NOTES
TO FINANCIAL STATEMENTS
NOTE
1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS
Broad
Capital Acquisition Corp (the “Company”) is a blank check company incorporated in the State of Delaware on April 16, 2021.
The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing
all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination
with one or more businesses or entities (“Business Combination”). The Company is not limited to a particular industry or
sector for purposes of consummating a Business Combination.
As
of June 30, 2022, the Company had not commenced any operations. All activity for the (inception) through December 31, 2021 and the six
months ended June 30, 2022 relates to the Company’s formation and the Initial Public Offering (as defined below). The Company will
not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will
generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial
Public Offering. The Company has selected December 31 as its fiscal year end. 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.
The
Company’s sponsor is Broad Capital LLC, a Delaware limited liability company (the “Sponsor”). The registration statement
for the Company’s Initial Public Offering was declared effective on January 10, 2022. On January 13, 2022, the Company closed its
Initial Public Offering of 10,000,000 units (the “Units” and, with respect to the shares of common stock included in the
Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $100,000,000 (the “Initial
Public Offering”), and incurring transaction costs of $6,917,226, of which $3,500,000 was for deferred underwriting commissions
(see Note 6). The Company granted the underwriter a 45-day option to purchase up to an additional 1,500,000 Units at the Initial Public
Offering price to cover over-allotments, if any. On February 9, 2022, the Underwriters partially exercised the over-allotment option
and on February 10, 2022, purchased an additional 159,069 Units from the Company (the “Over-Allotment Units”), generating
gross proceeds of $1,590,690, and forfeited the remainder of the option.
Simultaneously
with the consummation of the closing of the Initial Public Offering, the Company consummated the private placement of an aggregate of
446,358 units (the “Placement Units”) to the Sponsor at a price of $10.00 per Placement Unit, generating total gross proceeds
of $4,463,580 (the “Private Placement”) (see Note 4). With the exercise of the overallotment, the Company consummated the
Private Placement of 4,772 Placement Units to Broad Capital LLC, a Delaware limited liability company (the “Sponsor”), generating
gross proceeds of $47,720.
On
February 10, 2022, the underwriters partially exercised the over-allotment option and purchased an additional 159,069 Units, generating
gross proceeds of $1,590,690 and forfeited the remainder of the option, which is 335,233 shares of common stock. In connection with the
closing and sale of the Over-Allotment Units and the additional Placement Units (together, the “Over-Allotment Closing”),
a total of $1,606,597 in proceeds from the Over-Allotment Closing (which amount includes $31,814 of the Underwriters’ deferred
discount) was placed in a U.S.-based trust account established for the benefit of the Company’s public shareholders, maintained
by Continental Stock Transfer & Trust Company, acting as trustee.
Following
the closing of the Initial Public Offering on January 13, 2022, an amount of $101,000,000 ($10.10 per Unit) from the net proceeds of
the sale of the Units in the Initial Public Offering and a portion of the proceeds from the sale of the Placement Units was placed in
a trust account (the “Trust Account”), located in the United States and held as cash items or may be invested in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in
any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment
Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution
of the funds in the Trust Account to the Company’s stockholders, 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 Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal
to at least 80% of the value of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions
and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of
1940, as amended (the “Investment Company Act”).
Upon
the closing of the Initial Public Offering, management has agreed that an amount equal to at least $10.10 per Unit sold in the Initial
Public Offering, including proceeds of the Placement Units, will be held in a trust account (“Trust Account”), located in
the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund
selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the
earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described
below.
The
Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem
all or a portion of their Public Shares either (i) in connection with a shareholders meeting called to approve the Business Combination
or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek shareholder
approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to
redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.10 per Public
Share, plus any pro rata interest then in the Trust Account, net of taxes payable). The Public Shares subject to redemption will be recorded
at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Accounting
Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity”.
