Item 1. Interim Financial Statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Avalon Acquisition Inc. (the “Company”)
was incorporated in Delaware on October 12, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
Although the Company is not limited
to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on businesses
that are in the financial services and financial technologies industries. 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 commenced any operations. All activity for the period from October 12, 2020 (inception) through September 30, 2021 relates
to the Company’s formation and the preparation for its initial public offering (“Initial Public Offering”). The Company
will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company
will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company
has selected December 31 as its fiscal year end.
The registration statement for
the Company’s Initial Public Offering was declared effective on October 5, 2021. On October 8, 2021, the Company consummated the
Initial Public Offering of 20,700,000 units (the “Units” and, with respect to the shares of Class A common stock included
in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of the over-allotment option
to purchase an additional 2,700,000 Units, at $10.00 per Unit, generating gross proceeds of $207,000,000, which is described in Note 3.
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the sale of 8,100,000 warrants (each, a “Private Placement Warrant”
and, collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement
to Avalon Acquisition Holdings, LLC (the “Sponsor”), generating gross proceeds of $8,100,000, which is described in Note 4.
Following the closing of the
Initial Public Offering on October 8, 2021, an amount of $210,105,000 ($10.15 per Unit) from the net proceeds of the sale of the units
in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”)
located in the United States and held as cash and will be invested only in U.S. government securities, within the meaning set forth in
Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days
or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions
of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business
Combination or (ii) the distribution of the funds in the Trust Account, as described below.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company’s
initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of
the balance in the Trust Account (as defined below) (excluding taxes payable on interest income earned from the Trust Account and the
deferred underwriting commissions) at the time of the agreement to enter into the initial Business Combination. 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 it not to be required to register as an investment company
under the Investment Company Act. There is no assurance that the Company will be able to complete a Business Combination successfully.
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, solely in its discretion. The Public Stockholders will
be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be
$10.15 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company
to pay its tax obligations). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be
reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note 6). There will be
no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Public Shares subject
to redemption are recorded at redemption value and classified as temporary equity in accordance with the Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
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 or stock exchange requirements 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. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed
to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in
favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the proposed transaction.
Notwithstanding the above, 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 15% or more of the Public Shares, without the prior consent of the Company.
The Company’s Sponsor has
agreed (i) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the
completion of a Business Combination and (ii) not to propose an amendment to the Company’s Amended and Restated Certificate
of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the
Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their
shares in conjunction with any such amendment.
The Company will have until January
8, 2023 to consummate a Business Combination or until July 8, 2023 if the Company extends the period of time to consummate an initial
Business Combination by the full amount of time (the “Combination Period”). 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 earned on the funds held in the Trust Account
and not previously released to the Company to pay taxes (less up to $100,000 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. 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 a Business Combination within the Combination Period.
The Sponsor has agreed to waive
its right to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business
Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such
Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination
within the Combination Period. The underwriter has agreed to waive their rights to their deferred underwriting commission (see Note 6)
held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such
event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the
Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution
will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts
held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account to below (i) $10.15 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, except as to any claims by a third party who executed a
waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the
underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended
(the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party,
the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility
that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers
(other than our independent registered public accounting firm), prospective target businesses or other entities with which the Company
does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the
Trust Account.
Liquidity and Going Concern
As of September 30,
2021, the Company had $29
in its operating bank accounts and negative working capital of approximately $377,000. The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment
of $25,000 from
the Sponsor to cover certain expenses on behalf of the Company in consideration of Founder Shares (as defined in Note 4), and
the loan from the Sponsor of $197,000 as
of September 30, 2021 under the Note (as defined in Note 4). The Company repaid the Note in full on October 15, 2021.
Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the
net proceeds of $2.28 million
from the consummation of the Initial Public Offering (including the Over-Allotment), the Private Placement and the Second
Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a
Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors
may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 4). As of September 30, 2021 and
December 31 2020, there were no amounts outstanding under any Working Capital Loans.
Based
on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through
one year from this filing. Over this time period, the Company will be using the funds held outside of the Trust Account for paying existing
accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective
target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating
and consummating the Business Combination.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The unaudited condensed financial
statements of the Company are presented 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.
The accompanying unaudited condensed
financial statements should be read in conjunction with the audited financial statements and notes thereto included in the final prospectus
filed by the Company with the SEC on October 7, 2021 related to the Initial Public Offering and the audited balance sheet included in
the Current Report on Form 8-K filed by the Company with the SEC on October 15, 2021. The interim results for the three and nine months
ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any
future periods.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of
certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports
and proxy statements, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight
Board regarding mandatory audit firm rotation or to provide a supplement to the auditor’s report providing additional information
about the audit and the financial statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation
and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
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.
