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Syntec Optics (OPTX) - 2022 Q4 - Annual Report
Syntec Optics Syntec Optics (US:OPTX)2023-01-30 22:25

FORWARD LOOKING STATEMENTS The report contains forward-looking statements about future events, including the ability to select and complete a business combination, target business performance, and management retention - The report contains forward-looking statements about future events, including the ability to select and complete a business combination, target business performance, and management retention1214 - These statements are based on current expectations but involve risks and uncertainties that could cause actual results to differ materially13 - The company does not undertake to update or revise any forward-looking statements, except as required by applicable securities laws13 PART I ITEM 1. BUSINESS OmniLit Acquisition Corp. is a blank check company formed to effect a business combination, primarily targeting the advanced manufacturing industry, specifically photonics or optics sectors, with an enterprise value of $350 million to $750 million. The company leverages its experienced management team and board, who possess deep industry networks and M&A expertise, to identify and acquire suitable targets Introduction OmniLit Acquisition Corp. was incorporated as a blank check company to effect a business combination, focusing on the advanced manufacturing industry, specifically photonics or optics sectors - OmniLit Acquisition Corp. was incorporated on May 20, 2021, as a blank check company to effect a business combination16 - The company intends to focus on the advanced manufacturing industry, specifically photonics or optics sectors, targeting businesses with an enterprise value of approximately $350 million to $750 million16 Leadership The leadership team brings extensive experience in optics, photonics, finance, and M&A, crucial for identifying and growing target companies - Al Kapoor, CEO and Chairman, has over 20 years of experience in finding, acquiring, and growing optics and photonics companies, including building Syntec Optics17129 - Robert O. Nelson II, CFO, has 20+ years in finance, tax, and technology, with experience in public and private corporations, including optics and photonics companies18130 - Skylar M. Jacobs, COO, has eight years of experience working with technology entrepreneurs, focusing on business development, operations, and fundraising for M&A activities19131 Business and Investment Strategies The company's investment strategy focuses on the advanced manufacturing industry, specifically optics and photonics products, services, and end-markets, aiming to capitalize on significant market growth - The company's investment strategy focuses on the advanced manufacturing industry, specifically optics and photonics products, services, and end-markets24 - The global optics and photonics market is estimated between $7 trillion and $10 trillion annually, with photonics-enabled products and services exceeding $2 trillion in 2019, growing at a 4.2% CAGR from 2012-20192728 - Key growth areas for focus include Sensing, monitoring, and control (+10% CAGR), Advanced manufacturing (+8% CAGR), Semiconductor processing (+8% CAGR), BioMedical (+13% CAGR), and Defense, safety, and security (+10% CAGR)3137 Business Combination Criteria Target businesses are sought in the advanced manufacturing industry, particularly optics and photonics, with an enterprise value of $350 million to $750 million, requiring strategic growth capital and strong management - Target businesses are expected to be in the advanced manufacturing industry, focusing on optics and photonics, with an enterprise value of $350 million to $750 million35 - The company seeks targets that need strategic growth capital, can benefit from public listing, require creative approaches to unlock value, or need to repurchase debt, make acquisitions, or secure working capital35 - Additional criteria include scalability and growth potential, robust financial and regulatory processes and controls, and a strong management team4546 Competitive Strengths The management team's extensive experience in sourcing, valuation, diligence, and execution, combined with broad industry relationships, provides a significant competitive advantage in identifying and acquiring suitable targets - The management team's capabilities in sourcing, valuation, diligence, and execution provide a significant pipeline of opportunities42 - Strengths include a strong management team with extensive experience in acquisitions and financings, broad sourcing channels, leading industry relationships, and rigorous underwriting, execution, and structuring capabilities46 Initial Business Combination Nasdaq rules require the initial business combination to have an aggregate fair market value of at least 80% of the trust account assets, with stockholders approving an extension until November 12, 2023, for completion - Nasdaq rules require the initial business combination to have an aggregate fair market value of at least 80% of the trust account assets43 - Stockholders approved an extension, granting the company until November 12, 2023, to complete a business combination, without requiring additional funds to be deposited into the trust account48229 - In connection with the extension, 13,026,951 Class A common shares were redeemed at approximately $10.28 per share, leaving 1,348,049 shares outstanding as of December 21, 202249231 Our Initial Business Combination Process The company conducts thorough due diligence for prospective business combinations, addresses potential conflicts of interest through its certificate of incorporation, and requires a fairness opinion for affiliated transactions - The company will conduct thorough due diligence, including financial, operational, and legal reviews, for prospective business combinations52 - Affiliated transactions require an independent investment banking or accounting firm's fairness opinion53 - Conflicts of interest for management and directors, arising from founder shares, private warrants, or other obligations, are addressed by the company's certificate of incorporation, which renounces corporate opportunities not expressly offered to them in their company capacity5456 