SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the period from
to
POWER & DIGITAL INFRASTRUCTURE ACQUISITION
II CORP.
(Exact name of registrant as specified in its charter)
321 North Clark Street, Suite 2440
Chicago, IL60654
(312)262-5642
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b)
of the Act:
Title of Each Class Trading Symbol Name of Each Exchange On Which Registered
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 ☒
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, a smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth 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
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If the 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
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
The aggregate market value of the common stock outstanding, other than
shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing sales price for the Class
A common stock on June 30, 2023, as reported on the NASDAQ Stock Market LLC (“Nasdaq”) was approximately $110,325,051 (based
on the closing sales price of the Class A common stock on June 30, 2023 of $10.40).
As of March 11, 2024, there were 10,608,178 shares of Class A common
stock, $0.0001 par value per share, and 7,187,500 shares of Class B common stock, $0.0001 par value per share, issued and outstanding.
Documents Incorporated by Reference: None.
Table of Contents
Page
CERTAIN TERMS ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS iv
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 20
Item 1B. Unresolved Staff Comments 56
Item 1C: Cybersecurity 56
Item 2. Properties 56
Item 3. Legal Proceedings 56
Item 4. Mine Safety Disclosures 56
Item 6. [Reserved.] 58
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 66
Item 8. Financial Statements and Supplementary Data 66
Item 9A. Controls and Procedures 67
Item 9B. Other Information 68
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 68
Item 10. Directors, Executive Officers and Corporate Governance 68
Item 11. Executive Compensation 78
Item 14. Principal Accounting Fees and Services 83
PART III 84
Item 15. Exhibit and Financial Statement Schedules 84
SIGNATURES 86
INDEX TO FINANCIAL STATEMENTS F-1
i
CERTAIN
TERMS
Unless otherwise stated in this Annual Report on
Form 10-K (this “Report”), or the context otherwise requires, references to:
● “common stock” are to our Class A common stock and our Class B common stock;
● “Nasdaq” are to the Nasdaq Stock Market LLC;
ii
iii
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report, including, without limitation, statements
under the heading “Item 7. 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, as amended, (the “Securities Act”)
and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Our forward-looking statements include,
but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies
regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,”
“plan,” “possible,” “potential,” “predict,” “project,” “should,”
“would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that
a statement is not forward-looking. Forward-looking statements in this Report may include, for example, statements about:
● our ability to select an appropriate target business or businesses;
● our ability to complete our initial business combination;
● our pool of prospective target businesses;
● our public securities’ potential liquidity and trading;
● the lack of a market for our securities;
● the trust account not being subject to claims of third parties; or
● our financial performance following our initial public offering.
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. There can be
no assurance that future developments affecting us will 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. These risks and uncertainties include,
but are not limited to, those factors described under the heading “Risk Factors.” 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. These risks and others described
under “Risk Factors” may not be exhaustive.
iv
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties.
These risks include, but are not limited to:
v
vi
PART I
Item 1. Business.
Overview
We are a blank check company incorporated as a
Delaware corporation 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 or entities, which we refer to throughout this Report as our initial business
combination.
Our intention is to acquire a business or entity
that could benefit from our expertise across the power and digital infrastructure landscape.
● XMS is an entity owned by professionals of XMS Capital.
In March 2021, our sponsor paid $25,000 to cover
for certain offering costs on behalf of us in exchange for issuance of 5,750,000 shares of our Class B common stock. In November 2021,
we effected a stock dividend of 1,437,500 shares of our Class B common stock, resulting in there being an aggregate of 7,187,500 shares
of our Class B common stock outstanding. We have agreed to sell to the anchor investors 1,078,125 founder shares, and the anchor investors
agreed to purchase from us on the date of the initial business combination an aggregate of 1,078,125 founder shares for an aggregate purchase
price of approximately $3,750, or approximately $0.004 per share. Our sponsor has also agreed that in the event of such purchase by the
anchor investors, our sponsor will forfeit to us for no consideration a number of founder shares equal to the number of founder shares
purchased by the anchor investors.
In July 2021, our sponsor transferred 30,000 shares
of Class B common stock to each of the four independent director nominees, a total of 120,000 shares of Class B common stock. In November
2021, our sponsor repurchased 30,000 shares of Class B common stock from a former independent director nominee.
