The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
The Company is a blank check
company incorporated in Delaware on November 20, 2020. The Company was formed for the purpose of effectuating a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar Initial Business Combination with one or more businesses.
The Company is an early stage
and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2022, the Company
had not yet commenced operations. All activity for the period November 20, 2020 (inception) through June 30, 2022 relates to the Company’s
formation and the Initial Public Offering. The Company will not generate any operating revenues until after the completion of an Initial
Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds
derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement
for the Company’s Initial Public Offering was declared effective on February 8, 2021. On February 11, 2021, the Company consummated
the Initial Public Offering of 12,500,500 Units, which includes the full exercise by the underwriter of its over-allotment option in the
amount of 1,630,500 Units, at $10.00 per Unit, generating gross proceeds of $125,005,000, which is described in Note 3.
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the sale of 4,250,100 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $4,250,100, which is described in Note 4.
Transaction costs amounted
to $7,252,819, consisting of $2,500,100 of underwriting fees, $4,375,175 of deferred underwriting fees and $377,544 of other offering
costs. Cash balances are held outside of the Trust Account (as defined below) and are available for the payment of offering costs and
for working capital purposes.
Following the closing of the
Initial Public Offering on February 11, 2021, an amount of $125,005,000 ($10.00 per Unit) from the net proceeds of the sale of the Units
in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a Trust Account, which may be invested in
U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days
or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the
Investment Company Act of 1940, as determined by the Company, until the earlier of: (i) the consummation of an Initial Business Combination
or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below, except that the interest
earned on the Trust Account can be released to the Company to pay its tax obligations.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private
Placement Warrants, although substantially all the net proceeds are intended to be applied generally toward consummating an Initial Business
Combination. There is no assurance that the Company will be able to complete an Initial Business Combination successfully. The Company
must complete one or more Initial Business Combinations with one or more operating businesses or assets with a fair market value equal
to at least 80% of the net assets held in the Trust Account (as defined above) (excluding any deferred underwriting fees and taxes payable
on the interest earned on the Trust Account) within 24 months of the Initial Public Offering to continue operations. The Company will
only complete an Initial 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 business sufficient for it not to be required to register as
an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect an
Initial Business Combination.
The Company will provide its
Public Stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of an Initial Business
Combination either (i) in connection with a stockholder meeting called to approve the Initial Business Combination or (ii) by means of
a tender offer. The decision as to whether the Company will seek stockholder approval of an Initial Business Combination or conduct a
tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares
for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata
interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will
be no redemption rights upon the completion of an Initial Business Combination with respect to the Company’s Warrants.
The Company will proceed with
an Initial Business Combination only if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation
of an Initial Business Combination and, if the Company seeks stockholder approval, a majority of the Public Shares and Founder Shares,
voting together as a single class, are voted in favor of the Initial Business Combination. If a stockholder vote is not required by law
and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and
Restated Certificate of Incorporation then in effect (the “Amended and Restated Certificate of Incorporation”), conduct the
redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing an Initial
Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder
approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the
proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with an Initial Business
Combination, the Sponsor has agreed to vote its Founder Shares and any Public Shares purchased during or after the Initial Public Offering
in favor of approving an Initial Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the Initial Business Combination or don’t vote at all.
Notwithstanding the above,
if the Company seeks stockholder approval of an Initial Business Combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of
such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section
13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public
Shares, without the prior consent of the Company.
The Sponsor has agreed (a)
to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of an
Initial Business Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete
an Initial Business Combination by February 11, 2023 and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation
(i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s Initial
Business Combination or to redeem 100% of its Public Shares if the Company does not complete an Initial Business Combination or (ii) with
respect to any other provision relating to stockholders’ rights or pre-Initial Business Combination activity, unless the Company
provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company will have until
February 11, 2023 to complete an Initial Business Combination (the “Combination Window”). If the Company is unable to complete
a Business Combination within the Combination Window, the Company will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the
Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution
expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board
of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect
to the Company’s Warrants, which will expire worthless if the Company fails to complete an Initial Business Combination within the
Combination Window.
The Sponsor has agreed to
waive its liquidation rights with respect to the Founder Shares if the Company fails to complete an Initial Business Combination within
the Combination Window. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will
be entitled to liquidating distributions from the Trust Account if the Company fails to complete an Initial Business Combination within
the Combination Window. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held
in the Trust Account in the event the Company does not complete a Business Combination within the Combination Window and, in such event,
such amounts will be included with the other 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 the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts
held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per Public Share or (2) the actual amount per Public Share
held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in
each case net of the interest which may be withdrawn to pay our taxes. This liability will not apply with respect to any claims by a third
party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s
indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act.
