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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

 

(Mark One)

 

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023.

 

or

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___ to _____

 

Commission File Number: 001-41102

 

 

Canna-Global Acquisition Corp

(Exact name of registrant as specified in its charter)

 

 

Delaware   86-3692449

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

4640 Admiralty Way, Suite 500

Marina Del Rey, California

   90292
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (310) 496-5700

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Units, each consisting of one share of Class A common stock, par value $0.000001 per share, and one redeemable warrant of one share of Common Stock   CNGLU   The Nasdaq Stock Market LLC
Class A common stock included as part of the units   CNGL   The Nasdaq Stock Market LLC
Redeemable warrants included as part of the units   CNGLW   The Nasdaq Stock Market LLC
Representative’s shares of Class A common stock   CNGL   The Nasdaq Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐   Accelerated filer ☐
     
Non-accelerated filer ☒   Smaller reporting company ☒
     
Emerging growth company ☒    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☒ No ☐

 

As of April 16, 2024, there were 860,000 shares of Class A common stock, par value $0.000001 per share, of the registrant (excluding 1,112,657 shares subject to possible redemption), and 5,750,000 shares of the Company’s Class B common stock, par value $0.000001 per share, of the registrant issued and outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    PAGE
Item 1. Business   1
Item 1A. Risk Factors   21
Item 1B. Unresolved Staff Comments   22
Item 2. Properties   22
Item 3. Legal Proceedings   22
Item 4. Mine Safety Disclosures   22
     
PART II    
Item 5. Market for Registrant’s Ordinary Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities   23
Item 6. [Reserved]   24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations   24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk   28
Item 8. Financial Statements and Supplementary Data   28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   28
Item 9A. Controls and Procedure   28
Item 9B. Other Information   29
     
PART III    
Item 10. Directors, Executive Officers and Corporate Governance   30
Item 11. Executive Compensation   37
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters   37
Item 13. Certain Relationships and Related Transactions, and Director Independence   39
Item 14. Principal Accounting Fees and Services   41
     
PART IV    
Item 15. Exhibits and Financial Statement Schedules   41
Item 16. Form 10-K Summary   41

 

i

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Report (as defined below), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:

 

  ● our ability to complete our initial business combination;
     
  ● 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, as a result of which they would then receive expense reimbursements;
     
  ● our potential ability to obtain additional financing to complete our initial business combination;
     
  ● the ability of our officers and directors to generate a number of potential acquisition opportunities;
     
  ● our pool of prospective target businesses;
     
  ● the ability of our officers and directors to generate a number of potential acquisition 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; or
     
  ● our financial performance.

 

The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

ii

 

 

Unless otherwise stated in this Report, or the context otherwise requires, references to:

 

  ● “board of directors” or “board” are to the board of directors of the Company;
  ● “common stock” are to our Class A common stock and our Class B common stock, collectively;
  ● “Continental” are to Continental Stock Transfer & Trust Company, trustee of our trust account (as defined below) and warrant agent of our public warrants (as defined below);
  ● “DGCL” are to the Delaware General Corporation Law;
  ● “DWAC System” are to the Depository Trust Company’s Deposit/Withdrawal At Custodian System;
  ● “Exchange Act” are to the Securities Exchange Act of 1934, as amended;
  ● “founder shares” (which includes the representative shares) are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to our initial public offering, and the shares of our Class A common stock issuable upon the conversion thereof as provided herein;
  ● “GAAP” are to the accounting principles generally accepted in the United States of America;
  ● “IFRS” are to the International Financial Reporting Standards, as issued by the International Accounting Standards Board;
  ● “initial business combination” or “business combination” are to a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses;
  ● “initial public offering” or “IPO” are to the initial public offering that was consummated by the Company on November 30, 2021;
  ● “initial stockholders” are to our sponsor and any other holders of our founder shares (including the holders of the representative shares) prior to our initial public offering (or their permitted transferees);
  ● “Investment Company Act” are to the Investment Company Act of 1940, as amended;
  ● “JOBS Act” are to the Jumpstart Our Business Startups Act of 2012;
  ● “management” or our “management team” are to our officers and directors;
  ● “Nasdaq” are to the Nasdaq Stock Market;
  ● “placement units” are to the units purchased by our sponsor, with each placement unit consisting of one placement share and one placement warrant;
  ● “placement shares” are to the shares of our common stock included within the placement units purchased by our sponsor in the private placement;
  ● “placement warrants” are to the warrants included within the placement units purchased by our sponsor in the private placement;
  ● “private placement” are to the private placement of 802,500 placement units at a price of $10.00 per unit, for an aggregate purchase price of $8,025,000, which occurred simultaneously with the completion of our initial public offering;
  ● “public shares” are to shares of our Class A common stock sold as part of the units in our initial public offering (whether they are purchased in our initial public offering or thereafter in the open market);
  ● “public stockholders” are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares;
  ● “public warrants” are to our redeemable warrants sold as part of the units in our initial public offering (whether they are purchased in our initial public offering or thereafter in the open market, including warrants that may be acquired by our sponsor or its affiliates in our initial public offering or thereafter in the open market);
  ● “PCAOB” are to the Public Company Accounting Oversight Board (United States);
  ● “Registration Statement” are to the Form S-1 filed initially with the SEC on August 9, 2021, as amended;
  ● “Report” are to this Annual Report on Form 10-K for the fiscal year ended December 31, 2021;

 

iii

 

 

  ● “representative” are to EF Hutton LLC, who is the representative of the underwriters in our initial public offering;
  ● “representative shares” are to the 57,500 shares of our Class A common stock issued in December 2021 to the representative and its designees;
  ● “Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002;
  ● “SEC” are to the U.S. Securities and Exchange Commission;
  ● “Securities Act” are to the Securities Act of 1933, as amended;
  ● “special meeting” are to the special meeting of its stockholders held by Canna-Global on November 28, 2022, and on December 1, 2023, in lieu of its 2022 and 2023 annual meetings;
  ● “sponsor” are to Canna-Global LLC;
  ● “termination date” are to the date by which Canna-Global must (i) complete an initial business combination, (ii) cease its operations if it fails to complete such initial business combination, and (iii) redeem or repurchase 100% of Canna-Global’s Class A Common Stock shares included as part of the units sold in Canna-Global’s IPO from December 2, 2024;
  ● “trust account” are to the trust account at J.P. Morgan Securities LLC maintained by the trustee in which an amount of $233,450,000 ($10.15 per unit) from the net proceeds of the sale of the units and placement units (including to reflect the underwriters exercise of the overallotment in full) in the initial public offering was placed on December 2, 2021;
  ● “trust agreement” are to the Investment Management Trust Agreement, dated December 2, 2021, as previously amended and as further amended from time to time, by and between Canna-Global and Continental Stock Transfer & Trust Company, as trustee;
  ● “trustee” are to Continental Stock Transfer & Trust Company;
  ● “underwriters” are to the underwriters of our initial public offering, for which the representative is acting as representative;
  ● “units” are to the units sold in our initial public offering, which consist of one public share and one public warrant;
  ●  “warrants” are to our redeemable warrants, which includes the public warrants as well as the placement warrants and any warrants sold as part of the placement units issued upon conversion of working capital loans to the extent they are no longer held by the initial holders or their permitted transferees;
  ● “warrant agent” are to Continental; and
  ● “we,” “us,” “Company” or “our Company” are to Canna-Global Acquisition Corp.

 

iv

 

 

PART I

 

Item 1. Business

 

General

 

We are an early stage blank check company incorporated in April 2021 as a Delaware corporation whose business purpose is to effect an initial business combination. Since our initial public offering, we have focused our search for an initial business combination with businesses that may provide significant opportunities for attractive investor returns. Our efforts to identify a prospective target business are not limited to a particular industry or geographic region.

 

Initial Public Offering

 

On November 30, 2021, we consummated our initial public offering of 20,000,000 units. Each unit consists of one share of Class A common stock of the Company, par value $0.000001 per share and one redeemable warrant of the Company, with each warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per whole share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $230,000,000, which included an additional 3,000,000 Option Units in connection with the exercise of the underwriters’ over-allotment option.

 

Simultaneously with the closing of the initial public offering, we completed the private sale of an aggregate of 802,500 units to our sponsor at a purchase price of $10.00 per placement unit, generating gross proceeds of $8,025,000.

 

A total of $233,450,000, comprised of the proceeds from the IPO after offering expenses and the proceeds of the sale of the placement units, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee.

 

Our management team is led by J. Gerald (Gerry) Combs, our Chief Executive Officer, and Sharwin Sinnan, our Chief Financial Officer. Mr. Combs brings more than 30 years of leadership experience across numerous engagements with a focus on investment management, manufacturing, and business growth working with a range of businesses from start-ups to established enterprises. We must complete our initial business combination by December 2, 2024, subject to one-month extensions (the “Termination Date”). If our initial business combination is not consummated by the Termination Date, then our existence will terminate, and we will distribute all amounts in the trust account.

 

Termination of the New Quantum Holdings Pty Ltd. Merger Agreement

 

On June 15, 2023, the Company entered into a definitive Bid Implementation and Business Combination Agreement (the “BIBCA Agreement”) with New Quantum Holdings Pty Ltd. (“New Quantum”) in connection with Canna-Global’s initial business combination. On October 16, 2023, the Company received written notice that New Quantum had terminated the BIBCA Agreement. As a result of the termination of the BIBCA Agreement, the BIBCA Agreement was of no further force and effect, and certain agreements entered into in connection with the BIBCA Agreement, were no longer in force or effect. Following the termination of the BIBCA Agreement, the Company continued to evaluate other possible business combination targets promptly though there can be no assurance these evaluations or efforts will result in a business combination transaction.

 

Extensions

 

November 28, 2022 Special Meeting

 

As previously announced on Form 8-K filed with the SEC on December 1, 2022, on November 28, 2022, we held a special meeting of our stockholders in lieu of our annual meeting pursuant to due notice (the “Special Meeting”). Our stockholders entitled to vote at the Special Meeting cast their votes and approved an amendment to the Trust Agreement (the “First Extension Amendment Proposal”), pursuant to which the Trust Agreement was amended to extend the date on which the trustee must liquidate the Trust Account if we have not completed our initial business combination, from December 2, 2022 to December 2, 2023 provided we deposit $0.045 per share of Canna-Global public Class A Common Stock per month extended.

 

1

 

 

Our stockholders also approved the First Amendment to our second amended and restated certificate of incorporation at the Special Meeting, giving us the right to extend the date by which we must (i) consummate an initial business combination, (ii) cease our operations if we fail to complete such initial business combination, and (iii) redeem or repurchase 100% of our public shares of Class A Common Stock included as part of the units sold in our IPO from December 2, 2022 by up to twelve (12) one-month extensions to December 2, 2023.

 

December 1, 2023 Special Meeting

 

As previously announced on Form 8-K filed with the SEC on December 7, 2023, on December 1, 2023, we held a special meeting of our stockholders in lieu of our annual meeting pursuant to due notice (the “Special Meeting”). Our stockholders entitled to vote at the Special Meeting cast their votes and approved an amendment to the Trust Agreement (the “Second Extension Amendment Proposal”), pursuant to which the Trust Agreement was amended a second time to extend the date on which the trustee must liquidate the Trust Account if we have not completed our initial business combination, from December 2, 2023 to December 2, 2024 provided we deposit $0.045 per share of Canna-Global public Class A Common Stock per month extended.

 

Our stockholders also approved the Second Amendment to our second amended and restated certificate of incorporation at the Special Meeting, giving us the right to extend the date by which we must (i) consummate an initial business combination, (ii) cease our operations if we fail to complete such initial business combination, and (iii) redeem or repurchase 100% of our public shares of Class A Common Stock included as part of the units sold in our IPO from December 2, 2023 by up to twelve (12) one-month extensions to December 2, 2024.

 

In connection with its first extension of the Termination Date, Canna-Global caused $0.045 per outstanding share of Canna-Global’s Class A common stock to be paid to the Trust.

 

Business Strategy

 

We seek to create compelling stockholder value by leveraging the track record, strong network, and complementary experience of our management team and sponsor affiliate, which includes strong expertise in mergers and investment management. We may pursue a business combination target in any business, industry or geographic region, however, we expressly disclaim any intent to and will not consummate a business combination with a target business located in China or Hong Kong.

 

Our business strategy is to identify and complete one or more business combinations with a target which we believe can materially grow revenue and earnings both organically and inorganically through the efforts of our management team. These may include targets that can benefit from access to capital in order to: (i) increase spending on strategic initiatives that are expected to generate favorable returns and which can accelerate revenue and earnings growth; (ii) invest in infrastructure or technology; or (iii) fundamentally restructure their business operations.

 

We plan to leverage our management team’s network of potential proprietary and public transaction sources where we believe a combination of our relationships, knowledge and experience in the technology sector could effect a positive transformation or augmentation of existing businesses to improve their overall value. Over the course of their careers, the members of our management team have developed a comprehensive network of contacts and corporate relationships that we believe will serve as a useful source of acquisition opportunities. We plan to leverage relationships with management teams of public and private companies, investment professionals at private equity firms and other financial sponsors, owners of private businesses, investment bankers, restructuring advisers, consultants, attorneys and accountants, which we believe should provide us with a number of business combination opportunities.

 

2

 

 

There is no geographic limitation to the location of targets, as these types of opportunities are not necessarily bound by geography, however, we expressly disclaim any intent to and will not consummate a business combination with a target business located in China or Hong Kong. While evaluating any business combination our team believes that the stage of the market should be considered whether it is a new, transitioning, or a mature market.

 

  ● Companies in new and transitioning markets will have a first mover advantage, with significant revenue potential and profit margins. As inexperienced competition enters these markets, supply increases with the resulting sales erosion. If the cyclical nature of the new market strategy is understood and proper practices are applied, our team believes that there is opportunity to capture significant revenues while building a sustainable and established business.
     
  ● Companies in mature markets experience less volatility and more market/price stability. This stability allows for a traditional approach in managing the business, market growth, operations and forecasting sales.
     
  ● Entering either a new market or a mature market both have a positive and negative effect, mature markets typically offer better stability but less growth potential.

 

Our management team has been communicating with their networks of relationships to articulate the parameters for our search for a target business and a potential business combination, and has begun the process of pursuing and reviewing potential opportunities. After the initial business combination, our management team intends to apply a rigorous approach to enhancing stockholder value, including examining opportunities for revenue enhancement, cost savings, operating efficiencies and strategic acquisitions and divestitures and developing and implementing corporate strategies and initiatives to improve profitability and long-term value. We also plan to evaluate additional opportunities in the cannabis industry that offer broad portfolio synergies and conduct appropriate risk-weighted analyses to capture opportunities for growth and value at every level of the cannabis industry supply chain.

