NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
1 — Organization and Business Operations
CENAQ
Energy Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on June 24,
2020. The Company was incorporated for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company has
not reached an agreement with any specific Business Combination target. The Company is focusing its search for a target business in the
energy industry in North America.
As
of September 30, 2021, the Company has neither engaged in any operations nor generated any revenues. All activity for the period from
June 24, 2020 (inception) through September 30, 2021 relates to the Company’s formation and the initial public offering (“IPO”),
described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination,
at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO.
The Company has selected December 31 as its fiscal year end.
The
Company’s sponsor is CENAQ Sponsor, LLC, a Delaware limited liability company (the “Sponsor”).
The
registration statement for the Company’s IPO was declared effective on August 12, 2021 (the “Effective Date”). On August
17, 2021, Company consummated its IPO of 15,000,000 units (the “Units”). Each Unit consists of one Class A common
stock of the Company, par value $0.0001 per share (the “Class A common stock”), and three-quarters of one redeemable
warrant of the Company (“Warrant”), each whole Warrant entitling the holder thereof to purchase one Class A common stock
for $11.50 per share. The Units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $150,000,000,
which is discussed in Note 4.
Certain
qualified institutional buyers or institutional accredited investors which are not affiliated with any member of the Company’s
management (the “Anchor Investors”) have purchased up to 1,485,000 Units in the IPO at the offering price of $10.00 per
Unit, generating gross proceeds to the Company of $14,850,000 included in the gross proceeds from units offered to public of $150,000,000.
In
connection with the closing of the IPO, the Sponsor sold membership interest reflecting an allocation of 75,000 founder shares,
or an aggregate of 825,000 founder shares, to each anchor investor at their original purchase price of approximately $0.0058 per
share.
The Company estimated the
aggregate fair value of these founder shares attributable to anchor investors to be $6,270,000, or $7.60 per share. The Company
allocated $6,265,215, the excess of the fair value over the gross proceeds from these anchor investors, among Class A common stock, Public
Warrants and Private Placement Warrants (defined below).
Substantially
with the closing of the IPO, the Company completed the private sale of an aggregate of 6,000,000 warrants (the “Private
Placement Warrants”) to the Sponsor and the Underwriters at a purchase price of $1.00 per Private Placement Warrant, generating
gross proceeds to the Company of $6,000,000. The Private Placement Warrants are identical to the Warrants sold in the IPO, except that
the Sponsor and the Underwriters agreed not to transfer, assign or sell any of the Private Placement Warrants (except to certain permitted
transferees) until 30 days after the completion of the Company’s initial Business Combination.
The
underwriters have a 45-day option from the date of the Company’s IPO (August 17,2021) to purchase up to an additional 2,250,000 Units
to cover over-allotments, if any. On August 19, 2021, the underwriters exercised the overallotment in full, at $10.00 per Unit,
generating additional gross proceeds of $22,500,000. Simultaneously with the closing of the over-allotment, the Company consummated the
sale of additional 450,000 Private Placement Warrants to the Sponsor, and additional 225,000 Private Placement Warrants
to the Underwriters, at $1.00 per warrant, generating gross proceeds to the Company of $675,000.
Transaction costs of the
IPO and the over-allotment amounted to $17,771,253 consisting of $3,450,000 of underwriting discount, $6,037,500 of deferred
underwriting discount, an excess of fair value of the founder shares acquired by the Anchor Investors of $6,265,215, fair value of the
189,750 representative shares of $1,442,100 and $576,438 of other cash offering costs were charged to additional paid in capital.
