Item
1. Financial Statements
FOXWAYNE
ENTERPRISES ACQUISITION CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
FOXWAYNE
ENTERPRISES ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
FOXWAYNE
ENTERPRISES ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| |
Common
Stock | | |
Additional | | |
| | |
Total | |
| |
Class
A | | |
Class
B | | |
Paid-In | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity
(Deficit) | |
Balance - December 31, 2020 | |
| - | | |
$ | - | | |
| 1,437,500 | | |
$ | 144 | | |
$ | 24,856 | | |
$ | (6,357 | ) | |
$ | 18,643 | |
Issuance of Representative’s Shares | |
| 50,000 | | |
| 5 | | |
| - | | |
| - | | |
| 499,995 | | |
| - | | |
| 500,000 | |
Excess of cash received over fair value of
the private placement warrants | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,316,000 | | |
| - | | |
| 1,316,000 | |
Accretion of Class A common stock subject to
redemption amount | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,840,851 | ) | |
| (5,837,374 | ) | |
| (7,678,225 | ) |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (157,269 | ) | |
| (157,269 | ) |
Balance - March 31, 2021 (unaudited) | |
| 50,000 | | |
| 5 | | |
| 1,437,500 | | |
$ | 144 | | |
| - | | |
| (6,001,000 | ) | |
| (6,000,851 | ) |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,575,147 | ) | |
| (1,575,147 | ) |
Balance - June 30, 2021 (unaudited) | |
| 50,000 | | |
$ | 5 | | |
| 1,437,500 | | |
$ | 144 | | |
$ | - | | |
$ | (7,576,147 | ) | |
$ | (7,575,998 | ) |
Begining balance | |
| 50,000 | | |
$ | 5 | | |
| 1,437,500 | | |
$ | 144 | | |
$ | - | | |
$ | (7,576,147 | ) | |
$ | (7,575,998 | ) |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,062,765 | | |
| 1,062,765 | |
Net
income (loss) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,062,765 | | |
| 1,062,765 | |
Balance - September
30, 2021 (unaudited) | |
| 50,000 | | |
$ | 5 | | |
| 1,437,500 | | |
$ | 144 | | |
$ | - | | |
$ | (6,513,382 | ) | |
$ | (6,513,233 | ) |
Ending balance | |
| 50,000 | | |
$ | 5 | | |
| 1,437,500 | | |
$ | 144 | | |
$ | - | | |
$ | (6,513,382 | ) | |
$ | (6,513,233 | ) |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
FOXWAYNE
ENTERPRISES ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Note
1 - Description of Organization and Business Operations
FoxWayne
Enterprises Acquisition Corp. (the “Company” and “FoxWayne”) is a blank check company incorporated in Delaware
on September 17, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth
company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As
of September 30, 2022, the Company had not commenced any operations. All activity for the period from September 17, 2020 (inception)
through September 30, 2022, relates to the Company’s formation and the initial public offering (the “Initial Public Offering”)
described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company
will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company
generates non-operating income in the form of interest income on its investments held in the trust account from the proceeds of its Initial
Public Offering.
The
Company’s sponsor is FoxWayne Enterprises Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s Initial Public Offering was declared effective on January 19, 2021. On January 22,
2021, the Company consummated its Initial Public Offering of 5,750,000 units (the “Units” and, with respect to the Class
A common stock included in the Units being offered, the “Public Shares”), which included 750,000 additional Units to cover
over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $57.5 million, and incurring
offering costs of approximately $4.2 million, of which approximately $2.0 million was for deferred underwriting commissions (see Note
5).
Simultaneously
with the closing of the Initial Public Offering, the Company consummated a private placement (“Private Placement”) of 2,800,000
warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price
of $1.00 per Private Placement Warrant to the Sponsor, generating proceeds of $2.8 million (see Note 4).
Upon
the closing of the Initial Public Offering and the Private Placement, approximately $58.1 million ($10.10 per Unit) of the net proceeds
of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”)
located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government
treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions
under Rule 2a-7 under the Investment Company Act of 1940, as amended (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 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 must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net
assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable) 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-business combination
company owns or acquires 50% or more of the 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.
The
Company will provide its holders of the 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 held in the Trust Account (currently at $10.1625
per Public Share). 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 underwriters (as discussed in Note 5). These Public Shares are recorded
at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing
Liabilities from Equity” (“ASC 480”). The Company will proceed with a Business Combination if a majority of the shares
voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an amount that would cause its
net tangible assets to be less than $5,000,001. If a stockholder vote is not required by law and the Company does not decide to hold
a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate of incorporation
(the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of
the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business
Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval
for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy
rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business
Combination, the Initial Stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and any Public
Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Stockholders
agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a
Business Combination.
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.
At
the time of the Company’s Initial Public Offering, the Sponsor and the Company’s officers and directors (the “Initial
Stockholders”) agreed not to propose an amendment to the Amended and Restated Certificate of Incorporation to modify the substance
or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company did not complete a Business Combination
within 12 months from the closing of the Initial Public Offering, or January 22, 2022, (or up to 18 months from the consummation of the
Initial Public Offering, or July 22, 2022, if the Company extended the period of time to consummate a Business Combination) (the “Original
Combination Period”), or with respect to any other material provisions relating to stockholders’ rights or pre-initial Business
Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction
with any such amendment. Since the completion of the Initial Public Offering, as further discussed below, the Original Combination Period
has been further extended, currently to January 22, 2023, and the Company has filed a proxy statement and plans to hold a special meeting
of stockholders on November 30, 2022 for the purpose of considering and voting upon a proposal to amend the Company’s Second Amended
and Restated Certificate of Incorporation, as amended to (i) extend the date by which the Company has to consummate a business combination
for three months, from January 22, 2023 to April 22, 2023, and (ii) allow the Company, without another stockholder vote, to elect to
further extend the date to consummate a business combination for an additional three months from April 22, 2023 to July 22, 2023 (the
“Original Combination Period,” as previously extended or as may be further extended, is hereinafter referred to as the “Combination
Period”).
In
accordance with the terms of the Company’s Initial Public Offering, the Company had the right to extend the period of time to consummate an
initial Business Combination up to two times from January 22, 2022, each by an additional three months (for a total of up to 18 months)
by depositing into the Trust Account $ (equal to $ for each Public Share outstanding), on or prior to the date of the applicable
deadline, for each of the available three month extensions. In January and April 2022, the Company extended the time to consummate an
initial Business Combination by additional three-month periods, first from January 22, 2022 to April 2022, then again from April 22,
2022 to July 22, 2022, by depositing an amount equal to $ for each share unit issued in its Initial Public Offering on each extension
date.