 

The Industry Opportunity

 

Given the rapid and continued growth of the legal cannabis market, management believes that the ability to move quickly to capitalize on new opportunities will be critical to success in creating stakeholder value. Potential areas of interest in the cannabis industry include but are not limited to domestic and international businesses that are involved in the production, distribution and sale of cannabis as well as businesses that legally cultivate, process and/or aid in the retail and direct-to-consumer distribution of cannabis.

 

The global legal marijuana market size was valued at $9.1 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 26.7% from 2021 to 2028 according to a May 2021 study by Grand View Research, called “Legal Marijuana Market Size,” Share & Trends Analysis Report By Marijuana Type (Medical, Adult Use), By Product Type (Flower, Oil), By Medical Application (Chronic Pain, Mental Disorders), And Segment Forecasts, 2021 – 2028.

 

One of the major factors fueling the market growth is the expanding demand for legal cannabis owing to the growing number of legal cannabis countries according to the study. Owing to the recent legalizations in different countries, the use of medical marijuana for various aliments is gaining momentum worldwide. Patients suffering from chronic illnesses, such as Parkinson’s, cancer, Alzheimer’s, and many neurological disorders, are administered medical marijuana, as are children for the treatment of disorders like epilepsy. Unlike other emerging industries, which have been driven by massive technological advances, cannabis has supported therapeutic treatments for thousands of years across a wide variety of cultures. The evolution of its public perception is being progressed by consumers seeking cannabis-based treatments for a variety of health and wellness needs.

 

The adult-use segment dominated the market with a revenue share of 54.6% in 2020 and is expected to witness significant growth from 2021 to 2028 according to the May 2021, Grand View Research Report. The legalization of cannabis for adult use is one of the major factors driving the demand for legal marijuana, according to Grand View Research. In particular, the cannabis industry has seen a dynamic increase in usage among patients opting to use marijuana in Canada and the U.S., where cannabis for adult use has been legalized, which can be due to its low prices and fast availability according to an April 22, 2021, article in Rolling Stone magazine titled “The United States of Weed.” North America dominated the legal marijuana market with a revenue share of 79.6% in 2020 according to the Grand View Research Report; this change in pattern is very evident in nations where reimbursement for medical marijuana is not available.

 

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The medical segment is expected to grow at a steady rate from 2021 to 2028 according to a May 2021 study that attributes the growth to the increased awareness of the medical benefits of cannabis, surging demand for plant-based treatments in pain management, and increasing legalization of cannabis for medical purposes are some of the key factors driving the segment. We believe that as the number of countries that are legalizing medical marijuana increases, the market will continue to expand thus achieving lucrative growth through 2028.

 

According to the Grand View Research Report, key factors that are driving the legal cannabis market growth include the high prevalence of cancer, expanding demand for legal marijuana due to the growing number of legal cannabis countries, and changes in government policies. A number of studies of smoked marijuana found that it can be helpful in treating nausea and vomiting from cancer chemotherapy and other studies have found that inhaled (smoked or vaporized) marijuana can be helpful treatment of neuropathic pain (pain caused by damaged nerves) according to the American Cancer Society. With an increasing number of people becoming aware of the benefits of cannabis consumption, the market is expected to grow at a CAGR of 14.6% during 2021 to 2030 according to a July 7, 2021, Market Watch article, “Legal Marijuana Market Will Reach US$ 85.0 Billion by 2030.”

 

The chronic pain segment dominated the market in 2020 with a share of 44.8%. The different types of chronic pain include neurogenic pain, arthritis pain, cancer pain, low back pain, headache, neck pain, and face pain among others according to an October 2010 National Institutes of Health (NIH) study called “Cannabinoid Delivery Systems for Pain and Inflammation Treatment.” Preclinical studies have shown that cannabinoid receptor agonists block pain in various acute and chronic pain models and that inflammation is attenuated according to the NIH study. Further, the NIH study reveals that data from clinical trials on synthetic and plant-derived cannabis-based medicines is promising for the management of chronic neuropathic pain of different origins. It is also hypothesized that cannabis reduces the alterations in cognitive and autonomic processing that are present in chronic pain states of being.

 

Cannabinoids and endocannabinoids are a hot topic in the fields of chemical and biomedical research with more than 1,000 articles being published per year and research into cannabinoid delivery systems is growing. We believe that recent developments in pharmacological, pharmaceutical and technological sciences will result in new therapeutic strategies using both known cannabinoids for new therapeutic strategies as well as cannabinoid synthetic derivatives.

 

There has been an increase in the adoption of cannabis and its products among patients suffering from mental disorders, such as anxiety, owing to their antipsychotic effect on the nervous system. Anxiety is expected to be effectively treated by cannabis-based products owing to their high therapeutic benefits. According to the Anxiety and Depression Association of America in 2021, around 18.1% of the total population in the U.S. suffers from anxiety disorders each year, and the number is growing at a significant pace.

 

Thus, we believe that there will be significant growth through the broader adoption of cannabis for medical, pain relief and other non-recreational use. Potential sources for additional growth include the disruption of a variety of health-related market segments including pain management, sleep, skin care and cosmetics and anxiety, as well as many other applications that are being explored. We believe that the ability to move quickly to capitalize on these new opportunities will be critical to success in creating stakeholder value.

 

As the industry continues to evolve, we believe that it is crucial to identify the most important end-markets, which we believe are social consumption, pharmaceutical applications, health and wellness and industrial applications through hemp.

 

Our Acquisition Philosophy

 

Our acquisition philosophy is rooted in several core tenets, consistent with those that have been utilized in the past by members of our management team as they have evaluated investment opportunities. We have identified the following general and non-exclusive criteria and guidelines that we believe are consistent with our acquisition strategy and management’s experience, and that we believe are important in evaluating prospective target businesses. We plan to use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines.

 

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We intend to focus on companies that we believe possess some or all of the following characteristics:

 

  ● Market leaders: Leading companies by sales, geographic reach, in our target sub-sectors;
     
  ● Institutional-level operations and financial controls: Companies that have the underlying infrastructure and operations to build a public company platform;
     
  ● Established growth: Rapidly growing businesses with a proven financial track record or demonstrated success in business model;
     
  ● Scalability: Companies with a clear strategy and demonstrated ability to scale in their respective state markets and beyond;
     
  ● Innovation: Innovative and disruptive solutions to industry problems and pain points, including development of new production methods, products or new markets;
     
  ● Exceptional managers: Talented management teams with integrity that seek to increase their companies’ growth trajectories and be trailblazing innovators; and
     
  ● Opportunity for value creation: Like-minded operators open to strategic resources and influence at the board level.

 

These criteria and guidelines are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general criteria and guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria and guidelines in our stockholder communications related to our initial business combination, which would be in the form of proxy solicitation or tender offer materials that we would file with the SEC.

 

Initial Business Combination

 

We will have until the Termination Date to consummate our initial business combination unless extended by the Company’s stockholders in accordance with the first amendment to our second amended and restated certificate of incorporation.

 

In the event that our sponsor elects to extend the time to complete a business combination and deposits the applicable amount into the trust account, as it has done for the first five monthly extensions of the Termination Date, it will receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that we are unable to close a business combination unless there are funds available outside the trust account to do so. Such notes would either be paid upon consummation of our initial business combination, or, at the relevant insider’s discretion, converted upon consummation of our business combination into additional placement units at a price of $10.00 per unit. Our stockholders have approved the issuance of the placement units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of our initial business combination.

 

Our sponsor is not obligated to fund the trust account to extend the time for us to complete our initial business combination. If we are unable to consummate our initial business combination by the Termination Date, we will, as promptly as possible but not more than ten business days thereafter, redeem 100% of our outstanding public shares for a pro rata portion of the funds held in the trust account, including a pro rata portion of any interest earned on the funds held in the trust account and not previously released to us to pay our taxes, and then seek to dissolve and liquidate. However, we may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders. In the event of our dissolution and liquidation, the placement units will expire and will be worthless. The public stockholders will not be able to vote on or redeem their public shares in connection with any such extensions.

 

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Nasdaq rules require that we complete one or more initial business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination.

 

If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects.

 

We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business for the post-acquisition company to meet certain objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target or assets sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended.

 

Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination.

 

If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the initial business combination for the purposes of a tender offer or for seeking stockholder approval, as applicable.

 

The net proceeds of the IPO and the sale of the placement units released to us from the trust account upon the closing of our initial business combination may be used as consideration to pay the sellers of a target business with which we complete our initial business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemption of our public shares, we may use the balance of the cash released to us from the trust account following the closing for general corporate purposes, including for maintenance or expansion of operations of the post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital. In addition, we may be required to obtain additional financing in connection with the closing of our initial business combination to be used following the closing for general corporate purposes as described above.

 

There is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances or other indebtedness in connection with our initial business combination, including pursuant to forward purchase agreements or backstop agreements we may enter into following consummation of this offering. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise. None of our sponsors, officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination. We may also obtain financing prior to the closing of our initial business combination to fund our working capital needs and transaction costs in connection with our search for and completion of our initial business combination.

 

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Our second amended and restated certificate of incorporation, as amended, provides that, prior to the consummation of our initial business combination, we will be prohibited from issuing additional securities that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote as a class with our public shares (a) on any initial business combination or (b) to approve an amendment to our second amended and restated certificate of incorporation, as amended, to (x) extend the time we have to consummate a business combination or (y) amend the foregoing provisions, unless (in connection with any such amendment to our second amended and restated certificate of incorporation, as amended) we offer our public stockholders the opportunity to redeem their public shares.

 

Our sponsor, Canna-Global LLC, is a Delaware limited liability company. Our sponsor currently beneficially owns 5,650,000 shares of our Class B common stock and 802,500 Private Placement Units. Our sponsor is controlled by one or more non-U.S. persons. While we do believe that our sponsor may constitute a “foreign person” under CFIUS rules and regulations, we do not believe any future initial business combination between us and a target company would be subject to CFIUS review in view of the asset class in which we seek to complete a business combination. If, however, our future business combination does fall within the scope of applicable foreign ownership restrictions, we may be unable to consummate the business combination so we may be required to seek other potential targets. The pool of potential targets with which we could complete an initial business combination may be limited as a result of any such regulatory restriction. Moreover, the process of any government review, whether by CFIUS or otherwise, could be lengthy, which could delay our ability to close our initial business combination within the requisite time period, which means we may be required to liquidate. If we make a mandatory filing or determine to submit a voluntary notice to CFIUS, or proceed with the business combination without notifying CFIUS, we risk CFIUS intervention, before or after closing the business combination.

 

Financial Position

 

With funds available in the trust account in the amount of $12,304,455 as of December 31, 2023 for an initial business combination (or $4,254,455 after payment of $8,050,000 of deferred underwriting fees), we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.

 

Effecting our Initial Business Combination

 

We will have until the Termination Date to consummate our initial business combination unless extended by the Company’s stockholders in accordance with the first amendment to our second amended and restated certificate of incorporation.

 

In the event that our sponsor elects to extend the time to complete a business combination and deposits the applicable amount into the trust account, as it has done for the first five monthly extensions of the Termination Date, it will receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that we are unable to close a business combination unless there are funds available outside the trust account to do so. Such notes would either be paid upon consummation of our initial business combination, or, at the relevant insider’s discretion, converted upon consummation of our business combination into additional placement units at a price of $10.00 per unit. Our stockholders have approved the issuance of the placement units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of our initial business combination.

 

Our sponsor is not obligated to fund the trust account to extend the time for us to complete our initial business combination. If we are unable to consummate our initial business combination by the Termination Date, we will, as promptly as possible but not more than ten business days thereafter, redeem 100% of our outstanding public shares for a pro rata portion of the funds held in the trust account, including a pro rata portion of any interest earned on the funds held in the trust account and not previously released to us to pay our taxes, and then seek to dissolve and liquidate. However, we may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders. In the event of our dissolution and liquidation, the placement units will expire and will be worthless. The public stockholders will not be able to vote on or redeem their public shares in connection with any such extensions.

 

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We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time. We intend to effectuate our initial business combination using cash from the proceeds of the IPO, the private placement of the placement units, our equity, debt or a combination of these as the consideration to be paid in our initial business combination. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.

 

If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.

 

We have not currently selected any business combination target. Accordingly, there is no current basis for investors to evaluate the possible merits or risks of the target business with which we may ultimately complete our initial business combination. Although our management will assess the risks inherent in a particular target business with which we may combine, we cannot assure you that this assessment will result in our identifying all risks that a target business may encounter. Furthermore, some of those risks may be outside of our control, meaning that we can do nothing to control or reduce the chances that those risks will adversely affect a target business.

 

We may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public shares upon completion of the initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. There are no prohibitions on our ability to issue securities or incur debt in connection with our initial business combination. We are not currently a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities, the incurrence of debt or otherwise.

 

Sources of Target Businesses

 

Our process of identifying acquisition targets will leverage our sponsor and our management team’s industry experiences, proven deal sourcing capabilities and broad and deep network of relationships in numerous industries, including executives and management teams, private equity groups and other institutional investors, large business enterprises, lenders, investment bankers and other investment market participants, restructuring advisers, consultants, attorneys and accountants, which we believe should provide us with a number of business combination opportunities. We expect that the collective experience, capability and network of our sponsor, our directors and officers, combined with their individual and collective reputations in the investment community, will help to create prospective business combination opportunities.

 

In addition, we anticipate that target business candidates may be brought to our attention from various unaffiliated sources, including investment bankers and private investment funds. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read our prospectus filed with the SEC and know what types of businesses we are targeting. Our officers and directors, as well as their respective affiliates, may also bring to our attention target business candidates of which they become aware through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions.

 

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We also expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction; in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation by the Company prior to, or for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). None of our sponsor, executive officers or directors, or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated acquisition of such target by us.

 

We are not prohibited from pursuing an initial business combination with a business that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a business that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, will obtain an opinion from either an independent investment banking firm that is a member of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view. Furthermore, in the event that we seek such a business combination, we expect that the independent members of our board of directors would be involved in the process for considering and approving the transaction.

 

Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities, including entities that are affiliates of our sponsor, pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Delaware law.

