Item 1. Unaudited Financial Statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, 2022
(Unaudited)
Assets |
Cash | |
$ | 30,507 | |
Total Current Assets | |
| 30,507 | |
| |
| | |
Other Assets | |
| | |
Deferred offering costs | |
| 229,433 | |
Total Assets | |
$ | 259,940 | |
| |
| | |
Liabilities and Shareholder’s Equity | |
| | |
Promissory note - related party | |
$ | 235,585 | |
Total Current Liabilities | |
| 235,585 | |
| |
| | |
Commitments and Contingencies | |
| | |
| |
| | |
Stockholder’s Equity: | |
| | |
Preferred stock, $0.0001 par value, 500,000 shares authorized, none issued and outstanding | |
| - | |
Class A common stock, $0.0001 par value, 20,000,000 shares authorized, none issued and outstanding | |
| - | |
Class B common stock, $0.0001 par value, 2,500,000 shares authorized, 2,156,250 shares issued and outstanding | |
| 216 | |
Additional paid-in capital | |
| 24,784 | |
Accumulated deficit | |
| (645 | ) |
Total Stockholder’s Equity | |
| 24,355 | |
| |
| | |
Total Liabilities and Stockholder’s Equity | |
$ | 259,940 | |
The accompanying notes are an integral part of these unaudited
condensed financial statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 7, 2022 (INCEPTION)
THROUGH MARCH 31, 2022
(Unaudited)
Formation and operating costs | |
$ | 645 | |
Net loss | |
$ | (645 | ) |
| |
| | |
Basic and diluted weighted average Class B common shares outstanding | |
| 2,156,250 | |
| |
| | |
Basic and diluted net loss per Class B common share | |
$ | (0.00 | ) |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDER’S
EQUITY
FOR THE PERIOD FROM JANUARY 7, 2022 (INCEPTION)
THROUGH MARCH 31, 2022
(Unaudited)
| |
Preferred Stock | | |
Common Stock | | |
Additional | | |
| | |
Total | |
| |
| | |
| | |
Class A | | |
Class B | | |
Paid-in | | |
Accumulated | | |
Stockholder’s | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity | |
Balance as of January 7, 2022 (inception) | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Founder shares issued to initial stockholder | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,156,250 | | |
| 216 | | |
| 24,784 | | |
| - | | |
| 25,000 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (645 | ) | |
| (645 | ) |
Balance as of March 31, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,156,250 | | |
$ | 216 | | |
$ | 24,784 | | |
$ | (645 | ) | |
$ | 24,355 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 7, 2022 (INCEPTION)
THROUGH MARCH 31, 2022
(Unaudited)
Cash Flows from Operating Activities: | |
| | |
Net loss | |
$ | (645 | ) |
Net Cash Used in Operating Activities | |
| (645 | ) |
| |
| | |
Cash Flows from Financing Activities: | |
| | |
Proceeds from issuance of founder shares | |
| 25,000 | |
Proceeds from promissory note to related party | |
| 235,585 | |
Payment of deferred offering costs | |
| (229,433 | ) |
Net Cash Provided by Financing Activities | |
| 31,152 | |
| |
| | |
Net Change in Cash | |
| 30,507 | |
| |
| | |
Cash, January 7, 2022 (inception) | |
| - | |
Cash, March 31, 2022 | |
$ | 30,507 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
ACRI
CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Note 1 — Organization, Business Operation and
Going Concern Consideration
Acri Capital Acquisition Corporation
(the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on January 7, 2022. The
Company was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization,
reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company has not
selected any Business Combination target and it has not, nor has anyone on its behalf, initiated any substantive discussions, directly
or indirectly, with any Business Combination target. The company is not limited to a particular industry or geographic region for purposes
of consummating an initial business combination. The Company will not undertake its initial business combination with any company being
based in or having the majority of the company’s operations in China (including Hong Kong and Macau). The Company has selected December 31
as its fiscal year end.
As
of March 31, 2022, the Company had not commenced any operations. For the period from January 7, 2022 (inception) through March 31,
2022, the Company’s efforts have been limited to organizational activities as well as activities related to the initial
public offering (the “IPO”).
