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Form 10-Q OceanTech Acquisitions For: Jun 30

August 15, 2022 12:02 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                

OceanTech Acquisitions I Corp.

(Exact name of registrant as specified in its charter)

Delaware

    

001-40450

    

85-2122558

(State or other jurisdiction of

incorporation or organization)

 

(Commission File Number)

(I.R.S. Employer

Identification Number) 

515 Madison Avenue, 8th Floor – Suite 8133

New York, New York

    

10022

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (929) 412-1272

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:

    

Trading Symbol:

    

Name of Each Exchange on Which
Registered:

Units, each consisting of one share of Class A common stock and one redeemable warrant

 

OTECU

 

The Nasdaq Stock
Market LLC

Class A common stock, par value $0.0001 per share

 

OTEC

 

The Nasdaq Stock
Market LLC

Warrants, each warrant exercisable for one share of
Class A common stock for $11.50 per share

 

OTECW

 

The Nasdaq Stock
Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,  smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

As of August 12, 2022, 10,429,260 shares Class A common stock, par value $0.0001 per share, and 2,581,500 shares of Class B common stock, par value $0.0001 per share, were issued and outstanding, respectively.

OCEANTECH ACQUISITIONS I CORP.

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

Page

PART I FINANCIAL INFORMATION

1

Item 1.

Financial Statements

1

Condensed Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021

1

Unaudited Condensed Statements of Operations for the Three and Six Months Ended June 30, 2022 (unaudited), for the Three Months Ended June 30, 2021 and for the period from February 3, 2021 (inception) through June 30, 2021 (unaudited)

2

Unaudited Condensed Statements of Changes in Stockholders’ Deficit for the Three and Six Months Ended June 30, 2022 (unaudited), for the Three Months Ended June 30, 2021 and for the period from February 3, 2021 (inception) through June 30, 2021 (unaudited)

3

Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2022 (unaudited) and for the period from February 3, 2021 (inception) through June 30, 2021 (unaudited)

4

Notes to Condensed Financial Statements (unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

23

Item 4.

Control and Procedures

23

Item 6.

Exhibits

25

SIGNATURES

26

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

OCEANTECH ACQUISITIONS I CORP.

CONDENSED BALANCE SHEETS

    

June 30, 

    

December 31, 

2022

2021

    

(unaudited)

    

ASSETS:

Cash

$

151,737

$

322,128

Prepaid expense

 

5,380

 

233,209

Total current assets

157,117

555,337

Investments held in Trust Account

105,839,024

104,295,948

TOTAL ASSETS

$

105,996,141

$

104,851,285

LIABILITIES AND STOCKHOLDERS’ DEFICIT:

 

  

 

  

Accounts payable and accrued expenses

$

419,204

$

308,796

Promissory note – related party

263,039

163,039

Due to related parties

122,667

62,667

Total current liabilities

 

804,910

 

534,502

Other long-term liabilities

2,000,000

2,000,000

Deferred underwriting commissions

3,614,100

3,614,100

Warrant liabilities

1,840,900

7,098,366

Total Liabilities

8,259,910

13,246,968

Commitments and Contingencies (see Note 8)

Redeemable Common Stock

Class A common stock subject to possible redemption, 10,326,000 shares (at redemption value of $10.25 and 10.10 per share at June 30, 2022 and December 31, 2021, respectively)

105,841,500

104,292,600

Stockholders’ Deficit:

 

  

 

  

Preferred shares, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding

 

 

Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 103,260 (excluding 10,326,000 shares subject to redemption) shares issued and outstanding at June 30, 2022 and December 31, 2021

 

10

 

10

Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 2,581,500 shares issued and outstanding at June 30, 2022 and December 31, 2021

 

259

 

259

Additional paid-in capital

 

3,367,665

 

Accumulated deficit

 

(11,473,203)

 

(12,688,552)

Total Stockholders’ Deficit

 

(8,105,269)

 

(12,688,283)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

$

105,996,141

$

104,851,285

The accompanying notes are an integral part of these unaudited condensed financial statements.