 

Evaluation of a Target Business and Structuring of our Initial Business Combination

 

Nasdaq rules require that we consummate an initial business combination with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the trust account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions). The fair market value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able to independently determine the fair market value of our initial business combination (including with the assistance of financial advisors), we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operation.

 

In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be valued for purposes of the 80% of fair market value test. There is no basis for investors in this offering to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.

 

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To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.

 

In evaluating a prospective target business, we expect to conduct a thorough due diligence review, which will encompass, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as well as a review of financial, operational, legal and other information which will be made available to us. If we determine to move forward with a particular target, we will proceed to structure and negotiate the terms of the initial business combination transaction.

 

The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of, and negotiation with, a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination. The Company will not pay any consulting fees to members of our management team, or any of their respective affiliates, for services rendered to or in connection with our initial business combination.

 

Lack of Business Diversification

 

For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. By completing our initial business combination with only a single entity, our lack of diversification may:

 

  ● subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination; and
     
  ● cause us to depend on the marketing and sale of a single product or limited number of products or services.

 

Limited Ability to Evaluate the Target’s Management Team

 

Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.

 

We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination. Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.

 

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Stockholders May Not Have the Ability to Approve our Initial Business Combination

 

We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC subject to the provisions of our second amended and restated certificate of incorporation, as amended. However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek stockholder approval for business or other reasons.

 

Type of Transaction   Whether
Stockholder
Approval is
Required
Purchase of assets   No
Purchase of stock of target not involving a merger with the company   No
Merger of target into a subsidiary of the company   No
Merger of the company with a target   Yes

 

Under Nasdaq’s listing rules, stockholder approval would be required for our initial business combination if, for example:

 

  ● we issue shares of common stock that will be equal to or in excess of 20% of the number of our shares of common stock then outstanding (other than in a public offering);
     
  ● any of our directors, officers or substantial stockholders (as defined by the Nasdaq rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in outstanding common stock or voting power of 5% or more; or
     
  ● the issuance or potential issuance of common stock will result in our undergoing a change of control.

 

The decision as to whether we will seek stockholder approval of a proposed business combination in those instances in which stockholder approval is not required by law will be made by us, solely in our discretion, and will be based on business and legal reasons, which include a variety of factors, including, but not limited to:

 

  ● the timing of the transaction, including in the event we determine stockholder approval would require additional time and there is either not enough time to seek stockholder approval or doing so would place the Company at a disadvantage in the transaction or result in other additional burdens on the Company;
     
  ● the expected cost of holding a stockholder vote;
     
  ● the risk that the stockholders would fail to approve the proposed business combination;
     
  ● other time and budget constraints of the Company; and
     
  ● additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.

 

Permitted Purchases of Our Securities

 

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase public shares or public warrants in privately-negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares or warrants our initial stockholders, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination.

 

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Our insider trading policy requires insiders to: (i) refrain from purchasing our securities during certain blackout periods when they are in possession of any material non-public information and (ii) clear all trades of company securities with a compliance officer prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.

 

The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

 

Our sponsor, officers, directors and/or any of their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors or their affiliates may pursue privately-negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests tendered by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such stockholder has already submitted a proxy with respect to our initial business combination. Such persons would select the stockholders from whom to acquire shares based on the number of shares available, the negotiated price per share and such other factors as any such person may deem relevant at the time of purchase. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. Our sponsor, officers, directors, advisors or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.

 

Any purchases by our sponsor, officers, directors and/or their respective affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their respective affiliates will not make purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.

 

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Manner of Conducting Redemptions

 

We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirement or whether we were deemed to be a foreign private issuer (which would require a tender offer rather than seeking stockholder approval under SEC rules). Asset acquisitions and share purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our shares of outstanding common stock or seek to amend our second amended and restated certificate of incorporation, as amended, would require stockholder approval. We currently intend to conduct redemptions in connection with a stockholder vote unless stockholder approval is not required by applicable law or stock exchange listing requirement and we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or other reasons. So long as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with Nasdaq rules.

 

If we held a stockholder vote to approve our initial business combination, we will, pursuant to our second amended and restated certificate of incorporation, as amended:

 

  ● conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and
     
  ● file proxy materials with the SEC.

 

In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.

 

If we submit our initial business combination to our public stockholders for a vote, we will complete our initial business combination only if a majority of the outstanding shares of common stock present and entitled to vote at the meeting to approve the initial business combination are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our sponsor, officers, directors, and director nominees will count towards this quorum. Our sponsor, officers, directors, and director nominees have agreed to vote their founder shares and any public shares purchased during or after this offering in favor of our initial business combination. These quorum and voting thresholds, and the voting agreements of our sponsor, officers, directors, and director nominees may make it more likely that we will consummate our initial business combination. Additionally, each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction, or abstained from voting. Public stockholders will not be offered the opportunity to vote on or redeem their shares in connection with any extension of the period to complete our initial business combination.

 

The quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will complete our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction or whether they were a stockholder on the record date for the stockholder meeting held to approve the proposed transaction. In addition, our sponsor, directors and each member of our management, have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares, including with respect to any shares obtained through the placement units, held by them in connection with (i) the completion of a business combination and (ii) a stockholder vote to approve an amendment to our second amended and restated certificate of incorporation, as amended, that would affect the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we have not completed an initial business combination within the period to consummate the initial business combination.

 

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If, however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other reasons, we will, pursuant to our second amended and restated certificate of incorporation, as amended:

 

  ● conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and
  ● file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.

 

Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act. In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than the number of public shares we are permitted to redeem. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.

 

Our second amended and restated certificate of incorporation, as amended, will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement pursuant to an agreement relating to our initial business combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of our Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of our Class A common stock submitted for redemption will be returned to the holders thereof.

 

Limitation on Redemption upon Completion of Our Initial Business Combination If We Seek Stockholder Approval

 

Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our second amended and restated certificate of incorporation, as amended, will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to the Excess Shares. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms.

 

Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in the IPO could threaten to exercise its redemption rights if such holder’s shares are not purchased by us, our sponsor or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in the IPO without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.

 

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Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights

 

Public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” will be required to either tender their certificates (if any) to our transfer agent prior to the date set forth in the proxy solicitation or tender offer materials, as applicable, mailed to such holders, or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/ Withdrawal At Custodian) System, at the holder’s option, in each case up to two business days prior to the initially scheduled vote to approve the initial business combination. The proxy solicitation or tender offer materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate the applicable delivery requirements, which will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two days prior to the initial vote on the initial business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short period in which to exercise redemption rights, it is advisable for stockholders to use electronic delivery of their public shares.

 

There is a nominal cost associated with the above-referenced 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 a fee of approximately $80.00 and it would be up to the broker whether to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.

 

The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial business combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the initial business combination was approved, the Company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the initial business combination during which he or she could monitor the price of the Company’s shares in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the Company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the general meeting, would become “option” rights surviving past the completion of the initial business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the initial business combination is approved.

 

Any request to redeem such shares, once made, may be withdrawn at any time up to two business days prior to the vote on the proposal to approve the initial business combination, unless otherwise agreed to by us. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.

 

If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares. If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different target until the Termination Date.

 

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Redemption of Public Shares and Liquidation if no Initial Business Combination

 

Our second amended and restated certificate of incorporation, as amended, provides that we will have until the Termination Date to complete our initial business combination. If we are unable to complete our business combination within such period, we 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 the 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 us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

  

There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our business combination by the Termination Date. In the event that our sponsor elects to extend the time to complete a business combination and deposits the applicable amount into the trust account, as it has done for the first five monthly extensions of the Termination Date, it will receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that we are unable to close a business combination unless there are funds available outside the trust account to do so. Such notes would either be paid upon consummation of our initial business combination, or, at the relevant insider’s discretion, converted upon consummation of our business combination into additional placement units at a price of $10.00 per unit. Our stockholders have approved the issuance of the placement units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of our initial business combination.

 

Our stockholders have approved the issuance of the placement units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of our initial business combination. Our sponsor is not obligated to fund the trust account to extend the time for us to complete our initial business combination. The public stockholders will not be able to vote on or redeem their public shares in connection with any such extensions.

 

Our sponsor, directors and each member of our management have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to their founder shares if we do not complete an initial business combination within the period to consummate the initial business combination including with respect to any shares obtained through the placement units. However, if our sponsor, directors or members of our management team acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we do not complete an initial business combination within the period to consummate the initial business combination.

 

Our sponsor, executive officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our second amended and restated certificate of incorporation, as amended, that would affect the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete an initial business combination within the period to consummate the initial business combination, unless we provide our public stockholders with the opportunity to redeem their public shares upon approval of any such amendment 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 us to pay our taxes, if any divided by the number of the then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement, we would not proceed with the amendment or the related redemption of our public shares at such time. This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, any executive officer, director or director nominee, or any other person.

 

We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $743 of proceeds held outside the trust account plus up to $100,000 of funds from the interest on the trust account available to us to pay dissolution expenses, although we cannot assure you that there will be sufficient funds for such purpose.

 

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If we were to expend all of the net proceeds of this offering the sale of the placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.15. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.15. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.

 

Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver.

 

The underwriters will not execute agreements with us waiving such claims to the monies held in the trust account. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. In order to protect the amounts held in the trust account, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us (other than our independent registered public accounting firm), or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i) $10.15 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.15 per unit, due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our taxes, if any, provided that such liability will not apply to any claims by a third party or prospective target business that executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act.

 

In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy their indemnity obligations and we believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

 

In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.15 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.15 per unit, due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, if any, and our sponsor asserts that they are unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.15 per unit.

 

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We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act.

 

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within the period to consummate the initial business combination may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.

 

Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within the period to consummate the initial business combination, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we do not complete our initial business combination within the period to consummate the initial business combination, we 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 the 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 that may be released to us to pay our taxes, if any (less up to $100,000 of interest to pay taxes and if needed, dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 18th month and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

 

Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.15 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.

 

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If we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy or insolvency law and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.15 per unit to our public stockholders. Additionally, if we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy or insolvency laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy or insolvency court could seek to recover some, or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.

 

Our public stockholders will be entitled to receive funds from the trust account only (i) in the event of the redemption of our public shares if we do not complete an initial business combination within the period to consummate the initial business combination, (ii) in connection with a stockholder vote to amend our second amended and restated certificate of incorporation, as amended, (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete an initial business combination within the period to consummate the initial business combination or (B) with respect to any other provisions relating to the rights of holders of our Class A common stock, or (iii) if they redeem their respective shares for cash upon the completion of the initial business combination. Public stockholders who redeem their Class A common stock in connection with a stockholder vote described in clause (ii) in the preceding sentence shall not be entitled to funds from the trust account upon the subsequent completion of an initial business combination or liquidation if we have not completed an initial business combination within the period to consummate the initial business combination, with respect to such shares of our Class A common stock so redeemed. In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the initial business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights described above. These provisions of our amended and restated certificate of incorporation, like all provisions of our second amended and restated certificate of incorporation, as amended, may be amended with a stockholder vote.

 

Competition

 

In identifying, evaluating and selecting a target business for our initial business combination, we may encounter competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, public companies and operating businesses seeking strategic business combinations. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.

 

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Employees

 

We currently have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters, but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the initial business combination process we are in. We do not intend to have any full-time employees prior to the completion of our initial business combination.

 

Periodic Reporting and Financial Information

 

Our Class A common stock and warrants are registered under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports contain financial statements audited and reported on by our independent registered public accounting firm.

 

We will provide stockholders with audited financial statements of the prospective target business as part of the proxy solicitation or tender offer materials, as applicable, sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements may be required to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have financial statements prepared in accordance with the requirements outlined above, or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.

 

We are required to evaluate our internal control procedures for the fiscal year ending December 31, 2023, as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to have our internal control procedures audited. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.

 

We have filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are 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, reduced disclosure obligations regarding executive compensation in our 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 our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

 

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In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

 

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates equals or exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

Item 1A. Risk Factors

 

As a smaller reporting company, we are not required to include risk factors in this Report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:

 

  ● our sponsor being controlled by one or more non-U.S. persons, which may result in us being deemed a “foreign person” under the regulations relating to the Committee on Foreign Investment in the United States and our failure to obtain any required approvals within the requisite time period may require us to liquidate;
     
  ● early stage company without an operating history;
     
  ● lack of opportunity to vote on our proposed business combination;
     
  ● lack of protections afforded to investors of blank check companies;
     
  ● issuance of equity and/or debt securities to complete a business combination;
     
  ● lack of working capital;
     
  ● third-party claims reducing the per-share redemption price;
     
  ● negative interest rate for securities in which we invest the funds held in the trust account;
     
  ● our stockholders being held liable for claims by third parties against us;
     
  ● failure to enforce our sponsor’s indemnification obligations;
     
  ● the ability of warrant holders to obtain a favorable judicial forum for disputes with our company;
     
  ● dependence on key personnel;

 

  ● conflicts of interest of our sponsor, officers and directors and the representative;
     
  ● the delisting of our securities by Nasdaq;
     
  ● dependence on a single target business with a limited number of products or services;
     
  ● shares being redeemed and warrants and rights becoming worthless;
     
  ● our competitors with advantages over us in seeking business combinations;
     
  ● ability to obtain additional financing;
     
  ● our initial stockholders controlling a substantial interest in us;
     
  ● warrants’ and founder shares’ adverse effect on the market price of our common stock;

 

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  ● disadvantageous timing for redeeming warrants;
     
  ● registration rights’ adverse effect on the market price of our common stock;
     
  ● impact of COVID-19 and related risks;
     
  ● business combination with a company located in a foreign jurisdiction;
     
  ● changes in laws or regulations; tax consequences to business combinations; and
     
  ● exclusive forum provisions in our amended and restated certificate of incorporation.

 

For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our Registration Statement.

 

Item 1B. Unresolved Staff Comments

 

Not applicable.

 

Item 2. Properties

 

Our executive offices are located at 4640 Admiralty Way, Suite 500, Marina Del Rey, California 90292 and our telephone number is (310) 496-5700. The cost for our use of this space is included in the $10,000 per month fee we pay to an affiliate of our sponsor for office space, administrative and shared personnel support services. We consider our current office space adequate for our current operations.

 

Item 3. Legal Proceedings

 

To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

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PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

  (a) Market Information

 

Our units, public shares and public warrants are each traded on Nasdaq under the symbols CNGLU, CNGL and CNGLW, respectively. Our units commenced public trading on November 30, 2021, and our public shares and public warrants commenced separate public trading on January 20, 2022.

