The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of the unaudited condensed
financial statements.
The accompanying notes are
an integral part of the unaudited condensed financial statements
The accompanying notes are
an integral part of the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Organization and Business Operations
Pacifico Acquisition Corp. (the “Company”)
is a newly organized blank check company incorporated as a Delaware corporation on March 2, 2021. The Company was formed for the purpose
of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more
businesses or entities (the “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 September 30, 2021, the Company had not
yet commenced any operations and had not generated revenue. All activities through September 30, 2021 relate to the Company’s formation
and the initial public offering (the “IPO”) described below. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Pacifico Capital
LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s
IPO (as described in Note 3) was declared effective on September 13, 2021. On September 16, 2021, the Company consummated the IPO of 5,000,000
units at $10.00 per unit (the “Public Units’), generating gross proceeds of $50,000,000. Simultaneously with the IPO, the
Company sold to its Sponsor and Chardan Capital Markets LLC (“Chardan”) (and/or their designees) 281,250 units at $10.00 per
unit (the “Private Units”) in a private placement generating total gross proceeds of $2,812,500, which is described in Note
4.
The Company granted the underwriters a 45-day
option to purchase up to 750,000 Units to cover Over-allotment, if any. As of September 22, 2021, the underwriters had fully exercised
the option and purchased 750,000 additional Units (the “Over-allotment Units”), generating gross proceeds of $7,500,000.
Upon the closing of the Over-allotment on September
22, 2021, the Company consummated the Private Placement sale of an additional 26,250 Private Units to the Sponsor and Chardan at a price
of $10.00 per Private Unit, generating gross proceeds of $262,500.
Offering costs amounted to $4,717,275 consisting
of $1,437,500 of underwriting fees, $2,469,769 of deferred underwriting fees and $810,006 of other offering costs (including $279,125
of the estimated cost of Unit Purchase Option issued to the underwriter). The Company received net proceeds of $58,075,000 from the IPO
(including the Over-allotment Units) and the sale of Private Units.
Trust Account
Upon the closing
of the IPO and the private placement (including Over-allotment), a total of $58,075,000 was placed
in a trust account (the “Trust Account”) with American Stock Transfer & Trust Company, LLC acting as trustee.
The funds held in the Trust Account can be invested
in United States government treasury bills, notes or bonds having a maturity of 185 days or less or in money market funds meeting the
applicable conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, until the earlier of the consummation
of its first business combination and the Company’s failure to consummate a business combination within applicable period of time.
Placing funds in the Trust account may not protect
those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective
target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies
held in the Trust Account, there is no guarantee that such persons will execute such agreements.
In addition, interest income earned on the funds
in the Trust account may be released to the Company to pay its income or other tax obligations. With these exceptions, expenses incurred
by the Company may be paid prior to a business combination only from the net proceeds of the IPO and private placement not held in the
Trust Account.
Business Combination
Pursuant to NASDAQ listing rules, the Company’s
initial business combination must occur with one or more target businesses having an aggregate fair market value equal to at least 80%
of the value of the funds in the Trust account (excluding any taxes payable on the income earned on the Trust account), which the Company
refers to as the 80% test, at the time of the execution of a definitive agreement for its initial business combination, although the Company
may structure a business combination with one or more target businesses whose fair market value significantly exceeds 80% of the trust
account balance. If the Company is no longer listed on NASDAQ, it will not be required to satisfy the 80% test.
The Company currently anticipates structuring
a business combination to acquire 100% of the equity interests or assets of the target business or businesses. The Company may, however,
structure a business combination where the Company merges directly with the target business or where the Company acquires less than 100%
of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or
for other reasons, but the Company will only complete such business combination if the post-transaction company owns 50% or more of the
outstanding voting securities of the target or otherwise owns a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act. If less than 100% of the equity interests or assets of a target
business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned
or acquired is what will be valued for purposes of the 80% test.
