The
accompanying notes are an integral part of these unaudited condensed financial statements.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Nubia
Brand International Corp. (the “Company”) was incorporated in Delaware on June 14, 2021. The Company was 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”). The Company is not limited to a particular industry or sector for purposes
of consummating a Business Combination. 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 commenced any operations. All activity for the period from June 14, 2021 (inception) through June
30, 2022 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described
below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest.
The Company will generate non-operating income in the form of interest income from the proceeds derived from the 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 March 10, 2022 On March 15, 2022, the
Company consummated the Initial Public Offering of 11,000,000 units (“Units” and, with respect to the shares of common stock
included in the Units being offered, the “Public Shares”), generating gross proceeds of $110,000,000, which is described
in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an
aggregate of 5,000,000 warrants (the “Private Placement Warrants”) to Mach FM Acquisitions LLC (the “Sponsor”)
at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company in the amount of $5,000,000.
On
March 15, 2022, the underwriters purchased an additional 1,350,000 Units pursuant to the exercise of the over-allotment option. The Units
were sold at an offering price of $10.00 per Unit, generating additional gross proceeds to the Company of $13,500,000. Also, in connection
with the exercise of the over-allotment option, the Sponsor and the underwriter purchased an additional 405,000 Private Placement Warrants
at a purchase price of $1.00 per warrant generating additional gross proceeds to the Company of $405,000.
The
Company’s ability to commence operations is contingent upon obtaining adequate financial resources through its Initial Public Offering
of 12,350,000 Units (including a partial exercise of the underwriters’ over-allotment option) at $10.00 per Unit (or 12,650,000
Units if the underwriters’ over-allotment option is exercised in full), which is discussed in Note 3, and the sale of 5,000,000
Private Placement Warrants (or 5,495,000 Private Placement Warrants if the underwriters’ over-allotment option is exercised on
full) at a price of $1.00 per Private Placement Warrant in private placements to the Sponsor that will close simultaneously with the
Initial Public Offering.
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 of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a 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 below) (excluding the deferred underwriting commissions
and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of
1940, as amended (the “Investment Company Act”). Upon the closing of the Initial Public Offering, management agreed that
an amount equal to at least $10.20 per Unit sold in the Initial Public Offering, including proceeds of the Private Placement Warrants,
will be held in a trust account (“Trust Account”), located in the United States and invested only 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 selected by the Company meeting certain conditions of Rule 2a-7 of the
Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the funds held in the Trust Account, as described below.
The
Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem
all or a portion of their Public Shares either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company. 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 to be $10.20 per Public Share, plus
any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business
Combination with respect to the Company’s warrants. The Public Shares subject to redemption were recorded at a redemption value
and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
If
the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority
of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange
rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide
to hold a stockholder vote for business or other reasons, the Company will, pursuant to its second amended and restated certificate of
incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S.
Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, 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 a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased
during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect
to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding
the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Certificate of Incorporation will provide 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 Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of 15% of the Public Shares, without the prior consent of the Company.
The
holders of the Founder Shares have agreed (a) to waive their redemption rights with respect to the Founder Shares and Public Shares held
by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation
(i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination
or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined
below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless
the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If
the Company has not completed a Business Combination within 12 months, by March 15, 2023, the Company may, by resolution
of the board if requested by the sponsor, extend the period of time to consummate a business combination up to two times, each by an
additional three months (for a total of up to 18 months to complete a business combination, by September 15, 2023), subject to the sponsor depositing additional
funds into the trust account upon five days advance notice prior to the applicable deadline (collectively the “Combination Period”). The Sponsor
will deposit into the trust account $1,235,000, on or
prior to the date of the applicable deadline, for each of the available three-month extensions providing a total possible business combination
period of 18 months at a total payment value of $2,470,000. Any such payments would be made in the form of non-interest-bearing loans. The Company may also seek to amend its charter or
governing instruments to extend the time to consummate an initial business combination in order to effectuate an initial business combination.
If the Company completes an initial business combination, it will, at the option of the sponsor, repay such loaned amounts out of the
proceeds of the trust account released to the Company or convert a portion or all of the total loan amount into warrants at a price of
$1.00 per warrant, which warrants are identical to the private warrants.
