ITEM 7. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
All statements other
than statements of historical fact included in this Amendment 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 Amendment,
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 our financial condition and results of operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Amendment. Certain information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Overview
We are a newly organized blank check company
incorporated on December 9, 2020 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. We have not selected any
specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or
indirectly, with any business combination target. Our efforts to identify a prospective target business will not be limited to a particular
industry or geographic region. While we may pursue an acquisition opportunity in any industry or sector, we intend to focus on assets
used in exploring, developing, producing, transporting, storing, gathering, processing, fractionating, refining, distributing or marketing
of natural gas, natural gas liquids, crude oil or refined products in North America.
As indicated in the accompanying financial statements,
at December 31, 2021 and December 31, 2020, we had $38,743 and $25,000 in cash, respectively, and a working capital deficit of $186,015
and $50,000, respectively (excluding deferred offering costs). 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 from inception (December 9, 2020) through December 31,
2021 were organizational activities, those necessary to prepare for our Initial Public Offering, described below, and, after our Initial
Public Offering, identifying a target company for a business combination. We do not expect to generate any operating revenues until after
the completion of our business combination. We generate non-operating income in the form of interest income on marketable securities
held in the trust account, and changes in the fair value of warrant liabilities. 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.
46
Liquidity and Capital Resources
As of December 31, 2021, we had $38,743 in cash
and a working capital deficit (excluding deferred offering costs) of $186,015. Further, we have incurred and expect to continue to incur
significant costs in pursuit of our finance and acquisition plans. Management’s plans to address this need for capital through our
Initial Public Offering are discussed in this section of this report titled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.” the Company does not complete a Business Combination within one year
of closing date of the Initial Public Offering, the Company is required to redeem the public shares sold in the Initial Public Offering.
We cannot assure you that our plans to raise additional capital or to consummate an initial business combination will be successful. These
factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere
in this report do not include any adjustments that might result from our inability to continue as a going concern.
On February 15, 2022, we consummated our Initial
Public Offering of 8,625,000 units at a price of $10.00 per unit (including 1,125,000 units from the full exercise of the underwriters’
over-allotment option), generating gross proceeds of $86,250,000. Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 505,000 private placement units to the Sponsor at a price of $10.00 per unit, generating gross proceeds of $5,050,000. Following
the Initial Public Offering, the exercise of the over-allotment option and the sale of the private placement units, a total of $76,250,000
was placed in the trust account. We incurred $4,888,707 in transaction costs, including $2,587,500 of underwriting fees, $1,725,000 of
underwriting discount and $576,207 of other offering costs.
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 and income taxes payable), to complete our business combination. To the extent that our capital stock or debt is used, in
whole or in part, as consideration to complete our 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.
In order to fund working
capital deficiencies or finance transaction costs in connection with a business combination, our sponsor and our initial stockholders
or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we would
repay such loaned amounts. In the event that a 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
$1,000,000 of such loans may be convertible into warrants identical to the private placement warrants, at a price of $1.00 per warrant
at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability
and exercise period. 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 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.
We believe we will need
to raise additional funds in order to meet the expenditures required for operating our business. If our estimate of the costs of identifying
a target business, undertaking in-depth due diligence and negotiating a 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 business combination. Moreover, we may need to
obtain additional financing either to complete our business combination or because we become obligated to redeem a significant number
of our public shares upon consummation of our business combination, in which case we may issue additional securities or incur debt in
connection with such business combination. Subject to compliance with applicable securities laws, we would only complete such financing
simultaneously with the completion of our business combination. If we are unable to complete our 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 business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-balance sheet financing arrangements
We did not have any off-balance sheet arrangements
as of December 31, 2021.
47
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 our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. The Company has
paid $9,250 to the Sponsor through December 31, 2021 for administrative support services.
Critical Accounting Policies
Net Loss Per Shares of Common Stock:
Net loss per share of common stock is computed
by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the
period, excluding shares of common stock subject to forfeiture. Weighted average shares for the year ended December 31, 2021 and the
period from December 9, 2020 (Inception) to December 31, 2020 were reduced for the effect of an aggregate of 375,000 shares of common
stock subject to forfeiture if the over-allotment option was not exercised by the underwriter (see Note 3). At December 31,
2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common
stock and then share in the earnings or losses of the Company under the treasury stock method. As a result, diluted loss per share of
common stock is the same as basic loss per share of common stock for the period presented.