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible
to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have
to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s
independent registered public accounting firm), prospective target businesses or other entities with which the Company does business,
execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
NOTE 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial
statements are presented in conformity with GAAP and pursuant to the rules and regulations of the SEC for interim financial information
and the instructions to Form 10-Q. Certain disclosures included in the annual financial statements have been condensed or omitted from
these financial statements as they are not required for interim financial statements under GAAP and the rules of the SEC. These unaudited
condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results
for the interim period presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative
of the operating results for a full year.
The accompanying unaudited
condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by 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 independent registered public accounting firm 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 financial
statements in conformity with 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 statements. Making estimates requires management
to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set
of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, may be
subject to change in the near term due to one or more future confirming events. 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 June 30, 2022 or December 31, 2021. The Company may maintain cash balances in various accounts, including the
Trust Account, in excess of federally insured limits.
Marketable Securities Held in Trust Account
At June 30, 2022 and December
31, 2021, the assets held in the Trust Account were held in marketable U.S. government securities. These assets are classified as trading
securities carried at fair value with unrealized gains/losses included in net income.
Deferred Offering Costs and Formation Costs
Deferred offering costs consisted
of legal, accounting and other expenses incurred through the Initial Public Offering that are directly
related to the Initial Public Offering. Offering costs amounting to $377,545 were charged to shareholders’ equity upon the completion
of the Initial Public Offering on February 11, 2021. As of June 30, 2022 and December 31, 2021, there were no deferred offering costs
recorded in the accompanying balance sheet other than the deferred underwriter’s fees, described below. Costs related to
the formation of the Company have been expenses as incurred.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its
Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480-10-S99 “Classification and Measurement of Redeemable Securities.” Conditionally redeemable common stock (including
common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock
is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered
to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2022 and December
31, 2021, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheet.
Income Taxes
The Company complies with
the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach
to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between
the financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted
tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of June 30, 2022 and December 31,
2021, the Company’s deferred tax asset was fully offset by a valuation allowance.
ASC Topic 740 prescribes a
recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax
expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 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 is subject to income tax examinations by major taxing authorities since inception.
Net Income Per Common Share
Net Income per common share
is computed by dividing net income by the weighted average number of common shares outstanding with income allocated pro-rata between
the classes. The calculation of diluted income per common share excludes the effect of the Warrants issued in connection with the Class
A common stock since the warrant shares’ current market value is below exercise price and would be antidilutive. Accretion associated
with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
As a result, diluted income per common share is the same as basic income per common share.
Class A | |
For the three months ended June 30, | | |
For the six months ended June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Allocation of net income including common stock subject to possible redemption | |
$ | 714,124 | | |
$ | 9,061,026 | | |
$ | 3,003,001 | | |
$ | 5,167,403 | |
Weighted Average Common Stock shares outstanding | |
| 12,500,500 | | |
| 12,500,500 | | |
| 12,500,500 | | |
| 9,599,831 | |
Basic and Diluted net income per share | |
$ | 0.06 | | |
$ | 0.72 | | |
$ | 0.24 | | |
$ | 0.54 | |
Class B | |
For the three months ended June 30, | | |
For the six months ended June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Allocation of net income including common stock subject to possible redemption | |
$ | 178,531 | | |
$ | 2,265,257 | | |
$ | 750,750 | | |
$ | 1,682,194 | |
Weighted Average Common Stock shares outstanding | |
| 3,125,125 | | |
| 3,125,125 | | |
| 3,125,125 | | |
| 3,125,125 | |
Basic and Diluted net income per share | |
$ | 0.06 | | |
$ | 0.72 | | |
$ | 0.24 | | |
$ | 0.54 | |
Warrants
The Company accounts for the
Public Warrants and Private Placement Warrants in accordance with ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s
Own Equity,” under which the Warrants do not meet the criteria for equity treatment. Accordingly, the Warrants are recorded as derivative
liabilities on the Balance Sheet and are measured at fair value at inception and remeasured at each reporting date in accordance with
ASC 820, “Fair Value Measurement,” with changes in fair value recognized in the Statement of Operations in the period of change.
Stock-Based Compensation Expense
The Company accounts for stock-based
compensation expense in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”). Under ASC 718,
stock-based compensation associated with equity-classified 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. The fair value of equity awards has been estimated using a market approach. Forfeitures are
recognized as incurred.