Lack of Business Diversification Post-business combination, the company's success may depend entirely on a single business, leading to a lack of diversification and increased exposure to adverse developments - Post-business combination, the company's success may depend entirely on a single business, leading to a lack of diversification58 - This lack of diversification could subject the company to adverse economic, competitive, and regulatory developments and dependence on a single or limited number of products/services59 Limited Ability to Evaluate a Target's Management Team The assessment of a target's management may not always be correct, and there is no assurance of retaining key personnel or recruiting additional managers, especially if future management lacks public company experience - The assessment of a target's management may not always be correct, and future management may lack public company experience59 - The future role of the founding team members is uncertain, and there is no assurance of retaining key personnel or recruiting additional managers596061 Competition The company faces intense competition from various entities, including other blank check companies and private equity groups, many of whom possess greater resources, placing the company at a competitive disadvantage - The company faces intense competition from various entities, including other blank check companies and private equity groups, in identifying and acquiring businesses62 - Many competitors possess greater financial, technical, and human resources, which may place the company at a competitive disadvantage63 Corporate Information The company's executive offices are located in Miami Beach, FL, with a provided telephone number - Executive offices are located at 1111 Lincoln Road, Suite 500, Miami Beach, FL 3313964 - The company's telephone number is (786) 750-282064 Employees The company has three executive officers who dedicate time as needed to business combination efforts - The company has three executive officers who devote time as needed to business combination efforts65 Reports to Security Holders The company files annual, quarterly, and current reports with the SEC, which are available online, and its financial statements are audited by independent registered public accountants - The company files annual, quarterly, and current reports with the SEC, available at http://sec.gov[66](index=66&type=chunk) - Financial statements are audited by independent registered public accountants66 Emerging Growth Company Status As an "emerging growth company" under the JOBS Act, the company benefits from exemptions like not complying with auditor attestation for Section 404 and has elected an extended transition period for new accounting standards - The company is an 'emerging growth company' under the JOBS Act, benefiting from exemptions like not complying with auditor attestation for Section 40467 - It has elected to use the extended transition period for complying with new or revised financial accounting standards68 - The company will remain an emerging growth company until the earlier of five years post-IPO, $1.07 billion in annual gross revenue, becoming a large accelerated filer ($700 million market value), or issuing over $1.0 billion in non-convertible debt69 Smaller Reporting Company Status The company qualifies as a "smaller reporting company," allowing for reduced disclosure obligations, such as providing only two years of audited financial statements, until specific market value or revenue thresholds are met - The company is a 'smaller reporting company,' allowing for reduced disclosure obligations, such as providing only two years of audited financial statements70 - This status will be maintained until the market value of non-affiliate common stock reaches $250 million, or annual revenues reach $100 million and market value reaches $700 million71 ITEM 1A. RISK FACTORS This section refers to the risk factors detailed in the company's Initial Public Offering Prospectus, stating that these factors could materially affect its operations or financial condition. No material changes to these risk factors have occurred as of the report date - Actual results may differ materially due to risks described in the IPO Prospectus72 - No material changes to the disclosed risk factors have occurred as of the date of this Annual Report72 ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable - Not applicable74 ITEM 2. PROPERTIES The company's executive offices are provided by its sponsor at no charge and are considered adequate for current operations - Executive offices are located at 1111 Lincoln Road, Suite 500 Miami Beach, FL 3313975 - Offices are provided by the sponsor at no charge and are considered adequate75 ITEM 3. LEGAL PROCEEDINGS The company is not currently a party to any material litigation or legal proceedings and is unaware of any legal exposure that could have a material adverse effect on its business, financial condition, or results of operations - The company is not currently a party to any material litigation or legal proceedings76 - No awareness of legal exposure with a material adverse effect on business, financial condition, or results of operations76 ITEM 4. MINE SAFETY DISCLOSURES Not applicable - Not applicable77 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES OmniLit's units, Class A common stock, and redeemable warrants trade on Nasdaq under symbols OLITU, OLIT, and OLITW, respectively. As of January 19, 2023, there was one holder of record for units and Class A common stock, one for Class B common stock, and four for public warrants. The company has not paid cash dividends and does not intend to prior to a business combination Market Information OmniLit's units began trading on Nasdaq in November 2021, with Class A common stock and redeemable warrants commencing separate trading in January 2022 - Units (OLITU) began trading on Nasdaq on November 9, 202180 - Class A common stock (OLIT) and redeemable warrants (OLITW) began separate trading on Nasdaq on January 24, 202280 Holders of Record As of January 19, 2023, the company had a limited number of holders of record for its units, Class A common stock, Class B common stock, and public warrants - As of January 19, 2023, there was