On
July 12, 2022, the Company held its 2022 annual meeting of stockholders at which stockholders of the Company approved a proposal to amend
the Company’s Certificate of Incorporation to (i) extend the date by which the Company has to consummate a business combination
for three months from July 22, 2022 to October 22, 2022 and (ii) allow the Company, without another stockholder vote, to elect to extend
the date to consummate a business combination for three months after October 22, 2022, for a total of up to six months after July 22,
2022, or until January 22, 2023. On July 12, 2022, the Company filed a Certificate of Amendment to its Certificate of Incorporation with
the Delaware Secretary of State to reflect such extended deadline. In connection with the Annual Meeting and vote to approve the Certificate
of Amendment, stockholders elected to redeem 4,406,322 Public Shares. Following such redemptions, approximately $13.6 million remains
in the Trust Account and 1,343,678 Public Shares remain issued and outstanding.
Subsequently,
in July and October 2022, the Company extended the time to consummate an initial Business Combination by additional three-month periods,
first from July 22, 2022 to October 22, 2022, then again from October 22, 2022 to January 22, 2023, by depositing the amount of $16,795.98
(based on $0.0125 for each share unit issued in the Company’s initial public offering that was outstanding at the time the extension
of the time to consummate the business combination was approved by the Company’s board of directors).
On
September 16, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gotham Merger
Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), Clover Inc., a corporation
organized under the laws of Ontario (“Clover”), and Isaac Raichyk as the stockholders’ representative pursuant to which,
among other things, Clover will be continued from Ontario into Delaware (the “Continued Company”) immediately prior to the
effective time of the Merger (as defined herein) and Merger Sub will be merged with and into the Continued Company (the “Merger”
and together with the other transactions related thereto, the “Proposed Transactions”). Pursuant to the Merger Agreement,
Clover is required to pay the Company fees to cover the Company’s transaction expenses, a portion of which has been paid and was
used to fund the deposit made in October 2022 described above.
In
accordance with the Certificate of Amendment, if a Business Combination has not been consummated on or prior to January 22, 2023 (the
“Extended Date”), 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 its 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 remaining stockholders and the Board of Directors, dissolve and liquidate,
subject in the case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of
other applicable law.
The
Company has determined there is not sufficient time before January 22, 2023 for the Company to consummate an initial business combination.
Accordingly, the Company’s board of directors has determined that it is in the best interests of the Company’s stockholders
to further extend the date that the Company has to consummate an initial business combination. In that regard, the Company has filed
a proxy statement and plans to hold a special meeting of stockholders on November 30, 2022 for the purpose of considering and voting
upon a proposal to amend (the “Extension Amendment”) the Company’s Second Amended and Restated Certificate of Incorporation,
as amended (the “Certificate of Incorporation”) to (i) extend the date by which the Company has to consummate a business
combination for three months, from January 22, 2023 to April 22, 2023, and (ii) allow the Company, without another stockholder vote,
to elect to further extend the date to consummate a business combination for an additional three months from April 22, 2023 to July 22,
2023.
The
Initial Stockholders agreed to waive their rights 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 Initial Stockholders acquire Public
Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect
to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed
to waive their rights to the deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not
complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds
held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is
possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be
only $10.1625 (determined as of September 30, 2022). In order to protect the amounts held in the Trust Account, the Sponsor agreed to
be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent registered public
accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered
into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”), reduce
the amount of funds in the Trust Account to below the lesser of (i) $10.1625 per Public Share and (ii) the actual amount per Public Share
held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.1625 per Public Share due to reductions
in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target
that executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor
will it apply 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”). 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 the Company’s 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 Consideration
As
of September 30, 2022, the Company had cash of approximately $201,000 and a working capital deficit of approximately $2.1 million.
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 purchase Founder Shares (as defined in Note 4) and proceeds from an officer of the Company of $42,125 under the Note
(as defined in Note 4). The Company repaid $1,615 of the outstanding Note balance on December 31, 2020 and repaid the remaining amount
of $40,510 in full on January 26, 2021. 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 as well as from borrowings under non-convertible promissory notes issued to affiliates of the Sponsor, including
certain of the Company’s officers and directors, as described in Note 4. As of September 30, 2022 and December 31, 2021, there
was approximately $1.0 million and $0.1 million, respectively outstanding under such promissory notes. 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 with Working Capital Loans (as defined in Note 4) as may be
required. As of September 30, 2022 and December 31, 2021, there were no amounts outstanding under any Working Capital Loans.
On
October 20, 2022, the Board of Directors of the Company approved an extension of the time for the Company to consummate a Business Combination
by an additional three-month period from October 22, 2022 to January 22, 2023.
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating
prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to acquire, and structuring, negotiating and consummating the Business Combination. The Company will need to raise
additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The
Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds from time to time or at any time,
in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.
Although
management intends to diligently work towards identifying a target to consummate a Business Combination within the Combination Period,
no assurance can be provided that management will be successful in identifying a target and/or consummating a Business Combination within
the Combination Period. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve
liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a Business Combination. Management cannot
provide any assurance that new financing will be available to on commercially acceptable terms, if at all. Further, management’s
plans to raise capital and to consummate its initial business combination may not be successful. These liquidity conditions and the mandatory
liquidation date and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern,
until the earlier of the consummation of the Business Combination or the date the Company is required to liquidate, January 22, 2023.
These condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Note
2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly,
certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they
are not required for interim financial statements under GAAP and the rules of the SEC. In the opinion of management, all adjustments
(consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and nine months
ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or
any future period.
The
accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report
on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 31, 2022, which contains the audited consolidated financial
statements and notes thereto. The financial information as of December 31, 2021, is derived from the audited consolidated financial statements
presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 31,
2022.
Certain
prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current presentation.
The reclassification has no impact on the total assets, total liabilities, stockholders’ deficit and net (loss) income for the
period.
Principles
of Consolidation
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth 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 unaudited condensed consolidated financial statements with another public company that is
neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of unaudited condensed consolidated 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 unaudited condensed consolidated 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 unaudited condensed
consolidated 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 September 30, 2022 and December 31, 2021.