If the Company has not completed a Business Combination within
the specified period, 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 pay taxes (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 are no redemption rights or liquidating distributions with respect to the Company’s Units, which will expire worthless if
the Company fails to complete a Business Combination within the Combination Period.
The
holders of the Founders Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails
to complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire Public Shares in
or after the Initial Public Offering, such Public Shares are entitled to liquidating distributions from the Trust Account if the Company
fails to complete a Business Combination within the Combination Period. 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 Period 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 (i) $10.20 per Public Share or (ii) such
lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.20
per public Share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn
to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account
and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (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 for the Company’s independent registered
accounting firm), prospective target businesses and 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.
Going
Concern Consideration
At June 30, 2022, the Company had cash outside
of trust of $662,748 and working capital of $664,214. Further, the Company has incurred and expects to continue to incur significant costs
in pursuit of its financing and acquisition plans. In connection with the Company’s assessment of going concern considerations in
accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s
Ability to Continue as a Going Concern,” management has determined that these liquidity risks, as well as if the Company is
unsuccessful in consummating an initial business combination within 12 months, by March 15, 2023, (or up to 18 months, by September 15,
2023, if the Company extends the period of time to consummate a business combination) from the closing of the IPO, the requirement that
the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve raises substantial doubt about the ability
to continue as a going concern for the next twelve months from the issuance of this filing. The condensed balance sheets do not include
any adjustments that might result from the outcome of this uncertainty. Management has determined that the Company has funds that are
sufficient to fund the working capital needs of the Company until the consummation of an initial business combination or the winding up
of the Company as stipulated in the Company’s amended and restated memorandum of association. The accompanying unaudited condensed
financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”),
which contemplate continuation of the Company as a going concern.
Risks
and Uncertainties
In February 2022, the Russian Federation and Belarus
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 financial statements. 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 financial statements.
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, close of the Initial Public
Offering and/or search for a target company, the specific impact is not readily determinable as of the date of these financial
statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
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 SEC.
Certain information and note disclosures
normally included in the financial statements prepared in accordance with US GAAP have been condensed. As such, the information
included in these financial statements should be read in conjunction with the audited financial statements as of December 31, 2021
filed with the SEC on the Registration Statement on Form S-1 (File No. 333-261114) (the “Registration Statement”) and
with the Current Report on Form 8-K filed with the SEC on February 28, 2022. In the opinion of the Company’s management,
these unaudited condensed financial statements include all adjustments, which are only of a normal and recurring nature, necessary
for a fair statement of the Company’s financial position as of June 30, 2022 and the Company’s results of operations and
cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2022 not necessarily
indicative of the results to be expected for the full year ending December 31, 2022.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart
Our Business Startups Act of 2012, as amended (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 unaudited condensed
financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
unaudited condensed financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the balance sheet which management considered in formulating its estimate, could change in the near term due
to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
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 and December 31, 2021.
Investments held in Trust Account
At June 30, 2022 and December 31, 2021, the Company
had $126.1 million and $0 in investments held in the Trust Account, respectively. The funds held in Trust are invested only 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 selected by the Company meeting certain conditions of
Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the funds held in the Trust Account. All of the Company’s investments held in the Trust Account are
classified as trading securities. Trading securities are presented on the balance sheet at fair
value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account
are included in interest income in the accompanying statements of operations. The estimated fair value of investments held in Trust Account
are determined using available market information.
Offering Costs associated with an Initial Public Offering
The Company complies with the requirements of
the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic
5A, “Expenses of Offering.” Offering costs were allocated to the separable financial instruments issued in the Initial
Public Offering based on a relative fair value basis, compared to total proceeds received. Upon completion of the Initial Public Offering,
offering costs associated with the shares of Class A Common Stock were allocated between temporary equity and the Public Warrants by the
relative fair value method. Total offering costs at the close of the Initial Public Offering were $6,951,081. Other costs of $597,334
consisted principally of costs, such as professional, legal and other fees, incurred in connection with preparation for the Initial Public
Offering. These offering costs, together with the underwriter fees of $5,557,500 (of which 4,322,500 is deferred until successful initial
Business Combination), were allocated between temporary equity in a relative fair value method upon completion of the Initial Public Offering.