one holder of record for units, one for Class A common stock, one for Class B common stock, and four for public warrants81 Dividends The company has not paid cash dividends on Class A common stock and does not intend to prior to an initial business combination, with future payments subject to board discretion and financial performance - No cash dividends have been paid on Class A common stock to date, and none are intended prior to an initial business combination82 - Future dividend payments are at the discretion of the board and will depend on revenues, earnings, capital requirements, and financial condition82 Securities Authorized for Issuance Under Equity Compensation Plans No securities are currently authorized for issuance under equity compensation plans - No securities are authorized for issuance under equity compensation plans83 Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities The sponsor purchased founder shares for $25,000, and the IPO generated $143,750,000 gross proceeds, with a total of $146,625,000 placed in a trust account from IPO and private placement proceeds - The sponsor purchased 4,791,667 founder shares for $25,000 (approx. $0.005 per share) on May 20, 2021, after a stock split84 - The IPO on November 12, 2021, sold 14,375,000 units at $10.00 each, generating $143,750,000 gross proceeds85 - Concurrently, 6,920,500 private warrants were sold for $6,920,500. A total of $146,625,000 from IPO and private placement proceeds was placed in a trust account. Transaction costs amounted to $8,333,135868788 Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no purchases of equity securities by the issuer or affiliated purchasers during the reporting period - No purchases of equity securities by the issuer or affiliated purchasers90 ITEM 6. [RESERVED.] This item is reserved and contains no information - This item is reserved91 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section discusses OmniLit's financial condition and results of operations, noting that as a blank check company, it has not generated operating revenues but incurs significant costs in pursuit of an acquisition. For the year ended December 31, 2022, the company reported net income of $847,623, primarily from interest earned on trust account investments, offsetting operational and transaction costs. The company's liquidity relies on funds outside the trust account for operational expenses and potential loans from the sponsor for transaction costs Overview OmniLit Acquisition Corp. was incorporated as a blank check company to effect a business combination, planning to use proceeds from its IPO, private warrants, capital stock, or debt for its initial acquisition - OmniLit Acquisition Corp. was incorporated on May 20, 2021, as a blank check company to effect a business combination92 - The company plans to use proceeds from its IPO, private warrants, capital stock, debt, or a combination for its initial business combination92 Results of Operations For the year ended December 31, 2022, the company reported a net income of $847,623, primarily driven by interest and dividends from trust account investments, offsetting formation, operational, and transaction costs - The company has not generated operating revenues and its activities have been limited to organizational tasks and searching for a business combination94 - For the year ended December 31, 2022, the company had a net income of $847,62395 - This net income resulted from $2,081,055 in interest and dividends from trust account investments, offsetting $787,639 in formation, operational, and transaction costs95 Liquidity and Capital Resources The company's IPO and private placement in November 2021 resulted in $146,625,000 placed in the trust account, with current liquidity relying on funds outside the trust account and potential additional financing from sponsor loans - IPO and private placement in November 2021 resulted in $146,625,000 placed in the trust account97 - As of December 31, 2022, cash and investments in the trust account were $14,011,070, and cash held outside the trust account was $117,506100101 - The company may need additional financing from sponsor loans or other sources to cover transaction costs or if significant public shares are redeemed102103 Off-Balance Sheet Financing Arrangements As of December 31, 2022, the company had no off-balance sheet obligations, assets, or liabilities - As of December 31, 2022, the company had no off-balance sheet obligations, assets, or liabilities105 Contractual Obligations The company has no long-term debt, capital lease, operating lease, or long-term liabilities, and its deferred underwriting fee was reduced to $500,000, payable only upon completion of the initial business combination - The company has no long-term debt, capital lease, operating lease, or long-term liabilities106 - The deferred underwriting fee was reduced from $5,031,250 to $500,000, payable only upon completion of the initial business combination107232 Critical Accounting Policies The company's critical accounting policies include warrant liabilities, common stock subject to possible redemption, and net income (loss) per common stock, which are crucial for financial reporting - The company's critical accounting policies include warrant liabilities, common stock subject to possible redemption, and net income (loss) per common stock108 Warrant Liabilities Warrants are classified as equity or liability based on specific accounting standards, with liability-classified warrants recorded at fair value and changes recognized as non-cash gain or loss - Warrants are classified as equity or liability based on ASC 480 and ASC 815, considering if they are freestanding, meet liability definition, and qualify for equity classification109 - Liability-classified warrants are recorded at fair value, with changes recognized as non-cash gain or loss in statements of operations110 Common Stock Subject to Possible Redemption Common stock subject to mandatory redemption is classified as a liability, and conditionally redeemable common stock as temporary equity, with changes in redemption value recognized immediately - Common stock subject to mandatory redemption is classified as a liability, and conditionally redeemable common stock as temporary