1

OCEANTECH ACQUISITIONS I CORP.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

For the

period from

February 3,

For the Six

2021

Months

(inception)

For the Three Months Ended

Ended

through

    

June 30, 

    

June 30, 

    

June 30, 

    

2022

    

2021

    

2022

    

2021

General and administrative expenses

$

346,845

$

60,833

$

753,628

$

66,637

Loss from operations

(346,845)

(60,833)

(753,628)

(66,637)

Other income

Offering costs allocated to warrants

(3,600,000)

(690,542)

(3,600,000)

(690,542)

Interest income

77,719

79,176

Change in fair value of warrants

635,439

5,489,801

Total other income

(2,886,842)

(690,542)

1,968,977

(690,542)

Net income (loss)

$

(3,233,687)

$

(751,375)

$

1,215,349

$

(757,179)

 

 

 

 

Weighted average shares outstanding of Class A common stock subject to possible redemption, basic and diluted

 

10,326,000

 

3,064,022

 

10,326,000

2,089,985

Basic and diluted net income (loss) per common stock, Class A subject to possible redemption

$

(0.25)

$

(0.13)

$

0.09

$

(0.16)

Weighted average shares outstanding of Non-redeemable common stock, basic and diluted

 

2,684,760

 

2,539,587

 

2,684,760

 

2,526,197

Basic and diluted net loss per Non-redeemable common stock

$

(0.25)

$

(0.13)

$

0.09

$

(0.16)

The accompanying notes are an integral part of these unaudited condensed financial statements.

2

OCEANTECH ACQUISITIONS I CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

Class A

Class B

Additional

Total

Common Stock

Common Stock

Paid-in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Deficit

Balance as of December 31, 2021

103,260

$

10

2,581,500

$

259

$

$

(12,688,552)

$

(12,688,283)

Net income

 

 

 

 

4,449,036

 

4,449,036

Balance as of March 31, 2022

 

103,260

$

10

2,581,500

$

259

$

$

(8,239,516)

$

(8,239,247)

Proceeds in excess of fair value of private placements warrants

1,316,565

1,316,565

Fair value of Sponsor Shares transferred to extension investors

3,600,000

3,600,000

Accretion of Class A common stock subject to possible redemption

(1,548,900)

(1,548,900)

Net income

(3,233,687)

(3,233,687)

Balance as of June 30, 2022

103,260

$

10

2,581,500

$

259

$

3,367,665

$

(11,473,203)

$

(8,105,269)

Class A

Class B

Additional

Total

Common Stock

Common Stock

Paid-in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity (Deficit)

Balance as of February 3, 2021 (inception)

$

$

$

$

$

Class B common stock issued to sponsor

2,875,000

288

24,712

25,000

Net loss

 

 

 

 

(5,804)

 

(5,804)

Balance as of March 31, 2021

$

2,875,000

$

288

$

24,712

$

(5,804)

$

19,196

Issuance of non-redeemable representative shares

103,260

10

1,033,623

1,033,633

Accretion of Class A common stock subject to possible redemption

(1,459,881)

(15,554,769)

(17,014,650)

Proceeds in excess of fair value of private placement warrants

401,517

401,517

Forfeiture of founder shares

(293,500)

(29)

29

Net loss

 

 

 

 

(751,375)

 

(751,375)

Balance as of June 30, 2021

 

103,260

$

10

2,581,500

$

259

$

$

(16,311,948)

$

(16,311,679)

The accompanying notes are an integral part of these unaudited condensed financial statements.

3

OCEANTECH ACQUISITIONS I CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

For the period

For the Six

from February 3,

Months

2021 (inception)

Ended

through

    

June 30, 2022

    

June 30, 2021

Cash Flows from Operating Activities:

    

  

Net income (loss)

$

1,215,349

$

(757,179)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

Formation costs paid by Sponsor

5,564

Offering costs allocated to warrants

3,600,000

690,542

Interest earned on investments in trust

(79,176)

Change in fair value of warrants

(5,489,801)

Changes in operating assets and liabilities:

 

  

 

  

Due from Sponsor

(9,000)

Prepaid assets

227,829

(587,478)

Accounts payable and accrued costs

110,408

134,491

Due to related party

60,000

11,667

Net cash used in operating activities

 

(355,391)

 

(511,393)

Cash Flows from Investing Activities:

