Drilling Tools International (US:DTI)2023-03-20 16:00IPO and Financial Proceeds - The company completed its initial public offering on December 6, 2021, raising gross proceeds of $180 million from the sale of 18 million units at $10.00 per unit[23]. - An additional 2.7 million units were sold under the over-allotment option, generating an extra $27 million in gross proceeds[25]. - A total of $209.07 million was placed in a trust account, consisting of $201.11 million from the IPO and $7.96 million from private unit sales[26]. - Following the full exercise of the underwriters' over-allotment option, the company issued an additional 2,700,000 units for $27,000,000, bringing the total proceeds in the trust account to $209,070,000[215]. - As of December 31, 2022, the company had cash and marketable securities in the trust account amounting to $213,475,172, which will be used to complete the business combination[219]. - The company generated gross proceeds of $180,000,000 from the initial public offering of 18,000,000 units at $10.00 per unit, with an additional $1,800,000 funded by the sponsor, resulting in a total trust account balance of $181,800,000[214]. - The company incurred $4,012,520 in initial public offering related costs, including $3,600,000 in underwriting fees[216]. Business Combination and Merger Agreement - The company entered into a merger agreement with Drilling Tools on February 13, 2023, which operates 22 locations across North America, Europe, and the Middle East[28][29]. - The merger agreement stipulates that the minimum cash condition at closing must equal or exceed $55 million from the trust account and equity financing[41]. - The company must complete its initial business combination by June 6, 2022, or face termination and distribution of trust account amounts[27]. - The merger agreement includes customary representations and warranties regarding operations, financial statements, and compliance with laws[39]. - The consummation of the Drilling Tools Business Combination is conditioned upon the Company having at least $5,000,001 of net tangible assets[46]. - The Drilling Tools Merger Agreement may be terminated if the other party breaches its representations, warranties, covenants, or agreements[47]. - The company may pursue an initial business combination with a company affiliated with its sponsor, officers, or directors, subject to obtaining a fairness opinion[68]. - The company must consummate an initial business combination with target businesses that have an aggregate fair market value of at least 80% of the assets held in the trust account[82]. - The company may issue a significant amount of debt or equity to consummate an initial business combination, potentially resulting in stockholders owning a minority of the combined company's voting securities[104]. - The company requires a net tangible asset threshold of at least $5,000,001 to consummate an initial business combination[112]. - Stockholder approval is required for mergers with target companies, while asset purchases do not require such approval[109]. - The company may incur losses from costs associated with identifying and evaluating prospective target businesses that do not result in completed transactions[103]. - The company has the flexibility to structure the initial business combination using cash, debt, or equity securities[97]. - The management team will conduct thorough due diligence on prospective target businesses, including financial reviews and management assessments[102]. - The company may engage professional firms to assist in identifying target businesses, potentially incurring finder's fees[98]. - The company may not consummate any other business combination prior to the initial business combination, ensuring focus on the current objective[169]. Financial Performance and Reporting - For the year ended December 31, 2022, the company reported a net income of $1,015,702, driven by interest income of $2,843,649, offset by operating costs of $1,281,902 and income tax provision of $546,045[212]. - Cash used in operating activities for the year ended December 31, 2022, was $1,667,273, with a net loss of $1,015,702 impacted by interest earned on investments[217]. - The company does not expect to generate operating revenues until after the completion of the initial business combination[211]. - The company has not engaged in any operations other than searching for an initial business combination since its inception on September 2, 2021[211]. - The company has reporting obligations under the Exchange Act, including the requirement to file annual and quarterly reports with the SEC[182]. Trust Account and Redemption Rights - The amount in the trust account as of December 31, 2022, was approximately $10.31 per public share[124]. - The company will only redeem public shares if net tangible assets are at least $5,000,001 immediately prior to or upon consummation of the initial business combination[134]. - Public stockholders can redeem shares at a per-share price equal to the aggregate amount in the trust account divided by the number of outstanding public shares[124]. - The company intends to redeem 100% of its outstanding public shares promptly after the end of the Combination Period, with a per-share distribution expected to be approximately $10.10[166]. - If the initial business combination is not completed by the end of the Combination Period, public stockholders will receive a cash redemption equal to the aggregate amount in the trust account divided by the number of outstanding public shares[145]. - The company will cease operations and redeem public shares if the initial business combination is not completed by the deadline, with a maximum of $100,000 allocated for dissolution expenses[145]. - The company’s sponsor, officers, and directors have waived their rights to liquidating distributions from the trust account concerning their founder shares if the initial business combination is not completed[146]. - The company will conduct redemptions either in connection with a general meeting or by means of a tender offer if the business combination is not consummated[126]. - The tender offer will remain open for at least 20 business days, and completion of the initial business combination is conditioned on public stockholders not tendering more than a specified number of public shares[133]. - The company anticipates that funds for redeeming public shares will be distributed promptly after the completion of the initial business combination[142]. - Any request to redeem shares may be withdrawn at any time up to the date of the stockholder meeting[142]. - The company will not proceed with amendments that affect redemption rights without providing public stockholders the opportunity to redeem their shares[149]. Management and Governance - The company has significant experience in executing transactions under varying economic conditions, providing a substantial number of potential business combination targets[88]. - The company believes its public status makes it an attractive partner for target businesses, offering a more efficient alternative to traditional IPOs[89]. - The management team has fiduciary obligations that may create conflicts of interest when evaluating potential business combinations[178]. - The company has not independently verified the financial stability of its sponsor, which may affect its indemnity obligations[180]. - The company expects its executive officers to devote an average of approximately 10 hours per week to its business[181]. - The company has agreed to pay EarlyBirdCapital a cash fee of $2,000,000 upon the consummation of the initial business combination[179]. - The company has entered into a director nomination agreement to nominate an individual designated by the sponsor to the board of directors[58]. - Certain Drilling Tools stockholders holding greater than 5% of its share capital will enter into a lock-up agreement for 180 days following the Closing Date[56]. - Insiders have waived their rights to participate in any redemption related to their founder shares, ensuring that public stockholders receive the full pro rata portion of the trust account[166]. Market and Competitive Landscape - The company is focused on acquiring non-operated, upstream oil and gas assets in the U.S., citing a significant opportunity set and low competition in this sector[22]. - The non-operated segment of the oil and gas sector is highly fragmented, presenting opportunities to buy high-quality assets at compelling prices[61]. - The company may face intense competition from other entities with similar business objectives, which may limit its ability to complete a business combination with sizable target businesses due to relatively limited financial resources[172]. - The company is classified as an "emerging growth company," allowing it to take advantage of certain exemptions from reporting requirements, including delaying the adoption of new accounting standards[92][94]. - The company will remain an emerging growth company until it has total annual gross revenue of at least $1.235 billion or the market value of its common stock held by non-affiliates exceeds $700 million[95]. - The company is also classified as a "smaller reporting company," which allows it to provide only two years of audited financial statements until certain market value or revenue thresholds are met[96].