All statements other than statements of historical fact included in this Report
including, without limitation, statements under "Item 7. 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. When used in
this Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of certain factors detailed in our filings with the SEC.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking
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statements as a result of many factors, including those set forth under "Special
Note Regarding Forward-Looking Statements," "Item 1A. Risk Factors" and
elsewhere in this Annual Report on Form 10-K.
Overview
We are blank check company incorporated as a Delaware corporation on May 14,
2021 and formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to consummate an initial
business combination using cash from the proceeds of our initial public offering
(the "IPO") that closed on October 21, 2021 and the Private Placement, and from
additional issuances of, if any, our equity and our debt, or a combination of
cash, equity and debt. On December 5, 2022, we entered into a Business
Combination Agreement with Infrared Cameras Holdings, Inc., a Delaware
corporation. See Item 1. Business - Recent Developments for more information.
Liquidity and Capital Resources
On October 21, 2021, we consummated our initial public offering (the "IPO") of
11,500,000 Units, including the full exercise of the underwriters'
over-allotment option to purchase 1,500,000 units, at a purchase price of $10.00
per Unit generating a profit of $115,000,000.
Simultaneously with the consummation of the IPO, we consummated the private
placement 675,000 units (the "Private Placement Units") at a price of $10.00 per
Private Placement Unit to the Sponsor and the representative of the underwriters
and/or certain of their designees or affiliates, generating gross proceeds to us
of $6,750,000.
Following the closing of the IPO on October 21, 2021, $117,300,000 ($10.20 per
Unit) from the net proceeds of the sale of Units in the IPO and a portion of the
proceeds of the sale of the Private Placement Units was deposited into a trust
account ("Trust Account") located in the United States with Continental Stock
Transfer & Trust Company acting as trustee, and will be invested only in U.S.
government treasury bills, notes or bonds with a maturity of 185 days or less or
in money market funds meeting certain conditions under Rule 2a-7 under the
Investment Company Act and which invest solely in U.S. Treasuries. Except as set
forth below, the proceeds held in the Trust Account will not be released until
the earlier of: (1) the completion of the initial Business Combination within
the required time period; (2) our redemption of 100% of the outstanding public
shares if we have not completed an initial Business Combination in the required
time period; and (3) the redemption of any public shares properly tendered in
connection with a stockholder vote to amend our amended and restated certificate
of incorporation (A) to modify the substance or timing of our obligation to
allow redemption of public shares as described in the IPO or redeem 100% of the
public shares if we do not complete the initial Business Combination within the
required time period or (B) with respect to any other provision relating to
stockholders' rights or pre-Business Combination activity.
As of December 31, 2022, we had $222,266 in our operating bank account, and
working capital of 124,865, excluding taxes. Our liquidity needs through
December 31, 2022 were satisfied through a payment from the Sponsor of $25,000
for the Founder Shares to cover certain offering costs and the loan under an
unsecured promissory note from the Sponsor of up to $400,000. The outstanding
balance under the promissory note of $323,190 was paid in full on October 22,
2021 and the unsecured promissory note is no longer available to the Company. As
of December 31, 2022, no amounts were outstanding under the unsecured promissory
note.
After consummation of the IPO on October 21, 2021, we had $24,991 in our
operating bank account, and working capital of $1,463,454, which included
$2,150,000 of private placement proceeds receivable from the Sponsor which was
received into our operating bank account on October 22, 2021. In addition, in
order to finance transaction costs in connection with a Business Combination,
our Sponsor or an affiliate of our Sponsor or certain of our officers and
directors may, but are not obligated to, provide us Working Capital Loans. As of
December 31, 2022, there were no amounts outstanding under any Working Capital
Loans.
Going Concern
We anticipate that the $222,266 held outside the trust account as of December
31, 2022 might not be sufficient to allow us to operate for at least 12 months
from the issuance of the financial statements, assuming that a business
combination is not consummated during that time. Until consummation of a
business combination, we will be using the funds not held in the Trust Account,
and any additional Working Capital Loans (as defined in Note 5 of the Financial
Statements) from the initial shareholders, certain of our officers and directors
(see Note 5 of the Financial Statements), for identifying and evaluating
prospective acquisition candidates, performing business due diligence on
prospective target businesses, traveling to and from the offices, plants or
similar locations of prospective target
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businesses, reviewing corporate documents and material agreements of prospective
target businesses, selecting the target business to acquire and structuring,
negotiating and consummating the business combination.