 

  (b) Holders

 

As of April 16, 2024, there were two holders of record of our units, four holders of record of our shares of Class A common stock and one holder of record of our warrants.

 

  (c) Dividends

 

We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. The payment of any cash dividends subsequent to our initial business combination will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

 

  (d) Securities Authorized for Issuance Under Equity Compensation Plans.

 

None.

 

  (e) Recent Sales of Unregistered Securities

 

As previously disclosed on Form 8-K filed with the SEC on December 2, 2021, on November 30, 2021, simultaneously with the consummation of the IPO, the Company completed a private placement of an aggregate of 802,500 units at a price of $10.00 per placement unit, generating total gross proceeds of $8,025,000. The placement units are identical to the units sold as part of the public units in the IPO, except as described in the Company’s S-1 Registration Statement, including in part that the initial purchasers agreed not to transfer, assign or sell any of the placement units or underlying securities (except in limited circumstances, as described in the S-1 Registration Statement) until the completion of the Company’s initial business combination.

 

Such initial purchasers were granted certain demand and piggyback registration rights in connection with the purchase of the placement units. The placement units were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions did not involve a public offering. If the placement units are held by holders other than the Sponsor or their respective permitted transferees, the placement units will be redeemable by the Company under all redemption scenarios and exercisable by holders on the same basis as the public warrants. The placement units were issued pursuant to, and are governed by the warrant agreement.

 

  (f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

  (g) Use of Proceeds from the Initial Public Offering

 

On November 30, 2021, the Company consummated its initial public offering of 23,000,000 units, including 3,000,000 units issued on December 2, 2021 pursuant to the exercise of the underwriters’ over-allotment option in full. Each unit consists of one public share and one public warrant, with each whole public warrant entitling the holder thereof to purchase one public share for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $230,000,000.

 

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A total of $233,450,000 of the proceeds from the initial public offering (which amount includes $3,450,000 of the underwriters’ deferred discount) and the sale of the private placement units, was placed in a U.S.-based trust account at J.P. Morgan Securities LLC, maintained by Continental, acting as trustee. The proceeds held in the trust account may be invested by the trustee only in U.S. government securities with a maturity of 180 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act.

 

Item 6. Reserved.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

References in this Report to “we,” “us” or the “Company” refer to Canna-Global Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Canna-Global, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Special Note Regarding Forward-Looking Statements

 

This Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements other than statements of historical fact included in Report, including statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to Item 1.A Risk Factors. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

 

Overview

 

We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds our IPO and the private placement of the placement units, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to backstop agreements we may enter into), shares issued to the owners of a target, debt issued to banks or other lenders or the owners of a target, or a combination of the foregoing.

 

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The issuance of additional shares of common stock in connection with an initial business combination to the owners of a target or other investors:

 

  ● may significantly dilute the equity interest of investors in our IPO, which dilution would increase if the anti-dilution provisions in the insider shares resulted in the issuance of common stock on a greater than one-to-one basis;
  ● may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;
  ● could cause a change in control if a substantial number of shares of our common stock is 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;
  ● may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
  ● may adversely affect prevailing market prices for our common stock and/or rights.

 

Similarly, if we issue debt securities or otherwise incur significant debt to banks or other lenders or the owners of a target, it could result in:

 

  ● 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 security is payable on demand;
  ● our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
  ● our inability to pay dividends on our 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 common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund 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;
  ● limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and
  ● other purposes and other disadvantages compared to our competitors who have less debt.

 

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initial business combination will be successful.

 

Results of Operations

 

We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary in connection with our IPO, as described below, and identifying a target for our initial business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generated non-operating income in the form of interest income on marketable securities held in the Trust Account of $1,196,903 for the year ended December 31, 2023. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing our initial business combination and have a net loss of $348,229 for the year ended December 31, 2023. For the year ended December 31, 2022, we generated interest income on marketable securities held in the Trust Account of $2,772,773. We incur expenses for formation and operating expenses in connection with business combination and had net income of $1,159,838.

 

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Liquidity and Capital Resources

 

On November 30, 2021, we consummated our IPO of 20,000,000 Units, at a price of $10.00 per unit, generating gross proceeds of $200,000,000. Simultaneously with the closing of the IPO, pursuant to the Unit Subscription Agreement, the Company completed the private sale of 712,500 placement units to the Sponsor at a purchase price of $10.00 per placement unit, generating gross proceeds to the Company of $7,125,000.

 

Following our IPO, the Underwriters exercised their over-allotment option in full, and the closing of the issuance and sale of the additional 3,000,000 Units (the “Over-Allotment Units”) occurred also on December 2, 2021, generating gross proceeds of $30,000,000. In connection with the closing of the purchase of the Over-Allotment Units, the Company sold an additional 90,000 placement units to the Sponsor at a price of $10.00 per placement unit, generating an additional $900,000 of gross proceeds. We incurred transaction costs in the IPO with the exercise of the overallotment totaling $15,335,300, consisting of $3,450,000 of cash underwriting fees, $8,050,000 of deferred underwriting fees, $3,450,000 funded to the trust account and $385,300 of other costs related to the IPO.

 

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less deferred underwriting commissions), to complete our initial business combination. We may withdraw interest to pay taxes. We estimate our annual franchise tax obligations, based on the number of shares of our common stock currently authorized and outstanding, to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from the IPO held outside of the trust account or from interest earned on the funds held in our trust account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

 

Prior to the completion of our initial business combination, we will have available to us the approximately $743 of proceeds held outside the trust account. We will use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.

 

In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our CEO or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest bearing basis as may be required. If we complete our initial business combination, we will repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment.

 

Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination. The units would be identical to the placement units. Other than as described above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our CEO as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

 

We expect our primary liquidity requirements during that period to include approximately $350,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; $60,000 for legal and accounting fees related to regulatory reporting requirements; $120,000 for office space, utilities and secretarial and administrative support; $150,000 for Director and Officer liability insurance premiums; and approximately $20,000 for working capital that will be used for miscellaneous expenses and reserves.

 

These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.

 

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We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of the IPO and the sale of the placement units, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

 

Going Concern

 

In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have until the Termination Date to consummate a business combination. It is uncertain that we will be able to consummate a business combination by this time. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern.

 

Off-Balance Sheet Financing Arrangements

 

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

 

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 an affiliate of our Sponsor a monthly fee of $10,000 for office space, utilities and administrative support provided to the Company.

 

We had a consulting agreement to pay Jonathan Combs a monthly fee of $7,000 for consulting service provided to the Company. We began incurring these fees after November 30, 2021 and the agreement has been terminated since April 2023. For the year ended December 31, 2023, $21,000 had been paid to him under the agreement.

 

The underwriter is entitled to a deferred fee of $0.15 per unit ($3,450,000 as the underwriters’ over-allotment option was exercised in full) in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.

 

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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 not identified any critical accounting policies.

 

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our condensed financial statements.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

Through December 31, 2023, our efforts have been limited to organizational activities, activities relating to our initial public offering and since the initial public offering, the search for a target business with which to consummate an initial business combination. We have engaged in limited operations and have not generated any revenues. We have not engaged in any hedging activities since our inception on April 12, 2021. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.

 

The net proceeds of the initial public offering and the sale of the private placement warrants held in the trust account at Morgan Stanley, maintained by Continental, acting as trustee, have been invested in U.S. government treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

 

Item 8. Financial Statements and Supplementary Data.

 

This information appears following Item 15 of this Report and is incorporated herein by reference.

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.

 

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 

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Management’s Report on Internal Controls over Financial Reporting

 

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

 

  (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,
  (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
  (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting on December 31, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2023, due to the material weakness in our internal controls due to inadequate segregation of duties within account processes due to limited personnel and insufficient written policies and procedures for accounting, IT, and financial reporting and record keeping.

 

Management intends to implement remediation steps to improve our internal controls due to inadequate segregation of duties within account processes due to limited personnel and insufficient written policies and procedures for accounting, IT, and financial reporting and record keeping. We plan to further improve this process by enhancing the size and composition of our board upon the closing of the business and to identify third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals and implemented additional layers of reviews in the financial close process.

 

This Report does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

Not applicable.

 

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PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Directors and Executive Officers

 

As of the date of this Report, our founder, officers and directors are as follows:

 

Name   Age   Position
J. Gerald Combs   74   Chief Executive Officer and Director
Sharwin Sinnan   40   Chief Financial Officer and Director
Subramaniam Thavaraj   71   Director, Chairperson of the Board’s Compensation Committee, Member of the Board’s Governance and Nomination Committee and Member of the Board’s Audit Committee
Christine Cho   63   Director, Chairperson of the Board’s Audit Committee and Member of the Board’s Compensation Committee
Kah Yong Tham   68   Director, Chairperson of the Board’s Governance and Nomination Committee, Member of the Board’s Audit Committee and Member of the Board’s Compensation Committee

 

J. Gerald (Gerry) Combs brings more than 30 years of investment management, manufacturing, finance and legal experience in various roles to his role as Chief Executive Officer and Director of the company. Mr. Combs has assisted clients in all phases of business development from business plan to their initial public offerings on Nasdaq and NYSE. His experience spans a wide range of companies from manufacturing and distribution to software and high tech where he has handled the corporate interaction with the research analyst community and individual market makers, and has deep experience negotiating with investment and commercial banks for both equity and debt financing as well as bringing significant public company experience. Currently, Mr. Combs also serves as chief executive officer of CASH International Asset Management Limited (CIAM) since 2018. Headquartered in Hong Kong, CIAM is a subsidiary of Celestial Asia Securities Holdings Limited, a global asset management company specializing in an array of active, return-oriented investment strategies. Previously, Mr. Combs served as a senior investment banker with the parent of CIAM, CASH Financial Services Group in Hong Kong where he handled U.S. relationships since 2004.

 

Since February 2010, Mr. Combs has also served as the CEO of Jerald Capital Corp, an investment banking firm. From 1997 to 2004, Mr. Combs served as SunRiver Corp’s chairman and chief executive officer. SunRiver Corp is the parent company of Boundless Technologies, which makes network computers. From 1992 to 1997, Mr. Combs served as President and chief executive officer New York-based financial consultancy Merrico Corp.

 

From 1985 to 1992, he served as Chairman and Chief Executive Officer of Merrico Corporation, a privately held financial consulting firm. In October 1975, he began his business career at the investment banking firm of Salomon Brothers, where his responsibilities included mergers and acquisitions, initial public offerings, secondary offerings, and private placements. He earned his Bachelor of Arts degree from Northwestern University (1972) and received a Juris Doctorate (J.D.) from St. Louis University where he graduated with honors (1975).

 

Sharwin Sinnan serves as Chief Financial Officer and Director of Canna-Global Acquisition Corp where he brings nearly 20 years of sophisticated finance and accounting experience. Mr. Sinnan is the Founder of S23 Capital LLC and serves as the Portfolio Manager for Global Long/Short Equity – Tech, Media & Telecom, which operates S23 Capital Growth Fund since January 2013. The S23 Capital Growth Fund focuses on long- and short-equity investments in the technology sector with an annualized rate of return of 21% over a 9-year period in asset classes involving global communications infrastructure, U.S. tech/media to include global telecom, cable and data infrastructure (including semiconductors, supply chain and software) and created and maintain an in-house database of 150+ company operating models and projections. At S23 Capital LLC, Mr. Sinnan executes a highly concentrated long/short equity strategy, generating actionable investment ideas across a 3-to-5-year investment horizon and provide financial advisory services within network of clients and industry professionals; conducted due diligence on private and public transactions across industries including Cannabis, Technology, Real Estate, and Energy.

 

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Prior to S23 Capital, Mr. Sinnan served for more than three years as the Financial Officer for SJLT Group Pvt. Ltd in New York and Chennai, India from September 2009 to December 2012 for Manufacturing Conglomerate: Textiles & Granite where he spearheaded the development and initial operations of the U.S. business arm of a multinational conglomerate headquartered in Chennai, India. The company revenues increased 500% over a 3-year period under Mr. Sinnan’s leadership. During that time he worked closely with the CEO and developed and executed the business plan, led client and supplier negotiations and was responsible for all financial reporting including budgeting and projections. From July 2006 to August 2009, Mr. Sinnan worked for three years as a Financial Associate for TIAA-CREF in New York worked he worked as an analyst on a distressed work-out team, managing a portfolio consisting of domestic and international private and public securities, equity positions and commercial mortgages totaling $1 billion AUM, prepared valuation analysis of public and private companies, attended deal-specific investor relations meetings and industry conferences, correspondingly updated financial models for business decisions, and was responsible for the creation and presentation of weekly, monthly, and quarterly portfolio reports and deal specific tear-sheets. At TIAA-CREF, Mr. Sinnan worked closely with internal and external legal counsel, financial advisory, accounting, compliance, proprietary desks, trading, and risk departments; responsible for company material non-public information and was instrumental in the origination of a company-first distressed investing initiative; team allocated $100 million. Mr. Sinnan is a graduate of New York University: Leonard N. Stern School Of Business in 2006 with a Bachelor of Science in Finance & Accounting where he was a NYU Stern Scholar.

 

Subramaniam Thavaraj brings more than 40 years of health education and health promotion programs at the state, national and institutional levels to us; the first 40 years with the Malaysia’s Ministry of Health from 1978 to 2018 where he rose the ladder from a junior officer to become the first Director of the Institute for Behavioral Research which he pioneered in 2005 to become a member of the Board of Directors of the Malaysian Health Promotion Board from 2014 to 2017.

 

Since 2019, Mr. Thavaraj has served as a Partner with Messrs. Palany, Fairus & Adib Chambers, a registered law firm with the Bar Council of Malaysia. Before then, from 2012 through 2019, he served as a Law Associate with Messrs. Rejendra Palany Chambers, a registered law firm with the Bar Council of Kuala Lumpur. Since August 2012, Mr. Thavaraj has served as a part-time lecturer in the International Medical University Kuala Lumpur, teaching Health Promotion for the Master in Science program in Public Health, and Business Law, Company Law and Employment Law for the Anglia Ruskin University in FTMS College in Kuala Lumpur. He has conducted training in Labor Laws for the plantation sector, and Health Promotion for Master in Public Health Program in University of Malaysia Sarawak (UNIMAS).

