming no redemptions. We estimate that at the Effective Time, assuming none of PTK’s public stockholders demand redemption of their public shares pursuant to the PTK Charter, the securityholders of Valens will own approximately 74% of the outstanding Valens ordinary shares and the securityholders of PTK, and certain accredited investors purchasing PIPE Shares will own the remaining Valens ordinary shares.

Merger Consideration

Prior to the Effective Time, Valens intends to (a) have each of its preferred share issued and outstanding at the end of the date immediately prior to the Effective Time converted into and become one Valens ordinary share effective as of the end of such date immediately prior to the Effective Time (the “Preferred Share Conversion”), and (b) effect a reverse stock split to cause the implied value of the outstanding Valens ordinary shares immediately prior to the Effective Time to equal $10.00 per share as of an agreed measurement time shortly prior to Closing (and valuing Valens equity as of such agreed measurement time at the Total Deal Value) (the “Stock Split” and, together with the Preferred Share Conversion, the “Capital Restructuring”).

Pursuant to the Business Combination Agreement and assuming the Capital Restructuring has occurred, at the Effective Time (a) each share of PTK Common Stock outstanding immediately prior to the Effective Time will be exchanged for one Valens ordinary share, subject to adjustment described herein, (b) each PTK warrant outstanding immediately prior to the Effective Time will be assumed by Valens and will become a Valens warrant, with the number of Valens ordinary shares underlying the Valens warrants and the exercise price of such Valens warrants subject to adjustment in accordance with the Business Combination Agreement in the event of a stock split, share dividend or distribution, or any change in Valens’ share capital by reason of any split-up reverse stock split, recapitalization, combination, reclassification, exchange of shares and (c) each outstanding Valens preferred share will be converted into one Valens ordinary share, in each case less any applicable withholding taxes.

Background of the Business Combination

PTK is a Delaware corporation formed on August 19, 2019, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Business Combination with Valens is the result of an active search for a potential transaction utilizing the network and investment experience of PTK’s management team and board of directors. The terms of the Business Combination Agreement and the other ancillary agreements are the result of

 

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arm’s-length negotiations between Valens and PTK and their respective representatives and advisors. The following is a discussion of the background of these negotiations, the Business Combination Agreement (and the ancillary agreements) and the Business Combination.

Prior to the pricing of PTK’s initial public offering, neither PTK, nor any authorized person on its behalf, initiated any substantive discussions, formal or otherwise, with respect to a business combination involving PTK.

The registration statement for the PTK IPO was declared effective on July 13, 2020. On July 15, 2020, PTK consummated the PTK IPO of 11,500,000 units, at a price of $10.00 per unit, generating gross proceeds of $115,000,000. Simultaneously with the closing of the PTK IPO, PTK consummated the sale of 6,800,000 private placement warrants at a price of $0.50 per warrant in a private placement to Sponsor, generating gross proceeds of $3,400,000. Following the closing of the PTK IPO on July 15, 2020, an amount of $115,000,000 from the net proceeds of the sale of the units in the PTK IPO and the sale of the private placement warrants to Sponsor was placed into the Trust Account.

From the date of the PTK IPO through the execution of the Business Combination Agreement with Valens on May 25, 2021, representatives of PTK commenced an active search for prospective acquisition targets, with an emphasis on companies in innovative subsectors within the semiconductor, technology hardware, automotive, gaming and digital media industries. During this period, representatives of PTK reviewed self-generated ideas, initiated contact and were contacted by a number of individuals and entities with respect to business combination opportunities. PTK identified the following general criteria in evaluating candidates for an initial business combination:

 

   

Expectation of Post-Acquisition Growth - A target PTK believed would experience both substantial organic growth and additional opportunities for add-on acquisitions through identification of multiple actionable targets.

 

   

Strong Management Team - Companies with strong and experienced public-ready management teams. Specifically, PTK looked for management teams that had a proven track record of driving revenue and value creation for their stakeholders.

 

   

Leadership Position - Companies that had a leadership position in their industry or a defensible niche within a target market as a result of differentiated technology or other competitive advantages.

 

   

Enterprise Value - A current total enterprise value of between $300 million and $1 billion.

 

   

Benefit from Being a Public Company - Business or businesses that would benefit from being publicly traded via access to broader sources of capital, greater visibility and expanded branding awareness in the market.

 

   

Benefit from PTK’s Network of Strategic Relationships - A business that would benefit from PTK’s management team’s relationships, including those in the Asia-Pacific region in order to accelerate growth and profitability from sales in that region.

 

   

Public Company Readiness - Companies that had a public company infrastructure substantially in place, in terms of corporate governance, audited financial statements and internal controls, depth of finance team, human resources and investor relations, as well as ready availability of key legal and financial documentation and supportive due diligence information.

Based on these criteria, PTK’s officers, directors and other representatives ultimately identified and evaluated over 140 potential target businesses from a wide range of industry segments during the period following the PTK IPO through the execution of the Business Combination Agreement with Valens on May 25, 2021. The potential target businesses considered included both private companies and divisions of publicly-traded companies, and ranged from pre-revenue companies to those with significant existing revenue streams.

In connection with such evaluation, representatives of PTK had discussions regarding potential transactions with members of management, the boards of directors and other representatives of certain potential acquisition

 

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targets. Representatives of PTK engaged in substantive discussions with a number of such potential acquisition targets with respect to a potential business combination and discussed potential valuations and structures. From the date of the PTK IPO through May 25, 2021, representatives of PTK entered into 47 non-disclosure or confidentiality agreements with potential business combination targets (including Valens). No such agreements imposed any “standstill” or similar restrictions that would restrict either the business combination target or PTK from proposing or pursuing an alternative transaction.

Over the course of these discussions and investigations, the list of potential targets was initially narrowed to approximately 26 companies and then to 12 companies, in respect of which representatives of PTK conducted substantial additional legal and financial due diligence, including multiple meetings with target board and management in person, on teleconference calls and via Zoom to discuss the terms of a potential business combination. Some of these potential targets were eliminated because PTK concluded that the target business would not be a suitable acquisition candidate given the specific criteria listed above, and some potential targets were eliminated because the target elected to pursue an alternative business combination or strategy. PTK ultimately submitted preliminary, non-binding indications of interest to five potential target companies, in addition to Valens.

The first of these companies, Company A, was in the fabless semiconductor sector. PTK signed a non-disclosure agreement with Company A on July 21, 2020 and conducted legal and financial due diligence via conference calls and Zoom sessions during July 2020 with Company A’s management, board members and other representatives. PTK submitted a preliminary and non-binding indication of interest to Company A on July 25, 2020. Company A subsequently advised PTK that the pre-transaction equity value indicated in PTK’s letter did not meet Company A’s valuation expectations. On the basis of its extensive financial and legal due diligence efforts, PTK declined to increase its indicated pre-transaction equity value and negotiations with Company A were halted.

On October 8, 2020, PTK entered into a non-disclosure agreement with Company B, a company in the electric mobility sector. PTK conducted substantial business, financial, legal, technical and accounting due diligence, including reviewing historical and budgeted financial statements, and information regarding current partners and customers. Representatives of PTK also met with Company B’s management team and other representatives via Zoom on numerous occasions to discuss diligence and potential deal terms. On November 4, 2020, representatives of PTK provided Company B with an indication of interest that was subsequently countersigned by both parties and included a 60-day exclusivity period. Following further diligence and discussion of potential deal terms, in December 2020, the board of Company B and PTK decided to put further discussions on hold due to differences in timing expectations.

A third potential business combination candidate, Company C, was in the internet advertising technology sector. On January 8, 2021, PTK entered into a non-disclosure agreement with Company C and, during January and February of 2021, conducted legal and financial due diligence via conference calls and Zoom sessions with the management and representatives of Company C. On February 2, 2021, PTK submitted a preliminary and non-binding indication of interest to Company C. However, Company C advised PTK that it had engaged a new financial advisor and was now focusing its efforts on exploring the possibility of a traditional public offering, and as a result PTK did not pursue further conversations with Company C.

Company D, a fourth potential business combination candidate, was in the autonomous driving technology sector. On January 21, 2021, PTK entered into a non-disclosure agreement with Company D, and, during the first quarter of 2021, PTK and its representatives proceeded to conduct legal and financial due diligence discussions via Zoom on numerous occasions with the management and advisors of Company D. On February 5, 2021, representatives of PTK provided Company D with a non-binding indication of interest. However, Company D and its representatives had engaged with a number of other SPACs in connection with their strategic search and ultimately selected an alternate SPAC.

 

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On January 29, 2021, PTK entered into a non-disclosure agreement with Company E, a company in the urban air mobility sector. PTK and its representatives proceeded to conduct legal and financial due diligence discussions via Zoom with the management of Company E during the first quarter of 2021. On February 12, 2021, representatives of PTK provided Company E with a non-binding indication of interest. Following the evaluation by Company E and its representatives of the indications of interests received, Company E declined to further engage with PTK.

On August 31, 2020, representatives of PTK were introduced to representatives of Valens. On September 7, 2020, PTK executed a customary non-disclosure agreement with Valens and Valens began providing preliminary confidential information to PTK regarding Valens and its business operations, including information pertaining to Valens’ chip technology and market demand. Over the week of September 14, 2020 the parties engaged in multiple telephone conversations and email exchanges with respect to the merits of a possible business combination involving PTK and Valens.

On October 12, 2020, representatives of PTK emailed to Valens an initial draft non-binding letter of intent, which assumed, consistent with PTK management’s preliminary analysis of the projected financial results of Valens and subject to further due diligence, an initial pre-transaction equity value of $600 million. The initial letter of intent also contemplated a PIPE financing of an unspecified amount.

In October, 2020, the board of directors of Valens defined a working group comprised of 4 members of the board and 2 executive officers (CEO and CFO) of Valens to review and advise the board with respect to potential business combination transactions with Special Purpose Acquisition Companies (the “Valens Special Committee”). On October 19, 2020, representatives of Valens informed PTK that the Valens board had determined to engage a financial advisor to assist it in the process of identifying a suitable business combination partner. On November 12, 2020, Valens engaged BofA Securities, Inc. (“BofA Securities”) as its financial advisor. In late November 2020, representatives of BofA Securities advised PTK that the formal marketing and evaluation process would begin in early January 2021.

On January 4, 2021, representatives of PTK engaged in discussions with representatives of BofA Securities regarding the Valens’ process and related timing. Given Valens’ business and financial developments, market performance of publicly traded comparables and initial public offerings, PTK considered revising its valuation. On February 1, 2021, following additional discussions with representatives of BofA Securities regarding valuation perspectives and developments in Valens’ business, PTK emailed BofA Securities a revised draft non-binding letter of intent, which, subject to due diligence, assumed an initial pre-transaction value of $900 million and a PIPE financing of $125 million.

On February 8, 2021, BofA Securities provided PTK with preliminary feedback from the Valens Special Committee, including that Valens was seeking a higher pre-transaction value. On February 15, 2021, PTK submitted a further revised letter of intent to BofA Securities, which, subject to continued due diligence, assumed a Total Deal Value based on a base equity value of $950 million. Also on February 15, 2021, members of PTK management and the PTK board were invited to make a presentation to the Valens’ Special Committee and board with respect to a proposed business combination transaction between PTK and Valens.

On February 22, 2021, principals of PTK and Valens convened by telephone call to discuss the terms of a non-binding term sheet outlining the parameters of a mutually agreed business combination transaction, and representatives of Goodwin Procter LLP (“Goodwin”), counsel to PTK, and Davis Polk & Wardwell LLP (“Davis Polk”), counsel to Valens, then exchanged drafts of the term sheet, including negotiations with respect transaction structure, PTK’s outstanding private placement warrants, the terms of Sponsor’s earn-out and other matters relating to Sponsor economics, the minimum cash at closing (including whether this would be a mutual or Valens-only condition), the size of the post-closing equity incentive plan and the treatment and allocation of fees and expenses. The final term sheet was attached as an exhibit to PTK’s revised non-binding letter of intent, which was then countersigned by Valens on February 25, 2021. The non-binding letter of intent included a 45-day mutual exclusivity period.

 

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On March 1, 2021, Goodwin and Goldfarb Seligman & Co. (“Goldfarb”), Israeli counsel to PTK, commenced confirmatory legal due diligence. On March 12, 2021, Goodwin distributed an initial draft of the Business Combination Agreement to Davis Polk and Meitar Law Offices (“Meitar”), Israeli counsel to Valens.

On March 24, 2021, Valens entered into an agreement to appoint Citigroup Global Markets Inc., BofA Securities and Oppenheimer & Co. Inc. as lead placement agents for the PIPE. Beginning on March 24, 2021, PTK, Valens and the placement agents and their respective counsel began discussing the wall cross procedures and the preparation of confidential investor marketing materials and a proposed timeline to allow potential interested investors to consider participation in the proposed PIPE in connection with the pending business combination.

In late March 2021, with authorization from PTK and Valens, representatives of the placement agents began to contact potential investors to discuss their interest in making an equity investment in Valens pursuant to a private placement in connection with the potential business combination. During April and May 2021, PTK, Valens and the placement agents conducted several PIPE roadshow presentations with potential investors that were confidentially wall-crossed by the placement agents regarding the possibility of making an equity investment Valens in connection with the potential business combination. The meetings were facilitated and coordinated by representatives of the placement agents. The meetings were facilitated and coordinated by representatives of the placement agents.

During April 2021, the parties’ respective counsel drafted and circulated initial drafts of: (i) a sponsor letter agreement addressing, among other things, support of the PTK Sponsor of the proposed business combination and proposed restrictions on transfer of shares by the PTK Sponsor; (ii) form of transaction support agreement from Valens ordinary and preferred shareholders; and (iii) the investor rights agreement addressing, among other things, the form of registration statement, timing and commitments relating to the registration rights of the parties.

On April 1, 2021, Davis Polk circulated a revised draft of the Business Combination Agreement that proposed various revisions to the terms of the Business Combination, including revisions to the representations and warranties and the interim operating covenants of both Valens and PTK. During April and early May 2021, Goodwin, Goldfarb, Davis Polk and Meitar negotiated and finalized various terms of the Business Combination Agreement (and related disclosure schedules), as well as the terms of the subscription agreements with potential PIPE investors and the other ancillary agreements described above (including the sponsor letter agreement), and held calls to resolve the remaining significant open points in the transaction documents, including, among other things: (a) the standard for the “bring-down” at the closing for certain representations and warranties; (b) the definition of Company Material Adverse Effect; (c) the overall suite of representations, warranties and covenants to be provided by each party under the Business Combination Agreement; (d) which party would hold the proxy granted by the shareholders of Valens pursuant to their respective transaction support agreements; (e) whether the transaction expenses of PTK would be capped and whether Aggregate Transaction Proceeds would be calculated before or after taking into account such expenses; (f) the timing of the approval of the Valens’ shareholder meeting and associated termination rights; and (g) the extent to which Sponsor’s private warrants (and the shares issuable thereunder) would be subject to the Sponsor’s 180-day lock-up. For further information related to the final terms of these documents, please see the section entitled “The Business Combination Agreement.”

On May 14, 2021, representatives of Valens and PTK held a call to discuss the proposed business combination, including the status of the PIPE process. On such call, the parties agreed that the Total Deal Value would be based on a base equity value of $850 million as shall be adjusted consistent with the terms of the Business Combination Agreement in order to permit additional selected investors to participate in the PIPE Financing. In connection therewith, the parties also agreed to adjust the vesting terms applicable to PTK’s earn-out, such that 35% (rather than 25%) of PTK’s shares would be subject to forfeiture, with the parties agreeing that the additional 10% would vest at a $12.00 per share trigger price within three years of the closing of the Business Combination.

On May 21, 2021, based on further discussions with prospective PIPE investors, (i) the PTK Sponsor agreed to cancel 740,000 warrants to purchase an aggregate of 370,000 Valens ordinary shares effective as of the

 

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Closing, and (ii) the parties agreed that the post-closing equity incentive pool of Valens would be equal to (x) 6% of the total number of Valens ordinary shares on a fully diluted basis immediately following the Effective Time (including as a result of the PIPE Financing) plus (y) an additional fixed amount of 370,000 Valens ordinary shares.

On May 24, 2021, the respective counsels agreed on what became substantially the final form of the Business Combination Agreement and Ancillary Documents. On the same day, the board of directors of PTK met, reviewed the Business Combination Agreement and Ancillary Documents, reviewed the PTK board of directors’ fiduciary duties under Delaware law in the context of consideration of the proposed business combination transaction with Valens, and unanimously adopted resolutions (i) determining that it is in the best interests of PTK and its stockholders for PTK to enter into the Business Combination Agreement, (ii) adopting the Business Combination Agreement and approving PTK’s execution, delivery and performance of the same and the consummation of the transactions contemplated by the Business Combination Agreement including the issuance of the PIPE Shares and entry into the Ancillary Documents, and (iii) approving the filing of the proxy statement with the SEC, subject, in each case, to changes to the Business Combination Agreement and documentation acceptable to the Chairman of PTK.

During the days preceding the execution of the Business Combination Agreement, the board of directors of Valens held several discussions regarding the Business Combination Agreement and the results of the negotiations between the two parties, as well as the subscription agreements with the PIPE Investors. On May 25, 2021, the board of directors of Valens had executed a written resolution unanimously approving the execution of the Business Combination Agreement and Ancillary Documents, and following such approval the parties executed the Business Combination Agreement and Ancillary Documents. PTK then filed a Current Report on Form 8-K that included a press release and investor presentations as exhibits. In addition, on May 25, 2021, Valens entered into subscription agreements with certain PIPE investors pursuant to which, among other things, the investors agreed to subscribe for and purchase substantially concurrently with the closing of the Business Combination an aggregate of 12,500,000 Valens ordinary shares (on a post-Stock Split basis) for an aggregate purchase price of $125,000,000, of which Sponsor agreed to purchase 400,000 Valens ordinary shares for an aggregate purchase price of $4,000,000, in each case, subject to customary terms and conditions.

PTK’s Board of Directors’ Reasons for the Business Combination and The Recommendation of the Board of Directors

PTK’s board of directors, in evaluating the Business Combination, consulted with PTK’s management and financial and legal advisors. In reaching its unanimous resolution (i) that the Business Combination Agreement and the transactions contemplated thereby are advisable and in the best interests of PTK and its stockholders and (ii) to recommend that the stockholders adopt the Business Combination Agreement and approve the Business Combination and the transactions contemplated thereby, PTK’s board of directors considered a range of factors, including, but not limited to, the factors discussed below. In light of the number and wide variety of factors considered in connection with its evaluation of the Business Combination, PTK’s board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination and supporting its decision. PTK’s board of directors viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of PTK’s reasons for the Business Combination and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Statement Regarding Forward-Looking Statements; Market, Ranking and Other Industry Data.”