The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company
will generate non-operating income in the form of interest income from the proceeds derived from the IPO.
The
registration statement for the Company’s IPO became effective on June 9, 2022. On June
14, 2022 the Company consummated the IPO of 8,625,000 units (the
“Units”) (including 1,125,000 Units issued
upon the full exercise of the over-allotment option). Each Unit consists of one share of Class A common stock, $0.0001 par value per share
(the “Class A Common Stock”), and one-half of one redeemable warrant (the “Public
Warrants”), each whole Warrant entitling the holder thereof to purchase one share of Class A Common Stock at an exercise
price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $86,250,000 on June
14, 2022.
Substantially concurrently with the closing of the IPO, the Company
completed the sale of 5,240,000 private placement warrants (the “Private Warrants”,
together with the Public Warrants, the “Warrants”) to the Company’s sponsor, Acri Capital Sponsor LLC (the
“Sponsor”) at a purchase price of $1.00 per Private Warrant, generating gross proceeds to the Company of $5,240,000. The Private
Warrants are identical to the Public Warrants except that the Private Warrants
(including the Class A Common Stock issuable upon exercise of the Private Warrants)
will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination except to permitted
transferees.
Transaction costs amounted
to $4,838,883, consisting of $4,312,500 of underwriting fees and $526,383 of other offering costs. Following the closing of IPO, cash
of $1,283,357 was held outside of the Trust Account (as defined below) and is available for working capital purposes.
The Company’s initial
Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of
the assets held in the Trust Account (as defined below) (excluding the deferred underwriting discounts and commissions and taxes payable
on the income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company
will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities
of the target or otherwise acquires a controlling interest in the target sufficient for the post-transaction company not to be required
to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
There is no assurance that the Company will be able to complete a Business Combination successfully.
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Note 1 — Organization,
Business Operation and Going Concern Consideration (cont.)
Following the closing of the IPO, the Company has agreed that $10.20
per Unit sold in the IPO, including the proceeds of the sale of the Private Warrants, will be held into a U.S.-based trust account (the
“Trust Account”) with Wilmington Trust, National Association, acting as trustee. The funds held in the Trust Account will
be invested only in U.S. government treasury bills, bonds or notes with a maturity of 185 days or less, or in money market funds
meeting the applicable conditions of Rule 2a-7 promulgated under the Investment Company Act which invest solely in direct U.S. government
treasury, so that the Company are not deemed to be an investment company under the Investment Company Act. Except with respect to interest
earned on the funds held in the Trust Account that may be released to the Company to pay the Company’s tax obligation, the proceeds
from the IPO and the sale of the Private Warrants that are deposited and held in the Trust Account will not be released from the Trust
Account until the earliest to occur of (a) the completion of the initial Business Combination, (b) the redemption of any shares
of Class A Common Stock included in the Units sold in the IPO (the “Public Shares”) properly submitted in connection
with a stockholder vote to amend then current amended and restated Company’s certificate of incorporation (i) to modify the
substance or timing of its obligation to allow redemption in connection with its initial Business Combination or to redeem 100% of the
Company’s Public Shares if it does not complete the initial Business Combination within the Combination Period (as defined below)
or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity and
(c) the redemption of 100% of the Company’s Public Shares if it is unable to complete the Business Combination within the Combination
Period, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s
creditors which could have higher priority than the claims of the Company’s public stockholders. If the Company anticipate that
it may not be able to consummate its initial Business Combination by March 14, 2023 (within nine (9) months from the consummation
of the IPO), it may extend the period of time to consummate a Business Combination up to nine (9) times by an additional one month each
time for a total of up to 9 months, affording the Company up to December 14, 2023 (up to eighteen (18) months from the consummation
of the IPO) to complete its initial business combination. Public stockholders will not be offered the opportunity to vote on or redeem
their shares if the Company chooses to make any such paid extension. Pursuant to the terms of the Company’s amended and restated
certificate of incorporation and the trust agreement entered into between the Company and Wilmington Trust, National Association acting
as trustee, the Sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit
into the Trust Account for each month extension $ $287,212 ($0.0333 per share), on or prior to the date of the applicable deadline. Any
such payments would be made in the form of a loan. If the Company complete its initial Business Combination, the Company would repay such
loaned amounts out of the proceeds of the Trust Account. In addition, such extension funding loans may be convertible into Private Warrants
upon the closing of the Company’s initial business combination at $1.00 per warrant at the option of the lender.