The Company will provide its holders of the outstanding
Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or
(ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a 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 anticipated to be $10.10 per Public Share, plus any pro rata interest earned on the
funds held in the Trust Account and not previously released to the Company to pay its franchise and income tax obligations). The Company
will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business
Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination.
If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons,
the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated 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 law, or the Company decides to obtain stockholder approval for business or legal 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.
Additionally, each public stockholder may elect
to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder
approval in connection with a Sponsor and any of the Company’s officers or directors that may hold Insider Shares (as defined in
Note 5) (the “Initial Stockholders”) and Chardan have agreed (a) to vote their Insider Shares, Private Shares (as defined
in Note 4) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination and (b) not to convert
any shares (including the Insider Shares) in connection with a stockholder vote to approve, or sell the shares to the Company in any
tender offer in connection with, a proposed Business Combination.
If the Company seeks stockholder approval of a
Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation
provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is
acting in concert or as a “group” (as defined under Section 13 of the 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 20% or more of the
Public Shares, without the prior consent of the Company.
The Company will have until 12 months from the
closing of the IPO to consummate a Business Combination. In addition, if the Company anticipates that it may not be able to consummate
initial business combination within 12 months, the Company’s insiders or their affiliates may, but are not obligated to, extend
the period of time to consummate a business combination two times by an additional three months each time (for a total of 15 or 18 months
to complete a business combination) (the “Combination Period”). In order to extend the time available for the Company to consummate
a Business Combination, the Sponsor or its affiliate or designees must deposit into the Trust Account $500,000, or $575,000 if the underwriters’
over-allotment option is exercised in full ($0.10 per Public Share in either case), for each such extension on or prior to the date of
the applicable deadline.
Liquidation
If the Company is unable to complete a Business
Combination within the Combination 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 (which interest shall be net of taxes payable,
and less certain amount 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), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the Company’s remaining stockholders and the Company’s board of directors, 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.
The Initial Stockholders and Chardan have agreed
to waive their liquidation rights with respect to the Insider Shares and Private Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the Initial Stockholders or Chardan acquires Public Shares in or after the IPO, such Public
Shares will be 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 in 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 IPO 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 vendor 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 $10.10 per Public Share, except as to any claims by a third party who executed a valid
and enforceable agreement with the Company waiving any right, title, interest or claim of any kind they may have in or to any monies
held in the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the IPO against certain
liabilities, including liabilities under the Securities Act of 1933, as amended. 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.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented
in U.S. Dollars and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and
pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP.
In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating
results for the three months ended September 30, 2021 and the period from March 2, 2021(inception) through September 30, 2021 are not
necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future period.
The accompanying unaudited condensed financial
statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 8-K and the final
prospectus filed by the Company with the SEC on September 22, 2021(for the IPO) and September 14, 2021, respectively.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(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 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 that is neither an emerging growth company nor an emerging growth
company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use of Estimates
The preparation of financial statements in conformity
with GAAP requires 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 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 financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of September 30, 2021.
Offering Costs Associated with the IPO
Offering costs consist of underwriting, legal,
accounting, registration and other expenses incurred through the balance sheet date that are directly related to the IPO. As of September
30, 2021, offering costs amounted to $4,717,275 consisting of $1,437,500 of underwriting fees, $2,469,769 of deferred underwriting fees
and $810,006 of other offering costs (including $279,125 of the estimated cost of Unit Purchase Option issued to the underwriter). The
Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering”.
The Company allocates offering costs between public shares and public rights based on the estimated fair values of public shares and public
rights at the date of issuance. Accordingly, $4,372,914 was allocated to public shares and was charged to temporary equity, and $344,361
was allocated to public rights and was charged to stockholders’ equity.
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 such account as of September 30, 2021.
Cash and Investments Held in Trust Account
The Company’s portfolio of investments held
in the Trust Account is comprised of investments in money market funds that invest in U.S. government securities. The estimated fair value
of investments held in the Trust Account are determined using available market information.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject
to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 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 feature redemption rights that is either within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified
as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features
certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future
events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the
stockholders’ equity section of the Company’s balance sheet.
