Item 1. Financial Statements
PROGRESS ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| |
September 30, 2022 | | |
December 31, 2021 | |
| |
(Unaudited) | | |
| |
Assets | |
| | |
| |
Cash | |
$ | 21,078 | | |
$ | 111,312 | |
Prepaid expenses | |
| 107,786 | | |
| 250,000 | |
Total current assets | |
| 128,864 | | |
| 361,312 | |
Prepaid expenses, non-current | |
| — | | |
| 27,397 | |
Money market funds held in Trust Account | |
| 173,237,830 | | |
| 172,512,282 | |
Total Assets | |
$ | 173,366,694 | | |
$ | 172,900,991 | |
| |
| | | |
| | |
Liabilities, Class A Common Stock Subject to Possible Redemption, and Stockholders’ Deficit | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 290,091 | | |
$ | 379,718 | |
Income tax payable | |
| 127,817 | | |
| — | |
Convertible promissory notes | |
| 11,622 | | |
| — | |
Due to related party | |
| — | | |
| 5,634 | |
Total current liabilities | |
| 429,530 | | |
| 385,352 | |
Warrant liability | |
| 443,514 | | |
| 2,309,416 | |
Deferred underwriting discount | |
| 250,000 | | |
| 250,000 | |
Total liabilities | |
| 1,123,044 | | |
| 2,944,768 | |
| |
| | | |
| | |
Commitments and Contingencies (Note 7) | |
| | | |
| | |
Class A common stock subject to possible redemption, 17,250,000 shares at redemption value as of September 30, 2022 and December 31, 2021 | |
| 172,959,563 | | |
| 172,512,282 | |
| |
| | | |
| | |
Stockholders’ Deficit | |
| | | |
| | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | |
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 150,000 shares issued and outstanding (excluding 17,250,000 shares subject to possible redemption) as of September 30, 2022 and December 31, 2021 | |
| 15 | | |
| 15 | |
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 4,312,500 shares issued and outstanding as of September 30, 2022 and December 31, 2021 | |
| 431 | | |
| 431 | |
Additional paid-in capital | |
| 1,472,806 | | |
| — | |
Accumulated deficit | |
| (2,189,165 | ) | |
| (2,556,505 | ) |
Total Stockholders’ Deficit | |
| (715,913 | ) | |
| (2,556,059 | ) |
Total Liabilities, Class A Common Stock Subject to Possible Redemption, and Stockholders’ Deficit | |
$ | 173,366,694 | | |
$ | 172,900,991 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
PROGRESS ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| |
For the Three Months Ended September 30, | | |
For the Nine Months Ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Operating costs | |
$ | 860,670 | | |
$ | 270,269 | | |
$ | 2,341,969 | | |
$ | 665,729 | |
Loss from operations | |
| (860,670 | ) | |
| (270,269 | ) | |
| (2,341,969 | ) | |
| (665,729 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Interest and dividend earned on money market funds held in Trust Account | |
| 758,630 | | |
| 3,545 | | |
| 946,819 | | |
| 7,995 | |
Fair value exceeding amount paid for warrants | |
| — | | |
| — | | |
| — | | |
| (1,318,351 | ) |
Unrealized (loss) gain on change in fair value of convertible promissory notes | |
| (51 | ) | |
| — | | |
| 12,123 | | |
| — | |
Unrealized gain on change in fair value of warrants | |
| 84,925 | | |
| 742,478 | | |
| 1,865,902 | | |
| 3,052,923 | |
Total other income, net | |
| 843,504 | | |
| 746,023 | | |
| 2,824,844 | | |
| 1,742,567 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss) income before income tax provision | |
| (17,166 | ) | |
| 475,754 | | |
| 482,875 | | |
| 1,076,838 | |
Income tax provision | |
| (127,817 | ) | |
| — | | |
| (127,817 | ) | |
| — | |
Net (loss) income | |
$ | (144,983 | ) | |
$ | 475,754 | | |
$ | 355,058 | | |
$ | 1,076,838 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 17,250,000 | | |
| 17,250,000 | | |
| 17,250,000 | | |
| 14,505,495 | |
Basic and diluted net (loss) income per Class A share - redeemable | |
$ | (0.01 | ) | |
$ | 0.02 | | |
$ | 0.02 | | |
$ | 0.06 | |
Basic and diluted weighted average shares outstanding, Class A and Class B common stock – non-redeemable | |
| 4,462,500 | | |
| 4,462,500 | | |
| 4,462,500 | | |
| 4,353,297 | |
Basic and diluted net (loss) income per Class A and Class B share – non-redeemable | |
$ | (0.01 | ) | |
$ | 0.02 | | |
$ | 0.02 | | |
$ | 0.06 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
PROGRESS ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2022
| |
Class A
Common Stock | | |
Class B
Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance as of December 31, 2021 | |
| 150,000 | | |
$ | 15 | | |
| 4,312,500 | | |
$ | 431 | | |
$ | — | | |
$ | (2,556,505 | ) | |
$ | (2,556,059 | ) |
Remeasurement of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 12,282 | | |
| 12,282 | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 981,486 | | |
| 981,486 | |
Balance as of March 31, 2022 | |
| 150,000 | | |
$ | 15 | | |
| 4,312,500 | | |
$ | 431 | | |
$ | — | | |
$ | (1,562,737 | ) | |
$ | (1,562,291 | ) |
Proceeds of convertible promissory notes over fair value | |
| — | | |
| — | | |
| — | | |
| — | | |
| 291,219 | | |
| — | | |
| 291,219 | |
Share-based compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| 995,294 | | |
| — | | |
| 995,294 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (481,445 | ) | |
| (481,445 | ) |
Balance as of June 30, 2022 | |
| 150,000 | | |
$ | 15 | | |
| 4,312,500 | | |
$ | 431 | | |
$ | 1,286,513 | | |
$ | (2,044,182 | ) | |
$ | (757,223 | ) |
Proceeds of convertible promissory notes over fair value | |
| — | | |
| — | | |
| — | | |
| — | | |
| 95,036 | | |
| — | | |
| 95,036 | |
Share-based compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| 550,820 | | |
| — | | |
| 550,820 | |
Remeasurement of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| (459,563 | ) | |
| — | | |
| (459,563 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (144,983 | ) | |
| (144,983 | ) |
Balance as of September 30, 2022 | |
| 150,000 | | |
$ | 15 | | |
| 4,312,500 | | |
$ | 431 | | |
$ | 1,472,806 | | |
$ | (2,189,165 | ) | |
$ | (715,913 | ) |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2021
| |
Class A
Common Stock | | |
Class B
Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
(Deficit) | |
Balance as of December 31, 2020 | |
| 150,000 | | |
$ | 15 | | |
| 4,312,500 | | |
$ | 431 | | |
$ | 24,554 | | |
$ | (2,579 | ) | |
$ | 22,421 | |
Proceeds allocated to Public Warrants | |
| — | | |
| — | | |
| — | | |
| — | | |
| 10,753,651 | | |
| — | | |
| 10,753,651 | |
Offering costs allocated to Public Warrants | |
| — | | |
| — | | |
| — | | |
| — | | |
| (244,820 | ) | |
| — | | |
| (244,820 | ) |
Remeasurement of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| (10,533,385 | ) | |
| (3,903,139 | ) | |
| (14,436,524 | ) |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,982,959 | | |
| 1,982,959 | |
Balance as of March 31, 2021 | |
| 150,000 | | |
$ | 15 | | |
| 4,312,500 | | |
$ | 431 | | |
$ | — | | |
$ | (1,922,759 | ) | |
$ | (1,922,313 | ) |
Remeasurement of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,926 | ) | |
| (3,926 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,381,875 | ) | |
| (1,381,875 | ) |
Balance as of June 30, 2021 | |
| 150,000 | | |
$ | 15 | | |
| 4,312,500 | | |
$ | 431 | | |
$ | — | | |
$ | (3,308,560 | ) | |
$ | (3,308,114 | ) |
Remeasurement of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,545 | ) | |
| (3,545 | ) |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 475,754 | | |
| 475,754 | |
Balance as of September 30, 2021 | |
| 150,000 | | |
$ | 15 | | |
| 4,312,500 | | |
$ | 431 | | |
$ | — | | |
$ | (2,836,351 | ) | |
$ | (2,835,905 | ) |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
PROGRESS ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| |
For the Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
Cash flows from Operating Activities: | |
| | |
| |
Net income | |
$ | 355,058 | | |
$ | 1,076,838 | |
Adjustments to reconcile net income to net cash used in operating activities: | |
| | | |
| | |
Fair value exceeding amount paid for warrants | |
| — | | |
| 1,318,351 | |
Unrealized gain on change in fair value of convertible promissory notes | |
| (12,123 | ) | |
| — | |
Unrealized gain on change in fair value of warrants | |
| (1,865,902 | ) | |
| (3,052,923 | ) |
Share-based compensation | |
| 1,546,114 | | |
| — | |
Interest and dividend earned on money market funds held in Trust Account | |
| (946,819 | ) | |
| (7,995 | ) |
Changes in current assets and current liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 169,611 | | |
| (340,411 | ) |
Income tax payable | |
| 127,817 | | |
| — | |