In approving the Business Combination, PTK’s board of directors determined not to obtain a fairness opinion. The officers and directors of PTK have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and background and sector expertise enabled them to make the necessary analyses and determinations regarding the Business Combination. In addition, PTK’s officers and directors have substantial experience with mergers and acquisitions.

 

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PTK’s board of directors considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Business Combination Agreement and the transactions contemplated thereby, including, but not limited to, the following material factors:

 

   

Redefining High-Speed, Zero Latency Connectivity in Automative. PTK’s board of directors noted that Valens was helping to redefine high-speed, zero latency connectivity in the automotive industry, by enabling fewer cables, lower weight and lower cost, as well as noting that Valens’ technology was selected as the basis for industry-wide end-to-end in-vehicle connectivity;

 

   

Driver of the New MIPI A-PHY Industry Standard, Positioned to Become Connectivity Platform of Choice. PTK’s board of directors noted that Valens is a driver of the new MIPI A-PHY industry standard, which is helping it to leapfrog other technologies and puts it well ahead of the curve with one of the fastest times to market;

 

   

Strong Take-Ups by a Leading OEM and Robust Customer Pipeline. PTK’s board of directors noted that Valens has strong take-ups by a leading OEM with a robust customer pipeline, as its products are deployed widely in Mercedes models and are being sold currently to other auto Tier-1s, and was additionally awarded 2023 start of production projects, as well as actively collaborating with leading players to integrate A-PHY-compliant chipsets into next generation ADAS platforms;

 

   

Massive Structural Growth in the Automotive Market. PTK’s board of directors noted the market opportunity for Valens, as the global automative semiconductor TAM is expected to reach $68B by 2026, and Valens automative Serviceable Available Market (SAM) is expected to reach $8B by 2026;

 

   

Leveraging Leadership Position in Audio-Video Connectivity. PTK’s board of directors noted Valens’ leadership position in audio-video connectivity, including the fact that Valens currently serves top audio-video players, and that Valens has a well-defined roadmap to expand its audio-video offering to strengthen its market leadership position;

 

   

Increase in Projected Revenue. PTK’s board of directors noted Valens’ strong financial profile, with $67m in revenue projected in 2021 at 70% gross margin, which Valens’ is projecting it to grow to approximately $480m in 2026 and $1B+ in 2030. Such projections are based on Valens’ management estimates that, in 2030, in addition to the growing revenue from the Company’s audio-video business, the Company’s share of the in-vehicle high speed connectivity solutions market could potentially reach 15-20%, with an estimated total addressable market at that time of approximately $5-6 billion. Some of the material assumptions underlying that estimate include (i) the addition of 100 million new cars every year, (ii), an assumed budget of $50-$60 per car for high speed connectivity semiconductor products and (iii) an average of 10-12 links for Advanced Driving Assistance Systems and high resolution displays in each car. For additional information, see “—Unaudited Prospective Financial Information of Valens” on page 71;

 

   

Experienced Leadership Team with a Proven Track Record. Valens is led by an experienced management team in Valens’ industry;

 

   

Stockholder Liquidity. The obligation in the Business Combination Agreement to have ordinary shares of Valens issued as consideration listed on the NYSE, a major U.S. stock exchange, which PTK’s board of directors believes has the potential to offer stockholders greater liquidity;

 

   

Attractive Valuation. PTK’s board of directors believes Valens’ implied valuation following the Business Combination relative to the current valuations experienced by comparable publicly traded companies in the vehicle data services sector is favorable for PTK;

 

   

Due Diligence. PTK’s due diligence examinations of Valens and discussions with Valens’ management and financial and legal advisors;

 

   

Lock-Up. Certain equityholders of Valens have agreed to be subject to a one-hundred and eighty (180) day lockup in respect of their Valens ordinary shares;

 

   

Other Alternatives. PTK’s board of directors believes, after a thorough review of other business combination opportunities reasonably available to PTK, that the Business Combination represents the

 

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best potential business combination for PTK and the most attractive opportunity for PTK’s management to accelerate its business plan based upon the process utilized to evaluate and assess other potential combination targets, and PTK’s board of directors’ belief that such process has not presented a better alternative; and

 

   

Negotiated Transaction. The financial and other terms of the Business Combination Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s-length negotiations between PTK and Valens.

PTK’s board of directors also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:

   

Industry Cyclicality. The cyclicality of the semiconductor industry;

 

   

COVID-19. The effects of health epidemics, such as the recent global COVID-19 pandemic, on Valens’ operations;

 

   

Competition. Competition in the semiconductor industry, and the failure to introduce new technologies and products in a timely manner to compete successfully against competitors;

 

   

Supply & Demand Issues. If Valens fails to adjust its supply chain volume due to changing market conditions or fails to estimate its customers’ demand;

 

   

Customer Relationships. Disruptions in relationships with any one of its key customers;

 

   

Lack of Integration Risk. Any difficulty selling Valens’ products if customers do not design its products into their product offerings;

 

   

Dependence on Design Wins. Valens’ dependence on winning selection processes;

 

   

Margin from Design Wins. Even if Valens succeeds in winning selection processes for its products, Valens may not generate timely or sufficient net sales or margins from those wins;

 

   

Manufacturing Delays. Sustained yield problems or other delays in the manufacturing process of products;

 

   

Limited Operating History. Valens’ limited operating history makes evaluating its business and future prospects difficult;

 

   

Systems Update. The need to update Valens’ financial systems and operations necessary for a public company;

 

   

Macroeconomic Risks. Macroeconomic uncertainty and the effects it could have on the combined company’s revenues;

 

   

Benefits Not Achieved. The risk that the potential benefits of the Business Combination may not be fully achieved or may not be achieved within the expected timeframe;

 

   

Redemption Risk. The potential that a significant number of PTK stockholders elect to redeem their shares prior to the consummation of the merger and pursuant to PTK’s existing charter, which would potentially make the merger more difficult or impossible to complete;

 

   

Stockholder Vote. The risk that PTK’s stockholders may fail to provide the respective votes necessary to effect the merger;

 

   

Closing Conditions. The fact that the completion of the merger is conditioned on the satisfaction of certain closing conditions that are not within PTK’s control;

 

   

Litigation. The possibility of litigation challenging the merger or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the merger;

 

   

No Third-Party Valuation. The risk that PTK did not obtain a third-party valuation or fairness opinion in connection with the merger;

 

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Liquidation of PTK. The risks and costs to PTK if the merger is not completed, including the risk of diverting management focus and resources from other business combination opportunities, which could result in PTK being unable to effect a business combination by January 15, 2022;

 

   

PTK Stockholders Receiving Minority Position. The fact that existing PTK stockholders will hold a minority position in the combined company; and

 

   

Fees and Expenses. The fees and expenses associated with completing the merger.

In addition to considering the factors described above, PTK’s board of directors also considered other factors including, without limitation:

 

   

Interests of Certain Persons. Some officers and directors of PTK may have interests in the merger. See the section titled “Proposal One — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” beginning on page 73 of this proxy statement/prospectus; and

 

   

Other Risks. Various other risks associated with Valens’ business, as described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement/prospectus.

PTK’s board of directors concluded that the potential benefits that it expected PTK and its stockholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, PTK’s board of directors unanimously determined that the Business Combination Agreement and the Business Combination contemplated therein were advisable, fair to and in the best interests of PTK and its stockholders.

Unaudited Prospective Financial Information of Valens

Valens does not as a matter of course make public projections as to future sales, earnings, or other results. However, Valens management prepared and provided to the Valens board of directors, Valens’ financial advisors, PTK and potential PIPE investors certain internal, unaudited prospective financial information in connection with the evaluation of the Business Combination. Valens management prepared such financial information based on their judgment and assumptions regarding the future financial performance of Valens. The inclusion of the below information should not be regarded as an indication that Valens or any other recipient of this information considered—or now considers—it to be necessarily predictive of actual future results.

The unaudited prospective financial information is subjective in many respects. As a result, there can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated. Since the unaudited prospective financial information covers multiple years, that information by its nature becomes less predictive with each successive year. In addition, various assumptions underlying the forecasts may prove to not have been accurate. The forecasts may not be realized, and actual results may be significantly higher or lower than projected in the forecasts. The forecasts also reflect assumptions as to certain business strategies or plans that are subject to change. As a result, the inclusion of the forecasts in this proxy statement/prospectus should not be relied on as “guidance” or otherwise predictive of actual future events, and actual results may differ materially from the forecasts.

While presented in this proxy statement/prospectus with numeric specificity, the information set forth in the summary below was based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Valens management, including, among other things, the matters described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements; Market, Ranking and Other Industry Data” and “Risk Factors.” Valens believes the assumptions in the prospective financial information were reasonable at the time the financial information was prepared, given the information Valens had at the time. However, important factors that may affect actual results and cause the results reflected in the prospective financial information not to be achieved include, among other things, risks and uncertainties relating to the Valens business, industry performance, the regulatory environment, and general business and economic conditions. The prospective financial information

 

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also reflects assumptions as to certain business decisions that are subject to change. The unaudited prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines of the SEC, or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of Valens management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of Valens management’s knowledge and belief, the expected course of action and the expected future financial performance of Valens. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/consent solicitation statement/prospectus are cautioned not to place undue reliance on the prospective financial information.

The prospective financial information included in this document has been prepared by, and is the responsibility of Valens. Neither Valens’ independent registered public accounting firm, Kesselman & Kesselman, Certified Public Accountants (Isr.), a member firm of PricewaterhouseCoopers International Limited, nor any other independent accountants, has audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, does not express an opinion or any other form of assurance with respect thereto. The Kesselman & Kesselman, Certified Public Accountants (Isr.) report included in this document relates to the Company’s previously issued financial statements. It does not extend to the prospective financial information and should not be read to do so.

EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LAWS, VALENS DOES NOT INTEND TO MAKE PUBLICLY AVAILABLE ANY UPDATE OR OTHER REVISION TO THE PROSPECTIVE FINANCIAL INFORMATION. THE PROSPECTIVE FINANCIAL INFORMATION DOES NOT TAKE INTO ACCOUNT ANY CIRCUMSTANCES OR EVENTS OCCURRING AFTER THE DATE THAT THE INFORMATION WAS PREPARED. READERS OF THIS PROXY STATEMENT/PROSPECTUS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE UNAUDITED PROSPECTIVE FINANCIAL INFORMATION SET FORTH BELOW. NONE OF VALENS, PTK NOR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, ADVISORS OR OTHER REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY VALENS SHAREHOLDER, PTK STOCKHOLDER OR ANY OTHER PERSON REGARDING ULTIMATE PERFORMANCE COMPARED TO THE INFORMATION CONTAINED IN THE PROSPECTIVE FINANCIAL INFORMATION OR THAT FINANCIAL AND OPERATING RESULTS WILL BE ACHIEVED.

Certain of the measures included in the prospective financial information may be considered non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Valens may not be comparable to similarly titled amounts used by other companies. Financial measures provided to a financial advisor in connection with a business combination transaction are excluded from the definition of non-GAAP financial measures and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Accordingly, we have not provided a reconciliation of such financial measures.

The following table sets forth certain summarized prospective financial information regarding Valens for the years 2021, 2022, 2023, 2024, 2025 and 2026:

 

     Forecast Year Ended December 31,  
(USD in millions)    2021E     2022E      2023E      2024E      2025E      2026E  

Revenue

   $ 69 (1)    $ 83      $ 120      $ 197      $ 320      $ 482  

Gross Profit

   $ 48     $ 55      $ 74      $ 130      $ 210      $ 310  

Adjusted EBITDA(2)

   ($ 18   ($ 38    ($ 24    $ 32      $ 110      $ 204  

 

(1)

Valens originally projected $67 million of revenue for 2021, but has since revised its projection to $69 million based on updated estimates by Valens management.

(2)

Adjusted EBITDA is defined as net profit (loss) before net financial expense, income tax provision, equity in earnings of investee and depreciation and amortization, further adjusted to exclude share-based compensation,

 

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  which may vary from period-to-period. We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other issuers, because not all issuers calculate Adjusted EBITDA in the same manner. Adjusted EBITDA should not be considered as an alternative to net loss or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity.

The Valens prospective financial information was prepared using several assumptions, including the below assumptions that Valens management believed to be material.

Revenue. In making the foregoing assumptions, which imply a revenue compound annual growth rate of approximately 48% between 2021 and 2026 Valens management relied on a number of factors, including:

 

   

its estimates of market development over the projected period;

 

   

its estimates with respect to its products’ Average Selling Prices (ASPs) and their expected price erosion over time;

 

   

its best estimates of the timing for new product releases and overall product development process and costs;

 

   

the relevant uses of Valens products for different applications and market segments;

 

   

the historical system usage patterns of Valens customers; and

 

   

third party forecasts for industry growth.

 

   

In addition, 2021-2026 projected revenues are based on a variety of operational assumptions including, among others, that the product mix of Audio-Video and Automotive segments in revenues will change over time, as follows:

 

   

2021: The total expected revenue in 2021 is $69M. Audio-Video and Automotive are expected to contribute $62M (90%) and $7M (10%), respectively, based on existing products, customers and contracts of the Company.

 

   

2023: The total expected revenues in 2023 are $120M. Audio-Video and Automotive are expected to contribute $82M (68%) and $38M (32%), respectively.

 

   

Audio-Video

 

   

an increase of 18% in revenues in 2023 (in comparison to 2021) is derived from an increase in chip volumes;

 

   

an increase of 11% in revenues in 2023 (in comparison to 2021) is derived from an increase in the average selling price, among other things, as a result of the ramp up of the Company’s new product (VS3000), which is a more advanced and integrated product.

 

   

Automotive

 

   

the vast majority of the revenues in 2023 are expected to be contributed by existing customers, using the first generation of automotive products (VA6000);

 

   

the projections related to the increase in automotive revenues in 2023 (in comparison to 2021), are based, among other things, on long term forecast received from existing customers.

 

   

2026: The total expected revenues in 2026 are $482M. Audio Video and Automotive are expected to contribute $198M (41%) and $284M (59%), respectively.

 

   

Audio-Video

 

   

the increase in revenues in 2026 (in comparison to 2023) is derived from an annual growth of 15% derived from the expected market growth due to the growing need of audio video extension products in the new post-COVID-19 era and revenue contribution of $74M derived from new products that the Company plans to develop in 2021-2024.

 

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Automotive

 

   

approximately 33% of the revenues in 2026 are expected to be contributed from customers using the first-generation automotive products, out of which, existing customers are expected to contribute 57% of the automotive revenues and the rest are to be contributed by new customers.

 

   

approximately 60% of the 2026 revenues are expected from the new MIPI A-PHY complaint products (VA7000 family), representing a projected penetration of 8% of the sensor market for 2026.

 

   

the balance of the 2026 revenues reflects a contribution from next generation products that expected to be developed by the Company in 2022-2024.

 

   

Gross Profit: 2021-2026 projected gross profit is driven by a multitude of factors including, among others:

 

   

an anticipated reduction in contribution margin (i.e., the difference between the products’ average sale price and the direct bill of materials) due to the competitive environment in which the company is anticipated to operate.

 

   

this expected erosion in contribution margin is partially offset by the reduction of the portion of the non-Bill of Materials (“non-BOM”) expenses. As the chip volumes sold by the Company increase, the fixed costs of production are expected to remain relatively stable and therefore the incremental gross profit will primarily reflect the difference between the products’ average sale price and the direct bill of materials, which will positively impact the overall gross profit margin as follows:

 

   

2021: Cost of goods is expected to be approximately 30% out of revenues, to be composed of 26% Bill of Material expenses related to Company’s semiconductor products and 4% derived from non-BOM expenses (such as payroll, storage, insurance and overhead).

 

   

2023: Cost of goods is expected to be approximately 38% out of revenues, to be composed of 35% Bill of Material expenses related to Company’s semiconductor products and 3% derived from non-BOM expenses (such as payroll, storage, insurance and overhead). The main reason for the increase in the portion of the BOM expenses out of revenues, is related to the increase in the portion of the automotive business, contributing in 2023 approximately 31% of the total revenues (compared to 10% in 2021) at a contribution margin of 45%.

 

   

2026: The cost of goods is expected to be approximately 36% out of revenues, to be composed of 35% Bill of Material expenses related to Company’s semiconductor products and 1% derived from non-BOM expenses (such as payroll, storage, insurance and overhead).

 

   

Adjusted EBITDA: 2021-2026 Adjusted EBITDA is driven by a multitude of factors including, among others:

 

   

in 2021-2026, an anticipated 10.5% annual increase in the Company’s expected R&D expenses to $79M in 2026 from the anticipated enhancement of new features of the then existing products, together with the development of new products, according to the Company’s road map. The Company’s expenses are divided to labor and other expenses, such as tape out, development tools cost, IP licensing, package design, test program development as well as product qualification;

 

   

while R&D projected cost allocation for specific years may vary, the Company projects that its average costs out of total expected R&D expenses in 2021-2026 will be as follows: (i) labor: approximately 65%; and (ii) other R&D expenses: approximately 35%;

 

   

in 2021-2023, an anticipated 4% annual increase in the Company’s sales and marketing expenses to $15M in 2023, reflecting the Company’s plan to support its revenue growth and business

 

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expansion. While specific sales and marketing projected cost allocations for a certain specific year may vary, the Company projects that its average costs out of total sales and marketing expenses in 2021-2023 will be as follows: (i) labor: approximately 74%; and (ii) other sales and marketing expenses (including exhibition expenses, marcom, travels etc.): approximately 26%; in 2024-2026, the Company assumed an annual increase of 10% in its sales and marketing expenses; and

 

   

in 2021-2023, an anticipated 1% annual increase in the Company’s General and Administrative (G&A) expenses to $9M in 2023, reflecting the Company’s plan to support its revenue growth and business expansion. 2021 G&A expenses already reflect the additional expenses due to the fact that the company is becoming public. While specific G&A projected cost allocations for a certain specific year may vary, the Company projects that its average costs out of total G&A expenses in 2021-2023 will be as follows: (i) labor: approximately 52%; and (ii) other G&A expenses (mainly including professional services such as legal, accounting, insurances, etc.): approximately 48%. The Company’s overhead expenses (lease, communication, welfare, maintenance, office supply etc.) are allocated to the different departments, pro-rata in accordance with their headcounts; in 2024-2026, the Company assumed an annual increase of 10% in its general and administrative expenses;

Satisfaction of 80% Test

It is a requirement under the PTK Charter and the NYSE rules that any business acquired by PTK have a fair market value equal to at least 80% of the balance of the funds in the Trust Account (excluding the deferred underwriting commissions and taxes payable) at the time of the execution of a definitive agreement for an initial business combination. The balance of the funds in the Trust Account (excluding deferred underwriting commissions and taxes payable) at the time of the execution of the Business Combination Agreement with Valens was approximately $115,000,000 and 80% thereof represents approximately $92,000,000. In determining whether the 80% requirement was met, rather than relying on any one factor, PTK’s board of directors concluded that it was appropriate to base such valuation all of the qualitative factors described in this section and the section of this proxy statement entitled “PTK’s Board of Directors’ Reasons for the Business Combination and Recommendation of Its Board of Directors” as well as quantitative factors, such as the anticipated implied equity value of the combined company being approximately $1.16 billion, assuming no redemptions, with no material debt expected to be outstanding. Based on the qualitative and quantitative information used to approve the Business Combination described herein, PTK’s board of directors determined that the foregoing 80% fair market value requirement was met. PTK’s board of directors believes that the financial skills and background of its members qualify it to conclude that the acquisition met the 80% requirement.