The shares of Class A
Common Stock subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the
IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
In such case, the Company will consummate a Business Combination and, solely if the Company has net tangible assets of at least $5,000,001
upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding
shares voted are voted in favor of the Business Combination. The Company will have only by March 14, 2023 (nine (9) months from
the closing of the IPO) (or up to December 14, 2023 (18 months from the closing of the IPO) if the Company extends the period of
time to complete a Business Combination) from the closing of the IPO to complete the initial Business Combination (the “Combination
Period”).
If the Company is unable to
complete the initial 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 earned
on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes (less up to $50,000
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), 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 its board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under
Delaware law to provide for claims of creditors and the requirements of other applicable law.
There will be no redemption rights or liquidating distributions with
respect to the Company’s Warrants, which will expire worthless if the Company fails to complete the Business Combination within
the Combination Period. The Sponsonr, directors and officers of the Company (the “founders”) have entered into a letter agreement
with the Company, pursuant to which they have agreed (i) to waive their redemption rights with respect to any Founder Shares (as
defined in Note 5) and any Public Shares held by them in connection with the completion of the initial Business Combination, (ii) waive
their redemption rights with respect to their Founder Shares and Public Shares in connection with a stockholder vote to approve an amendment
to the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s
obligation to allow redemption in connection with the initial Business Combination or to redeem 100% of the Company’s Public Shares
if the Company does not complete its initial Business Combination within the Combination Period or (B) with respect to any other
provision relating to stockholders’ rights or pre-initial Business Combination activity and (iii) to waive their rights to
liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete the
initial Business Combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust
Account with respect to any Public Shares they hold if the Company fails to complete the initial Business Combination within the Combination
Period. If the Company submits it initial Business Combination to its stockholders for a vote, the Company will complete its initial Business
Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial Business Combination.
In no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001.
In such case, the Company would not proceed with the redemption of Public Shares and the related Business Combination, and instead may
search for an alternate Business Combination.
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Note 1 — Organization,
Business Operation and Going Concern Consideration (cont.)
The Sponsor has agreed that
it will 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 by 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 due to reductions in the value of the trust assets, in each case net of the interest
which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of
any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters
of the IPO against certain liabilities, including liabilities under the Securities Act (as defined in Note 2). Moreover, in the event
that an executed waiver is deemed to be unenforceable against a third party, then the Company’s Sponsor will not be responsible
to the extent of any liability for such third party claims.
However, the Company has not
asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has
sufficient funds to satisfy their indemnity obligations and believe that the Sponsor’s only assets are securities of the Company.
Therefore, the Company cannot assure that its sponsor would be able to satisfy those obligations. None of the officers or directors will
indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Liquidity
As
of March 31, 2022, the Company had a working capital deficiency of $(205,078). Prior to the completion of the IPO, the Company has incurred
and expects to continue to incur significant costs in pursuit of its acquisition plans. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. The Company has since completed its IPO at which time capital in excess
of the funds deposited in the Trust Account and/or used to fund offering expenses was released to the Company for general working capital
purposes. Accordingly, management has since reevaluated the Company’s liquidity and financial condition and determined that sufficient
capital exists to sustain operations through the earlier of the consummation of a Business Combination or one year from this filing and
therefore substantial doubt has been alleviated. There is no assurance that the
Company’s plans to raise capital or to consummate a Business Combination will be successful or successful within the Combination
Period. The unaudited condensed financial statements do not include any adjustments that might result from the Company’s inability
to consummate the proposed Business Combination.