The Company has made a policy election in accordance with ASC 480-10-S99-3A
and recognizes changes in redemption value in additional paid-in capital (or accumulated deficit in the absence of additional paid-in
capital) over an expected 12-month period leading up to a Business Combination. On September 30, 2021, the Company recorded an accretion
of approximately $605,518, with unrecognized accretion remaining of $8,539,896.
Net Income (Loss) per Share
The Company complies with accounting and disclosure
requirements of FASB ASC 260, Earnings Per Share. The unaudited condensed statements of operations include a presentation of income (loss)
per redeemable share and income (loss) per non-redeemable share following the two-class method of income per share. In order to determine
the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed
income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using
the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average
number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value
of the common shares subject to possible redemption was considered to be dividends paid to the public shareholders. As of September 30,
2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary
shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the
period presented.
The net income (loss) per share presented in the
unaudited condensed statement of operations is based on the following:
|
|
For the three
months ended
|
|
|
For the period from
March 2, 2021
(inception) through
|
|
|
|
September 30,
2021
|
|
|
September 30,
2021
|
|
Net Loss
|
|
$
|
(36,009
|
)
|
|
$
|
(39,534
|
)
|
Accretion of temporary equity to redemption value
|
|
|
(605,518
|
)
|
|
|
(605,518
|
)
|
Net loss including accretion of temporary equity to redemption value
|
|
$
|
(641,527
|
)
|
|
$
|
(645,052
|
)
|
|
|
For the three
months ended
September 30,
2021
|
|
|
For the period from
March 2, 2021
(inception) through
September 30,
2021
|
|
|
|
Redeemable shares
|
|
|
Non-redeemable shares
|
|
|
Redeemable shares
|
|
|
Non-redeemable shares
|
|
Basic and diluted net income/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerators:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net loss including accretion of temporary equity
|
|
$
|
(247,936
|
)
|
|
$
|
(393,591
|
)
|
|
$
|
(141,423
|
)
|
|
$
|
(503,629
|
)
|
Accretion of temporary equity to redemption value
|
|
|
605,518
|
|
|
|
—
|
|
|
|
605,518
|
|
|
|
—
|
|
Allocation of net income (loss)
|
|
$
|
357,582
|
|
|
$
|
(393,591
|
)
|
|
$
|
464,095
|
|
|
$
|
(503,629
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding
|
|
|
826,087
|
|
|
|
1,311,386
|
|
|
|
358,491
|
|
|
|
1,276,639
|
|
Basic and diluted net income/(loss) per share
|
|
$
|
0.43
|
|
|
$
|
(0.30
|
)
|
|
$
|
1.29
|
|
|
$
|
(0.39
|
)
|
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute
for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes
accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and
no amounts accrued for interest and penalties as of September 30, 2021. The Company is currently not aware of any issues under review
that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations
by major taxing authorities since inception.
The Company has identified the United States
as its only “major” tax jurisdiction. The Company may be subject to potential examination by federal and state taxing authorities
in the areas of income taxes. These potential 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.
The provision for income taxes was deemed to be
immaterial for the period from March 2, 2021 (inception) to September 30, 2021.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC 825, “Financial Instrument,” approximates the carrying
amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which
simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes
certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies
the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years, with early adoption permitted. 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 recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial
statements.
Note 3 — Initial Public Offering
On September 16, 2021, the Company sold 5,000,000
Units at a price of $10.00 per Unit, generating gross proceeds of $50,000,000 related to its IPO. Each Unit consists of one share of common
stock and one right (“Public Right”). Each Public Right will convert into one-tenth (1/10) of one share of common stock upon
the consummation of a Business Combination (see Note 7). The Company granted the underwriters a 45-day option to purchase up to 750,000
Units to cover Over-allotment, if any. On September 22, 2021, the underwriters fully exercised the option and purchased 750,000 additional
Units (the “Over-allotment Units”), generating gross proceeds of $7,500,000.