The
Company’s portfolio of investments is comprised of 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 investments in money market funds that invest in U.S. government
securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held
in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s
investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities
and investments in money market funds are presented on the condensed consolidated balance sheets at fair value at the end of each reporting
period. Gains and losses resulting from the change in fair value of these securities are included in income from investments held in
the Trust Account in the accompanying unaudited condensed consolidated statements of operations. The estimated fair values of investments
held in the Trust Account are determined using available market information.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. As of September 30, 2022 and December
31, 2021, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant
risks on such accounts.
Fair
Value of Financial Instruments
The
carrying value of the Company’s assets and liabilities recognized in the condensed consolidated balance sheets, which qualify as
financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” equals or approximates the fair values for
such assets and liabilities either because of the short-term nature of the instruments or because the instrument is recognized at fair
value.
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value.
The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
● |
Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
|
|
● |
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and |
|
|
● |
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Derivative
Warrant Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC
815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as
equity, is re-assessed at the end of each reporting period.
The
warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants
are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities
at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each
balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed consolidated
statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants
was initially measured at fair value using a Monte Carlo simulation model, and subsequently, the fair value of the Private Placement
Warrants has been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection
with the Initial Public Offering has subsequently been measured based on the listed market price of such warrants. The determination
of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the
actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation
is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly
related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public
Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities
are expensed as incurred, presented as non-operating expenses in the condensed consolidated statements of operations. Offering costs
associated with the Class A common stock are charged against their carrying value of the Class A common stock subject to possible redemption
upon the completion of the Initial Public Offering. The Company classified deferred underwriting commissions as non-current liabilities
as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common
stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable
Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified
as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class
A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence
of uncertain future events. Accordingly, as of September 30, 2022 and December 31, 2021, 1,343,678 and 5,750,000 shares of Class A common
stock subject to possible redemption, respectively, were presented at redemption value as temporary equity, outside of the stockholders’
deficit section of the Company’s condensed consolidated balance sheets.
Under
ASC 480, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value
of the security to equal the redemption value at the end of the reporting period. This method would view the end of the reporting period
as if it were also the redemption date of the security. Effective with the closing of the Initial Public Offering (including exercise
of the over-allotment option), the Company recognized the accretion from initial book value to redemption amount. Subsequent changes
result from Extension Payments deposited in the Trust Account. The changes in the carrying value of the common stock, subject to possible
redemption, result in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net
Income (Loss) Per Share of Common Stock
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has
two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata
between the two classes of shares. This presentation assumes a business combination as the most likely outcome. Net income (loss) per
common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective
period.
The
calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the
Initial Public Offering and the Private Placement to purchase an aggregate of 8,550,000 shares of common stock in the calculation of
diluted income (loss) per share, because their exercise is contingent upon future events. Accretion associated with the redeemable Class
A common stock is excluded from earnings per share as the redemption value approximates fair value.
The
following tables reflects present a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss)
per share for each class of common stock:
Schedule of Basic and Diluted Earning Per Common Share
| |
Class
A | | |
Class
B | | |
Class
A | | |
Class
B | |
| |
For
the Three Months Ended
September 30, 2022 | | |
For
the Three Months Ended
September 30, 2021 | |
| |
Class
A | | |
Class
B | | |
Class
A | | |
Class
B | |
Basic and diluted net loss per common stock: | |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Allocation
of net loss | |
$ | (217,421 | ) | |
$ | (158,778 | ) | |
$ | 851,680 | | |
$ | 211,085 | |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted
average common stock outstanding | |
| 1,968,416 | | |
| 1,437,500 | | |
| 5,800,000 | | |
| 1,437,500 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net
income (loss) per common stock | |
$ | (0.11 | ) | |
$ | (0.11 | ) | |
$ | 0.15 | | |
$ | 0.15 | |
| |
Class
A | | |
Class
B | | |
Class
A | | |
Class
B | |
| |
For
the Nine Months Ended
September 30, 2022 | | |
For
the Nine Months Ended
September 30, 2021 | |
| |
Class
A | | |
Class
B | | |
Class
A | | |
Class
B | |
Basic and diluted net loss per common stock: | |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Allocation
of net income (loss) | |
$ | 1,747,816 | | |
$ | 557,244 | | |
$ | (529,032 | ) | |
$ | (140,619 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted
average common stock outstanding | |
| 4,508,770 | | |
| 1,437,500 | | |
| 5,353,846 | | |
| 1,423,077 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net
income (loss) per common stock | |
$ | 0.39 | | |
$ | 0.39 | | |
$ | (0.10 | ) | |
$ | (0.10 | ) |
Diligence
Costs
The
costs of identifying and evaluating prospective acquisition candidates, performing due diligence on suitable prospective Business Combinations
and structuring, negotiating and consummating the Business Combination are expensed as incurred and classified in general and administrative
expenses in the condensed consolidated statements of operations. Any contractual fees or reimbursement payments received from prospective
third-party acquisition candidates are recognized as other income in the condensed consolidated statements of operations, when, or as,
the Company satisfies its contractual obligations with the prospective third-party acquisition candidate. The amount of other income
recognized reflects the consideration the Company expects and is entitled to receive under the terms of the contract, which generally
occurs upon receipt of nonrefundable payments from prospective third-party acquisition candidates.
During
the three and nine months ended September 30, 2022, the Company was paid nonrefundable fees aggregating $400,000 by a prospective acquisition
candidate for the purpose of reducing the Company’s diligence and other expenses incurred. The payments were recognized as other
income in the condensed consolidated statements of operations.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes” (“ASC
740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income 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. There were no unrecognized tax benefits and no amounts accrued for interest and penalties
at each period.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. 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.
Recent
Accounting Pronouncements
In
August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt-Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments
by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required
for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation
in certain areas. The Company adopted ASU 2020-06 on January 1, 2022, using a modified retrospective application. Adoption of the ASU
did not impact the Company’s financial position, results of operations or cash flows.
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 condensed consolidated financial statements.
Note
3 - Initial Public Offering
On
January 22, 2021, the Company consummated its Initial Public Offering of 5,750,000 Units, which includes 750,000 Over-Allotment Units,
at $10.00 per Unit, generating gross proceeds of $57.5 million, and incurring offering costs of approximately $4.2 million, of which
approximately $2.0 million was for deferred underwriting commissions.
Each
Unit consists of one share of Class A common stock and one redeemable warrant (each, a “Public Warrant”). Each whole Public
Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see
Note 8).