Due to related party | |
| (5,634 | ) | |
| — | |
Accounts payable and accrued expenses | |
| (89,627 | ) | |
| 279,239 | |
Net cash used in operating activities | |
| (721,505 | ) | |
| (726,901 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Investment held in Trust Account | |
| — | | |
| (172,500,000 | ) |
Withdrawal of interest from Trust Account for franchise tax payment | |
| 221,271 | | |
| — | |
Net cash provided by (used in) investing activities | |
| 221,271 | | |
| (172,500,000 | ) |
| |
| | | |
| | |
Cash flows from Financing Activities: | |
| | | |
| | |
Proceeds from initial public offering, net of underwriters’ fees | |
| — | | |
| 147,000,000 | |
Proceeds from over-allotment, net of underwriters’ fees | |
| — | | |
| 22,300,000 | |
Proceeds from private placement | |
| — | | |
| 4,650,000 | |
Proceeds from convertible promissory notes | |
| 410,000 | | |
| — | |
Proceeds from issuance of promissory note to related party | |
| — | | |
| 85,700 | |
Payment to promissory note to related party | |
| — | | |
| (141,700 | ) |
Payment of deferred offering costs | |
| — | | |
| (477,169 | ) |
Net cash provided by financing activities | |
| 410,000 | | |
| 173,416,831 | |
| |
| | | |
| | |
Net change in cash | |
| (90,234 | ) | |
| 189,930 | |
Cash, beginning of the period | |
| 111,312 | | |
| 560 | |
Cash, end of the period | |
$ | 21,078 | | |
$ | 190,490 | |
| |
| | | |
| | |
Supplemental disclosure of non-cash activities | |
| | | |
| | |
Deferred underwriting commissions charged to additional paid in capital | |
$ | — | | |
$ | 250,000 | |
Initial value of Class A common stock subject to possible redemption | |
$ | — | | |
$ | 168,572,831 | |
Remeasurement of Class A common stock to redemption value | |
$ | 447,281 | | |
$ | 3,935,164 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
PROGRESS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization, Business
Operations and Going Concern
Organization and General
Progress Acquisition Corp.
(the “Company”) was incorporated as a Delaware company on September 23, 2020. The Company was incorporated for the purpose
of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business
combination with one or more businesses or entities (the “Business Combination”). The Company has not selected any specific
Business Combination target and the Company has not, nor has anyone on its behalf, engaged in any substantive discussions, directly or
indirectly, with any Business Combination target with respect to the Business Combination.
The Company has selected
December 31 as its fiscal year end.
As of September 30, 2022,
the Company had not commenced any operations. Significant activity for the period from September 23, 2020 (inception) through September
30, 2022, relates to the Company’s formation and the initial public offering (the “IPO”) described below, and, since
the closing of the IPO, the search for a prospective initial Business Combination. 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 and dividend on cash and cash equivalents from the proceeds derived from the IPO and will recognize changes in
the fair value of warrant liability as other income (expense).
The Company’s sponsor
is Progress Capital I LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement
for the Company’s IPO was declared effective on February 8, 2021 (the “Effective Date”). On February 11, 2021, the Company
consummated the IPO of 15,000,000 units, (the “Units” and, with respect to the shares of common stock included in
the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $150,000,000, which is
discussed in Note 3.
Simultaneously with the closing
of the IPO, the Company consummated the sale of 4,450,000 Private Placement Warrants (the “Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating total gross proceeds of $4,450,000.
Offering costs amounted to
$3,477,169 consisting of $3,000,000 of underwriting discount and $477,169 of other offering costs.
The Company granted the underwriters
in the IPO a 45-day option to purchase up to 2,250,000 additional Units to cover over-allotments, if any. On February 22, 2021,
the underwriters exercised the over-allotment option in full to purchase 2,250,000 Units (the “Over-allotment Units”),
generating an aggregate of gross proceeds of $22,500,000, and incurred $200,000 in cash underwriting fees and $250,000 in deferred
underwriting fees.
Trust Account
Following the closing of
the IPO on February 11, 2021, and the underwriters’ full exercise of over-allotment option on February 22, 2021, $172,500,000 ($10.00 per
Unit) from the net proceeds of the sale of the Units and the sale of the Private Placement Warrants was placed in a trust account (the
“Trust Account”) maintained by Continental Stock Transfer & Trust Company, as trustee. The funds held in trust will
be held as cash items or invested only in United States “government securities” within the meaning of Section 2(a)(16) of
the Investment Company Act having a maturity of 180 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 and dividend earned on the funds held in the Trust Account that may be released to the Company to pay its income or other
tax obligations, the proceeds will not be released from the Trust Account until the earlier of the completion of a Business Combination
or the redemption of 100% of the outstanding public shares if the Company has not completed a Business Combination within the Extended
Combination Period (as defined below). The proceeds held in the Trust Account may be used as consideration to pay the sellers of a target
business with which the Company completes a Business Combination. Any amounts not paid as consideration to the sellers of the target business
may be used to finance operations of the target business.
On September 27, 2022, pursuant
to the trust agreement dated as of February 8, 2021 between the Company and Continental Stock Transfer & Trust Company (“Continental”),
the trustee of the Trust Account, the Company issued a request to Continental to withdraw $221,271 of interest income from the Trust
Account for the payment of the Company’s taxes. The proceeds from this withdrawal were deposited into the Company’s operating
bank account on September 28, 2022.
On October 27, 2022, the Company
held a special meeting in lieu of the 2022 annual meeting of stockholders (the “Meeting”), at which the Company's stockholders
approved the Extension Amendment (as defined below). At the Meeting, Stockholders holding 16,441,812 shares of common stock exercised
their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, $165,347,999
(approximately $10.05 per share) was removed from the Trust Account to pay such holders.
As of a result of the approval
of the Extension Amendment, the Sponsor has agreed to contribute to the Company a loan (the “Charter Extension Loan”) of $50,000
per month, for each calendar month (commencing on November 8, 2022 and on the 8th day of each subsequent month) until the Extended Date
(as defined below) (each, an “Extension Period”), or portion thereof, that is needed to complete an initial Business Combination,
for up to an aggregate of $300,000. Each Charter Extension Loan will be deposited in the Trust Account within five (5) business days from
the beginning of such calendar month (or portion thereof).
On October 27, 2022, the Company filed
an amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware
(the “Extension Amendment”). The Extension Amendment extends the date by which the Company must consummate its initial business
combination to May 8, 2023, or such earlier date as determined by our board of directors (the “Extended Date”) (the “Extended
Combination Period”).
Initial Business Combination
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 (excluding the deferred
underwriting commissions and taxes payable on the interest and dividend 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 it 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.
In connection with any proposed Business Combination, the Company will
either (1) seek stockholder approval of the initial Business Combination at a meeting called for such purpose at which stockholders may
seek to convert their shares, regardless of whether they vote for or against the proposed Business Combination or do not vote at all,
into their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable), or (2) provide its public
stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder
vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable).