Financial Instruments:
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurement”, approximates the
carrying amounts represented on the balance sheet.
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:
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.
Use of Estimates:
The preparation of financial statements in conformity
with GAAP requires the Company’s 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. Actual results could differ from those estimates.
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.
48
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
We are a smaller reporting
company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears following Item 16
of this Amendment and is included 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
Disclosure controls and procedures
are controls and other procedures that are 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 our management, including
our Chief Executive Officer (Principal Executive Officer, Principal Financial and Accounting Officer), as appropriate to allow timely
decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the
Exchange Act, our Chief Executive Officer (Principal Executive Officer, Principal Financial and Accounting Officer) carried out an evaluation
of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Based upon his evaluation,
our Chief Executive Officer (Principal Executive Officer, Principal Financial and Accounting Officer) concluded that, our disclosure controls
and procedures were not effective related to the lack of sufficient accounting personnel to manage the Company’s financial accounting
process and certain accruals not initially being recorded in a timely manner which combined constituted a material weakness in our internal
control over financial reporting. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements
were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements
included in this Annual Report on Form 10-K present fairly in all material respects our financial position, results of operations and
cash flows for the period presented.
A material weakness is a deficiency, or combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management concluded
that a deficiency in internal control over financial reporting existed relating to the lack of sufficient accounting personnel and certain
accruals not being recorded in a timely manner constituted a material weakness as defined in the SEC regulations.
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 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.
Management assessed the
effectiveness of our internal control over financial reporting at December 31, 2021. 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, 2021 due to the material weakness in our internal control over financial reporting described above.
This Annual Report on Form
10-K does not include an attestation report on internal control over financial reporting from our independent registered public accounting
firm due to our status as an emerging growth company under the JOBS Act.
49
Changes in Internal Control over Financial Reporting
During the most recently
completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting. In light of the restatement of our financial statements included in the Prior Reports, we plan to enhance our processes
to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting
standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature,
research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding
complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance
that these initiatives will ultimately have the intended effects.
ITEM 9B. OTHER INFORMATION.
On March 10, 2022, the Company
amicably terminated MaloneBailey LLP (“MaloneBailey”) as its independent registered public accounting firm. In connection
with the audit by MaloneBailey of the Company’s balance sheet as of December 31, 2020, and the related statements of operations,
stockholders’ equity, and cash flows for the period from December 9, 2020 (inception) through December 31, 2020, and
the related notes (collectively referred to as the “Financial Statements”). During the subsequent period through the date
of filing of this Current Report on Form 8-K, there were: (i) no disagreements with MaloneBailey on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure, which if not resolved to MaloneBailey’s satisfaction,
would have caused MaloneBailey to make reference to the subject matter of any such disagreements in its report; and (ii) no reportable
events as that term is defined in Item 304(a)(1)(v) of Regulation S-K. Further, the report of MaloneBailey on the Company’s Financial
Statements did not contain any adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit
scope or accounting principles. The report of MaloneBailey on the Financial Statements contained an explanatory paragraph disclosing
that the Financial Statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to
the Financial Statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial
doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note
3 to the Financial Statements. The Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. The
Company provided MaloneBailey with a copy of this Current Report on Form 8-K prior to filing it with the Securities and Exchange Commission
and has requested and received from MaloneBailey a letter addressed to the SEC stating whether MaloneBailey agrees with the statements
made herein. A copy of that letter, dated March 16, 2022, is attached as Exhibit 16.1 hereto.
On March 10, 2022, the Company
engaged Marcum LLP as its independent registered public accounting firm which was approved by the Company’s Board of Directors
and its Audit Committee. From the Company’s inception (December 9, 2020) through December 31, 2020, and in the subsequent
interim period through the date of this report, the Company has not consulted with Marcum LLP with respect to the application of accounting
principles to a specified transaction, either completed or proposed, or the type of audit opinion that would have been rendered on the
Company’s financial statements, or any other matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.
Effective April 11, 2022,
the Company entered into an agreement with Houston Natural Resources Inc., a Company controlled by our Chairman and CEO, for services
related to identifying potential business combination targets. The Company paid $275,000 up front related to this agreement in February
2022. A copy of that agreement is attached hereto as Exhibit 10.8.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.
Not applicable.
