Breeze Acquisition (BREZ) - 2021 Q4 - Annual Report

Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements Overview This section identifies forward-looking statements, noting actual results may differ materially due to various factors, and the company does not commit to updating them - Forward-looking statements are identified by terms like 'believes,' 'estimates,' 'anticipates,' 'expects,' 'intends,' 'plans,' 'may,' 'will,' 'potential,' 'projects,' 'predicts,' 'continue,' or 'should,' or their negatives[10] - Actual results may differ materially from expectations due to factors such as the ability to complete an initial business combination, success in retaining or recruiting key personnel, potential conflicts of interest, ability to obtain additional financing, and market liquidity[10] - The company does not undertake any obligation to update or revise forward-looking statements, except as required by applicable securities laws[11] PART I Item 1. Business Breeze Holdings Acquisition Corp. is a blank check company formed in June 2020, targeting the North American energy sector, with a proposed business combination with D-Orbit, a space logistics company - Breeze Holdings Acquisition Corp. was incorporated on June 11, 2020, as a Delaware corporation[15] - The company's primary purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses, focusing on the North American energy sector[15] - On January 26, 2022, Breeze entered into a Business Combination Agreement with D-Orbit S.p.A., a space logistics and transportation infrastructure pioneer. Upon consummation, D-Orbit S.A. (Holdco) would become the NASDAQ-listed parent company[26] Proposed Ownership Structure Post-Business Combination with D-Orbit | Shareholder Group | Pro Forma Ownership (approx.) | | :---------------- | :---------------------------- | | Former Breeze Stockholders | 11% | | Former D-Orbit Shareholders | 84% | Overview Breeze Holdings Acquisition Corp. is a blank check company established in June 2020, aiming to acquire a business in the North American energy sector, leveraging its experienced management team - The company was formed on June 11, 2020, as a Delaware corporation, to effect a business combination, primarily targeting assets in the North American natural gas, natural gas liquids, crude oil, or refined products sectors[15] - The management team, including J. Douglas Ramsey, Ph.D., Russell D. Griffin, and Charles C. Ross, P.E., possesses nearly 30 years of average experience in the energy industry, with a track record in acquisitions, divestitures, and capital markets[18][19] - Management's strategy includes identifying fundamentally sound companies that can benefit from operational expertise, improved capital structures, and cost management, as demonstrated by their past success at EXCO Resources, Inc. and Saddle Operating, LLC[16][20][22] Proposed Business Combination with D-Orbit Breeze Holdings Acquisition Corp. has entered into a Business Combination Agreement with D-Orbit S.p.A., an Italian space logistics company, which will result in D-Orbit S.A. (Holdco) becoming the NASDAQ-listed parent - On January 26, 2022, Breeze entered into a Business Combination Agreement with D-Orbit S.p.A., a space logistics and transportation infrastructure pioneer[26] - The Business Combination involves D-Orbit shareholders contributing their shares to Holdco in exchange for Holdco Shares, and Merger Sub merging into Breeze, with Breeze becoming a wholly-owned subsidiary of Holdco[27] Key Terms of Business Combination with D-Orbit | Item | Description | | :--- | :--- | | Exchange Ratio | $1.2 billion / (D-Orbit Shares outstanding * $10) | | Breeze Common Stock | Converts to one Holdco Share | | Breeze Rights | Converts to 1/20th of a Holdco Share | | Breeze Warrants | Assumed by Holdco, convertible to Holdco Shares at $11.50 exercise price | | Debenture Financing | $30,000,000 aggregate principal amount of Holdco's Original Issue Discount Convertible Debentures, convertible at $12.00 per share | | PIPE Investment | 550,000 newly issued Holdco Shares for approximately $5.5 million gross proceeds | Business Strategy & Competitive Strengths Breeze's strategy is to identify, acquire, and build companies in the North American energy industry that can benefit from its management team's operational expertise and extensive network - The acquisition and value creation strategy is to identify, acquire, and build a company in the North American energy industry that complements the management team's experience and can benefit from their operational expertise[40] - The strategy leverages the management team's broad network of contacts and industry relationships, developed through extensive experience in investing and operating in the energy industry[41] - Key strategies for generating favorable returns include acquiring quality, producing assets with high working interests, providing development capital and expertise, leveraging proved developed reserves, and targeting assets with significant opportunities for cost improvements and new technology application[44][45] Acquisition Strategy Breeze's acquisition strategy focuses on target businesses well-positioned for growth in key domestic basins, possessing significant proved developed producing reserves, and offering opportunities for improved financial performance - The company seeks to acquire businesses that are well-positioned to benefit from increased production, have significant proved developed producing reserves, and can generate substantial current free cash flow[46] - Target businesses should have the potential for significant growth in shareholder value, be at an inflection point requiring additional management expertise or innovation, and have leading positions within the energy industry[46] - A thorough due diligence review is conducted, involving meetings with management, document reviews, facility inspections, and leveraging the expertise of the management team and I-Bankers[49] Initial Business Combination Breeze's initial business combination must be approved by a majority of independent directors and have an aggregate fair market value of at least 80% of the trust account assets - The initial business combination requires approval by a majority of independent directors and must have an aggregate fair market value of at least 80% of the assets held in the trust account[57] - The company will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest[58] - Stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company if a substantial number of new shares are issued in exchange for the target's capital stock[60] Our Business Combination Process The business combination process involves thorough due diligence, assembling expert teams, rigorous research and analysis to determine intrinsic value, and implementing optimal operating and financial structures - The process includes conducting thorough due diligence, assembling industry and financial experts, and performing disciplined, bottom-up fundamental research and analysis[61][62] - The management team aims to acquire target companies at attractive prices relative to their intrinsic value, evaluating future cash flow potential, industry valuation metrics, and precedent transactions[62] - Post-combination, the company intends to evaluate opportunities to enhance shareholder value by developing corporate strategies, opportunistically accessing capital markets, and identifying acquisition/divestiture opportunities[63] Corporate Information Breeze Holdings Acquisition Corp. is an 'emerging growth company' under the JOBS Act, allowing it to take advantage of certain exemptions from reporting requirements and an extended transition period for new accounting standards - The company is an 'emerging growth company' as defined by the JOBS Act[66] - As an emerging growth company, it is eligible for exemptions from auditor attestation requirements of Section 404 of Sarbanes-Oxley Act, reduced executive compensation disclosures, and exemptions from non-binding advisory votes on executive compensation[66] - The company intends to take advantage of the extended transition period for complying with new or revised financial accounting standards, allowing it to delay adoption until private companies are required to comply[67] Status as a Public Company Breeze offers target businesses an alternative to a traditional IPO, providing greater access to capital, enhanced management incentives, and an increased public profile, which is considered more expeditious and cost-effective - Being a public company offers target businesses an alternative to traditional IPOs, providing greater access to capital and additional means of creating management incentives aligned with stockholders' interests[69] - The business combination method is considered more expeditious and cost-effective than a typical IPO, which involves significant expenses and longer timelines[70] - Public company status can augment a company's profile among potential new customers and vendors and aid in attracting talented employees[71] Financial Position As of December 31, 2021, Breeze had approximately $117.9 million in its trust account, providing flexibility for its initial business combination through various financing options Trust Account Balance (as of December 3