In addition, the Company recorded the fair value of $776,815 for representative shares issued upon close of the Public Offering as well
as the fair value of the remaining over-allotment option of $19,432 as offering costs.
Class A ordinary shares subject to possible redemption
The Company accounts for its Class A common
stock subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing Liabilities from
Equity”. Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity (deficit).
The Company’s Class A common stock features certain redemption rights that are considered by the Company to be outside of the
Company’s control and subject to the occurrence of uncertain future events. Accordingly, at June 30, 2022, the shares of Class
A common stock subject to possible redemption in the amount of $125,970,000 are presented as temporary equity, outside of the
shareholders’ equity section of the Company’s unaudited condensed balance sheets.
The Company recognizes changes in redemption
value immediately as they occur and adjusts the carrying value of redeemable Class A common stock to equal the redemption value at the
end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized a measurement adjustment
from initial book value to redemption amount value. The change in the carrying value of redeemable Class A ordinary shares resulted in
charges against additional paid-in capital and accumulated deficit of approximately $12.9 million. The valuation of common stock subject
to redemption includes the Company’s estimate of interest held in the Trust Account that is available for payment of taxes, and
excludes dissolution expense of up to $100,000 since it is only taken into account in the event of the Company’s liquidation.
At June 30, 2022, the Class A common
stock subject to possible redemption reflected in the unaudited condensed balance sheet is reconciled in the following table:
Gross proceeds | |
$ | 123,500,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (3,755,675 | ) |
Class A common stock issuance costs | |
| (6,716,427 | ) |
| |
| (10,472,102 | ) |
| |
| | |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 12,942,102 | |
Class A common stock subject to possible redemption | |
$ | 125,970,000 | |
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of 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.
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.
Our effective tax rate was (369.98)% and 0.00%
for the three months ended June 30, 2022 and 2021, respectively, and (14.45)% and 0.00% for the six months ended June 30, 2022 and 2021,
respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and six months ended June 30, 2022 and 2021,
due to changes in the fair value of the over-allotment liabilities and the valuation allowance on the deferred tax assets.
Net Loss per Common Stock
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss per share of common stock is computed by dividing
net loss by the weighted average number of shares of common stock outstanding for the period. The Company applies the two-class method
in calculating earnings per share. The remeasurement adjustment associated with the redeemable shares of Class A Common Stock is
excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted loss per share of common stock does not consider
the effect of the warrants issued in connection with the (i) Initial Public Offering and (ii) the Private Placement. As of June 30, 2022,
the warrants are exercisable to purchase 11,580,000 shares of Class A common stock in the aggregate. As a result, diluted loss per share
of common stock is the same as basic loss per common stock for the periods presented. On March 10, 2022, the Company effectuated a 1.1-for-1 share
split on the Class B common stock, resulting in an aggregate of 3,162,500 founder shares outstanding (up to 412,500 shares of which were
subject to forfeiture). For the three and six month periods ended June 30, 2022, due to the partial exercise of the over-allotment option,
the remaining 75,000 shares subject to forfeiture were excluded from the basic and diluted weighted average shares outstanding. For the
period from June 14, 2021 (inception) through June 30, 2021, the 412,500 shares subject to forfeiture were excluded from the basic and
diluted weighted average shares outstanding.
The following table reflects the calculation of
basic and diluted net income per share of common stock.