Interests of Certain Persons in the Business Combination

In considering the recommendation of PTK’s board of directors to vote in favor of approval of the Business Combination Proposal, stockholders should keep in mind that the Sponsor and PTK’s directors and executive officers have interests in such proposals that are different from, or in addition to, those of PTK’s stockholders generally. In particular:

 

   

If the Business Combination with Valens or another business combination is not consummated by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter), PTK will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account (net of interest that may be used by PTK to pay income taxes or other taxes) which redemption will completely extinguish the PTK public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and, subject to the approval of its remaining stockholders and PTK’s board of directors and applicable law, dissolving and

 

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liquidating. In such event, the 2,875,000 Founder Shares, which were acquired by the Sponsor for $25,000, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Such shares had an aggregate market value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021. On the other hand, if the Business Combination is consummated, each outstanding share of PTK Common Stock will be converted into one Valens ordinary share subject to adjustment described herein.

 

   

The Sponsor has spent $25,000 to purchase 2,875,000 Founder Shares and $3,400,000 to purchase 6,800,000 private placement warrants from PTK for $0.50 per private warrant. Additionally, the Sponsor was issued 600,000 additional private placement warrants as a result of the conversion of the promissory note in the amount of $300,000 which the Sponsor and its affiliates had loaned PTK to cover expenses related to its initial public offering. Subsequently, pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed to cancel 740,000 warrants to purchase an aggregate of 370,000 shares of Valens ordinary shares effective as of the Closing. The Founder Shares had an aggregate value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021 and the private placement warrants (excluding the Cancelled Warrants) had an aggregate market value of $3.0 million based upon the closing price of $0.40 per warrant on the NYSE on August 27, 2021. The Founder Shares and the private placement warrants will become worthless if PTK does not consummate a business combination by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter).

 

   

If PTK is unable to complete a business combination within the required time period, the Sponsor will be liable under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by PTK for services rendered or contracted for or products sold to PTK. If PTK consummates a business combination, on the other hand, PTK will be liable for all such claims.

 

   

The Sponsor and PTK’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on PTK’s behalf, such as identifying and investigating possible business targets and business combinations. However, if PTK fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, PTK may not be able to reimburse these expenses if the Business Combination or another business combination is not completed by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter). As of the record date, the Sponsor and PTK’s officers and directors and their affiliates had incurred approximately $500,000 of unpaid reimbursable expenses.

 

   

The Business Combination Agreement provides for the continued indemnification of PTK’s current directors and officers and the continuation of directors and officers liability insurance covering PTK’s current directors and officers.

 

   

PTK’s Sponsor, officers and directors (or their affiliates) may make loans from time to time to PTK to fund certain capital requirements. If the Business Combination is not consummated, the loans will not be repaid and will be forgiven except to the extent there are funds available to PTK outside of the Trust Account.

 

   

Ker Zhang will be a member of the board of directors of Valens following the closing of the Business Combination and, therefore, in the future Mr. Zhang will receive any cash fees, stock options or stock awards that Valens’ board of directors determines to pay to its non-executive directors.

 

   

PTK’s Sponsor has agreed to invest an aggregate amount of $4.0 million to purchase 400,000 Valens ordinary shares in connection with the PIPE Financing to be completed at the closing of the Business Combination.

 

   

The Sponsor will benefit financially from the completion of any business combination even if the stock price declines after the Business Combination, generating a negative return for other shareholders. The Sponsor will lose substantially all of its investment in PTK and will not be reimbursed for any out-of

 

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pocket expenses if an initial business combination is not completed prior to January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK charter). Thus, if the proposed Business Combination with Valens is not consummated, PTK may seek to complete a business combination with a less favorable target company or on terms less favorable to PTK stockholders rather than choose to dissolve and liquidate.

 

   

The Sponsor paid an aggregate of $25,000 for 2,875,000 Founder Shares, which had an aggregate market value of $28.5 million based upon the closing price of $9.90 per share on the NYSE on August 27, 2021. If the proposed Business Combination with Valens is consummated, the Sponsor may still earn a positive rate of return on its investment, even if other stockholders experience a negative rate of return in post-Business Combination.

Anticipated Accounting Treatment

The Transaction is comprised of a series of transactions pursuant to the Business Combination Agreement, as described elsewhere in this proxy statement/prospectus. For accounting purposes, the Transaction will be effectuated by three main steps:

 

  1.

The conversion of outstanding Valens preferred shares into Valens ordinary shares, and thereafter the Stock Split of Valens ordinary shares such that each such ordinary share has an implied value of $10.00 per share as of an agreed measurement time shortly prior to Closing (and valuing Valens equity as of such agreed measurement time at the Total Deal Value).

 

  2.

The merger of PTK with Merger Sub, which is not within the scope of ASC 805 (“Business Combinations”) because PTK does not meet the definition of a business in accordance with ASC 805. The merger will be accounted for as a recapitalization; as such, any difference between the fair value of Valens ordinary shares issued and the fair value of PTK’s identifiable net assets should be recorded as additional paid-in capital. For purposes of the unaudited pro forma condensed combined financial information, it is assumed that the fair value of each individual Valens ordinary share issued to PTK stockholders is equal to the fair value of each individual Valens shareholder resulting from the Total Deal Value, assigned to Valens in the Business Combination Agreement.

 

  3.

As part of the Transactions, PTK Private Warrants will be amended such that there will be no change in their terms (including as to lack of redemption and cashless exercise) based on the identity of the holder thereof. Accordingly, such warrants will be classified as equity.

 

  4.

35% of the Valens ordinary shares that the PTK Sponsor will receive in respect of its PTK common stock will be subject to forfeiture if certain price targets for the Valens ordinary shares are not achieved within a certain period of time after the Effective Time or if an M&A Transaction does not occur at a certain minimum price (the “Forfeiture Shares”). Such Forfeiture Shares will be classified as a liability and presented at fair value, although they are considered outstanding shares and are entitled to voting rights and distributions.

 

  5.

The Subscription Agreements related to the PIPE, which were executed concurrently with the Business Combination Agreement, will result in the issuance of Valens ordinary shares, leading to an increase in share capital and share premium.

Regulatory Matters

The Business Combination is not subject to any federal or state regulatory requirement or approval, except for filings with the State of Delaware necessary to effectuate the Business Combination.

Vote Required for Approval

The approval of the Business Combination Proposal will require the affirmative vote of the holders of a majority of the votes cast by the then-outstanding shares of PTK Common Stock present and entitled to vote at the special meeting. Abstentions will have no effect on the Business Combination Proposal. Brokers are not entitled to

 

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vote on the Business Combination Proposal absent voting instructions from the beneficial holder and, consequently, broker non-votes will have no effect on the Business Combination Proposal. The Transactions will not be consummated if PTK has less than $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act) either immediately prior to or upon consummation of the Transactions.

The approval of the Business Combination Proposal is a condition to the consummation of the Transactions. If the Business Combination Proposal is not approved, the other proposals (except an Adjournment Proposal, as described below) will not be presented to the PTK stockholders for a vote.

Resolution

RESOLVED, as an ordinary resolution, that PTK’s entry into the Business Combination Agreement, dated as of May 25, 2021, by and among PTK, Valens, and Merger Sub, a Delaware corporation and wholly owned subsidiary of Valens, a copy of which is attached to this proxy statement/prospectus as Annex A, pursuant to which, among other things, the merger of Merger Sub with and into PTK, with PTK surviving the merger as a wholly owned subsidiary of Valens, in accordance with the terms and subject to the conditions of the Business Combination Agreement, be approved, ratified and confirmed in all respects.”

Recommendation of PTK’s Board of Directors

PTK’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE PTK STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.

No Appraisal Rights

Under Section 262 of the General Corporation Law of the State of Delaware, the holders of PTK Common Stock will not have appraisal rights in connection with the Business Combination.

Resale of Valens Ordinary Shares

The Valens ordinary shares to be issued in connection with the Business Combination will be freely transferable under the Securities Act except for shares issued to any shareholder who may be deemed for purposes of Rule 144 under the Securities Act an “affiliate” of PTK immediately prior to the Effective Time or an “affiliate” of Valens following the Business Combination. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under common control with, Valens or PTK (as appropriate) and may include the executive officers, directors and significant shareholders of Valens or PTK (as appropriate).

Stock Exchange Listing of Valens Ordinary Shares

Valens will use commercially reasonable efforts to cause, prior to the Effective Time, the Valens ordinary shares and warrants issuable pursuant to the Business Combination Agreement to be approved for listing on the NYSE under the symbols “VLN” and “VLNW,” respectively, subject to official notice of issuance. Approval of the listing on the NYSE of the Valens ordinary shares and warrants (subject to official notice of issuance) is a condition to each party’s obligation to complete the Business Combination.

Delisting and Deregistration of PTK Common Stock

If the Business Combination is completed, shares of PTK Common Stock, PTK warrants and PTK’s units will be delisted from the NYSE and will be deregistered under the Exchange Act.

 

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Combined Company Status as a Foreign Private Issuer under the Exchange Act

Valens expects to remain a “foreign private issuer” (under SEC rules). Consequently, upon consummation of the Business Combination, Valens will be subject to the reporting requirements under the Exchange Act applicable to foreign private issuers. Valens will be required to file its annual report on Form 20-F for the year ending December 31, 2021 with the SEC by April 30, 2022. In addition, Valens will furnish reports on Form 6-K to the SEC regarding certain information required to be publicly disclosed by Valens in Israel or that is distributed or required to be distributed by Valens to its shareholders.

Based on its foreign private issuer status, Valens will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as a U.S. company whose securities are registered under the Exchange Act. Valens will also not be required to comply with Regulation FD, which addresses certain restrictions on the selective disclosure of material information. In addition, among other matters, Valens officers, directors and principal shareholders will be exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of the Valens ordinary shares.

Given the substantial number of Valens ordinary shares that Valens will issue in the Business Combination to PTK stockholders who are U.S. residents and the prospective, increased U.S.-oriented profile of Valens’ officers and directors, assets and business administration, it is possible that Valens will lose its status as a foreign private issuer after the Business Combination. If that happens Valens will no longer be exempt from such rules and, among other things, will be required to file quarterly reports on Form 10-Q containing interim financial statements as if it were a company incorporated in the United States, as well as annual reports on Form 10-K. Valens’ qualification for foreign private issuer status will be tested again as of June 30, 2022, (the final business day of the second fiscal quarter in 2022) to determine whether Valens will instead be subject to the reporting requirements applicable to U.S. companies registered under the Exchange Act beginning at the start of 2023. If it no longer meets the definition of a “foreign private issuer” as of that test date, Valens will begin to be required to file a quarterly report on Form 10-Q for the quarter ending March 31, 2023, and will be required to continue to file quarterly reports with the SEC thereafter.

Despite its initial exemption due to its foreign private issuer status, Valens, and following the consummation of the Business Combination, Valens, nevertheless expects to issue interim quarterly financial information publicly and to furnish it to the SEC on Form 6-K following the Business Combination.

Combined Company Status as an Emerging Growth Company under U.S. Federal Securities Laws and Related Implications

Each of PTK and Valens is, and consequently, following the Business Combination, the combined company will be, an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, Valens will be eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find Valens’ securities less attractive as a result, there may be a less active trading market for Valens’ securities and the prices of Valens’ securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act

 

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provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Valens has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, Valens, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of Valens’ financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

Valens will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of Valens’ initial public offering, (b) in which Valens’ has total annual gross revenue of at least $1.07 billion, or (c) in which Valens is deemed to be a large accelerated filer, which means the market value of Valens’ common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which Valens has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

 

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PROPOSAL TWO—THE ADJOURNMENT PROPOSAL

The Adjournment Proposal, if adopted, will allow PTK’s board of directors to adjourn the special meeting to a later date or dates, if necessary. In no event will PTK solicit proxies to adjourn the special meeting or consummate the Transactions beyond the date by which it may properly do so under the PTK Charter and Delaware law. The purpose of the Adjournment Proposal is to provide more time to meet the requirements that are necessary to consummate the Transactions. See the section titled “Proposal One — The Business Combination Proposal — Interests of Certain Persons in the Transactions.”

Consequences If the Adjournment Proposal Is Not Approved

If the Adjournment Proposal is presented to the meeting and is not approved by the stockholders, PTK’s board of directors may not be able to adjourn the special meeting to a later date or dates. In such event, the Transactions would not be completed.

Required Vote

The approval of the Adjournment Proposal will require the affirmative vote of the holders of a majority of the shares of PTK Common Stock present and entitled to vote at the special meeting. Abstentions will have the same effect as a vote “against” on the Adjournment Proposal. Broker non-votes will have no effect on the Adjournment Proposal.

Recommendation

PTK’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PTK STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.

 

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THE BUSINESS COMBINATION AGREEMENT

For a discussion of the Business Combination structure and merger consideration provisions of the Business Combination Agreement, see the section entitled “Proposal One – The Business Combination Agreement Proposal.” Such discussion and the following summary of other material provisions of the Business Combination Agreement is qualified by reference to the complete text of the Business Combination Agreement, a copy of which is attached as Annex A to the proxy statement/prospectus. All PTK stockholders are encouraged to read the Business Combination Agreement in its entirety for a more complete description of the terms and conditions of the Business Combination.

The Business Combination Agreement summary below is included in this proxy statement/prospectus only to provide you with information regarding the terms and conditions of the Business Combination Agreement and not to provide any other factual information regarding PTK, Valens or their respective businesses. Accordingly, the representations and warranties and other provisions of the Business Combination Agreement should not be read alone, but instead should be read only in conjunction with the information provided elsewhere in this proxy statement/prospectus.

Closing and Effective Time of the Transactions

The Closing will take place as promptly as reasonably practicable, but in no event later than the third business day following the satisfaction of (or, to the extent permitted by law, the waiver of) the conditions set forth in the Business Combination Agreement (the “Closing Date”) and summarized below under the subsection entitled “The Business Combination Agreement—Conditions to Closing of the Transactions,” unless PTK and Valens agree in writing to another time or unless the Business Combination Agreement is terminated pursuant to its terms. The Transactions are expected to be consummated promptly after the special meeting of PTK’s stockholders described in this proxy statement/prospectus.

Representations and Warranties

The Business Combination Agreement contains representations and warranties of PTK relating, among other things, to:

 

   

organization and qualification;

 

   

the authorization, delivery and enforceability of the Business Combination Agreement and the Ancillary Documents;

 

   

governmental approvals and no conflicts;

 

   

brokers’ fees;

 

   

information supplied;

 

   

capitalization;

 

   

SEC filings;

 

   

Trust Account;

 

   

indebtedness;

 

   

transactions with affiliates;

 

   

litigation;

 

   

compliance with applicable law;

 

   

business activities;

 

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internal controls; NYSE listing; financial statements

 

   

no undisclosed liabilities;

 

   

tax matters;

 

   

material contracts; no defaults;

 

   

absence of changes;

 

   

employee benefit plans;

 

   

Sponsor Letter Agreement and Investors’ Rights Agreement;

 

   

Investment Company Act;

 

   

charter provisions;

 

   

compliance with international trade and anti-corruption laws;

 

   

non-Israeli residency;

 

   

independent investigation and absence of outside reliance; and

 

   

employee termination.

The Business Combination Agreement contains representations and warranties of Valens and its subsidiaries relating, among other things, to:

 

   

organization and qualification;

 

   

capitalization;

 

   

the authorization, delivery and enforceability of the Business Combination Agreement and the Ancillary Documents;

 

   

financial statements; undisclosed liabilities;

 

   

consents and requisite governmental approvals; no violations;

 

   

permits;

 

   

material contracts; no defaults;

 

   

absence of changes;

 

   

litigation;

 

   

compliance with applicable law;

 

   

employee plans;

 

   

environmental matters;

 

   

intellectual property;

 

   

privacy and data security;

 

   

labor matters;

 

   

insurance;

 

   

tax matters;

 

   

brokers’ fees;

 

   

real and personal property;

 

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transactions with affiliates;

 

   

compliance with international trade and anti-corruption laws;

 

   

PIPE financing;

 

   

governmental grants;

 

   

information supplied;

 

   

anti-trust; and

 

   

independent investigation and absence of outside reliance.

Covenants

The parties have each agreed to use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary or advisable to consummate and make effective as promptly as reasonably practicable the transactions contemplated by the Business Combination Agreement. PTK and Valens have each also agreed that (a) Valens shall, and shall cause its subsidiaries to use commercially reasonable efforts to (i) conduct and operate their respective businesses in the ordinary course in all material respects (ii) maintain and preserve intact in all material respects the business organization, assets, properties and material business relations of Valens and its subsidiaries, taken as a whole, (iii) keep available the services of the present officers and key employees of Valens and (iv) preserve existing relations and goodwill of Valens and its subsidiaries with customers, suppliers, distributors and creditors of Valens and its subsidiaries, and (b) PTK shall use its commercially reasonable efforts to comply with and continue performing under its governing documents, the Investment Management Trust Agreement, dated as of July 13, 2020, between PTK and Continental as trustee (the “Trust Agreement”), and all other agreements or contracts to which PTK may be a party, in each case through the earlier of the Closing or the termination of the Business Combination Agreement in accordance with its terms.