Investment of cash in trust account

(1,548,900)

(104,292,600)

Cash withdrawn from trust account for taxes

85,000

Net cash used in investing activities

(1,463,900)

(104,292,600)

 

  

 

  

Cash Flows from Financing Activities:

 

  

 

  

Proceeds from initial public offering, net of underwriting discount

100,909,536

Proceeds from private placement

1,548,900

4,668,800

Proceeds from the issuance of founders’ shares

25,000

Proceeds from issuance of promissory note to related party

100,000

124,975

Payment of deferred offering costs

 

 

(484,254)

Net cash provided by financing activities

 

1,648,900

 

105,244,057

 

  

 

  

Net Change in Cash

 

(170,391)

 

440,064

Cash - Beginning

 

322,128

 

Cash - Ending

$

151,737

$

440,064

 

 

Supplemental Disclosure of Non-cash Financing Activities:

 

 

Deferred offering costs paid by Sponsor under the promissory note

$

$

32,500

Initial value of Class A common stock subject to redemption

$

$

104,292,600

Accretion of Class A common stock subject to possible redemption

$

1,548,900

$

Deferred underwriting commissions payable charged to additional paid-in-capital

$

$

3,614,100

The accompanying notes are an integral part of these unaudited condensed financial statements.

4

OCEANTECH ACQUISITIONS I CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2022

(UNAUDITED)

Note 1—Description of Organization and Business Operations

OceanTech Acquisitions I Corp. (the “Company”) is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

As of June 30, 2022, the Company had not commenced any operations. All activity for the period from February 3, 2021 (inception) through June 30, 2022 relates to the Company’s formation and the public offering (the “Initial Public Offering”) as defined below, and, since the closing of the initial public offering, a search for a Business Combination candidate. 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 on cash and cash equivalents from the proceeds derived from the Initial Public Offering.

The Company’s sponsor is OceanTech Acquisitions I Sponsors LLC, a Delaware limited liability company (the “Sponsor”).

Financing

The registration statement for the Company’s Initial Public Offering was declared effective on May 27, 2021 (the “Effective Date”). On June 2, 2021, the Company consummated its Initial Public Offering of 10,000,000 units (the “Units”) at a price of $10.00 per Unit, generating gross proceeds to the Company of $100,000,000, which is discussed in Note 3.

Simultaneously with the consummation of the Initial Public Offering and the sale of the Units, the Company consummated the private placement sale (“Private Placement”) of an aggregate 4,571,000 warrants (“Private Placement Warrants”), of which 3,871,000 Private Placement Warrants were purchased by the Sponsor and 700,000 Private Placement Warrants were purchased by Maxim Group LLC and/or its designees (“Maxim”), at a price of $1.00 per Private Placement Warrant, generating total proceeds of $4,571,000.

Transaction costs of the Initial Public Offering amounted to $7,482,451 consisting of $2,065,200 of underwriting discount, $3,614,100 of deferred underwriting discount, $1,033,633 in fair value of representative shares issued and  $769,518 of other offering costs. Of the transaction costs, $690,542 were charged to operations for the portion related to warrants and $6,791,909 were included as offering costs and charged against equity.

The Company granted the underwriter in the Initial Public Offering a 45-day option to purchase up to 1,500,000 additional Units to cover over-allotments, if any. On June 17, 2021, the underwriter partially exercised the over-allotment option to purchase 326,000 additional Units (the “Over-Allotment Units”), generating an aggregate of gross proceeds of $3,260,000, and incurred $65,200 in cash underwriting fees.

On June 2, 2022, the Company closed and offering to private investors which included issuance of 1,548,900 Private Warrants at a price of $1.00 per warrant. Proceeds of the offering were deposited in the Company’s Trust account for its public stockholders, representing $0.15 per public share, allowing the Company to extend the period of time it has to consummate its initial business combination by six months from June 2, 2022, to December 2, 2022 (the “Extension”). The Extension is permitted under the Company’s governing documents.