On
July 12, 2022, at the Company’s Annual Meeting to approve the Amendment, stockholders elected to redeem 4,406,322 Public Shares
at $10.15 per share for a total of approximately $44.7 million. Following such redemptions, 1,343,678 Public Shares remain issued and
outstanding, classified in Class A common stock subject to possible redemption in the Company’s condensed consolidated balance
sheets.
Note
4 - Related Party Transactions
Founder
Shares
On
October 15, 2020, the Sponsor purchased 1,437,500 shares of the Company’s Class B common stock, par value $0.0001 per share (the
“Founder Shares”), for an aggregate price of $25,000. In October 2020, the Sponsor transferred 25,000 Founder Shares to each
of Messrs. Reavey, Pavell, Zippin and Agrawal and 180,000 Founder Shares to certain other Initial Stockholders. The per share purchase
price of the Founder Shares was determined by dividing the amount of cash contributed to the Company by the aggregate number of Founder
Shares issued. The Initial Stockholders agreed to forfeit up to 187,500 Founder Shares to the extent that the over-allotment option was
not exercised in full by the underwriters, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding
shares after the Initial Public Offering (excluding the Representative’s Shares, as defined in Note 5). The underwriter exercised
its over-allotment option in full on January 22, 2021; thus, these 187,500 Founder Shares are no longer subject to forfeiture.
The
Initial Stockholders agreed, subject to limited exceptions, not to transfer, assign or sell (i) with respect to 50% of Founder Shares,
for a period ending on the six-month anniversary of the date of the consummation of the initial Business Combination and (ii) with respect
to the remaining 50% of such shares, for a period ending on the one-year anniversary of the date of the consummation of the initial Business
Combination, or earlier, in either case, if, subsequent to the initial Business Combination, the Company completes a liquidation, merger,
capital stock exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their
shares of common stock for cash, securities or other property.
Private
Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of Private Placement Warrants
at a price of $ per Private Placement Warrant to the Sponsor, generating proceeds of $2.8 million.
Each
whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion
of the proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the Initial Public Offering
held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement
Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so
long as they are held by the Sponsor or its permitted transferees.
The
Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of
their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Related
Party Loans
On
September 30, 2020, affiliates of the Sponsor, including certain of the Company’s officers and directors, agreed to loan the Company
an aggregate of up to $150,000 pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable
upon the completion of the Initial Public Offering. The Company borrowed $42,125 under the Note. The Company repaid $1,615 of the outstanding
Note balance on December 31, 2020 and repaid the remaining amount of $40,510 in full on January 26, 2021.
Beginning
in September 2021, the Company issued promissory notes to affiliates of the Sponsor, including certain of the Company’s officers
and directors, to provide the Company with additional working capital or to fund Extension Payments prior to the Company completing its
initial Business Combination. The promissory notes are non-interest bearing, non-convertible, and payable upon the consummation of the
Company’s initial Business Combination. If a Business Combination is not consummated, the promissory notes will not be repaid by
the Company and all amounts owed thereunder by the Company will be forgiven except to the extent that the Company has funds available
to it outside of the Trust Account. As of September 30, 2022 and December 31, 2021, the Company has borrowed $1,034,999 and $100,000,
respectively, under such promissory notes.
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, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. 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 or, at the lenders’
discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity
at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30, 2022 and December
31, 2021, the Company had no outstanding borrowings under the Working Capital Loans.
Administrative
Services Agreement
Commencing
on the date that the Company’s securities were first listed on Nasdaq through the earlier of consummation of the initial Business
Combination and the Company’s liquidation, the Company agreed to pay the Sponsor a total of $ per month for office space,
utilities and secretarial and administrative services. Administrative expenses were included within general and administrative expenses
- related party in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, the Company
incurred $30,000 in administrative expenses, which are classified as general and administrative expenses - related party in the accompanying
condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, the Company incurred $90,000
in administrative expenses, which are classified as general and administrative expenses - related party in the accompanying condensed
consolidated statements of operations. As of September 30, 2022 and December 31, 2021, $210,000 and $120,000 are accrued for such services,
respectively, and included in due to related party on the accompanying condensed consolidated balance sheets.
The
Company’s officers or directors will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the
Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations.
The audit committee of the Company’s Board of Directors will review on a quarterly basis all payments that were made to the Sponsor,
officers, directors or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is
no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on the Company’s
behalf.
Due
to Related Party
Due
to related party consists of amounts due from the Company to Sponsor primarily for administrative services and including advances from
an officer of the Company. As of September 30, 2022 and December 31, 2021, the Company had amounts of approximately $210,000 and $133,000
outstanding, respectively, which are presented on the condensed consolidated balance sheets.
Note
5 - Commitments and Contingencies
Registration
and Stockholder Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans or Extension
Loans, if any (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 and upon conversion of the Founder Shares), are entitled to registration rights
pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. 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 initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to 750,000 additional Units
to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriter
exercised its over-allotment option in full on January 22, 2021.
The
underwriters were entitled to an underwriting discount of $0.20 per Unit, or approximately $1.2 million in the aggregate, paid upon the
closing of the Initial Public Offering. In addition, the underwriters will be entitled to a deferred fee of $0.35 per Unit, or approximately
$2.0 million in the aggregate. 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.
The
Company issued EF Hutton (formerly Kingswood Capital Markets), division of Benchmark Investments, Inc. (“EF Hutton”), the
Representative of the underwriters (the “Representative”), and/or its designees, 50,000 shares of Class A common stock (the
“Representative’s Shares”) upon the consummation of the Initial Public Offering. EF Hutton agreed not to transfer,
assign or sell any such shares until the completion of the initial Business Combination. In addition, EF Hutton agreed (i) to waive its
redemption rights with respect to such shares in connection with the completion of the 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 Combination Period. The Company recorded the fair value of the 50,000 Representative Shares, $500,000,
charged as an offering cost to the Class A common stock subject to possible redemption.
Risks
and Uncertainties
In
February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action,
various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further,
the impact of this action and related sanctions on the world economy is not determinable as of the date of these condensed consolidated
financial statements, and the specific impact on the Company’s financial condition, results of operations, and cash flows is also
not determinable as of the date of these condensed consolidated financial statements.