The
Company will not redeem Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 (so that it does
not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which
may be contained in the agreement relating to the Business Combination. If the Company seeks shareholder approval of the Business Combination,
the Company will proceed with a Business Combination if a majority of the outstanding shares voted are voted in favor of the Business
Combination, or such other vote as required by law or stock exchange rule. If a shareholder vote is not required by applicable law or
stock exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company
will, pursuant to its second amended and restated certificate of incorporation (the “Certificate of Incorporation”), conduct
the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender
offer documents with the SEC prior to completing a Business Combination.
If,
however, shareholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company
decides to obtain shareholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks shareholder approval in connection
with a Business Combination, the Sponsor has agreed to vote its Insider shares (as defined in Note 5) and any Public Shares purchased
during or after the Public Offering in favor of approving a Business Combination. Additionally, each Public Shareholder may elect to
redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding
the foregoing, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Certificate of Incorporation will provide that a Public Shareholder, together with any affiliate of such shareholder
or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of 20% of the Public Shares, without the prior consent of the Company.
The
holders of the Insider Shares have agreed (a) to waive their redemption rights with respect to the Insider Shares and Public Shares held
by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation
(i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination
or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined
below) or (ii) with respect to any other provision relating to shareholders’ rights or pre-business combination activity, unless
the Company provides the Public Shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If
the Company has not completed a Business Combination within 12 months (or 15 months, or 18 months, as applicable from the closing of
the Initial Public Offering (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 pay taxes (less up to $100,000 of interest to pay dissolution expenses),
divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights
as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the Company’s remaining shareholders and the Company’s board of directors,
dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law.
The
holders of the Insider Shares have agreed to waive their liquidation rights with respect to the Insider shares if the Company fails to
complete a Business Combination within the Combination Period. However, if the holders of Insider shares acquire 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 underwriters have agreed to waive their rights to their deferred
underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within
the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be
available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of
the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.10 per Public Share or (ii) such
lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.10
per Public Share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn
to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account
and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an
executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability
for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account
due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered
accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity
and Capital Resources
As
of June 30, 2022, the Company had $622,351 of cash in its operating bank account.
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 for certain offering costs on the Company’s behalf in exchange for issuance of Insider shares (as defined
in Note 4). Following the Initial Public Offering of the Company on January 13, 2022, a total of $133,533 under the promissory note was
repaid on January 19, 2022. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied
through the net proceeds from the consummation of the Initial Public Offering and the 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 June 30, 2022, there were no amounts outstanding under any Working Capital Loan.
Based
on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs
through the earlier of the consummation of a Business Combination or 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.
Going
Concern Consideration
The
Company expects to incur significant costs in pursuit of its financing and acquisition plans. In connection with the Company’s
assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures
of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company
is unsuccessful in consummating an initial business combination within the prescribed period of time from the closing of the Initial
Public Offering, the requirement that the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve
raises substantial doubt about the ability to continue as a going concern. The balance sheet does not include any adjustments that might
result from the outcome of this uncertainty. Management has determined that the Company has funds that are sufficient to fund the working
capital needs of the Company until the consummation of an initial business combination or the winding up of the Company as stipulated
in the Company’s amended and restated memorandum of association. The accompanying financial statement has been prepared in conformity
with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of
the Company as a going concern.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements are presented in U.S. Dollars and conformity with accounting principles generally accepted in the United
States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of financial statements in conformity with 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 revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had no cash equivalents as of June 30, 2022.
Marketable
Securities Held in Trust Account
As
of June 30, 2022, substantially all of the assets held in the Trust Account were held in government securities (United States Treasury
Bills). As of June 30, 2022, the balance in the Trust Account was $102,755,004.
Deferred
offering costs
Deferred
offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly
related to the Proposed Offering and that will be charged to stockholders’ equity upon the completion of the Proposed Offering.
Should the Proposed Offering have proved to be unsuccessful, these deferred costs, as well as additional expenses incurred, would have
been charged to operations.