On August 10, 2022, the Company, OceanTech Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and OceanTech Acquisitions I Sponsors, LLC, the Company’s sponsor (the “Sponsor”), entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Captura Biopharma, Inc., a Delaware corporation (the “Target”, and together with the Company and Merger Sub, the “Parties”) and Michael Geranen, as seller representative (“Geranen”). Pursuant to the Merger Agreement, upon the Closing of the Business Combination, we will effect the merger of Merger Sub with and into the Target, with the Target continuing as the surviving entity (the “Merger”), as a result of which all of the issued and outstanding capital stock of the Target shall be exchanged for shares of the Class A Common Stock of the Company upon the terms set forth as follows: the Target’s shareholders collectively shall be entitled

5

to receive from the Company, in the aggregate, a number of Company’s securities with an aggregate value equal to (a) $200,000,000 minus (b) the amount, if any, by which the Target’s net working capital amount exceeds the net working capital amount (but not less than zero), minus (c) the amount of Closing Net Indebtedness (as defined in the Merger Agreement) minus (d) the amount of any transaction expenses, provided that the merger consideration otherwise payable to the Target’s shareholders is subject to adjustment after the Closing in accordance with the terms of the Merger Agreement.

The obligations of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain customary closing conditions of the respective parties, including, without limitation: (a) the representations and warranties of the respective Parties being true and correct subject to the materiality standards contained in the Merger Agreement; (b) material compliance by the Parties of their respective pre-closing covenants and agreements, subject to the standards contained in the Merger Agreement; (c) the approval by the Company’s stockholders of the Business Combination; (d) the approval by the Target’s stockholders of the Business Combination; (e) the absence of any Material Adverse Effect (as defined in the Merger Agreement) with respect to the Company or with respect to the Target since the effective date of the Merger Agreement that is continuing and uncured; (f) the election of the members of the post-Closing Board consistent with the provisions of the Merger Agreement, a majority of which are to be independent in accordance with the Nasdaq rules; (g) the Company having at least $5,000,001 in tangible net assets upon the Closing; (h) the entry into certain ancillary agreements as of the Closing; (i) the lack of any notice or communication from, or position of, the SEC requiring the Company to amend or supplement the Prospectus and Proxy Statement; and (j) the receipt of certain closing deliverables.

The Merger Agreement and agreements related thereto are further described in the Form 8-K, filed by us on August 10, 2022

Liquidity and Going Concern

At June 30, 2022, we had cash of $151,737 and a working capital deficit of $647,793.

The Company’s liquidity needs up to June 30, 2022  were satisfied through the proceeds of $25,000 from the sale of the founder shares (Note 5), a loan of $263,039 under an unsecured and noninterest bearing promissory note – related party (Note 5), and from the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the trust account (“Trust Account”) located in the United States at JPMorgan Chase Bank, N.A. with Continental Stock Transfer & Trust Company acting as trustee.

Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. The Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s Sponsor, officers and directors may, but are not obligated to, loan the Company funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. 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 a potential transaction, 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. These conditions raise substantial doubt about the Company’s ability to continue as a going concern until the earlier of the consummation of the Business Combination or the date the Company is required to liquidate, December 2, 2022 or twelve months from the date of issuance of these unaudited condensed financial statements. These unaudited 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.

Risks and Uncertainties

Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the COVID-19 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 unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

6

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in Section2(a) of 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, Section102(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 an emerging growth 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 unaudited condensed 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 these 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.

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 cash equivalents as of June 30, 2022 and December 31, 2021.

Trust Account

Upon the closing of the Initial Public Offering and the Private Placement, $104.3 million ($10.10 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was held in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act 1940, as amended (the “Investment Company Act”), which will be invested only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

Upon closing of offering of the Private warrants on June 2, 2022 (as described above) additional $1.5 million (or $0.15 per Class A share subject to redemption) were placed in the trust account to provide for the Extension as described above.

7

Offering Costs

Offering costs consisted of legal, accounting, underwriting and other costs incurred that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the unaudited condensed statements of operations. Offering costs associated with the issuance of Class A common stock subject to possible redemption were charged to temporary equity upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

In connection with the Extension payment on June 2, 2022, the Sponsor transferred $1.2M of previously issued Class B shares (the “Founder Shares”) to the investors who participated in the offering. The fair value of the Founder Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A and 5T. Accordingly, the offering cost was be allocated to the only financial instruments issued, which were private placement warrants. Offering costs allocated to derivative warrant liabilities are expensed as incurred in the statement of operations.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets, primarily due to its short-term nature.

