ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
one-half of one redeemable warrant |
||||
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
☒ | Smaller reporting company | |||||
Emerging growth company |
• | our ability to select an appropriate target business or businesses; |
• | our ability to complete our initial business combination; |
• | our expectations around the performance of the prospective target business or businesses; |
• | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
• | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination; |
• | our potential ability to obtain additional financing to complete our initial business combination; |
• | our pool of prospective target businesses; |
• | our ability to consummate an initial business combination due to the uncertainty resulting from the recent COVID-19 pandemic; |
• | the ability of our officers and directors to generate a number of potential business combination opportunities; |
• | our public securities’ potential liquidity and trading; |
• | the lack of a market for our securities; |
• | the use of proceeds not held in the Trust Account or available to us from interest income on the Trust Account balance; |
• | the Trust Account not being subject to claims of third parties; or |
• | our financial performance following our Public Offering. |
• | We are a blank check company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective. |
• | Our stockholders may not be afforded an opportunity to vote on our proposed initial business combination, and even if we hold a vote, holders of our Founder Shares will participate in such vote, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination. |
• | Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash. |
• | If we seek stockholder approval of our initial business combination, our initial stockholders and management team have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote. |
• | The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target. |
• | The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure. |
• | The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your shares. |
• | The requirement that we complete our initial business combination within 15 months after the closing of the Public Offering (or 18 months from the closing of the Public Offering if we extend the time to complete a business combination) may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders. |
• | Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19) outbreak and the status of debt and equity markets. |
• | We may not be able to complete our initial business combination within 15 months from the closing of the Public Offering (or 18 months from the closing of the Public Offering if we extend the time to complete a business combination as), in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate. |
• | You will not be entitled to protections normally afforded to investors of many other blank check companies. |
• | Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire worthless. |
• | Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations. |
• | We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors. |
• | The New York Stock Exchange (the “NYSE”) may delist our securities from its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. |
• | You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss. |
• | Holders of our Class A common stock will not be entitled to vote on any appointment of directors prior to our initial business combination. |
• | Past performance by our management team and their affiliates may not be indicative of future performance of an investment in us. |
• | We may seek business combination opportunities in industries or sectors that may be outside of our management’s areas of expertise. |
• | We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers. |
• | Our warrants are expected to be accounted for as a warrant liability and will be recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our Class A common stock or may make it more difficult for us to consummate an initial business combination. |
Market |
2020 Sales |
Market |
2020 Sales |
|||||||
United States |
$ | 40.1 | Italy | $ | 2.8 | |||||
China |
$ | 19.2 | Canada | $ | 3.1 | |||||
South Korea |
$ | 17.7 | India | $ | 3.0 | |||||
Germany |
$ | 17.9 | Russia | $ | 2.1 | |||||
Japan |
$ | 15.4 | Colombia | $ | 1.9 | |||||
Brazil |
$ | 8.2 | Peru | $ | 1.9 | |||||
Malaysia |
$ | 6.9 | Indonesia | $ | 1.6 | |||||
Mexico |
$ | 5.3 | Philippines | $ | 1.4 | |||||
France |
$ | 5.1 | Australia | $ | 1.2 | |||||
Taiwan |
$ | 4.4 | Ecuador | $ | 0.9 | |||||
United Kingdom |
$ | 1.0 | Argentina | $ | 1.4 | |||||
Thailand |
$ | 2.9 | Poland | $ | 1.1 |
• | restrictions on the nature of our investments; and |
• | restrictions on the issuance of securities, |
• | registration as an investment company; |
• | adoption of a specific form of corporate structure; and |
• | reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations. |
• | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
• | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
• | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
• | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
• | our inability to pay dividends on our Class A common stock; |
• | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
• | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
• | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
• | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
• | solely dependent upon the performance of a single business, property or asset; or |
• | dependent upon the development or market acceptance of a single or limited number of products, processes or services. |
• | a limited availability of market quotations for our securities; |
• | reduced liquidity for our securities; |
• | a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
• | a limited amount of news and analyst coverage; and |
• | decreased ability to issue additional securities or obtain additional financing in the future. |
• | may significantly dilute the equity interest of investors in the Public Offering; |
• | may subordinate the rights of holders of Class A common stock if shares of preferred stock are issued with rights senior to those afforded our Class A common stock; |
• | could cause a change in control if a substantial number of shares of Class A common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and |
• | may adversely affect prevailing market prices for our units, Class A common stock and/or warrants. |
Public shares |
23,000,000 | |||
Founder shares |
5,750,000 | |||
|
|
|||
Total shares |
28,750,000 |
Total funds in trust available for initial business combination (less deferred underwriting commissions) |
$ | 226,550,000 | ||
Initial implied value per public share |
$ | 10.20 | ||
Implied value per share upon consummation of initial business combination |
$ | 7.88 |
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Page No. |
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F-1 |
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Financial Statements: |
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F-2 |
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F-3 |
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F-4 |
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F-5 |
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F-6 |
Assets: |
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Cash |
$ | |||
Prepaid expenses |
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|
|
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Total current assets |
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Investments held in Trust Account |
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|
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Total assets |
$ | |||
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|
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Liabilities, Redeemable Common Stock and Stockholders’ Deficit |
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Franchise taxes payable |
$ |
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Due to related party |
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Accrued offering costs and expenses |
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|
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Total current liabilities |
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Warrant liability |
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Deferred underwriters’ discount |
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Total liabilities |
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|
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Commitments and Contingencies (Note 7) |
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Redeemable Class A common stock subject to possible redemption, |
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Stockholders’ Deficit: |
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Preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Accumulated deficit |
( |
) | ||
|
|
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Total Stockholders’ Deficit |
( |
) | ||
|
|
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Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit |
$ |
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|
|
Formation and operating costs |
$ | |||
|
|
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Loss from operations |
( |
) | ||
|
|
|||
Other income (loss) |
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Offering costs associated with warrants |
( |
) | ||
Bank interest income |
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Interest on Trust investments |
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Change in fair value of warrant liability |
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|
|
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Total other income |
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|
|
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Net income |
$ | |||
|
|
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Weighted average shares outstanding of Class A common stock |
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|
|
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Basic and diluted net loss per share, Class A common stock |
$ | ( |
) | |
|
|
|||
Weighted average shares outstanding of Class B common stock |
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|
|
|||
Basic and diluted net loss per share, Class B common stock |
$ | ( |
) | |
|
|
Class B common stock |
Additional |
Accumulated |
Total Stockholders’ |
|||||||||||||||||
Shares |
Amount |
Paid-in Capital |
Deficit |
Deficit |
||||||||||||||||
Balance as of March 9, 2021 (inception) |
$ | $ | |
$ | $ | |
||||||||||||||
Class B common stock issued to founders |