Deferred Offering Costs Associated with the
Initial Public Offering
The Company complies with the
requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A – “Expenses of Offering.” Costs
incurred in connection with preparation for the Public Offering ($684,509) together with $10,953,007 of underwriters’ discount,
were allocated to equity instruments ($11,157,580) and derivative warrant liabilities ($479,936), based on their relative values, and
charged to temporary equity or expensed (in the case of the portion allocated to derivative warrant liabilities) upon completion of the
Initial Public Offering.
Income Taxes
The Company follows the asset
and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement’s
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.
Deferred tax assets are de minimis as of September 30, 2021 and December 31, 2020.
FASB ASC Topic 740 prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained
upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as
income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021
and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals
or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Loss per Common Share
Net loss per common
share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the
period, excluding shares of common stock subject to forfeiture. Weighted average common shares were reduced for the effect of
an aggregate of 675,000
shares of common stock that are subject to forfeiture if the over-allotment option is not exercised by the underwriter. At
September 30, 2021 and December 31, 2020, the Company did not have any other dilutive securities and other contracts that
could, potentially, be exercised or converted into shares of common stock and then share in the earnings of the Company. As a
result, diluted loss per common share is the same as basic loss per common share for the periods presented.
Redeemable Common Stock
As discussed in Note 1, all of
the 20,700,000 public shares sold as part of Units in the Initial Public Offering contain a redemption feature which allows for the redemption
of public shares if the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination.
In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company require the security to be classified
outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity
instruments, are excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its
charter provides that in no event will it redeem its public shares in an amount that would cause its net tangible assets (i.e., total
assets less intangible assets and liabilities) to be less than $5,000,001 upon the closing of a Business Combination.
While redemptions cannot cause
the Company’s net tangible assets to fall below $5,000,000, all shares of Class A common stock sold in the Initial Public Offering
are redeemable and will be classified as classified as temporary equity on the Company’s balance sheet until such time as a redemption
event takes place. The value of Class A common stock that may be redeemed will be equal to $10.15 per share (which is the assumed redemption
price) multiplied by 20,700,000 shares of Class A common stock.
Derivative Warrant Liabilities
The Company will account for
warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms
and in accordance with 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, 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 additional paid-in
capital 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 at their initial fair value of 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. Costs associated with
issuing the warrants classified as derivative liabilities are charged to operations when the warrants are issued.
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 Corporation coverage of $250,000. 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, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
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.
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, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. The Company is currently evaluating the impact the pronouncement will have on the condensed financial statements.
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 statements.
COVID-19
Management continues to evaluate
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 the financial statement. The financial statement does not include any adjustments
that might result from the outcome of this uncertainty.
NOTE 3 — INITIAL PUBLIC OFFERING
On October 8, 2021, the Company
consummated the Public Offering of 20,700,000 Units, which includes the full exercise by the underwriter of its option to purchase an
additional 2,700,000 Units, at a price of $10.00 per unit (the “Units”). Each Unit consists of one share of the Company’s
Class A common stock, $0.0001 par value and three-fourths of one redeemable warrant (“Public Warrant”). Each whole Warrant
offered in the Initial Public Offering is exercisable to purchase one share of Class A common stock at $11.50 per share, subject
to adjustment (see Note 7).
Simultaneously with the closing
of the Initial Public Offering, the Sponsor purchased an aggregate of Private Placement Warrants for an aggregate purchase price
of $. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $ per
share.
NOTE 4 — RELATED PARTY TRANSACTIONS
Founder Shares
On October 21, 2020, the Sponsor
paid an aggregate of $25,000, or approximately $0.004 per share, to cover certain of our offering costs in consideration of 5,750,000
shares of our Class B common stock, par value $0.0001. On August 30, 2021, the Sponsor forfeited 1,437,500 of these shares, for no
consideration, such that there were 4,312,500 shares of Class B common stock outstanding. On October 5, 2021, the Company effected a stock
dividend of 0.2 of a founder share for each outstanding founder share, which resulted in the Sponsor holding an aggregate of 5,175,000
Founder Shares (up to 675,000 of which are subject to forfeiture by the Sponsor depending on the extent to which the underwriter’s
option to purchase additional units is exercised). The Founder Shares include an aggregate of up to 675,000 shares subject to forfeiture
to the extent that the underwriter’s over-allotment option is not exercised in full or in part, so that the Sponsor will own, on
an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering. As a result of the
underwriter’s election to exercise fully its over-allotment option, 675,000 Founder Shares are no longer subject to forfeiture.