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”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in 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.

Fair Value Measurements

Fair value is defined as the price that would be received for sale of an asset or paid to 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.

Net Income (Loss) Per Common Stock

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common stock is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.

8

The calculation of diluted net income (loss) does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering and the private placement warrants to purchase an aggregate of 16,543,700 shares for the three and six months ended June 30, 2022 and 14,994,800 shares for the three months ended June 30, 2021 and for the period from February 3, 2021 (inception) through June 30, 2021 of Class A common stock subject to possible redemption in the calculation of diluted income (loss) per share, because they are contingent on future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and six months ended June 30, 2022, for the three months ended June 30, 2021 and for the period from February 3, 2021 (inception) through June 30, 2021. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

The basic and diluted income (loss) per common stock is calculated as follows:

    

    

For the period

from February

3, 2021

For the Three

For the Six

(inception)

Months Ended June 30,

Months Ended

through

    

2022

    

2021

    

June 30, 2022

    

June 30, 2021

Common stock subject to possible redemption

 

  

 

  

Numerator:

 

  

 

  

Net income (loss) allocable to Class A common stock subject to possible redemption

$

(2,566,418)

$

(411,068)

$

964,563

$

(342,814)

Denominator:

 

  

 

  

Weighted Average Redeemable Class A common stock, basic and diluted

 

10,326,000

3,064,022

10,326,000

 

2,089,985

Basic and Diluted net income (loss) per share, redeemable Class A common stock

$

(0.25)

$

(0.13)

$

0.09

$

(0.16)

Non-redeemable common stock

 

  

 

  

Numerator:

 

  

 

  

Net income (loss) allocable to non-redeemable common stock

$

(667,269)

$

(340,307)

$

250,786

$

(414,365)

Denominator:

Weighted Average non-redeemable common stock, basic and diluted

 

2,684,760

2,539,587

2,684,760

 

2,526,197

Basic and diluted net income (loss) per share, common stock

$

(0.25)

$

(0.13)

$

0.09

$

(0.16)

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 June 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate differs from the statutory tax rate of 21% for the three months and six months ended June 30, 2022 and 2021, due to changes in fair value in warrant liability, warrant issuance costs, 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 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.

9

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.

Redeemable Share Classification

All of the 10,326,000 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 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. 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 FASB ASC Topic 470-20, “Debt – Debt with Conversion and Other Options.”

Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which approximates fair value. The change in the carrying value of Class A common stock subject to possible redemption resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit and Class A common stock.

As of June 30, 2022 and December 31, 2021, the Class A Common Stock reflected on the balance sheets are reconciled in the following table:

    

June 30, 2022

    

December 31, 2021

As of beginning of the period

$

104,292,600

$

Gross Proceeds

    

103,260,000

Less:

 

Proceeds allocated to public warrants

 

(9,190,140)

Issuance costs related to Class A common stock subject to possible redemption

 

(6,791,909)

Plus:

 

Accretion of carrying value to redemption value

 

1,548,900

17,014,649

Contingently redeemable Class A common stock subject to possible redemption

$

105,841,500

$

104,292,600

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt - 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”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

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

10

Note 3 — Initial Public Offering

On June 2, 2021, the Company consummated its Initial Public Offering of 10,000,000 Units. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (the “Class A common stock”), and one redeemable warrant of the Company (“Warrant”), each Warrant entitling the holder thereof to purchase one Class A common stock for  $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $100,000,000.

On June 17, 2021, the underwriter partially exercised the over-allotment option and purchased an additional 326,000 Over-Allotment Units. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $3,260,000.

Note 4 — Private Placement

On June 2, 2021, simultaneously with the closing of the Initial Public Offering and the sale of the Units, the Company consummated the Private Placement of an aggregate 4,571,000 Private Placement Warrants, of which 3,871,000 Private Placement Warrants were purchased by the Sponsor and 700,000 Private Placement Warrants were purchased by Maxim at a price of $1.00 per Private Placement Warrant, generating total proceeds of $4,571,000.