On December 14, 2021 the company consummated its
IPO of 28,750,000 units, which included the exercise of the underwriters’ option to purchase an additional 3,750,000 units at the
initial public offering price to cover over-allotments. Each unit consists of one share of Class A common stock and one-half of one warrant,
each whole public warrant entitling the holder thereof to purchase one share of Class A common stock at an exercise price of $11.50 per
share, subject to adjustment. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $287,500,000.
Simultaneously with the closing of our IPO and
the issuance and sale of the units, we completed the private placement of an aggregate of 11,125,000 private placement warrants at a price
of $1.00 per private placement warrant, generating total proceeds of $11,125,000. The private placement warrants, which were purchased
by the sponsor and the anchor investors, are substantially similar to the public warrants, except that if held by the sponsor, the anchor
investors or their respective permitted transferees, they (i) may be exercised on a cashless basis, (ii) are not redeemable and (iii)
subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of our initial
business combination. If the private placement warrants are held by holders other than the sponsor, the anchor investors or their respective
permitted transferees, the private placement warrants will be redeemable by the company under all redemption scenarios and exercisable
by holders on the same basis as the public warrants.
On May 15, 2023, we filed
a definitive proxy statement for the solicitation of proxies in connection with that certain special meeting in lieu of annual meeting
of stockholders of the company held on June 9, 2023 (the “Extension Special Meeting”) to consider and vote on, among
other proposals, the extension of the date by which the company must consummate an initial business combination from June 14, 2023
to December 14, 2023, and to allow the company, without another stockholder vote, by resolution of the company’s board of directors
(the “Board”) to elect to further extend such date in one-month increments up to three additional times until March 14,
2024, unless the closing of a an initial business combination shall have occurred prior thereto, or such earlier date as determined by
the Board to be in the best interests of the company (such proposal, the “Extension Amendment Proposal”), and the amendment
of the company’s amended and restated certificate of incorporation to remove the limitation that the company may not redeem public
shares to the extent that such redemption would result in the company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of
the Exchange Act (or any successor rule)) of less than $5,000,001 (such proposal, the “Redemption Limitation Amendment
Proposal”).
1
At the Extension Special Meeting on June 9,
2023, the company’s stockholders approved the Extension Amendment Proposal and the Redemption Limitation Amendment Proposal. In
connection with the stockholders’ vote at the Extension Special Meeting, the stockholders elected to redeem 18,141,822 shares
of XPDB Class A Common Stock at a redemption price of approximately $10.37 per share, for an aggregate redemption amount of approximately
$188,132,132 (the “June Redemptions”). After the satisfaction of the June Redemptions, the balance in the trust account as
of December 31, 2023 was approximately $114,641,527. Upon completion of the June Redemptions, 10,608,178 shares of Class A common
stock and 7,187,500 shares of Class B common stock remained issued and outstanding.
In connection with the approval of the Extension
Amendment Proposal, the company deposited $300,000 in the trust account on June 15, 2023, July 10, 2023 and August 10, 2023 and the sponsor
deposited $300,000 in the trust account on September 8, 2023, October 10, 2023, and November 9, 2023.On December 12, 2023, the Board
approved an extension of the date by which the company must consummate an initial business combination from December 14, 2023 to
January 14, 2024.
On January 10, 2024, the
Board approved an extension of the date by which the company must consummate an initial business combination from January 14, 2024
to February 14, 2024.
On February 8, 2024, the Board
approved an extension of the date by which the company must consummate an initial business combination from February 14, 2024 to
March 14, 2024.
On February 20, 2024, we filed
a definitive proxy statement for the solicitation of proxies in connection with a special meeting of stockholders of the company to consider
and vote on, among other proposals, the extension of the date by which the company must consummate an initial business combination from
March 14, 2024 to April 14, 2024, and to allow the company, without another stockholder vote, by resolution of the Board, to
elect to further extend such date in one-month increments up to three additional times until July 14, 2024 (the “2024
Extension”), unless the closing of a an initial business combination shall have occurred prior thereto, or such earlier date as
determined by the Board to be in the best interests of the company.