 

During his years with Malaysia’s Ministry of Health, Mr. Thavaraj as Head of the Post-graduate Program in Health Education and Coordinator of the Master of Science Program in University Kebangsaan Malaysia (“UKM” or the National University of Malaysia), conducted training in Health Education and Health Promotion from 1994 to 2008. He can attribute the accreditation of this course by UKM in 1996 as his legacy. Mr. Thavaraj was the Principal Researcher for Behavioral Research among youths and specific groups in various communicable and chronic diseases. He was responsible for developing Risk Communication Training Manuals for Malaysia and Association of Southeast Asian Nations (“ASEAN”) countries, while conducting workshops, seminars and conferences for ASEAN countries in Risk Communication. Mr. Thavaraj pioneered health promotion campaigns in healthy lifestyle from 1989 to 1994 in Malaysia. He conducted behavioral research in healthy lifestyles and was involved in campaigns and research on healthy sexual behavior, HIV AIDS, lifestyle diseases, as well as in immunization programs for Rubella, Hepatitis B and childhood diseases.

 

Mr. Thavaraj reached the height of his profession as the ASEAN Consultant in Risk Communication from 2006 to 2008. He was attached to the Johns Hopkins University for three weeks in Disaster Management in 2003, and attended international meetings and seminars, and presented papers in Health Promotion and HIV AIDS in Vancouver 2006, and Manila in 1998. Mr. Thavaraj visited health agencies in various cities in the United States on a World Health Organization (WHO) Fellowship for Media Campaigns in 1991. He also visited the National Institute of Health (NIH) and Centers for Disease Control and Prevention (CDC), and public health agencies and universities in Canada to study behavioral research in 2006.

 

Mr. Thavaraj obtained a Bachelor of Science degree with Honors from University of Science, Malaysia (1977), a Master in Arts degree from the University of South Dakota (1992), and a Bachelor of Laws (LL.B) degree in 1996 in the United Kingdom and a Certificate in Legal Practice (Malaysia) in 1997.

 

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Dr. Stander is a graduate from the University of Pretoria in 2000 and he obtained a post-graduate qualification in Tropical Diseases and Travel Medicine at University of the Witwatersrand in 2004. He completed Fellowship training in Anti-ageing and Functional Medicine at the South African Association of Anti-Ageing and Integrative Medicine in 2012 as well as Advanced Stem Cell Therapy program at the American Academy for Anti-Aging Medicine in 2014. He is currently an advanced Fellowship program Pediatric Special Needs through the U.S.-based MedMAPs organization.

 

Christine Cho brings over 20 years of accounting experience with public and private companies in Malaysia and Singapore. From January 2019 to February 2022, Ms. Cho was a Director of Sales and Advisory at CTBC Bank in Singapore. Prior to that, Ms. Cho served as a Director and Client Advisor at Standard Chartered Bank in Singapore from December 2015 to January 2019 and as the Director for South East Asia operations at the Singapore branch of Coutts & Co. from December 2013 to December 2015. At these roles, Ms. Cho focused on strategic and holistic advisory to high net worth clients, advising on various asset classes and products in global markets. Prior to working at Coutts & Co, Ms. Cho was the Director and Founder of Private Banking at RHB Investment Bank in Malaysia from January 2007 to December 2013. There, Ms. Cho was responsible for the direction and profitability of Private Banking, with a focus on commercial viability, marketing, operational efficiency, product/service offerings and banking rules and regulations in Malaysia. Ms. Cho also has extensive experience as an Audit Manager, working for Ernst & Young in Malaysia from January 1980 to December 1987, including a secondment to the Los Angeles office of the company from October 1985 to September 1986.

 

Ms. Cho holds banking qualifications in Malaysia and Singapore and is a member of the Malaysian Institute of Accountants and the Malaysian Institute of Certified Public Accountants.

 

Kah Yong Tham brings nearly 40-year career in the banking industry, he has acquired wide variety of experience in credit evaluation, marketing, trade finance, fraud detection, as well as credit risk management. From April 2019 to January 2020, he served as Executive Director of Vortex Consolidated Berhad, an information technology public company listed on Bursa Malaysia, the Malaysian stock exchange.

 

From June 2011 to December 2017, Mr. Tham applied his strong experience in credit risk management at Malayan Banking Berhad, Malaysia’s largest banking group, to assist on a contract basis as a Credit Specialist from 2010 to 2017, to improve the bank’s assets quality for consumer mortgage loans and middle market lending to business enterprises, enhance the bank’s internal risk assessment processes, security documentation, and trade finance processing of documents, to filter out potential fictitious financing and timely asset remedial actions.

 

In 2004, Mr. Tham joined the Credit Operations Division of Public Bank Berhad as Director of Credit Approval and was subsequently promoted to Director of Credit Administration and Supervision where he remained until 2010, upon reaching the then mandatory retirement age of 55. In 1991, he was transferred to the bank’s subsidiary as its Chief Operating Officer for the factoring operations (domestic and international), reporting to the board of directors. Factoring operations requires an in-depth knowledge of business acumen and stringent credit appraisal to weed out potential frauds. Mr. Tham played this key role for 13 years with an impeccable record of achieving the yearly budget set by the board.

 

In 1983, Mr. Tham joined Public Bank Berhad as a Senior Officer in Credit Administration and Supervision for four years before assuming the post of Branch Manager until 1991. As Branch Manager, Mr. Tham’s key responsibilities were the overall profitability in deposits, loans growth and asset quality. Prior to that, he was with Koperasi Serbaguna Malaysia Berhad, a licensed and regulated public cooperative as Deputy General Manager (Loans), where his main job was to formulate operating policies on loans to its members as well as general office administration. Mr. Tham started his career in 1979 with a member bank of United Overseas Bank Group, Malaysia, as Credit Officer where he remained until 1982, as Assistant Branch Manager. He is experienced in all aspects of branch banking operations, including credit processing for consumer and business loans. He graduated from University Malaya in 1979 with a Bachelor of Economics, majoring in Business Administration.

 

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Number and Terms of Office of Officers and Directors

 

We have five directors. Our board of directors is divided into three classes, with only one class of directors being elected in each year and with each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term.

 

The term of office of the first class of directors, consisting of Christine Cho and Kah Yong Tham, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Subramaniam Thavaraj, will expire at our second annual meeting of the stockholders. The term of office of the third class of directors, consisting of J. Gerald Combs and Sharwin Sinnan, will expire at our third annual meeting of stockholders.

 

We may not hold an annual meeting of stockholders until after we complete our initial business combination. Prior to the completion of an initial business combination, any vacancy on the board of directors may be filled by a nominee chosen by holders of a majority of our founder shares. In addition, prior to the completion of an initial business combination, holders of a majority of our founder shares may remove a member of the board of directors for any reason. Pursuant to an agreement to be entered into concurrently with the issuance and sale of the securities in this offering, our sponsor, upon completion of an initial business combination, will be entitled to nominate individuals for election to our board of directors, as long as our sponsor holds any securities covered by the registration rights agreement.

 

Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to nominate persons to the offices set forth in our second amended and restated certificate of incorporation, as amended, as it deems appropriate. Our second amended and restated certificate of incorporation, as amended, provides that our officers may consist of one or more chairman of the board of directors, chief executive officer, president, chief financial officer, vice presidents, secretary, treasurer and such other offices as may be determined by the board of directors.

 

Director Independence

 

Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the Company or its subsidiaries or any other individual having a relationship which in the opinion of the Company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. We have “independent directors,” as defined in Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.

 

Committees of the Board of Directors

 

Our board of directors have three standing committees: an audit committee, a compensation committee and a corporate governance and nominating committee. Subject to phase-in rules and a limited exception, the rules of Nasdaq and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors. Subject to phase-in rules and a limited exception, the rules of Nasdaq require that the compensation committee of a listed company be comprised solely of independent directors.

 

Audit Committee

 

We have established an audit committee of the board of directors. Christine Cho, Kah Yong Tham and Subramaniam Thavaraj serve as members of our audit committee. Our board of directors has determined that each Christine Cho, Kah Yong Tham and Subramaniam Thavaraj meet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act. Christine Cho serves as the chairman of the audit committee. Each member of the audit committee is financially literate, and our board of directors has determined that each of Christine Cho, Kah Yong Tham and Subramaniam Thavaraj qualifies as an “audit committee financial expert” as defined in applicable SEC rules. We have adopted an audit committee charter, which details the principal functions of the audit committee, including:

 

  ● appointing, compensating and overseeing our independent registered public accounting firm;
     
  ● reviewing and approving the annual audit plan for the Company;
     
  ● overseeing the integrity of our financial statements and our compliance with legal and regulatory requirements;

 

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  ● discussing the annual audited financial statements and unaudited quarterly financial statements with management and the independent registered public accounting firm;
     
  ● pre-approving all audit services and permitted non-audit services to be performed by our independent registered public accounting firm, including the fees and terms of the services to be performed;
     
  ● appointing or replacing the independent registered public accounting firm;
     
  ● establishing procedures for the receipt, retention and treatment of complaints (including anonymous complaints) we receive concerning accounting, internal accounting controls, auditing matters or potential violations of law;
     
  ● monitoring our environmental sustainability and governance practices;
     
  ● establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies;
     
  ● approving audit and non-audit services provided by our independent registered public accounting firm;
     
  ● discussing earnings press releases and financial information provided to analysts and rating agencies;
     
  ● discussing with management our policies and practices with respect to risk assessment and risk management;
     
  ● reviewing any material transaction between our Chief Financial Officer that has been approved in accordance with our Code of Ethics for our officers, and providing prior written approval of any material transaction between us and our President; and
     
  ● producing an annual report for inclusion in our proxy statement, in accordance with applicable rules and regulations.

 

The audit committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.

 

Compensation Committee

 

We have established a compensation committee of our board of directors. The members of our compensation committee are Subramaniam Thavaraj, Christine Cho and Kah Yong Tham. Subramaniam Thavaraj serves as chairman of the compensation committee. Under Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent directors. Our board of directors has determined that each of Subramaniam Thavaraj, Christine Cho and Kah Yong Tham is independent. We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:

 

  ● reviewing and approving corporate goals and objectives relevant to our President’s compensation, evaluating our President’s performance in light of those goals and objectives, and setting our President’s compensation level based on this evaluation;
     
  ● setting salaries and approving incentive compensation and equity awards, as well as compensation policies, for all other officers who file reports of their ownership, and changes in ownership, of the Company’s common stock under Section 16(a) of the Exchange Act (the “Section 16 Officers”), as designated by our board of directors;

 

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  ● making recommendations to the board of directors with respect to incentive compensation programs and equity-based plans that are subject to board approval;
     
  ● approving any employment or severance agreements with our Section 16 Officers;
     
  ● granting any awards under equity compensation plans and annual bonus plans to our President and the Section 16 Officers;
     
  ● approving the compensation of our directors; and
     
  ● producing an annual report on executive compensation for inclusion in our proxy statement, in accordance with applicable rules and regulations.

 

Notwithstanding the foregoing, as indicated above, other than the payment to an affiliate of our sponsor, of $10,000 per month until the Termination Date, for office space, utilities and secretarial and administrative support, no compensation of any kind, including finders or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. We had a consulting agreement to pay Jonathan Combs a monthly fee of $7,000 for consulting service provided to the Company. We began incurring these fees after November 30, 2021 and the agreement has been terminated since April, 2023. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.

 

The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.

 

Compensation Committee Interlocks and Insider Participation

 

None of our executive officers currently serves, and in the past year has not served, as a member of the compensation committee of any entity that has one or more executive officers serving on our board of directors.

 

Corporate Governance and Nominating Committee

 

We have established a corporate governance and nominating committee of our board of directors. The members of our corporate governance and nominating committee are Subramaniam Thavaraj and Kah Yong Tham. Kah Yong Tham serves as chairman of the corporate governance and nominating committee. Under the Nasdaq listing standards, we are required to have a corporate governance and nominating committee composed entirely of independent directors. Our board of directors has determined that each of Subramaniam Thavaraj and Kah Yong Tham is independent.

 

The primary function of the corporate governance and nominating committee include:

 

  ● identifying individuals qualified to become members of the board of directors and making recommendations to the board of directors regarding nominees for election;
     
  ● reviewing the independence of each director and making a recommendation to the board of directors with respect to each director’s independence;
     
  ● developing and recommending to the board of directors the corporate governance principles applicable to us and reviewing our corporate governance guidelines at least annually;
     
  ● making recommendations to the board of directors with respect to the membership of the audit, compensation and corporate governance and nominating committees;

 

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  ● overseeing the evaluation of the performance of the board of directors and its committees on a continuing basis, including an annual self-evaluation of the performance of the corporate governance and nominating committee;
     
  ● considering the adequacy of our governance structures and policies, including as they relate to our environmental sustainability and governance practices;
     
  ● considering director nominees recommended by stockholders; and
     
  ● reviewing our overall corporate governance and reporting to the board of directors on its findings and any recommendations.

 

Guidelines for Selecting Director Nominees

 

The guidelines for selecting nominees, which we have specified in our charter adopted by us, generally provide that potential candidate nominations:

 

  ● should possess personal qualities and characteristics, accomplishments and reputation in the business community;
     
  ● should have current knowledge and contacts in the communities in which we do business and, in our industry, or other industries relevant to our business;
     
  ● should have the ability and willingness to commit adequate time to the board of directors and committee matters;
     
  ● should demonstrate ability and willingness to commit adequate time to the board of directors and committee matters;
     
  ● should possess the fit of the individual’s skills and personality with those of other directors and potential directors in building a board of directors that is effective, collegial and responsive to our needs; and
     
  ● should demonstrate diversity of viewpoints, background, experience, and other demographics, and all aspects of diversity in order to enable the board of directors to perform its duties and responsibilities effectively, including candidates with a diversity of age, gender, nationality, race, ethnicity, and sexual orientation.

 

Each year in connection with the nomination of candidates for election to the board of directors, the corporate governance and nominating committee will evaluate the background of each candidate, including candidates that may be submitted by our stockholders.

 

Code of Ethics

 

We have adopted a Code of Ethics applicable to our directors, officers and employees. We have filed a copy of our Code of Ethics and our audit committee charter with the SEC. You are able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.

 

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Item 11. Executive Compensation.

 

Compensation Discussion and Analysis

 

None of our executive officers or directors have received any cash compensation for services rendered to us. In addition, our sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, executive officers or directors, or our or their respective affiliates. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than quarterly audit committee review of such reimbursements, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with our activities on our behalf in connection with identifying and completing an initial business combination. In addition, our sponsor has transferred 60,000 founder shares among our former Chief Executive Officer, to our former Chief Financial Officer and to each of our independent directors at their original purchase price pursuant to executed securities assignment agreements, effective as of July 23, 2021. On October 5, 2021, our sponsor assigned 40,000 founder shares to our new Chief Executive Officer and on April 6, 2022, our sponsor assigned 20,000 founder shares to our new Chief Financial Officer. On July 1, 2022, our sponsor assigned 1,000 founder shares to Christine Cho upon her appointment to our Board of Directors. The founder shares will be worthless if we do not complete an initial business combination. Other than these payments and reimbursements, no compensation of any kind, including finder’s and consulting fees, will be paid by the Company to our sponsor, executive officers and directors, or any of their respective affiliates, prior to completion of our initial business combination.