Note 2 — Significant accounting
policies
Basis of Presentation
The
accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the
United States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC, and
include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial
position and operation results. Interim results are not necessarily indicative of results to be expected for any other interim period
or for the full year.
Emerging Growth Company Status
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities
Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth
companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act of 2002, 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.
ACRI
CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Note 2 — Significant accounting
policies (cont.)
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 of 1934, as amended (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 an 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 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. Actual results could differ from those estimates.
Cash
The Company considers all short-term
investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalent
as of March 31, 2022.
Deferred Offering Costs
Deferred
offering costs consist of legal expenses incurred through the balance sheet date that are directly related to the IPO and that will be
charged to stockholder’s equity upon the completion of the IPO. As of March 31, 2021,
the Company had deferred offering costs of $229,433.
Warrants
The Company accounts for Warrants
as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable
authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480, Distinguishing Liabilities from Equity (“ASC 480”)
and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the Warrants are freestanding
financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the Warrants
meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to the Company’s
own shares of Class A common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance
outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the Warrants
are outstanding.
For issued or modified Warrants
that meet all of the criteria for equity classification, the Warrants are required to be recorded as a component of equity at the time
of issuance. For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are required to
be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of the Warrants are recognized as a non-cash gain or loss on the statements of operations.
ACRI
CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Note 2 — Significant accounting
policies (cont.)
Net Loss Per Common Share
Net loss per common share
is computed by dividing net loss by the weighted average number of common stock outstanding during the period, excluding common shares
subject to forfeiture by the Sponsor. Weighted average shares were reduced for the effect of an aggregate of 281,250 shares of Class B
common stock that are subject to forfeiture if the over-allotment option is not exercised by the underwriters (see Note 6). At March
31, 2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into
common stock 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.
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution. The Company has
not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term
nature.
Income Taxes
The Company accounts for income
taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance
to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies
the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure
and transition.
The Company recognizes accrued
interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts
accrued for interest and penalties as of March 31, 2022. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The Company has identified
the United States as its only major tax jurisdiction.
The Company 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 Company’s tax provision
is zero for the period from January 7, 2022 (inception) through March 31, 2022.
ACRI
CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Note 2 — Significant accounting
policies (cont.)
Recent Accounting Pronouncements
Management does not believe
that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
unaudited condensed financial statements.
Note 3 — Initial Public
Offering
Pursuant to the IPO, the Company
sold 8,625,000 Units (the underwriters’ over-allotment option was exercised in full) on June 14, 2022. Each Unit has an offering
price of $10.00 and consists of one share of the Company’s Class A Common Stock and one-half of one redeemable Public Warrants.
The Company will not issue fractional shares. As a result, the Public Warrants must be exercised in multiples of two. Each whole redeemable
Public Warrant entitles the holder thereof to purchase one share Class A Common Stock at a price of $11.50 per full share. The Public
Warrants will become exercisable on the later of 30 days after the completion of the Company’s initial Business Combination
or 12 months from the closing of the IPO, and will expire five years after the completion of the Company’s initial Business
Combination or earlier upon redemption or liquidation.
Note 4 — Private Placement
Substantially
concurrently with the closing of the IPO on June 14, 2022, the Company completed the sale of 5,240,000 Private Warrants to the Sponsor at a
purchase price of $1.00 per Private Warrant, generating gross proceeds to the Company of $5,240,000. Private
Warrants are identical to the Public Warrants included in the Units sold in this IPO except that the Private Warrants (including the
Class A Common Stock issuable upon exercise of the Private Warrants) will not be transferable, assignable or salable until 30 days
after the completion of the initial Business Combination except to permitted transferees.
Note 5 — Related Party
Transactions
Founder Shares
On February 4, 2022, the
Sponsor acquired 2,156,250 Class B common stock (“Founder Shares”) of for an aggregate purchase price of $25,000, or
approximately $0.01 per share.
As of March 31, 2022, there
were 2,156,250 Founder Shares issued and outstanding.
The number of Founder Shares
issued was determined based on the expectation that such Founder Shares would represent 20% of the number of Class A Common Stock
and Class B common stock issued and outstanding upon completion of the IPO.