As of September 30, 2021, the Company incurred
$4,717,275 consisting of $1,437,500 of underwriting fees, $2,469,769 of deferred underwriting fees (payable only upon completion of a
Business Combination) and $810,006 of other offering costs (including $279,125 of the estimated cost of Unit Purchase Option issued to
the underwriter).
Note 4 — Private Placement
Concurrently with the closing of the IPO, the
Company’s Sponsor and Chardan (and/or their designees) purchased an aggregate of 281,250 Private Units at a price of $10.00 per
Private Unit for an aggregate purchase price of $2,812,500 in a private placement. Upon the closing of the Over-allotment on September
22, 2021, the Company consummated the Private Placement sale of an additional 26,250 Private Units to the Sponsor and Chardan at a price
of $10.00 per Private Unit, generating gross proceeds of $262,500.
The Private Units are identical to the Public
Units except with respect to certain registration rights and transfer restrictions. The proceeds from the Private Units were added to
the proceeds from the IPO to be 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 Units will be used to fund the redemption of the Public Shares (subject to the requirements
of applicable law), and the Private Units and all underlying securities will expire worthless.
Note 5 — Related Party Transactions
Promissory Note - Related Party
On March 15, 2021, the Sponsor loaned the Company
an aggregate of up to $200,000 to cover expenses related to the IPO pursuant to a promissory note (the “Promissory Note”).
The Promissory Note is unsecured, interest-free and due on the closing of the IPO. As of September 30, 2021, the Company fully repaid
the Promissory Note and no amount is owed under the note.
Insider Shares
On April 13, 2021, the Company issued 1,437,500 shares of common stock
to the Initial Stockholders (the “Insider Shares”) for an aggregate of $25,000. The Insider Shares include an aggregate of
up to 187,500 shares subject to forfeiture by the Initial Stockholders to the extent that the underwriters’ over-allotment is not
exercised in full, so that the Initial Stockholders will collectively own 20% of the Company’s issued and outstanding shares after
the IPO (assuming the Initial Stockholders do not purchase any Public Shares in the IPO and excluding the Private Units). As the over-allotment
option was fully exercised on September 22, 2021, no portion of the Insider Shares are subject to forfeiture.
The Initial Stockholders have agreed, subject
to certain limited exceptions, not to transfer, assign or sell any of their Insider Shares until, with respect to 50% of the Insider Shares,
the earlier of six months after the consummation of a Business Combination and the date on which the closing price of the common stock
equals or exceeds $12.50 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 commencing after a Business Combination and, with respect to the remaining 50% of the
Insider Shares, until the six months after the consummation of a Business Combination, or earlier, in either case, if, subsequent to a
Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of
the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Note 6 — Commitments and contingency
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 virus could have a negative effect
on the Company’s future financial position, results of its operations and/or search for a target company, there has been no significant
impact as of the date of these financial statements. The financial statements do not include any adjustments that might result from the
future outcome of this uncertainty.
Registration Rights
The holders of the Insider Shares, Private Units
(and all underlying securities), and any shares that may be issued upon conversion of working capital loans (may be provided by the Company’s
insiders, officers, directors, or their affiliates to finance transaction costs in connection with searching for a target business or
consummating a Business Combination) will be entitled to registration rights pursuant to a registration rights agreement to be signed
prior to or on the effective date of IPO. The holders of the majority of these securities are entitled to make up to two demands that
the Company register such securities. The holders of the majority of the Insider Shares can elect to exercise these registration rights
at any time commencing three months prior to the date on which the Insider Shares are to be released from escrow. The holders of a majority
of the Private Units and units issued in payment of working capital loans made to the Company can elect to exercise these registration
rights at any time commencing on the date that the Company consummates a Business Combination. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were paid a cash underwriting discount of 2.5% of
the gross proceeds of the IPO, or $ 1,437,500 including Over-allotment. In addition, the underwriters will be entitled to a deferred fee
of 3.75% of the gross proceeds of the IPO, or $2,156,250, which will be paid upon the closing of a Business Combination from the amounts
held in the Trust Account, subject to the terms of the underwriting agreement. The underwriters will also be entitled to 0.75% of the
gross proceeds of the IPO in the form of common shares to be issued if the Company closes a Business Combination.
