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. 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, 2022 and December 31, 2021, we had $75,612 and $38,743 in cash, respectively, and a working capital deficit of $788,689
and $186,015, 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.
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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, 2022 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.
For the years ended December 31, 2022 and 2021,
we had a net loss of $750,347 and $13,782, respectively, which consisted of $1,598,013 and $13,782 of operating costs, respectively, $200,000
and $0 of franchise tax, partially offset by $1,268,362 and $0 of interest income on marketable securities held in our Trust Account,
and $969 and $0 of interest income, respectively. Operating costs increased during the current year due to the Company’s Initial
Public Offering that closed in February 2022, and costs related to pursuit of the Company’s Initial Business Combination. We also
recognized income tax expense of $221,665 and $0 for the years ended December 31, 2022 and 2021, respectively.
Liquidity and Capital Resources
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 $82,925,000
of net proceeds were placed in the trust account. We incurred $4,793,698 in transaction costs, including $2,587,500 of underwriting fees,
$1,725,000 of underwriting discount and $481,198 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 equity 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.
At December 31, 2022, we had $75,612 in cash and a working capital
deficit of $788,689. Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition
plans. On February 5, 2023, the Company received notice from the Sponsor of its intention to extend the Combination period by three months
until May 15, 2023. On February 8, 2023 in accordance with the Company’s amended and restated certificate of incorporation, the
Sponsor’s designee deposited $862,500 into the Company’s trust account in connection with the extension. There is one additional
three-month extension available to the Company. In the event we do not complete a Business Combination by May 15, 2023, or within an additional
three months from that date if the available extension is exercised, the Company is required to redeem the public shares sold in the Initial
Public Offering. Additionally, our officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to
time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.
Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may
be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing
will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date that the financial statements are issued. There is no assurance
that the Company’s plans to consummate a Business Combination will be successful within the Combination Period. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
53
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, 2022.
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 $124,250 to the Sponsor through December 31, 2022 for administrative
support services.
Critical Accounting Policies
The preparation of financial statements and related
disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption:
The Company accounts for its common stock subject
to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity”. Common stock subject to mandatory redemption (if any) are classified as a liability instrument and are
measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either
within the control of the holder or subject to the redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s
common stock issued in the Initial Public Offering feature certain redemption rights that are considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, the shares of common stock subject to possible redemption
will be presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance
sheet upon closing of the Initial Public Offering.
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 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). The Company has not considered the effect of the warrants sold in the Initial Public Offering
and private placement warrants to purchase an aggregate of 6,847,500 shares in the calculation of diluted income per share,
since the exercise of the warrants is contingent upon the occurrence of future events. 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.
The Company’s statements of operations
include a presentation of net loss per share for common stock shares subject to possible redemption in a manner similar to the two-class
method of income per share. Net loss per common share, basic and diluted, for redeemable common stock is calculated by dividing the net
income allocable to redeemable common stock, by the weighted average number of redeemable common shares outstanding since original issuance.
Net loss per common stock, basic and diluted, for non-redeemable common stock is calculated by dividing net income allocable to non-redeemable
common stock, by the weighted average number of shares of non-redeemable common stock outstanding for the periods. Shares of non-redeemable
common stock include the founder shares as these common shares do not have any redemption features and do not participate in the income
earned on the Trust Account.
54
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
In August 2020, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt-Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)
(“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models
that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces
additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity.
ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible
instruments. The amendments are effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including
interim periods within those fiscal years. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its
financial position, results of operations or cash flows.
Management does not believe
that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial
statements.
55
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, 2022. 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.
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Management’s Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing
Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with
GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of 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, 2022. 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, 2022 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.
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.
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.
Not applicable.
57
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 65 Chief Executive Officer, Director and Chairman
Donald W. Orr 70 President and Director
Joseph V. Salvucci, Sr. 66 Independent Director
Diego Rojas 68 Independent Director
Joseph V. Salvucci, Jr. 38 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.
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.
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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.
59
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, other than Donald W. Orr, as detailed below.
We currently pay our sponsor $5,000 per month for providing us with
office space, utilities, secretarial and administrative services. We also agreed to pay Sponsor an additional $5,000 per month for such
services, but have agreed with Sponsor to defer payment to Sponsor of such additional accrued amounts until the closing of the Purchase.
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 $5,000 per month, including the deferred payments, administrative
fee for office space, utilities, secretarial and administrative services, and the reimbursement for out-of-pocket expenses, and $5,000
per month paid to Donald W. Orr, 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).
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).
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. Any compensation to be paid to our executive
officers will be determined by a compensation committee consisting solely of independent directors in accordance with the compensation
committee charter.
Some or all of our executive officers and directors
may negotiate employment or consulting arrangements to remain with us after the initial business combination. 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.
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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:
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● reviewing our executive compensation policies and plans;
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.
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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.”
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 provides 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:
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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 provides 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.
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ITEM 11. EXECUTIVE COMPENSATION
Officer and Director Compensation
We currently pay our sponsor $5,000 per month
for providing us with office space, utilities, secretarial and administrative services. We’ve also agreed to pay Sponsor an additional
$5,000 per month for such services, but have agreed with Sponsor to defer payment to Sponsor of such additional accrued amounts until
the closing of the Purchase. 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 $5,000 per month, including the
deferred payments, administrative fee for office space, utilities, secretarial and administrative services, and the reimbursement for
out-of-pocket expenses, and $5,000 per month paid to Donald W. Orr, 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).
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).
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. Any compensation to be paid to our executive
officers will be determined by a compensation committee constituted solely by independent directors in accordance with the compensation
committee charter.
Some or all of our executive officers and directors
may negotiate employment or consulting arrangements to remain with us after the initial business combination. 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.
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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 W. Orr(4) — —
Joseph V. Salvucci, Sr. — —
Diego Rojas — —
Joseph V. Salvucci, Jr.(5) — —
All directors and executive officers as a group (5 individuals) 367,969 3.16 %
(2) Consists solely of founder shares.
(3) Based on 11,631,250 shares of common stock outstanding.
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 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) in a private placement that closed simultaneously
with the closing of our Initial Public Offering. The common stock and warrants which were components of the private placement units cannot
be transferred except to certain permitted transferees until 30 days after the completion of our initial business combination. Such permitted
transferees 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. If the private
placement warrants 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.
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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.
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