Income
Taxes
The
Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset
and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed
for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible
amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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’s management determined the United States is the Company’s
only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income
tax expense. There were no unrecognized tax benefits as of June 30, 2022 and no amounts accrued for interest and penalties. The Company
is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its
position. The Company is subject to income tax examinations by major taxing authorities since inception.
The
provision for income taxes was deemed to be de minimis for the six months ended June 30, 2022.
Net
loss per share
The
Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per share is
computed by dividing net loss by the weighted average number of common stock outstanding during the period, excluding common stock subject
to forfeiture. As of June 30, 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 periods 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
which, at times may exceed the Federal depository insurance coverage of $250,000. On June 30, 2022, the Company had 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
Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to
their short-term nature.
Recent
Accounting Standards
The
Company’s management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently
adopted, would have a material effect on the accompanying financial statement.
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, close of the Initial Public
Offering, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE
3. INITIAL PUBLIC OFFERING
On
January 13, 2022, the Company closed its Initial Public Offering of 10,000,000 Units at $10.00 per Unit, generating gross proceeds of
$100,000,000.
Each
Unit consists of one share of common stock and one right to receive one-tenth (1/10) of one share of common stock upon the consummation
of an initial business combination.
As
of January 13, 2022, the Company closed its Initial Public Offering and incurred transaction costs of approximately $6,917,226, of which
$3,500,000 was for deferred underwriting commissions.
On
February 9, 2022, the Underwriters partially exercised the over-allotment option and on February 10, 2022, purchased an additional 159,069
Units from the Company (the “Over-Allotment Units”), generating gross proceeds of $1,590,690, and forfeited the remainder
of the option.
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 446,358 Placement Units at a price of $10.00 per
Placement Unit ($4,463,580 in the aggregate).
The
proceeds from the sale of the Placement Units were added to the net proceeds from the Initial Public Offering held in the Trust Account.
The Placement Units are identical to the Units sold in the Initial Public Offering. If the Company does not complete a Business Combination
within the Combination Period, the proceeds from the sale of the Placement Units will be used to fund the redemption of the Public Shares
(subject to the requirements of applicable law) and the Placement Units will expire worthless.
Simultaneously
with the closing of the Over-Allotment, the Company completed the private sale of an additional 4,772 placement units at a purchase price
of $10.00 per placement unit, to the Company’s sponsor, Broad Capital LLC, generating additional gross proceeds to the Company
of $47,720.
In
connection with the closing and sale of the Over-Allotment Units and the additional placement units (together, the “Over-Allotment
Closing”), a total of $1,606,597 in proceeds from the Over-Allotment Closing was placed in a U.S.-based trust account established
for the benefit of the Company’s public shareholders, maintained by Continental Stock Transfer & Trust Company, acting as trustee.
NOTE
5. RELATED PARTY TRANSACTIONS
Insider
shares
On
May 7, 2021, the Sponsor purchased insider shares for an aggregate purchase price of $. The number of insider shares
will equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding shares of ordinary shares after
the Initial Public Offering.
On
May 25, 2021, our sponsor transferred insider shares of common stock among our four independent directors, leaving 2,795,000 insider
shares held by our sponsor.
Due
to the over-allotment option being partially exercised by the underwriter on February 10, 2022 (see note 6), the Sponsor forfeited 335,233
insider shares. As of June 30, 2022, there were 2,539,767 insider shares issued and outstanding and no further insider shares are subject
to forfeiture.