50
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Our current directors and executive officers
are as follows:
Name Age Title
Donald H. Goree 64 Chief Executive Officer, Director and Chairman
Donald W. Orr 69 President and Director
Joseph V. Salvucci, Sr. 65 Independent Director
Diego Rojas 67 Independent Director
Joseph V. Salvucci, Jr. 37 Independent Director
Donald H. Goree founded our company and
has served as our Chairman and Chief Executive Officer since our inception. Mr. Goree is also the founder of Houston Natural Resources,
Inc., a global natural resource corporation located in Houston, Texas and controlling member of our sponsor, and has served as its Chairman
and Chief Executive Officer since January 2018. Mr. Goree is also the Chairman and Chief Executive Officer of Houston Natural
Resources Corp, positions he has held since April 2020. Mr. Goree has over 40 years’ experience in the oil and gas
industry involving exploration and production, oil and gas pipeline construction and operations, natural gas gathering, processing and
gas liquification. In 2003, Mr. Goree founded Global Xchange Solutions AG., a publicly reporting corporation, private equity, investment
bank and market-making firm, based in Zurich, Switzerland, with offices in Frankfurt, Germany and London, United Kingdom, and
served as Chairman and Chief Executive Officer of Global Xchange Solutions from 2002 to 2012. Global Xchange Solutions sponsored listings
of private companies to the London Stock Exchange, AIM, the Frankfurt Stock Exchange, the Berlin Stock Exchange and the Börse Stuttgart, and
provided public company development and marketdevelopment advice. From 2003 to 2005, Mr. Goree served as Chairman and
Chief Executive officer of Azur Holdings, Inc., a Fort Lauderdale, Florida-based, OTC-listed luxury real estate developer of mid-rise waterfront
condominiums. From 2012 to 2019, Mr. Goree served as the Managing Director of Rhone Merchant House Ltd., a firm which provides merchant
banking and investment banking services to a small and elite list of clients. Mr. Goree has an Executive Master of Business and Entrepreneurship
degree from the Rice University Jones Graduate School of Business. We believe Mr. Goree is qualified to serve as a member of our
board of directors based on our review of his experience, qualifications, attributes and skills, including co-founding our company
and other companies and his executive leadership experience in the oil and gas industry.
Donald W. Orr has served as our President
and a member of our Board of Directors since January 2021. Mr. Orr is a geologist with over 42 years of experience in petroleum
geology and production operations. Mr. Orr began his career as a junior geologist with Texas Oil and Gas Corporation in 1976. In
February 1979, Mr. Orr helped form American Shoreline, Inc., an independent oil and gas company. Mr. Orr was previously held
the title of Senior Geologist at Seven Energy LLC, a wholly owned subsidiary of Weatherford International plc from June 2005 to August
2008, where he helped pioneered numerous innovations in UBD (underbalanced drilling), including drilling with unconventional materials
and devising the methodology for unlocking the productive capacity of the Buda Lime through the use of UBD. In June 2009, Mr. Orr
founded XNP Resources, LLC, an independent oil and gas company engaged in the exploration, development, production, and acquisition of
oil and natural gas resources. Shortly thereafter, XNP Resources teamed up with Tahoe Energy Partners, LLC in 2012 to acquire oil and
gas leases for drilling in the Rocky Mountain region. At Mr. Orr’s direction, XNP Resources began acquiring a strategic leasehold
position in the Sand Wash Basin in Colorado. XNP Resources was able to secure a major leasehold position in the heart of what has become
the highly competitive Niobrara Shale formation in western Colorado. Since 2014, Mr. Orr has been developing an unconventional resource
play in Alaska that contains over 600 billion cubic feet of gas in stacked coal reservoirs. More recently, Mr. Orr assembled
a team of oil and gas professionals in order to study certain oil provinces in Columbia. S.A. Mr. Orr also serves as President and
on the Board of Directors of Houston Natural Resources, Inc. Mr. Orr has a Bachelor of Science degree in Geology from Texas A&I
University, with a minor in Mathematics.
