10-K: ShoulderUp Technology Acquisition Corp. Files 10-K, Details Business Combination with SEE ID

ShoulderUp Technology Acquisition Corp. has filed its annual 10-K report, outlining its financial status and detailing a business combination agreement with SEE ID, Inc.

Summary

• ShoulderUp Technology Acquisition Corp., a blank check company, has filed its annual report on Form 10-K for the year ended December 31, 2023.
• The company's authorized capital stock consists of 320,000,000 shares of common stock and 1,000,000 shares of preferred stock.
• As of March 2, 2023, there were 41,800,000 shares of common stock outstanding, including 31,350,000 Class A shares and 10,450,000 Class B shares.
• The company's initial public offering (IPO) on November 19, 2021, included units consisting of one Class A common share and one-half of a redeemable warrant, with each whole warrant exercisable at $11.50 per share.
• The company entered into a Business Combination Agreement with SEE ID, Inc. on March 18, 2024, with the expectation that the combined entity will be listed on the Nasdaq.
• The company reported a net income of approximately $0.3 million for the year ended December 31, 2023, which included investment income offset by operating expenses, tax expenses, and changes in the fair value of derivative liabilities.
• The company has identified material weaknesses in its internal controls over financial reporting related to reporting period closing and compliance with the Trust Agreement.
• The company's securities were delisted from the NYSE on December 29, 2023, and are expected to be quoted on the Pink Sheets.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the company has secured a business combination agreement, the delisting from the NYSE, material weaknesses in internal controls, and the need for additional financing raise concerns. The sentiment is therefore cautiously negative.

Positives

• The company has secured a business combination agreement with SEE ID, Inc., which is a significant step towards completing its initial business combination.
• The company has generated investment income from its trust account, contributing to its net income.
• The company has a diverse and experienced board of directors with expertise in technology, cybersecurity, and government.

Negatives

• The company has identified material weaknesses in its internal controls over financial reporting, which could impact the reliability of its financial statements.
• The company's securities were delisted from the NYSE, which may reduce investor confidence and liquidity.
• The company has a working capital deficit of approximately $4.2 million as of December 31, 2023.

Risks

• The company may not be able to complete the business combination with SEE ID, Inc. if certain closing conditions are not met.
• The company's ability to complete a business combination is dependent on having sufficient cash, which may require additional financing.
• The company's public stockholders may not have the opportunity to vote on the proposed business combination.
• The company's initial stockholders and management team have significant control over the company and may have conflicts of interest.
• The company's warrants may expire worthless if the underlying Class A common stock is not registered or qualified.
• The company may be subject to a new 1% U.S. federal excise tax on share redemptions.
• The company's exclusive forum provisions in its amended and restated certificate of incorporation may discourage lawsuits against its directors and officers.

Future Outlook

The company is focused on completing its business combination with SEE ID, Inc. and expects the combined entity to be listed on the Nasdaq. The company may seek additional financing to complete the business combination and fund future operations.

Management Comments

• Our team is designed to leverage technology, private and public market expertise to identify and execute a successful transaction.
• We believe that SEE ID exhibits unrecognized value with platform for a consolidation.
• We believe that our management teams extensive experience and demonstrated success in both investing and operating businesses in this industry has culminated in a unique set of capabilities that will be utilized in generating stockholder returns in structuring and supporting our initial business combination with SEE ID.

Industry Context

The document reflects the ongoing trend of special purpose acquisition companies (SPACs) seeking merger targets, particularly in the technology and cybersecurity sectors. The delisting from the NYSE and the move to the Pink Sheets highlights the challenges faced by some SPACs in maintaining exchange listings.

Comparison to Industry Standards

• The company's structure as a blank check company is typical of SPACs, which are formed to raise capital through an IPO and then acquire an existing company.
• The company's focus on technology and cybersecurity aligns with current industry trends, where these sectors are seeing significant investment and acquisition activity.
• The company's financial performance, including its net income and working capital deficit, is within the range of other SPACs at a similar stage.
• The company's delisting from the NYSE is a negative event, as it indicates a failure to meet listing requirements, which is not typical of successful SPACs.
• The company's material weaknesses in internal controls are a concern, as they indicate a lack of proper oversight and risk management, which is not in line with industry best practices.

Management Changes

Corporate Governance

Related Party Transactions

• The company pays its sponsor $10,000 per month for office space, secretarial, and administrative services.
• The company may reimburse its sponsor, executive officers, and directors for out-of-pocket expenses.
• The company may obtain working capital loans from its sponsor or affiliates.
• The company's initial stockholders purchased founder shares and private placement units.

Stakeholder Impact

• Shareholders may experience dilution if additional shares are issued to complete the business combination.
• Shareholders may not have the opportunity to vote on the proposed business combination.
• Shareholders may be subject to a new 1% U.S. federal excise tax on share redemptions.
• Employees of the target company may experience changes in their roles and responsibilities after the business combination.
• Customers of the target company may experience changes in products or services after the business combination.
• Creditors of the company may have claims against the trust account if the business combination is not completed.

Next Steps

• The company will seek to complete its business combination with SEE ID, Inc.
• The company will work to remediate the identified material weaknesses in its internal controls.
• The company will seek to obtain a listing on the Nasdaq Stock Market, LLC.

Key Dates

Keywords

business combination, SPAC, SEE ID, warrants, Class A common stock, Class B common stock, redemption, trust account, internal controls, delisting, cybersecurity, technology