equity111 - Changes in redemption value are recognized immediately, adjusting the carrying value to the redemption value at each reporting period end112 Net Income (Loss) per Common Stock Net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of outstanding common shares, with warrants excluded from diluted EPS due to contingent exercisability - Net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of outstanding common shares113 - Warrants were excluded from diluted EPS for 2022 due to contingent exercisability, resulting in basic and diluted EPS being the same113 - Remeasurement of redeemable common stock is excluded from EPS calculation as redemption value approximates fair value114 Recent Accounting Standards No other recently issued, but not yet effective, accounting standards are expected to materially affect the company's financial statements - No other recently issued, but not yet effective, accounting standards are expected to materially affect financial statements115 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2022, the company was not subject to any material market or interest rate risk. Proceeds from the IPO and trust account funds are invested in short-term U.S. government treasury obligations or money market funds, minimizing interest rate risk exposure - As of December 31, 2022, the company had no material exposure to market or interest rate risk116 - IPO proceeds and trust account funds are invested in short-term U.S. government treasury obligations or money market funds, limiting interest rate risk116 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This item refers to the financial statements and supplementary data located after Item 16 of the report, starting on Page F-1 - Financial statements and supplementary data are included after Item 16, starting on Page F-1117 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There are no changes in or disagreements with accountants on accounting and financial disclosure - None118 ITEM 9A. CONTROLS AND PROCEDURES This section details the company's disclosure controls and procedures and management's annual report on internal controls over financial reporting Evaluation of Disclosure Controls and Procedures As of December 31, 2022, disclosure controls and procedures were deemed effective by certifying officers, designed to ensure timely and accurate reporting despite inherent limitations - As of December 31, 2022, disclosure controls and procedures were deemed effective by certifying officers119 - Disclosure controls are designed to ensure timely and accurate reporting but cannot prevent all errors or fraud due to inherent limitations and resource constraints119120 Management's Annual Report on Internal Controls Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, which was assessed as effective as of December 31, 2022, without an auditor attestation due to the company's emerging growth company status - Management is responsible for establishing and maintaining adequate internal control over financial reporting to ensure reliable financial reporting121 - An assessment as of December 31, 2022, evaluated the control environment, risk assessment, control activities, information and communication, and quarterly controls122 - The report does not include an auditor attestation due to the company's emerging growth company status123 Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the most recent fiscal quarter - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter124 ITEM 9B. OTHER INFORMATION None - None125 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable - Not applicable126 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE This section provides information on OmniLit's directors and executive officers, their business experience, qualifications, terms of office, and the structure of its board committees (Audit and Compensation). The company emphasizes the diverse experience of its leadership team in strategic planning, financial reporting, and M&A Directors and Executive Officers The company's leadership team comprises experienced professionals in optics, finance, technology, and M&A, along with independent directors with expertise in private equity, automotive, and securities law - Al Kapoor (Chairman & CEO): Extensive experience in optics and photonics, founder of Syntec Optics, and M&A129 - Robert O. Nelson II (CFO): 20+ years in finance, tax, and technology, including financial systems and SEC compliance for optics companies130 - Skylar M. Jacobs (COO): 8 years in business development and operations for technology entrepreneurs, with expertise in fundraising and M&A131 - Independent Directors: Kent R. Weldon (private equity, M&A), Mark D. Norman (automotive, mobility, IPOs), and James M. Jenkins (securities law, SPAC compliance)132134136 Officer and Director Qualifications Officers and directors possess diverse experience in strategic and financial planning, financial reporting, compliance, risk management, and leadership, which is crucial for achieving acquisition goals - Officers and directors possess diverse experience in strategic and financial planning, financial reporting, compliance, risk management, and leadership139 - Their experience in managing assets and facilitating business combinations is crucial for achieving acquisition goals140 Number and Terms of Office of Officers and Directors The board consists of four directors, divided into two classes with two-year terms, while officers are appointed by and serve at the discretion of the board - The board has four directors, divided into two classes, with two-year terms141 - Officers are appointed by and serve at the discretion of the board of directors142 Family Relationships No family relationships exist among the company's directors and officers - No family relationships exist among directors and officers143 Board Committees The Board has standing Audit and Compensation Committees, both composed of independent directors with charters filed with the SEC - The Board has standing Audit and Compensation Committees, both with charters filed with the SEC144 - Both committees are composed of independent directors146148 Audit Committee The Audit Committee, composed of independent directors, oversees the independent auditor, pre-approves