Competitive Strengths
We believe the sourcing, valuation, diligence and
execution capabilities of our management team will provide us with a significant pipeline of opportunities from which to evaluate and
select a target for an initial business combination that will benefit from our extensive experience. Our competitive strengths include
the following:
● XMS’ partners average over 25 years of investment banking experience;
2
Business Strategy
Our business strategy is to identify and complete
an initial business combination that creates substantial long-term value for our stockholders. We will seek North American targets operating
as leaders in the power and digital infrastructure areas and adjacent industries to capitalize on co-optimization opportunities, where
they exist. We believe the network of proprietary and relationship-based opportunities of the management, combined with its rigorous underwriting
and risk management acumen, and macroeconomic and financial insight, will allow us to effectively and efficiently identify and evaluate
potential opportunities for our initial business combination. In addition to our network and expertise, we plan to leverage XMS’
world class execution with expertise navigating all potential process dynamics and nuances, to extend our access to opportunities. We
will seek to:
Our company is supported by a full management team
with deep expertise and deal flow across both the intermittent renewable and dispatchable power and digital infrastructure industries.
Our operations are overseen by an experienced Board of Directors with deep knowledge developed through extensive M&A, financing transactions,
and entrepreneurial ventures. Our management team brings extensive knowledge and a developed network.
We believe that the evolving transition taking
place in the electrical power and digital infrastructure landscape has created and will continue to create significant opportunity for
co-optimization from renewable energy resources, expanding their integration into the transmission and distribution grid, and utilizing
the more sustainable power to satisfy the demands of the ever-increasing high-density electrical needs of data centers and blockchain
infrastructure.
Acquisition Criteria
The following general criteria and guidelines were
developed to evaluate prospective target businesses, consistent with our Business Strategy.
3
These criteria and guidelines will be used in evaluating
acquisition opportunities, but the target business that we decide to enter into our initial business combination with may not meet all
of the criteria and guidelines listed below. We may also consider other criteria and/or guidelines not listed below. We intend to acquire
a business or an entity that we believe:
The list of criteria and guidelines are not intended
to be exhaustive. Any evaluation of the merits of a particular initial business combination may be based on the above criteria and guidelines
as well as other factors and considerations that our management and our sponsors may deem appropriate. Should we elect to enter into our
initial business combination with a target business that does not meet the above criteria and guidelines, it will be disclosed in any
stockholder communications related to our initial business combination that the target business does not meet the above criteria.
Initial Business Combination
In accordance with the rules of the Nasdaq, our initial business combination
must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in
the trust account (excluding the amount of deferred underwriting discounts held in trust and taxes payable by us on the income earned
on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. If our Board
is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent
investment banking firm or an independent valuation or appraisal firm with respect to satisfaction of such criteria. Our stockholders
may not be provided with a copy of such opinion nor will they be able to rely on such opinion. We do not intend to purchase multiple businesses
in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management has virtually
unrestricted flexibility in identifying and selecting one or more prospective businesses, although we are not permitted to effectuate
our initial business combination solely with another blank check company or a similar company with nominal operations. 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 in order to
meet certain objectives of the prior owners of the target business, 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 a controlling interest in the target sufficient for it not to be required to register as
an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting
securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction
company, depending on valuations ascribed to the target and us in the business combination transaction. 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, shares or other
equity interests 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 issued and 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 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 purposes of a tender offer or for seeking stockholder approval,
as applicable.
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, inspection of facilities, as well as a review of financial, operational, legal and other information
which will be made available to us.
4
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 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.
Potential Conflicts of Interest
We are not prohibited from pursuing an initial
business combination with a company that is affiliated with our sponsor, officers, directors. or any of their affiliates. In the event
we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers, or directors, we, or
a committee of independent directors, will obtain an opinion from an independent investment banking firm or another valuation or appraisal
firm that commonly renders fairness opinions that our initial business combination is fair to our company from a financial point of view.