The Founder Shares are identical
to the Public Shares. However, the founders have agreed (A) to vote their Founder Shares in favor of any proposed Business Combination,
(B) not to propose, or vote in favor of, prior to and unrelated to an initial Business Combination, an amendment to the Company’s
certificate of incorporation that would affect the substance or timing of the Company’s redemption obligation to redeem all Public
Shares if the Company cannot complete an initial Business Combination within the Combination Period, unless the Company provides public
stockholders an opportunity to redeem their Public Shares in conjunction with any such amendment, (C) not to redeem any shares, including
Founder Shares and Public Shares into the right to receive cash from the Trust Account in connection with a stockholder vote to approve
the Company’s proposed initial Business Combination or sell any shares to us in any tender offer in connection with the Company’s
proposed initial Business Combination, and (D) that the Founder Shares shall not participate in any liquidating distribution upon
winding up if a Business Combination is not consummated.
ACRI
CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Note 5 — Related Party
Transactions (cont.)
The founder has agreed not
to transfer, assign or sell its Founder Shares until the earlier to occur of: (A) six months after the completion of the Company’s
initial Business Combination, or (B) the date on which the Company completes a liquidation, merger, 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, and (C) the date on which the last reported sale price of the Company’s Class A Common Stock equals
or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading
days within any 30-trading day period commencing after the initial Business Combination, any permitted transferees will be subject
to the same restrictions and other agreements of the Company’s founders with respect to any Founder Shares.
Promissory Note — Related Party
On January 20, 2022, the Sponsor
has agreed to loan the Company up to $500,000 to be used for a portion of the expenses of the IPO. This loan is non-interest bearing,
unsecured and is due at the earlier of (1) January 20, 2023 or (2) the date on which the Company consummates an initial
public offering of its securities. The loan will not be repaid in the event that the Company is unable to close a Business Combination
unless there are funds available outside the Trust Account to do so. Such notes would either be paid upon consummation of the Company’s
initial Business Combination solely from funds available outside of the Trust Account or, at the relevant insider’s discretion,
converted upon consummation of Business Combination into additional Private Warrants at a price of $1.00 per warrant. As of March 31,
2022, the Company had $235,585 outstanding loan balance. The loan was repaid in full on June 21, 2022.
Related Party Loans
In addition, in order to finance
transaction costs in connection with an intended initial 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. If the Company
completes the initial Business Combination, it would repay such loaned amounts. In the event that the initial Business Combination does
not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds
from the Trust Account would be used for such repayment. Up to $3,000,000 of such loans may be converted upon consummation of the Company’s
Business Combination into Private Warrants at a price of $1.00 per warrant. If the Company does not complete a Business Combination,
the loans would be repaid out of funds not held in the Trust Account, and only to the extent available. Such warrants converted from
loan would be identical to the Private Warrants sold in the private placement.
As of March 31, 2022, the Company
had no borrowings under the working capital loans.
Administrative Services Fees
The Company has agreed, commencing
on the effective date of the prospectus, to pay the Sponsor the monthly fee of an aggregate of $10,000 for office space, administrative
and shared personnel support services. This arrangement will terminate upon the earlier of (a) completion of a Business Combination
or (b) twelve months after the completion of the IPO.
Note 6 — Commitments &
Contingencies
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 financial position, results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
ACRI
CAPITAL ACQUISITION CORPORATION
NOTES
TO CONDENSED FINANCIAL STATEMENTS
MARCH
31, 2022
(Unaudited)
Note 6 — Commitments &
Contingencies (cont.)
Registration
Rights
The holders of the Founder
Shares and Private Warrants and warrants issuable upon the conversion of certain working capital loans will be entitled to registration
rights pursuant to a registration rights agreement signed on June 9, 2022 requiring the Company to register such securities for resale.
The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such
securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements
filed subsequent to the completion of the Company’s initial Business Combination and rights to require the Company to register
for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriting
Agreement
The underwriters of the
IPO (the “underwriters”) exercised the option to purchase an additional 1,125,000 units in the IPO.
