Financial Position - As of December 31, 2022, the company had $75,612 in cash and a working capital deficit of $788,689[143]. - The company has net tangible assets exceeding $4,600,000, exempting it from certain SEC rules for blank check companies, allowing immediate trading of its securities[159]. - Only about $800,000 will be available outside the trust account for working capital, which may limit operational capabilities[164]. - The company has net proceeds of $87,975,000 from its Initial Public Offering and the sale of private placement units, which will be used to complete its business combination, assuming no redemptions[209]. - The company may incur substantial debt to complete a business combination, which could adversely affect its leverage and financial condition[208]. Business Combination Requirements - The company must complete its initial business combination within 15 months from February 15, 2022, or within 18 months if extended[153]. - The company requires a minimum net tangible asset of $5,000,001 upon consummation of the initial business combination to avoid SEC's "penny stock" rules[148]. - A minimum of 3,315,538 public shares, or approximately 28.51%, may need to be voted in favor for the initial business combination to be approved[145]. - If too many public stockholders exercise their redemption rights, the company may not meet closing conditions for a business combination[148]. - The company may not hold a stockholder vote unless required by law or if it chooses to do so for other reasons[144]. Stockholder Influence and Redemption - Initial stockholders own 22.48% of the outstanding shares, which may influence the approval of the initial business combination[145]. - Public stockholders may receive approximately $10.30 per share upon redemption if the initial business combination is not completed, potentially increasing to $10.40 if extensions occur[161]. - Stockholders holding 10% or more of common stock may lose redemption rights for excess shares if certain conditions are met[160]. - If the company cannot complete its initial business combination, public stockholders may receive approximately $10.30 to $10.40 per share upon liquidation of the trust account[174]. - The company intends to redeem public shares as soon as possible if it does not complete its business combination within the prescribed time frame[175]. Risks and Challenges - The company may face challenges in completing a desirable business combination if public stockholders redeem a large number of shares[149]. - The company may face intense competition from well-established entities in acquiring target businesses, potentially limiting its acquisition opportunities[161]. - There is a risk that third-party claims could reduce the funds in the trust account, leading to lower redemption amounts for stockholders[166]. - The company may incur write-downs or restructuring charges post-business combination, negatively impacting financial condition and stock price[165]. - The company may face claims from creditors if it distributes proceeds from the trust account before addressing creditor claims, potentially leading to punitive damages[169]. Management and Operational Risks - The company may face challenges in assessing the management capabilities of prospective target businesses, which could impact post-combination operations[196]. - The company anticipates that the investigation and negotiation of target businesses will require substantial management time and costs, which may not be recoverable if a combination is not completed[190]. - Conflicts of interest may arise as executive officers and directors allocate their time between the company and other business endeavors, potentially affecting the completion of the initial business combination[198]. - The departure of key personnel from an acquisition target could negatively impact the operations and profitability of the post-combination business[197]. - The company may not be able to diversify its operations, which could expose it to economic and competitive risks[210]. Regulatory and Compliance Issues - The company does not believe its principal activities will subject it to the Investment Company Act, as proceeds will be invested only in U.S. government treasury bills or money market funds[174]. - Compliance with the Sarbanes-Oxley Act may increase the time and costs associated with acquisitions, particularly due to the need for adequate internal controls[244]. - The SEC proposed rules on March 30, 2022, which may materially affect the company's ability to negotiate and complete initial business combinations[258]. - The company has not opted out of the extended transition period for new accounting standards, which may complicate financial comparisons with other public companies[243]. - The company is classified as an "emerging growth company" and intends to utilize exemptions from various reporting requirements, which may affect the attractiveness of its securities to investors[241]. Shareholder Dilution and Securities - The company may issue up to 100 million shares of common stock and 1 million shares of preferred stock, which could dilute existing stockholders' interests[188]. - The company experienced immediate and substantial dilution of approximately 105.4% (or $10.5416 per share) due to the nominal price paid for founder shares[226]. - The company issued warrants to purchase 8,625,000 shares of common stock, which could adversely affect the market price of the common stock and complicate business combinations[233]. - The company may amend the terms of the warrants without holder approval if at least 50% of the outstanding public warrants approve such amendments, potentially disadvantaging holders[231]. - There is currently no market for the company's securities, which may adversely affect liquidity and price, and an active trading market may never develop[236].
HNR Acquisition p(HNRA) - 2022 Q4 - Annual Report