Following the closing of
the IPO on August 17, 2021 and over-allotment on August 19, 2021, $174,225,000 ($10.10 per Unit) from the net proceeds of the
sale of the Units in the IPO, and a portion of the proceeds from the sale of the Private Placement Warrants, was deposited in a trust
account (“Trust Account”), located in the United States with Continental Stock Transfer & Trust Company acting as
trustee, and may only be invested in U.S. government securities, within the meaning set forth in 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. Except with respect to interest earned
on the funds held in the Trust Account that may be released to the Company to pay franchise and income tax obligations as well as expenses
relating to the administration of the Trust Account, the proceeds from the IPO and the sale of the Private Placement Warrants will not
be released from the Trust Account until the earliest of (i) the completion of initial Business Combination, (ii) the redemption of the
any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate
of incorporation (a) to modify the substance or timing of the Company’s obligation to redeem 100% of its public shares if
the Company does not complete initial Business Combination within 12 months (or within 18 months if the Company extends the period of
time to consummate its initial Business Combination) from August 17, 2021, or (b) relating to any other provisions relating to stockholders’
rights or permitted pre-initial business combination activity, or (iii) the redemption of the Company’s public shares if the Company
is unable to complete its Business Combination within 12 months (or within 18 months if the Company extends the period of time to consummate
its initial Business Combination) from August 17, 2021, subject to applicable law. The proceeds deposited in the Trust Account could
become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s
public stockholders, according to the investment management trust agreement.
The
Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the value
of the assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on the
income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company
will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires a controlling interest in the target sufficient for the post-transaction company not to
be required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”).
There is no assurance that the Company will be able to complete a Business Combination successfully.
The
Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion
of the initial Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or
(ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed Business Combination
or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem all or a
portion of their public shares upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to
the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination,
including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and
income taxes as well as expenses relating to the administration of the Trust Account, divided by the number of then outstanding public
shares, subject to the limitations described herein. The amount in the Trust Account was $10.10 per public share. The per-share
amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions
the Company will pay to the underwriters.
The
shares of common stock subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion
of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from
Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least
$5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued
and outstanding shares voted are voted in favor of the Business Combination.
The
Company will have until August 17, 2022, 12 months from the closing of the IPO, to complete the initial Business Combination (the “Combination
Period”). If the Company anticipates that it may not be able to consummate its initial Business Combination within the Combination
Period, it may, but not obligated to, extend the Combination Period two times by an additional three months each time (for a total of
up to 18 months to complete a Business Combination); provided that the Sponsor (or its designees) must deposit into the trust account
funds equal to one percent (1%) of the gross proceeds of the offering (including such proceeds from the exercise of the underwriters’
over-allotment option, if exercised) for each 3-month extension of the time period to complete the initial Business Combination, in exchange
for a non-interest bearing, unsecured promissory note.
If
the Company is unable to complete the initial Business Combination within the Combination Period (or up to 18 months following extensions),
the Company 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 and not previously released to the
Company to pay its franchise and income taxes as well as expenses relating to the administration of the Trust Account (less up to $100,000 of
interest released to the Company 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 liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of
the Company’s remaining stockholders and the Company’s 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.
The
Sponsor, officers and directors, as well as the Anchor Investors, have agreed to (i) waive their redemption rights with respect to any
Founder Shares held by them in connection with the completion of the initial Business Combination, (ii) waive their rights to liquidating
distributions from the Trust Account with respect to any Founder Shares hold by them if the Company fails to complete the initial Business
Combination within the Combination Period (or within 18 months following extensions), and (iii) vote any Founder Shares held by them
and any public shares purchased during or after the IPO in favor of the initial Business Combination.
The
Anchor Investors are not required to vote any of their public shares (as opposed to their Founder Shares) in favor of our initial business
combination or for or against any other matter presented for a stockholder vote.
The
Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s
independent auditors ) for services rendered or products sold to the Company, or a prospective target business with which the Company
has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.10 per
public share and (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account,
due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes as well
as expenses relating to the administration of the Trust Account, except as to any claims by a third party who executed a waiver of any
and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters
of the IPO against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed
to be unenforceable against a third party, then the Sponsor will not be responsible to the extent of any liability for such third-party
claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors
by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business,
execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Risks
and Uncertainties
Management
is continuing 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 the Company’s financial position, results of its operations and/or search for a
target company, the specific impact is not readily determinable as of the date of this financial statement. The financial statement does
not include any adjustments that might result from the outcome of this uncertainty.