  

After the completion of our initial business combination, members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials or tender offer materials furnished to our stockholders in connection with a proposed business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our members of management. It is unlikely the amount of such compensation will be known at the time of the proposed business combination because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our executive officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.

 

We do not intend to take any action to ensure that members of our management team maintain their positions with us after the completion of our initial business combination, although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the completion of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.

 

The compensation committee has reviewed and discussed this Compensation Discussion and Analysis with management and, based upon its review and discussions, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Report.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth information regarding the beneficial ownership of our common stock as of April 16, 2024, based on information obtained from the persons named below, with respect to the beneficial ownership of common stock, by:

 

  ● each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
     
  ● each of our executive officers and directors that beneficially owns shares of common stock; and
     
  ● all our executive officers and directors as a group.

 

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In the table below, percentage ownership is based on 7,665,157 shares of our common stock, consisting of (i) 1,915,157 shares of Class A common stock, par value $0.000001 per share, issued and outstanding (including 1,112,657 shares subject to possible redemption) and (ii) 5,750,000 shares of our Class B common stock, issued and outstanding. On all matters to be voted upon, except for the election of directors of the board, holders of the shares of Class A common stock and shares of Class B common stock vote together as a single class. Currently, all of the shares of Class B common stock are convertible into Class A common stock on a one-for-one basis.

 

Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the private placement warrants as these warrants are not exercisable within 60 days of the date of this Report.

 

   Class A Common Stock   Class B Common Stock     
Name and Address of 7,665,157 Beneficial Owner(1)  Number of Shares Beneficially Owned(2)   Approximate Percentage of Class   Number of Shares Beneficially Owned(2)   Approximate Percentage of Class   Approximate Percentage of Outstanding Common Stock 
Canna-Global LLC(1)   802,500    41.9%   5,629,000    97.9%   83.9%
J. Gerald Combs   -    -    40,000    *    * 
Sharwin Sinnan   -    -    20,000    *    * 
Subramaniam Thavaraj   -    -    5,000    *    * 
Kah Yong Tham   -    -    5,000    *    * 
Christine Cho   -    -    1,000    *    * 
All executive officers and directors as a group (five (5) individuals)   -    -    76,000    *    * 
Westchester Capital Management, LLC(3)   134,020    7.0%   -    *    1.7%
Glazer Capital, LLC(4)   282,053    14.7%   -    *    3.7%

 

* Less than 1%
   
(1) Canna-Global LLC, our sponsor, is the record holder of the securities reported herein. The business address of each of these entities and individuals is 4640 Admiralty Way, Suite 500, Marina Del Rey, California 90292.
   
(2) Interests shown consist solely of founder shares, classified as shares of Class B common stock, as well as placement shares.
   
(3) Based on information available on Schedule 13G filed with SEC on February 14, 2023 filed jointly for Westchester Capital Management, LLC, a Delaware limited liability company, Westchester Capital Partners, LLC, a Delaware limited liability company and Virtus Investment Advisers, Inc., a Massachusetts corporation. Their business address is Westchester Capital Management, LLC, 100 Summit Drive, Valhalla, NY 10595.
   
(4) Based on information available on Schedule 13G filed with SEC on February 14, 2023 filed jointly for Glazer Capital, LLC, a Delaware limited liability company and Paul J. Glazer who serves as the Managing Member of Glazer Capital LLC. Their business address is 250 West 55th Street, Suite 30A, New York, New York 10019.

 

Securities Authorized for Issuance under Equity Compensation Table

 

None.

 

38

 

 

Changes in Control

 

None.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

On July 13, 2021, our sponsor paid an aggregate of $25,000, or approximately $0.004 per unit, in exchange for the issuance of 5,750,000 Class B founder shares, par value $0.000001. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares upon completion of this offering (excluding the placement units and underlying securities). Up to 750,000 founder shares held by our sponsor were subject to forfeiture by our sponsor depending on the extent to which the underwriters’ over-allotment option was exercised, which is no longer the case as they were exercised in full.

 

The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder. Our sponsor has transferred 60,000 founder shares among our former Chief Executive Officer, our former Chief Financial Officer and each of our independent directors at their original purchase price pursuant to executed securities assignment agreements, effective as of July 23, 2021. On October 5, 2021, our sponsor assigned 40,000 shares to our new Chief Executive Officer and on April 6, 2022, our sponsor assigned 20,000 founder shares to our new Chief Financial Officer. On July 1, 2022, our sponsor assigned 1,000 founder shares to Christine Cho upon her appointment to our Board of Directors.

 

On December 2, 2021, simultaneously with the closing of our initial public offering, our sponsor purchased an aggregate of 802,500 placement units at a purchase price of $10.00 per unit in a private placement for an aggregate purchase price of $8,025,000. There will be no redemption rights or liquidating distributions from the trust account with respect to the founder shares, placement shares or placement warrants, which will expire worthless if we do not consummate a business combination by the Termination Date. There will be no redemption rights or liquidating distributions from the trust account with respect to the founder shares, placement shares, placement warrants or placement rights, which will expire worthless if we do not consummate a business combination by the Termination Date.

 

We have agreed to pay Canna-Global LLC, our sponsor, a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.

 

No compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers or directors or any affiliate of our sponsor, officers or directors prior to, or in connection with any services rendered in order to effectuate, the consummation of an initial business combination (regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.

 

Prior to the closing of our initial public offering, our sponsor agreed to loan us up to $300,000 to be used for a portion of the expenses of our initial public offering. This loan was non-interest bearing, unsecured and due the earlier of (i) December 31, 2021, or (ii) the consummation of the Initial Public Offering. As of December 31, 2021, there was $154,288 outstanding under the Promissory Note. The Promissory Note was fully repaid on January 21, 2022 out of the offering proceeds that had been allocated to the payment of offering expenses (other than underwriting commissions).

 

In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest bearing basis as may be required. If we complete an initial business combination, we will repay such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination. The units would be identical to the placement units. Other than as described above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.

 

39

 

 

On November 10, 2022, our sponsor agreed to loan us up to $160,000 (in addition to the $30,000 in loans that the sponsor had loaned us in April 2022) to be used for working capital expenses. This loan was non-interest bearing, unsecured and due upon the consummation of the initial business combination. As of December 31, 2023, $644,560 is due under this working capital loan.

 

In connection with approval of the First Extension Amendment Proposal, the Company caused $0.045 per outstanding share of the Company’s Class A common stock, giving effect to the redemptions or approximately $106,622 for the remaining 2,369,370 Class A common stock to be deposited in the Trust Account in connection with the exercise of the first monthly extension of the Extended Date on November 30, 2022 in advance of the December 2, 2022 due date pursuant to the extension loans from the Company’s sponsor. As of December 31, 2023, $1,369,364 is due under the extension loans.

 

We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

 

After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.

 

The holders of the founder shares, representative shares, placement units, and units that may be issued upon conversion of working capital loans (and in each case holders of their component securities, as applicable) have (or will have) registration rights to require us to register a sale of any of our securities held by them pursuant to a registration rights agreement signed on November 30, 2021. These holders are entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by us.

 

We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.

 

Director Independence

 

Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that each of Subramaniam Thavaraj, Christine Cho and Kah Yong Tham is an “independent director,” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.

 

40

 

 

Item 14. Principal Accounting Fees and Services.

 

The following is a summary of fees paid or to be paid to MaloneBailey, LLP, for services rendered.

  

Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by MaloneBailey, LLP in connection with regulatory filings. The aggregate fees billed by MaloneBailey, LLP for professional services rendered for the audit of our annual financial statements, and other required filings with the SEC for the year ended December 31, 2023 and 2022, totaled $47,500 and $42,500, respectively. These amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.

 

Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay MaloneBailey, LLP for consultations concerning financial accounting and reporting standards for the years ended December 31, 2023 and December 31, 2022.

 

Tax Fees. We did not pay MaloneBailey, LLP for tax planning and tax advice for the year ended December 31, 2023. We paid MaloneBailey a total of $8,000 for tax planning and tax advice for the year ended December 31, 2022.

 

All Other Fees. We did not pay MaloneBailey, LLP other fees for the year ended December 31, 2023, or for the year ended December 31, 2022.

 

Pre-Approval Policy

 

Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).

 

PART IV

 

Item 15. Exhibits, Financial Statements and Financial Statement Schedules.

 

  (a) The following documents are filed as part of this Report:

 

(1) Financial Statements

 

    Page(s)
     
Report of MaloneBailey, LLP, Houston, TX (PCAOB ID 206)   F-1
     
Financial Statements:    
Balance Sheets   F-2
     
Statements of Operations   F-3
     
Statements of Changes in Stockholders’ Deficit   F-4
     
Statements of Cash Flows   F-5
     
Notes to the Financial Statements   F-6

 

(2) Financial Statements Schedule

 

All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes beginning on F-1 on this Report.

 

(3) Exhibits

 

We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected on the SEC website at sec.gov.

 

Item 16. Form 10-K Summary

 

Not applicable.

 

41

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Board of Directors of

Canna-Global Acquisition Corp.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Canna-Global Acquisition Corp. (the “Company”) as of December 31, 2023 and 2022, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Matter

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination within a prescribed period of time and if not completed will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company’s auditor since 2021.

Houston, Texas

April 16, 2024

 

F-1

 

 

Canna-Global Acquisition Corp

BALANCE SHEETS

 

  

December 31,

2023

  

December 31,

2022

 
         
ASSETS          
Current Assets          
Cash  $743   $54,476 
Accounts receivable   -    25,000 
Prepaid income tax   208,650    - 
Prepaid franchise tax   15,679    - 
Prepaid expenses   4,350    6,350 
Total Current Assets   229,422    85,826 
           
Cash and Marketable Securities held in trust account   12,304,455    24,599,703 
           
Total Assets  $12,533,877   $24,685,529 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Accounts payable  $1,155,832   $555,605 
Accrued expenses   80,000    20,000 
Franchise tax payable   -    206,719 
Income tax payable   -    231,252 
Working capital loan   644,560    190,000 
Extension loan   1,369,364    106,622 
Excise tax liability   137,430    - 
Total Current Liabilities   3,387,186    1,310,198 
           
Deferred underwriter commission   8,050,000    8,050,000 
           
Total Liabilities   11,437,186    9,360,198 
           
Commitments and Contingencies   -    - 
           
Class A common stock subject to possible redemption; 1,112,657 shares (at $11.06 per share) at December 31, 2023 and 2,369,370 shares ($10.38 per share) at December 31, 2022   12,304,455    23,019,232 
           
Stockholders’ Deficit          
Preferred Stock, $0.000001 par value; 2,000,000 shares authorized; none issued and outstanding   -    - 
Class A Common Stock, $0.000001 par value; 200,000,000 shares authorized; 860,000 issued and outstanding (excluding 1,112,657 and 2,369,370 shares subject to possible redemption as of December 31, 2023 and 2022, respectively)   1    1 
Class B common stock, $0.000001 par value; 20,000,000 shares authorized; 5,750,000 shares issued and outstanding   6    6 
           
Accumulated deficit   (11,207,771)   (7,693,908)
Total Stockholders’ Deficit   (11,207,764)   (7,693,901)
Total Liabilities and Stockholders’ Deficit  $12,533,877   $24,685,529 

 

The accompanying notes are an integral part of these financial statements.

 

F-2

 

 

Canna-Global Acquisition Corp

STATEMENTS OF OPERATIONS

 

  

For the

Year Ended

December 31, 2023

  

For the

Year Ended

December 31, 2022

 
         
Formation and operating costs  $(1,187,581)  $(1,174,964)
Franchise tax   (149,324)   (206,719)
Loss from Operations   (1,336,905)   (1,381,683)
           
Other Income          
Interest earned on marketable securities held in trust account   1,196,903    2,772,773 
Net Income (Loss) before income taxes  $(140,002)  $1,391,090 
Income tax expense   (208,227)   (231,252)
Net Income (Loss)  $(348,229)  $1,159,838 
           
Weighted average shares outstanding of Class A common stock   3,129,552    21,994,765 
Basic and diluted net income (loss) per common stock  $(0.04)  $0.04 
Weighted average shares outstanding of Class B common stock   5,750,000    5,750,000 
Basic and diluted net income (loss) per common stock  $(0.04)  $0.04 

 

The accompanying notes are an integral part of these financial statements.

 

F-3

 

 

Canna-Global Acquisition Corp

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2023, AND 2022

 

   Shares      Shares             
  

Class A

Common Stock

  

Class B

Common Stock

  

Additional

Paid in

   Accumulated  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
                             
Balance – December 31, 2022   860,000   $1    5,750,000   $6   $     -   $(7,693,908)  $    (7,693,901)
Extension Funds attributable to common stock subject to redemption   -    -    -    -    -    (1,262,742)   (1,262,742)
Remeasurement of common stock subject to redemption   -    -    -    -    -    (1,765,462)   (1,765,462)
Excise tax liability   -    -    -    -    -    (137,430)   (137,430)
Net Loss   -    -    -    -    -    (348,229)   (348,229)
Balance – December 31, 2023   860,000    1    5,750,000   $6    -    (11,207,771)  $(11,207,764)

 

  

Class A

Common Stock

  

Class B

Common Stock

  

Additional

Paid in

   Accumulated  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
                             
Balance – December 31, 2021   860,000   $1    5,750,000   $6   $         -   $(7,633,485)  $    (7,633,478)
Remeasurement of common stock subject to redemption   -    -    -    -    -    (1,113,639)   (1,113,639)
Extension Funds attributable to common stock subject to redemption   -    -    -    -    -    (106,622)   (106,622)
Net Income   -    -    -    -    -    1,159,838    1,159,838 
Balance – December 31, 2022   860,000   $1    5,750,000   $6    -    (7,693,908)   (7,693,901)

 

The accompanying notes are an integral part of these financial statements.