On June 17, 2021, the underwriter partially exercised the over-allotment option and purchased an additional 326,000 Over-Allotment Units. Simultaneously with the closing of the exercise of the overallotment option, the Company consummated the Private Placement of an aggregate of 97,800 Private Placement Warrants, of which 74,980 Private Placement Warrants were purchased by the Sponsor and 22,820 Private Placement Warrants were purchased by Maxim at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds of $97,800.

On June 2, 2022, the Company closed an offering to private investors which included issuance of 1,548,900 Private Warrants at a price of $1.00 per warrant.

The Private Placement Warrants (and the underlying securities) are identical to the public warrants sold as part of the Units in the Initial Public Offering, except as otherwise disclosed in the Registration Statement. No underwriting discounts or commissions were paid with respect to such sale. The issuance of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

Note 5 — Related Party Transactions

Founder Shares

In February 2021, the Sponsor paid $25,000 to cover certain offering costs in consideration for 2,875,000 Class B shares (the “Founder Shares”). The number of Founder Shares outstanding was determined based on the expectation that the total size of the Initial Public Offering would be a maximum of 11,500,000 Units if the underwriter’s over-allotment option is exercised in full, and therefore that such Founder Shares would represent 20% of the outstanding shares after the Initial Public Offering. Thus, up to 375,000 of the Founder Shares were subject to forfeiture depending on the extent to which the underwriter’s over-allotment option was exercised. On June 21, 2021, the underwriter partially exercised its over-allotment option, purchasing an additional 326,000 Units. On June 21, 2021, the underwriter forfeited the right to purchase the remaining Units of the over-allotment option, and hence 293,500 founder shares of Class B common stock were subsequently forfeited, resulting in 2,581,500 outstanding Founder Shares.

Concurrently with the issuance of Private Warrants on June 2, 2022, the Sponsor committed to transfer 1,200,000 of Class B shares previously issued and outstanding as additional incentive to participants in the Extension Offering. The Company accounted for the Sponsor shares transferred to the participants in the Extension Offering at Fair Value as a charge directly to stockholder’s equity. The Company estimated the fair value of these shares to be $3,600,000 or $3 per share.

The Company’s initial stockholders agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (i) one year after the date of the consummation of the initial Business Combination or (ii) the date on which the Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and other agreements of the initial stockholders with respect to any Founder Shares. Notwithstanding the foregoing, if the closing price of the shares of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any  20 trading days within any 30- trading day period commencing 150 days after the initial Business Combination, the Founder Shares will no longer be subject to such transfer restrictions.

11

Promissory Note—Related Party

On February 14, 2021, the Sponsor agreed to loan the Company up to $300,000 to be used for a portion of the expenses of the Initial Public Offering. This loan is non-interest bearing, unsecured and was due at the closing of the Initial Public Offering and the Sponsor has not demanded payment of the note through the date of this filing. As of June 30, 2022 and December 31, 2021, $263,039 and $163,039 were outstanding under the promissory note.

Related Party Loans

In order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor, an affiliate of the Sponsor or certain of the Company’s officers and directors may, but is not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes an initial Business Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account released to the Company. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. 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 to repay such loaned amounts. Up to  $1,500,000 of such loans may be convertible into Private Placement Warrants of the post Business Combination entity, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to the Sponsor. As of June 30, 2022 and December 31, 2021, no such Working Capital Loans were outstanding.

Administrative Support Agreement

The Company has agreed to pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. The administrative support agreement began on the day the Company first listed on the Nasdaq Capital Market and continue monthly until the completion of the Company’s initial Business Combination or liquidation of the Company. As of June 30, 2022 and December 31, 2021, the Company owed $122,667 and $62,667 under the administrative support agreement, respectively. For the three and six months ended June 30, 2022, the Company incurred $30,000 and $60,000 in administrative support fees, respectively, and none for the three months ended June 30, 2021 and for the period from February 3, 2021 (inception) through June 30, 2021.

Note 6 —Derivative Warrant Liabilities

As of both June 30, 2022, and December 31, 2021, there were 10,326,000 public warrants outstanding. As of June 30, 2022, and December 31, 2021 there were 6,217,700 and 4,668,800 Private Placement Warrants outstanding, respectively.