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’s initial
stockholders, officers and directors, and their affiliates have agreed (i) to vote any shares owned by them in favor of any proposed Business
Combination, (ii) not to convert any shares in connection with a stockholder vote to approve a proposed initial Business Combination,
and (iii) not to sell any shares to the Company in a tender offer in connection with any proposed Business Combination.
Going Concern and Liquidity
As of September 30, 2022,
the Company had $21,078 in its operating bank account and working capital deficit of $22,399 (less taxes payable).
Prior to the completion of
the Initial Public Offering, the Company’s liquidity needs had been satisfied through a payment from the Sponsor of $25,000 (see
Note 5) for the founder shares to cover certain offering costs and the loan under an unsecured promissory note from the Sponsor of $141,700 (see
Note 5). The Company fully paid the note to the Sponsor on February 12, 2021. Subsequent to the consummation of the Initial Public Offering
and Private Placement, the Company’s liquidity needs have been satisfied through the proceeds from the consummation of the Private
Placement not held in the Trust Account.
In addition, in order to
finance offering costs in connection with a Business Combination, the Company’s Sponsor, officers, directors and their affiliates
may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). To date, there were no amounts
outstanding under any Working Capital Loans.
On April 26, 2022, the Company
issued one promissory note in the principal amount of up to $195,000 to the Sponsor. The note bears no interest and is due and payable
upon the earlier to occur of (i) the date on which the Company consummates its initial Business Combination and (ii) the date that the
winding up of the Company is effective. At the Sponsor’s option, at any time prior to payment in full of the principal balance of
the promissory note, the Sponsor may elect to convert all or any portion of the unpaid principal balance of the promissory note into that
number of warrants, at a price of $1.00 per warrant (the “Conversion Warrants”). The Conversion Warrants shall be identical
to the warrants issued by the Company to the Sponsor in the Private Placement upon consummation of the Company’s IPO, including
as to exercise price, exercisability and exercise period. As of September 30, 2022, the Company has drawn down the promissory note in
full.
On June 15, 2022, the Company
issued one promissory note in the principal amount of up to $300,000 to the Sponsor. The note bears no interest and is due and payable
upon the earlier to occur of (i) the date on which the Company consummates its initial Business Combination and (ii) the date that the
winding up of the Company is effective. At the Sponsor’s option, at any time prior to payment in full of the principal balance of
the promissory note, the Sponsor may elect to convert all or any portion of the unpaid principal balance of the promissory note into that
number of warrants, at a price of $1.00 per warrant (the “Conversion Warrants”). The Conversion Warrants shall be identical
to the warrants issued by the Company to the Sponsor in the Private Placement upon consummation of the Company’s IPO, including
as to exercise price, exercisability and exercise period. As of September 30, 2022, the Company has drawn down $215,000 of the promissory
note.
On September 27, 2022, pursuant
to the trust agreement dated as of February 8, 2021 between the Company and Continental, the trustee of the Trust Account, the Company
issued a request to Continental to withdraw $221,271 of interest income from the Trust Account for the payment of the Company’s
taxes. The proceeds from this withdrawal were deposited into the Company’s operating bank account on September 28, 2022.
On October 27, 2022, stockholders
holding 16,441,812 shares of common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s
Trust Account. As a result, $165,347,999 (approximately $10.05 per share) will be removed from the Trust Account to pay such holders.
The Company anticipates that
the $21,078 outside of the Trust Account as of September 30, 2022, will not be sufficient to allow the Company to operate through May
8, 2023, the scheduled liquidation date of the Company if it does not complete a Business Combination prior to such date. Until consummation
of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loans
(as defined in Note 5), for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective
target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate
documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating
and consummating the Business Combination.
The Company believes it will
need to raise additional funds in order to meet the expenditures required for operating its business. The Company will need to raise additional
capital through loans from its Sponsor, officers, directors, or third parties. None of the Sponsor, officers or directors are under any
obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required
to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending
the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all.
In connection with the Company’s
assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures
of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management also determined that the liquidity
condition and date for mandatory liquidation and dissolution raise substantial doubt about the Company’s ability to continue as
a going concern through May 8, 2023, the scheduled liquidation date of the Company if it does not complete a Business Combination prior
to such date. These condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
These conditions raise substantial
doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance date of these financial
statements. Management plans to address this uncertainty through loans from its Sponsor, officers, directors, or third parties, and the
consummation of a Business Combination before May 8, 2023. None of the Sponsor, officers or directors are under any obligation to advance
funds to, or to invest in, the Company. There is no assurance that the Company’s plans to raise capital or to consummate a Business
Combination will be successful. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Risks and Uncertainties
Management continues to evaluate
the impact of the COVID-19 pandemic 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, cash flows and/or search for a target company, the specific impact
is not readily determinable as of the date of the condensed financial statements. The condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
On February 24, 2022, Russian
forces launched significant military action against Ukraine, and sustained conflict and disruption in the region is possible. The impact
to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by Canada, the United Kingdom, the
European Union, the United States, and other countries and companies and organizations against officials, individuals, regions, and industries
in Russia and Ukraine, and actions taken by Russia in response to such sanctions, and each country’s potential response to such
sanctions, tensions, and military actions could have a material adverse effect on the Company’s ability to complete the Business
Combination. Any such material adverse effect from the conflict and enhanced sanctions activity may include reduced trading and business
activity levels, disruption of financial markets, increased costs, disruption of services, inability to complete financial or banking
transactions, and inability to service existing or new customers in the region. Prolonged unrest, military activities, or broad-based
sanctions, should they be implemented, could have a material adverse effect on the Company’s ability to complete the Business Combination.
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 redemption or other 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 would 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.
Note 2 — Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying unaudited
condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United
States of America (“GAAP”) for interim financial information and pursuant to the SEC’s rules and regulations found in
Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by 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 three and nine months ended September
30, 2022 is not necessarily indicative of the results that may be expected through December 31, 2022.
The accompanying unaudited
condensed financial statements should be read in conjunction with the Company’s Form 10-K as filed with the SEC on April 21, 2022.
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 the unaudited
condensed financial statements in conformity with US GAAP requires 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 financial statement. Actual results
could differ from those estimates.
Main significant accounting
estimates included in these financial statements are the determination of the fair value of the warrant liability, the convertible promissory
notes, the Sponsor interests transferred to directors and officers, and the Class A common stock subject to redemption. Such estimates
may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly
from those estimates.
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, 2022 and December 31, 2021.
Money Market Funds Held in Trust Account
At September 30, 2022 and
December 31, 2021, the assets held in the Trust Account were invested in money market funds, which are classified as trading securities.
Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from
the change in fair value of investments held in Trust Account are included in interest and dividend income in the accompanying statements
of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Fair Value Measurements
Fair value is defined as
the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants
at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
● |
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
|
|
|
|
● |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
|
|
|
|
● |
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the
inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair
value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the
fair value measurement.
The fair value of the Company’s
certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, prepaid expenses, accounts
payable and accrued expenses are estimated to approximate the carrying values as of September 30, 2022 and December 31, 2021 due to the
short maturities of such instruments.
The Company’s warrant
liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with
less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material
change in fair value. The fair value of the warrant liability is classified as Level 3. See Note 6 for additional information on assets
and liabilities measured at fair value.
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 Coverage of $250,000. As of September 30, 2022 and December 31, 2021, the Company has not
experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Common Stock Subject to Possible Redemption
All of the 17,250,000 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
in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination
and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with
SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions
not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.
Therefore, all Class A common stock has been classified outside of permanent equity.
The Company recognizes changes
in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges
against additional paid in capital and accumulated deficit.
As of September 30, 2022
and December 31, 2021, the Class A common stock reflected on the balance sheet is reconciled in the following table:
Gross proceeds from IPO | |
$ | 172,500,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (10,753,651 | ) |
Class A common stock issuance costs | |
| (3,682,349 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 14,448,282 | |
Class A common stock subject to possible redemption, December 31, 2021 | |
$ | 172,512,282 | |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| (12,282 | ) |
Class A common stock subject to possible redemption, March 31, 2022, June 30, 2022 | |
$ | 172,500,000 | |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 459,563 | |
Class A common stock subject to possible redemption, September 30, 2022 | |
| 172,959,563 | |
Net (Loss) Income Per Common Stock
Earnings and losses are shared
pro rata between the redeemable shares and non-redeemable shares. The 13,275,000 potential common stock for outstanding warrants to purchase
the Company’s shares were excluded from diluted earnings per share for the three and nine months ended September 30, 2022 and 2021
because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net (loss) income
per common stock is the same as basic net (loss) income per common stock for the periods.