51
Joseph V. Salvucci, Sr. has served
as a member of our board of directors since December 2021. Mr. Salvucci acquired PEAK Technical Staffing USA (“PEAK”),
peaktechnical.com in 1986 and has grown the business to be a premier provider of USA-based contract engineers and technical specialists,
on assignment worldwide through a comprehensive, customer focused, enterprise-wide Managed Staffing Solution. During his 35 year
tenure as owner of the company, PEAK has expanded from Pittsburgh to do business in all 50 States, Canada, Europe, South America, India,
and the Philippines. Mr. Salvucci is also active in several professional and charitable organizations. He served 10 years on the
board of directors culminating as President of the National Technical Services Association, a trade association representing 300,000
contractors on assignment in the technical staffing industry, later merging with the American Staffing Association. He is an active member
of the Young Presidents Organization Gold, formerly known as the World Presidents Organization (WPO), and has served as a member of the
WPO International Board, as well as chairman of East Central US (ECUS) Region and Pittsburgh chapters. As a 1976 Civil Engineering graduate
of the University of Pittsburgh, he was member of the Triangle (Engineering) Fraternity and its Alumni Association. He earned the Triangle
Fraternity Distinguished Alumnus Citation in 2011 and currently serves on the Board of Directors. After earning the rank of Eagle Scout
in 1970, he has remained active with the Boy Scouts of America, having served as Chairman of the Pittsburgh Chapter of the National Eagle
Scout Association, earning the NOESA (National Outstanding Eagle Scout Award) and the Silver Beaver Award and is currently VP of Development
and a board member of the Laurel Highlands Council in Western Pennsylvania. He was awarded the Manifesting the Kingdom Award by the Catholic
Diocese of Pittsburgh in 2011. He was awarded the “Big Mac Award” from the Ronald McDonald Charities. He earned his BS in
Civil Engineering from the University of Pittsburgh in 1976 and attended Harvard Business School’s OPM 33. We believe Mr. Salvucci
is qualified to serve as a member of our board of directors based on our review of his extensive executive experience, qualifications,
attributes and skills, including founding and growing PEAK into a global staffing enterprise.
Diego Rojas has served as a member
of our board of directors since January 2021. Mr. Rojas has 40 years’ experience in the oil and gas industry with most
of that experience in energy operations onshore, offshore and internationally. He began his career in 1975 with Exxon Company USA in
their Southeast Division headquarters in New Orleans, Louisiana, and eventually became District Engineering Manager for Exxon’s
Offshore District, with responsibility for more than 75 engineers, 200 offshore platforms and 2,000 wells. After leaving Exxon,
Mr. Rojas led several independent companies both in the United States and Latin America, including Enercap Corp (formerly,
DCR Petroleum), which he founded in 1983, and served as Principal Owner until 1985. Prior to DRC Petroleum, Mr. Rojas was an independent
acquisitions and operations consultant involved in exploration and production (E&P) and services company activities. From 1991 to
1994, Mr. Rojas served as Vice President of King Ranch Capital, where he managed King Ranch Capital’s acquisitions group.
For the past five years Mr. Rojas has served as a consultant with Enerlat, a private consulting company which he controls. Mr. Rojas
graduated with honors from the University of Florida with a Bachelor of Science in Mechanical Engineering. We believe Mr. Rojas
is qualified to serve as a member of our board of directors based on our review of his experience, qualifications, attributes and skills,
including his management experience and his considerable experience in the oil and gas industry.
Joseph V. Salvucci, Jr. has served
as a member of our board of directors since December 2021. Mr. Salvucci began his career with PEAK in November 2010 and is currently
serving as the President and Chief Operating Officer overseeing nine branches with several hundred employees, and the Marketing and Recruiting
Process Enhancement departments. Joseph also oversees strategic initiatives, including Staff Training, Career Pathing, and Organic Growth.
A graduate of Susquehanna University in Pennsylvania, Mr. Salvucci earned his Bachelor of Science in Business Administration with
emphasis in Finance, and studied Business in London. Before joining PEAK, Mr. Salvucci worked with Merrill Lynch in various banking
and brokerage back-office functions from 2007 to 2009. In addition to his responsibilities as President/COO of PEAK, Mr. Salvucci
serves on the board of Temporary Services Insurance Limited, a Workers’ Compensation company serving staffing companies. We believe
Mr. Salvucci is qualified to serve as a member of our board of directors based on our review of his extensive experience, qualifications,
attributes and skills, including his education and expertise in finance, and his management and executive experience as President and
COO of PEAK.
Family Relationships
There are no family relationships between any
of our officers and directors, except that Mr. Joseph V. Salvucci Jr. and Mr. Joseph V. Salvucci Sr. are father and son.