services, reviews related party transactions, and addresses compliance matters, with Mr. Norman qualifying as an "audit committee financial expert" - The Audit Committee comprises independent directors Mark D. Norman (Chair), James M. Jenkins, and Kent R. Weldon146 - Mr. Norman qualifies as an 'audit committee financial expert,' and all members are financially literate147 - Key functions include oversight of the independent auditor, pre-approval of services, setting hiring policies, reviewing related party transactions, and addressing compliance matters148151 Compensation Committee The Compensation Committee, consisting of independent directors, reviews and approves executive compensation policies and incentive plans, with no compensation paid to existing stockholders, officers, or directors prior to an initial business combination - The Compensation Committee consists of independent directors Kent R. Weldon (Chair) and Mark D. Norman148 - Functions include reviewing and approving CEO and other officer compensation, executive compensation policies, and incentive plans152 - No compensation is paid to existing stockholders, officers, or directors prior to the consummation of an initial business combination149 Director Nominations The company does not have a standing nominating committee, with independent directors recommending nominees based on educational background, diversity of experience, business knowledge, integrity, and independence, and stockholders able to nominate directors per company bylaws - No standing nominating committee; independent directors recommend nominees154 - Criteria for nominees include educational background, diversity of experience, business knowledge, integrity, and independence156 - Stockholders can nominate directors following company bylaws155 Compensation Committee Interlocks and Insider Participation There are no compensation committee interlocks or insider participation within the company - No compensation committee interlocks or insider participation157 Code of Ethics A code of conduct and ethics, applicable to directors, officers, and employees, has been adopted and filed with the SEC, codifying business and ethical principles and requiring disclosure of amendments or waivers - A code of conduct and ethics, applicable to directors, officers, and employees, has been adopted and filed with the SEC158 - The code codifies business and ethical principles and requires disclosure of amendments or waivers158 Section 16(a) Beneficial Ownership Reporting Compliance All Section 16(a) filing requirements for executive officers, directors, and greater than 10% beneficial owners were filed timely - All Section 16(a) filing requirements for executive officers, directors, and greater than 10% beneficial owners were filed timely160 ITEM 11. EXECUTIVE COMPENSATION This section details the company's executive compensation policies, noting that no employment agreements exist with executive officers and no cash compensation has been paid for services rendered to date. Reimbursements for out-of-pocket expenses are made to the sponsor, officers, and directors, subject to quarterly audit committee review. Post-business combination, directors or management may receive consulting or management fees, determined by the post-combination board or compensation committee Employment Agreements The company has no employment agreements with executive officers and no agreements for termination benefits - No employment agreements with executive officers161 - No agreements for termination benefits161 Executive Officers and Director Compensation No cash compensation has been paid to officers or directors for services rendered to date, with out-of-pocket expenses reimbursed and reviewed quarterly by the audit committee, and potential post-business combination consulting or management fees - No cash compensation has been paid to officers or directors for services rendered162 - Out-of-pocket expenses incurred by the sponsor, officers, and directors are reimbursed and reviewed quarterly by the audit committee162 - Post-business combination, directors or management may receive consulting or management fees, determined by the combined company's board or compensation committee163 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS This section details the beneficial ownership of common stock as of January 30, 2023, for major shareholders, officers, and directors. OmniLit Sponsor LLC and Al Kapoor each beneficially own 25.00% of common stock. Other significant holders include Polar Asset Management Partners Inc. (17.06%), Owl Creek Asset Management, L.P. (14.84%), Sea Otter Advisors, L.P. (9.27%), and Radcliffe Capital Management, L.P. (8.53%) Beneficial Ownership Beneficial ownership of common stock as of January 30, 2023, shows OmniLit Sponsor LLC and Al Kapoor each holding 25.00%, with other significant institutional investors also listed Beneficial Ownership of Common Stock (as of January 30, 2023) | Name | Number of Shares Beneficially Owned | Percent of Class | | :----------------------------------- | :--------------------------------- | :--------------- | | OmniLit Sponsor LLC | 4,791,667 | 25.00% | | Al Kapoor | 4,791,667 | 25.00% | | Polar Asset Management Partners Inc. | 230,000 | 17.06% | | Owl Creek Asset Management, L.P. | 200,000 | 14.84% | | Sea Otter Advisors, L.P. | 125,005 | 9.27% | | Radcliffe Capital Management, L.P. | 115,000 | 8.53% | | All officers and directors as a group (7 individuals) | 4,791,667 | 25.00% | - Interests shown consist solely of founder shares (Class B common stock), convertible to Class A common stock on a one-for-one basis170 Securities Authorized for Issuance Under Equity Compensation Plans No securities are authorized for issuance under equity compensation plans - No securities are authorized for issuance under equity compensation plans169 Changes in Control There have been no changes in control of the company - None171 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE This section outlines transactions and relationships involving the company's sponsor, officers, and directors. It covers the issuance of founder shares and private warrants, potential conflicts of interest due to fiduciary obligations, reimbursement policies for out-of-pocket expenses, and