On October 5, 2021, the Sponsor transferred 150,000 Founder Shares to its independent directors.
The Sponsor has agreed, subject
to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after
the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last reported sale price of
the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination,
or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results
in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note—Related Party
On October 31, 2020, the Sponsor
agreed to loan the Company an aggregate of up to $250,000 to cover expenses related to the Proposed Public Offering pursuant to a promissory
note (the “Promissory Note”). The Promissory Note is non-interest bearing and was payable, as amended, on the earlier of December
31, 2021 or the completion of the Initial Public Offering. As of September 30, 2021, $ was outstanding under the Promissory Note.
At December 31, 2020, there was no amount outstanding under the Promissory Note. On October 15, 2021, the Company repaid the balance in
full to the Sponsor. Because the balance of the Promissory Note has been repaid, it is no longer available to the Company.
Administrative Support Agreement
Commencing on the effective date
of the Initial Public Offering, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, and administrative
support services. Upon completion of an initial Business Combination or the Company’s liquidation, the Company will cease paying
these monthly fees. As of September 30, 2021 and December 31, 2020, there were no amounts accrued under this agreement.
Related Party Loans
In order to finance transaction
costs in connection with a Business Combination, the Sponsor, or the Company’s officers and directors may, but are not obligated
to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination,
the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. In the event that
a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital
Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms
of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working
Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion,
up to $1,500,000 of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant at the option of
the lender. The warrants would be identical to the Private Placement Warrants. As of September 30, 2021 and December 31, 2020, there was
no working capital loan outstanding.
NOTE 5 — COMMITMENTS
Registration Rights
The holders of the Founder Shares,
Private Placement Warrants, warrants and representative shares that may be issued upon conversion of Working Capital Loans (and any shares
of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion
of Working Capital Loans) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or
on the effective date of Initial Public Offering. The holders of these securities will be 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 a Business Combination. However, the registration
rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective
until termination of the applicable lockup period. The Company will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The Company granted the underwriter
a 45-day option from the date of Initial Public Offering to purchase up to 2,700,000 additional Units to cover over-allotments, if any,
at the Initial Public Offering price less the underwriting discounts and commissions. At October 8, 2021, the underwriter exercised such
option in full.
The underwriter was entitled
to an underwriting discount of $0.125 per Unit, or $1,875,00 in the aggregate (or $2,156,250 in the aggregate if the underwriter’s
over-allotment option is exercised in full) of the gross proceeds of the Initial Public Offering. In addition, the underwriter was entitled
to a deferred fee of $0.35 per Unit, or $5,250,000 in the aggregate (or $6,037,500 in the aggregate if the underwriter’s over-allotment
option is exercised in full); provided that up to 0.875% of the gross proceeds or $1,312,500 (or $1,509,375 if the over-allotment option
is exercised in full) in the aggregate may be paid to third parties not participating in the offering (but who are members of the Financial
Industry Regulatory Authority (“FINRA”) or regulated broker-dealers) that assist the underwriter in consummating the initial
Business Combination. The deferred fee will be waived by the underwriter in the event that the Company does not complete a Business Combination,
subject to the terms of the underwriting agreement.
In addition, the Company issued
to the underwriter 155,250 non-redeemable shares of Class A common stock upon closing of the Initial Public Offering, at a price of $0.0001
(the “Representative Shares”). The holder of the Representative Shares has agreed not to transfer, assign or sell any such
shares without the Company’s prior consent until the completion of the Company’s initial Business Combination. In addition,
the holder of the Representative Shares has agreed (i) to waive its conversion rights (or right to participate in any tender offer) with
respect to such shares in connection with the completion of the Company’s initial Business Combination and (ii) to waive its rights
to liquidating distributions from the Trust account with respect to such shares if the Company fails to complete its initial Business
Combination within the required time period. The Representative Shares have been deemed compensation by FINRA and are therefore subject
to a lock-up for a period of 180 days immediately following the date of the effectiveness of the registration statement.
NOTE 6 – WARRANTS LIABILITIES
There were no warrants outstanding
at September 30, 2021 and December 31, 2020. The Company will account for the Public and Private Placement Warrants in accordance with
the guidance contained in ASC 815-40. Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder,
each warrant must be recorded as a liability. Accordingly, the Company will classify each warrant as a liability at its fair value and
charge the costs associated with issuing such warrants to operations. The accounting treatment of derivative financial instruments requires
that the Company records a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company will classify
the warrants as a liability at their fair value and allocate a portion of the proceeds from the issuance of the Units to the warrants.