| |
Three Months Ended | |
| |
June 30, | |
| |
2022 | |
Class A Redeemable Common Stock | |
| |
Numerator: Loss allocable to Class A Redeemable Common Stock | |
$ | (16,979 | ) |
Denominator: Basic and diluted weighted average shares outstanding | |
| 12,350,000 | |
Basic and diluted net loss per share, Class A Redeemable Common Stock | |
$ | (0.00 | ) |
| |
| | |
Class A and Class B Non-Redeemable Common Stock | |
| | |
Numerator: Loss allocable to Class A and Class B Non-Redeemable Common Stock | |
$ | (4,414 | ) |
Denominator: Basic and diluted weighted average shares outstanding | |
| 3,211,000 | |
Basic and diluted net loss per share, Class A and Class B Non-Redeemable Common Stock | |
$ | (0.00 | ) |
| |
Six Months | | |
For the Period From June 14, 2021 (Inception) | |
| |
Ended June 30, | | |
Through June 30, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Class A Redeemable common stock | |
| | |
| |
Numerator: Loss allocable to Class A common stock | |
$ | (94,337 | ) | |
$ | — | |
Denominator: Basic and diluted weighted average shares outstanding | |
| 7,300,829 | | |
| — | |
Basic and diluted net loss per share, Class A Redeemable Common Stock | |
$ | (0.01 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | |
Class A and Class B Non-redeemable common stock | |
| | | |
| | |
Numerator: Loss allocable to Class B common stock | |
$ | (39,055 | ) | |
$ | (939 | ) |
Denominator: Basic and diluted weighted average shares outstanding | |
| 3,022,525 | | |
| 2,750,000 | |
Basic and diluted net loss per share, Class A and Class B Non-Redeemable Common Stock | |
$ | (0.01 | ) | |
$ | (0.00 | ) |
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.
Fair Value of Financial Instruments
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. US 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). See Note 8.
Derivative Financial Instruments
The Company evaluates its financial
instruments, including the over-allotment option, 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 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 unaudited condensed 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.
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 unaudited condensed financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company
sold 11,000,000 Units at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half of one redeemable
warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at
a price of $11.50 per share, subject to adjustment (see Note 7).
On March 15, 2022, the underwriters purchased
an additional 1,350,000 Units pursuant to the partial exercise of the over-allotment option. The Units were sold at an offering price
of $10.00 per Unit, generating additional gross proceeds to the Company of $13,500,000.
NOTE 4 — PRIVATE PLACEMENTS
The Sponsor purchased an aggregate of 5,495,000
Private Placement Warrants at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $5,495,000, from the Company
in private placements that occurred simultaneously with the closing of the Initial Public Offering. Each Private Placement Warrant is
exercisable to purchase one share of Common stock at a price of $11.50 per share, subject to adjustment (see Note 7). 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 a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement
Warrants held in the Trust Account 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 (including the Common stock issuable upon
exercise of the Private Placement Warrants) will not be transferable, assignable or saleable until 30 days after the completion of an
Initial Business Combination, subject to certain exceptions.
On March 15, 2022, in connection with the exercise
of the over-allotment option, the Sponsor and the underwriter purchased an additional 405,000 Private Placement Warrants at a purchase
price of $1.00 per warrant generating additional gross proceeds to the Company of $405,000.
NOTE 5 — RELATED PARTIES
Founder Shares
On August 17, 2021, the Sponsor received 2,875,000 of the Company’s
Class B common stock (the “Founder Shares”) for $25,000 paid for Company deferred offering costs. On March 10, 2022, the Company
effectuated a 1.1-for-1 share split, resulting in an aggregate of 3,162,500 Founder Shares outstanding (see Note 7). All share amounts
have been adjusted to reflect the share split. The Founder Shares include an aggregate of up to 412,500 shares subject to forfeiture to
the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the number of Founder Shares equals,
on an as-converted basis, approximately 20% of the Company’s issued and outstanding shares of common stock after the Initial Public
Offering. During the three months ended June 30, 2022, as a result of the partial exercise of the over-allotment option, the remaining
75,000 shares subject to forfeiture expired.
The holders of the Founder Shares have agreed,
subject to 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 a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class
A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a 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 Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note — Related Party
On July 27, 2021, the Sponsor issued an unsecured
promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal
amount of $300,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) March 31, 2022 or (ii) the consummation
of the Initial Public Offering (the “Original Maturity Date”). On May 20, 2022, the Company and the Sponsor amended and restated
the Promissory Note (the “Amended Note”) (i) to extend the Original Maturity Date to a new maturity date which shall be upon
the earlier of the closing of the Company’s initial business combination or the Company’s liquidation, and (ii) to permit
the holder of the Amended Note, in its sole discretion, to convert any or all of the unpaid principal under the Amended Note into warrants,
at a price of $1.00 per warrant, upon consummation of the Company’s initial business combination. As of June 30, 2022 and December
31, 2021, there was $125,341 outstanding under the Promissory Note. On May 20, 2022, the Company and the Sponsor entered into the Amended
Note (i) to extend the Original Maturity Date to a new maturity date which shall be upon the earlier of the closing of the Company’s
initial business combination or the Company’s liquidation, and (ii) to permit the holder of the Amended Note, in its sole discretion,
to convert any or all of the unpaid principal under the Amended Note into Warrants, at a price of $1.00 per warrant, upon consummation
of the Company’s initial business combination.