Any compensation expense related
to the Founder Shares is recognized only when the performance condition is probable of occurrence. As of June 30, 2022, the Company determined
that an Initial Business Combination is not yet considered probable, and, therefore, no stock-based compensation expense has been recognized.
Stock-based compensation would be recognized at the date an Initial Business Combination is considered probable (i.e., upon consummation
of an Initial Business Combination) in an amount equal to the number of Founder Shares that ultimately vest multiplied times the latest
modification date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founder
Shares.
Fair Value of Financial Instruments
FASB ASC Topic 820 “Fair
Value Measurements and Disclosures” (“ASC 820”) defines fair value, the methods used to measure fair value and the expanded
disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between the buyer and the seller at the measurement date. In measuring fair value, the valuation techniques
consistent with the market approach, income approach and cost approach shall be used. ASC 820 establishes a fair value hierarchy for inputs,
which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable
and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market
data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that
the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 — Valuations
based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation
adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 — Valuations
based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for
identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally
from or corroborated by market through correlation or other means.
Level 3 — Valuations
based on inputs that are unobservable and significant to the overall fair value measurement.
Our policy is to recognize
asset or liability transfers among Level 1, Level 2, and Level 3 as of the actual date of the events or change in circumstances that caused
the transfer.
Recent Accounting Standards
Management does not believe
that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
financial statements.
Risks and Uncertainties
Management is currently evaluating
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, and/or search for a target company, the specific impact is not readily
determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
In February 2022, the Russian
Federation commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United
States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these unaudited condensed financial statements and the specific
impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these
unaudited condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company sold 12,500,500 Units at a purchase price of $10.00 per Unit. Each Unit will consist of one share of the Company’s
Class A common stock and one-half of one redeemable Public Warrant. Each Public Warrant will entitle the holder to purchase one share
of Class A common stock at an exercise price of $11.50 per whole share (see Note 7).
The Public Warrants issued
as part of the Units are accounted for as liabilities as there are terms and features that do not qualify for equity classification in
ASC 815-40. The fair value of the Public Warrants at issuance resulted in a liability of $10,375,415. At December 31, 2021, the fair value
has decreased to $3,000,745. At June 30, 2022, the fair value has decreased to $437,518. The change in fair value of Public Warrants for
the period from December 31, 2021 to June 30, 2022 of $2,563,227 is included in the decrease in the fair value of derivative warrant liabilities
on the Statement of Operations.
All of the 12,500,500 Class
A Common Stock sold as part of the Units in the Initial Public Offering 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 Initial Business Combination and in connection with certain amendments to the Company’s 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. Given that the Class A Common Stock was issued with other freestanding instruments (i.e., Public Warrants), the initial carrying
value of Class A Common Stock classified as temporary equity is the allocated proceeds based on the guidance in ASC 470-20.
The Class A Common Stock is
subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable
that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the
period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the
earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying
amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes
immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of
retained earnings, additional paid-in capital).
As of June 30, 2022, the Class
A Common Stock reflected on the balance sheet are reconciled in the following table:
Gross proceeds from public issuance | |
$ | 125,005,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (10,375,415 | ) |
Class A shares issuance costs | |
| (6,650,835 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 17,241,368 | |
Contingently redeemable Class A Common Stock | |
$ | 125,220,118 | |
NOTE 4. PRIVATE PLACEMENT WARRANTS
Simultaneously with the closing
of the Initial Public Offering, the Sponsor purchased an aggregate of 4,250,100 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per
share, subject to adjustment. The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial
Public Offering held in the Trust Account. If the Company does not complete an Initial Business Combination within the Combination Window,
the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the
requirements of applicable law) and the Private Placement Warrants will expire worthless.
The Private Placement Warrants
are accounted for as derivative liabilities as there are terms and features that do not qualify for equity classification in ASC 815-40.
The fair value of the Private Placement Warrants at issuance resulted in a liability of $7,830,832. At December 31, 2021, the fair value
had decreased to $2,046,099. At June 30, 2022, the fair value has decreased to $297,824. The change in fair value is included in the decrease
in the fair value of derivative warrant liabilities on the Statement of Operations.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On December 10, 2020, the
Sponsor paid $25,000 to cover certain offering costs of the Company in consideration for 3,125,125 Founder Shares (as adjusted from 2,875,000
shares as a result of a stock dividend occurring in February 2021) of Class B common stock. The Founder Shares included an aggregate of
up to 407,625 shares (as adjusted from 375,000 shares due to a stock dividend occurring in February 2021) that were subject to forfeiture
by the Sponsor to the extent that the underwriter’s over-allotment was not exercised in full or in part, so that the Sponsor will
collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering
(assuming the Sponsor did not purchase any Public Shares in the Initial Public Offering). As a result of the underwriters’ election
to fully exercise their over-allotment option, no Founder Shares are currently subject to forfeiture.