Liquidity
and Capital Resources
As of September 30, 2021,
the Company had $539,610 in its operating bank account, and a working capital of $757,200.
The Company’s liquidity
needs up to September 30, 2021 had been satisfied through a payment from the Sponsor of $25,000 for the Founder Shares (see Note
6) and no borrowings under the promissory note. Upon close of the IPO, there was no amount outstanding on the promissory note.
In
order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor
or certain of the Company’s officers and directors committed to provide the Company with Working Capital Loans up to $1,500,000,
as defined later (see Note 6). To date, there were no amounts outstanding under any Working Capital Loans.
Based
on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs
through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will
be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with
or acquire, and structuring, negotiating and consummating the Business Combination.
Note
2 — Restatement of Prior Period Financial Statements
In connection with the preparation
of the Company’s financial statements as of September 30, 2021, management determined it should restate its previously reported
financial statement. The Company previously determined Class A common stock subject to possible redemption (“Public Shares”)
to be equal to the redemption value of $10.10 per common stock while also taking into consideration its charter’s requirement
that a redemption cannot result in net tangible assets being less than $5,000,001. Upon review of its financial statements for the period
ended September 30, 2021, the Company reevaluated the classification of the Public Shares and determined that the Public Shares issued
during the IPO and pursuant to the exercise of the underwriters’ overallotment can be redeemed or become redeemable subject to the
occurrence of future events considered outside the Company’s control under ASC 480-10-S99. Therefore, management concluded that
all the Public Shares should be classified as temporary equity in its entirety. As a result, management has noted a reclassification
adjustment related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the Public
Shares with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock.
Impact
of the Restatement
The
impact of the restatement on the Company’s financial statement is reflected in the following table.
Balance Sheet as of August 17, 2021
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
Class A common stock subject to redemption
|
|
|
142,231,068
|
|
|
|
9,268,932
|
|
|
|
151,500,000
|
|
Class A common stock
|
|
|
109
|
|
|
|
(92
|
)
|
|
|
17
|
|
Additional Paid-in Capital
|
|
|
5,013,264
|
|
|
|
(5,013,264
|
)
|
|
|
-
|
|
Accumulated Deficit
|
|
|
(13,798
|
)
|
|
|
(4,301,886
|
)
|
|
|
(4,315,684
|
)
|
Total Stockholders' Equity
|
|
$
|
5,000,006
|
|
|
$
|
(9,315,242
|
)
|
|
$
|
(4,315,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares subject to redemption
|
|
|
14,082,284
|
|
|
|
917,716
|
|
|
|
15,000,000
|
|
Note
3 — Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the
United States of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission
(“SEC”). Accordingly, they do not include all of the information and footnotes required by US GAAP. In the opinion of management,
the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the
fair statement of the balances and results for the period presented. Operating results for the period from December 31, 2020 through
September 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.
The
accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto
included in the final prospectus filed by the Company with the SEC August 13, 2021.
Emerging
Growth Company Status
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the
“Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may
take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging
growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404
of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements,
and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any
golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates which would include the various equity securities issued.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.
Marketable
Securities held in Trust Account
As
of September 30, 2021, the Company had $174.2 million in Marketable Securities held in the Trust Account which was invested in BLF Treasury
Trust Fund. Upon closing of the IPO, $10.10 per Unit sold in the IPO, including the proceeds of the sale of the Private Placement Warrants,
were held in a trust account (“Trust Account”) and may be invested only in U.S. government securities with a maturity of
185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only
in direct U.S. government treasury obligations.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Corporation limit of $250,000. At September 30, 2021, the Company has not
experienced losses on this account.
Offering
Costs associated with the Initial Public Offering
Offering
costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related
to the IPO. The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”)
Topic 5A—“Expenses of Offering”. Offering costs are allocated to the separable financial instruments issued in the
IPO based on a relative fair value basis compared to total proceeds received.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value
Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to its short-term
nature.