PTK and Valens have agreed that, unless otherwise contemplated under the Business Combination Agreement or any Ancillary Document or required by applicable law, and subject to certain disclosed exceptions, neither Valens nor its subsidiaries will take the following actions during the interim period from the date of the Business Combination Agreement through the earlier of the Closing or the valid termination of the Business Combination Agreement pursuant to its terms, among others, except as consented to in writing by PTK (such consent, not to be unreasonably withheld, conditioned or delayed):

 

   

declare, set aside, make or pay a dividend on, or make any other distribution or payment (whether in cash, stock or property) in respect of, any equity securities of Valens or its subsidiaries or Merger Sub or repurchase, redeem or otherwise acquire, offer to repurchase, redeem or otherwise acquire, any outstanding equity securities of Valens or its subsidiaries or Merger Sub, other than (x) dividends or distributions, declared, set aside or paid by any of Valens’ subsidiaries to Valens or any subsidiary that is, directly or indirectly, wholly owned by Valens (y) any dividends or distributions required under the governing documents of any joint venture of any subsidiaries of Valens and (z) repurchases of any equity securities pursuant to Valens existing equity incentive awards as of the date of the Business Combination Agreement (or equity incentive awards permitted to be issued pursuant to the Business Combination Agreement on and after the date of the Business Combination Agreement);

 

   

(A) merge, consolidate, combine or amalgamate Valens or any of its subsidiaries with any person or (B) purchase or otherwise acquire (whether by merging or consolidating with, purchasing any equity security in or a substantial portion of the assets of, or by any other manner) any corporation, partnership, association or other business entity or organization or division thereof, other than such acquisitions and purchases that would not require financial statements of the acquired business to be included in this proxy statement/prospectus pursuant to Rule 3-05 of Regulation S-X under the Securities Act;

 

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adopt any amendments, supplements, restatements or modifications to Valens’ or any of its subsidiaries’ governing documents, Valens’ investor agreements or the Investors’ Rights Agreement (other than de minimis amendments);

 

   

transfer, issue, sell, grant or otherwise directly or indirectly dispose of, or subject to a lien, (A) any equity securities of Valens or any of its subsidiaries or Merger Sub or (B) any options, restricted stock, warrants, rights of conversion or other rights, agreements, arrangements or commitments obligating Valens or any of its subsidiaries or Merger Sub to issue, deliver or sell any equity securities of Valens or any of its subsidiaries, other than (i) to employees and independent contracts of Valens and its subsidiaries in the ordinary course of business consistent with past practice in a cumulative amount not to exceed 300,000 Company Options (in addition to a previously promised amount of options as of the date of the Business Combination Agreement), in each cause, out of the Company Equity Plan, (ii) the issuance of shares of capital stock of Valens upon the exercise of any Company Equity Award outstanding on the date of the Business Combination Agreement in accordance with the terms of the applicable Company Equity Plan and the underlying grant, award or similar agreement or (iii) pursuant to the Subscription Agreements;

 

   

incur, create or assume any indebtedness in excess of $1,000,000 (either individually or in the aggregate), other than (x) ordinary course trade payables, (y) between Valens and any of its wholly owned subsidiaries or between any of such wholly owned subsidiaries or (z) in connection with borrowings, extensions of credit and other financial accommodations under Valens’ and its subsidiaries’ existing credit facilities, notes and other existing indebtedness and, in each case, any refinancings thereof; provided, that, in the case of clause (z) above, such borrowings do not exceed $5,000,000 in the aggregate, and such indebtedness for borrowed money is incurred in the ordinary course of Valens’ or its subsidiaries’ business;

 

   

make any loans, advances or capital contributions to, or guarantees for the benefit of, or any investments in, any person, in each case for an amount in excess of $500,000 (either individually or in the aggregate), other than (A) intercompany loans or capital contributions between Valens and any of its wholly owned subsidiaries, (B) the reimbursement of expenses of employees in the ordinary course of business and consistent with past practice, (C) prepayments and deposits paid to suppliers of Valens or its subsidiaries in the ordinary course of business, (D) trade credit extended to customers of Valens or its subsidiaries in the ordinary course of business and (E) advances to wholly owned subsidiaries of Valens;

 

   

except (w) as required under the existing terms of any Employee Benefit Plan of Valens or its subsidiaries, (x) as required under the terms of the Business Combination Agreement, (y) as required by any applicable law or (z) in the ordinary course of business, (A) adopt, enter into, terminate or materially amend or modify any material employee benefit plan of Valens or its subsidiaries or any other material benefit or compensation plan, policy, program, agreement, trust, fund or contract that would be an employee benefit plan if in effect as of the date of the Business Combination Agreement, (B) materially increase or decrease the compensation payable to any current or former director, manager, officer, employee, individual independent contractor or other service provider of Valens or its subsidiaries, in each case with annual base compensation in excess of $500,000, (C) accelerate, by any action or omission of any Group Company, any payment, right to payment, vesting or benefit, or the funding of any payment, right to payment, vesting or benefit, payable or to become payable to any current or former director, manager, officer, employee, individual independent contractor or other service provider of Valens or its subsidiaries or (D) waive or release any noncompetition, non-solicitation, no-hire, nondisclosure or other restrictive covenant obligation of any current or former director, manager, officer, employee, individual independent contractor or other service provider of Valens or its subsidiaries in each case with annual base compensation in excess of $500,000;

 

   

(i) materially modify, extend (other than extension in the ordinary course of business), terminate, negotiate, or enter into any collective bargaining agreement or (ii) recognize or certify any labor union,

 

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works council, or other labor organization or group of employees of Valens or its subsidiaries as the bargaining representative for any employees of Valens or its subsidiaries;

 

   

hire, engage, terminate (without cause), furlough, or temporarily lay off any key employee;

 

   

implement or announce any closings, employee layoffs, furloughs, reductions-in-force, reduction in terms and conditions of employment, or other personnel actions that could implicate the Worker Adjustment and Retraining Notification Act;

 

   

except in the ordinary course of business, make, change or revoke any material election concerning Taxes (including, for the avoidance of doubt, making any U.S. federal income Tax entity classification election pursuant to Treasury Regulations Section 301.7701-3(c) with respect to Valens), change or otherwise modify any material income or other method of accounting as such relates to taxes, amend any material tax return, surrender any right to claim a material refund of taxes, enter into any tax closing agreement, settle any material tax claim or assessment, change Valens’ jurisdiction of tax residence, or consent to any extension or waiver of the limitation period applicable to or relating to any material tax claim or assessment;

 

   

enter into any settlement, conciliation or similar contract outside of the ordinary course of business the performance of which would involve the payment by Valens or its subsidiaries in excess of either $1,000,000 individually or $5,000,000 in the aggregate, in the aggregate, or that imposes, or by its terms will impose at any point in the future, any material, non-monetary obligations on Valens or its subsidiaries (or PTK or any of its affiliates after the Closing);

 

   

authorize, recommend, propose or announce an intention to adopt, or otherwise effect, a plan of complete or partial liquidation, dissolution, restructuring, recapitalization, reorganization or similar transaction involving Valens or any of its subsidiaries (other than dormant entities), or to voluntarily initiate or permit or consent to any proceeding of insolvency, bankruptcy, receivership, administration, conservatorship or other similar proceeding involving Valens or any of its subsidiaries (other than dormant entities);

 

   

change Valens’ or its subsidiaries’ methods of accounting in any material respect, other than changes that are made in accordance with PCAOB standards;

 

   

enter into any contract with any broker, finder, investment banker or other person under which such person is or will be entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by the Business Combination Agreement;

 

   

except for entries, modifications, amendments, waivers or terminations in the ordinary course of business, enter into, materially modify, materially amend, waive any material right under or terminate (excluding any termination for breach by the counterparty(ies) or expiration in accordance with its terms), any material contract or any material real property lease (excluding, for the avoidance of doubt, any expiration or automatic extension or renewal of any such material contract pursuant to its terms);

 

   

abandon, sell, assign, or exclusively license any material owned intellectual property to any person (other than in the ordinary course of business);

 

   

sell, lease, license, encumber or otherwise dispose of any properties or assets material to Valens and its subsidiaries, taken as a whole, except for the sale, lease, license, or disposition in the ordinary course of business;

 

   

close any material facility or discontinue any material line of business or material business operations;

 

   

suffer any lien on or transfer (other than pursuant to non-exclusive licenses), let lapse, abandon or dispose of any material owned intellectual property; or

 

   

enter into any contract to take, or cause to be taken, any of the foregoing actions.

 

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PTK and Valens have agreed that, unless otherwise contemplated under the Business Combination Agreement or any Ancillary Document or required by applicable law, and subject to certain disclosed exceptions, PTK will not take the following actions during the interim period from the date of the Business Combination Agreement through the earlier of the Closing or the valid termination of the Business Combination Agreement pursuant to its terms, among others, except as consented to in writing by Valens (such consent not to be unreasonably withheld, conditioned or delayed):

 

   

adopt any amendments, supplements, restatements or modifications to the Existing Warrant Agreement, the Trust Agreement or the governing documents of PTK;

 

   

declare, set aside, make or pay a dividend on, or make any other distribution or payment (whether in cash, stock or property) in respect of, any equity securities of PTK or repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any outstanding equity securities of PTK;

 

   

(A) merge, consolidate, combine or amalgamate PTK with any person or (B) purchase or otherwise acquire (whether by merging or consolidating with, purchasing any equity security in or a substantial portion of the assets of, or by any other manner) any corporation, partnership, association or other business entity or organization or division thereof;

 

   

split, combine or reclassify any of its capital stock or other equity securities or issue any other security in respect of, in lieu of or in substitution for shares of its capital stock;

 

   

incur, create, assume, refinance, guarantee or otherwise become liable for (whether directly, contingently, or otherwise) any indebtedness or other liability;

 

   

make any loans or advances to, or capital contributions to, or guarantees for the benefit of, or any investment in, any other person, other than to, of, or in, PTK;

 

   

issue any equity securities of PTK or grant any additional options, warrants or stock appreciation rights with respect to equity securities of the foregoing of PTK;

 

   

enter into, renew, modify or revise any PTK related-party transaction (or any contract or agreement that if entered into prior to the execution and delivery of the Business Combination Agreement would be a PTK related-party transaction);

 

   

engage in any activities or business, other than activities or business (i) in connection with or incident or related to PTK’s incorporation or continuing corporate (or similar) existence, (ii) contemplated by, or incident or related to, the Business Combination Agreement, any Ancillary Document, the performance of covenants or agreements thereunder or the consummation of the Transactions or (iii) those that are administrative or ministerial, in each case, which are immaterial in nature

 

   

except in the ordinary course of business, make, change or revoke any material election concerning taxes (including, for the avoidance of doubt, making any U.S. federal income tax entity classification election pursuant to Treasury Regulations Section 301.7701-3(c) with respect to PTK), change or otherwise modify any material method of accounting as such relates to taxes, amend any material tax return, surrender any right to claim a material refund of taxes, enter into any tax closing agreement, settle any tax claim or assessment, change its jurisdiction of tax residence, or consent to any extension or waiver of the limitation period applicable to or relating to any material tax claim or assessment;

 

   

enter into any settlement, conciliation or similar contract that would require any payment from the Trust Account or that would impose non-monetary obligations on PTK or any of its affiliates (or Valens or any of its subsidiaries after the Closing);

 

   

authorize, recommend, propose or announce an intention to adopt, or otherwise effect, a plan of complete or partial liquidation, dissolution, restructuring, recapitalization, reorganization or similar transaction involving PTK;

 

   

change PTK’s methods of accounting in any material respect, other than changes that are made (i) in accordance with PCAOB standards or (ii) as required by any securities law or any order, directive,

 

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guideline, recommendation, statement or guidance issued, passed, approved, published, promulgated or released by, the SEC, following reasonable prior consultation with Valens and, to the extent such change would adversely affect PTK’s ability to consummate the transactions contemplated by the Business Combination Agreement, delay the consummation of the transactions contemplated by the Business Combination Agreement or result in any material liability, subject to Valens’ prior written consent (not to be unreasonably withheld, conditioned or delayed);

 

   

enter into any contract with any broker, finder, investment banker or other person under which such person is or will be entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by the Business Combination Agreement;

 

   

except for entries, modifications, amendments, waivers, terminations or non-renewals in the ordinary course of business, enter into, materially modify, materially amend, waive any material right under, terminate (excluding any expiration in accordance with its terms) or fail to renew, any material contract (excluding, for the avoidance of doubt, any expiration or automatic extension or renewal of any such material contract pursuant to its terms);

 

   

enter into or adopt any PTK benefit plan or any benefit or compensation plan, policy, program or arrangement that would be a PTK benefit plan if in effect as of the date of the Business Combination Agreement; or

 

   

enter into any contract to take, or cause to be taken, any of the foregoing actions.

The Business Combination Agreement also contains additional covenants of the parties, including, among other things:

 

   

notifying the other party in writing promptly after learning of any shareholder demands or other shareholder proceedings relating to the Business Combination Agreement, any Ancillary Document or any matters relating thereto and reasonably cooperate with one another in connection therewith;

 

   

keeping certain information confidential in accordance with the existing non-disclosure agreements; and

 

   

making relevant public announcements.

In addition, PTK and Valens agreed that PTK and Valens will prepare and mutually agree upon and Valens will file with the SEC, this proxy statement/prospectus on Form F-4 relating to the Business Combination.

Conditions to Closing of the Transactions

Conditions to Each Party’s Obligations

The respective obligations of each party to the Business Combination Agreement to consummate the transactions contemplated by the Business Combination Agreement are subject to the satisfaction or waiver, if permitted by applicable law, in writing by the party for whose benefit such condition exists, of the following conditions:

 

   

there shall not have been entered, enacted or promulgated any law or order enjoining or prohibiting the consummation of the Transactions;

 

   

this proxy statement/prospectus becoming effective in accordance with the provisions of the Securities Act, no stop order suspending the effectiveness of the proxy statement/prospectus shall have been issued by the SEC and remaining in effect with respect to this proxy statement/prospectus, and no proceeding seeking such a stop order being threatened or initiated by the SEC and remaining pending;

 

   

the requisite of approval of Valens’ preferred and ordinary shareholders shall have been obtained;

 

   

the requisite approval of PTK’s stockholders shall have been obtained;

 

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PTK shall have at least $5,000,001 of net tangible assets remaining immediately prior to the Transactions (after taking into account any redemption requests by PTK stockholders);

 

   

Valens’ initial listing application with NYSE in connection with the Transactions having been approved and Valens not having received any notice of non-compliance therewith that has not been cured or would not be cured at or immediately following the Effective Time of the Business Combination and Valens’ shares (including, for the avoidance of doubt, the Valens ordinary shares to be issued pursuant to the Business Combination) having been approved for listing on NYSE, subject only to official notice of issuance thereof and the requirement to have a sufficient number of round lot holders;

 

   

Valens’ board of directors shall consist of the number of directors, and be comprised of the individuals as set forth in the Business Combination Agreement; and

 

   

the filing and obtaining of certain notices and approvals to and by the Israeli Innovation Authority.

Other Conditions to the Obligations of PTK

The obligations of PTK to consummate the transactions contemplated by the Business Combination Agreement are subject to the satisfaction or waiver, if permitted by applicable law, waiver by PTK of the following further conditions:

 

   

certain representations and warranties of Valens regarding the organization of Valens and its subsidiaries, the capitalization of Valens’ subsidiaries, the authority of Valens to, among other things, execute and deliver the Business Combination Agreement and each of the Ancillary Documents to which it is or will be a party and to consummate the transactions contemplated thereby, the absence of certain changes and brokers’ fees being true and correct in all material respects as of the Closing Date as if made at and as of such date (or, if given as of an earlier date, as of such earlier date);

 

   

the representations and warranties set forth in Section 3.2(a) of the Business Combination Agreement regarding the capitalization of Valens being true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date (or, if given as of an earlier date, as of such earlier date);

 

   

the other representations and warranties of Valens set forth in Article III of the Business Combination Agreement being true and correct (without giving effect to any limitation as to “materiality” or “Valens Material Adverse Effect” or any similar limitation set forth in the Business Combination Agreement) in all respects as of the Closing Date (or, if given as of an earlier date, as of such earlier date, in which case such representation and warranty shall be true and correct in all respects), except where the failure of such representations and warranties to be true and correct, taken as a whole, does not cause a Valens Material Adverse Effect;

 

   

Valens having performed and complied in all material respects with the covenants and agreements required to be performed or complied with by it under the Business Combination Agreement prior to the Closing;

 

   

since the date of the Business Combination Agreement, no Valens Material Adverse Effect has occurred that is continuing;

 

   

PTK having received a certificate executed by an authorized officer of Valens confirming that the conditions specified in Section 6.2(a), Section 6.2(b) and Section 6.2(c) of the Business Combination Agreement have been satisfied;

 

   

PTK having received a certificate of the secretary or equivalent officer of each of the Company and Merger Sub certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors or equivalent body of each of the Company and Merger Sub authorizing the execution, delivery, and performance of the Business Combination Agreement and the Transactions, and that all such resolutions are in full force and effect and are all of the resolutions adopted in connection with the Transactions; and

 

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each Ancillary Document (other than the Subscription Agreements) shall have been executed and delivered by the parties thereto (other than PTK and the Sponsor).

Other Conditions to the Obligations of the Valens Parties

The obligations of each of Valens and Merger Sub (together, the “Valens Parties”) to consummate the transactions contemplated by the Business Combination Agreement are subject to the satisfaction or waiver, if permitted by applicable law, by the Valens Parties of the following further conditions:

 

   

certain representations and warranties regarding the organization and qualification of PTK, the authority of PTK to, among other things, execute and deliver the Business Combination Agreement and each of the Ancillary Documents to which it is or will be a party and to consummate the transactions contemplated thereby, brokers’ fees and the absence of certain changes being true and correct, in all material respects as of the Closing Date, as though made on and as of the Closing Date (or, if given as of an earlier date, as of such earlier date);

 

   

the representations and warranties set forth in Section 4.6(a) of the Business Combination Agreement regarding the capitalization of PTK being true and correct in all respects, (except for de minimis inaccuracies) as of the Closing Date (or, if given as of an earlier date, as of such earlier date);

 

   

the other representations and warranties of PTK set forth in Article IV of the Business Combination Agreement being true and correct (without giving effect to any limitation of “materiality” or “material adverse effect” or any similar limitation set forth in the Business Combination Agreement) in all respects as of the Closing Date (except to the extent that any such representation and warranty is made as of an earlier date, in which case such representation and warranty shall be true and correct in all respects as of such earlier date), except where the failure of such representations and warranties to be true and correct in all respects, taken as a whole, does not cause a material adverse effect on PTK;

 

   

PTK having performed and complied in all material respects with the covenants and agreements required to be performed or complied with by them under the Business Combination Agreement;

 

   

pursuant to the Business Combination Agreement, the Company shall not be obligated to consummate the Transactions unless such Transactions will yield to the Company at least $215,000,000 Aggregate Transaction Proceeds, before the payment of any Valens transaction expenses and PTK transaction expenses;

 

   

Valens having received a certificate of the secretary or equivalent officer of PTK certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of PTK authorizing the execution, delivery, and performance of the Business Combination Agreement and the Transactions, and that all such resolutions are in full force and effect and are all of the resolutions of the board of directors of PTK adopted in connection with the Transactions;

 

   

Valens having received a certificate executed by an authorized officer of PTK confirming that the conditions set forth in Section 6.3(a) and Section 6.3(b) of the Business Combination Agreement have been satisfied;

 

   

each Ancillary Document (other than the Subscription Agreements) shall have been executed and delivered by PTK and the Sponsor; and

 

   

Valens having received from the PIPE Investors and holders of PTK shares of common stock undertakings that Valens has reasonably determined to be required pursuant to the Encouragement of Research Development and Technological Innovation in the Industry Law, 5744-1984 and the rules and regulations promulgated thereunder.