We can raise additional capital through Working Capital Loans from the initial
shareholders, certain of our officers, and directors (see Note 5 of the
Financial Statements), or through loans from third parties. None of the sponsor,
officers or directors are under any obligation to advance funds to, or to invest
in, us. If we are unable to raise additional capital, we may be required to take
additional measures to conserve liquidity, which could include, but not
necessarily be limited to, curtailing operations, suspending the pursuit of our
business plan, and reducing overhead expenses. We cannot provide any assurance
that new financing will be available to us on commercially acceptable terms, if
at all. These conditions raise substantial doubt about our ability to continue
as a going concern for a reasonable period of time, which is considered to be
one year from the issuance date of the financial statements.
We have until April 20, 2023 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by that
date, which is less than 12 months from the issuance date of these financial
statements. If a Business Combination is not consummated by the required date,
there will be a mandatory liquidation and subsequent dissolution. In connection
with our assessment of going concern considerations in accordance with the
authoritative guidance in Financial Accounting Standards Board ("FASB")
Accounting Standards Update ("ASU") 2014-15, "Disclosure of Uncertainties About
an Entity's Ability to Continue as a Going Concern," we have determined that
mandatory liquidation, and subsequent dissolution, should we be unable to
complete a business combination, raises substantial doubt about our ability to
continue as a going concern for the next 12 months from the issuance of these
financial statements. No adjustments have been made to the carrying amounts of
assets and liabilities should we be required to liquidate after April 20, 2023.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and
Russia-Ukraine war and has concluded that while it is reasonably possible that
the virus and war could have a negative effect on our financial position,
results of our operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these financial statements.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
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 of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. 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.
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 we 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 us
and not by the redeeming holder, 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 our ability
to complete a Business Combination.
Results of Operations
As of December 31, 2022, we had not commenced any operations. All activity for
the period from May 14, 2021 (inception) through December 31, 2022 relates to
our formation and the IPO, and since the IPO, the search for a suitable business
combination. We have
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neither engaged in any operations nor generated any revenues to date. We will
not generate any operating revenues until after the completion of our initial
Business Combination, at the earliest. We will generate non-operating income in
the form of interest income on cash and cash equivalents from the proceeds
derived from the IPO. We expect to incur increased expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the year ended December 31, 2022, we had net income of $36,861, which
consisted of interest earned on cash and securities held in Trust Account of
$1,739,145, partially offset by operating costs of $1,385,573 and provision for
income taxes of $316,711.
For the period from May 14, 2021 (inception) to December 31, 2021, we had net
loss of approximately $413,954, which consisted of formation and operating costs
of $424,882, offset by interest earned on cash and securities held in Trust
Account of $10,928.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
Administrative Services Agreement
We entered into an administrative services agreement on October 18, 2021,
pursuant to which we will pay the Sponsor a total of $10,000 per month for
office space, utilities, secretarial support and other administrative and
consulting services. Upon completion of our initial Business Combination or our
liquidation, we will cease paying these monthly fees. At December 31, 2022 and
2021, we had accrued $13,505 and $7,834, respectively, of administrative service
fees, net of payments made. For the year ended December 31, 2022, the Company
incurred $120,000 of administrative service fees expense. For the period from
May 14, 2021 (inception) through December 31, 2021, the Company incurred $24,516
of administrative service fees expense. Included in the Administrative Service
Fee paid to the Sponsor is $100,000 the Sponsor pays to Lawson Gow, the
Company's Chief Strategy Officer, in connection with services related to
identifying and consummating the initial Business Combination.
Registration Rights
Our initial stockholders and their permitted transferees can demand that we
register the founder shares, the Private Placement Units and the underlying
private shares and private warrants, and the units issuable upon conversion of
Working Capital Loans and the underlying common stock and warrants, pursuant to
an agreement to be signed prior to or on the date of the IPO. The holders of
such securities are entitled to demand that we register these securities at any
time after we consummate an initial Business Combination. Notwithstanding
anything to the contrary, any holder that is affiliated with an underwriter
participating in the IPO may only make a demand on one occasion and only during
the five-year period beginning on the commencement date of sales in the IPO. In
addition, the holders have certain "piggy-back" registration rights on
registration statements filed after our consummation of a Business Combination;
provided that any holder that is affiliated with an underwriter participating in
the IPO may participate in a "piggy-back" registration only during the
seven-year period beginning on the commencement date of sales in the IPO.
Underwriting Agreement
On October 21, 2021, we paid a cash underwriting discount of 2.0% per Unit, or
$2,300,000.
Business Combination Marketing Agreement
The Company has engaged Roth Capital Partners, LLC, the representative, as an
advisor in connection with the Business Combination to assist it in holding
meetings with its stockholders to discuss the potential Business Combination and
the target business' attributes, introduce the Company to potential investors
that are interested in purchasing its securities in connection with the initial
Business Combination, assist the Company in obtaining stockholder approval for
the Business Combination and assist the Company with its press releases and
public filings in connection with the Business Combination. The Company will pay
the representative a cash fee for such services upon the consummation of the
initial Business Combination in an amount equal to 3.5% of the gross proceeds of
the IPO, or $4,025,000 (exclusive of any applicable finders' fees which might
become payable).