The
Company paid an underwriting discount of 2.0% of the gross proceeds of the IPO, or $1,725,000 to the underwriters at the closing of the
IPO. In addition, the underwriters will be entitled to a deferred fee of 3.0% of the gross proceeds of the IPO, or $2,587,500 until the
closing of the Business Combination.
Right
of First Refusal
For a period of twelve (12) months
from the closing of a Business Combination the Company shall give underwriter a right of first refusal to act as lead left bookrunner
and lead left manager and/or lead left placement agent with at least seventy-five percent (75%) of the economics for a two-handed deal
and thirty-five percent (35%) of the economics for a three-handed deal for any and all future public and private equity and debt offerings
during such period by the Company or any successor to or any subsidiary of the Company. It is understood that if, during the twelve (12) month
period following the consummation of a successful financing, a third party broker-dealer provides the Company with written terms with
respect to a future securities offering (“Written Offering Terms”) that the Company desires to accept, the Company shall
promptly present the Written Offering Terms to EF Hutton, division of Benchmark Investments LLC (“EF Hutton”), the representative
of the underwriters of the IPO. EF Hutton shall have five (5) business days from its receipt of the Written Offering Terms in which
to determine whether or not to accept such offer and, if EF Hutton declines such offer or fail to respond within such five (5) day
period, then the Company shall have the right to proceed with such financing with another placement agent or underwriter upon the same
terms and conditions as the Written Offering Terms.
Note 7 — Stockholder’s
Equity
Preferred
Stock — The Company is authorized to issue 500,000 shares of preferred stock, $0.0001 par value, with such designations,
voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March
31, 2022, there were no preferred stock issued or outstanding.
Class A
Common Stock — The Company is authorized to issue 20,000,000 shares of Class A common stock with a par value
of $0.0001 per share. As of March 31, 2022, there were no shares of Class A common stock issued or outstanding.
Class B
Common Stock — The Company is authorized to issue 2,500,000 shares of Class B common stock with a par value
of $0.0001 per share. As of March 31, 2022, the Company had 2,156,250 shares of Class B common stock issued and outstanding.
ACRI
CAPITAL ACQUISITION CORPORATION
NOTES
TO CONDENSED FINANCIAL STATEMENTS
MARCH
31, 2022
(Unaudited)
Note 7 — Stockholder’s
Equity (cont.)
Common stockholders of record are entitled to
one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A Common Stock and holders of the
Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders,
except as required by law.
The Class B common stock
will automatically convert into shares of the Class A Common Stock at the time of the initial Business Combination, or at any time
prior thereto at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution right.
Warrants — Each
whole Warrant entitles the registered holder to purchase one whole share of the Company’s Class A Common Stock at a price
of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 12 months from the closing
of the IPO or the date of the completion of the initial Business Combination. Pursuant to the warrant agreement signed on June 9, 2022
between the Company and VStock Transfer, LLC, the warrant agent of the Company (the “warrant agreement”), a warrant holder
may exercise its Warrants only for a whole number of shares of Class A Common Stock. This means that only a whole Warrant may be
exercised at any given time by a warrant holder. No fractional Warrants will be issued upon separation of the Units and only whole Warrants
will trade. The Warrants will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m.,
New York City time, or earlier upon redemption or liquidation.
As of March 31, 2022, no Warrants
were outstanding.
The Company has agreed that
as soon as practicable, but in no event later than 30 business days, after the closing of the initial Business Combination, it will
use its reasonable best efforts to file, and within 60 business days following its initial Business Combination to have declared
effective, a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable
upon exercise of the Warrants. The Company will use its reasonable best efforts to maintain the effectiveness of such registration statement,
and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement.
No Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the Class A
Common Stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of common stock. Notwithstanding
the above, if the Company’s 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 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 it so elect, it will not be required to file or
maintain in effect a registration statement, but it will be required to use its reasonable best efforts to register or qualify the shares
under applicable blue sky laws to the extent an exemption is not available.