The table below presents
a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income per share for the redeemable and
non-redeemable portions of the Class A and Class B common stock:
| |
For the Three Months Ended September 30, | |
| |
2022 | | |
2021 | |
| |
Redeemable | | |
Non- redeemable | | |
Redeemable | | |
Non- redeemable | |
Basic and diluted net (loss) income per share: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net (loss) income | |
$ | (115,185 | ) | |
$ | (29,798 | ) | |
$ | 377,974 | | |
$ | 97,780 | |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 17,250,000 | | |
| 4,462,500 | | |
| 17,250,000 | | |
| 4,462,500 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net (loss) income per share | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | 0.02 | | |
$ | 0.02 | |
| |
For the Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
| |
Redeemable | | |
Non- redeemable | | |
Redeemable | | |
Non- redeemable | |
Basic and diluted net income per share: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income | |
$ | 282,084 | | |
$ | 72,974 | | |
$ | 828,265 | | |
$ | 248,573 | |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 17,250,000 | | |
| 4,462,500 | | |
| 14,505,495 | | |
| 4,353,297 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net income per share | |
$ | 0.02 | | |
$ | 0.02 | | |
$ | 0.06 | | |
$ | 0.06 | |
Offering Costs
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 consist principally of professional and registration fees incurred through the balance sheet date that are related to the
IPO and were charged to temporary equity upon the completion of the IPO.
Derivative Financial Instruments
The Company evaluates its
financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance
with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued
at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are
classified on the balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument
could be required within 12 months of the balance sheet date. The Company has determined the private placement warrants are a derivative
liability (See Note 4).
Convertible Promissory Notes
The Company accounts for
its convertible promissory notes under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be
made at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825, Financial Instruments
(“ASC 825”). The Company has made such election for its convertible promissory notes. Using the fair value option, the convertible
promissory notes are required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter.
Differences between the face value of the convertible promissory notes and fair value at issuance are recognized as either an expense
in the statements of operations (if issued at a premium) or as a capital contribution (if issued at a discount). Any material changes
in the estimated fair value of the convertible promissory notes are recognized as non-cash gains or losses in the condensed statements
of operations.
Stock-based Compensation
Stock-based compensation expense
associated with the Company’s equity awards is measured at fair value upon the grant date and recognized over the requisite service
period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if
any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is
deemed probable to occur. Forfeitures are recognized as incurred.
Income Taxes
The Company accounts for
income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities
and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
As of September 30, 2022
and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective tax rate
was -744.59% and 26.47% for the three and nine months ended September 30, 2022, and 0.00% and 0.00% for three and nine months
ended September 30, 2021. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September
30, 2022, due to changes in fair of warrant liabilities, change in fair value of convertible promissory notes, shared based compensation,
and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position 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.
ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and
transition.
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, 2022 and December 31, 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 has identified
the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities
since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax
jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Pronouncements
In August 2020, the FASB
issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), which simplifies
the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features
from the host contract for convertible instruments. ASU 2020-06 allows for a modified or full retrospective method of transition. This
update is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption
is permitted. The Company is currently evaluating the impact of adoption of ASU 2020-06 on its unaudited condensed financial statements.
Management does not believe
that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
unaudited condensed financial statements.
Note 3 — Initial Public Offering
Pursuant to the IPO on February
11, 2021, the Company sold 15,000,000 Units at a purchase price of $10.00 per Unit. Each Unit consists of one Class
A common stock and one-half of one redeemable warrant. Each whole warrant entitles the holder to purchase one Class A common stock at
a price of $11.50 per share, subject to adjustment. The warrants will become exercisable 30 days after the completion of the
initial Business Combination, and will expire five years after the completion of the initial Business Combination or earlier
upon redemption or liquidation.
On February 22, 2021, the
Underwriters exercised the over-allotment option in full to purchase 2,250,000 Units.
Following the closing of
the IPO on February 11, 2021, and the underwriters’ full exercise of over-allotment option on February 22, 2021, $172,500,000 ($10.00 per
Unit) from the net proceeds of the sale of the Units in the IPO, the sale of Over-allotment Units and the sale of the Private Placement
Warrants was placed in a Trust Account maintained by Continental, as trustee. The funds held in trust will be held as cash items or invested
only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having
a maturity of 180 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.
Note 4 — Private Placement Warrants
Simultaneously with the closing
of the IPO, the Sponsor purchased an aggregate of 4,450,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant, for an aggregate purchase price of $4,450,000, in a private placement (the “Private Placement”).
On February 22, 2021, simultaneously
with the closing of the underwriters’ full exercise of the over-allotment option, the Company completed the private sale of an aggregate
of 200,000 Private Placement Warrants to the Sponsor, at a purchase price of $1.00 per Private Placement Warrant, generating
gross proceeds of $200,000.
The Private Placement Warrants
are identical to the warrants sold in the IPO except that the Private Placement Warrants: (i) will not be redeemable by the Company and
(ii) may be exercised for cash or on a cashless basis, as described in the IPO, in each case so long as they are held by the initial purchasers
or any of their permitted transferees. If the Private Placement Warrants are held by holders other than the initial purchasers or any
of their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the
same basis as the warrants included in the Units being sold in the IPO.
The Company has accounted
for the 4,650,000 Private Placement Warrants in accordance with the guidance contained in FASB ASC 815-40. Such guidance
provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability.
This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant
liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statements of operations. The
Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period,
the warrants will be reclassified as of the date of the event that causes the reclassification.
Note 5 — Related Party Transactions
Founder Shares
On October 29, 2020, the
Company issued 3,593,750 shares of Class B common stock to the Sponsor for $25,000 in cash, or approximately $0.007 per
share, up to 468,750 shares of which are subject to forfeiture depending on the extent to which the underwriters’ over-allotment
option is exercised. In February 2021, the Company effected a stock dividend of 0.2 shares for each founder share outstanding,
resulting in an aggregate of 4,312,500 founder shares outstanding and held by the Sponsor (up to 562,500 of which
are subject to forfeiture by our sponsor if the underwriters’ over-allotment option is not exercised in full). On February 22, 2021,
the underwriter exercised its over-allotment option in full, hence, the 562,500 Founder Shares are no longer subject to forfeiture
since then.
On April 21, 2022, the Sponsor
transferred its interests representing a total of 260,000 shares of Class B common stock of the Company to two independent
directors and two officers of the Company for no consideration. Pursuant to the terms of the agreements governing these transfers, if
the transferee ceases to serve as a director or officer of the Company prior to the completion of the Company’s initial Business
Combination, any unvested portion of the interests shall be immediately and automatically forfeited and deemed transferred to the Sponsor
for no consideration. The transfer of the interests to the Company’s directors and officers is in the scope of FASB ASC Topic 718,
“Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, share-based compensation associated with equity-classified
awards is measured at fair value upon the grant date. The fair value of the interests transferred to the Company’s directors and
officers was $1,203,612 or approximately $4.63 per share. As of September 30, 2022, 230,000 shares were vested and the Company
recognized $1,064,734 as share-based compensation.
On August 1, 2022, the Sponsor
transferred its interests representing a total of 100,000 shares of Class B common stock of the Company to one independent
director of the Company for no consideration. Pursuant to the terms of the agreements governing these transfers, if the transferee ceases
to serve as a director of the Company prior to the completion of the Company’s initial Business Combination, any unvested portion
of the interests shall be immediately and automatically forfeited and deemed transferred to the Sponsor for no consideration. The transfer
of the interests to the Company’s director is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation”
(“ASC 718”). Under ASC 718, share-based compensation associated with equity-classified awards is measured at fair value upon
the grant date. The fair value of the interests transferred to the Company’s director was $481,380 or approximately $4.81 per
share. As of September 30, 2022, all 100,000 shares were vested and the Company recognized $481,380 as share-based compensation.