The Sponsor has agreed, subject
to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after
the completion of an Initial Business Combination or (B) subsequent to an Initial Business Combination, (x) if the last sale price of
the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30 trading days period commencing at least 150 days after an Initial Business Combination,
or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results
in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Administrative Support Agreement
The Company agreed, commencing
on February 8, 2021, to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support
services. These fees were suspended as of February 28, 2022.
Related Party Loans
In order to finance
transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the
Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes an Initial Business Combination, the Company would repay the Working Capital Loans
out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of
funds held outside the Trust Account. In the event that an Initial Business Combination does not close, the Company may use a
portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account
would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have
not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid
upon consummation of an Initial Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of
such Working Capital Loans may be convertible into Warrants of the post-Business Combination entity at a price of $1.00 per warrant.
The Warrants would be identical to the Private Placement Warrants. On April 6, 2022, the Sponsor agreed to loan the Company an
aggregate of $1,500,000 to cover expenses pursuant to a promissory note (the “Note”). The Note does not bear interest
and is payable upon the completion of an Initial Business Combination. As of June 30, 2022, there was $500,000 outstanding on this
Note.
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration
rights agreement entered into on February 8, 2021, the holders of the Founder Shares, Private Placement Warrants and any Warrants that
may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private
Placement Warrants and Warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares)
will be entitled to registration rights pursuant to a registration and shareholder rights agreement to be signed prior to or on the effective
date of the Initial Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares,
only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands,
excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the completion of the Initial Business Combination and
rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights
agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s
securities. The Company will bear the expenses incurred in connection with the filing of any such registration statement.
Deferred Underwriter’s Fees Agreement
The underwriter is entitled
to a deferred fee of $0.35 per Unit, or $4,375,175 in the aggregate. The deferred fee will become payable to the underwriter from the
amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms
of the underwriting agreement. Because management believes it is probable that this fee will be paid, a liability has been recorded on
the balance sheet in the amount of $4,375,175 as of June 30, 2022.
NOTE 7. STOCKHOLDER’S EQUITY
Preferred Stock —
The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At June 30, 2022, there were no shares of preferred
stock issued or outstanding.
Class A Common Stock
— The Company is authorized to issue up to 100,000,000 shares of Class A, $0.0001 par value common stock. Holders of the
Company’s common stock are entitled to one vote for each share. At June 30, 2022, there were 12,500,500 shares of Class A common
stock issued and subject to possible redemption. The Class A common stock is presented at redemption value as temporary equity, outside
of the stockholders’ equity section of the balance sheet.
Class B Common Stock
— The Company is authorized to issue up to 10,000,000 shares of Class B, $0.0001 par value common stock. Holders of the
Company’s common stock are entitled to one vote for each share. At June 30, 2022, there were 3,125,125 shares of Class B common
stock issued and outstanding.
Only holders of Class B common
stock will have the right to vote on the election of directors prior to the Initial Business Combination. Holders of Class A common stock
and Class B common stock will vote together as a single class on all other matters submitted to a vote of shareholders, except as required
by law.
The shares of Class B common
stock will automatically convert into shares of Class A common stock at the time of an Initial Business Combination on a one-for-one basis
(subject to adjustment). In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed
issued in excess of the amounts offered in the Initial Public Offering and related to the closing of an Initial Business Combination,
the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed
issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal,
in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon completion
of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection
with an Initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business
combination, and any private placement-equivalent Warrants issued to the Sponsor or its affiliates upon conversion of loans made to the
Company). The Company cannot determine at this time whether a majority of the holders of the Class B common stock at the time of any future
issuance would agree to waive such adjustment to the conversion ratio.
Warrants — Public
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) 30 days after the consummation of an Initial Business Combination or (b)
12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years from the consummation of a Business
Combination or earlier upon redemption or liquidation.
The Company will not be obligated
to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant
exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise
of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations
with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock
upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to
be exempt under the securities laws of the state of residence of the registered holder of the Warrants.
The Company has agreed that
as soon as practicable, but in no event later than 15 business days after the closing of an Initial Business Combination, it will use
its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the
Warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class
A common stock until the Warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering
the shares of Class A common stock issuable upon exercise of the Warrants is not effective by the 60th business day after the
closing of an Initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during
any period when the Company will have failed to maintain an effective registration statement, exercise Warrants on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement
covering the Class A common stock issuable upon exercise of the Warrants is not effective within a specified period following the consummation
of an 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.