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and
certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed
on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the
abuse or avoidance of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection
with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would
be subject to the excise tax in connection with a Business Combination, extension vote or otherwise will depend on a number of factors,
including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise,
(ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection
with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year
of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise
tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not
been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s
ability to complete a Business Combination.
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 these condensed consolidated financial statements. The condensed
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note
6 - Derivative Warrant Liabilities
As
of September 30, 2022 and December 31, 2021, the Company has an aggregate of 8,550,000 warrants outstanding, comprised of 5,750,000 and
2,800,000 Public Warrants and Private Placement Warrants, respectively.
Public
Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units
and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) the completion of a Business
Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective
registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Public Warrants
and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless
basis and such cashless exercise is exempt from registration under the Securities Act). The Company agreed that as soon as practicable,
but in no event later than 15 business days after the closing of the initial Business Combination, it will use its commercially reasonable
efforts to file with the SEC and have an effective registration statement covering the shares of the Class A common stock issuable upon
exercise of the warrants and to maintain a current prospectus relating to those shares of the Class A common stock until the warrants
expire or are redeemed. If a registration statement covering the shares of the Class A common stock issuable upon exercise of the warrants
is not effective by the 60th business day after the closing of the initial 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.
The
warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation. 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 initial Business Combination at an issue
price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to
be determined in good faith by the 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 the initial Business Combination on the date of the consummation of the initial Business
Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A common stock during the 20 trading
day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price,
the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent)
to be equal to 115% of the greater of the Market Value and the Newly Issued Price, 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 greater of the Market Value and the Newly Issued Price.
The
Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A
common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after
the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be
non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone
other than the Sponsor or its 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.
Once
the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private
Placement Warrants):
● |
in
whole and not in part; |
● |
at
a price of $0.01 per warrant; |
● |
upon
a minimum of 30 days’ prior written notice of redemption; and |
● |
if,
and only if, the last sale price of 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 on the
third day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
The
Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the shares
of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class
A common stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and
such cashless exercise is exempt from registration under the Securities Act.
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.
Note
7 - Class A Common Stock Subject to Possible Redemption
The
Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is authorized to issue 50,000,000 shares of Class A common stock with a par
value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. On July 20,
2022, stockholders holding 4,406,322 shares of the Company’s Class A common stock exercised their right to redeem such shares for
a pro rata portion of the funds in the Company’s Trust Account. As of September 30, 2022 and December 31, 2021, there were 1,393,678
and 5,800,000 shares of Class A common stock outstanding, respectively, 1,343,678 and 5,750,000 shares of which were subject to possible
redemption and are classified outside of permanent equity in the condensed consolidated balance sheets, respectively.
The
Class A common stock subject to possible redemption reflected on the condensed consolidated balance sheets is reconciled on the following
table:
Schedule
of Redemption of Condensed Balance Sheet
Gross proceeds received from Initial
Public Offering | |
$ | 57,500,000 | |
Less: | |
| | |
Fair value of Public Warrants
at issuance | |
| (3,105,000 | ) |
Class A common stock issuance
costs | |
| (3,998,225 | ) |
Plus: | |
| | |
Accretion
on Class A common stock to redemption value | |
| 7,678,225 | |
Class A common stock subject
to possible redemption, December 31, 2021 | |
$ | 58,075,000 | |
Accretion on Class A common
stock subject to redemption value | |
| 304,296 | |
Redemption
of Class A ordinary shares | |
| (44,724,168 | ) |
Class
A common stock subject to possible redemption, September 30, 2022 | |
$ | 13,655,128 | |
Note
8 - Stockholders’ Deficit
Preferred
Stock - The Company is authorized to issue 1,000,000 shares of preferred stock, par value $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. As of September
30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class
A Common Stock - The Company is authorized to issue 50,000,000 shares of Class A common stock with a par value of $0.0001 per
share. As of September 30, 2022 and December 31, 2021, there were 50,000 shares of Class A common stock issued or outstanding which are
not subject to possible redemption and are classified in permanent equity in the condensed consolidated balance sheets.
Class
B Common Stock - The Company is authorized to issue 2,000,000 shares of Class B common stock with a par value of $0.0001 per
share. As of September 30, 2022 and December 31, 2021, there were 1,437,500 shares of Class B common stock issued and outstanding, of
which an aggregate of up to 187,500 shares of Class B common stock were subject to forfeiture to the extent that the underwriters’
over-allotment option was not exercised in full or in part, so that the Initial Stockholders will collectively own 20% of the Company’s
issued and outstanding common stock after the Initial Public Offering (excluding the Representative’s Shares). The underwriter
exercised its over-allotment option in full on January 22, 2021; thus, these 187,500 Founder Shares are no longer subject to forfeiture.
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 stockholders, except as required by law. Each share of common stock will have one vote on all such matters. However, the
holders of the Founder Shares have the right to elect all of the Company’s directors prior to the initial Business Combination.
The
Class B common stock will automatically convert into Class A common stock at the closing of the initial Business Combination on a one-for-one
basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further
adjustment as provided herein. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed
issued in connection with the initial Business Combination, 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 the total number of all shares of common
stock outstanding upon the completion of the Initial Public Offering, plus the total number of shares of Class A common stock issued,
or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company
in connection with or in relation to the consummation of the initial Business Combination, excluding 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 the initial Business Combination and any private placement-equivalent warrants issued to the Sponsor, officers or directors upon conversion
of Working Capital Loans or Extension Loans; provided that such conversion of Founder Shares will never occur on a less than one for
one basis.
Note
9 - Fair Value Measurements
The
following tables presents information about the Company’s financial assets and liabilities that are measured at fair value on a
recurring basis as of September 30, 2022 and December 31, 2021.
Schedule of Fair Value Measurement of Financial Assets and Liabilities
September
30, 2022
| |
| | | |
| | | |
| | |
Description | |
Quoted
Prices in Active Markets (Level 1) | | |
Significant
Other Observable Inputs (Level 2) | | |
Significant
Other Unobservable Inputs (Level 3) | |
Assets: | |
| | | |
| | | |
| | |
Investments held in Trust Account | |
$ | 13,732,320 | | |
$ | - | | |
$ | - | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative warrant liabilities - Public warrants | |
$ | 575,000 | | |
$ | - | | |
$ | - | |
Derivative warrant liabilities - Private placement
warrants | |
$ | - | | |
$ | - | | |
$ | 280,000 | |
December
31, 2021
| |
| | | |
| | | |
| | |
Description | |
Quoted
Prices in Active Markets (Level 1) | | |
Significant
Other Observable Inputs (Level 2) | | |
Significant
Other Unobservable Inputs (Level 3) | |
Assets: | |
| | | |
| | | |
| | |
Investments held in Trust Account | |
$ | 58,080,426 | | |
$ | - | | |
$ | - | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative warrant liabilities - Public warrants | |
$ | 2,357,500 | | |
$ | - | | |
$ | - | |
Derivative warrant liabilities - Private placement
warrants | |
$ | - | | |
$ | - | | |
$ | 1,148,000 | |
Transfers
to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred
from a Level 3 fair value measurement to a Level 1 fair value measurement, when the Public Warrants were separately listed and traded
in February 2021.