Termination

The Business Combination Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including, among others, the following:

 

   

by the mutual written consent of PTK and Valens;

 

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by PTK, if any of the representations or warranties set forth in Article III of the Business Combination Agreement shall not be true and correct or if either Valens or Merger Sub has breached or failed to perform any covenant or agreement on the part of Valens set forth in the Business Combination Agreement (including an obligation to consummate the Closing) such that the condition to Closing set forth in either Section 6.2(a) or Section 6.2(b) of the Business Combination Agreement could not be satisfied and the breach or breaches causing such representations or warranties not to be true and correct, or the breaches or failures to perform any covenant or agreement, as applicable, is (or are) not cured or cannot be cured within the earlier of (i) thirty (30) days after written notice thereof is delivered to Valens by PTK, and (ii) November 30, 2021 (the “Termination Date”); provided, however, that PTK is not then in breach of the Business Combination Agreement so as to prevent the condition to Closing set forth in either Section 6.3(a) or Section 6.3(b) of the Business Combination Agreement from being satisfied; provided, further, that PTK may only terminate the Business Combination Agreement pursuant to a breach or failure to perform Valens’ obligations under Section 5.16(a) of the Business Combination Agreement before Valens delivers specified required financial Statements of Valens to PTK;

 

   

by Valens, if any of the representations or warranties set forth in Article IV of the Business Combination Agreement shall not be true and correct or if PTK has breached or failed to perform any covenant or agreement on the part of PTK set forth in the Business Combination Agreement (including an obligation to consummate the Closing) such that the condition to Closing set forth in either Section 6.3(a) or Section 6.3(b) of the Business Combination Agreement could not be satisfied and the breach or breaches causing such representations or warranties not to be true and correct, or the breaches or failures to perform any covenant or agreement, as applicable, is (or are) not cured or cannot be cured within the earlier of (i) thirty (30) days after written notice thereof is delivered to PTK by Valens and (ii) the Termination Date; provided, however, neither Valens nor Merger Sub is then in breach of the Business Combination Agreement so as to prevent the condition to Closing set forth in Section 6.2(a) or Section 6.2(b) of the Business Combination Agreement from being satisfied;

 

   

by either PTK or Valens, if the transactions contemplated by the Business Combination Agreement shall not have been consummated on or prior to the Termination Date; provided, that (i) the right to terminate the Business Combination Agreement pursuant to this paragraph shall not be available to PTK if PTK’s breach of any of its covenants or obligations under the Business Combination Agreement shall have proximately caused the failure to consummate the transactions contemplated by the Business Combination Agreement on or before the Termination Date, and (ii) the right to terminate the Business Combination Agreement pursuant to this paragraph shall not be available to Valens if either Valens or Merger Sub breach of its covenants or obligations under the Business Combination Agreement shall have proximately caused the failure to consummate the transactions contemplated by the Business Combination Agreement on or before the Termination Date;

 

   

by either PTK or Valens, if any governmental entity shall have issued an order, promulgated a law or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by the Business Combination Agreement and such order or other action shall have become final and nonappealable; provided, that (i) the right to terminate the Business Combination Agreement pursuant to this paragraph shall not be available to PTK if (A) PTK’s failure to fulfill any obligation under the Business Combination Agreement has been the primary cause of, or primarily resulted in, the failure of the Closing to occur on or before such date or (B) PTK is in material breach of its obligations under the Business Combination Agreement on such date and (ii) the right to terminate the Business Combination Agreement pursuant to this paragraph shall not be available to Valens if (A) Valens’ or Merger Sub’s failure to fulfill any obligation under the Business Combination Agreement has been the primary cause of, or primarily resulted in, the failure of the Closing to occur on before such date or (B) Valens is in material breach of its obligations under the Business Combination Agreement on such date;

 

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by either PTK or Valens if PTK’s stockholders meeting has been held (including any adjournment thereof), has concluded, PTK’s stockholders have duly voted and the required approvals of PTK’s stockholders was not obtained;

 

   

by Valens, if: (i) at any time before PTK’s stockholders shall have duly voted at PTK’s stockholder meeting, if the PTK’s stockholders shall have not duly voted at PTK’s stockholder meeting that shall have been held and concluded within the later of: (A) thirty (30) business days after the date that the SEC declares this proxy statement/prospectus effective; and (B) a specified date; or (ii) at any time before the required PTK stockholder approval is obtained, if the PTK stockholder approval shall have not been obtained within the later of: (A) thirty (30) business days after the date that the SEC declares this proxy statement/prospectus effective; and (B) a specified date;

 

   

by Valens if, prior to obtaining the required PTK stockholder approval, PTK’s board of directors (i) shall have changed its recommendation to PTK’s stockholders to vote in favor of the Business Combination Agreement and the transactions contemplated thereby or (ii) shall have failed to include such recommendation in this proxy statement/prospectus; or

 

   

by PTK if: (i) at any time before the Valens shareholders shall have duly voted at a Valens shareholder meeting, if the Valens shareholders shall have not duly voted at a Valens shareholder meeting that shall have been held (including any adjournment thereof) and concluded within eighteen (18) calendar days after the date that the SEC declares this proxy statement/prospectus effective; or (ii) at any time before each of the required Valens preferred shareholder approval and the required Valens company shareholder approval are obtained, if either the Valens preferred shareholder approval or the Valens shareholder approval shall have not been obtained within eighteen (18) calendar days after the date that the SEC declares this proxy statement/prospectus effective.

Fees and Expenses

The fees and expenses incurred in connection with the Business Combination Agreement and the Ancillary Documents, and the Transactions, including the fees and disbursements of counsel, financial advisors and accountants, will be paid by the party incurring such fees or expenses; provided that (i) if the Business Combination Agreement is terminated in accordance with its terms, Valens shall pay, or cause to be paid, all unpaid Valens expenses and PTK shall pay, or cause to be paid, all unpaid PTK expenses and (ii) if the Closing occurs, then Valens shall pay, or cause to be paid, all unpaid Valens expenses and all unpaid PTK expenses.

Amendments

The Business Combination Agreement may be amended or modified in whole or in part, only by a duly authorized agreement in writing executed by each of the parties thereto in the same manner as the Business Combination Agreement and which makes reference to the Business Combination Agreement.

Governing Law

The Business Combination Agreement, and all claims or causes of action based upon, arising out of, or related to the Business Combination Agreement or the Transactions, is governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Delaware.

 

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AGREEMENTS ENTERED INTO IN CONNECTION WITH THE BUSINESS COMBINATION AGREEMENT

Subscription Agreements

Concurrently with the execution of the Business Combination Agreement, Valens entered into the Subscription Agreements with certain parties subscribing for Valens ordinary shares, pursuant to which the PIPE Investors have agreed to subscribe for and purchase from Valens, and Valens has agreed to sell to the PIPE Investors, an aggregate of 12,500,000 Valens ordinary shares at a purchase price of $10.00 per share, for an aggregate purchase price of $125.0 million, which price per share and aggregate purchase price assume that Valens has effected the Stock Split prior to the Effective Time. The obligations to consummate the transactions contemplated by the Subscription Agreements are conditioned upon, among other things, the consummation of the transactions contemplated by the Business Combination Agreement.

The Subscription Agreements provide that Valens is required to file with the SEC, within thirty (30) calendar days after the Closing, a registration statement registering the resale of the shares of Valens ordinary shares to be issued to any such investor and to use its commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof but no later than the earlier of (i) the 60th calendar day (or 90th calendar day if the SEC notifies Valens that it will “review” such registration statement) following the Closing and (ii) the 10th business day after the date Valens is notified (orally or in writing, whichever is earlier) by the SEC that such registration statement will not be “reviewed” or will not be subject to further review.

Company Transaction Support Agreements

Concurrently with the execution of the Business Combination Agreement, holders of a majority of Valens’ outstanding shares and at least 65% of Valens’ outstanding preferred shares entered into agreements (the “Transaction Support Agreements”) pursuant to which they agreed with PTK and Valens, to (i) appear at a shareholder meeting called by Valens for the purpose of approving the Business Combination and other transactions contemplated by the Business Combination, for the purpose of establishing a quorum, (ii) execute a written consent in favor of the Business Combination and against all other action that would reasonably be expected to materially impede the Business Combination, (iii) not to solicit, initiate, encourage, or facilitate certain alternate business combinations, (iv) vote, consent or approve any other consent or other approval that may be required under Valens’ governing documents or otherwise sought in furtherance of the transactions contemplated by the Business Combination, and (v) not to transfer, assign, or sell their respective shares, except to certain permitted transferees, prior to the consummation of the Transactions.

Investors’ Rights Agreement

Concurrently with the execution of the Business Combination Agreement, Valens, the Sponsor and certain securityholders of Valens entered into the Investors’ Rights Agreement pursuant to which, following completion of the Transactions, Valens agreed to register for resale upon demand certain Valens ordinary shares that are held by the parties thereto from time to time. In certain circumstances, various parties to the Investors’ Rights Agreement will also be entitled to customary piggyback registration rights, in each case subject to certain limitations set forth in the Investors’ Rights Agreement. In addition, the Investors’ Rights Agreement provides that Valens will pay certain expenses relating to such registrations and indemnify the securityholders against certain liabilities. The rights granted under the Investors’ Rights Agreement supersede any prior registration, qualification, or similar rights of the parties with respect to Valens securities, and all such prior agreements shall be terminated.

Additionally, under the Investors’ Rights Agreement, each of the securityholders of Valens party thereto (other than the Sponsor) have agreed not to transfer its Valens ordinary shares, except to certain permitted

 

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transferees, beginning on the closing date of the Business Combination and continuing for a period of one hundred eighty (180) days thereafter. The Sponsor has agreed not to transfer the Sponsor Lock-Up Shares, except to certain permitted transferees, beginning on the closing date of the Business Combination and continuing until the earlier of (i) one hundred eighty (180) days thereafter and (ii) when Valens completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all Valens shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Separately, the articles of association of Valens will be amended and restated as of the consummation of the Business Combination. Pursuant to such amendment, each securityholder of Valens as of immediately prior to such amendment will be restricted from transferring its Valens ordinary shares, except to certain permitted transferees, beginning on the date of such amendment and continuing for a period of one hundred eighty (180) days thereafter.

Valens Warrant Agreement

Upon the closing of the Business Combination, Valens, PTK and Continental will enter into the Valens Warrant Agreement. Such agreement will amend and restate the Existing Warrant Agreement to provide for the assignment by PTK of all its rights, title and interest in the outstanding warrants of PTK to Valens and to amend the terms of the private placement warrants such that they remain, following the consummation of the Transactions contemplated by the Business Combination Agreement, exercisable on a cashless basis at any time at the holder’s option and are not redeemable, regardless of the holder’s identity. Pursuant to the Valens Warrant Agreement, all PTK warrants under the Existing Warrant Agreement will no longer be exercisable for shares of PTK Common Stock, but instead will be exercisable for Valens ordinary shares.

Sponsor Support Agreement

Concurrently with the execution of the Business Combination Agreement, the Sponsor entered into a letter agreement (the “Sponsor Support Agreement”) in favor of Valens and PTK, pursuant to which it has agreed to (i) vote all shares of common stock of PTK beneficially owned by it in favor of the Business Combination and each other proposal related to the Business Combination proposed by the PTK board of directors at the meeting of PTK shareholders called to approve the Business Combination, (ii) appear at such shareholder meeting for the purpose of establishing a quorum, (iii) vote all such shares against any action that would reasonably be expected to materially impede, interfere with, delay, postpone, or adversely affect the Business Combination or any of the other transactions contemplated by the Business Combination Agreement, and (iv) not to transfer, assign, or sell such shares, except to certain permitted transferees, prior to the consummation of the Transactions. Additionally, pursuant to an existing letter agreement between the Sponsor and PTK, the Sponsor has agreed not to redeem any shares of common stock of PTK in connection with the Business Combination.

Pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed, with respect to the ordinary shares of Valens to be received by it in connection with the Business Combination, not to transfer:

 

   

287,500 of such shares (the “Initial Earnout Shares”) until the date on which the closing price of the ordinary shares exceeds $12.00 per share for any 20 trading days within any 30-day trading period commencing after the Closing, subject to forfeiture if such price target is not satisfied within three years following the Closing;

 

   

359,375 of such shares (the “Secondary Earnout Shares”) until the date on which the closing price of the ordinary shares exceeds $12.50 per share for any 20 trading days within any 30-day trading period commencing after the Closing, subject to forfeiture if such price target is not satisfied within three years following the Closing; and

 

   

359,375 of such shares (the “Tertiary Earnout Shares” and together with the Initial Earnout Shares and the Secondary Earnout Shares, the “Earnout Shares”) until the date on which the

 

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closing price of the ordinary shares exceeds $15.00 per share for any 20 trading days within any 30-day trading period commencing after the Closing, subject to forfeiture if such price target is not satisfied within four years following the Closing.

In the event of a Valens change in control transaction within three years following the Closing, fifty percent of the Earnout Shares not earlier released will be released from such transfer restrictions if the effective price per share to be received by Valens shareholders in such change in control transaction is at least $11.25 per share.

In the event of a Valens change in control transaction within four years following the Closing, one hundred percent of the Earnout Shares not earlier released will be released from such transfer restrictions if the effective price per share to be received by Valens shareholders in such change in control transaction is at least $12.50 per share.

In addition, pursuant to the terms of the Sponsor Support Agreement, the Sponsor agreed to cancel 740,000 warrants to purchase an aggregate of 370,000 shares of Valens ordinary shares effective as of the Closing.

 

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INFORMATION ABOUT THE COMPANIES

PTK Acquisition Corp.

PTK was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities. PTK was incorporated under the laws of the State of Delaware on August 19, 2019.

On July 15, 2020, PTK consummated the PTK IPO of 11,500,000 units, with each unit consisting of one share of PTK Common Stock and one-half of one redeemable warrant, with each whole warrant entitling the holder to purchase one-half share of PTK Common Stock at a price of $11.50 per whole share, exercisable on the later of (i) the completion of an initial business combination and (ii) 12 months from the PTK IPO. The units from the PTK IPO were sold at an offering price of $10.00 per unit, generating total gross proceeds of $115,000,000. Simultaneously with the closing of the PTK IPO, the Company consummated the sale of 6,800,000 private placement warrants at a price of $0.50 per private placement warrant in a private placement to the Sponsor, generating gross proceeds of $3,400,000. A total of $115,000,000 of the net proceeds of these offerings was deposited into the Trust Account, net of underwriting discounts and commissions and other costs and expenses, which became available to be used as working capital to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. As of August 27, 2021, there was approximately $115,000,000 held in the Trust Account.

The PTK IPO was conducted pursuant to a registration statement on Form S-1 (Registration No. 333-239149) that became effective on July 13, 2020. PTK’s units, the PTK Common Stock and the PTK warrants are listed on the NYSE Capital Market under the symbols PTK.U, PTK and PTK WS, respectively.

The mailing address of PTK’s principal executive office is 4601 Wilshire Boulevard, Suite 240, Los Angeles, California 90010, and its telephone number is (213) 625-8886. After the consummation of the Business Combination, PTK’s principal executive office will be that of Valens.

Valens Semiconductor Ltd.

Valens is a leading provider of semiconductor products, pushing the boundaries of connectivity by enabling long-reach, high-speed video and data transmission for the professional audio-video and automotive industries. Valens’ Emmy® award-winning HDBaseT technology is the leading standard in the professional audio-video market, with tens of millions of Valens chipsets integrated into thousands of HDBaseT-enabled products. Valens technology for Automotive is a key enabler of the evolution of autonomous driving, providing chipsets that support Advanced Driver-Assistance Systems (“ADAS”), Automated Driving Systems (“ADS”), infotainment, telecommunications and basic connectivity. Valens’ underlying technology has been selected by the MIPI Alliance as the basis for the new standard for high-speed automotive video connectivity.

The mailing address of Valens’ principal executive office is 8 Hanagar St. POB 7152, Hod Hasharon 4501309, Israel and its telephone number is +(972) 9-762-6900.

Merger Sub

Valens Merger Sub, Inc. is a newly formed Delaware corporation and a wholly owned subsidiary of Valens. Merger Sub was formed solely for the purpose of effecting the Transactions and has not carried on any activities other than those in connection with the Transactions. The address and telephone number for Merger Sub’s principal executive offices are the same as those for Valens.

 

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PTK’S BUSINESS

Introduction

PTK was incorporated on August 19, 2019 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. PTK’s efforts to identify a prospective target business were not limited to any particular industry or geographic region, although it initially focused its search for target businesses on software companies, especially those targeting enterprise vertical sectors owned by private equity and venture capital firms as well as corporate carve-outs. Prior to executing the Business Combination Agreement, PTK’s efforts were limited to organizational activities, completion of its initial public offering and the evaluation of possible business combinations.

Initial Public Offering and Simultaneous Private Placement

On July 15, 2020, PTK consummated the PTK IPO of 11,500,000 units, which included the full exercise by the underwriters of the over-allotment option. The units sold in the PTK IPO were sold at an offering price of $10.00 per unit, generating total gross proceeds of $115,000,000. Chardan Capital Markets, LLC acted as sole book-running manager. The PTK IPO was conducted pursuant to a registration statement on Form S-1 (Registration No. 333-239149) that became effective on July 13, 2020.

Simultaneously with the consummation of the PTK IPO, PTK consummated the private placement of an aggregate of 6,800,000 warrants at a price of $0.50 per private placement warrant, generating total proceed of $3,400,000. The issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. If PTK does not complete a business combination by January 15, 2022, the private placement warrants will expire worthless. Upon the consummation of the PTK IPO, 600,000 additional private placement warrants were issued to the Sponsor as a result of the conversion of a promissory note.

The private placement units and private placement warrants are identical to the units and warrants underlying the units sold in the PTK IPO, except that the private placement warrants are not transferable, assignable or salable until the later of (i) the completion of an initial business combination and (ii) 12 months from the PTK IPO.

Of the gross proceeds received from the PTK IPO, including the underwriter’s exercise of the over-allotment option in full, and the sale of private securities, $115,000,000 was placed in the Trust Account.

PTK may withdraw from the Trust Account interest earned on the funds held therein necessary to pay its income taxes, if any. Except as described in the prospectus for the PTK IPO and described in the subsection below entitled “PTK’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” these proceeds will not be released until the earlier of the completion of an initial business combination and PTK’s redemption of 100% of the outstanding public shares upon its failure to consummate a business combination within the required time period.

The remaining proceeds from the PTK IPO and simultaneous private placement, net of underwriting discounts and commissions and other costs and expenses, became available to be used as working capital to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses.