Number and Terms of Office of Officers and Directors
Our board of directors has five directors. Our
board of directors is divided into two classes with only one class of directors being elected in each year and each class (except for
those directors appointed prior to our first annual meeting of stockholders) serving a one-year term. The class I directors consist
of Diego Rojas and Joseph V. Salvucci, Jr., and their term expires at our first annual meeting of stockholders. The class II directors
will consist of Donald H Goree, Donald W. Orr and Joseph V. Salvucci, Sr. and their term expires at the second annual meeting of stockholders.
We may not hold an annual meeting of stockholders until after we consummate our initial business combination.
Our officers are elected 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 appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of
a Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Assistant Secretaries, Treasurer and such
other offices as may be determined by the board of directors.
52
Director Independence
The NYSE American 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. Of the current members of our board of directors, Messrs. Salvucci Sr., Rojas and Salvucci Jr. are each considered an “independent
director” under the NYSE American listing standards and applicable SEC rules. Our independent directors will have regularly scheduled
meetings at which only independent directors are present.
Executive Officer and Director Compensation
None of our executive officers or directors has
received any cash compensation for services rendered to us.
On December 8, 2021, the Board of Directors
of the Company agreed to compensate the directors of the Company through the issuance of shares of the Company equal in value to
$100,000 per director, which shall be payable and issued subject to one year of continued service to the Company commencing after
the completion of the initial business combination (and which shall be pro-rated for any period less than one year of service).
Commencing on February 10, 2022 through the earlier of 12 months (or up to 18 months if we extend the period of time to
consummate a business combination) after such effective date or the consummation of our initial business combination, we will pay
our sponsor $10,000 per month for providing us with office space, utilities, secretarial and administrative services. However, this
arrangement is solely for our benefit and is not intended to provide our officers or directors compensation in lieu of a salary. 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. There is no limit on the amount of out-of-pocket expenses
reimbursable by us; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the trust
account, such expenses would not be reimbursed by us unless we consummate an initial business combination. Our audit committee will
review and approve all reimbursements and payments made to our sponsor, officers, directors or our or their respective affiliates,
with any interested director abstaining from such review and approval.
Other than the $10,000 per month administrative
fee for office space, utilities, secretarial and administrative services, and the reimbursement for out-of-pocket expenses, no compensation
or fees of any kind will be paid to our sponsor, or members of our management team or their respective affiliates, for services rendered
prior to or in connection with the consummation of our initial business combination (regardless of the type of transaction that it is).
After the completion of our initial business
combination, directors or members of our management team who remain with us may be paid consulting, management or other fees from the
combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials
or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. It is unlikely the
amount of such compensation will be known at the time, 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
by a compensation committee consisting solely of independent directors.
We do not intend to take any action to ensure
that members of our management team maintain their positions with us after the consummation 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 the 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 consummation 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.
Committees of the Board of Directors
Our board of directors has three standing committees:
an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee operates under a charter
that has been approved by our board of directors and has the composition and responsibilities described below. The charter of each committee
is available on our website. Our audit committee, compensation committee and nominating and corporate governance committee is composed
solely of independent directors.
53
Audit Committee
We have established an audit committee of the
board of directors. The members of our audit committee are Messrs. Salvucci Sr. and Salvucci Jr., and Mr. Salvucci Jr. serves as
chairman of the audit committee. As a smaller reporting company under the NYSE American listing standards, we are required to have at
least two members on the audit committee. The rules of the NYSE American and Rule 10A-3 of the Exchange Act require that the
audit committee of a listed company be comprised solely of independent directors. Each of Messrs. Salvucci Sr. and Salvucci Jr. qualifies
as an independent director under applicable rules. Each member of the audit committee is financially literate and our board of directors
has determined that Mr. Salvucci Jr. 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:
Compensation Committee
We have established a compensation committee
of the board of directors consisting of three members. The members of our Compensation Committee are Messrs. Rojas and Salvucci, Jr.
Mr. Salvucci, Jr. serves as chairman of the compensation committee. Under the NYSE American listing standards and applicable SEC
rules, we are required to have at least two members on the compensation committee, all of whom must be independent.
We have adopted a compensation committee charter,
which details the principal functions of the compensation committee, including:
● reviewing our executive compensation policies and plans;
54
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 the NYSE American and the SEC.