Class
A common stock Subject to Possible Redemption
The
Company accounts for its Class A 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 (if any) are classified as a liability instrument and measured
at fair value. Conditionally redeemable common stock (including common stock that feature 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)
are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. At September 30, 2021
and December 31, 2020, 17,250,000 and 0 Class A common stock, respectively, subject to possible redemption are presented at redemption
value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
All
of the 17,250,000 shares of Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the
redemption of such public shares if there is a shareholder vote or tender offer in connection with the Business Combination and in connection
with certain amendments to the Company’s certificate of incorporation.
The
Class A common stock sold as part of the Units in the IPO is subject to ASC 480-10-S99. If it is probable that the equity instrument
will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of
issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption
date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the
instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately
as they occur. Immediately upon the closing of the IPO, the Company recognized the subsequent remeasurement under ASC 480-10-S99 from
initial carrying amount to redemption value. The change in the carrying value of redeemable common stock resulted in charges against
additional paid-in capital and accumulated deficit.
As
the holder of representative shares and Class B common stock have agreed to waive their redemption rights per the letter agreement and
the underwriting agreement, so the representative shares and Class B common stock are non-redeemable.
As of September 30, 2021,
the common stock subject to possible redemption reflected on the balance sheet are reconciled in the following table:
Gross proceeds from IPO
|
|
$
|
174,225,000
|
|
Less:
|
|
|
|
|
Net proceeds from Public warrants
|
|
|
(16,152,951
|
)
|
Class A ordinary shares issuance cost
|
|
|
(12,937,500
|
)
|
Cash held in trust account over $10.00 per unit ($10.10 per unit - $10.00 per unit)
|
|
|
(1,725,000
|
)
|
Plus:
|
|
|
|
|
Accretion of carrying value of Class A stock to redemption value
|
|
|
30,815,451
|
|
Common stock subject to possible redemption
|
|
$
|
174,225,000
|
|
Net Loss Per Common Stock
The Company has two classes
of common stock, which are referred to as Class A common stock and Class B common stock. Income and losses are allocated on pro rata basis
between redeemable and non-redeemable common stock. The 19,612,500 potential common shares for outstanding warrants to purchase the Company’s
stock were excluded from diluted earnings per share for the three and nine months ended September 30, 2021 because the warrants are contingently
exercisable, and the contingencies have not yet been met. As a result, diluted net loss per common share is the same as basic net loss
per common share for the periods. The table below presents a reconciliation of the numerator and denominator used to compute basic and
diluted net loss per share between redeemable and non-redeemable.
|
|
For the three months ended
September 30, 2021
|
|
|
For the nine months ended
September 30, 2021
|
|
|
|
Redeemable
common
stock
|
|
|
Non-
redeemable
common
stock
|
|
|
Redeemable
common
stock
|
|
|
Non-
redeemable
common
stock
|
|
Basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net loss
|
|
$
|
(44,876
|
)
|
|
$
|
(22,419
|
)
|
|
$
|
(30,343
|
)
|
|
$
|
(42,304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding including common stock subject to redemption
|
|
|
8,201,087
|
|
|
|
4,097,005
|
|
|
|
2,773,897
|
|
|
|
3,867,369
|
|
Basic and diluted net loss per share
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
Income Taxes
The Company follows the asset
and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be
taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The
Company is subject to income tax examinations by major taxing authorities since inception.
Recent Accounting Pronouncements
In August 2020, the FASB
issued Accounting Standards Update (“ASU”) No. 2020-06, Debt —debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging —Contracts in Entity’ Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’ Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing
major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked
contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas.
The Company is currently evaluating the impact of the ASU on its financial position, results of operations or cash flows.
In May 2021, the FASB issued
ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock
Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting
for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues
Task Force). This guidance clarifies certain aspects of the current guidance to promote consistency among reporting of an issuer’s
accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity
classified after modification or exchange. The amendments in this update are effective for all entities for fiscal years beginning after
December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for all entities, including adoption
in an interim period. The Company is currently evaluating the impact of the ASU on its financial position, results of operations or cash
flows.
The Company’s management
does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material
effect on the accompanying unaudited condensed financial statement.