Public Warrants

Each Warrant entitles the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment. 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 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 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 its affiliates, 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 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 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 higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.

The warrants will expire at 5:00 p.m., New York City time, five years after the completion of the initial Business Combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to the Company and not placed in the Trust Account.

The Company has not registered the shares of Class A common stock issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company 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

12

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 within 90 days after the closing 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 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 above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

Private Placement Warrants

The Private Placement Warrants and the underlying securities are identical to the public warrants sold as part of the Units in the Initial Public Offering, except as otherwise disclosed in the Registration Statement. No underwriting discounts or commissions were paid with respect to such sale. The issuance of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00

Once the warrants become exercisable, the Company may redeem the outstanding warrants (except the Private Placement Warrants):

in whole and not in part;
at a price of $0.01 per warrant;
upon a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and
if, and only if, the 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 day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If the Company calls the warrants for redemption as described above, the management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the management will consider, among other factors, the cash position, the number of warrants that are outstanding and the dilutive effect on the stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the warrants. In such event, 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” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

13

Note 7 —Fair Value Measurements

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 that the Company utilized to determine such fair value.

    

    

Quoted Prices In

    

Significant Other

    

Significant Other

Active Markets

Observable Inputs

Unobservable Inputs

June 30, 2022

(Level 1)

(Level 2)

(Level 3)

Assets:

U.S. Money Market held in Trust Account

 

$

105,839,024

$

105,839,024

 

$

$

$

105,839,024

$

105,839,024

$

$

Liabilities:

Warrant Liability- public

$

1,032,600

$

1,032,600

$

$

Warrant Liability- private

$

808,300

$

$

$

808,300

Total Warrant Liability

$

1,840,900

$

1,032,600

$

$

808,300

Quoted Prices In

Significant Other

Significant Other

Active Markets

Observable Inputs

Unobservable Inputs

    

December 31, 2021

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets:

 

  

 

  

 

  

 

  

U.S. Money Market held in Trust Account

$

104,295,948

$

104,295,948

$

$

$

104,295,948

$

104,295,948

$

$

Liabilities:

 

  

 

  

 

  

 

  

Warrant Liability- public

$

4,749,960

$

4,749,960

$

$

Warrant Liability- private

2,348,406

2,348,406

Total Warrant Liability

$

7,098,366

$

4,749,960

$

$

2,348,406

Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. During the period from February 3, 2021 (inception) through December 31, 2021, the public warrants began trading separately on July 19, 2021 and thus were transferred from Level 3 to Level 1.

Level 1 assets include investments in money market funds and U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.

At June 30, 2022 and December 31, 2021, the Company’s Warrant liability was valued at $1,840,900 and $7,098,366, respectively.Under the guidance in ASC 815-40 the Warrants do not meet the criteria for equity treatment. As such, the Warrants must be recorded on the balance sheets at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, the valuations will be adjusted to fair value, with the change in fair value recognized in the Company’s unaudited condensed statements of operations.

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 public Warrant liability is classified within Level 1 of the fair

14

value hierarchy, as the public warrants are actively traded. The fair value of the private Warrant liability is classified within Level 3 of the fair value hierarchy.

Private

Public Warrants

Warrants

Warrant

    

Level 1

    

Level 3

    

Liabilities

Warrant liabilities at December 31, 2021

$

4,749,960

$

2,348,406

$

7,098,366

Change in Fair Value

(3,304,320)

(1,550,042)

(4,854,362)

Warrant liabilities at March 31, 2022

1,445,640

798,364

2,244,004

Issuance of Private warrants as part on June 2, 2022

232,335

232,335

Change in Fair Value

(413,040)

(222,399)

(635,439)

Warrant liabilities at June 30, 2022

$

1,032,600

$

808,300

$

1,840,900

The Company utilized a binomial Monte-Carlo simulation to estimate the fair value of the public warrants at each reporting period for its warrants that are not actively traded.  Inherent in a Monte Carlo simulation are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

The estimated fair value of the Private Placement Warrants is determined using Level 3 inputs. Inherent in a modified Black-Scholes model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the Warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

The key inputs into the modified Black-Scholes model were as follows:

    