Level
1 assets include investments in money market funds that invest in U.S. Treasury securities. The Company uses inputs such as actual trade
data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Subsequent
to the Public Warrants being separately listed and traded, their value is based on their observable listed trading price, a Level 1 measurement.
Level
3 instruments are comprised of derivative warrant liabilities measured at fair value using a Monte Carlo simulation model. The estimated
fair value of the Private Placement Warrants and the Public Warrants, prior to the Public Warrants being traded in an active market,
was determined using Level 3 inputs. Inherent in a Monte Carlo simulation model are assumptions related to expected stock-price volatility,
expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on
implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock
that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield
curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed
to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates
remaining at zero.
The
primary significant unobservable input used in the fair value measurement of the Company’s Private Placement Warrants is the expected
volatility of the common stock. Significant increases (decreases) in the expected volatility in isolation would result in a significantly
higher (lower) fair value measurement.
The
following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
Schedule of Fair Value Input Measurements
| |
As
of
September 30, 2022 | | |
As
of
December 31, 2021 | |
Option term (in years) | |
| 5.32 | | |
| 5.25 | |
Volatility | |
| 9.10 | % | |
| 8.00 | % |
Risk-free interest rate | |
| 4.05 | % | |
| 1.28 | % |
Expected dividends | |
| 0.00 | % | |
| 0.00 | % |
Stock price | |
$ | 10.04 | | |
$ | 9.94 | |
The
change in the fair value of the derivative warrant liabilities, measured using Level 3 inputs, for the nine months ended September 30,
2022 and 2021, is summarized as follows:
Schedule of Changes in Derivative Warrant Liabilities
Derivative warrant liabilities at January 1, 2022 | |
$ | 1,148,000 | |
Change in fair value of derivative warrant liabilities | |
| (952,000 | ) |
Derivative warrant liabilities at March 31, 2022 | |
$ | 196,000 | |
Change in fair value of derivative warrant liabilities | |
| (56,000 | ) |
Derivative warrant liabilities at June 30, 2022 | |
$ | 140,000 | |
Change in fair value of derivative warrant liabilities | |
| 140,000 | |
Derivative warrant liabilities at September 30, 2022 | |
$ | 280,000 | |
| |
| | |
Derivative warrant liabilities at January 1, 2021 | |
$ | - | |
Issuance of Public and Private Warrants | |
| 4,589,000 | |
Transfer of Public Warrants to a Level 1 measurement | |
| (3,105,000 | ) |
Change in fair value of derivative warrant liabilities | |
| (84,000 | ) |
Derivative warrant liabilities at March 31, 2021 | |
$ | 1,400,000 | |
Change in fair value of derivative warrant liabilities | |
| 448,000 | |
Derivative warrant liabilities at September 30, 2021 | |
$ | 1,848,000 | |
Change in fair value of derivative warrant liabilities | |
| (504,000 | ) |
Derivative warrant liabilities at September 30, 2021 | |
$ | 1,344,000 | |
Note
10 - Subsequent Events
On
October 20, 2022, the Board of Directors of the Company approved an extension of the time for the Company to consummate a Business Combination
by an additional three-month period from October 22, 2022 to January 22, 2023. In connection with the extension, the Company deposited
$16,796 into the Trust Account (based on $0.0125 for each Public Share outstanding).
The
Company evaluated subsequent events and transactions that occurred up to the date unaudited condensed consolidated financial statements
were available to be issued. Based upon this review the Company did not identify any subsequent events other than noted above, that would
have required adjustment or disclosure in the unaudited condensed consolidated financial statements.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References
to the “Company,” “FoxWayne Enterprises Acquisition Corp.,” “FoxWayne,” “our,” “us”
or “we” refer to FoxWayne Enterprises Acquisition Corp. The following discussion and analysis of the Company’s financial
condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements
and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Cautionary
Note Regarding Forward-Looking Statements
This
Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking
statements on our current expectations and projections about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking
statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,”
“could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause
or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We
are a blank check company that was incorporated in Delaware on September 17, 2020. We were 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”). We are an emerging growth company and, as such, we are subject to all of the risks associated
with emerging growth companies.
Our
sponsor is FoxWayne Enterprises Acquisition Sponsor LLC, a Delaware limited liability company. On January 22, 2021, we consummated our
initial public offering of 5,750,000 units, which includes 750,000 additional units to cover over-allotments (the “Units”
and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), at $10.00 per unit,
generating gross proceeds of $57.5 million, and incurring offering costs of approximately $4.2 million, of which approximately $2.0 million
was for deferred underwriting commissions.
Simultaneously
with the closing of the initial public offering, we consummated a private placement of 2,800,000 Private Placement Warrants at a price
of $1.00 per Private Placement Warrant to the Sponsor, generating proceeds of $2.8 million.
Upon
the closing of the initial public offering and the private placement, approximately $58.1 million ($10.10 per unit) of the net proceeds
of the initial public offering and certain of the proceeds of the private placement were placed in the Trust Account located in the United
States with Continental Stock Transfer & Trust Company acting as Trustee, and invested only in U.S. government treasury bills with
a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule
2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by us, until the
earlier of: (i) the completion of a business combination and (ii) the distribution of the Trust Account as described below. As of September
30, 2022, there was approximately $13.7 million in the Trust Account.
Our
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 we will be able to complete a business combination successfully. We must complete
one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account
(excluding the deferred underwriting commissions and taxes payable) at the time of the agreement to enter into the initial Business Combination.
However, we will only complete a business combination if the post-business combination company owns or acquires 50% or more of the 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.
We
will provide holders of the 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 held in the Trust Account (currently at $10.1625
per Public Share). 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 underwriters.
