Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Report including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward- looking statements. When used in this Report, words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report.

Recent Developments

On February 13, 2023, we entered into the Drilling Tools Merger Agreement with Drilling Tools and Merger Sub. Drilling Tools is a Houston based oilfield services company that rents downhole drilling tools used in horizontal and directional drilling of oil and natural gas wells. Drilling Tools operates from 22 locations across North America, Europe and the Middle East. At the closing of the transactions contemplated by the Drilling Tools Merger Agreement, in accordance with the DGCL, Merger Sub will be merged with and into Drilling Tools, with Drilling Tools surviving the merger as a wholly-owned subsidiary of the Company.

For a full description of the Drilling Tools Merger Agreement and the proposed Drilling Tools Business Combination, please see "Item 1. Business."

Overview

We are a blank check company formed under the laws of the State of Delaware on September 2, 2021 for the purpose of effecting a business combination with one or more businesses. We intend to effectuate an initial business combination using cash from the proceeds of the initial public offering and the sale of the private units, our capital stock, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination, including the Drilling Tools Business Combination, will be successful.

Results of Operations

We have neither engaged in any operations (other than searching for an initial business combination after our initial public offering) nor generated any revenues to date. Our only activities from September 2, 2021 (inception) through December 31, 2022 were organizational activities, those necessary to prepare for the initial public offering, described below, and, subsequent to the initial public offering, identifying a target company for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form of interest earned on investments held after the initial public offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses, including due diligence expenses in connection with the Drilling Tools Business Combination.

For the year ended December 31, 2022, we had a net income of $1,015,702, which consists of interest income on investments held in the Trust Account of $2,843,649, offset by operating costs of $1,281,902 and provision for income taxes of $546,045.

For the period from September 2, 2021 (inception) through December 31, 2021, we had a net loss of $235,380, which consists of operating costs of $252,254, offset by interest income on investments held in the trust account of $16,874.


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Liquidity and Capital Resources

On December 6, 2021, we consummated the initial public offering of 18,000,000 units at $10.00 per unit, generating gross proceeds of $180,000,000. An additional $1,800,000 was funded by our sponsor which resulted in a total balance in the trust account of $181,800,000. Simultaneously with the closing of the initial public offering, we consummated the sale of 715,000 private units at a price of $10.00 per private unit to the sponsor generating gross proceeds of $7,150,000.

On December 9, 2021, the underwriters fully exercised their over-allotment option, resulting in an additional 2,700,000 units issued for an aggregate amount of $27,000,000. In connection with the underwriters' full exercise of their over-allotment option, we also consummated the sale of an additional 81,000 private units at $10.00 per private unit, generating total proceeds of $27,810,000. A total of $27,270,000 was deposited into the trust account, bringing the aggregate proceeds held in the trust account to $209,070,000.

Following the initial public offering, the full exercise of the over-allotment option, and the sale of the private units, a total of $181,800,000 was placed in the trust account. We incurred $4,012,520 in initial public offering related costs, including $3,600,000 of underwriting fees and $412,520 of other costs. In connection with the underwriters' full exercise of their over-allotment option, we also consummated the sale of an additional 81,000 private units at $10.00 per private unit, generating total proceeds of $27,810,000. A total of $27,270,000 was deposited into the trust account, including an additional $540,000 of underwriting fees, bringing the aggregate proceeds held in the trust account to $209,070,000.

For the year ended December 31, 2022, cash used in operating activities was $1,667,273. Net loss of $1,015,702 was affected by interest earned on investments held in the Trust Account of $2,843,649 and changes in operating assets and liabilities, which provided $69,102 of cash from operating activities.

For the period from September 2, 2021 (inception) through December 31, 2021, cash used in operating activities was $13,000. Net loss of $235,380 was affected by interest earned on investments held in the trust account of $16,874 and changes in operating assets and liabilities, which provided $239,254 of cash from operating activities.

As of December 31, 2022, we had cash and marketable securities held in the trust account of $213,475,172. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account to complete our business combination. We may withdraw interest to pay taxes. During the period ended December 31, 2022, we withdrew $525,351 of interest income from the trust account. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As of December 31, 2022, we had $207,915 of cash held outside of the trust account. We intend to use the funds held outside the trust account primarily perform business due diligence on Drilling Tools, travel to and from the offices, plants or similar locations of Drilling Tools or their representatives or owners, review corporate documents and material agreements of, and structure, negotiate and complete an initial business combination with Drilling Tools.

In order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, the sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that an initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units at a price of $10.00 per unit, at the option of the lender. The units would be identical to the private units.



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Going Concern

In connection with the Company's assessment of going concern considerations in accordance with FASB's ASU 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," the Company has until June 6, 2023, fifteen months from the closing of its Initial Public Offering, to consummate a business combination. It is uncertain that the Company will be able to consummate a business combination by this time. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company through the Company's liquidation date or one year from the issuance of these financial statements. If a business combination is not consummated by the liquidation date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and 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. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after June 6, 2023. There can be no assurance that the Company will be able to consummate any business combination by June 6, 2023.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

We entered into an agreement, commencing on December 1, 2021, through the earlier of our consummation of an initial business combination and its liquidation, to pay Fifth Partners, an affiliate of the sponsor, a total of $13,000 per month for general and administrative services including office space, utilities and secretarial support.

The Company had granted the underwriters a 45-day option from the date of initial public offering to purchase up to 2,700,000 additional Units to cover over-allotments, if any, at the initial public offering price less the underwriting discounts and commissions.

On December 9, 2021, the underwriters elected to fully exercise the over-allotment option to purchase an additional 2,700,000 public shares at a price of $10.00 per public share.

We engaged EarlyBirdCapital as an advisor in connection with the initial business combination to assist in holding meetings with the stockholders to discuss the potential business combination and the target business' attributes, introduce the us to potential investors that are interested in purchasing securities in connection with the initial business combination, assist in obtaining stockholder approval for the business combination and assist with press releases and public filings in connection with the initial business combination. We will pay EarlyBirdCapital a cash fee for such services upon the consummation of the initial business combination in an amount equal to 3.5% of the gross proceeds of the initial public offering (exclusive of any applicable finders' fees which might become payable). In addition, we will pay EarlyBirdCapital a cash fee in an amount equal to 1.0% of the total consideration payable to the target in the initial business combination if EarlyBirdCapital introduces the target business with whom we complete the initial business combination; provided that the foregoing fee will not be paid prior to the date that is 60 days from the effective date of the IPO Registration Statement, unless such payment would not be deemed underwriters' compensation in connection with the initial public offering pursuant to FINRA Rule 5110. In connection with the Merger Agreement on February 13, 2023, we have amended EarlyBirdCapital's fees under the Business Combination Marketing Agreement from (i) 3.5% of the total gross proceeds raised in the initial public offering and (ii) 1% of the total consideration of an initial business combination transaction to a flat cash fee of $2,000,000

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 income and expenses during the



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periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Common Stock Subject to Possible Redemption

We account for our common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) is classified in temporary equity. At all other times, common stock is classified as stockholders' equity. The Company's public shares feature certain redemption rights that are considered to be outside of the Company's control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2022 and 2021, the public shares are presented at redemption value as temporary equity, outside of the stockholders' equity (deficit) section of the Company's balance sheet. We recognize changes in redemption value immediately as they occur and adjusts the carrying value of the common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of common stock is excluded from earnings per share as the redemption value approximates fair value.

Recent Accounting Standards

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

Factors That May Adversely Affect Our Results of Operations

Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete initial business combination.

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