Advances from Related Parties
From time to time, affiliates of the Sponsor advance
funds to the Company or pay expenses on behalf of the Company for formation and operating costs. These advances are due on demand and
are non-interest bearing. During the three and six months ended June 30, 2022, the related parties paid $0 and $2,841 of expenses on behalf
of the Company, respectively. As of June 30, 2022 and December 31, 2021, the outstanding balance due was $0 and $939, respectively.
General and Administrative Services
Commencing on the date the Units are first listed
on the Nasdaq, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and
administrative support for up to 18 months. Upon completion of the Initial Business Combination or the Company’s liquidation, the
Company will cease paying these monthly fees. During the three and six months ended June 30, 2022, the Company recorded $30,000 and $35,000
of expense related to the agreement, respectively. As of June 30, 2022, there was no balance outstanding.
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans
would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the
lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into Warrants at a
price of $1.00 per Warrant. Such Units would be identical to the Private Placement Warrants. In the event that a 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. As of June 30, 2022 and December 31, 2021, there were no amounts
outstanding under the Working Capital Loans.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement
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 to be signed prior to or on the effective date of 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 are entitled to make up to three demands, excluding short form registration
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 completion of a Business Combination and rights to require the Company to
register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides
that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until
the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters
a 45-day option from the date of Initial Public Offering to purchase up to 1,650,000 additional Units to cover over-allotments, if any,
at the Initial Public Offering price less the underwriting discounts and commissions.
The underwriters were paid a cash underwriting
discount of $0.10 per Unit, or $1,235,000 upon the closing of the Initial Public Offering. EF Hutton, division of Benchmark Investments,
LLC, which is the representative of the underwriters in the Initial Public Offering, also received 123,500 shares of Class A common stock
as compensation in connection with the closing of the Initial Public Offering (the “Representative Shares”). In addition,
the underwriters are entitled to a deferred fee of $0.35 per Unit, or $4,322,500, which includes the additional deferred fee from the
exercise of the over-allotment option. he deferred fee will become payable to the underwriters from the amounts held in the Trust Account
solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
On March 15, 2022, the underwriters purchased
an additional 1,350,000 Units pursuant to the partial exercise of the over-allotment option. The Units were sold at an offering price
of $10.00 per Unit, generating additional gross proceeds to the Company of $13,500,000. The Company recorded the fair value of the remaining
over-allotment option of $19,432 as a liability on accordance with ASC 815-50 on March 15, 2022. During the three months ended June 30,
2022, the remaining over-allotment option expired and the liability was written off to the condensed statements of operations. Upon consummation
of the Initial Public Offering, the Company used a modified Black-Scholes model to value the over-allotment option. See Note 8.
The Representative Shares have been
deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness
of the registration statement of which this prospectus forms a part pursuant to Rule 5110(e)(1) of the FINRA Manual. Upon close of the
Initial Public Offering, the Company recorded additional stock issuance costs of $776,815, the grant date fair value of the shares.
NOTE 7 — STOCKHOLDER’S EQUITY
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
December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock —
The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class
A common stock are entitled to one vote for each share. As of June 30, 2022 and December 31, 2021, there 123,500 and 0 shares of Class
A common stock issued and outstanding, respectively. In addition, there were 12,350,000 shares of Class A common stock in temporary equity
on the unaudited condensed balance sheets.