Note 4 — Initial Public
Offering
On August 17, 2021, Company
consummated its IPO of 15,000,000 units (the “Units”). Each Unit consists of one Class A common stock of the Company,
par value $0.0001 per share (the “Class A common stock”), and three-quarters of one redeemable warrant of the Company
(“Warrant”), each whole Warrant entitling the holder thereof to purchase one Class A common stock for $11.50 per share.
The Units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $150,000,000. The warrants will become
exercisable on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the IPO,
and will expire five years after the completion of the initial Business Combination or earlier upon redemption or liquidation.
The underwriters have a 45-day
option from the date of the Company’s IPO (August 17, 2021) to purchase up to an additional 2,250,000 Units to cover over-allotments.
On August 19, 2021, the over-allotments were exercised in full, at $10.00 per Unit, generating additional proceeds of $22,500,000.
Note 5 — Private Placement
Simultaneously with the closing
of the IPO, the Company’s Sponsor purchased an aggregate of 4,500,000 warrants at a price of $1.00 per warrant, for
an aggregate purchase price of $4,500,000, the Company’s underwriters purchased an aggregate of 1,500,000 warrants at
a price of $1.00 per whole warrant (for an aggregate purchase price of $1,500,000) in a private placement.
On August 19, 2021, simultaneously
with the closing of the over-allotments, the Sponsor purchased an additional 450,000 Private Placement Warrants, and the underwriters
purchased an additional 225,000 Private Placement Warrants, at $1.00 per warrant, generating gross proceeds to the Company
of $675,000.
The Private Placement Warrants
are identical to the warrants sold as part of the Units in the IPO. The Sponsor and the underwriters have agreed, subject to certain limited
exceptions, that the Private Placement Warrants will not be transferred, assigned or sold until 30 days after the completion of the Company’s
initial Business Combination and that they will be entitled to certain registration rights.
Note 6 — Related Party
Transactions
Founder Shares
On December 31, 2020, the
Sponsor paid $25,000, or approximately $0.006 per share, to cover certain offering costs in consideration for 4,312,500 Class
B common stocks, par value $0.0001 (the “Founder Shares”). Up to 562,500 Founder Shares are subject to forfeiture
by the Sponsor depending on the extent to which the underwriters’ over-allotment option is exercised. On August 19, 2021, the underwriters
exercised the over-allotment option in full. As a result, these 562,500 founder shares are no longer subject to forfeiture.
Additionally, upon consummation
of the IPO, the Sponsor sold 75,000 Founder Shares to each of the 11 Anchor Investors that purchased at least 9.9% of the units sold in
the IPO, at their original purchase price of approximately $0.0058 per share. The aggregate fair value of these founder shares attributable
to anchor investors is $6,270,000, or $7.60 per share. The Company allocated $6,265,215, the excess of the fair value over the gross
proceeds from these Anchor Investors, among Class A common stock, Public Warrants and Private Placement Warrants.
The initial stockholders
and the Anchor Investors have agreed not to transfer, assign or sell any of their Founder Shares and any Class A common stock issuable
upon conversion thereof until the earlier to occur of: (A) six months after the completion of the initial Business Combination or
(B) subsequent to the initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds
$12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days
within any 30-trading day period commencing at least 75 days after the initial Business Combination, or (y) the date on which the Company
completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of its stockholders having the
right to exchange their shares of common stock for cash, securities or other property (the “Lock-up” ). Notwithstanding the
foregoing, if (1) the closing price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period
commencing at least 75 days after the initial Business Combination, or (2) the Company completes a liquidation, merger, capital stock
exchange or other similar transaction that results in all of its stockholders having the right to exchange their shares of common stock
for cash, securities or other property, the Founder Shares will be released from the Lock-up.
Due from related Party
As of September 30, 2021,
the Company had $45,312 due from a related party which consists of $50,000 incurred from purchase of over-allotment private warrants,
offset by $4,688 of other miscellaneous costs paid by Michael J. Mayell and the Sponsor. As of December 31, 2020, the Company had $0 due
to a related party. The Sponsor paid off the balance in full on October 1, 2021.