 

F-4

 

 

Canna-Global Acquisition Corp

STATEMENTS OF CASH FLOWS

 

  

For the

Year Ended

December 31, 2023

  

For the

Year Ended

December 31, 2022

 
Cash flows from operating activities:          
Net income (loss)  $(348,229)  $1,159,838 
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
           
Interest earned on marketable securities held in Trust Account   (1,196,903)   (2,772,773)
Changes in operating assets and liabilities:          
Accounts Receivable   25,000    - 
Prepaid expenses   2,000    73,576 
Account payable   600,226    555,605 
Accrued expenses   60,000    (10,000)
Franchise tax payable   (206,719)   124,402 
Franchise tax prepaid   (15,679)   - 
Income tax payable   (231,252)   231,252 
Income tax prepaid   (208,650)   - 
Net cash used in operating activities   (1,520,206)   (638,100)
           
Cash flows from investing activities:          
Cash withdraw from trust account in connection with redemption   13,742,981    211,651,029 
Cash withdrawn from Trust Account to pay taxes   1,011,913    80,000 
Investment of cash in Trust Account   (1,262,742)   (106,622)
Net cash provided by (used in) investing activities   13,492,152    (211,624,407)
           
Cash flows from financing activities:          
Redemption of Common Stock   (13,742,981)   (211,651,029)
Proceeds from working capital loan   454,560    106,622 
Proceeds from extension loan   1,262,742    190,000 
Repayment of promissory note - related party   -    (154,288)
Net cash used in financing activities   (12,025,679)   (211,508,695)
           
Net change in cash   (53,733)   (522,388)
Cash at the beginning of the period   54,476    576,864 
Cash at the end of the period  $743   $54,476 
           
Supplemental disclosure of non-cash investing and financing activities:          
Extension Funds attributable to common stock subject to redemption  $1,262,742   $106,622 
Re-measurement of common stock subject to redemption  $1,765,462   $1,113,639 
Excise tax liability  $137,430   $- 

 

The accompanying notes are an integral part of these financial statements.

 

F-5

 

 

CANNA-GLOBAL ACQUISITION CORP

NOTES TO FINANCIAL STATEMENTS

December 31, 2023

 

Note 1 — Description of Organization and Business Operations

 

Canna-Global Acquisition Corp (the “Company”) is a blank check company incorporated in Delaware on April 12, 2021. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or more businesses or entities (“Business Combination”). While the Company may pursue a business combination target in any business or industry, it intends to focus its search on industries that complement its management team’s background and to capitalize on the ability of its management team to identify and acquire a business focusing on the natural resources industry, specifically within the oil and gas sectors where its management team has extensive experience.

 

The Financing

 

As of December 31, 2023, the Company had not commenced any operations beyond its initial public offering and seeking an initial Business Combination. All activity for the period from April 12, 2021 (inception) through December 31, 2023 relates to the Company’s formation and the Offering (as defined below). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Offering. The Company has selected December 31 as its fiscal year end.

 

The Company’s sponsor is Canna-Global LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on November 29, 2021.

 

On November 30, 2021, the Company held its Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $200,000,000, which closed on December 2, 2022, incurring offering costs of $11,885,300, of which $8,050,000 was for deferred underwriting commissions (which amount includes deferred underwriting commissions attributable to the exercise of the underwriters’ election of their over-allotment option, as described below) (see Note 6). The Company granted the underwriter a 45-day option to purchase up to an additional 3,000,000 Units at the Initial Public Offering price to cover over-allotments.

 

Simultaneously with the consummation of the closing of the Offering, the Company consummated the private placement of an aggregate of 712,500 units (the “Private Placement Units”) to Canna-Global LLC, the sponsor of the Company (the “Sponsor”), at a price of $10.00 per Private Placement Unit, generating total gross proceeds of $7,125,000 (the “Private Placement”) (see Note 4).

 

F-6

 

 

Additionally, on December 2, 2021, the Company consummated the closing of the sale of 3,000,000 additional units at a price of $10.00 per unit (the “Units”) upon receiving notice of the underwriters’ election to fully exercise their overallotment option (“Overallotment Units”), generating additional gross proceeds of $30,000,000 and incurred additional offering costs of $450,000 in underwriting fees. Each Unit consists of one share of Class A common stock of the Company, par value $0.000001 per share (“Class A Common Stock”), and one redeemable warrant of the Company (“Warrant”), with each whole Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share, subject to adjustment, pursuant to the Company’s registration statement on Form S-1.

 

Simultaneously with the exercise of the overallotment, the Company consummated the Private Placement of an additional 90,000 Private Placement Units to the Sponsor generating gross proceeds of $900,000.

 

A total of $233,450,000, comprised of the proceeds from the Offering and the proceeds of private placements that each closed on December 2, 2021, net of the underwriting commissions, discounts, and offering expenses, was deposited in a trust account (“Trust Account”) which may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account to the Company’s stockholders, as described below.

 

We incurred transaction costs in the IPO with the exercise of the overallotment totaling $15,335,300, consisting of $3,450,000 of cash underwriting fees, $8,050,000 of deferred underwriting fees, $3,450,000 funded to the trust account and $385,300 of other costs related to the Initial Public Offering.

 

Trust Account

 

Following the closing of the Initial Public Offering and full exercise of underwriter’s over-allotment option, $853,288 of cash was held outside of the Trust Account available for working capital purposes. As of December 31, 2023, we have available to us $743 of cash on our balance sheet with a working capital deficit of $3,157,764.

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the signing of a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.

 

Redemption Option

 

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.

 

F-7

 

 

The Company will have until December 2, 2024 (the “Termination Date”) to consummate a Business Combination. If the Company is unable to complete a Business Combination by the Termination Date, the Company 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 the 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 us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following the Termination Date and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

 

Stockholder Approval

 

If stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder shares (as defined in Note 5) and any Public Shares purchased during or after the Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.

 

Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 20% of the Public Shares, without the prior consent of the Company.

 

The holders of the Founder Shares have agreed (a) to waive their redemption rights with respect to the Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.

 

Termination of the New Quantum Holdings Pty Ltd. Merger Agreement

 

On June 15, 2023, the Company entered into a definitive Bid Implementation and Business Combination Agreement (the “BIBCA Agreement”) with New Quantum Holdings Pty Ltd. (“New Quantum”) in connection with Canna-Global’s initial business combination. On October 16, 2023, the Company received written notice that New Quantum had terminated the BIBCA Agreement. As a result of the termination of the BIBCA Agreement, the BIBCA Agreement was of no further force and effect, and certain agreements entered into in connection with the BIBCA Agreement, were no longer in force or effect. Following the termination of the BIBCA Agreement, the Company continued to evaluate other possible business combination targets promptly though there can be no assurance these evaluations or efforts will result in a business combination transaction.

 

Charter Amendment and Termination Date

 

On November 30, 2021, Canna-Global consummated its IPO of 20,000,000 Units, pursuant to a registration statement on Form S-1 (Registration No. 333-258619) that became effective on November 29, 2021. The IPO included 3,000,000 Units issued pursuant to the full exercise by the underwriters of their over-allotment option, with each Unit consisting of one share of Class A common stock and one redeemable Warrant, with each Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share.

 

F-8

 

 

The Units were sold at a price of $10.00 per Unit, generating gross proceeds to Canna-Global of $200,000,000. Simultaneously with the closing of the IPO, Canna-Global completed the private sale of an aggregate of 802,500 Placement Units to the Sponsor at a purchase price of $10.00 per unit, generating gross proceeds of $8,025,000. A total of $233,450,000, comprised of $230,000,000 of the proceeds from the Canna-Global IPO (which amount includes $8,050,000 of the underwriter’s deferred discount) and a portion of the $8,025,000 proceeds of the sale of the Placement Units, was placed in the Trust Account.

 

The Company held a special meeting of its stockholders on November 28, 2022, where stockholders approved an amendment to the Trust Agreement pursuant to which the Trust Agreement was amended to extend the date on which the trustee must liquidate the Trust Account if the Company has not completed its initial business combination, from December 2, 2022 to December 2, 2023 provided that the Company deposits $0.045 per share of Canna-Global public Class A Common Stock per month extended (the “Extension Amendment Proposal”). Stockholders also approved the First Amendment to Canna-Global’s Second Amended and Restated Certificate of Incorporation, giving Canna-Global the right to extend the date by which it must consummate an initial business combination by up to twelve (12) one-month extensions to December 2, 2023. In connection with the voting on the Extension Amendment Proposal, holders of 20,630,630 shares of Canna-Global’s Class A common stock exercised their right to redeem those shares for cash at an approximate price of $10.26 per share, for an aggregate of approximately $211,651,029.

 

On December 1, 2023, the Company held a special meeting of its shareholders, in lieu of its 2023 annual meeting, in a virtual format pursuant to due notice (the “2023 Special Meeting”). At the 2023 Special Meeting, the Company shareholders entitled to vote at the 2023 Special Meeting cast their votes and approved the Trust Amendment Proposal, pursuant to which the Trust Agreement was amended to extend the date on which Continental must liquidate the Trust Account (the “Trust Account”) established in connection with the IPO if the Company has not completed its initial business combination, from December 2, 2023 by up to twelve (12) one-month extensions to December 2, 2024. In connection with the voting on the Extension Amendment Proposal and the Trust Amendment Proposal at the 2023 Special Meeting, holders of 1,256,713 shares of public Class A common stock exercised their right to redeem those shares for cash at an approximate price of $10.76 per share, for an aggregate payout of approximately $13,742,981.

 

Following the special meeting on December 1, 2023, Canna-Global deposited $44,506 or $0.040 per outstanding share of Canna-Global’s Class A common stock to the Trust Account to extend the Termination Date from December 2, 2023 to January 2, 2024.

 

In order to protect the amounts held in the Trust Account, our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than the independent public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.15 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.15 per public share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our Company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

 

The holders of the Founder Shares have agreed to waive their liquidation rights with respect to the Founder shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).

 

F-9

 

 

Liquidity and Management’s Plans

 

Prior to the completion of the Initial Public Offering, the Company lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. The Company has since completed its Initial Public Offering at which time capital in excess of the funds deposited in the Trust Account and/or used to fund offering expenses was released to the Company for general working capital purposes. There is no assurance that the Company’s plans to consummate an initial Business Combination will be successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Going Concern Consideration

 

The Company expects to incur significant costs in pursuit of its financing and acquisition plans. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unsuccessful in consummating an initial business combination within the prescribed period of time from the closing of the IPO, the requirement that the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. The balance sheet does not include any adjustments that might result from the outcome of this uncertainty. The accompanying financial statement has been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern.

 

Risks and Uncertainties

 

Management continues evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statement. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Note 2 — Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.

 

Emerging Growth Company

 

The Company is 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”), and 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, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

F-10

 

 

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. The Company 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, the Company, 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 the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value. The Company had $743 in cash and no cash equivalents as of December 31, 2023. The Company had $54,476 in cash and no cash equivalents as of December 31, 2022.

 

Marketable Securities Held in Trust Account

 

The Company’s portfolio of investments is comprised solely 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 in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act that invest only in direct U.S. government treasury obligation. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in investment income earned on investment held in Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. At December 31, 2023, substantially all of the assets held in the Trust Account were held in mutual funds. At December 31, 2023, the balance in the Trust Account was $12,304,455. At December 31, 2022, the balance in the Trust Account was $24,599,703.

 

Franchise Tax

 

Delaware, where the Company is incorporated, imposes a franchise tax that applies to most business entities that are formed or qualified to do business, or which are otherwise doing business, in Delaware. Delaware franchise tax is based on authorized shares or on assumed par and non-par capital, whichever yields a lower result. Under the authorized shares method, each share is taxed at a graduated rate based on the number of authorized shares. During years ended December 31, 2023 and 2022 the company incurred $149,324 and $206,719 in Delaware franchise tax respectively.

 

F-11

 

 

Income Taxes

 

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statements’ recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2023 and 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

 

For the year ended December 31, 2023, the Company generated taxable income of $1,196,903 and recognized income tax expense of $208,227 and the Company has prepaid income tax $208,650. For the year ended December 31, 2022, the Company generated taxable income of $1,042,912 and thus accrued and recognized income tax expense of $231,252. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2023 and 2022 after applying enacted corporate income tax rate, is net operating loss carryforward of $0 and $0, and a valuation allowance of $0 and $0, respectively, which the total deferred tax asset was $0 in both 2023 and 2022.

 

Inflation Reduction Act of 2022

 

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022.

 

Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holders, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.

 

At this time, it has been determined that the IR Act tax provisions would have an impact to the Company’s fiscal 2023 tax provision as there were redemptions by the public stockholders in 2023; as a result, the Company recorded $137,430 excise tax liability as of December 31, 2023. The Company will continue to monitor for updates to the Company’s business along with guidance issued with respect to the IR Act to determine whether any adjustments are needed to the Company’s tax provision in future periods.

 

F-12

 

 

Class A Common Stock Subject to Possible Redemption

 

All of the Class A common stock sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with ASC 480, conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001. However, the threshold in its charter would not change the nature of the underlying shares as redeemable and thus public shares would be required to be disclosed outside of permanent equity. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value ($11.06 per share at December 31, 2023 and $10.38 per share at December 31, 2022). Such changes are reflected in additional paid-in capital, or in the absence of additional capital, in accumulated deficit.

 

As of December 31, 2023 and December 31, 2022, 1,112,657 and 2,369,370 Class A Common Stocks outstanding are subject to possible redemption respectively.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. On December 31, 2023 and 2022, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

 

Net Income or Loss Per Share

 

Net income (loss) per share is computed by dividing net income by the weighted average number of common stock shares outstanding for the period. The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the Initial Public Offering and warrants issued as components of the Private Placement Units (the “Placement Warrants”) since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

 

The Company’s statements of operations include a presentation of income (loss) per share for common stock shares subject to possible redemption in a manner similar to the two-class method of income per share. Net income (loss) per common share, basic and diluted, for redeemable Class A common stock is calculated by dividing the net income allocable to Class A common stock subject to possible redemption, by the weighted average number of redeemable Class A common stock outstanding since original issuance. Net income (loss) per common stock, basic and diluted, for non-redeemable Class A and Class B common stock is calculated by dividing net income allocable to non-redeemable common stock, by the weighted average number of shares of non-redeemable common stock outstanding for the periods. Shares of non-redeemable Class B common stock include the founder shares as these common shares do not have any redemption features and do not participate in the income earned on the Trust Account.