Class B Common Stock
— The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders
of Class B common stock are entitled to one vote for each share. As of June 30, 2022 and December 31, 2021, there were 3,087,500 and
3,162,500 shares of Class B common stock issued and outstanding. At issuance, the Class B common stock included an aggregate of up
to 412,500 shares of Class B common stock originally subject to forfeiture to the extent that the underwriters’
over-allotment option is not exercised in full or in part so that the number of Founder Shares will equal 20% of the Company’s
issued and outstanding common stock after the Initial Public Offering. Upon the partial exercise of the over-allotment option, there
were 75,000 shares which were forfeited during the three months ended June 30, 2022 when the
remaining over-allotment option expired.
Only holders of the Class B common stock
will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders
of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise
required by law. In connection with our initial business combination, we may enter into a stockholders agreement or other arrangements
with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from
those in effect upon completion of this offering.
The shares of Class B common stock will
automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, 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 issued in the Initial Public Offering and related to the closing of a 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 then-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 the completion
of Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection
with a Business Combination (net of the number of shares of Class A common stock redeemed in connection with a Business Combination),
excluding any shares or equity-linked securities issued or issuable to any seller of an interest in the target to us in a Business Combination.
Warrants — As of
June 30, 2022, there were 11,580,000 warrants outstanding (5,405,000 Private warrants and 6,175,000 Public Warrants). Public Warrants
may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole
warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of
a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to
deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise
unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise
of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the
Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will
be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise
their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state
of residence of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon
as practicable after the closing of a Business Combination the Company will use its commercially reasonable efforts to file, and within
90 days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class
A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common
stock until the warrants expire or are redeemed. 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, but will use its commercially reasonable
efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
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 Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per Public
Warrant; |
| ● | upon a minimum of 30 days’
prior written notice of redemption, or the 30-day redemption period to each warrant holder; and |
| ● | if, and only if, the last reported
sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganization,
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 warrant holders. |
If and when the warrants become redeemable
by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for
sale under all applicable state securities laws.
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 common stock issuable
upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not
be adjusted for issuances of 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 a Business Combination within the Combination Period 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.
The Private Placement Warrants are identical
to the Public Warrants underlying the Units being sold in the Initial Public Offering.
NOTE 8 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in
ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial
assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1—quoted prices
in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for
the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
Level 3—unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The following table presents information
about the Company’s assets and liabilities that are measured at fair value at June 30, 2022, and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value:
| |
| |
June 30, | |
Description: | |
Level | |
2022 | |
Assets: | |
| |
| |
Investments held in Trust Account | |
1 | |
$ | 126,148,752 | |
The
estimated fair value of Investments held in Trust Account are determined using available market information.
On March 15, 2022, the Company
recognized over-allotment option liability in accordance with ASC 815-40 in the unaudited condensed balance sheets of $19,432. The
over-allotment option was measured at fair value at inception, and re-measured at March 31, 2022. Upon expiration of the
over-allotment option on April 29, 2022, the Company wrote-off the option to the unaudited condensed statement of operations. During
the three and six months ended June 30, 2022, the Company recorded a gain on the change in fair value of $15,720 and $19,432 to the
unaudited condensed statement of operations, respectively.
The initial fair value measurement of the
over-allotment option liability as of March 15, 2022, and re-measurement at March 31, 2022, were calculated using the following
range of weighted average assumptions:
| |
March 15, | | |
March 31, | |
| |
2022 | | |
2022 | |
Risk-free interest rate | |
| 0.055 | % | |
| 0.17 | % |
Expected life of over-allotment option | |
| 0.12years | | |
| 0.08years | |
Expected volatility of underlying stock | |
| 4.60 | % | |
| 4.60 | % |
Dividends | |
| 0 | % | |
| 0 | % |
The 123,500 Representative Shares
have a grant date fair value of $6.29 per share or an aggregate of $776,815. The Company measured the fair value of the
Representative Shares on the grant date of the award utilizing a valuation model which considers certain assumptions. These
assumptions include the offering price, the marketability of the Company and the probability of initial business combination, which
were considered Level 3 inputs. Upon the Initial Public Offering, such amounts were allocated to offering costs within stockholders’ equity
(deficit).
NOTE 9 — SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited
condensed financial statements were issued. The Company did not identify any subsequent events that would have required adjustment
or disclosure in the financial statements.