In addition, if (x) the
Company issues additional shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection
with the closing of the Company’s initial Business Combination at a Newly Issued Price of less than $9.20 per share (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any
such issuance to the Company’s founders or their affiliates, without taking into account any founders’ shares held by the
Company’s founders or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such
issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s
initial Business Combination on the date of the consummation of the Company’s initial Business Combination (net of redemptions),
and (z) the Market Value (as defined in the warrant agreement) is below $9.20 per share, the exercise price of the Warrants will
be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price (as defined in the
warrant agreement), and the $18.00 per share redemption trigger price described below will be adjusted (to the nearest cent) to be equal
to 180% of the higher of the Market Value and the Newly Issued Price.
ACRI
CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH
31, 2022
(Unaudited)
Note 7 — Stockholder’s
Equity (cont.)
The Company may call the
Warrants for redemption, in whole and not in part, at a price of $0.01 per Warrant:
| ● | in whole and not in part; |
| | |
| ● | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each Warrantholder; and |
| | |
| ● | if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
The
Private Warrants have terms and provisions that are identical to those of the Public Warrants being sold as part of the Units in the
IPO except that the Private Warrants will be entitled to registration rights. The Private Warrants (including the Class A Common Stock
issuable upon exercise of the Private Warrants) will not be transferable, assignable or salable until 30 days after the completion
of the Company’s initial Business Combination except to permitted transferees.
Note 8 — Subsequent
Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date through July 18, 2022.
On
June 9, 2022, the Company’s registration statement was declared effective by the U.S. Securities and Exchange Commission. On June
14, 2022, the Company consummated the IPO of 8,625,000 Units (including 1,125,000 Units issued upon the full exercise of the over-allotment
option). Each Unit consists of one share of Class A Common Stock, and
one-half of one redeemable Public Warrant, each whole Warrant entitling the holder thereof to purchase one share of Class A Common Stock
at an exercise price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $86,250,000.
Substantially concurrently
with the closing of the IPO, the Company completed the private sale of 5,240,000 Private Warrants to the Sponsor, with each whole Warrant
entitling the holder thereof to purchase one share of Class A Common Stock at an exercise price of $11.50 per share, at a purchase price
of $1.00 per Private Warrant, generating gross proceeds to the Company of $5,240,000.
On
June 21, 2022, the Company repaid the related party promissory note of $316,827.
CAUTIONARY
NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This
Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act that are not historical facts, and involve risks and uncertainties that could cause
actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included
in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives
of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,”
“intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify
such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s
current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the forward-looking statements. For information identifying important
factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to
the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the U.S. Securities and Exchange
Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website
at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to
update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References
in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Acri
Capital Acquisition Corporation. References to our “management” or our “management team” refer to our officers
and directors, references to the “sponsor” refer to Acri Capital Sponsor LLC. The following discussion and analysis of the
Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes
thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results, expectations
and plans discussed in these forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.”
Special
Note Regarding Forward-Looking Statements
This
Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E
of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including,
without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations,
are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,”
“potential,” “predict,” “project,” “should,” “would” and variations
thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate
to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed
in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially
from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus
for its initial public offering filed with the SEC on June 10, 2022 (dated June 9, 2022). The Company’s securities filings can
be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law,
the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information,
future events or otherwise.
Overview
We
are a blank check company incorporated as a Delaware corporation on January 7, 2022 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 (a “Business
Combination”). We have not selected any business combination target
and we have not, nor has anyone on our behalf, initiated any substantive discussions directly or indirectly, with respect to identifying
any business combination target. We intend to effectuate our Business Combination using cash derived from the proceeds of our initial
public offering (the “IPO”) and the sale of warrants (the “Private Placement Warrants”) in a private placement
(the “Private Placement”) to the Company’s sponsor Acri Capital Sponsor LLC (the “sponsor”), potential
additional shares, debt or a combination of cash, shares and debt.
We
expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete
a Business Combination will be successful.