Holders of the founder shares
have agreed not to transfer, assign or sell (subject to certain limited exceptions set forth below) their founder shares or any shares
of the Company’s Class A common stock issuable upon conversion thereof: (i) with respect to 50% of such shares, for a period
ending on the earlier of the one-year anniversary of the date of the consummation of the initial Business Combination and the date on
which the closing price of the Company’s Class A common stock equals or exceeds $12.50 per share (as adjusted for share splits,
share dividends, reorganizations and recapitalizations) for any 20 trading days within a 30-trading day period following the consummation
of the initial Business Combination and (ii) with respect to the remaining 50% of such shares, for a period ending on the one-year
anniversary of the date of the consummation of the initial Business Combination, or earlier, in either case, if, subsequent to the initial
Business Combination, the Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all
of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note — Related Party
On September 30, 2020, the
Sponsor agreed to loan the Company up to $300,000 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. The loan was repaid upon the closing of
the IPO out of the offering proceeds not being placed in the Trust Account. The Company had borrowed $141,700 under the promissory
note, and the note was paid in full on February 12, 2021.
Convertible Promissory Notes
On April 26, 2022, the Company
issued one promissory note in the principal amount of up to $195,000 to the Sponsor. The Note bears no interest and is due and payable
upon the earlier to occur of (i) the date on which the Company consummates its initial Business Combination and (ii) the date that the
winding up of the Company is effective. At the Sponsor’s option, at any time prior to payment in full of the principal balance of
the promissory note, the Sponsor may elect to convert all or any portion of the unpaid principal balance of the promissory note into that
number of warrants, at a price of $1.00 per warrant (the “Conversion Warrants”). The Conversion Warrants shall be identical
to the warrants issued by the Company to the Sponsor in the Private Placement upon consummation of the Company’s IPO, including
as to exercise price, exercisability and exercise period. As of September 30, 2022, the Company has drawn down the promissory note in
full.
On June 15, 2022, the Company
issued one promissory note in the principal amount of up to $300,000 to the Sponsor. The Note bears no interest and is due and payable
upon the earlier to occur of (i) the date on which the Company consummates its initial Business Combination and (ii) the date that the
winding up of the Company is effective. At the Sponsor’s option, at any time prior to payment in full of the principal balance of
the promissory note, the Sponsor may elect to convert all or any portion of the unpaid principal balance of the promissory note into that
number of warrants, at a price of $1.00 per warrant (the “Conversion Warrants”). The Conversion Warrants shall be identical
to the warrants issued by the Company to the Sponsor in the Private Placement upon consummation of the Company’s IPO, including
as to exercise price, exercisability and exercise period. As of September 30, 2022, the Company has drawn down $215,000 of the promissory
note.
Related Party Loans
In order to meet the Company’s
working capital needs following the consummation of the IPO, the Sponsor, officers, directors and their affiliates may, but are not obligated
to, loan the Company funds (“Working Capital Loans”), from time to time or at any time, in whatever amount they deem reasonable
in their sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of the initial
Business Combination, without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants
at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. 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 such
loaned amounts, but no proceeds from the Trust Account would be used for such repayment. As of September 30, 2022 and December 31, 2021,
no such Working Capital Loans were outstanding.
Administrative Service Fee
Commencing on February 8,
2021, the Company will make a payment of a monthly fee of $10,000 to the Sponsor or an affiliate thereof for administrative services
including office space, utilities and secretarial support provided to the Company. Upon completion of the initial Business Combination
or the Company’s liquidation, the Company will cease paying these monthly fees. During the three and nine months ended September
30, 2022, the Company incurred and paid $30,000 and $90,000 administrative service fees, respectively. During the three and nine months
ended September 30, 2021, the Company incurred $30,000 and $80,000 administrative service fees, respectively.
Note 6 — Fair Value Measurements
The following table presents
information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30,
2022, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| |
September 30, | | |
Quoted Prices In Active Markets | | |
Significant Other Observable Inputs | | |
Significant Other Unobservable Inputs | |
| |
2022 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
U.S. Money Market funds held in Trust Account | |
$ | 173,237,830 | | |
$ | 173,237,830 | | |
$ | — | | |
$ | — | |
| |
$ | 173,237,830 | | |
$ | 173,237,830 | | |
$ | — | | |
$ | — | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liability | |
$ | 443,514 | | |
$ | — | | |
$ | — | | |
$ | 443,514 | |
Convertible promissory notes | |
| 11,622 | | |
| — | | |
| — | | |
| 11,622 | |
| |
$ | 455,136 | | |
$ | — | | |
$ | — | | |
$ | 455,136 | |
The following table presents
information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of December 31,
2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| |
December 31, | | |
Quoted Prices In Active Markets | | |
Significant Other Observable Inputs | | |
Significant Other Unobservable Inputs | |
| |
2021 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
U.S. Money Market funds held in Trust Account | |
$ | 172,512,282 | | |
$ | 172,512,282 | | |
$ | — | | |
$ | — | |
| |
$ | 172,512,282 | | |
$ | 172,512,282 | | |
$ | — | | |
$ | — | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liability | |
$ | 2,309,416 | | |
$ | — | | |
$ | — | | |
$ | 2,309,416 | |
| |
$ | 2,309,416 | | |
$ | — | | |
$ | — | | |
$ | 2,309,416 | |
Private Placement Warrants
The estimated fair value
of the Private Placement Warrants was determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model are assumptions
related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend yield and risk-free interest
rate. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated
with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the
expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions regarding the
timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates
to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However,
inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The key inputs into the Monte
Carlo simulation model for the Private Placement Warrants were as follows as of September 30, 2022 and December 31, 2021:
Input | |
September 30, 2022 | | |
December 31, 2021 | |
Expected term (years) | |
| 5.64 | | |
| 5.67 | |
Expected volatility | |
| 9.20 | % | |
| 10.10 | % |
Risk-free interest rate | |
| 4.03 | % | |
| 1.32 | % |
Stock price | |
$ | 9.98 | | |
$ | 9.75 | |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
The following table sets
forth a summary of the changes in the fair value of the Level 3 warrant liability for the three and nine months ended September 30, 2022:
| |
Warrant Liability | |
Fair value as of January 1, 2022 | |
$ | 2,309,416 | |
Revaluation of warrant liability for the three months ended March 31, 2022 | |
| (1,202,395 | ) |
Fair value as of March 31, 2022 | |
$ | 1,107,021 | |
Revaluation of warrant liability for the three months ended June 30, 2022 | |
| (578,582 | ) |
Fair value as of June 30, 2022 | |
$ | 528,439 | |
Revaluation of warrant liability for the three months ended September 30, 2022 | |
| (84,925 | ) |
Fair value as of September 30, 2022 | |
$ | 443,514 | |
The following table sets
forth a summary of the changes in the fair value of the Level 3 warrant liability for the year ended December 31, 2021:
| |
Warrant Liability | |
Fair value as of January 1, 2021 | |
$ | — | |
Initial fair value of warrant liability upon issuance at IPO | |
| 5,711,648 | |
Initial fair value of warrant liability upon issuance at over-allotment | |
| 256,703 | |
Revaluation of warrant liability for the year ended December 31, 2021 | |
| (3,658,935 | ) |
Fair value as of December 31, 2021 | |
$ | 2,309,416 | |
Convertible Promissory Notes
The Company used a Monte
Carlo model to value the convertible promissory notes on the issuance date and September 30, 2022. The convertible promissory notes are
classified within Level 3 of the fair value hierarchy at the measurement date due to the use of unobservable inputs.