Promissory
Note – Related Party
On
April 16, 2021, the Sponsor issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate
principal amount of $, to be used for payment of costs related to the Initial Public Offering. The note is non-interest bearing
and payable on the earlier of (i) June 30, 2022 or (ii) the consummation of the Initial Public Offering pursuant to an Amendment to Promissory
Note effective September 30, 2021. The Company had borrowed $ under the promissory note with the Sponsor. Following the closing
of the Initial Public Offering on January 13, 2022, the Company repaid a total of $ under the promissory note on January 19, 2022.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of
a Business Combination, without interest, or, at the lender’s discretion, up to $ of the notes may be converted upon completion
of a Business Combination into units at a price of $ per unit. Such units would be identical to the Placement Units. In the event
that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working
Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of June 30, 2022, there
were no amounts outstanding under the Working Capital Loans.
Administrative
Services Arrangement
Commencing
on the date the Units were first listed on the Nasdaq, the Company agreed to pay the Sponsor $ per month for office space, utilities
and secretarial and administrative support for up to 18 months. Upon completion of the Initial Business Combination or the Company’s
liquidation, the Company will cease paying these monthly fees. For the period April 16, 2021 (inception) through June 30, 2022, $50,000
of expense was recorded and included in formation and operating costs in the statement of operations.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Registration
Rights
The
holders of the insider shares and Placement Units that may be issued upon conversion of Working Capital Loans (and any shares of ordinary
shares issuable upon the exercise of the Placement Units or units issued upon conversion of the Working Capital Loans and upon conversion
of the Insider shares) 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 requiring the Company to register such securities for resale. The holders of these securities
will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In
addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent
to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415
under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit
any registration or cause any registration statement to become effective until the securities covered thereby are released from their
lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
On
February 9, 2022, the Underwriters partially exercised the over-allotment option and on February 10, 2022, purchased an additional 159,069
Units from the Company (the “Over-Allotment Units”), generating gross proceeds of $1,590,690, and forfeited the remainder
of the option, less the underwriting discounts and commissions.
The
underwriters were entitled to a cash underwriting discount of $0.20 per Unit, or $2,000,000 in the aggregate (or $2,300,000 in the aggregate
if the underwriters’ over-allotment option is exercised in full), payable upon the closing of the Initial Public Offering. In addition,
the underwriters were entitled to a deferred fee of $0.35 per Unit, or $3,500,000 in the aggregate (or $4,025,000 in the aggregate if
the underwriters’ over-allotment option is exercised in full). The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
On
February 10, 2022, the underwriters purchased an additional 159,069 Option Units pursuant to the exercise of the over-allotment option.
The Option Units were sold at an offering price of $10.00 per Unit, generating additional gross proceeds to the Company of $1,590,690.
NOTE
7. STOCKHOLDERS’ EQUITY
Common
Stock — Our Certificate of Incorporation authorizes the Company to issue 100,000,000 shares of common stock with a par
value of $0.000001 per share. Holders of the Company’s common stock are entitled to one vote for each share. On June 30, 2022,
there were 2,990,897 (excluding 10,159,069 shares subject to possible redemption) shares of common stock issued and outstanding.
Preferred
Shares — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.000001 per share
with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. On June
30, 2022, there were no preferred shares issued or outstanding.
Rights
— Except in cases where the Company is not the surviving company in a Business Combination, each holder of a Public Right
will automatically receive one-tenth (1/10) of one share of common stock upon consummation of a Business Combination, even if the holder
of a Public Right converted all shares held by him, her or it in connection with a Business Combination or an amendment to the Company’s
Amended and Restated Certificate of Incorporation with respect to its pre-business combination activities. In the event that the Company
will not be the surviving company upon completion of a Business Combination, each holder of a Public Right will be required to affirmatively
convert his, her or its rights in order to receive the one-tenth (1/10) of a share underlying each Public Right upon consummation of
the Business Combination.
The
Company will not issue fractional shares in connection with an exchange of Public Rights. Fractional shares will either be rounded down
to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General Corporation Law.
As a result, the holders of the Public Rights must hold rights in multiples of 10 in order to receive shares for all of the holders’
rights upon closing of a Business Combination.
NOTE
8. SUBSEQUENT EVENTS
In
accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or
transactions that occurred through the date the financial statements were available to issue.