Promissory Note — Related
Party
On December 31, 2020, the
Sponsor agreed to loan the Company up to $500,000 to be used for a portion of the expenses of the IPO. These loans are non-interest
bearing, unsecured and are due at the earlier of September 30, 2021 or the closing of the IPO. As of December 31, 2020, the Company borrowed
$88,333 under the promissory note and the loan was fully repaid upon the closing of the IPO out of the offering proceeds.
Related Party Loans
In addition, in order to
finance transaction costs in connection with an intended Business Combination, on November 11, 2021 the Sponsor signed a commitment letter
to provide loans of up to an aggregate of $1,500,000 to the Company (“Working Capital Loans”). These loans will be non-interest
bearing, unsecured and will be repaid upon the consummation of a Business Combination. If the Company completes the initial Business Combination,
the Company would repay the Working Capital Loans. In the event that the initial Business Combination does not close, the Company may
use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust
Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into
Private Placement Warrants at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the Private
Placement Warrants. As of September 30, 2021 and December 31, 2020, the Company had no borrowings under the Working Capital Loans.
Note 7 — Commitments and Contingencies
Registration Rights
The holders of the Founder
Shares, the Class A representative shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital
Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued
upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a
registration rights agreement signed on the IPO closing date of the IPO, requiring the Company to use its best efforts to register such
securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A common stock). The holders
of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers
such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements
filed subsequent to the completion of the initial Business Combination and rights to require the Company to register for resale such securities
pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit
any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period, which
occurs (i) in the case of the Founder Shares, on the earlier of (A) six months after the completion of the initial Business Combination
or (B) subsequent to the initial Business Combination, (x) if the last sale price of our Class A common stock equals or exceeds $12.00
per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within
any 30-trading day period commencing at least 75 days after the initial Business Combination, or (y) the date on which the Company completes
a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s
stockholders having the right to exchange their shares of common stock for cash, securities or other property and (ii) in the case of
the Private Placement Warrants and the respective Class A common stock underlying such warrants, 30 days after the completion of the initial
Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
The Company granted the underwriters
a 45-day option from the date of this IPO to purchase up to an additional 2,250,000 units to cover over-allotments, if any.
On August 19, 2021, the over-allotments were exercised in full.
Simultaneously with the closing
of the IPO and the over-allotment, the underwriters were paid an underwriting discount of two percent (2%) of the gross proceeds
of the IPO and the over-allotment, or $3,450,000. Additionally, the underwriters will be entitled to a deferred underwriting discount
of 3.5% of the gross proceeds of the IPO and the over-allotment upon the completion of the Company’s initial Business Combination.
Representative Shares
Simultaneously with the
closing of the IPO, the Company issued to Imperial Capital LLC and/or its designees, 165,000 shares of Class A Common Stock (the
“Representative Shares”). On August 19, 2021, the over-allotments were exercised in full, the Company issued additional 24,750
Representative Shares to Imperial Capital LLC and/or its designees. The aggregate fair value of the Representative shares was $1,442,100,
or $7.60 per share and recorded as offering costs, which was treated as transaction cost of offering.
Imperial Capital LLC has
agreed not to transfer, assign or sell any such shares of common stock until the completion of an initial business combination. In addition,
Imperial Capital LLC has agreed (i) to waive its redemption rights with respect to such shares of common stock in connection with the
completion of our initial business combination; and (ii) to waive its rights to liquidating distributions from the trust account with
respect to such shares of common stock if the Company fails to complete an initial business combination within the Combination Period
(or up to 18 months following extensions).
The representative shares
may be deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the commencement
of sales of the registration statement of which the IPO forms a part pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules.
Pursuant to FINRA Rule 5110(e)(1), these securities may not be sold, transferred, assigned, pledged or hypothecated or the subject of
any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person
for a period of 180 days immediately following the effective date of the registration statement of which this prospectus forms a part,
nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of
sales of the IPO except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners,
registered persons or affiliates or as otherwise permitted under Rule 5110(e)(2).