The key inputs into the pricing
model for the convertible promissory notes on the issuance date were as follows:
Input | |
| | |
Expected term (years) | |
| 5.34 – 5.68 | |
Expected volatility | |
| 9.20% - 19.00% | |
Risk-free interest rate | |
| 2.79% - 4.06% | |
Stock price | |
$ | 9.88 – 9.98 | |
The key inputs into the pricing
model for the convertible promissory notes on September 30, 2022 were as follows:
Input | |
September 30, 2022 | |
Expected term (years) | |
| 5.64 | |
Expected volatility | |
| 9.20 | % |
Risk-free interest rate | |
| 4.06 | % |
Stock price | |
$ | 9.98 | |
The following table sets
forth a summary of the changes in the fair value of the convertible promissory notes from initial measurement to September 30, 2022:
| |
Convertible Promissory Notes | |
Initial measurement of convertible promissory notes | |
$ | 18,781 | |
Revaluation of convertible promissory notes from initial measurement to June 30, 2022 | |
| (12,174 | ) |
Fair value as of June 30, 2022 | |
$ | 6,607 | |
Initial measurement of convertible promissory notes | |
| 4,964 | |
Revaluation of convertible promissory notes from initial measurement to September 30, 2022 | |
| 51 | |
Fair value as of September 30, 2022 | |
$ | 11,622 | |
There were no transfers in
or out of Level 3 from other levels in the fair value hierarchy during the three and nine months ended September 30, 2022 for the convertible
promissory notes.
Note 7 — Commitments and Contingencies
Registration Rights
The holders of the founder shares
and representative shares issued and outstanding on the date of the IPO, as well as the holders of the Private Placement Warrants and
any warrants the Sponsor, officers, directors or their affiliates may be issued in payment of Working Capital Loans made to the Company
(and all underlying securities), will be entitled to registration rights pursuant to an agreement signed on February 8, 2021. The holders
of a majority of these securities are entitled to make up to two demands that the Company registers such securities. The holders of the
majority of the founder shares can elect to exercise these registration rights at any time commencing three months prior to the date on
which the lockup period for these shares of common stock expires. The holders of a majority of the representative shares, Private
Placement Warrants and warrants issued to the Sponsor, officers, directors or their affiliates in payment of Working Capital Loans made
to the Company (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a
Business Combination. Notwithstanding anything to the contrary, EarlyBirdCapital may only make a demand on one occasion and only during
the five-year period beginning on February 8, 2021. In addition, the holders have certain “piggy-back” registration rights
with respect to registration statements filed subsequent to the Company’s consummation of a Business Combination; provided, however,
that EarlyBirdCapital may participate in a “piggy-back” registration only during the seven-year period beginning on February
8, 2021. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters had a 45-day
option from February 11, 2021 to purchase up to an aggregate of 2,250,000 additional Units to cover over-allotments, if any.
On February 22, 2021, the underwriters purchased an additional 2,250,000 units to exercise its over-allotment option in full.
The proceeds of $22,500,000 from the over-allotment was deposited in the Trust Account after deducting the cash underwriting discounts.
The underwriters are entitled
to a cash underwriting discount of 2% of the gross proceeds of the IPO, or $3,450,000 since the underwriters’ over-allotment
was exercised in full, $250,000 of which will be deferred underwriting discount, upon the completion of the Company’s initial
Business Combination subject to the terms of the underwriting agreement. Additionally, if the Company consummates its initial business
combination, the underwriter is entitled to a cash fee for its services in relation thereto in an aggregate amount equal to up to 3.5%
of the total gross proceeds raised in such offering.
Representative’s Common Stock
In December 2020, the Company
issued to designees of EarlyBirdCapital 150,000 representative shares for nominal consideration. The holders of the representative
shares have agreed not to transfer, assign or sell any such shares without the Company’s prior consent until the completion of the
initial Business Combination. In addition, the holders of the representative shares have agreed (i) to waive their conversion rights (or
right to participate in any tender offer) with respect to such shares in connection with the completion of the initial Business Combination
and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to
complete its initial Business Combination within the Combination Period. The stock was treated as cost of capital and charged directly
to stockholders’ equity (deficit).
The representative shares have
been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following February 8, 2021
pursuant to Rule 5110(e)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(e)(1), these securities will not be sold during the IPO,
or sold, transferred, assigned, pledged, or hypothecated, or be 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 February
8, 2021 or commencement of sales of the IPO, except to any underwriter and selected dealer participating in the IPO and their bona fide
officers or partners, provided that all securities so transferred remain subject to the lockup restriction above for the remainder of
the time period.
Right of First Refusal
The Company has granted EarlyBirdCapital
a right of first refusal for a period commencing from the consummation of the IPO until the consummation of the initial Business Combination
(or the liquidation of the Trust Account in the event that the Company fails to consummate its initial Business Combination within the
Combination Period) to act as book running manager, placement agent and/or arranger for all financings where the Company seeks to raise
equity, equity-linked, debt or mezzanine financings relating to or in connection with a Business Combination.
In addition, under certain circumstances
EarlyBirdCapital will be granted, for a period of 12 months from the closing of the IPO, the right to act as lead underwriter for the
next U.S. registered public offering of securities undertaken by the Company or the Sponsor or its affiliates for the purpose of raising
up to $150 million in capital and placing 90% or more of the proceeds in a trust or escrow account to be used to acquire one or more operating
businesses that have not been identified at the time of the IPO.
Note 8 — Stockholders’ Deficit
Preferred Stock —
The Company is authorized to issue 1,000,000 preferred shares at par value of $0.0001 each. As of September 30, 2022 and
December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock —
The Company is authorized to issue 100,000,000 Class A common stock with a par value of $0.0001 per share. As of September
30, 2022 and December 31, 2021, there were 150,000 shares of common stock issued and outstanding, excluding 17,250,000 and 17,250,000 shares of Class A common stock subject to possible redemption, respectively.
Class B Common Stock —
The Company is authorized to issue 10,000,000 Class B common stock with a par value of $0.0001 per share. On October 29,
2020, the Company issued 3,593,750 shares of Class B common stock to the Sponsor for $25,000 in cash, or approximately
$0.007 per share, up to 468,750 shares of which are subject to forfeiture depending on the extent to which the underwriters’
over-allotment option is exercised. In February 2021, the Company effected a stock dividend of 0.2 shares for each founder share
outstanding, resulting in an aggregate of 4,312,500 founder shares outstanding and held by the Sponsor (up to 562,500 of
which are subject to forfeiture by our sponsor if the underwriters’ over-allotment option is not exercised in full). As a result
of the underwriters’ election to fully exercise of their over-allotment option on February 22, 2021, the 562,500 shares
were no longer subject to forfeiture.
Holders of the founder shares
may not transfer, assign or sell (subject to certain limited exceptions set forth below) their founder shares and any shares of the Company’s
Class A common stock issuable upon conversion thereof: (i) with respect to 50% of such shares, for a period ending on the earlier
of the one-year anniversary of the date of the consummation of the initial Business Combination and the date on which the closing price
of the Company’s Class A common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations
and recapitalizations) for any 20 trading days within a 30-trading day period following the consummation of the initial Business Combination
and (ii) with respect to the remaining 50% of such shares, for a period ending on the one-year anniversary of the date of the consummation
of the initial Business Combination, or earlier, in either case, if, subsequent to the initial Business Combination, the Company consummates
a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the
right to exchange their shares of common stock for cash, securities or other property.
Public Warrants
Each whole warrant entitles the
holder to purchase one Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein. In addition,
if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with
the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class
A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors,
and in the case of any such issuance to the Sponsor, initial stockholders or their affiliates, without taking into account any founder
shares held by them prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the
total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation
of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class
A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial
Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will
be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at which the Company
issues the additional shares of common stock or equity-linked securities.
The warrants will become exercisable
30 days after the completion of the initial Business Combination, and will expire five years after the completion of the Company’s
initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
No warrants will be exercisable
for cash unless the Company has 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 the initial Business Combination, warrant holders may, until such time as there is an
effective registration statement and during any period when the Company 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 of 1933, as amended,
or 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 Company may call the warrants
for redemption in whole and not in part, at a price of $0.01 per warrant,
|
● |
At any time after the warrants become exercisable, |
|
|
|
|
● |
Upon not less than 30 days’ prior written notice of redemption to each warrant holder, |
| ● | If, and only if, the reported last sale price of the shares of Class A common stock equals or exceeds $21.00 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 |
| | |
| ● | 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. |
If the Company calls the warrants
for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise warrants
to do so on a “cashless basis.”
Note 10 — Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were
issued. Other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure
in the unaudited condensed financial statements.