June 2, 2022

June 30, 2022

    

December 31, 2021

Risk-free interest rate

2.89

%

2.97

%

1.29

%

Expected term (years)

 

5.50

5.42

5.42

Expected volatility

 

3.8

%

2.8

%

11.0

%

Stock price

 

$

10.08

10.08

$

9.98

Strike price

$

11.50

11.50

$

11.50

Dividend yield

0

%

0

%

0

%

Probability of business combination

30

%

 

30

%

70

%

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Note 8 — Commitments and Contingencies

Registration Rights

The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the working capital loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement 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 shares of Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s 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 Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriter Agreement

The underwriter had a 45-day option to purchase up to 1,500,000 additional Units to cover any over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On June 17, 2021, the underwriter partially exercised the over-allotment option and purchased an additional 326,000 Over-Allotment Units, generating an aggregate of gross proceeds of $3,260,000. On June 21, 2021, the underwriter forfeited the right to purchase the remaining 1,174,000 Units of the over-allotment option.

The underwriter was entitled to an underwriting discount of $0.20 per Unit, or $2,065,200 in the aggregate (reflecting the partial exercise by the underwriter of its over-allotment option), paid at the closing of the Initial Public Offering. Additionally, $3,614,100 in the aggregate (reflecting the partial exercise by the underwriter of its over-allotment option), is payable to the underwriter for deferred underwriting commissions. 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.

Representative’s Class A Common Stock

The Company has issued to Maxim Group LLC and/or its designees, 103,260 shares of Class A common stock upon the consummation of the Initial Public Offering and the partial exercise of the underwriter’s over-allotment. Maxim has agreed not to transfer, assign or sell any such shares until the completion of the initial Business Combination. In addition, Maxim has agreed (i) to waive its redemption rights with respect to such shares in connection with the completion of the initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete the initial Business Combination within 12 months, or up to 18 months if the Company uses the one time option to extend the period of time to consummate a Business Combination from the closing of the Initial Public Offering.

The shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the commencement of sales of the offering pursuant to Rule 5110(e)(1) of FINRA’s Rules. Pursuant to FINRA Rule 5110(e)(1), these securities will not 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 the Effective Date of the registration statement of which the prospectus forms a part, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales of the offering except as permitted by FINRA Rule 5110(e)(2).

Right of First Refusal

On May 27, 2021, subject to certain conditions, the Company granted Maxim, for a period beginning on the closing of the offering and ending 12 months after the date of the consummation of a business combination, a right of first refusal to act as lead left book-running managing underwriter with at least 75% of the economics; or, in the case of a three-handed deal 50% of the economics, for any and all future public and private equity, convertible and debt offerings for the Company or any of the Company’s successors or subsidiaries. In accordance with FINRA Rule 5110(g)(6), such right of first refusal shall not have a duration of more than three years from the commencement of sales of the Initial Public Offering.

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Amendment of Underwriting Agreement

On December 15, 2021, in order to resolve certain issues and concerns that have arisen between Maxim and the Company, both parties have agreed to amend the Underwriting Agreement as follows: (i) The Company and Maxim mutually agreed that the rights of first refusal be deleted and as if no further force and effect. As such, Maxim shall have no right of first refusal to act as an underwriter in any future financing event; (ii) As consideration for the waiver of the right of first refusal, if the Company consummates a Business Combination, the Company shall remit to Maxim a one-time cash payment of $2,000,000 at the closing of such Business Combination as a mergers and acquisition advisory fee; (iii) The Company and Maxim agreed that the over-allotment option has been limited to 326,000 Units and that the over-allotment option has terminated as of June 22, 2021; and (iv) The Company and Maxim agreed that the Company shall not be responsible for any additional reimbursements, out of pocket expenses, or disbursements of Maxim. For the sake of clarity, all right and obligations relating to underwriting fees (including but not limited to deferred underwriting commissions) shall not be amended or affected by this amendment. The $2,000,000 is recorded as other long-term liabilities in the accompanying balance sheets and in formation and operating costs for the period from February 3, 2021 through December 31, 2021 on the accompanying statements of operations.

Note 9 — Stockholders’ Deficit

Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of June 30, 2022 and De