Fair Market Value of Target Business

The target business or businesses that PTK acquires must collectively have a fair market value equal to at least 80% of the balance of the funds in the Trust Account (excluding the amount of deferred underwriting

 

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commissions held in trust and taxes payable) at the time of the execution of a definitive agreement for its initial business combination, although PTK may acquire a target business whose fair market value significantly exceeds 80% of the Trust Account balance. PTK’s board of directors determined that this test was met in connection with the proposed business combination with Valens as described in the section entitled “Proposal One — The Business Combination Proposal — Satisfaction of 80% Test” above.

Stockholder Approval of Business Combination

Under the PTK Charter, PTK must seek stockholder approval of an initial business combination at a meeting called for such purpose at which public stockholders may seek to have their public shares converted into cash, regardless of whether they vote for or against the proposed Business Combination or do not vote at all, subject to the limitations described in the prospectus for the PTK IPO. Accordingly, in connection with the Business Combination, the PTK public stockholders may seek to have their public shares redeemed for cash in accordance with the procedures set forth in this proxy statement/prospectus. See ”Special Meeting of PTK Stockholders — Conversion Rights.”

Voting in Connection with the Stockholder Meeting

In connection with any vote for a proposed business combination, including the vote with respect to the Business Combination Proposal, the Sponsor has agreed to vote its PTK shares in favor of such proposed Business Combination.

At any time prior to the special meeting, during a period when they are not then aware of any material nonpublic information regarding PTK or its securities, the PTK officers and directors, Valens shareholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the Business Combination Proposal, or execute agreements to purchase such shares from them in the future, or they may enter into transactions with such persons and others to provide them with incentives to acquire common stock or vote their shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirement that the holders of a majority of the shares entitled to vote at the special meeting to approve the Business Combination Proposal vote in its favor and that the conditions to the closing of the Business Combination otherwise will be met, where it appears that such requirements or conditions would otherwise not be met. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, include arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares for nominal value.

Entering into any such arrangements may have a depressive effect on the shares of PTK Common Stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he owns, either prior to or immediately after the special meeting.

If such transactions are effected, the consequence could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the Business Combination Proposal and the other proposals to be presented at the special meeting and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it more likely that the conditions to the closing of the Business Combination are met.

No agreements dealing with the above arrangements or purchases have been entered into as of the date of this proxy statement/prospectus. PTK will file a Current Report on Form 8-K to disclose any arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the

 

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Business Combination Proposal or the satisfaction of any closing conditions. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

Liquidation if No Business Combination

Under the PTK Charter, if PTK does not complete the Business Combination with Valens or another initial business combination by January 15, 2022 (or such later date as may be approved by PTK’s stockholders in an amendment to the PTK Charter), PTK will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to PTK to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding PTK public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of PTK’s remaining stockholders and its board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to PTK’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. At such time, the PTK warrants will expire. Holders of warrants will receive nothing upon a liquidation and the warrants will be worthless.

The Sponsor has agreed to waive its rights to participate in any distribution from the Trust Account or other assets with respect to the shares held by them prior to the PTK IPO. There will be no distribution from the Trust Account with respect to the PTK warrants, which will expire worthless if PTK is liquidated.

The proceeds deposited in the Trust Account could, however, become subject to the claims of PTK’s creditors which would be prior to the claims of the PTK public stockholders. Although PTK has obtained waiver agreements from certain vendors and service providers it has engaged and owes money to, and the prospective target businesses PTK has negotiated with, whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account, and although PTK will seek such waivers from vendors it engages in the future, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the Trust Account notwithstanding such agreements. The Sponsor has agreed that it will be liable under certain circumstances to pay debts and obligations to target businesses or vendors or other entities that are owed money by PTK for services rendered or contracted for or products sold to it, but PTK cannot ensure that the Sponsor will be able to satisfy its indemnification obligations if it is required to do so. Additionally, there are two exceptions to the Sponsor’s indemnity: the Sponsor will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement with PTK waiving any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account, or (2) as to any claims under the indemnity with the underwriter of the PTK IPO against certain liabilities, including liabilities under the Securities Act. Moreover, the Sponsor will not be liable to the PTK public stockholders and instead will only have liability to PTK. Furthermore, PTK has not asked the Sponsor to reserve for such indemnification obligations, nor has PTK independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations; therefore, the Sponsor may not be able to satisfy its indemnification obligations if it is required to as the Sponsor’s only assets are securities of PTK and PTK has not taken any further steps to ensure that the Sponsor will be able to satisfy any indemnification obligations that arise. Accordingly, the actual per-share redemption price could be less than approximately $10.00, plus interest, due to claims of creditors. Additionally, if PTK is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in PTK’s bankruptcy estate and subject to the claims of third parties with priority over the claims of PTK’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, PTK cannot assure you it will be able to return to the PTK public stockholders at least approximately $10.00 per share. PTK’s public stockholders are entitled to receive funds from the Trust Account only in the event of its failure to complete a business combination within the required time period or if the

 

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stockholders properly seek to have PTK redeem their respective shares for cash upon a business combination which is actually completed by PTK. In no other circumstances does a stockholder have any right or interest of any kind to or in the Trust Account. None of the PTK officers or directors will indemnify PTK for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

If PTK is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor, creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by PTK’s stockholders. Because PTK intends to distribute the proceeds held in the Trust Account to its public stockholders promptly after the expiration of the time period to complete a business combination, this may be viewed or interpreted as giving preference to its public stockholders over any potential creditors with respect to access to or distributions from its assets. Furthermore, by paying public stockholders from the Trust Account prior to addressing the claims of creditors, PTK’s board of directors may be viewed as having breached its fiduciary duty to PTK’s creditors and/or may be viewed as having acted in bad faith, which may subject PTK and Valens to claims of punitive damages. PTK cannot assure you that such claims will not be brought against it.

PTK will pay the costs of any subsequent liquidation from its remaining assets outside of the Trust Account plus the up to $100,000 of interest earned on the funds in the Trust Account that PTK may use for liquidation and dissolution expenses.

Employees

As of the date of the signing of the Business Combination Agreement, PTK has three executive officers and two employees. These individuals are not obligated to devote any specific number of hours to PTK’s matters and devote only as much time as they deem necessary to its affairs.

Facilities

Upon the closing of the Business Combination, the principal executive offices of PTK will be those of Valens.

Directors and Executive Officers

PTK’s current directors and executive officers are as follows:

 

Name

   Age   

Position

Peter Kuo    48    Chief Executive Officer and Director
Timothy Chen    45    Chief Financial Officer and Director
Ker Zhang    57    Secretary and Director
Charles Huang    50    Independent Director
John Hui    64    Independent Director
Dr. Walden C. Rhines    72    Independent Director

Peter Kuo serves as PTK’s Chief Executive Officer and Director. Mr. Kuo has served as a co-founding partner of Canyon Bridge Capital Partners, a private equity firm, since April 2017. Mr. Kuo was a Managing Director at Lazard Limited, where he advised clients on strategic M&A from June 2011 until March 2018. Mr. Kuo was a Managing Director at Cowen Inc. from March 2010 until May 2011 and Susquehanna International Group from June 2005 until December 2010. A Fulbright Scholar, Peter holds a JD from Harvard Law School and a BS in Foreign Service from Georgetown University.

Timothy Chen serves as PTK’s Chief Financial Officer and Director. Since February 1997 Mr. Chen has held numerous position with VIA Technologies, Inc., a leading innovator of PC silicon and platform

 

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technologies. Since February 2010, Mr. Chen has served as the Head of Global Sales & Marketing at VIA Technologies, Inc. Since February 2017 Mr. Chen has also served as the Chief Executive Officer of VIA China, a wholly owned subsidiary of VIA Technologies, Inc. Mr. Chen is also a World Economic Forum Young Global Leader and a Fellow of the China Fellowship Program and member of the Aspen Global Leadership Networks. Mr. Chen holds a B.S. in Industrial Engineering from the University of California at Berkley. Mr. Chen is also involved in social ventures, social media, premium content providers, hardware companies at the semiconductor & system level.

Ker Zhang serves as PTK’s Secretary and Director. Mr. Zhang has been an entrepreneur in residence at Kleiner Perkins since February 2018. Mr. Zhang was Vice President and General Manager of CDMA Product and Development of Intel Corporation from October 2015 until February 2018. Mr. Zhang was Chief Executive Officer of VIA Telecom from April 2002 until it was acquired by Intel Corporation in October 2015. Mr. Zhang has been the Executive Chairman of privately-held Crossbar, Inc., since March 2019. Mr. Zhang earned his M.S. in Physics from the University of Massachusetts and his Ph.D. in Electrical Engineering from Worcester Polytechnic Institute.

Charles Huang serves as a Director of PTK. Mr. Huang has served as Chief Executive Officer of Indigo 7 Limited since February 2014. Since March 2011 Mr. Huang has also served as a co-founder of Blue Goji Corp, a maker of games and controllers. Prior to Blue Goji, Mr. Hui was Co-founder of American electronic entertainment company RedOctane, where he was the co-developer of the video game Guitar Hero. Mr. Huang holds a BA in Economics and Asian Studies from the University of California at Berkley.

John Hui serves as a Director of PTK. Mr. Hui has served as Chief Strategy Officer of Foxconn since September 2010. Mr. Hui has also served as the Chief Executive Officer of Joui International since January 2015. Mr. Hui served as Chairman of the Board Of Directors of privately-held Smart Technologies from October 2016 until December 2018. Mr. Hui also served as the Chief Executive Officer of InFocus from September 2009 until June 2016. Mr. Hui holds a B.Sc. in Business from State University of New York at Buffalo and a Master of Business Administration from McMaster University.

Dr. Walden C. Rhines serves as a Director of PTK. From 1995 until 2015, he served as a director of TriQuint. He is CEO Emeritus of Mentor, a Siemens Business and an electronic design automation company, having previously served as President and Chief Executive Officer of Mentor from its acquisition by Siemens Industry, Inc. in March 2017 until October 2018. He previously served as Chief Executive Officer of Mentor Graphics Corporation from 1993 and chairman of its board of directors from 2000 until the acquisition of Mentor Graphics by Siemens in 2017. Prior to joining Mentor Graphics, he spent 21 years at Texas Instruments, a semiconductor manufacturer, with his most recent position as the Executive Vice President of its Semiconductor Group with responsibility for its worldwide semiconductor business. Dr. Rhines also served as a director of Cirrus Logic, Inc., a semiconductor company, from 1995 to 2009, is a member of the board of Electronic System Design Alliance, a trade association for electronic design companies, and serves on the board of Semiconductor Research Corporation, a technology research consortium, and as a consultant to the Defense Advanced Research Projects Agency (DARPA), a research investment arm of the U.S. government. Dr. Rhines brings to the Board and its committees over 45 years of experience in the semiconductor industry, including substantial operating experience and management expertise as a CEO of a publicly traded technology company.

Legal Proceedings

There is no material litigation, arbitration, governmental proceeding or any other legal proceeding currently pending or known to be contemplated against PTK, and PTK has not been subject to any such proceeding in the 10 years preceding the date of this proxy statement/prospectus.

 

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Periodic Reporting and Audited Financial Statements

PTK has registered its securities under the Exchange Act and has reporting obligations, including the requirement to file annual and quarterly reports with the SEC. PTK has filed with the SEC its Annual Report on Form 10-K/A for the year ended December 31, 2020, as restated, and its Quarterly Report on Form 10-Q for the three months ended March 31, 2021.

 

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VALENS’ BUSINESS

The following summary highlights selected information about our company and this offering that is included elsewhere in this proxy statement/prospectus in greater detail. It does not contain all of the information you should consider before voting on the Merger or deciding to invest in our ordinary shares. Before investing in our ordinary shares, you should read this entire proxy statement/prospectus carefully, including the information presented under the headings “Risk Factors,” “Valens’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto.

In this proxy statement/prospectus, unless we indicate otherwise or the context requires, “Valens,” “the company,” “our company,” “the registrant,” “we,” “our,” “ours” and “us” refer to Valens Semiconductor Ltd. and its consolidated subsidiaries.

Our Mission

Our mission is to be a leading global provider of semiconductor solutions that power high-speed connectivity over simple wiring infrastructure, enabling cutting-edge innovation in the audio-video, automotive, and other adjacent markets.

Our Company

Valens is a leading provider of semiconductor products, pushing the boundaries of connectivity by enabling long-reach, high-speed video and data transmission for the professional audio-video and automotive industries. Valens’ Emmy® award-winning HDBaseT technology is the leading standard in the professional audio-video market, with tens of millions of Valens chipsets integrated into thousands of HDBaseT-enabled products. Valens technology for Automotive is a key enabler of the evolution of autonomous driving, providing chipsets that support Advanced Driver-Assistance Systems (“ADAS”), Automated Driving Systems (“ADS”), infotainment, telecommunications and basic connectivity. Valens’ underlying technology has been selected by the MIPI Alliance as the basis for the new standard for high-speed automotive video connectivity.

Audio Video

Valens set the standard for long-range connectivity in the audio-video market. The company’s HDBaseT technology, supports the digitization of wired connectivity and is used by key leading audio-video product manufacturers, including EPSON, LG, Panasonic, Samsung, Sony, Harman, Crestron, Extron, Logitech, and many more. These companies have created thousands of electronic devices that embed Valens’ HDBaseT technology as part of their connectivity solution.

HDBaseT enables the simultaneous delivery of ultra-high-definition digital video and audio, Ethernet, USB, control signals, and power, all through a single low cost, long-reach cable. HDBaseT technology is a hardware-based solution, with no high-level software dependency, enabling true plug-and-play digital connectivity between ultra-HD video sources and remote displays, such as high-resolution projectors and displays.

As the market leader in long-range connectivity in audio-video, Valens is well positioned to capitalize on the market’s growth, which has accelerated recently due to COVID-19. When Work from Home (“WFH”) became the new normal, demand for video conferencing surged, leading to a significant uptick in demand for HDBaseT solutions. As the world starts to adapt to a hybrid “new normal” that comprises both WFH and the office, we expect demand for Valens solutions to continue to grow. This view is based on an increasing need for huddle rooms, hybrid education and remote healthcare. Valens’ audio-video solutions can be deployed wherever long distance high-definition video systems are required, for time sensitive applications that require zero latency (a few micro-seconds of latency are commonly perceived in the industry as “zero-latency”), with applications spanning the medical, education and industrial sectors.

 

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Automotive

After setting the standard in the audio-video market, Valens has positioned itself to do the same in the much larger automotive market. The MIPI Alliance - the standardization body controlling important connectivity streams widely used by carmakers around the world – recently announced a new standard governing automotive connectivity, called MIPI A-PHYSM, which is fundamentally based on Valens technology.

MIPI A-PHY is already gaining momentum within the automotive industry. The IEEE Standards Association has signed an agreement to facilitate the adoption of A-PHY as an IEEE standard, and leading System on Chip (SoC) and camera sensor vendors such as Sony and Mobileye have stated that they will integrate A-PHY into their products going forward. Companies that participated in the development of MIPI A-PHY standard include Intel, ON Semiconductor, Qualcomm, Bosch, Toshiba, and ST.

Valens will be the first to market with A-PHY compliant chipsets later this year. Valens provides one of the safest, most resilient, ultra-high-speed in-vehicle connectivity solutions, all transmitted through standard, simple, low-cost, low-weight wires and connectors, enabling advanced electronics architecture in cars. Valens’ superior physical layer (“PHY”) technology enables powerful bandwidth over long-reach and low-cost infrastructure, while maintaining error-free links (MIPI A-PHY targets worst case Packet Error Rate (“PER”) of 1E-19 (10-19) which translates to mean-time between packet errors of 2.5 trillion (2.512) seconds for a 16Gbps link) and enhanced electromagnetic compatibility (“EMC”) performance, hence providing the safety and resilience required to handle the harsh automotive environment.

The Valens solution is scalable, allowing it to support the evolution of car architecture and the growing need for in-vehicle high-speed connectivity. Valens chipsets address the needs of the increasingly interconnected vehicle computer systems, such as ADAS, ADS, infotainment and telecommunications.

Demand for a global standard for ultra-high-speed in-vehicle connectivity is accelerating. As the automotive industry continues to move towards the next stages in the evolution of autonomous driving by integrating more cameras, LIDARs, radars, and other sensors for safety applications, the amount of data being generated within the car is rising exponentially. This requires a reliable, high-speed connectivity solution. Valens chipsets will allow original equipment manufacturers (“OEMs”) to transmit data at multi-gigabit bandwidth over error-free links with near zero latency, all with the estimated lowest total system cost. Our technology connects mission-critical safety sensors and monitors to effectively transform vehicles into “data centers on wheels” and to uphold high levels of passenger safety.

Valens has made significant inroads in the automotive market. Its high-speed symmetric connectivity solution is the only multi-gigabit connectivity solution over Unshielded Twisted Pair (“UTP”) wiring that is currently deployed in vehicle, supporting the aggregation of multiple interfaces for feature-rich infotainment and telecommunications systems. Valens partnered with Daimler to power newer-model Mercedes-Benz’s infotainment systems, and both companies are planning on taking advantage of the joint collaboration to empower future cars with unique connectivity solutions.

Our Market Opportunity – Audio Video

As an established player in the audio-video space, we believe we are well positioned to take advantage of positive trends in the market. Our growth strategy includes increasing our market share with existing audio-video clients, leveraging new opportunities resulting from COVID-19, and expanding our available market by addressing key growth opportunities in adjacent verticals. We also plan to utilize products from the Automotive business unit in the audio-video market, including our first-generation VA6000 family chipsets and our second-generation MIPI A-PHY-compliant VA7000 family chipsets.

The audio-video market has been growing steadily year over year, and Valens has maintained its leadership position for long-reach connectivity. As a market leader, we have established tight relationships and customer

 

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loyalty with the audio-video industry’s key companies. We expect this will allow Valens to maintain its lead on the technological and business front and help us to continue to grow in the professional audio-video (“ProAV”) market.

COVID-19 has created significant business potential for Valens in the audio-video market and we expect to grow our audio-video business in the future. With the growing need for social distancing, video conferencing has become the “new normal” in many aspects of our lives, including in huddle rooms, home offices, hybrid education, remote healthcare, and more. This has driven increased demand for high-resolution cameras, multiple displays, and huddle room audio-video accessories. Valens chipsets, which support zero-latency extension of audio and video, as well as USB, power and control signals embedded in our products, all enable enhanced and seamless user experiences, bringing clear value to this new “hybrid” environment.

In addition to the growing opportunity in ProAV, Valens is developing new markets for its audio-video solutions. The company has gained strong footholds in industrial, medical imaging and transportation, each of which require long-reach, high-resolution, zero-latency video connectivity while using simple, standard, low-cost cables. These industries are themselves growing, and present new avenues for Valens to add and capture value:

 

  1.

Industrial: Valens is a key supplier for five of the leading industrial PC manufacturers. Industrial PCs (“IPCs”) are ruggedized devices mostly used in industrial settings, such as manufacturing plants, production lines, and factory sites. These are usually loud, hot, dusty environments, with high vibration and/or electromagnetic interferences. As such, IPCs must perform at a higher level in terms of reliability, interoperability, robustness and usage patterns. Valens chipsets are an ideal solution for factory floors where there is a need for real-time, long-distance connectivity from nodes to a central office. We believe there is also room for growth in this segment as smart factories, also called Industry 4.0, increasingly rely on camera, sensors and computer vision systems. Valens’ audio-video business unit plans to leverage the VA70XX VA7000 automotive product family to introduce a unique offering to the industrial segment that will enable machine vision-driven applications

 

  2.

Medical: Valens is a key supplier for three of the leading medical imaging manufacturers, and its solutions have been integrated in diagnostic equipment, assisted surgical equipment, ventilation machines, and operating room video distribution. The technological overhaul taking place in operating rooms, hospitals, and medical centers is reliant on the highest possible video quality for the most accurate representation of patient conditions. The industry is therefore introducing a growing number of high-quality, zero latency, high resolution camera sensors. In addition, we see a growing need for mobile medical equipment that requires simple wiring infrastructure. Valens delivers high throughput connectivity, addressing the requirements of the medical industry with a one-cable solution for long-distance, high bandwidth transmission.

 

  3.

Transportation: Valens is a supplier for two of the leading manufacturers in the public transportation space, focusing on two key applications – digital signage and passenger infotainment. Proper connectivity in public transportation is a must to deliver the ultimate ride experience, optimizing the delivery of content in trains, buses, airplanes, and in train platforms and bus stations. The transportation industry has a number of special requirements for connectivity, including limited space for cabling, long distance transmissions, a large number of systems and devices that require connection, power sourcing, and more. There has also been a push in U.S. cities to allow commercial advertising on public buses; COVID-19 has forced governments to implement new ways to convey public safety information to the public through signage. Valens offers the optimal solution for several applications in the public transportation sector, providing the necessary infrastructure for high-quality entertainment, while ensuring stable and secure connectivity. Valens’ technology enables in-seat connectivity, including USB support for streaming and device charging. The technology’s ability to converge different interfaces and transmit high bandwidth over a single twisted pair cable translates into an overall lower total system cost. The technology also consumes less energy due to lower cabling weight, which has positive environmental impacts.

 

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Valens intends to continue to invest in research and development, sales, and marketing to further address these opportunities.    

Our Market Opportunity – Automotive

Within the automotive market, we believe there are several large potential growth opportunities mainly in ADAS and autonomous vehicle applications. ADAS features are considered some of the most desirable in modern vehicles and are already being adopted in vehicles worldwide. Industry experts expect the adoption of ADAS features to continue to increase over time. ADAS is a precursor to fully autonomous vehicles, and as ADAS features become more sophisticated and adoption increases, demand for our products is expected to expand into new applications. Our products play a key role in ADAS and other autonomous vehicle applications by enhancing a vehicle’s ability to send large amounts of data quickly, reliably, and with fewer wires than existing solutions.

 

LOGO

The use of an increasing number of sensors, such as cameras, radars, LIDARs, and high-resolution displays in the vehicle is driving an urgent need for high-speed data processing capabilities, as can be seen in the below table: computing data generated by sensors in cars. The amount of data being captured and processed throughout the vehicle has resulted in enormous – and rising – bandwidth requirements. This will drive the need for a robust networking solution to support the significantly increased amount of data required to be processed within the car. In addition, the deployment of new electronic components and high-resolution displays cannot come at the expense of a more complicated car architecture because cost, weight and lack of physical space are already pushing the auto manufacturers to their limits, as existing car architectures lack the capacity to add more cables, connectors and devices.

 

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Computing data generated by sensors in cars

 

Sensor

  

Data

  

Data (lh)

  

Bandwidth

    

Low

  

High

  

Low

  

High

  

Low

  

High

ADAS camera    98MB/s    98MB/s    352GB    352GB    780Mbps    780Mbps
Viewing camera    20MB/s    40MB/s    72GB    144GB    160Mbps    320Mbps
Radar    10kB/s    100kB/s    36MB    360MB    80kbps    800kbps
LiDAR    10MB/s    70MB/s    36GB    252GB    80Mbps    560Mbps
US Sonar    10kB/s    100kB/s    36MB    360MB    80kbps    800kbps
GPS    50kB/s    50kB/s    180MB    180MB    400kbps    400kbps
Total       Total (lh)    460GB    748GB    1,020Mbps    1,660Mbps

Most of the data generated comes from cameras and in particular the multi-purpose ADAS camera, generating 352Gbps in 1 hour, according to YOLE

As more ADAS systems are deployed in cars with the eventual goal of enabling autonomous driving, high-speed and error-free links with zero latency will be of the utmost importance. The need for even greater passenger safety remains a top priority for OEMs. This is driving the trend for integrating more ADAS systems in each vehicle, increasing the number and different types of sensors (cameras, radars and LIDARs), high-resolution displays and other high-speed connections that are all required to ensure safety in ADAS and autonomous cars. Valens’ connectivity technology is completely agnostic to the types of sensors being deployed in the car since they all require long-reach, reliable, high-speed connectivity and, more importantly, zero latency, in order to detect and act upon safety events within milliseconds.

Finally, the strong market trend toward cars becoming “data centers on wheels” and keeping them seamlessly connected requires widespread adoption of 4G, 5G, V2X and WiFi modems, to support a new level of user-experience and comfort for the end customers. OEMs are trying to differentiate themselves through advanced personalization, including by integrating more displays and fewer buttons, advanced user interfaces, interior monitoring cameras and customized applications. These developments have led to an automotive cockpit that can be as much an entertainment zone as a driving space. The increased number of displays, along with their increased average size, creates strong demand for even higher bandwidth video links. The high-speed modems that utilize 4G, 5G and WiFi integrated into their telecommunication units (“TCUs”) require high-bandwidth data links for the backbone network connecting all cockpit and infotainment elements.    

Valens estimates, based on several research reports, that the global automotive semiconductor market is expected to grow from $45 billion in 2021 to an estimated $68 billion by 2026, representing a CAGR of approximately 8% and the main driver for this growth is the deployment of connectivity solutions. The target market for our automotive connectivity products is likely to increase even faster over the same timeframe. Specifically, it is our estimation that Valens’ target markets are expected to grow from approximately $2 billion in 2021 to approximately $8 billion in 2026, representing a CAGR of 35%.

We believe we can provide the automotive OEMs with a smart high-speed connectivity solution that will result in lower total system cost, reduced complexity and lower power consumption, which are critical factors for all vehicles, but particularly electric vehicles. This is primarily because our current and future products provide: 1) very high bandwidth over simple, unshielded wiring infrastructure, and 2) increased link resilience with built-in diagnostic and analytic capabilities.

In 2020, approximately 96% of our revenue was derived from our audio-video segment; however, over time our automotive segment is expected to represent an increasingly large percentage of our revenue and be a key driver of new growth, considering the following facts:

 

   

During the fourth quarter of 2020, Valens started to sell its first-generation automotive product in mass production.

 

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In the fourth quarter of 2020, Valens signed an additional deal with a significant automotive customer that is expected to ramp up its volumes in early 2023.

 

   

The increase in the number of different ADAS sensors deployed in cars (cameras, radars and LIDARs) all have similar connectivity requirements of high bandwidth, zero latency and resilient connectivity links. The deployment of more high-resolution displays in the car will also increase demand for Valens’ connectivity solution.

 

   

Valens technology was selected as the baseline for the new MIPI A-PHY automotive standard for in-vehicle high-speed video connectivity published in the fourth quarter of 2020. Shortly after the announcement of this standard, the IEEE adopted it “as is” to become one of its own automotive standards. Valens is ahead of the curve with A-PHY compliant chipsets. Valens expects to have years of first-mover advantage, which should position the Company as the incumbent provider of high-speed video connectivity in the cars.

Our Technology

Our technology is not only market-leading, but it has also been adopted and integrated into several industry standards. Our chipsets are helping to advance innovation in the audio-video and automotive industries.

Valens invented the HDBaseT connectivity technology and co-founded the HDBaseT Alliance, together with LG, Samsung, and Sony Pictures, as a standards association promoting HDBaseT technology. HDBaseT provides the most optimized solution for a myriad of verticals and applications, addressing the market connectivity needs for long distance transmission, convergence, low-cost and simplicity. HDBaseT is the global standard for the convergence and distribution of ultra-high-definition video & audio, Ethernet, control signals, USB and up to 100W of power over a single, low cost commonly used cable for up to 100 m/328 ft. HDBaseT eliminates cable clutter without compromising performance or high quality.

Valens technology was specifically designed to distribute high-speed video and data in challenging EMC environments. With the formation of the Automotive business unit, the technology was adapted to address the needs of the automotive market and was subsequently selected as the baseline of the MIPI Alliance’s most recent standard for high-speed video connectivity in cars. Our superior connectivity mechanisms ensure connectivity resilience with “on-line” error correction, adaptive modulation, and real-time noise cancelers. Valens’ highly efficient hardware-based solution is optimized for asymmetric links, with no software stack, leading to a simplified architecture, which in turn guarantees reduction in wire harness complexity. The data transmission is done without any compression at zero latency, for very long distances while providing diagnostic capabilities on the link’s quality.

Valens’ Connectivity Solution

 

 

LOGO

We believe the following attributes collectively differentiate our technology:

 

   

Validated as baseline for different connectivity standards, primarily the MIPI A-PHY standard due to the technology’s superior performance.

 

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Multi-gigabit bandwidth with zero-latency and error-free links.

 

   

Years ahead of competitors from a technical perspective.

Given the business opportunities we have identified in both the audio-video and automotive markets, we expect to invest further in research and development of new products to ensure that we maximize our considerable market opportunity.

Our Strengths

The semiconductor market is highly competitive. As a leader in advanced semiconductor products, we believe that by effectively navigating technology transitions, maintaining close customer relationships and anticipating market trends in our clients’ end markets, we have established a leadership position in the audio-video market and are gaining share in the automotive space.

We believe that our competitive advantages are based on the following key strengths:

 

   

Industry standard in audio-video and automotive. We set the standard for long-range connectivity in the audio-video market with our HDBaseT technology and intend to repeat this success in the even larger automotive industry with our A-PHY compliant chipsets. Our solution utilizes the technology that underpins the MIPI A-PHY standard for in-car video connectivity. The A-PHY standard has also been adopted by the IEEE standard association extending our potential market reach.

 

   

Established technological leadership, strong intellectual property and system-level expertise. We believe our technology leadership is based on our strong intellectual property portfolio. Our core competence is in our superior physical (PHY) layer that enables us to provide the most optimized connectivity solution for any application at any speed. Additionally, we believe our integration capabilities coupled with our system-level knowledge, resulting from close customer collaboration, enables us to understand our customers’ specific system requirements and more quickly and effectively develop advanced solutions to meet their long-term needs.

 

   

Leading market position in audio-video connectivity. We currently serve the major players in the audio-video connectivity space. These companies drive the market trends and we are there to support them in leading the change. COVID-19 has only increased society’s reliance on audio-video connectivity through remote work, education and healthcare. We believe that our leading market position strengthens our ability to continue serving this core market and capitalize on growing demand for connectivity solutions.

 

   

Re-purposing of automotive solutions in the audio-video markets. We are seeing a growing demand from our non-automotive customers for the advanced connectivity products that we designed for automotive applications. This expands our offering to an even wider range of customers and applications, and thereby accelerates the return on our development investment. Our ability to leverage technologies and products from the two business units will accelerate our expansion efficiently.

 

   

Strong relationships with leading automotive OEMs and Tier 1 suppliers. We currently supply components in mass volume to a leading automotive OEM, which embeds our chipsets in multiple platforms across its model range, through various Tier 1 suppliers such as Continental, Harman, Molex, and Bosch, and we continue to strengthen these relationships. As ADAS and ADS systems become mainstream, we believe that our strong connections in the automotive space will enable us to achieve success and grow our automotive business.

 

   

Proven management team: We have a strong track record of execution and an experienced management team. Our executive management team’s experience in effectively guiding companies through various industry cycles and technology transitions provides us with steady, reliable leadership, uniquely capable of identifying strong investments, executing through change, and maintaining stability during market uncertainty.

 

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Our Growth Opportunities/Strategies

We intend to grow our business through the following key areas:

 

   

Promote our technology into new industry standards and become the de facto standard in the markets we serve.

Audio-Video:

 

   

Valens’ HDBaseT technology is a leading standard for long-reach, high performance connectivity. The HDBaseT Alliance now boasts more than 200 member companies promoting the use of this technology in the audio video market. Valens leverages the HDBaseT Alliance to strengthen its relationships with end customers, safeguard the quality of HDBaseT-enabled products, and educate the market on the technology by generating continuous awareness and demand for these products. HDBaseT provides the most optimized solution for a myriad of verticals and applications, addressing the needs of the audio-video market, including long distance transmission, convergence, low-cost and simplicity. Valens will continue to promote HDBaseT technology in emerging industries, such as industrial, medical imaging, and transportation.

Automotive:

 

   

The MIPI A-PHY standard, announced in September 2020, was developed to address a need for higher bandwidth and performance requirements. Existing analog-based technologies can no longer meet these requirements as they lack digital signal processing (DSP) capabilities, are not scalable, and are incapable of increasing speed over longer cables. The MIPI A-PHY standard is optimized for the implementation of in-vehicle connectivity for high bandwidth applications. The specification reduces wiring cost and weight, as high-speed data, control data, and power all share the same physical wiring. This enables designers to optimize systems for performance, cost, and complexity required by their use cases and provides scalability and flexibility to meet a broad range of speed and design needs. The MIPI A-PHY standard serves as the foundation of what will be an end-to-end system designed to simplify the integration of various sensors and displays, while also incorporating functional safety and security.

 

   

The new MIPI A-PHY standard was developed by the MIPI A-PHY Working Group; Valens was a key contributor to the definition of this standard, which is largely based upon Valens technology. We believe that the adoption of this connectivity standard by OEMs will position A-PHY-based solutions as the leading high-speed connectivity solution in cars. Adoption of A-PHY will be driven in part by the fact that available legacy solutions for in-vehicle video connectivity are proprietary, while the market is looking to deploy standard-based products.

 

   

Valens’ new VA7000 product family will be the first on the market to comply with the recent MIPI A-PHY v1.0 standard, positioning us to capture automotive opportunities for ADAS, ADS and other surround-sensor applications, including cameras, radars, and LIDARs. The VA7000 product family is a hardware-based solution, optimized for asymmetric links with no software stack. It guarantees a high-performing, simplified architecture, leading to a reduction in wire harness complexity and lower total system costs. The current VA7000 family has been designed to support a wide range of bandwidth levels as defined in the MIPI A-PHY standard.

 

   

Valens is the first vendor on the market to introduce products that comply with the new MIPI A-PHY standard and is positioned to become the incumbent vendor for high-speed video connectivity within the vehicle. The first vehicles using A-PHY components are expected to be in production in 2024-2025.

 

   

Grow our audio video and automotive market offerings. In the audio-video market, we are continuously increasing the silicon integration of key features required to simplify the total solution we offer. Valens

 

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intends to support higher video resolutions (e.g. 8K) and develop extension products for advanced USB generations (USB 3.1), advanced network topologies and a variety of new interfaces in our next generation products. In automotive, we intend to continue to provide solutions as the market undergoes powerful structural change in favor of greater electronic and data-processing capabilities, particularly in the application of our products to ADAS and ADS systems. We believe our focus on meeting or exceeding industry standards as the baseline for product development increases our opportunity in the automotive market as customers look for trusted suppliers to deliver standard-backed, highly reliable, safety-focused solutions for this rapidly growing market. We intend to introduce complimentary products to support end-to-end connectivity solutions for all high-speed connectivity applications required in the car. In the audio-video market, we see the need for more feature integration as well as increased video resolution, to support the growing demands of next generation products.

 

   

Expand into other audio-video adjacent markets. We intend to continue expanding our offerings in audio-video adjacent markets including the industrial (camera sensors and computer vision systems), remote healthcare (medical imaging, diagnostic and surgical equipment, operating room video) and transportation spaces. We believe that as the need for higher connectivity bandwidth and lower cost alternatives for these applications increases there will be significant opportunity to expand our business and customer base.

 

   

Continue to improve our gross margins through product innovation and cost optimization. We strive to improve our profitability by rapidly introducing new products with value-added features and reducing our manufacturing costs through our asset-light manufacturing model. We will continue to improve our product mix by developing new products for growth markets where we believe we can generate higher ASPs and/or gross margins. We believe we can reduce our manufacturing costs by leveraging the advanced manufacturing capabilities of our strategic supply chain suppliers, implementing more cost-effective packaging technologies, and leveraging both internal and external assembly and test capacity to lower our operating costs, enhance reliability of supply, and support our continued growth.

 

   

Expand our global presence. We sell our products globally, both directly and through a wide range of local distributors. We intend to continue strengthening our relationships with our existing customers and distributors, while also enabling our channel partners to support demand creation and fulfillment for smaller customers. We believe we can efficiently scale our business to accelerate growth by enabling our channels to become an extension of our demand generation and customer support efforts. Our operations are global and we intend to continue expanding our presence worldwide to serve the needs of clients in additional geographies. We are currently investing in select regions in North America, Europe and multiple countries in the Asia Pacific region.

Company Products

Our product portfolio includes over 20 products across a range of high-performance semiconductors and other components that are in turn integrated in a range of technological applications, including:

 

    

Audio-Video

  

Automotive

CHIPSETS   

•   VS100 family – Valens’ first chipsets, which revolutionized the audio video market by enabling transmission of uncompressed ultra-high-definition video, audio, control and power, with near-zero latency, over a single LAN cable, according to the HDBaseT Alliance’s Spec 1.0.

  

•   VA6000 family - The highest bandwidth long-reach solution deployed in vehicles supporting the aggregation of multiple interfaces for feature-rich infotainment and telematics systems. The chipsets are designed to deliver resilient, multi-gig, long-distance connectivity over the simplest wiring and connector infrastructure.

 

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Audio-Video

  

Automotive

  

•   VS2000 family (Colligo) - Second generation of HDBaseT chipsets (Spec 2.0), supporting the transmission of ultra-HD video & audio, Ethernet, controls, USB 2.0, and power, over either a LAN cable or fiber cable, with near-zero latency. The family enables point-to-point, daisy-chaining, and multi-streaming.

  

VA7000 family - Supports connectivity of CSI-2-based cameras, RADARs, LIDARs, and other sensors, with link speeds of up to 8Gbps. Operates over standard, cost-effective, in-vehicle wires for up to 15 meters (50 feet), with 4 inline connectors. First product on the market that complies with the new MIPI A-PHY standard.