— | |||||||||||||||||||
Sale of |
— | — | — | |||||||||||||||||
Deemed dividend to Class A stockholders to provide for the additional $ |
— | — | — | ( |
) | ( |
) | |||||||||||||
Initial classification of warrant liability - Private Placement Warrants |
— | — | ( |
) | — | ( |
) | |||||||||||||
Deemed dividend to Class A stockholders to state the Trust Account at redemption value |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||
Net income |
— | — | — | |||||||||||||||||
Balance as of December 31, 2021 |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||
Cash flows from operating activities: |
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Net income |
$ | |||
Adjustments to reconcile net income to net cash used in operating activities: |
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Offering costs allocated to warrants |
||||
Change in fair value of warrant liability |
( |
) | ||
Interest earned on investments held in Trust Account |
( |
) | ||
Changes in current assets and liabilities: |
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Prepaid assets |
( |
) | ||
Taxes payable |
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Due to related party |
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Accrued offering costs and expenses |
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Net cash used in operating activities |
( |
) | ||
Cash flows from investing activities: |
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Principal deposited in Trust Account |
( |
) | ||
Net cash used in investing activities |
( |
) | ||
Cash flows from financing activities: |
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Proceeds from private placement warrants |
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Proceeds from initial public offering, net of costs |
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Proceed from private placement |
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Payment of deferred offering costs |
( |
) | ||
Proceeds from issuance of promissory note to related party |
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Repayment of promissory note to related party |
( |
) | ||
Net cash provided by financing activities |
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Net change in cash |
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Cash, beginning of the period |
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Cash, end of the period |
$ |
|||
Supplemental disclosure of non-cash financing activities: |
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Deferred underwriting commissions payable charged to additional paid in capital |
$ | |||
Deemed dividend to Class A stockholders |
$ | |||
For the period from March 9, 2021 (inception) through December 31, 2021 |
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Class A | Class B | |||||||
Basic and diluted net income per share of common stock: |
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Numerator: |
||||||||
Allocation of net income |
$ | $ | ||||||
Deemed dividends |
( |
) | ( |
) | ||||
Allocation of net loss and deemed dividends |
$ | ( |
) | $ | ( |
) | ||
Denominator: |
||||||||
Weighted-average shares outstanding |
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Basic and diluted net loss per share of common stock |
$ | ( |
) | $ | ( |
) |
• | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
• | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
• | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Gross proceeds from Public Offering |
$ | |
||
Less: |
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Proceeds allocated to Public Warrants |
( |
) | ||
Common stock issuance costs |
( |
) | ||
Plus: |
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Accretion of carrying value to redemption value |
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Contingently redeemable common stock |
$ | |||
• | in whole and not in part; |
• | at a price of $ |
• | upon not less than |
• | if, and only if, the closing price of the common stock equals or exceeds $ within a ending trading days before the Company sends the notice of redemption to the warrant holders). |
Amortized Cost and Carrying Value |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value as of December 31, 2021 |
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Cash |
$ | $ | — | $ | — | $ | ||||||||||
U.S. Treasury Securities |
— | ( |
) | |||||||||||||
$ | $ | — | $ | ( |
) | $ | ||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Public Warrants |
$ | $ | — | $ | — | |||||||
Private Placement Warrants |
— | — | ||||||||||
$ | $ | $ | — | |||||||||
Input |
September 28, 2021 (Initial Measurement) |
|||
Risk-free interest rate |
% | |||
Expected term (years) |
||||
Expected volatility |
% | |||
Exercise price |
$ | |||
Dividend rate |
% |
Fair value at March 9, 2021 (inception) |
$ | |||
Initial fair value of September 28, 2021 |
||||
Public Warrants reclassified to level 1 |
( |
) | ||
Private Placement Warrants reclassified to level 2 |
( |
) | ||
Change in fair value |
( |
) | ||
Fair v alue at December 31, 2021 |
$ | |||
Name |
Age |
Position | ||
Dave Wentz | 51 | Chairman and Chief Executive Officer | ||
Mike Lohner | 59 | President, Chief Financial Officer and Directo | ||
Wayne Moorehead | 47 | Chief Strategy Officer and Director | ||
John Addison | 64 | Director | ||
Bradford Richardson | 57 | Director | ||
Travis Ogden | 50 | Director | ||