Unit Purchase Option
The Company sold to Chardan (and/or its designees), for $100, an option
(“UPO”) to purchase 158,125 units as the over-allotment option was fully exercised on September 22, 2021. The UPO will be
exercisable at any time, in whole or in part, between the close of the IPO and fifth anniversary of the effective date of the registration
at a price per Unit equal to $11.50 (or 115% of the volume weighted average trading price of the ordinary shares during the 20 trading
day period starting on the trading day immediately prior to consummation of an initial Business Combination). The option and the underlying
securities that may be issued upon exercise of the option, have been deemed compensation by FINRA and are therefore subject to a 180-day
lock-up pursuant to Rule 5110(e)(1) of FINRA’s NASDAQ Conduct Rules. Additionally, the option may not be sold, transferred,
assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the date of IPO except to any
underwriter and selected dealer participating in the IPO and their bona fide officers or partners.
Right of First Refusal
The Company has granted Chardan a right of first
refusal, for a period of 15 months after the date of the consummation of a Business Combination, to act as lead underwriters or minimally
as a co-manager, with at least 30% of the economics; or, in the case of a three-handed deal 20% of the economics, for any and all future
public or private equity and debt offerings.
Leases
The Company entered into a short-term agreement
for temporary office space through its Sponsor expiring on March 31, 2022.
Note 7 — Stockholders’ Equity
Common Stock — The Company
is authorized to issue 10,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the common stock are entitled
to one vote for each share. At September 30, 2021, there were 1,745,000 shares of common stock (excluding 5,750,000 shares subject to
possible redemption).
Rights — Except in cases where
the Company is not the surviving company in a Business Combination, each holder of a Public Right will automatically receive one-tenth
(1/10) of one share of common stock upon consummation of a Business Combination, even if the holder of a Public Right converted all shares
held by him, her or it in connection with a Business Combination or an amendment to the Company’s Amended and Restated Certificate
of Incorporation with respect to its pre-business combination activities. In the event that the Company will not be the surviving company
upon completion of a Business Combination, each holder of a Public Right will be required to affirmatively convert his, her or its rights
in order to receive the one-tenth (1/10) of a share underlying each Public Right upon consummation of the Business Combination. No additional
consideration will be required to be paid by a holder of Public Rights in order to receive his, her or its additional shares of common
stock upon consummation of a Business Combination. The shares issuable upon exchange of the rights will be freely tradable (except to
the extent held by affiliates of the Company).
The Company will not issue fractional shares in
connection with an exchange of Public Rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed
in accordance with the applicable provisions of the Delaware General Corporation Law. As a result, the holders of the Public Rights must
hold rights in multiples of 10 in order to receive shares for all of the holders’ rights upon closing of a Business Combination.
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 Rights will not receive any of such funds with respect to their Public Rights, nor will they receive
any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Rights, and the Public
Rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the Public
Rights upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights.
Accordingly, the rights may expire worthless.
Note 8 — Fair Value Measurements
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:
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|
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.
|
|
|
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Level 2:
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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.
|
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Level 3:
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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 that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value.
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September 30, 2021
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Quoted Prices in Active Markets
(Level 1)
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|
Significant Other Observable Inputs
(Level 2)
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|
Significant Other Unobservable Inputs
(Level 3)
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Assets
|
|
|
|
|
|
|
|
|
|
|
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Marketable securities held in trust account
|
|
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58,075,086
|
|
|
|
58,075,086
|
|
|
|
—
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|
—
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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. Based on the review, the Company
did not identify any material subsequent event that is required disclosure in the financial statements.