  

•   VS3000 family (Stello) - The first and only ASIC in the industry that enables the long-distance transmission of uncompressed 4K@60Hz 4:4:4. It enables transmission of HDMI 2.0 (18Gbps) including HDCP, based on Spec 3.0 of HDBaseT technology, convergence of audio & video, 1Gbps Ethernet, USB 2.0, controls and power, with near-zero latency, over a category cable (e.g. Cat 6A).

  
  

•   VA6000 family - Small-form factor chipset; a cost-effective and flexible solution that enables the convergence of multiple interfaces, including audio (I2S, S/PDIF), Ethernet, USB 2.0 and controls with near-zero latency, over a single unshielded twisted pair cable.

  
APPLICATIONS   

•   Signage – distribution from content source to large high- resolution displays, projectors, video walls.

  

•   ADAS systems sensor fusion (radar, lidar, camera).

  

•   Collaboration hubs and cameras used in video conferencing systems.

  

•   Body & chassis, door, truck and trailer connectivity.

 

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Audio-Video

  

Automotive

  

•   Distribution - video and audio distribution products such as matrixes, switches, extenders used in Enterprise, Government, and Education, etc. applications.

  

•   Infotainment: display and multimedia box.

 

•   ECU to ECU connectivity.

  

•   Remote healthcare, including high resolution medical imaging and video distribution of medical equipment to large displays.

 

•   Transportation - Infotainment displays in mass transportation like train and bus platforms as well as inside the train/bus.

 

•   Education – typically distribution of teacher laptop to projector; can also include USB extension for web camera, portable storage, etc.

 

•   Remote operation, such as KVM (Keyboard, Video, Mouse) extension; very popular in data centers, and industrial machinery operations, enabling a remote operator to a control PC/machine.

  

•   Smart antenna/TCU connectivity.

 

•   Car backbone/networking.

Manufacturing and Raw Materials

We primarily manufacture our products through contract manufacturers in Taiwan and Europe. As of today, all our silicon wafers, which are the basic components of any semiconductor product, are designed to be manufactured at TSMC, the largest foundry in the world. The wafers are then transferred to the assembly house where they are processed and many chips are manufactured from each wafer. These chips are then packaged and transferred for final testing. This is the phase where all chips are tested in accordance with specially designed programs developed specifically for each product family. Along the product life cycle, we continuously invest in the improvement of testing in order to enhance manufacturing yield and reduce chip costs.

Despite the current global shortage in the semiconductor products, derived mainly from macro trends such as strong demand for 5G and high performance computing, as well as the COVID-19 pandemic, we have succeeded in managing our inventory and have not had delays historically in fulfilling our obligations to customers. We have managed to do this utilizing two main strategies:

 

   

Conservative and accurate planning – Even before the shortage, Valens took a conservative approach to inventory management. The trigger for the purchase of inventory for Valens has not exclusively been based on customer purchase orders, but rather on a combination of our assessments of demand based on purchase orders and forecasts of demand from our sales teams.

 

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Capturing capacity allocation from the supply chain vendors – Amid the shortage, we have made necessary adjustments to our supply and demand planning, with the goal of capturing capacity allocation within the supply chain vendors. In order to do so, during 2021, we have placed longer-term purchase orders for raw materials and manufacturing services, even into 2022.

Although the global silicon shortage has affected every company in the semiconductor industry, Valens is well positioned to emerge from this situation without any significant adverse business impact.

Sales, Marketing and Customer Support

We sell our products worldwide through multiple sales channels, including through our direct sales force and through distributors and independent sales representatives, which resell our products to numerous end customers. Approximately 50% and 51% of our net sales in fiscal years 2020 and 2019, respectively, were made to distributors.

Our direct sales force and applications engineers provide our customers with specialized technical support. We believe that maintaining a close relationship with our customers and serving their specific technical needs improves their level of satisfaction and enables us to anticipate and influence their future product needs. We provide ongoing technical training to our distributor and sales representatives to keep them informed of our existing and new products.

We maintain an internal marketing organization, which is responsible for increasing our brand awareness and promoting our products to prospective customers. This includes the creative management of our website, market research and analytics, and development of demand generation strategies and materials such as product announcements, press releases, brochures, training and videos, as well as securing thought leadership through published technical and trend articles and advertisements, and active engagement in key industry events.

Customers

Our installed customer base consists of major technology firms in the audio-video space and Tier 1 part suppliers in the automotive industry. In the audio video vertical, we have served the leading manufacturers of video distribution equipment, displays, projectors, industrial equipment, and healthcare equipment for many years. We have a wide distribution of our revenues across our customer base. In 2020, our three leading clients collectively represented approximately 40% of our total revenue.

In the automotive space, while we promote our products to the OEMs who are in most cases the final decision makers on the technology that will be deployed in their cars, actual sales are made to Tier 1s. Our contracts are typically based on short-term purchase orders.

Competition

The semiconductor industry is highly competitive and is characterized by constant and rapid technological change. Our ability to compete in this industry depends on many factors, including our ability to identify emerging markets and technology trends in an accurate and timely manner, introduce new and innovative technologies and products, implement advanced manufacturing technologies at a sustainable pace, maintain the performance and quality of our products, and manufacture our products in a cost-effective manner.

Intellectual Property

We consider the strength of our intellectual property portfolio to be our most significant competitive advantage. The protection of our technology, intellectual property and proprietary rights is therefore an important aspect of our business. We rely on a combination of trade secrets, trademark and copyright laws, confidentiality

 

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agreements, and technical measures to establish, maintain and protect our intellectual property rights and technology. We currently have 103 patents issued, and 14 patent applications pending. Our patents are in a wide variety of areas relevant to our products, specifically covering our innovation in the areas of convergence of multiple-data types/multi-stream over the same wires and robust operation under severe electromagnetic interference.

Our in-house know-how is an important element of our intellectual property. The development of technological solutions requires sophisticated coordination among many specialized employees. We believe that duplication of this coordination by competitors or individuals seeking to copy our platform would be difficult. The risk of a competitor effectively replicating the functionality of our platform is further mitigated by the fact that our service product offerings do not include exposure of source code, as our solution is based on hardware (integrated circuits) and software that is delivered as binary code.

We cannot guarantee that any of our pending patent or trademark applications will be granted, that our current or subsequently issued patents or trademarks will be effective to protect our intellectual property rights, that any of our pending patent applications will result in issued patents, that any of our intellectual property rights will provide us with any meaningful competitive advantages, or that others will not infringe, misappropriate or violate our intellectual property rights. In addition, while there is no active litigation involving any of our patents or other intellectual property rights, we may be required to enforce or defend our intellectual property rights against third parties in the future.

Regulation

Our operations are subject to various environmental, labor, health, safety and other laws and regulations in Israel, the United States and other jurisdictions in which we operate. We are also required to obtain authorizations or licenses from governmental authorities for certain of our operations and have to protect our intellectual property worldwide. In the jurisdictions in which we operate, we need to comply with differing standards and varying practices of regulatory, tax, judicial and administrative bodies for joint and several costs associated with investigation and remediation of sites at which we have arranged for the disposal of hazardous wastes if such sites become contaminated, even if we fully comply with applicable environmental laws and regulations. We are also subject to various federal, state, local, international and non-U.S. laws and regulations relating to occupational health and safety. Any failure on our part to comply with these laws and regulations may subject us to significant fines or other civil or criminal costs, obligations, sanctions or property damage or personal injury claims, or suspension of our facilities’ operating permits. Compliance with current or future environmental and occupational health and safety laws and regulations could restrict our ability to expand our business or require us to modify processes or incur other substantial expenses which could harm our business.

As part of our business development, we also collect information about individuals, also referred to as personal data, and other potentially sensitive and/or regulated data from our customers. Laws and regulations in Israel, the United States and around the world restrict how personal information is collected, processed, stored, used and disclosed, as well as set standards for its security, implement notice requirements regarding privacy practices, and provide individuals with certain rights regarding the use, disclosure and sale of their protected personal information.

For example, in the United States, various federal and state regulators, including governmental agencies like the Federal Trade Commission, or the FTC, have adopted, or are considering adopting, laws and regulations concerning privacy and data protection. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act of 2018, or the CCPA, which increases privacy rights for California residents and imposes obligations on companies that process their personal information (including device identifiers, IP addresses, cookies and geo-location), came into effect on January 1, 2020. Among other things, the CCPA

 

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requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. Additionally, voters approved a new privacy law, the California Privacy Rights Act, or the CPRA, in the November 2020 election. Effective starting on January 1, 2023, the CPRA will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information. State laws are changing rapidly and there is discussion in Congress of a new comprehensive federal data privacy law to which we would become subject if it is enacted.

Internationally, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information. For example, the GDPR, which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data (including online identifiers and location data). EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data. In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area or the United Kingdom, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.

In addition, in Israel, the Privacy Protection Law, 5741-1981 (“PPL”), and the regulations enacted thereunder, including the Privacy Protection Regulations (Data Security) 2017 (“Data Security Regulations”), as well as guidelines issued by the Israeli Privacy Protection Authority, and Amendment No. 40 to the Communications Law (Telecommunications and Broadcasting), 5742-1982, impose obligations with respect to the manner certain personal data is processed, maintained, transferred, disclosed, accessed and secured. Failure to comply with the PPL, its regulations and guidelines issued by the Israeli Privacy Protection Authority may expose us to administrative fines, civil claims (including class actions) and in certain cases criminal liability. Current pending legislation may result in a change of the current enforcement measures and sanctions and may also require us to modify the manner personal data is collected, processed and maintained by us. The Israeli Privacy Protection Authority may initiate administrative inspection proceedings, from time to time, without any suspicion of any particular breach of the PPL, as it has done in the past with respect to dozens of Israeli companies in various business sectors. In addition, to the extent that any administrative supervision procedure is initiated by the Israeli Privacy Protection Authority and reveals certain irregularities with respect to our compliance with the PPL, in addition to our exposure to administrative fines, civil claims (including class actions) and in certain cases criminal liability, we may also need to take certain remedial actions to rectify such irregularities, which may increase our costs.

Restrictions on the collection, use, sharing or disclosure of personal information or additional requirements and liability for security and data integrity could require us to modify our solutions and features, possibly in a material manner, could limit our ability to develop new products and features and could subject us to increased compliance obligations and regulatory scrutiny.

See “Risk Factors—Risks Related to Laws and Regulation.”

 

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Human Capital

As of March 31, 2021, we had 270 full-time employees, primarily based in Israel. Our team draws from a broad spectrum of backgrounds and experiences, across technology, with strong engineering, analog mix signal, DSP, VLSI and software capabilities. We foster an entrepreneurial culture so that we may remain focused and innovative over time, as we strive to serve our clients with openness, transparency and humility.

Facilities

Our principal executive office is located in Hod Hasharon, Israel. In addition to our Israeli headquarters, we have offices in the United States, Asia and Europe. We lease each of our offices. We believe that our current facilities are adequate to meet our immediate needs.

Legal Proceedings

From time to time, we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.

 

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PTK’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion of PTK’s financial condition and results of operations should be read in conjunction with PTK’s financial statements and notes to those statements included elsewhere in this proxy statement/prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Please see “Cautionary Statement Regarding Forward-Looking Statements; Market, Ranking and Other Industry Data.” PTK’s actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described under “Risk Factors” and elsewhere in this proxy statement/prospectus. References in this section to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of PTK Acquisition Corp.

Overview

PTK is a blank check company formed under the laws of the State of Delaware on August 19, 2019 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar Business Combination with one or more businesses. PTK intends to effectuate its Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.

PTK’s Sponsor is PTK Holdings LLC, a Delaware limited liability company. The registration statement for PTK’s IPO was declared effective on July 13, 2020. On July 15, 2020, PTK consummated the PTK IPO of 11,500,000 units, including the issuance of 1,500,000 units as a result of the underwriters’ exercise of their over-allotment option in full, at $10.00 per unit, generating gross proceeds of $115.0 million, and incurring offering costs of approximately $7.3 million, inclusive of approximately $4.0 million in deferred underwriting commissions.

Simultaneously, with the closing the PTK IPO, PTK consummated the private placement of 6,800,000 private placement warrants, at a price of $0.50 per private placement warrant to the Sponsor, generating gross proceeds to PTK of $3.4 million. In addition, upon the consummation of the PTK IPO, 600,000 additional private placement warrants were issued to the Sponsor as a result of the conversion of a promissory note.

Upon the closing of the PTK IPO and the private placement of warrants, $115.0 million ($10.00 per unit) of the net proceeds of the PTK IPO and certain of the proceeds of the private placement of warrants was placed in the Trust Account, located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the distribution of the Trust Account as described below.

PTK’s management has broad discretion with respect to the specific application of the net proceeds of the PTK IPO and the sale of the private placement warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.

If PTK is unable to complete a Business Combination within 18 months from the closing of the PTK IPO, or January 15, 2022, PTK will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding Public Shares for a pro rata portion of the funds held in the Trust Account (net of interest that may be used by PTK to pay income taxes or other taxes) which redemption will completely extinguish the public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of PTK’s remaining holders of common stock and PTK’s board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii)

 

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above) to PTK’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. PTK will pay the costs of any liquidation following the redemptions from our remaining assets outside of the Trust Account. If such funds are insufficient, the Sponsor has agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $50,000) and has agreed not to seek repayment for such expenses.

Results of Operations

PTK’s entire activity since inception through March 31, 2021 related to its formation, the preparation for the PTK IPO, and since the closing of the PTK IPO, the search for a prospective initial Business Combination. PTK has neither engaged in any operations nor generated any revenues to date. PTK will not generate any operating revenues until after completion of its initial Business Combination. PTK generates non-operating income in the form of income from investments held in the Trust Account. PTK expects to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the six months ended June 30, 2021, PTK had net loss of approximately $2.1 million, which consisted of approximately $2.0 million general and administrative expenses, $60,000 of related part administrative fees and approximately $99,000 franchise tax expense, partially offset by approximately $6,000 in interest earned from investments held in the Trust Account.

For the six months ended June 30, 2020, PTK had net loss of approximately $107,000, which consisted of approximately $7,000 general and administrative expenses and approximately $100,000 franchise tax expense.

For the year ended December 31, 2020 PTK had net losses of approximately $2.5 million, which consisted of approximately $0.6 million in general and administrative expenses, $55,000 of administrative fees – related party, approximately $107,000 of franchise tax expenses, change in fair value of private warrant liabilities of approximately $1.7 million, offering costs associated with issuance of private warrants of approximately $25,000, offset by approximately $6,000 in net gain from investments held in the Trust Account.

For the period from August 19, 2019 (inception) through December 31, 2019, PTK had a net loss of approximately $3,000.

Liquidity and Capital Resources

As of June 30, 2021, PTK had approximately $53,000 in cash and working capital deficit of approximately $2.2 million (not taken into account tax obligations of approximately $208,000 that may be paid using investment income earned from Trust Account). As of December 31, 2020, PTK had approximately $333,000 in cash and working capital deficit of approximately $172,000 (not taken into account tax obligations of approximately $109,000 that may be paid using investment income earned from Trust Account). In order to meet working capital needs following the consummation of the PTK IPO, the Sponsor may, but is not obligated to, loan PTK funds, from time to time or at any time, in whatever amount it deems reasonable in its sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of the initial business combination, without interest, or, at the Sponsor’s discretion, up to $1.0 million of the notes may be converted upon consummation of the business combination into private warrants at a price of $0.50 per warrant (which, for example, would result in our sponsor being issued 1,000,000 private warrants at a purchase price of $0.50 per warrant if $500,000 of notes were so converted). If PTK does not complete a business combination, any outstanding loans from the Sponsor, will be repaid only from amounts remaining outside our trust account, if any.

Prior to the completion of the PTK IPO on July 15, 2020, PTK’s liquidity needs were satisfied through the receipt of $25,000 from the Sponsor in exchange for the issuance of the Founder Shares, and a $300,000

promissory note issued to the Sponsor, which was converted into 600,000 private warrants upon closing of the

 

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PTK IPO. Subsequent to the consummation of the PTK IPO and Private Placement, PTK’s liquidity needs have been satisfied with the proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but is not obligated to, provide PTK working capital loans. To date, there were no amounts outstanding under any working capital loans.

Based on the foregoing, PTK management has determined that the working capital deficit raises substantial doubt about PTK’s ability to continue as a going concern until the earlier of the consummation of the Business Combination or the date PTK is required to liquidate, January 15, 2022. The financial statements do not include any adjustment that might be necessary if PTK is unable to continue as a going concern.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. PTK management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2021.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support provided to the Company. We incurred $60,000 of such fees in the six months ended June 30, 2021, which are payable as of June 30, 2021. Upon completion of the Business Combination, we will cease paying these monthly fees.

The underwriters are entitled to a deferred fee of $4.0 million in the aggregate. The deferred fee will be waived by the underwriters in the event that the Company does not complete a Business Combination, subject to the terms of the underwriting agreement. The deferred fee is due and payable upon the completion of the Business Combination, regardless of the level of redemptions of PTK Common Stock. In the case of the No Redemption scenario, the deferred fee of $4.0 million represents approximately 3.5% of of PTK’s Trust Account, assuming a value of $115 million (which assumes $10.00 per share). In the case of a redemption of 50% of the PTK’s Common Shares are redeemed by holders of PTK Common Stock, the deferred fee of $4.0 million represents approximately 7% of PTK’s Trust Account, assuming a value of $57.5 million (which assumes $10.00 per share). In case of the Maximum Redemption scenario, the deferred fee of $4.0 million represents approximately 40% of of PTK’s Trust Account, assuming a value of $115 million (which assumes $10.00 per share).

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Investments Held in Trust Account

Our portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof.

 

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Our investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these investments are included in interest earned from investments held in Trust Account in the statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information, other than for investments in open-ended money market funds with published daily net asset values (“NAV”), in which case the Company uses NAV as a practical expedient to fair value. The NAV on these investments is typically held constant at $1.00 per unit.

Derivative Warrant Liabilities

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

We issued 7,400,000 warrants in connection with its Private Placement (6,800,000) and conversion of note payable (600,000) which are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of warrants issued in connection with the Private Placement and conversion of note payable have been estimated using a Modified Black-Scholes model for the Affective Periods.

PTK Common Stock Subject to Possible Redemption

We account for our stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at March 31, 2021 and December 31, 2020, the Company had 9,969,788 and 10,052,015, respectively, of shares of common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of PTK’s condensed balance sheets.

Net Income (Loss) Per Share of Common Stock

Net income (loss) per share is computed by dividing net loss by the weighted-average number of common stock outstanding during the periods. We have not considered the effect of the warrants sold in the PTK IPO and Private Placement, as well as the warrants issued on the note conversion to purchase an aggregate of 18,900,000 shares of commo