Our sponsor and directors directly or indirectly
own founder shares, Class A common stock and/or private placement warrants following our IPO and, accordingly, may have a conflict of
interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business
combination. In particular, because the founder shares were purchased at approximately $0.004 per share, the holders of our founder shares
(including members of our management team that directly or indirectly own founder shares) could make a substantial profit after our initial
business combination even if our public stockholders lose money on their investment as a result of a decrease in the post-combination
value of their shares of common stock (after accounting for any adjustments in connection with an exchange or other transaction contemplated
by the business combination). Further, each of our officers and directors may have a conflict of interest with respect to evaluating a
particular business combination if the retention or resignation of any such officers and directors was included by a target business as
a condition to any agreement with respect to our initial business combination.
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 pursuant to which such officer
or director is or will be required to present a business combination opportunity to such entities, including as described above. Accordingly,
if any of our officers or directors becomes aware of a business combination opportunity that is suitable for an entity to which he or
she has then current fiduciary or contractual obligations, including one or more other blank check companies, he or she will honor his
or her fiduciary or contractual obligations to present such business combination opportunity to such other entity, subject to their fiduciary
duties under Delaware law.
Certain of our directors and officers have invested, directly or indirectly,
in Montana Technologies LLC (“Montana Technologies”).
Status as a Public Company
We believe our structure will make us an attractive
business combination partner to target businesses. As an existing public company, we offer a target business an alternative to the traditional
initial public offering through a merger or other business combination with us. In a business combination transaction with us, the owners
of the target business may, for example, exchange their shares of stock, shares or other equity interests in the target business for our
Class A common stock (or shares of a new holding company) or for a combination of our Class A common stock and cash, allowing us to tailor
the consideration to the specific needs of the sellers. We believe target businesses will find this method a more expeditious and cost
effective method to becoming a public company than the typical initial public offering. The typical initial public offering process takes
a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in
the initial public offering process, including underwriting discounts and commissions, that may not be present to the same extent in connection
with a business combination with us.
5
Furthermore, once a proposed business combination
is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’
ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could
have negative valuation consequences. Once public, we believe the target business would then have greater access to capital, an additional
means of providing management incentives consistent with stockholders’ interests and the ability to use its shares as currency for
acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers
and vendors and aid in attracting talented employees.
While we believe that our structure and our management
team’s backgrounds will make us an attractive business partner, some potential target businesses may view our status as a blank
check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed initial business
combination, negatively.
Financial Position
With funds available for a business combination from our IPO and the
sale of the private placement warrants, after the satisfaction of the June Redemptions, the balance in the trust account as of December
31, 2023 was approximately $114,641,527. After payment of approximately $6 million 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
Our entire activity since inception up to December
31, 2023 has been related to our formation, preparation for the IPO, and since the closing of the IPO, the search for a prospective initial
business combination. We intend to effectuate our initial business combination using cash from the proceeds of our IPO, the private placements
of the private placement warrants, 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.
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.
6
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 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 XMS, TEP, 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 XMS, TEP, 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 this Report and know what types of businesses we are targeting. Our officers and directors,
as well as their 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.
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 either of 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). 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.
We are not prohibited from pursuing an initial
business combination with a business combination target that is affiliated with our sponsor, officers or directors or from making the
acquisition through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek to
complete our initial business combination with a business combination target that is affiliated with our sponsor, executive officers or
directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm or an independent
accounting firm, that such an initial business combination is fair to our company from a financial point of view. We are not required
to obtain such an opinion in any other context.
7
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 our sponsor or its affiliates or
our officers or directors becomes aware of a business combination opportunity that 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
Our initial business combination must occur with one or more target
businesses that together have an aggregate fair market value of at least 80% of our assets held in the trust account (excluding the deferred
underwriting commissions and taxes payable by us on the income earned on the trust account) at the time of the agreement to enter into
the initial business combination. The fair market value of the target or targets will be determined by our Board based upon one or more
standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. If
our Board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion
from an independent investment banking firm, or from an independent accounting firm, with respect to the satisfaction of such criteria.
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 operations.
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 net assets test.
There is no basis for investors in our IPO to evaluate the possible merits or risks of any target business with which we may ultimately
complete our business combination.
To the extent we effect our 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 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.
8
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:
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 (as defined below) 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.
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 amended and restated certificate of incorporation.
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 legal reasons.
Under the Nasdaq’s listing rules, stockholder
approval would be required for our initial business combination if, for example:
9
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 expected cost of holding a stockholder vote;
● other time and budget constraints of the company; and
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,
directors, executive officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions
or in the open market prior to the completion of our initial business combination. 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. None of the funds
in the trust account will be used to purchase shares or public warrants in 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.