Note 8 — Stockholder’s
Equity
Preferred stock — The
Company is authorized to issue 1,000,000 preferred stock with a par value of $0.0001 and with such designations, voting
and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30,
2021 and December 31, 2020 there were no preferred stock issued or outstanding.
Class A common
stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of
$0.0001 per share. At September 30, 2021, there were 189,750 Class A common stocks issued or outstanding excluding 17,250,000 Class
A stock subject to redemption. At December 31, 2020, there were no Class A common stock issued or outstanding.
Class B common
stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of
$0.0001 per share. Holders are entitled to one vote for each share of Class B common stock. At September 30, 2021 and December 31,
2020, there were 4,312,500 shares of Class B common stock issued and outstanding. Of the 4,312,500 shares of
Class B common stock, an aggregate of up to 562,500 shares were subject to forfeiture to the Company for no consideration
to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that the initial stockholders
will collectively own 20% of the Company’s issued and outstanding common stocks after the IPO. On August 19, 2021, the over-allotments
were exercised in full, hence the 562,500 Founder Shares were no longer subject to forfeiture.
Holders of Class A common
stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s
stockholders except as required by law. Unless specified in the Company’s amended and restated certificate of incorporation or bylaws,
or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of the Company’s
shares of common stock that are voted is required to approve any such matter voted on by its stockholders.
The Class B common stocks
will automatically convert into Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to
adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided
herein. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in excess of
the amounts offered in this IPO and related to the closing of the Business Combination, including pursuant to a specified future issuance,
the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed
issuance, including a specified future issuance) so that the number of shares of Class A common stock issuable upon conversion of all
shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all
shares of common stock outstanding upon completion of the IPO plus all shares of Class A common stock and equity-linked securities issued
or deemed issued in connection with the Business Combination (excluding any shares or equity-linked securities issued, or to be issued,
to any seller in the Business Combination). Holders of Founder Shares may also elect to convert their shares of Class B common stock into
an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
Warrants —
There are 19,612,500 warrants currently outstanding, including 12,937,500 public
warrants and 6,675,000 Private Placement Warrants. Each warrant entitles the registered holder to purchase one share of Class
A common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the
completion of our initial business combination. However, no warrants will be exercisable for cash unless we have an effective and current
registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating
to such shares of Class A common stock. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common
stock issuable upon exercise of the public warrants is not effective within a specified period following the consummation of our initial
business combination, warrant holders may, until such time as there is an effective registration statement and during any period when
we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption
provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption,
is not available, holders will not be able to exercise their warrants on a cashless basis. In the event of such cashless exercise, each
holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient
obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference
between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair
market value” for this purpose will mean the average reported last sale price of the shares of Class A common stock for the 5 trading
days ending on the trading day prior to the date of exercise. The warrants will expire on the fifth anniversary of our completion of an
initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Private Placement Warrants,
as well as any warrants underlying additional units we issue to our sponsor, officers, directors, initial stockholders or their affiliates
in payment of working capital loans made to us, will be identical to the warrants underlying the units being offered by this prospectus.
We may call the warrants
for redemption, in whole and not in part, at a price of $0.01 per warrant:
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at any time after the warrants become exercisable;
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upon not less than 30 days’ prior written notice of redemption
to each warrant holder;
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if, and only if, the reported last sale price of the shares of Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing at any time after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and
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if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants.
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If and when the warrants
become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying
securities for sale under all applicable state securities laws.
The Private Placement Warrants,
as well as any warrants the Company issues to the Sponsor, officers, directors, initial stockholders or their affiliates in payment of
Working Capital Loans made to the Company, will be identical to the public warrants underlying the Units being offered in the Initial
Public Offering.
Note 9 — Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Apart from
the Initial Public Offering noted in the footnotes above, the Company did not identify any subsequent events that would have required
adjustment in these unaudited condensed financial statements. On October 1, 2021, the Sponsor paid in full the Due from Related Party
balance as of September 30, 2021. On November 11, 2021, the Sponsor signed a commitment letter to provide loans of up to an aggregate
of $1,500,000 to the Company.