Additionally, the Company engaged Craig-Hallum Capital Group LLC
("Craig-Hallum") to act as its placement agent and its merger and acquisition
advisor in connection with any offering in respect to a Business Combination
with a Target. Craig-Hallum will assist
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with identifying selecting a potential target company, assisting with the
formation of a letter of intent ("LOI"), evaluating proposals for potential
business combination, assisting in structuring the formation of a potential
business combination, identifying and selecting investors and other activities
related to a potential business combination. In the event an offering of
securities in connection with a Business Combination with a Target or any other
evidence of commitment with a Business Combination with a Target, the Company
will pay Craig-Hallum a cash fee of 6.0% of the gross proceeds raised and only
if Craig-Hallum is the source of introduction to the specific transaction.
Additionally, if the Company completes a Business Combination with a target
during the term of the contract with Craig Hallum, Craig-Hallum will be owed an
M&A Advisory Fee in stock equal to the greater of (i) 2.0% of the aggregate
transaction value of the target; and (ii) 250,000 shares of newly issued common
stock registered within 90 days of closing of the Business Combination. Roth
Capital will be due 30% of the M&A Advisory Fee in stock.
Legal fees
The Company has engaged ArentFox Schiff LLP ("AFS") to assist with various
routine and business combination related matters. AFS has agreed to perform the
foregoing services at a discounted rate, and, subject to final consummation of
the Business Combination, the Company will pay an additional amount to AFS equal
to the cumulative amount earned by AFS up until the date of the consummation of
the Business Combination. To the extent the Business Combination is not
completed, the Company will not be required to pay AFS any additional amounts in
excess of the discounted rate.
Critical Accounting Policies
Offering Costs
We comply with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin ("SAB") Topic 5A - "Expenses of Offering". Offering costs consist of
underwriting, legal, accounting and other expenses incurred through the balance
sheet date that are directly related to the IPO. Offering costs are allocated to
the separable financial instruments to be issued in the IPO based on a relative
fair value basis, compared to total proceeds received. Offering costs directly
attributable to the issuance of an equity contract to be classified in equity
are recorded as a reduction of equity. Offering costs for equity contracts that
are classified as assets and liabilities are expensed immediately. Upon closing
of the IPO on October 21, 2021, offering costs associated with the common stock
and the warrants were charged to stockholders' equity. Transaction costs
amounted to $2,822,937, consisting of $2,686,076 which was charged to temporary
equity and $136,861 which was charged to additional paid-in capital.
Common Stock Subject to Possible Redemption
We will account for our common stock subject to possible redemption in
accordance with the guidance in FASB ASC Topic 480 "Distinguishing Liabilities
from Equity." Common stock subject to mandatory redemption (if any) is
classified as a liability instrument and measured at fair value. Conditionally
redeemable common stock (including shares of 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 our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our Common stock will feature certain
redemption rights that are considered to be outside of our control and will be
subject to the occurrence of uncertain future events. Accordingly, common stock
subject to possible redemption will be presented at redemption value as
temporary equity, outside of the stockholders' equity section of our balance
sheets.
Net Loss Per Common Stock
We comply with the accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net loss per common stock is computed by dividing net loss
by the weighted average number of shares of common stock outstanding during the
period. At December 31, 2022, we did not have any dilutive securities and other
contracts that could, potentially, be exercised or converted into common stock
and then share in our earnings. As a result, diluted loss per common stock is
the same as basic loss per common stock for the period presented.
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Warrants
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities
from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to our own common
stock and whether the warrant holders could potentially require "net cash
settlement" in a circumstance outside of our control, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all of the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. We account for our outstanding
warrants as equity-classified instruments.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40) ("ASU 2020-06"), which simplifies the accounting for
convertible instruments. The guidance removes certain accounting models that
separate the embedded conversion features from the host contract for convertible
instruments. ASU 2020-06 allows for a modified or full retrospective method of
transition. For smaller reporting companies, this update is effective for fiscal
years beginning after December 15, 2023, and interim periods within those fiscal
years. Early adoption is permitted. We are currently evaluating the impact this
change will have on our financial statements.
Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we did not have any off-balance sheet
arrangements.
Inflation
We do not believe that inflation had a material impact on our business, revenues
or operating results during the period presented.
Emerging Growth Company Status
We are an "emerging growth company," as defined in Section 2(a) of the
Securities Act of 1933, as amended, (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 our 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.
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. We have 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, us, 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
our financial statements with another public company which is neither
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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.
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