the terms of potential working capital loans from related parties. The company has adopted a code of ethics and its audit committee reviews related party transactions to ensure director independence Founder Shares and Private Warrants The sponsor purchased 4,791,667 founder shares for $25,000 and 6,920,500 private warrants for $6,920,500, both subject to transfer restrictions until 30 days after the initial business combination - The sponsor purchased 4,791,667 founder shares for $25,000172 - 6,920,500 private warrants were sold to the sponsor and underwriters for $6,920,500173 - Both founder shares and private warrants are subject to transfer restrictions until 30 days after the initial business combination172173 Fiduciary and Contractual Obligations Officers and directors have fiduciary or contractual obligations to other entities, potentially creating conflicts of interest, which the company addresses by renouncing corporate opportunities not expressly offered to them in their company capacity - Officers and directors have fiduciary or contractual obligations to other entities, potentially creating conflicts of interest regarding business opportunities175 - The company's certificate of incorporation renounces interest in corporate opportunities not expressly offered to directors/officers in their company capacity56 Reimbursement of Expenses The sponsor, officers, and directors are reimbursed for out-of-pocket expenses related to business combination activities, with payments reviewed quarterly by the audit committee and made from funds outside the trust account - The sponsor, officers, and directors are reimbursed for out-of-pocket expenses related to business combination activities176 - Payments are reviewed quarterly by the audit committee and made from funds outside the trust account176 Promissory Note and Working Capital Loans A $300,000 non-interest bearing loan from the sponsor for IPO expenses was repaid upon IPO closing, and the sponsor or affiliates may loan up to $1,500,000 for working capital, convertible into private warrants - A $300,000 non-interest bearing loan from the sponsor for IPO expenses was repaid upon IPO closing177 - The sponsor or affiliates may loan up to $1,500,000 for working capital, convertible into private warrants at $1.00 per warrant179 Post-Combination Compensation Directors or management remaining with the combined company may receive consulting or management fees post-business combination, with compensation determined by the post-combination board or its independent compensation committee - Directors or management remaining with the combined company may receive consulting or management fees post-business combination180 - Compensation will be determined by the post-combination board or its compensation committee, which will consist of independent directors180 Registration Rights Holders of founder shares and private warrants have registration rights, and the company will bear the expenses of filing registration statements - Holders of founder shares and private warrants have registration rights182 - The company will bear the expenses of filing registration statements182 Related Party Policy A code of ethics was adopted post-IPO to avoid conflicts of interest, with related party transactions reviewed by the audit committee, and affiliated business combinations requiring an independent fairness opinion - A code of ethics was adopted post-IPO to avoid conflicts of interest, with related party transactions reviewed by the audit committee183184185 - Affiliated business combinations require an independent fairness opinion187 - No finder's fees or cash payments are made to related parties prior to a business combination, except for expense reimbursements and repayment of specific loans187 Director Independence A majority of the board must be independent as per Nasdaq listing standards, with James M. Jenkins, Mark D. Norman, and Kent R. Weldon deemed independent directors - A majority of the board must be independent as per Nasdaq listing standards188 - James M. Jenkins, Mark D. Norman, and Kent R. Weldon are deemed independent directors188 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES This section details the fees paid to Marcum LLP, the independent registered public accounting firm, for audit, tax, and other services for the years ended December 31, 2022, and 2021. The audit committee, formed post-IPO, now pre-approves all auditing and permitted non-audit services Public Accounting Fees Marcum LLP serves as the independent registered public accounting firm, with a summary of fees paid for services rendered - Marcum LLP serves as the independent registered public accounting firm189 - Summary of fees paid to Marcum LLP for services rendered189 Audit Fees Audit fees paid to Marcum LLP were $111,240 for the year ended December 31, 2022, and $94,760 for the period from inception through December 31, 2021 Audit Fees Paid to Marcum LLP | Period | Amount | | :------------------------------------------ | :----------- | | Year Ended December 31, 2022 | $111,240 | | May 20, 2021 (inception) - December 31, 2021 | $94,760 | Audit-Related Fees No audit-related services were rendered for the periods presented - No audit-related services were rendered for the periods presented191 Tax Fees Tax fees paid to Marcum LLP were $7,200 for the year ended December 31, 2022, with no tax fees incurred in the prior period Tax Fees Paid to Marcum LLP | Period | Amount | | :------------------------------------------ | :----------- | | Year Ended December 31, 2022 | $7,200 | | May 20, 2021 (inception) - December 31, 2021 | $0 | All Other Fees No other fees were billed for products and services beyond audit and tax fees for the periods presented - No other fees were billed for products and services beyond audit and tax fees for the periods presented193194 Pre-Approval Policy The audit committee, formed post-IPO, pre-approves all auditing and permitted non-audit services, with prior services approved by the board of directors - The audit committee, formed post-IPO, pre-approves all auditing and permitted non-audit services195 - Services prior to the audit committee's formation were approved by the board of directors195 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report