Nominating and Corporate Governance Committee
We have established a nominating and corporate
governance committee. The members of our nominating and corporate governance are Messrs. Rojas and Salvucci Jr. Mr. Rojas serves
as chair of the nominating and corporate governance committee.
The primary purposes of our nominating and corporate
governance committee are to assist the board in:
The nominating and corporate governance committee
is governed by a charter that complies with the rules of the NYSE American.
Director Nominations
Our nominating and corporate governance committee
will recommend to the board of directors candidates for nomination for election at the annual meeting of the stockholders. The board
of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking
proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders).
We have not formally established any specific,
minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating
nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our
business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Prior to our initial business combination, holders of our public shares will not have the right to recommend director candidates for
nomination to our board of directors.
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 board of directors or compensation committee of any entity that has one or more
executive officers serving on our board of directors, except that Donald W. Orr, our President and Board member, serves on the Board
of Directors of Houston Natural Resources, Inc., an entity of which Donald H. Goree, our Chairman of the Board, serves as Chief Executive
Officer.
Code of Ethics
We have adopted a Code of Ethics applicable to
our directors, officers and employees. The Code of Ethics and the charter of each committee is available on our website. 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. See “Where You Can Find Additional Information.”
55
Conflicts of Interest
Each of our officers and directors presently
has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity 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 these fiduciary obligations under applicable law. We do not believe, however, that the
fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business
combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity
offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director
or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be
reasonable for us to pursue.
Potential investors should also be aware of the
following other potential conflicts of interest:
56
The conflicts described above may not be resolved
in our favor.
In general, officers and directors of a corporation
incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
● the corporation could financially undertake the opportunity;
● the opportunity is within the corporation’s line of business; and
Accordingly, as a result of multiple business
affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the
above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation will provide that
the doctrine of corporate opportunity will not apply with respect to any of our officers or directors in circumstances where the application
of the doctrine would conflict with any fiduciary duties or contractual obligations they may have. We do not believe that these contractual
obligations will materially affect our ability to complete our business combination. Our amended and restated certificate of incorporation
will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is
expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we
are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
We are not prohibited from pursuing an initial
business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our
initial business combination with such a company, we, or a committee of independent directors, would obtain an opinion from an independent
investment banking firm or another independent entity that commonly renders valuation opinions that such an initial business combination
is fair to our company from a financial point of view. We will also provide a summary of any such opinion or report to shareholders in
connection with any vote on an initial business combination in our proxy materials or tender offer documents, as applicable, related
to our initial business combination in accordance with Section 1015(b) of Regulation S-K.
In the event that we submit our initial business
combination to our public stockholders for a vote, our sponsor has agreed to vote all shares of our common stock having voting rights
that it then owns in favor of our initial business combination.
Limitation on Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation
will provide that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists
or may in the future be amended. In addition, our amended and restated certificate of incorporation will provide that our directors will
not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, except to the extent such exemption
from liability or limitation thereof is not permitted by the DGCL.
We will enter 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 maintain 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 will obtain 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.
These provisions may discourage stockholders
from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing
the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit
us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement
and damage awards against officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the directors’
and officers’ liability insurance and the indemnification agreements are necessary to attract and retain talented and experienced
officers and directors.
57
ITEM 11. EXECUTIVE COMPENSATION
Officer and Director Compensation
None of our executive officers or directors have
received any cash compensation for services rendered to us.
We entered into an Administrative
Services Agreement pursuant to which we will pay our sponsor $10,000 per month for up to 12 months from February 10, 2022 for office
space, utilities, secretarial and administrative services. None of the $10,000 per month payment will be received by our officers or
directors or their affiliates (other than our sponsor). In the event the consummation of our initial business combination takes the maximum
18 months, our sponsor will be paid a total of $180,000 ($10,000 per month) for office space, utilities, secretarial and administrative
services, and will be entitled to be reimbursed for out-of-pocket expenses relating to certain activities it conducts on our behalf.
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 and approve all reimbursements and payments made to our sponsor, officers, directors or our or their
respective affiliates, with any interested director abstaining from such review and approval. 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; provided, however, that to the extent
such expenses exceed the available proceeds not deposited in the trust account, such expenses would not be reimbursed by us unless we
consummate an initial business combination.