At
the time of our initial public offering, our Sponsor and our officers and directors (the “Initial Stockholders”) agreed not
to propose an amendment to the Amended and Restated Certificate of Incorporation to modify the substance or timing of the Company’s
obligation to redeem 100% of the Public Shares if the Company did not complete a Business Combination within 12 months from the closing
of the Initial Public Offering, or January 22, 2022, (or up to 18 months from the consummation of the Initial Public Offering, or July
22, 2022, if the Company extended the period of time to consummate a Business Combination) (the “Original Combination Period”),
or with respect to any other material provisions relating to stockholders’ rights or pre-initial Business Combination activity,
unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
Since the completion of the initial public offering, as further discussed below, the Original Combination Period has been further extended,
currently to January 22, 2023, and the Company has filed a proxy statement and plans to hold a special meeting of stockholders on November
30, 2022 for the purpose of considering and voting upon a proposal to amend the Company’s Second Amended and Restated Certificate
of Incorporation, as amended to (i) extend the date by which the Company has to consummate a business combination for three months, from
January 22, 2023 to April 22, 2023, and (ii) allow the Company, without another stockholder vote, to elect to further extend the date
to consummate a business combination for an additional three months from April 22, 2023 to July 22, 2023 (the “Original Combination
Period,” as previously extended or as may be further extended, is hereinafter referred to as the “Combination Period”).
In
accordance with the terms of our initial public offering, we may extend the period of time to consummate an initial Business Combination
up to two times from January 22, 2022, each by an additional three months (for a total of up to 18 months) by depositing into the Trust
Account $143,750 (equal to $0.025 for each Public Share outstanding), on or prior to the date of the applicable deadline, for each of
the available three month extensions. In January and April 2022, the Company extended the time to consummate an initial Business Combination
by additional three-month periods, first from January 22, 2022 to April 2022, then again from April 22, 2022 to July 22, 2022, by depositing
an amount equal to $0.025 for each share unit issued in its Initial Public Offering on each extension date.
On
July 12, 2022, the Company held its 2022 annual meeting of stockholders at which stockholders of the Company approved a proposal to amend
the Company’s Certificate of Incorporation to (i) extend the date by which the Company has to consummate a business combination
for three months from July 22, 2022 to October 22, 2022 and (ii) allow the Company, without another stockholder vote, to elect to extend
the date to consummate a business combination for three months after October 22, 2022, for a total of up to six months after July 22,
2022, or until January 22, 2023. On July 12, 2022, the Company filed a Certificate of Amendment to its Certificate of Incorporation with
the Delaware Secretary of State to reflect such extended deadline. In connection with the Annual Meeting and vote to approve the Certificate
of Amendment, stockholders elected to redeem 4,406,322 Public Shares. Following such redemptions, approximately $13.6 million remain
in the Trust Account and 1,343,678 Public Shares remain issued and outstanding.
Subsequently,
in July and October 2022, the Company extended the time to consummate an initial Business Combination by additional three-month periods,
first from July 22, 2022 to October 22, 2022, then again from October 22, 2022 to January 22, 2023, by depositing the amount of $16,795.98
(based on $0.0125 for each share unit issued in the Company’s initial public offering that was outstanding at the time the extension
of the time to consummate the business combination was approved by the Company’s board of directors).
On
September 16, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gotham Merger
Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), Clover Inc., a corporation
organized under the laws of Ontario (“Clover”), and Isaac Raichyk as the stockholders’ representative pursuant to which,
among other things, Clover will be continued from Ontario into Delaware (the “Continued Company”) immediately prior to the
effective time of the Merger (as defined herein) and Merger Sub will be merged with and into the Continued Company (the “Merger”
and together with the other transactions related thereto, the “Proposed Transactions”). Pursuant to the Merger Agreement,
Clover is required to pay the Company fees to cover the Company’s transaction expenses, a portion of which has been paid and was
used to fund the deposit made in October 2022 described above.
On
October 20, 2022, our Board of Directors approved an extension of the time for the Company to consummate a Business Combination by an
additional three-month period from October 22, 2022 to January 22, 2023. In connection with the extension, the Company deposited $16,796
into the Trust Account (based on $0.0125 for each Public Share outstanding).
In
accordance with the Certificate of Amendment, if a Business Combination has not been consummated on or prior to January 22, 2023 (the
“Extended Date”), 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 its 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 remaining stockholders and the Board of Directors, dissolve and liquidate,
subject in the case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of
other applicable law.
The
Company has determined there is not sufficient time before January 22, 2023 for the Company to consummate an initial business combination.
Accordingly, the Company’s board of directors has determined that it is in the best interests of the Company’s stockholders
to further extend the date that the Company has to consummate an initial business combination. In that regard, the Company has filed
a proxy statement and plans to hold a special meeting of stockholders on November 30, 2022 for the purpose of considering and voting
upon a proposal to amend (the “Extension Amendment”) the Company’s Second Amended and Restated Certificate of Incorporation,
as amended (the “Certificate of Incorporation”) to (i) extend the date by which the Company has to consummate a business
combination for three months, from January 22, 2023 to April 22, 2023, and (ii) allow the Company, without another stockholder vote,
to elect to further extend the date to consummate a business combination for an additional three months from April 22, 2023 to July 22,
2023.
Recent
Developments
Loans
from Our Officers & Directors
Beginning
in September 2021, we issued promissory notes to affiliates of our Sponsor, including certain of the Company’s officers and directors,
to provide us with additional working capital or to fund Extension Payments prior to us completing an initial Business Combination. The
promissory notes are non-interest bearing, non-convertible, and payable upon the consummation of our initial Business Combination. If
a Business Combination is not consummated, the promissory notes will not be repaid by the Company and all amounts owed thereunder will
be forgiven except to the extent that we have funds available to us outside of the Trust Account. As of September 30, 2022 and December
31, 2021, we have borrowed $1,034,999 and $100,000, respectively, under such promissory notes.
Liquidity
and Capital Resources
As
of September 30, 2022, we had cash of approximately $201,000 and a working capital deficit of approximately $2.1 million.
Our
liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from our Sponsor
to purchase 1,437,500 shares of our Class B common stock, par value $0.0001 per share (the “Founder Shares”) and proceeds
from an officer of the Company pursuant to a promissory note (the “Note”). We repaid $1,615 of the outstanding Note balance
on December 31, 2020 and repaid the remaining amount of $40,510 in full on January 26, 2021. Subsequent to the consummation of the Initial
Public Offering, our needs liquidity have been satisfied through the net proceeds from the consummation of the Initial Public Offering
and the Private Placement held outside of the Trust Account as well as from borrowings under non-convertible promissory notes issued
to affiliates of our Sponsor, including certain of the Company’s officers and directors. As of September 30, 2022 and December
31, 2021, we have borrowed $1,034,999 and $100,000, respectively, under such promissory notes.