Such a purchase may include a contractual acknowledgment
that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not
to exercise its redemption rights. In the event that our sponsor, directors, officers, advisors or their affiliates purchase shares in
privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling
stockholders would be required to revoke their prior elections to redeem their shares. 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.
The purpose of any such purchases of shares could
be to (i) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval
of the business combination or (ii) 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 Class A common stock or public 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 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 submitted by stockholders (in the
case of our Class A common stock) 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 but only if such shares have not already been voted at the stockholder meeting related to our initial business combination.
Our sponsor, executive officers, directors, advisors or any of their affiliates will select which stockholders to purchase shares from
based on the negotiated price and number of shares and any other factors that they may deem relevant, and will only purchase shares if
such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
10
Any purchases by our sponsor, officers, directors
and/or their 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 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.
Redemption Rights for Public Stockholders upon Completion of our
Initial Business Combination
We will provide our public stockholders with the opportunity to redeem
all or a portion of their Class A common stock upon the completion of our initial business combination at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the trust account calculated as of two business days prior to the completion of
the initial business combination, 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 then outstanding public shares, subject to the limitations described herein. The amount
in the trust account as of December 31, 2023 was approximately $10.80 per public share. The per-share amount we will distribute to investors
who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. The redemption
rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. There will be
no redemption rights upon the completion of our initial business combination with respect to our warrants. Our sponsor, directors, each
other member of our management team and the anchor investors have entered into agreements with us, pursuant to which they have agreed
to waive their redemption rights with respect to any founder shares and any public shares in connection with (i) the completion of our
initial business combination and (ii) a stockholder vote to approve an amendment to our amended and restated certificate of incorporation
that would affect the substance or timing of our obligation to provide holders of shares of Class A common stock the right to have their
shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we have not completed an
initial business combination by March 14, 2024 (or such later date approved by the stockholders or the Board in accordance with our amended
and restated certificate of incorporation, including the 2024 Extension).
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 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 amended and restated certificate of incorporation
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 legal reasons. So long as we obtain and maintain a listing for our securities on the
Nasdaq, we will be required to comply with the Nasdaq rules.
11
If we held a stockholder vote to approve our initial
business combination, we will, pursuant to our amended and restated certificate of incorporation:
● 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 seek stockholder approval, we will complete
our initial business combination only if a majority of the outstanding shares of common stock are voted by the stockholders at a stockholders
meeting to approve the initial business combination, unless applicable law, our corporate governing documents or applicable stock exchange
rules require a different vote, in which case we will complete our initial business combination only if such requisite vote is received.
A quorum for such meeting will consist of the holder 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 initial stockholders and the anchor investors will count towards this quorum and, pursuant to the terms of a letter agreement entered
into with us, our sponsor, directors and each member of our management team have agreed to vote their founder shares and any public shares
purchased during or after our IPO, in favor of our initial business combination. For purposes of seeking approval of the majority of our
outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum
is obtained. As a result, in addition to our initial stockholders’ founder shares, we would need 1,710,340, or 16.1%, of the 10,608,178
public shares remaining after the June Redemptions to be voted in favor of an initial business combination in order to have our initial
business combination approved (assuming all issued and outstanding shares are voted). Also, as a result of the founder shares and private
placement warrants that our anchor investors may hold (directly or indirectly), they may have different interests with respect to a vote
on an initial business combination than other public stockholders. These 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, each other
member of our management team and the anchor investors have entered into agreements with us, pursuant to which they have agreed to waive
their redemption rights with respect to their founder shares and public shares in connection with (i) the completion of a business combination
and (ii) a stockholder vote to approve an amendment to our amended and restated certificate of incorporation that would affect the substance
or timing of our obligation to provide holders of shares of Class A common stock the right to have their shares redeemed in connection
with our initial business combination or to redeem 100% of our public shares if we have not completed an initial business combination
by March 14, 2024 (or such later date approved by the stockholders or the Board in accordance with our amended and restated certificate
of incorporation, including the 2024 Extension).
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 legal reasons,
we will, pursuant to our amended and restated certificate of incorporation: