References to the "Company," "Insight Acquisition Corp.," "Insight," "our," "us"
or "we" refer to Insight Acquisition Corp. The following discussion and analysis
of the Company's financial condition and results of operations should be read in
conjunction with the financial statements and the notes thereto contained
elsewhere in this Report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this Annual Report on Form 10-K may
constitute "forward-looking statements" for purposes of the federal securities
laws. Our forward-looking statements include, but are not limited to, statements
regarding our or our management team's expectations, hopes, beliefs, intentions
or strategies regarding the future. In addition, any statements that refer to
projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements. The words "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a
statement is not forward-looking.
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The forward-looking statements contained in this Annual Report on Form 10-K are
based on our current expectations and beliefs concerning future developments and
their potential effects on us. There can be no assurance that future
developments affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of
which are beyond our control) or other assumptions that may cause actual results
or performance to be materially different from those expressed or implied by
these forward-looking statements. These risks and uncertainties include, but are
not limited to, the following risks, uncertainties (some of which are beyond our
control) or other factors:
• we have no operating history and no revenues, and you have no basis on
which to evaluate our ability to achieve our business objective;
• our ability to select an appropriate target business or businesses;
• our ability to complete a merger, share exchange, asset acquisition,
share purchase, reorganization or similar business combination with one
or more businesses (the "Business Combination");
• our expectations around the performance of a prospective target business
or businesses;
• our success in retaining or recruiting, or changes required in, our
officers, key employees or directors following our initial Business
Combination;
• our officers and directors allocating their time to other businesses and
potentially having conflicts of interest with our business or in
approving our initial Business Combination;
• our potential ability to obtain additional financing to complete our
initial Business Combination;
• our pool of prospective target businesses;
• our ability to consummate an initial Business Combination due to the
uncertainty resulting from the recent COVID-19 pandemic;
• the ability of our officers and directors to generate a number of
potential Business Combination opportunities;
• our public securities' potential liquidity and trading;
• the use of proceeds not held in the trust account or available to us from
interest income on the trust account balance;
• the trust account not being subject to claims of third parties;
• our financial performance following our IPO; and
• the other risks and uncertainties discussed herein, in our filings with
the SEC and in our final prospectus relating to our IPO, filed with the
SEC on September 2, 2021.
Should one or more of these risks or uncertainties materialize, or should any of
our assumptions prove incorrect, actual results may vary in material respects
from those projected in these forward-looking statements. We undertake no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as may be required
under applicable securities laws.
Overview
We are a blank check company incorporated in Delaware on April 20, 2021. We were
formed for the purpose of effecting a Business Combination that we have not yet
identified. Our sponsor is Insight Acquisition Sponsor LLC, a Delaware limited
liability company (the "Sponsor").
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Our registration statement for our IPO was declared effective on September 1,
2021. On September 7, 2021, we consummated an IPO of 24,000,000 Units (and with
respect to the Class A common stock included in the Units being offered, the
"Public Shares"), generating gross proceeds of $240.0 million, and incurring
offering costs of approximately $17.5 million, of which approximately
$12.0 million and approximately $668,000 was for deferred underwriting
commissions and offering costs allocated to derivate warrant liabilities,
respectively. Simultaneously with the closing of the IPO, the Company
consummated the private placement ("Private Placement") of 7,500,000 and
1,200,000 warrants (each, a "Private Placement Warrant" and collectively, the
"Private Placement Warrants"), to the Sponsor and Cantor Fitzgerald & Co. and
Odeon Group, LLC, respectively, for an aggregate of 8,700,000 Private Placement
Warrants, at a price of $1.00 per Private Placement Warrant, generating proceeds
of $8.7 million.
Upon the closing of the IPO and the Private Placement, $241.2 million ($10.05
per Unit) of the net proceeds of the sale of the Units in the IPO and of the
Private Placement Warrants in the Private Placement were placed in a trust
account ("Trust Account") located in the United States with Continental Stock
Transfer & Trust Company acting as trustee, and invested only in U.S.
"government securities" within the meaning of Section 2(a)(16) of the Investment
Company Act having a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations, as
determined by the Company, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.
Our management has broad discretion with respect to the specific application of
the net proceeds of the IPO and the sale of Private Placement Warrants, although
substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination.
If the Company is unable to complete a Business Combination by May 7, 2023 (the
"Combination Period"), which may be extended by our board of directors in their
sole discretion on a monthly basis up to and including to September 7, 2023, we
will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter,
redeem the Public Shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the Trust Account, including interest earned
on the funds held in the Trust Account (which interest shall be net of taxes
payable and up to $100,000 of interest to pay dissolution expenses), divided by
the number of then outstanding Public Shares, which redemption will completely
extinguish Public Stockholders' rights as stockholders (including the right to
receive further liquidating distributions, if any), and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the
remaining stockholders and the board of directors, liquidate and dissolve,
subject, in each case, to the Company's obligations under Delaware law to
provide for claims of creditors and the requirements of other applicable law.
We intend to effectuate our initial Business Combination using cash from the
proceeds of our IPO and the sale of the Private Placement Warrants, our shares,
debt or a combination of cash, equity and debt.
The issuance of additional shares in a Business Combination:
• may significantly dilute the equity interest of investors in our IPO, which
dilution would increase if the anti-dilution provisions in the Class B common
stock resulted in the issuance of Class A common stock on a greater than
one-to-one basis upon conversion of the Class B common stock;
• may subordinate the rights of holders of Class A common stock if preference
shares are issued with rights senior to those afforded our Class A common
stock;
• could cause a change in control if a substantial number of our Class A common
stock are issued, which may affect, among other things, our ability to use
our net operating loss carry forwards, if any, and could result in the
resignation or removal of our present officers and directors;
• may have the effect of delaying or preventing a change of control of us by
diluting the share ownership or voting rights of a person seeking to obtain
control of us; and
• may adversely affect prevailing market prices for our Class A common stock.
Similarly, if we issue debt or otherwise incur significant debt, it could result
in:
• default and foreclosure on our assets if our operating revenues after an
initial Business Combination are insufficient to repay our debt obligations;
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• acceleration of our obligations to repay the indebtedness even if we make all
principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any, if the
debt is payable on demand;
• our inability to obtain necessary additional financing if the debt contains
covenants restricting our ability to obtain such financing while the debt is
outstanding;
• our inability to pay dividends on our Class A common stock;
• using a substantial portion of our cash flow to pay principal and interest on
our debt, which will reduce the funds available for dividends on our Class A
common stock if declared, expenses, capital expenditures, acquisitions and
other general corporate purposes;
• limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation; and
• limitations on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, execution of our
strategy and other purposes and other disadvantages compared to our
competitors who have less debt.
Proposed Business Combination
On April 3, 2023, Insight Acquisition Corp., a Delaware corporation ("SPAC"),
Avila Amalco Sub Inc., an Alberta corporation ("Amalco Sub") and Avila Energy
Corporation, an Alberta corporation ("Avila"), entered into a business
combination agreement and plan of merger (the "BCA") pursuant to which SPAC will
acquire Avila for consideration of shares in SPAC following its redomicile into
the Province of Alberta (as further explained below). The terms of the BCA,
which contains customary representations and warranties, covenants, closing
conditions and other terms relating to the mergers and the other transactions
contemplated thereby, are summarized below. The Company's entry into the BCA was
previously disclosed in the Company's Current Report on Form 8-K, which was
filed on April 4, 2023, and is incorporated herein by reference.
Liquidity and Capital Resources
As of December 31, 2022, we had approximately $172,000 in our operating bank
account, and working capital deficit of approximately $360,000, excluding the
accrued franchise tax.
Our liquidity needs prior to the consummation of the IPO were satisfied through
the payment of $25,000 from the Sponsor to cover for certain offering costs on
behalf of the Company in exchange for issuance of the Founder Shares, and the
loan from the Sponsor of approximately $163,000 under the Note. We repaid
$157,000 of the Note balance on September 7, 2021 and repaid the remaining
balance of approximately $6,000 in full on September 13, 2021, at which time the
Note was terminated. Subsequent to the consummation of the IPO, our liquidity
has been satisfied through the net proceeds from the consummation of the IPO and
the Private Placement held outside of the Trust Account. In addition, in order
to finance transaction costs in connection with a Business Combination, the
Sponsor or an affiliate of the Sponsor, or certain of the Company's officers and
directors may, but are not obligated to, loan the Company funds as may be
required ("Working Capital Loans"). As of December 31, 2022 and 2021, there were
no amounts outstanding under any Working Capital Loans.
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," the Company has until May 7, 2023 which may be extended by the
board of directors in its sole discretion on a monthly basis up to and including
September 7, 2023, to consummate a Business Combination. It is uncertain that we
will be able to consummate a Business Combination by this time. If a Business
Combination is not consummated by this date, there will be a mandatory
liquidation and subsequent dissolution of the Company. We have determined that
the insufficient liquidity as well as the mandatory liquidation, should a
Business Combination not occur, and potential subsequent dissolution raises
substantial doubt about the Company's ability to continue as a going concern. We
intend to complete a Business Combination by close of business on September 7,
2023. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after September 7, 2023.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
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In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
financial statements. The specific impact on the Company's financial condition,
results of operations, and cash flows is also not determinable as of the date of
these financial statements.