Until
the consummation of a Business Combination, we will be using the funds not held in the Trust Account for identifying and evaluating prospective
acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target
business to acquire, and structuring, negotiating and consummating the Business Combination. We will need to raise additional capital
through loans or additional investments from our Sponsor, stockholders, officers, directors, or third parties. Our officers, directors
and Sponsor may, but are not obligated to, loan us funds from time to time or at any time, in whatever amount they deem reasonable in
their sole discretion, to meet our working capital needs.
Although
we intend to diligently work towards identifying a target to consummate a Business Combination within the Combination Period, no assurance
can be provided that we will be successful in identifying a target and/or consummating a Business Combination within the Combination
Period. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could
include, but not necessarily be limited to, suspending the pursuit of a Business Combination. We cannot provide any assurance that new
financing will be available to on commercially acceptable terms, if at all. Further, our plans to raise capital and to consummate an
initial Business Combination may not be successful. These liquidity conditions and the mandatory liquidation date and subsequent dissolution
raises substantial doubt about the Company’s ability to continue as a going concern, until the earlier of the consummation of the
Business Combination or the date the Company is required to liquidate, January 22, 2023. The condensed consolidated financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of
the date of the condensed consolidated financial statements. The condensed consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Results
of Operations
Our
entire activity since inception up to September 30, 2022, has been in preparation for our formation and the Initial Public Offering,
and since the Initial Public Offering, our search for a prospective target for a Business Combination. We will not generate any operating
revenues until, at the earliest, the closing and completion of our initial Business Combination.
For
the three months ended September 30, 2022, we had a net loss of approximately $376,000, which consisted of general and administrative
expenses of approximately $381,000, general and administrative expenses to a related party of $30,000, franchise tax expense of approximately
$26,000, and a non-operating loss of approximately $428,000 resulting from the change in fair value of derivative liabilities, partially
offset by non-operating income from investments held in the Trust Account of approximately $89,000 and other income associated with payments
received from a prospective acquisition candidate of $400,000.
For
the three months ended September 30, 2021, we had net income of approximately $1.1 million, which consisted of change in fair value of
derivative liabilities of $1.5 million, income from investment held in the Trust Account of approximately $1,000, partially offset by
general and administrative expenses of approximately $347,000, general and administrative expenses to related party of $30,000 and franchise
tax expense of approximately $43,000.
For
the nine months ended September 30, 2022, we had net income of approximately $2.3 million, which consisted of a non-operating gain of
approximately $2.7 million resulting from the change in fair value of derivative liabilities, other income associated with payments received
from a prospective acquisition candidate of $400,000 and income from investments held in the Trust Account of approximately $168,000,
partially offset by general and administrative expenses of approximately $684,000, general and administrative expenses to a related party
of $90,000, and franchise tax expense of approximately $140,000.
For
the nine months ended September 30, 2021, we had a net loss of approximately $670,000, which consisted of general and administrative
expenses of approximately $728,000, general and administrative expenses to related party of $90,000, franchise tax expense of approximately
$128,000, financing costs to derivative warrant liabilities of approximately $212,000, partially offset by change in fair value of derivative
liabilities of $485,000 and income from investment held in the Trust Account of approximately $4,000.
Contractual
Obligations
Registration
and Stockholder Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans or Extension
Loans, if any, (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 and upon conversion of the Founder Shares) are entitled to registration rights
pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. 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 the completion of the
initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
We
granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to 750,000 additional Units to cover
over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriter exercised
its over-allotment option in full on January 22, 2021.
The
underwriters were entitled to an underwriting discount of $0.20 per Unit, or approximately $1.2 million in the aggregate, paid upon the
closing of the Initial Public Offering. In addition, the underwriters will be entitled to a deferred fee of $0.35 per Unit, or approximately
$2.0 million in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely
in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
We
issued EF Hutton (formerly Kingswood Capital Markets), division of Benchmark Investments, Inc. (“EF Hutton”), the Representative
of the underwriters (the “Representative”), and/or its designees, 50,000 shares of Class A common stock (the “Representative’s
Shares”) upon the consummation of the Initial Public Offering. EF Hutton agreed not to transfer, assign or sell any such shares
until the completion of the initial Business Combination. In addition, EF Hutton agreed (i) to waive its redemption rights with respect
to such shares in connection with the completion of the initial Business Combination and (ii) to waive its rights to liquidating distributions
from the Trust Account with respect to such shares if we fail to complete our initial Business Combination within the Extended Combination
Period. We recorded the fair value of the 50,000 Representative Shares, $500,000, charged as an offering cost to the Class A common stock
subject to possible redemption.
Risks
and Uncertainties
In
February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action,
various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further,
the impact of this action and related sanctions on the world economy is not determinable as of the date of these condensed consolidated
financial statements, and the specific impact on the Company’s condensed consolidated financial condition, results of operations,
and cash flows is also not determinable as of the date of these financial statements.
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and
certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed
on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the
abuse or avoidance of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection
with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would
be subject to the excise tax in connection with a Business Combination, extension vote or otherwise will depend on a number of factors,
including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise,
(ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection
with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year
of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise
tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not
been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s
ability to complete a Business Combination.
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 condensed consolidated financial statements. The condensed
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires
management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary
of our significant accounting policies is included in Note 2 to our condensed consolidated financial statements in Part I, Item 1 of
this Quarterly Report. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction
of our condensed consolidated financial statements and require significant, difficult or complex judgments, often employing the use of
estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion
and Analysis of Financial Condition and Results of Operations section in our 2021 Annual Report on Form 10-K filed with the SEC on March
31, 2022. There have been no significant changes in the application of our critical accounting policies during the nine months ended
September 30, 2022.
Recent
Accounting Pronouncements
See
Note 2 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for a discussion
of recent accounting pronouncements.
JOBS
Act
The
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act
are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies.
We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised
accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result,
the unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally,
we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject
to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions
we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over
financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted
by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report
providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain
executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief
Executive Officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following
the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.