After the completion of
our initial business combination, directors or members of our management team who remain with us may be paid consulting, management or
other fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender
offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. It
is unlikely the amount of such compensation will be known at the time, 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 by a compensation committee constituted solely by independent directors.
We do not intend to take
any action to ensure that members of our management team maintain their positions with us after the consummation 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 the 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 consummation 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.
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 the date of this report, by:
● each of our executive officers and directors; and
● all our executive officers and directors as a group.
58
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 units (and their constituent securities)
as these securities are not exercisable within 60 days of the date of this report.
Donald H. Goree — —
Donald W. Orr(4) — —
Joseph V. Salvucci, Sr. — —
Diego Rojas — —
Joseph V. Salvucci, Jr.(5) — —
All directors and executive officers as a group (5 individuals) __ —
(2) Consists solely of founder shares.
Changes in Control
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
On December 24, 2020,
our sponsor purchased 2,875,000 founder shares for an aggregate purchase price of $25,000, up to 375,000 founder shares of which were
subject to forfeiture. On February 4, 2022, our sponsor forfeited 373,750 founder shares and as a result, there are currently 2,501,250
founder shares issued and outstanding. The purchase price of the founder shares was determined by dividing the amount of cash contributed
to the company by the number of founder shares issued. Our sponsor has agreed not transfer any of its ownership interest in the founder
shares (except to certain permitted transferees) until the earlier of (i) 180 days following of the completion of our initial business
combination or earlier if, subsequent to our initial business combination, the last sale price of our common stock equals or exceeds
$12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period commencing at least 90 days after our initial business combination and (ii) the date
on which we complete a liquidation, merger, stock exchange or other similar transaction after our initial business combination that results
in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Our sponsor purchased an aggregate of
505,000 private placement units at a price of $10.00 per unit in a private placement that closed simultaneously with the closing of
our Initial Public Offering. Our sponsor has purchased from us an aggregate of 505,000 private placement units at a price of $10.00
per unit ($5,050,000 in the aggregate). The private placement units and the common stock and warrants which are components thereof
cannot be transferred except to certain permitted transferees until 30 days after the completion of our initial business
combination. Such permitted transferees will include our executive officers and directors and other persons or entities affiliated
with or related to them. Any permitted transferees receiving such securities will be subject to the same agreements with respect to
such securities as our sponsor. The private placement units were otherwise identical to the units sold in our Initial Public
Offering, including as to exercise price, exercisability and exercise period, except that that the private placement units (and
their constituent securities) will be entitled to registration rights. If the private placement warrants included in the private
placement units are held by holders other than our sponsor or any of its permitted transferees, such warrants will be redeemable by
us and exercisable by the holders on the same basis as the warrants included in the units being sold in our Initial Public
Offering.
59
As more fully discussed in
“Management — Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination
opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations,
he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination
opportunity to us. Our executive officers and directors currently have certain relevant fiduciary duties or contractual obligations that
may take priority over their duties to us.
Through December 31, 2021, a shareholder of our sponsor has funded
certain offering costs, totaling $88,200. The amount owed to our sponsor is unsecured, due on demand and non-interest bearing.
We entered into an Administrative
Services Agreement pursuant to which we will pay our sponsor $10,000 per month for up to 12 months from February 10, 2022 for office
space, utilities, secretarial and administrative services. None of the $10,000 per month payment will be received by our officers or
directors or their affiliates (other than our sponsor). In the event the consummation of our initial business combination takes the maximum
18 months, our sponsor will be paid a total of $180,000 ($10,000 per month) for office space, utilities, secretarial and administrative
services, and will be entitled to be reimbursed for out-of-pocket expenses relating to certain activities it conducts on our behalf,
as discussed below.
Effective April 11, 2022,
the Company entered into an agreement with Houston Natural Resources Inc., a Company controlled by our Chairman and CEO, for services
related to identifying potential business combination targets. The Company paid $275,000 up front related to this agreement in February
2022.
Additionally, in February 2022, the Company repaid
the $88,200 in short term advances from a shareholder of the Sponsor, and agreed to pay an additional $190,202 for expenses the individual
incurred related to services provided by our sponsor.
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 and approve all reimbursements and payments made to our sponsor, officers, directors or our or their
respective affiliates, with any interested director abstaining from such review and approval. 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; provided, however, that to the extent