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its shareholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair
market value of the shares repurchased at the time of the repurchase. However,
for purposes of calculating the excise tax, repurchasing corporations are
permitted to net the fair market value of certain new stock issuances against
the fair market value of stock repurchases during the same taxable year. In
addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the "Treasury") has been given authority to provide regulations and
other guidance to carry out and prevent the abuse or avoidance of the excise
tax. Any share redemption or other share repurchase that occurs after
December 31, 2022, in connection with a Business Combination, extension vote or
otherwise, may be subject to the excise tax. Whether and to what extent the
Company would be subject to the excise tax in connection with a Business
Combination, extension vote or otherwise will depend on a number of factors,
including (i) the fair market value of the redemptions and repurchases in
connection with the Business Combination, extension or otherwise, (ii) the
structure of a Business Combination, (iii) the nature and amount of any "PIPE"
or other equity issuances in connection with a Business Combination (or
otherwise issued not in connection with a Business Combination but issued within
the same taxable year of a Business Combination) and (iv) the content of
regulations and other guidance from the Treasury. In addition, because the
excise tax would be payable by the Company and not by the redeeming holder, the
mechanics of any required payment of the excise tax have not been determined.
The foregoing could cause a reduction in the cash available on hand to complete
a Business Combination and in the Company's ability to complete a Business
Combination.
Results of Operations
Our entire activity since inception up to December 31, 2022 was in preparation
for our formation and the IPO, and subsequent to the IPO, the search for a
business combination target. We will not be generating any operating revenues
until the closing and completion of our initial Business Combination.
For the year ended December 31, 2022, we had net income of approximately
$11.9 million, which consisted of $10.7 million change in the fair value of
derivative warrant liabilities and approximately $3.3 million of net (gain) loss
on investments held in Trust Account partially offset by approximately
$1.3 million in general and administrative costs, income tax expense of
approximately $625,000 and approximately $206,000 franchise tax expenses.
For the period from April 20, 2021 (inception) through December 31, 2021, we had
a net income of approximately $995,000, which consisted of $2.2 million change
in the fair value of derivative warrant liabilities partially offset by
approximately $668,000 in financing costs, approximately $453,000 in general and
administrative costs and $140,000 franchise tax expenses.
Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans (and any shares of common
stock issuable upon the exercise of the Private Placement Warrants or warrants
issued upon conversion of the Working Capital Loans and upon conversion of the
Founder Shares), are entitled to registration rights pursuant to a registration
and stockholder rights agreement signed prior to the consummation of the IPO.
These holders are entitled to certain demand and "piggyback" registration
rights. We will bear the expenses incurred in connection with the filing of any
such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
$4.8 million in the aggregate, paid upon the closing of the IPO. An additional
fee of $0.50 per unit, or $12.0 million in the aggregate will be payable to the
underwriters for deferred underwriting commissions. If the underwriters'
over-allotment option was fully exercised, $0.70 per over-allotment unit, or up
to an additional approximately $2.5 million, or approximately $14.5 million in
the aggregate, would have been deposited in the Trust Account as deferred
underwriting commissions. On October 16, 2021, the over-allotment option expired
unexercised. The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that the Company completes
a Business Combination, subject to the terms of the underwriting agreement.
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Services Agreement
On September 1, 2021, we entered into an agreement with the Sponsor, pursuant to
which we agreed to pay the Sponsor a total of $10,000 per month for office
space, secretarial and administrative services provided to or incurred by
members of our management team until the earlier of the consummation of a
Business Combination and the Company's liquidation. For the year ended
December 31, 2022 and for the period from April 20, 2021 (inception) through
December 31, 2021, we incurred approximately $120,000 and $40,000, respectively,
under the services agreement in the statement of operations. As of December 31,
2022 and 2021, $40,000 and $10,000, respectively, was included in Accrued
expenses-related party on our balance sheets.
The board of directors has also approved payments of up to $15,000 per month,
through the earlier of the consummation of our initial Business Combination or
our liquidation, to members of our management team for services rendered to us.
In addition, the 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 reviews on a quarterly basis all payments that were made to the
Sponsor, executive officers or directors, or the Company's or their affiliates.
For the year ended December 31, 2022 and for the period from April 20, 2021
(inception) through December 31, 2021, we incurred approximately $180,000 and
$45,000, respectively, under the services agreement in the statement of
operations. As of December 31, 2022 and 2021, $40,000 and $0, respectively, was
included in Accrued expenses - related party on the balance sheets.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") 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 the reported amounts of
income and expenses during the period reported. Actual results could materially
differ from those estimates. The Company has not identified any critical
accounting estimates.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we did not have any off-balance sheet
arrangements as defined in Item 303 of Regulation S-K.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" and under the JOBS Act are allowed to comply with new
or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, the
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional
information about the audit and the financial statements (auditor discussion and
analysis) and (iv) disclose certain executive compensation related items such as
the correlation between executive compensation and performance and comparisons
of the executive compensation to median employee compensation. These exemptions
will apply for a period of five years following the completion of our IPO or
until we are no longer an "emerging growth company," whichever is earlier.
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