 

F-13

 

  

For the

Year Ended

December 31, 2023

  

For the

Year Ended

December 31, 2022

 
         
Class A common stock          
Numerator: net income (loss) allocable to Class A common shares  $(122,730)  $919,466 
Denominator: weighted average number of Class A common shares   3,129,552    21,994,765 
Basic and diluted net income (loss) per Class A common share  $(0.04)  $0.04 
           
Non-redeemable Class B common shares          
Numerator: net income (loss) allocable to non-redeemable Class B common stock  $(225,499)  $240,372 
           
Denominator: weighted average number of non-redeemable Class B common shares   5,750,000    5,750,000 
Basic and diluted net income (loss) per non-redeemable Class B common shares  $(0.04)  $0.04 

 

Offering Costs Associated with the Initial Public Offering

 

Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to stockholders’ equity upon the completion of the Initial Public Offering.

 

Fair Value of Financial Instruments

 

The Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

 

● 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.

 

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

 

The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of December 31, 2023 and December 31, 2022:

 

   Level  

December 31,

2023

   December 31, 2022 
Assets:               
Cash and marketable securities held in trust account   1   $12,304,455   $24,599,703 

 

Recent Accounting Standards

 

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

 

F-14

 

 

Note 3 —Initial Public Offering

 

Pursuant to the Initial Public Offering the Company consummated on December 2, 2021, the Company sold 23,000,000 Units at a purchase price of $10.00 per Unit generating gross proceeds to the Company in the amount of $230,000,000. Each Unit consists of one share of Class A common stock and one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per whole share.

 

Note 4 — Private Placement

 

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an aggregate of 802,500 units (the “Private Placement Units”) to Canna-Global LLC (the “Sponsor”) at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds to the Company in the amount of $8,025,000.

 

A portion of the proceeds from the Private Placement Units was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Units will be worthless.

 

The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of an Initial Business Combination, subject to certain exceptions.

 

Note 5 — Related Party Transactions

 

Founder Shares

 

On July 13, 2021, the Sponsor purchased 5,750,000 of the Company’s Class B common stock (the “Founder Shares”) in exchange for $25,000. The Founder Shares included an aggregate of up to 750,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding shares of common stock after the Initial Public Offering. The Founder Shares are no longer subject to forfeiture due to full exercise of the over-allotment by the underwriter.

 

The holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) six months after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital share exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of Class B common stock for cash, securities or other property.

 

Promissory Note — Related Party

 

On April 12, 2021 the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) September 30, 2023 or (ii) the consummation of the Initial Public Offering. Following the IPO of the Company on December 2, 2021, a total of $154,288 under the promissory note was fully repaid on January 21, 2022.

 

Related Party Loans

 

In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into units at a price of $10.00 per unit. Such units would be identical to the Private Placement Units. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of December 31, 2023 and 2022, there was $644,560 and $190,000 outstanding under such Working Capital Loans respectively.

 

F-15

 

 

Extension Loan — Related Party

 

The Company will have until June 2, 2023, subject to six (6) one-month extensions to December 2, 2023 (the “Termination Date”) to consummate a Business Combination. If the Company is unable to complete a Business Combination by the Termination Date, the Company 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 the 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 us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following the Termination Date and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

 

On December 1, 2023, the Company held a special meeting of its shareholders, in lieu of its 2023 annual meeting, in a virtual format pursuant to due notice (the “2023 Special Meeting”). At the 2023 Special Meeting, the Company shareholders entitled to vote at the 2023 Special Meeting cast their votes and approved the Trust Amendment Proposal, pursuant to which the Trust Agreement was amended to extend the date on which Continental must liquidate the Trust Account (the “Trust Account”) established in connection with the IPO if the Company has not completed its initial business combination, from December 2, 2023 by up to twelve (12) one-month extensions to December 2, 2024.

 

In connection with approval of the Extension Amendment Proposal, the Company caused $0.040 per outstanding share of our Class A Common Stock or approximately $44,506 for the remaining 1,112,657 Class A common stock to be paid to the Trust Account for the twelve one-month extension from December 2, 2023 to December 2, 2024, in advance of each monthly due date. As of December 31, 2023, $1,369,364 were outstanding under such extension loan. As of December 31, 2022, $106,622 were outstanding under such extension loan.

 

This extension loan is non-interest bearing and will be due upon consummation of the initial business combination. If the Company complete the initial business combination, the Company will, at the option of the sponsor, repay such loaned amounts out of the proceeds of the trust account released to the Company or convert a portion or all of the total loan amount into units at a price of $10.00 per unit, which units will be identical to the Private Placement Units. If the Company does not complete a business combination, the Company will repay such loans only from funds held outside of the trust account.

 

Sponsor Funding of Trust Account

 

In order to fund the trust to the required level, the Sponsor has deposited $3,450,000 into the trust account in connection with the IPO.

 

Representative Shares

 

In connection with the IPO, the Company issued the Representative 57,500 shares upon full exercise of the Over-allotment Option (the “Representative Shares”) on December 2, 2021. The Representative has agreed not to transfer, assign or sell any such Representative Shares without prior consent of the Company until the completion of the initial Business Combination. In addition, the Representative has agreed (i) to waive its redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of the initial Business Combination and (ii) to waive its rights to liquidating distributions from the trust account with respect to such shares if the Company fails to complete the initial Business Combination by the Termination Date.

 

F-16

 

 

The Representative will not sell, transfer, assign, pledge or hypothecate the Representative Shares, or cause the Representative Shares to be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Representative Shares by any person, for a period of 180 days (pursuant to Rule 5110(e)(1) of the Conduct Rules of FINRA) following the Effective Date to anyone other than (i) the Representative or an underwriter or selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such underwriter or selected dealer. On and after the 181st day following the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws.

 

Administrative Support Agreement

 

Commencing on the date the Units are first listed on the Nasdaq, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support for up to 18 months. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the year ended December 31, 2023 and the year ended December 31, 2022, the Company incurred $120,000 and $120,000, respectively, in fees related to this service. As of December 31, 2023, $80,000 had been accrued under the Administrative Support Agreement. As of December 31, 2022, $20,000 had been accrued under the Administrative Support Agreement.

 

Consulting Agreement

 

On March 15, 2022, the Company signed an agreement with Jonathan Combs, who is related to our CEO, for consulting service. The company has agreed to pay him a total of $7,000 per month for service. For the year ended December 31, 2023, $21,000 had been paid to him under the agreement. For the year ended December 31, 2022, $63,000 had been paid to him under the agreement. The Consulting Agreement has been terminated since April 2023.

 

Note 6 — Commitments and Contingencies

 

Registration Rights

 

The holders of the Founder Shares, Private Placement Units and warrants that may be issued upon conversion of Working Capital Loans (and shares of Class A common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

Underwriters Agreement

 

The Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions.

 

The underwriters were entitled to a cash underwriting discount of $0.15 per Unit, or $3,000,000 in the aggregate (or $3,450,000 in the aggregate if the underwriters’ over-allotment option was exercised in full), payable upon the closing of the Initial Public Offering. In addition, the underwriters were entitled to a deferred fee of $0.35 per Unit, or $7,000,000 in the aggregate (or $8,050,000 in the aggregate if the underwriters’ over-allotment option was exercised in full). The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

 

F-17

 

 

On December 2, 2021, the underwriters purchased an additional 3,000,000 Option Units pursuant to the exercise of the over-allotment option. The Option Units were sold at an offering price of $10.00 per Unit, generating additional gross proceeds to the Company of $30,000,000.

 

Note 7 – Stockholders’ Equity

 

Preferred Shares — The Company is authorized to issue 2,000,000 shares of preferred stock with a par value of $0.000001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. As of December 31, 2023 and 2022, there were no shares of preferred stock issued or outstanding.

 

Class A Common Stock — Our Certificate of Incorporation will authorize the Company to issue 200,000,000 shares of Class A common stock with a par value of $0.000001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. As of December 31, 2023 and December 31, 2022, there were 860,000 shares of Class A common stock issued and outstanding (excluding 1,112,657 and 2,369,370 shares subject to possible redemption).

 

Class B Common stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.000001 per share. Holders of the Company’s Class B common stock are entitled to one vote for each share. As of December 31, 2023 and December 31, 2022 there were 5,750,000 shares of Class B common stock issued and outstanding, such that the Initial Stockholders will maintain ownership of at least 20% of the issued and outstanding shares after the Proposed Public Offering.

 

Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A Common Stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our Stockholders except as otherwise required by law. In connection with our initial business combination, we may enter into a Stockholders agreement or other arrangements with the Stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering.

 

The shares of Class B common stock will automatically convert into Class A Common Stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A Common Stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A Common Stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A Common Stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of Class A common stock outstanding upon the completion of Initial Public Offering plus all shares of Class A Common Stock and equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A Common Stock redeemed in connection with a Business Combination), excluding any shares or equity-linked securities issued or issuable to any seller of an interest in the target to us in a Business Combination.

 

Warrants — Public Warrants may only be exercised for a whole number of shares. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

 

F-18

 

 

The Company will not be obligated to deliver any shares of Class A Common Stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A Common Stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A Common Stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.

 

The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A Common Stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A Common Stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

 

Redemption of Warrants when the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:

 

  ● in whole and not in part;
     
  ● at a price of $0.01 per Public Warrant;
     
  ● upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and
     
  ● if, and only if, the last reported sale price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganization, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to warrant holders.

 

If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

 

If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of Class A Common Stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of Class A Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination by the Termination Date and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.

 

The Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the Initial Public Offering.

 

Note 8 – Subsequent Events

 

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred up to the filing date, the date the audited financial statements were available to issue. Based upon this review, the Company identified the following subsequent events:

 

On January 2, 2024 the Company has deposited in the Trust Account $44,506 to extend the period of time to complete the Business Combination from January 2, 2024 to February 2, 2024. On February 2, 2024 the Company has deposited in the Trust Account $44,506 to extend the period of time to complete the Business Combination from February 2, 2024 to March 2, 2024. On March 2, 2024 the Company has deposited in the Trust Account $44,506 to extend the period of time to complete the Business Combination from March 2, 2024 to April 2, 2024. On April 2, 2024 the Company has deposited in the Trust Account $44,506 to extend the period of time to complete the Business Combination from April 2, 2024 to May 2, 2024.

 

F-19

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
1.1   Underwriting Agreement, dated as of November 29, 2021, between the Company and EF Hutton, division of Benchmark Investments, LLC(4)
3.1   Certificate of Incorporation(1)
3.2   First Amended and Restated Certificate of Incorporation(2)
3.3   Bylaws(1)
3.4   Form of Second Amended and Restated Certificate of Incorporation(3)
3.5   First Amendment to the Second Amended and Restated Certificate of Incorporation(5)
4.1   Specimen Unit Certificate(1)
4.2   Specimen Common Stock Certificate(1)
4.3   Specimen Warrant Certificate(1)
4.4   Warrant Agreement, dated as of November 29, 2021, between Continental Stock Transfer & Trust Company and the Company(4)
4.5   Description of Registered Securities*
10.1   Investment Management Trust Agreement, dated as of November 29, 2021, between Continental Stock Transfer & Trust Company and the Company(4)
10.2   First Amendment to the Investment Management Trust Agreement(5)
10.3   Registration and Stockholder Rights Agreement, dated as of November 29, 2021, among the Company, Canna-Global LLC and certain directors of the Company(4)
10.4   Private Placement Unit Purchase Agreement, dated as of November 29, 2021, between the Company and Canna-Global LLC(4)
10.5   Form of Indemnity Agreement(1)
10.6   Promissory Note, dated as of April 12, 2021, issued to Canna-Global LLC(1)
10.7   Securities Subscription Agreement, dated July 13, 2021, between the Registrant and Canna-Global LLC(1)
10.8   Letter Agreement, dated as of November 29, 2021, among the Company, Canna-Global LLC and each of the officers and directors of the Company(4)
10.9   Administrative Services Agreement, dated as of November 29, 2021, between the Company and Canna-Global LLC(4)
10.10   Form of Stock Escrow Agreement among the Registrant, Continental Stock Transfer & Trust Company and the Initial Stockholders(1)
10.11   Second Amendment to the Second Amended and Restated Articles of Association(6)
10.12   Second Amendment to Investment Management Trust Agreement(6)
10.13   Bid Implementation and Business Combination Agreement, dated as of June 15, 2023, by and among Canna-Global Acquisition Corp and New Quantum Holdings Pty Ltd., an Australian company with Australian Company Number (ACN) 628 253 743, along with J. Gerald Combs, solely in his capacity as the representative for the stockholders of Canna-Global and Hyun Jong Chung, solely in his capacity as the representative for New Quantum(7)
10.14   Sponsor Support Agreement, dated as of June 15, 2023, by and among Canna-Global, New Quantum, and Canna-Global LLC, a Delaware limited liability company(7)
10.15   Form of Lock-Up Agreement by and among each of the Significant Company Holders, the Key Sponsor and the One-Percent Shareholders(7)
10.16   Form of Non-Competition and Non-Solicitation Agreement(7)
    Form of Registration Rights Agreement by and among Canna-Global, Canna-Global LLC and certain directors of Canna-Global(7)
10.17   Joinder Agreement to Bid Implementation and Business Combination Agreement(7)
14   Form of Code Ethics(1)
31.1   Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
31.2   Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
32.1   Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*
32.2   Certification of the Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*

 

* Filed herewith.

 

(1) Incorporated by reference to the Company’s Form S-1, filed with the SEC on August 9, 2021.

(2) Incorporated by reference to the Company’s Form S-1, filed with the SEC on September 23, 2021.

(3) Incorporated by reference to the Company’s Form S-1, filed with the SEC on October 12, 2021

(4) Incorporated by reference to the Company’s Form 8-K, filed with the SEC on December 3, 2021.

(5) Incorporated by reference to the Company’s Form 8-K, filed with the SEC on December 1, 2022.

(6) Incorporated by reference to the Company’s Form 8-K, filed with the SEC on December 7, 2023.

(7) Incorporated by reference to the Company’s Form 8-K, filed with the SEC on June 16, 2023.

 

42

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Canna-Global Acquisition Corp
   
Date: April 16, 2024 By: /s/ J. Gerald Combs
    J. Gerald Combs
    Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ J. Gerald Combs   Chief Executive Officer and Director   April 16, 2024
J. Gerald Combs   (Principal Executive Officer)    
         
/s/ Sharwin Sinnan   Chief Financial Officer and Director   April 16, 2024
Sharwin Sinnan   (Principal Financial and Accounting Officer)    
         
/s/ Subramaniam Thavaraj   Director   April 16, 2024
Subramaniam Thavaraj        
         
/s/ Christine Cho   Director   April 16, 2024
Christine Cho        
         
/s/ Kah Yong Tham   Director   April 16, 2024
Kah Yong Tham        

 

43