Once the Warrants become exercisable,
the Company may call the Warrants for redemption (except as described with respect to the Private Placement Warrants):
|
● |
in whole and not in part; |
|
● |
at a price of $0.01 per warrant; |
|
● |
upon not less than 30 days prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading days period ending three business days before the Company sends the notice of redemption to the warrant holders. |
If and when the Warrants become
redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying
securities for sale under all applicable state securities laws.
If the Company calls the Public
Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public
Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of Class A common
stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances, including in the event of a share dividend,
extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants
will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company
be required to net cash settle the Public Warrants. If the Company is unable to complete an Initial Business Combination within the Combination
Window and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with
respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account
with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company
issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing
of its 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 or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates,
as applicable, prior to such issuance) (the “Newly Issued Price”), (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 Company’s Initial Business Combination
on the date of the consummation of such Initial Business Combination (net of redemptions), and (z) the volume weighted average trading
price of the Company’s common stock during the 20 trading days period starting on the trading day prior to the day on which the
Company consummates its 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 the Market Value and the Newly Issued
Price and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the greater of the
Market Value and the Newly Issued Price.
The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants
and the common shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until
30 days after the completion of an Initial Business Combination, subject to certain limited exceptions. Additionally, the Private Placement
Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their
permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 8. FAIR VALUE MEASUREMENT
The Company uses available
market pricing to value the Public Warrants and a Black Scholes Option pricing model to value the Private Placement Warrants. The Warrants
were valued at issuance and at period end, with changes in fair value recognized in the statement of operations. The key assumptions in
the option pricing model utilized are assumptions related to expected volatility, expected term, risk-free interest rate and dividend
yield. The expected volatility was derived from observable implied volatility on comparable ‘blank-check’ companies’
Warrants and the implied volatility of certain stock indexes. The risk-free interest rate is based on the interpolated U.S. Constant Maturity
Treasury yield. The expected term of the Warrants is assumed to be the contractual five-year term or representative holding period. The
dividend yield is based on the historical rate, which the Company anticipates to remain at zero.
The Private Placement Warrants
are classified as Level 3 at June 30, 2022.
The key inputs into the option
pricing model for the Private Warrants were as follows as of June 30, 2022 and December 31, 2021:
| |
June 30, 2022 | | |
December 31, 2021 | |
Implied Volatility | |
| 1.4 | % | |
| 10.2 | % |
Risk-free interest rate | |
| 3.01 | % | |
| 1.26 | % |
Warrant exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
Expected term Years | |
| 5.0 | | |
| 5.0 | |
Dividend Yield | |
| 0.0 | % | |
| 0.0 | % |
The following table presents
the changes in the fair value of level 3 financial instruments:
| |
Private Placement Warrants | |
As of December 31, 2021 | |
$ | 2,046,099 | |
Change in fair value | |
| (1,748,275 | ) |
Fair value at June 30, 2022 | |
$ | 297,824 | |
The following table presents
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022
and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair
value.
June 30, 2022 | |
Total | | |
Quoted Prices in Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Marketable Securities held in Trust Account | |
$ | 125,220,118 | | |
$ | 125,220,118 | | |
$ | - | | |
$ | - | |
| |
$ | 125,220,118 | | |
$ | 125,220,118 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Public Warrants | |
$ | 437,518 | | |
$ | 437,518 | | |
$ | - | | |
$ | - | |
Private Placement Warrants | |
| 297,824 | | |
| - | | |
| - | | |
| 297,824 | |
| |
$ | 735,342 | | |
$ | 437,518 | | |
$ | - | | |
$ | 297,824 | |
December 31, 2021 | |
Total | | |
Quoted Prices in Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Marketable Securities held in Trust Account | |
$ | 125,032,679 | | |
$ | 125,032,679 | | |
$ | - | | |
$ | - | |
| |
$ | 125,032,679 | | |
$ | 125,032,679 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Public Warrants | |
$ | 3,000,745 | | |
$ | 3,000,745 | | |
$ | - | | |
$ | - | |
Private Placement Warrants | |
| 2,046,099 | | |
| - | | |
| - | | |
| 2,046,099 | |
| |
$ | 5,046,844 | | |
$ | 3,000,745 | | |
$ | - | | |
$ | 2,046,099 | |
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the financial statements was available to be issued.
Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial
statements other than disclosed herein.