Financial Statements The financial statements include the Report of Independent Registered Public Accounting Firm, Balance Sheet, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and Notes to Financial Statements - Includes Report of Independent Registered Public Accounting Firm, Balance Sheet, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and Notes to Financial Statements198 Financial Statement Schedules All financial statement schedules are omitted as the information is either not applicable or presented within the financial statements or notes - All financial statement schedules are omitted198 - Information is either not applicable or presented in the financial statements or notes198 Exhibits A detailed list of exhibits, including key agreements and corporate documents, is filed with the report, with copies available on the SEC website - A detailed list of exhibits is filed with the report, including key agreements and corporate documents199201202 - Copies of these materials can be obtained on the SEC website198 ITEM 16. FORM 10-K SUMMARY None - None203 FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Marcum LLP issued an unqualified opinion on OmniLit Acquisition Corp.'s financial statements for 2022 and 2021, but included an explanatory paragraph highlighting substantial doubt about the company's ability to continue as a going concern due to a significant working capital deficiency and incurred losses - Marcum LLP issued an unqualified opinion on the financial statements for 2022 and 2021207 - An explanatory paragraph raises substantial doubt about the company's ability to continue as a going concern due to a significant working capital deficiency and incurred losses208 - The company is not required to have an audit of its internal control over financial reporting due to its status210 Balance Sheets The balance sheets show a significant decrease in marketable securities and cash held in the Trust Account from $146,626,679 at December 31, 2021, to $14,011,070 at December 31, 2022, primarily due to redemptions. Total assets decreased from $147,428,222 to $14,271,766, and total liabilities decreased from $5,235,345 to $617,070. Common stock subject to possible redemption also significantly decreased from $146,625,000 to $13,919,834 Balance Sheet Highlights | Item | December 31, 2022 | December 31, 2021 | Change | | :-------------------------------------- | :------------------ | :------------------ | :------------------ | | Cash on hand | $117,506 | $494,599 | -$377,093 | | Marketable securities and cash held in Trust Account | $14,011,070 | $146,626,679 | -$132,615,609 | | Total assets | $14,271,766 | $147,428,222 | -$133,156,456 | | Total liabilities | $617,070 | $5,235,345 | -$4,618,275 | | Common stock subject to possible redemption | $13,919,834 | $146,625,000 | -$132,705,166 | | Total stockholders' deficit | $(265,138) | $(4,432,123) | +$4,166,985 | - The significant decrease in trust account assets and common stock subject to redemption is primarily due to redemptions of 13,026,951 shares214 Statements of Operations For the year ended December 31, 2022, OmniLit reported a net income of $847,623, a significant improvement from a net loss of $169,488 for the period from inception through December 31, 2021. This was primarily driven by $2,081,055 in interest earned on trust account investments in 2022, offsetting operating costs and income tax expenses Statements of Operations Highlights | Item | Year Ended Dec 31, 2022 | May 20, 2021 (Inception) Through Dec 31, 2021 | | :-------------------------------------- | :-------------------------- | :------------------------------------------------ | | Operating costs | $787,639 | $171,167 | | Loss from operations | $(787,639) | $(171,167) | | Interest earned on investment held in Trust Account | $2,081,055 | $1,679 | | Total income (loss) before income tax | $1,293,416 | $(169,488) | | Income tax expense | $445,793 | $0 | | Net income (loss) | $847,623 | $(169,488) | | Basic and diluted net income (loss) per share, Class A common stock | $0.05 | $(0.01) | - The company shifted from a net loss in 2021 to a net income in 2022, largely due to increased interest income from the trust account217 Statements of Stockholders' Deficit The statements show a significant reduction in total stockholders' deficit from $(4,432,123) at December 31, 2021, to $(265,138) at December 31, 2022. This improvement is primarily due to the reclassification of deferred underwriter's fees and net income for the year, partially offset by accretion of common stock to redemption value Stockholders' Deficit Highlights | Item | December 31, 2022 | December 31, 2021 | Change | | :-------------------------------------- | :------------------ | :------------------ | :------------------ | | Class B Common Stock Amount | $479 | $479 | $0 | | Accumulated deficit | $(265,618) | $(4,432,602) | +$4,166,984 | | Total stockholders' deficit | $(265,138) | $(4,432,123) | +$4,166,985 | - The accumulated deficit improved from $(4,432,602) in 2021 to $(265,618) in 2022219 - This change was influenced by net income for the year and a significant adjustment related to deferred underwriter's fees219 Statements of Cash Flows For the year ended December 31, 2022, net cash used in operating activities was $(644,474), compared to $(274,017) in the prior period. Net cash provided by financing activities was $267,379 in 2022, significantly lower than $147,393,616 in 2021, reflecting the IPO proceeds in the prior year and redemptions in the current year. Cash on hand decreased from $494,599 to $117,506 Cash Flow Highlights | Item | Year Ended Dec 31, 2022 | May 20, 2021 (Inception) Through Dec 31, 2021 | | :-------------------------------------- | :-------------------------- | :------------------------------------------------ | | Net cash used in operating activities | $(644,474) | $(274,017) | | Net cash used in investing activities | $0 | $(146,625,000) | | Net cash provided by financing activities | $267,379 | $147,393,616 | | Net change in cash | $(377,093) | $494,599 | | Cash, end of the period | $117,506 | $494,599 | - Cash used in operating activities increased in 2022, while cash provided by financing activities significantly decreased due to the IPO in 2021 and redemptions in 