This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted
to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the
classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be
reclassified as of the date of the event that causes the reclassification.
NOTE 7 — STOCKHOLDERS’ DEFICIT
Preferred Stock —
The Company was authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations,
voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September
30, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock
— The Company was authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share.
Holders of Class A common stock are entitled to one vote for each share. At September 30, 2021 and December 31, 2020, there were
no shares of Class A common stock issued and outstanding.
Class B Common Stock
— The Company was authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders
of Class B common stock are entitled to one vote for each share. At September 30, 2021, there were 5,175,000 shares of Class B
common stock issued and outstanding.
Holders of Class B common
stock will have the right to elect all of the Company’s directors prior to a Business Combination. Holders of Class A common
stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders except
as required by law.
The shares of Class B common
stock will automatically convert into shares of Class A common stock on the first business day following the completion of a Business
Combination at a ratio such that the number of shares of Class A common stock issuable upon conversion of all Founder shares will
equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of shares of the Company’s common
stock issued and outstanding upon completion of Initial Public Offering, plus (ii) the sum of (a) all shares of the Company’s
common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or deemed issued by the Company
in connection with or in relation to the completion of a Business Combination, excluding (1) any shares of Class A common stock
or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller
in a Business Combination and any (2) Private Placement Warrants issued to the Sponsor or any of its affiliates upon conversion of
Working Capital Loans minus (b) the number of Public Shares redeemed by public stockholders in connection with a Business Combination.
Warrants —Public
Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only
whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a
Business Combination or (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five
years after the completion of a Business Combination or earlier upon redemption or liquidation. As of September 30, 2021 and December
31, 2020, there were no warrants outstanding.
The Company will not be obligated
to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant
exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the
warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect
to registration, or a valid exemption from registration is available. No warrant will be exercisable and the Company will not be obligated
to issue shares of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such
warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered
holder of the warrants.
The Company has agreed that as
soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, the Company will use its
commercially reasonable efforts to file with the SEC 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 commercially reasonable efforts to cause
the same to become effective within 60 business days following the closing of our initial business combination and to maintain the effectiveness
of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the warrants in accordance
with the provisions of the warrant agreement. If a registration statement covering the issuance of the shares of Class A common stock
issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant
holders may, until such time as there is an effective registration statement and during any period when the company will have failed to
maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9)
of the Securities Act or another exemption. In addition, if the Class A common stock are at the time of any exercise of a warrant
not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1)
of the Securities Act, the Company may, at its option, require holders of the Public Warrants who exercise their warrants to do so on
a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects to do
so, the Company will not be required to file or maintain in effect a registration statement, but it will use its best efforts to register
or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrants when
the price per share of Class A common stock equals or exceeds $18.00. Once the Public Warrants become exercisable, the Company
may redeem the Public Warrants (except with respect to the Private Placement Warrants):
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon not less than 30 days prior written notice of redemption to each warrant holder; and
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if, and only if, the reported last sale price of the shares of the Company’s Class A common stock 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 “Reference Value”) equals or exceeds $18.00 per share (as adjusted).
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If and when the warrants become redeemable by the
Company, the company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale
under all applicable state securities laws.
Redemption of warrants when
the price per share of Class A common stock equals or exceeds $10.00. Once the Public Warrants become exercisable, the Company
may redeem the Public Warrants:
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in whole and not in part;
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at $0.10 per warrant upon a minimum of 30 days prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the Class A common stock;
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if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted); and
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if the Reference Value is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
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If and when the Public Warrants
become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying
securities for sale under all applicable state securities laws.
If the Company calls the Public
Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on
a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common
stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization,
reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuances of Class A
common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.
If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in
the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire
worthless.
In addition, if (x) the Company
issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the
closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A common (with such issue
price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance
to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable,
prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more
than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation
of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A
common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business
Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the Public 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, the $18.00 per share redemption
trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly
Issued Price, and the $10.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to
the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants
are identical to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private Placement
Warrants and the Class A common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or
salable until the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants
will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement
Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 8 — SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date through November 17, 2021, the date that the financial statements
were issued. Other than as described in these financial statements in relation to the Company’s Initial Public Offering (Note 1,
3 and 5) and related transactions, the Company did not identify any other subsequent events that would have required adjustment or disclosure
in the financial statements.