On October 27, 2022, the Company
held a special meeting in lieu of the 2022 annual meeting of stockholders (the “Meeting”), at which the Company's stockholders
approved the Extension Amendment (as defined below). At the Meeting, Stockholders holding 16,441,812 shares of common stock exercised
their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, $165,347,999
(approximately $10.05 per share) was removed from the Trust Account to pay such holders.
As of a result of the approval
of the Extension Amendment, the Sponsor has agreed to contribute to the Company a loan (the “Charter Extension Loan”) of $50,000
per month, for each calendar month (commencing on November 8, 2022 and on the 8th day of each subsequent month) until the Extended Date
(as defined below) (each, an “Extension Period”), or portion thereof, that is needed to complete an initial Business Combination,
for up to an aggregate of $300,000. Each Charter Extension Loan will be deposited in the Trust Account within five (5) business days from
the beginning of such calendar month (or portion thereof).
On October 27, 2022, the Company filed
an amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware
(the “Extension Amendment”). The Extension Amendment extends the date by which the Company must consummate its initial business
combination to May 8, 2023, or such earlier date as determined by our board of directors (the “Extended Date”) (the “Extended
Combination Period”).
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical
fact included in this Quarterly Report on Form 10-Q (the “Report”) including, without limitation, statements under this “Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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, the 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 Securities and Exchange Commission (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.
Overview
We were formed on September 23, 2020 for the purpose
of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business
combination with one or more target businesses. Our efforts to identify a prospective target business are not limited to a particular
industry or geographic region although we currently are focusing on target businesses in the nexus of media, entertainment and technology.
We are intending to utilize cash derived from the proceeds of our initial public offering, our securities, debt or a combination of cash,
securities and debt, in effecting a business combination. The issuance of additional shares of common stock or preferred stock:
|
● |
may significantly reduce the equity interest of our stockholders, which dilution would increase if the anti-dilution provisions in our Class B common stock resulted in the issuance of our Class A common stock on a greater than one-to-one basis upon conversion of our Class B common stock; |
|
● |
may subordinate the rights of holders of shares of Class A common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of Class A common stock; |
|
● |
will likely cause a change in control if a substantial number of our shares of 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 most likely will also result in the resignation or removal of our present officers and directors; and |
|
● |
may adversely affect prevailing market prices for our securities. |
Similarly, if we issue debt securities, it could result in:
|
● |
default and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations: |
|
● |
acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant; |
|
● |
our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and |
|
● |
our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding. |
On February 11, 2021, we consummated our initial public
offering of 15,000,000 units. Each unit consists of one share of common stock of the Company, par value $0.0001 per share (“Common
Stock”), and one-half of one redeemable warrant of the Company, with each warrant entitling the holder thereof to purchase one share
of Common Stock for $11.50 per whole share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company
of $150,000,000.
On February 11, 2021, simultaneously with the consummation
of our initial public offering, we completed the private sale of an aggregate of 4,450,000 warrants to our sponsor at a purchase price
of $1.00 per private placement warrant, generating gross proceeds of $4,450,000.
On February 22, 2021, the underwriters exercised the over-allotment option
in full to purchase 2,250,000 units. On February 22, 2021, simultaneously with the closing of the underwriters’ full exercise of
the over-allotment option, we completed the private sale of an aggregate of 200,000 private placement warrants to our sponsor, at a purchase
price of $1.00 per private placement warrant, generating gross proceeds of $200,000.
Following the closing of our initial public offering
on February 11, 2021 and the underwriters’ full exercise of over-allotment option on February 22, 2021, $172,500,000 from the net
proceeds of the sale of the units in our initial public offering, the exercise of the over-allotment option and the sale of the private
placement warrants was placed in a Trust Account established for the benefit of our public stockholders (the “Trust Account”)
and maintained by Continental, as trustee.
On October 27, 2022, the Company held a special
meeting in lieu of the 2022 annual meeting of stockholders (the “Meeting”), at which the Company's stockholders approved the
Extension Amendment (as defined below). At the Meeting, Stockholders holding 16,441,812 shares of common stock exercised their right to
redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, $165,347,999 (approximately
$10.05 per share) was removed from the Trust Account to pay such holders.
As of a result of the approval of the Extension
Amendment, the Sponsor has agreed to contribute to the Company a loan (the “Charter Extension Loan”) of $50,000 per month,
for each calendar month (commencing on November 8, 2022 and on the 8th day of each subsequent month) until the Extended Date (as defined
below) (each, an “Extension Period”), or portion thereof, that is needed to complete an initial Business Combination, for
up to an aggregate of $300,000. Each Charter Extension Loan will be deposited in the Trust Account within five (5) business days from
the beginning of such calendar month (or portion thereof).
On October 27, 2022, the Company filed an amendment to the Company’s
Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Extension Amendment”).
The Extension Amendment extends the date by which the Company must consummate its initial business combination to May 8, 2023, or such
earlier date as determined by our board of directors (the “Extended Date”) (the “Extended Combination Period”)
If we are unable to complete our initial business
combination by May 8, 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 100% of the outstanding public shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account, including any interest not previously released to us but net of franchise
and income taxes payable, 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 our remaining stockholders and
our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under Delaware law to
provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions
with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by November 11, 2022
and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption
of the public shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for
distribution will be less than $10.00.
Our amended and restated certificate of incorporation
provides that we will have only until May 8, 2023 to complete an initial business combination. If we have not completed an initial business
combination by such date, 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 100% of the outstanding public shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account, including any interest not previously released to us but net of taxes payable,
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 our remaining stockholders and our board of directors, dissolve
and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law.
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19 pandemic 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, cash flows and/or search for a target company, the specific impact is not readily determinable
as of the date of the condensed financial statements. The condensed financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
On February 24, 2022, Russian forces launched significant
military action against Ukraine, and sustained conflict and disruption in the region is possible. The impact to Ukraine as well as actions
taken by other countries, including new and stricter sanctions imposed by Canada, the United Kingdom, the European Union, the United States,
and other countries and companies and organizations against officials, individuals, regions, and industries in Russia and Ukraine, and
actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions, tensions, and military
actions could have a material adverse effect on the Company’s ability to complete the Business Combination. Any such material adverse
effect from the conflict and enhanced sanctions activity may include reduced trading and business activity levels, disruption of financial
markets, increased costs, disruption of services, inability to complete financial or banking transactions, and inability to service existing
or new customers in the region. Prolonged unrest, military activities, or broad-based sanctions, should they be implemented, could have
a material adverse effect on the Company’s ability to complete the Business Combination.
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 redemption or other 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 would
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
As of September 30, 2022, we have not commenced any
operations. All activity for the period from September 23, 2020 (inception) through September 30, 2022 relates to our formation, initial
public offering and search for a target company. We will not generate any operating revenues until after the completion of our initial
business combination, at the earliest. We will generate non-operating income in the form of interest and dividend income from the proceeds
derived from the initial public offering and placed in the Trust Account.
For the three months ended September 30, 2022, we
had a net loss of $144,983 which was comprised of unrealized loss on change in fair value of convertible promissory notes of $51, operating
costs of $860,670, and income tax provision of $127,817, less interest and dividend income of $758,630 from money market funds held in
our Trust Account and unrealized gain on change in fair value of warrants of $84,925.
For the nine months ended September 30, 2022, we had
a net income of $355,058 which was comprised of interest and dividend income of $946,819 from money market funds held in our Trust Account,
unrealized gain on change in fair value of warrants of $1,865,902, unrealized gain on change in fair value of convertible promissory notes
of $12,123, less operating costs of $2,341,969 and income tax provision of $127,817.
For the three months ended September 30, 2021, we
had a net income of $475,754 which was comprised of operating costs of $270,269, interest income of $3,545 from marketable securities
held in our Trust Account, and unrealized gain on change in fair value of warrants of $742,478.
For the nine months ended September 30, 2021, we had
a net income of $1,076,838 which was comprised of operating costs of $665,729, interest income of $7,995 from marketable securities held
in our Trust Account, unrealized gain on change in fair value of warrants of $3,052,923, and other expense relating to fair value exceeding
amount paid for warrants of $1,318,351.