2022222 - The company paid $133,917,056 from the Trust Account in connection with share redemptions in 2022222 Notes to Financial Statements This comprehensive section provides detailed explanations of the company's organization, business operations, significant accounting policies, and specific financial statement line items. It covers the IPO, private placement, trust account mechanics, related party transactions, commitments, stockholder's deficit components, fair value measurements, and income tax details. A key concern highlighted is the company's going concern status due to its mandatory liquidation date and working capital needs Note 1 — Organization and Business Operations OmniLit Acquisition Corp. was incorporated as a blank check company in May 2021, with its IPO and private placement in November 2021 generating significant proceeds for a trust account. Stockholders approved an extension to November 2023 for a business combination, but the company faces going concern doubts due to a working capital deficiency and mandatory liquidation deadline, despite sponsor commitments for additional capital - OmniLit Acquisition Corp. was incorporated on May 20, 2021, as a blank check company224 - The IPO and private placement in November 2021 generated gross proceeds of $143,750,000 and $6,920,500, respectively, with $146,625,000 deposited into a trust account226 - Stockholders approved an extension, moving the business combination deadline to November 12, 2023. In connection with the extension, 13,026,951 Class A shares were redeemed for approximately $133,917,056229231 - The company has a significant working capital deficiency and faces going concern doubts due to the mandatory liquidation deadline, but the sponsor has committed $100,000 in additional working capital if needed208239241 Note 2 — Significant Accounting Policies The company's financial statements conform to GAAP, and as an "emerging growth company," it has elected an extended transition period for new accounting standards, with key policies covering marketable securities, offering costs, and Class A ordinary shares subject to possible redemption - Financial statements are presented in U.S. dollars in conformity with GAAP247 - The company is an 'emerging growth company' and has elected the extended transition period for new accounting standards248249 - Key policies cover marketable securities in the trust account (classified as trading securities or recognized at fair value), offering costs, and Class A ordinary shares subject to possible redemption (classified as temporary equity)252255257 - The company is assessing the potential impact of the Inflation Reduction Act on stock buybacks and redemptions, but does not expect a material impact271272 Note 3 — Initial Public Offering The IPO, completed on November 12, 2021, sold 14,375,000 units for $143,750,000, with 1,348,049 Class A common stock shares remaining outstanding after redemptions as of December 21, 2022, and underwriters receiving a cash discount and deferred underwriting discount - IPO completed on November 12, 2021, selling 14,375,000 units for $143,750,000277 - As of December 21, 2022, 1,348,049 Class A common stock shares remained outstanding after redemptions277 - Underwriters received a $2,875,000 cash discount and a $500,000 deferred underwriting discount278 Note 4 — Private Placement 6,920,500 Private Placement Warrants were sold for $1.00 each, generating $6,920,500, which are identical to public warrants but have transfer restrictions and registration rights - 6,920,500 Private Placement Warrants were sold for $1.00 each, generating $6,920,500279 - Private Placement Warrants are identical to public warrants but have transfer restrictions and registration rights280 Note 5 — Related Party Transactions The sponsor advanced $363,995 and provided a $300,000 promissory note, both repaid upon IPO consummation, and may provide future working capital loans convertible into private placement-equivalent warrants. Additionally, 4,791,667 founder shares were issued to the sponsor for $25,000, subject to transfer restrictions - Sponsor advanced $363,995 and provided a $300,000 promissory note, both repaid upon IPO consummation284285 - Sponsor or affiliates may provide working capital loans, convertible into private placement-equivalent warrants at $1.00 per warrant287 - 4,791,667 founder shares were issued to the sponsor for $25,000, subject to transfer restrictions288 Note 6 — Commitments Commitments include registration rights for founder shares and private warrants, a deferred underwriting fee, and a right of first refusal for Imperial Capital - Commitments include registration rights for founder shares and private warrants, a deferred underwriting fee, and a right of first refusal for Imperial Capital291293294 Note 7 — Stockholder's Deficit A recapitalization in November 2021 resulted in 4,791,667 founder shares (Class B common stock) held by the sponsor, with 1,348,049 Class A common stock shares outstanding and subject to possible redemption as of December 31, 2022. Warrants become exercisable on the later of 12 months from IPO closing or 30 days post-business combination, expiring five years after the business combination - Recapitalization on November 1, 2021, resulted in 4,791,667 founder shares (Class B common stock) held by the sponsor295 - As of December 31, 2022, 1,348,049 Class A common stock shares were outstanding and subject to possible redemption, and 4,791,667 Class B common stock shares were outstanding296297 - Warrants (7,187,500 Public Warrants and 6,920,500 Private Placement Warrants) become exercisable on the later of 12 months from IPO closing or 30 days post-business combination, expiring five years after the business combination302304 Note 8 — Fair Value Fair value measurements are categorized into a three-tier hierarchy, with marketable securities in the trust account classified as Level 1 assets, and warrants initially classified as Level 3 and valued using a modified Black-Scholes model - Fair value measurements are categorized into a three-tier hierarchy261 - Marketable securities held in the trust account are Level 1 assets309 - Warrants were initially classified as Level 3 and valued using a modified Black-Scholes model312 [Note 9 — Income T