Heather Chastain | 47 | Director |
• | assisting board oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm’s qualifications and independence, and (4) the performance of our internal audit function and independent registered public accounting firm; the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and any other independent registered public accounting firm engaged by us; |
• | pre-approving all audit and non-audit services to be provided by the independent registered public accounting firm or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; reviewing and discussing with the independent registered public accounting firm all relationships the registered public accounting firm has with us in order to evaluate its continued independence; |
• | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (1) the independent registered public accounting firm’s internal quality-control procedures and (2) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
• | meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent auditor, including reviewing our specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
• | reviewing with management, the independent, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
• | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
• | reviewing and making recommendations to our board of directors with respect to the compensation, and any incentive compensation and equity based plans that are subject to board approval of all of our other officers; |
• | reviewing our executive compensation policies and plans; |
• | implementing and administering our incentive compensation equity-based remuneration plans; |
• | assisting management in complying with our proxy statement and annual report disclosure requirements; |
• | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
• | producing a report on executive compensation to be included in our annual proxy statement; and |
• | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
• | screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by the board, and recommending to the board of directors candidates for nomination for election at the annual meeting of stockholders or to fill vacancies on the board of directors; |
• | developing and recommending to the board of directors and overseeing implementation of our corporate governance guidelines; |
• | coordinating and overseeing the annual self-evaluation of the board of directors, its committees, individual directors and management in the governance of the company; and |
• | reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary. |
• | each person known by us to be the beneficial owner of more than 5% of our issued and outstanding shares of common stock; |
• | each of our officers, directors and director nominees; and |
• | all our officers and directors as a group. |
Class A Common Stock |
Class B Common Stock |
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Name and Address of Beneficial Owner (1) |
Number of Shares Beneficially Owned |
Percent of Class |
Number of Shares Beneficially Owned (2) |
Percent of Class |
Percentage of Outstanding Common Stock |
|||||||||||||||
DSAC Partners LLC (3) |
— | — | 5,750,000 | 100 | % | 20.0 | % | |||||||||||||
Dave Wentz (3) |
— | — | 5,750,000 | 100 | % | 20.0 | % | |||||||||||||
Mike Lohner |
— | — | ||||||||||||||||||
Wayne Moorehead |
— | — | ||||||||||||||||||
John Addison |
— | — | — | — | — | |||||||||||||||
Bradford Richardson |
— | — | — | — | — | |||||||||||||||
Travis Ogden |
— | — | — | — | — | |||||||||||||||
Heather Chastain |
— | — | — | — | — | |||||||||||||||
Saba Capital Management, L.P. (4) |
1,928,598 | 8.4 | % | 8.4 | % | |||||||||||||||
Boaz R. Weinstein (4) |
1,928,598 | 8.4 | % | 8.4 | % | |||||||||||||||
Saba Capital Management GP, LLC (4) |
1,928,598 | 8.4 | % | 8.4 | % | |||||||||||||||
All officers and directors as a group (seven individuals) |
5,750,000 | 100 | % | 20.0 | % |
(1) | Unless otherwise noted, the business address of each of the following entities or individuals is c/o Direct Selling Acquisition Corp., 5800 Democracy Drive, Plano, TX 75024. |
(2) | Interests shown consist solely of Founder Shares, classified as shares of Class B common stock. Such shares will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one |
(3) | DSAC Partners LLC is the record holder of the shares reported herein. DSAC Manager LLC is the manager of the sponsor. Mr. Wentz is the sole member of DSAC Manager LLC and has voting and investment discretion with respect to the common stock held of record by the sponsor. Mr. Wentz disclaims any beneficial ownership of the shares held by the sponsor, except to the extent of his pecuniary interest therein. |
(4) | Information regarding Saba Capital Management, L.P. is based solely on the Schedule 13G/A filed jointly filed by Saba Capital Management, L.P., Boaz R. Weinstein, and Saba Capital Management GP, with the SEC on February 14, 2022 for the year ended December 31, 2021. |
DIRECT SELLING ACQUISITION CORP. | ||
By: | /s/ Dave Wentz | |
Name: Dave Wentz | ||
Title: Chief Executive Officer |
Name |
Title |
Date | ||
/s/ Dave Wentz |
Chairman and Chief Executive Officer (Principal Executive Officer) | March 28, 2022 | ||
/s/ Mike Lohner |
President, Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer) | March 28, 2022 | ||
/s/ John Addison |
Director | March 28, 2022 | ||
/s/ Bradford Richardson |
Director | March 28, 2022 | ||
/s/ Travis Ogden |
Director | March 28, 2022 |