Going Concern and Liquidity
As of September 30, 2022, we had $21,078 in our operating
bank account and working capital deficit of $22,399 (less tax payable).
Prior to the completion of the Initial Public Offering,
our liquidity needs had been satisfied through a payment from the Sponsor of $25,000 for the Founder Shares to cover certain offering
costs and the loan under an unsecured promissory note from the Sponsor of $141,700. We fully paid the note to the Sponsor on February
12, 2021. Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs have been satisfied
through the proceeds from the consummation of the Private Placement not held in the Trust Account.
In addition, in order to finance transaction costs
in connection with a Business Combination, our Sponsor, officers, directors and their affiliates may, but are not obligated to, provide
us Working Capital Loans, as defined below. To date, there were no amounts outstanding under any Working Capital Loans.
On April 26, 2022, we issued one promissory note in
the principal amount of up to $195,000 to the Sponsor. The note bears no interest and is due and payable upon the earlier to occur
of (i) the date on which we consummate the initial Business Combination and (ii) the date that the winding up is effective. At the Sponsor’s
option, at any time prior to payment in full of the principal balance of the promissory note, the Sponsor may elect to convert all or
any portion of the unpaid principal balance of the promissory note into that number of warrants, at a price of $1.00 per warrant (the
“Conversion Warrants”). The Conversion Warrants shall be identical to the warrants issued by us to the Sponsor in the Private
Placement upon consummation of the IPO, including as to exercise price, exercisability and exercise period. As of September 30, 2022,
we have drawn down the promissory note in full.
On June 15, 2022, we issued one promissory note in
the principal amount of up to $300,000 to the Sponsor. The note bears no interest and is due and payable upon the earlier to occur
of (i) the date on which we consummate the initial Business Combination and (ii) the date that the winding up is effective. At the Sponsor’s
option, at any time prior to payment in full of the principal balance of the promissory note, the Sponsor may elect to convert all or
any portion of the unpaid principal balance of the promissory note into that number of warrants, at a price of $1.00 per warrant (the
“Conversion Warrants”). The Conversion Warrants shall be identical to the warrants issued by us to the Sponsor in the Private
Placement upon consummation of the IPO, including as to exercise price, exercisability and exercise period. As of September 30, 2022,
we have drawn down $215,000 of the promissory note.
On September 27, 2022, pursuant to the trust agreement
dated as of February 8, 2021 between us and Continental, the trustee of the Trust Account, we issued a request to Continental to withdraw
$221,271 of interest income from the Trust Account for the payment of our taxes. The proceeds from this withdrawal were deposited
into our operating bank account on September 28, 2022.
On October 27, 2022, stockholders holding 16,441,812
shares of common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account.
As a result, $165,347,999 (approximately $10.05 per share) will be removed from the Trust Account to pay such holders.
As of a result of the approval of the Extension
Amendment, the Sponsor has agreed to contribute to the Company a Charter Extension Loan of $50,000 per month, for each calendar month
(commencing on November 8, 2022 and on the 8th day of each subsequent month) until the Extended Date, or portion thereof, that is needed
to complete an initial Business Combination, for up to an aggregate of $300,000. Each Charter Extension Loan will be deposited in the
Trust Account within five (5) business days from the beginning of such calendar month (or portion thereof).
We anticipate that the $21,078 outside of the Trust
Account as of September 30, 2022, will not be sufficient to allow us to operate through May 8, 2023, the scheduled liquidation date of
the Company if it does not complete a Business Combination prior to such date. Until consummation of the Business Combination, we will
be using the funds not held in the Trust Account, and any additional Working Capital Loans, for identifying and evaluating prospective
acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants
or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses,
selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.
We believe we will need to raise additional funds
in order to meet the expenditures required for operating our business. We will need to raise additional capital through loans from our
Sponsor, officers, directors, or third parties. None of the Sponsor, officers or directors are under any obligation to advance funds to,
or to invest in, us. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of our business plan, and reducing
overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at
all.
In connection with our assessment of going concern
considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties
about an Entity’s Ability to Continue as a Going Concern,” management also determined that the liquidity condition and date
for mandatory liquidation and dissolution raise substantial doubt about our ability to continue as a going concern through May 8, 2023,
the scheduled liquidation date if we do not complete a Business Combination prior to such date. These condensed financial statements do
not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary
should we be unable to continue as a going concern.
These conditions raise substantial doubt about our
ability to continue as a going concern for the next twelve months from the issuance date of these financial statements. Management plans
to address this uncertainty through loans from our Sponsor, officers, directors, or third parties, and the consummation of a Business
Combination before May 8, 2023. None of the Sponsor, officers or directors are under any obligation to advance funds to, or to invest
in, us. There is no assurance that our plans to raise capital or to consummate a Business Combination will be successful. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed financial
statements in conformity with US GAAP requires 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 expenses during the reporting period. Actual results could differ from those estimates. We have identified the following
as our critical accounting policies:
Derivative Financial Instruments
The Company evaluates its financial instruments to
determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815,
“Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the
balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required
within 12 months of the balance sheet date. The Company has determined the private placement warrants are a derivative liability.
Convertible Promissory Notes
The Company accounts for its convertible promissory
notes under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be made at the inception of a
financial instrument to account for the instrument under the fair value option under ASC 825, Financial Instruments (“ASC 825”).
The Company has made such election for its convertible promissory notes. Using the fair value option, the convertible promissory notes
are required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Differences between
the face value of the convertible promissory notes and fair value at issuance are recognized as either an expense in the statements of
operations (if issued at a premium) or as a capital contribution (if issued at a discount). Any material changes in the estimated fair
value of the convertible promissory notes are recognized as non-cash gains or losses in the condensed statements of operations.
Common Stock Subject to Possible Redemption
All of the 17,250,000 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 in connection with the
Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection
with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with SEC and its staff’s
guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control
of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all Class A common
stock has been classified outside of permanent equity.
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting
period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital
and accumulated deficit.
Net (Loss) Income Per Common Stock
Earnings and losses are shared pro rata between the
redeemable shares and non-redeemable shares. The 13,275,000 potential common stock for outstanding warrants to purchase the Company’s
shares were excluded from diluted earnings per share for the three and nine months ended September 30, 2022 and 2021 because the warrants
are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net (loss) income per common stock is
the same as basic net (loss) income per common stock for the periods
Commitments and Contractual Obligations
Underwriting Agreement
The underwriters had a 45-day option from February
11, 2021 to purchase up to an aggregate of 2,250,000 additional Units to cover over-allotments, if any. On February 22, 2021,
the underwriters purchased an additional 2,250,000 units to exercise its over-allotment option in full. The proceeds of $22,500,000 from
the over-allotment was deposited in the Trust Account after deducting the cash underwriting discounts.
The underwriters are entitled to a cash underwriting
discount of 2% of the gross proceeds of the IPO, or $3,450,000 since the underwriters’ over-allotment was exercised in full,
$250,000 of which will be deferred underwriting discount, upon the completion of the Company’s initial Business Combination
subject to the terms of the underwriting agreement. Additionally, if the Company consummates its initial business combination, the underwriter
is entitled to a cash fee for its services in relation thereto in an aggregate amount equal to up to 3.5% of the total gross proceeds
raised in such offering.
Administrative Service Fee
Commencing on February 8, 2021, the Company will make
a payment of a monthly fee of $10,000 to the Sponsor or an affiliate thereof for administrative services including office space,
utilities and secretarial support provided to the Company. Upon completion of the initial Business Combination or the Company’s
liquidation, the Company will cease paying these monthly fees. During the three and nine months ended September 30, 2022, the Company
incurred and paid $30,000 and $90,000 administrative service fees, respectively. During the three and nine months ended September 30,
2021, the Company incurred $30,000 and $80,000 administrative service fees, respectively.
Off-Balance Sheet Arrangements
As of September 30,2022, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company”
and under the JOBS Act will be 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, our 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 independent registered public accounting firm’s attestation report on our system of internal controls
over financial reporting pursuant to Section 404, (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 report of the independent registered public accounting
firm 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 CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion
of this offering or until we are no longer an “emerging growth company,” whichever is earlier.
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 an initial business combination.