Results
of Operations
We
have neither engaged in any operations nor generated any operating revenues to date except the preparation and completion of the IPO
and search for target candidate following the consummation of the IPO. Our only activities from inception through March 31, 2022
were organizational activities and those necessary to prepare for the IPO, described below. We do not expect to generate any operating
revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the
form of interest income on marketable securities held after the IPO. We expect that we will incur increased expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection
with searching for, and completing, a Business Combination.
For
the period from January 7, 2022 (inception) through March 31, 2022, we had a net loss of $645, all of which consisted of formation
and operating costs.
Liquidity
and Capital Resources
The Company’s liquidity needs up to March 31,
2022 had been satisfied through a payment from the sponsor of $25,000 for the Founder Shares to cover certain offering costs and the loan
under an unsecured promissory note from the sponsor of $500,000.
On
June 14, 2022, we consummated the IPO of 8,625,000 units at a price of $10.00 per unit (including 1,125,000 units issued upon the fully
exercise of the over-allotment option, the “Public Units”), generating gross proceeds of $86,250,000. Simultaneously
with the closing of the IPO and exercise of the over-allotment option in full by the underwriters, we consummated the sale of
5,240,000 warrants as Private Placement Warrants, at a price of $1.00 per warrant, with each warrant entitling
the registered holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share,
generating gross proceeds of $5,240,000. Following the closings of the IPO and the sales of the Private Placement Warrants on June
14, 2022, a total of $87,975,000 (or $10.20 per share) was placed in a trust account, established for the benefit of the
Company’s public stockholders and the underwriters of the IPO with Wilmington Trust, National Association acting as trustee
(the “Trust Account”).
As of March 31, 2022, the Company had cash
of $30,507 and a working capital deficit of $205,078 (excluding deferred offering costs). Upon the closing of the IPO and the Private
Placement on June 14, 2022, cash of $1,600,184 was held outside of the Trust Account and is available for the payment of offering
costs and for working capital purposes.
We
intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust
Account, excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account
to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business
Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth strategies.
We
intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence
on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their
representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate
and complete a Business Combination.
In
order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our sponsor or an
affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If
the Company completes the initial Business Combination, it would repay such loaned amounts. In the event that the initial Business Combination
does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds
from the Trust Account would be used for such repayment. Up to $3,000,000 of such loans may be convertible into warrant, at a price of
$1.00 per warrant at the option of the lender.
We
do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However,
if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business
Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior
to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination
or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which
case we may issue additional securities or incur debt in connection with such Business Combination.
Off-Balance Sheet
Financing Arrangements
We
have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of March 31, 2022.
We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred
to as variable interest entities, which would have been established for
the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual
Obligations
As
of March 31, 2022, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The
holders of the founder shares, the Private Placement Warrants, and any warrants that may be issued upon conversion of working capital
loans (and any underlying securities) will be entitled to registration rights pursuant to a registration rights agreement entered into
in connection with the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that
we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to our completion of our initial Business Combination. We will bear the expenses incurred in connection with
the filing of any such registration statements.
Critical Accounting Policies and Estimates
In preparing the unaudited condensed financial statements
in conformity with U.S. GAAP, management makes 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 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, actual results may differ from these estimates. We
have identified the following critical accounting policies and estimates:
Offering
Costs
The
Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials”
(“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Offering costs
consisting principally of underwriting, legal, accounting and other expenses that are directly related to the IPO and charged to shareholders’
equity upon the completion of the IPO.
Warrants
We
account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific
terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480 “Distinguishing
Liabilities from Equity” (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers
whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant
to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants
are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while
the warrants are outstanding.
For
issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component
of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants
are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter.
Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. We determined
that upon further review of the proposed form of warrant agreement, management concluded that the warrants included in the units
issued in the IPO pursuant to the warrant agreement qualify for equity accounting
treatment.
Net
Income (Loss) per Share
The
Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings 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 common stock and non-redeemable common stock 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 common stock. Any remeasurement of the accretion to redemption
value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders.
Recent
Accounting Pronouncements
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts
in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments.
ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s
own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed
to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement
to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 for the Company and should
be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is
currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management
does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company’s financial statement.