Notes to Financial Statements
March 31, 2022
(UNAUDITED)
Note
1 — Organization and Business Operations
Jupiter Wellness Acquisition
Corporation (the “Company”) is a blank check company incorporated on September 14, 2021 under the laws of the State of Delaware
for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other
similar business combination with one or more businesses or entities (a “Business Combination”). The Company has not selected
any potential business combination target, and the Company has not, nor has anyone on its behalf, initiated any substantive discussions,
directly or indirectly, with any potential business combination target with respect to an initial business combination with the Company.
While the Company may, subject to certain limitations, pursue a Business Combination target with operations or prospects in the digital
healthcare and AI in medicine sector in the global market.
As of March 31, 2022, the Company had not yet commenced any operations.
All activity through March 31, 2022 relates to the Company’s formation, its initial Public Offering (as defined below) and search
for a target for its initial Business Combination. The Company will not generate any operating revenues until after the completion
of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds
derived from the IPO. The Company has selected September 30 as its fiscal year end.
On December 9, 2021, the Company
consummated its IPO of 13,800,000 units (the “Units” and, with respect to the shares of Class A common stock included in the
Units, the “Public Shares”) at $10.00 per unit, which included 1,800,000 Units issued pursuant to the full exercise by the
Underwriters (as defined below) of their over-allotment option, and the private sale of an aggregate of 629,000 Units (the “Private
Placement Units” and with respect to the shares of Class A common stock included in the Units, the “Private Placement Shares”)
to its sponsor, Jupiter Wellness Sponsor LLC (the “Sponsor”) and I-Bankers Securities, Inc. (“I-Bankers”) at a
purchase price of $10.00 per Private Placement Unit, generating gross proceeds of $6,290,000 to the Company that closed simultaneously
with the closing of the IPO (see Note 3). The Company’s Units were listed on the Nasdaq Global Market (“Nasdaq”) under
the ticker symbol “JWACU” until January 7, 2022, when the Company’s Units were
separated and ceased to trade, and the shares of the Company’s Class A common stock and rights, which together comprised the Units,
commenced trading separately with the ticker symbols “JWAC” and “JWAR,” respectively.
Transaction
costs amounted to $7,985,917
consisting of $2,760,000
in cash of underwriting commissions, $4,830,000
of business combination marketing fee, and $395,917
of other offering costs. In addition, as of December 9, 2021, cash of $1,630,676
was held outside of the Trust Account (as defined below) and is available for working
capital purposes.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Units,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination
with one or more operating businesses or assets that together have an aggregate fair market value equal to at least 80% of the net assets
held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount
of any deferred underwriting commissions) at the time of the Company’s signing a definitive agreement in connection with its initial
Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more
of the outstanding voting securities of the target or otherwise acquires an interest in the target business or assets sufficient for it
not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company
Act”).
Upon the closing of the IPO on
December 9, 2021, the Company deposited $139,380,000 ($10.10 per Unit) from the proceeds of the IPO and certain proceeds of the sales
of Private Placement Units in the trust account (“Trust Account”), located in the United States and invested only in U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or
less or in any open-ended investment company that holds itself out as a money market fund selected by the
Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i)
the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
Note 1 — Organization and Business Operations
(Continued)
The Company will provide its stockholders
with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection
with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the
Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The stockholders
will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account (initially $10.10 per share), calculated
as of two business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in
the Trust Account and not previously released to the Company to pay its tax obligations. The shares of Class A common stock will be recorded
at redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
The Company will proceed with
a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such completion of a Business Combination
and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks stockholder
approval in connection with a Business Combination, the Sponsor has agreed to (i) waive its redemption rights with respect to their Private
Placement Shares in connection with the completion of the Business Combination, (ii) waive its redemption rights with respect to their
Private Placement Shares in connection with a stockholder vote to approve an amendment to the Company’s second amended and restated
certificate of incorporation (a) to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares
if the Company does not complete the Business Combination within the Combination Period (as defined below) or (b) with respect to any
other provision relating to stockholders’ rights or pre-initial Business Combination activity and (iii) waive its rights to liquidating
distributions from the Trust Account with respect to their Private Placement Shares if the Company fails to complete the Business Combination
within the Combination Period. In addition, the Sponsor has agreed to vote any share it held in favor of the Business Combination.
Additionally, each public stockholder
may elect to redeem its Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed
Business Combination.
Notwithstanding the foregoing,
if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules,
the Company’s second 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% of the Public Shares without the Company’s prior written consent.
The Company will have until 12 months from the closing
of the IPO (or 18 months from the closing of the IPO if the Company may extend the period of time to consummate a Business Combination)
(the “Combination Period”) to complete a Business Combination. If the Company is unable to complete a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but no more than 10 business days thereafter, redeem 100% of the outstanding 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 (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 liquidation distributions, if any), and (iii) as promptly
as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board
of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
Note 1 — Organization and Business Operations
(Continued)
The Sponsor has agreed to waive
its liquidation rights with respect to the Founder Shares (as defined below) and Private Placement Shares if the Company fails to complete
a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the IPO, such Public
Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within
the Combination Period. The underwriters have agreed to waive their rights to their business combination marketing fees (see Note 5) held
in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event,
such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares.
In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be
less than the IPO price per Unit ($10.10).
The Sponsor has agreed that it
will be liable to the Company, if and to the extent any claims by a third party for services rendered or products sold to the Company,
or by a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds
in the Trust Account to below (1) $10.10 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the
date of the liquidation of the Trust Account due to reductions in the value of trust assets, in each case net of the amount of interest
which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of
any and all rights to seek access to the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters
of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible
to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have
to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s
independent auditors), 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.
Underwriting Agreement and Business Combination
Marketing Agreement
The Company engaged I-Bankers
as the representative of the underwriters (the “Underwriters”) in the IPO of the Company’s Class A common stock, par
value of $0.0001 per share (“Shares”), for $120 million and the simultaneous listing on Nasdaq. Pursuant to that certain underwriting
agreement, I-Bankers acted as the representative of the Underwriters of the IPO for 12,000,000 Units at $10.00 per unit, plus an over-allotment
option equal to 15% of the number of Units offered, or 1,800,000 Units, which was exercised in full simultaneously upon the closing of
the IPO. The Company paid I-Bankers underwriters’ commission of $2,760,000, equal to 2.0% of the gross proceeds raised in the IPO
for such services upon the consummation of the IPO (exclusive of any applicable finders’ fees which might become payable).
Upon the closing of the
IPO, the Company issued to I-Bankers a five-year warrant to purchase 414,000 Shares of Class A common stock, equal to 3.0% of the Shares
issued in the IPO (“Representative Warrants”). The exercise price of Representative Warrants is $12.00 per Share. In addition,
I-Bankers was issued 276,000 shares of Class A common stock upon the consummation of IPO (“Representative Shares”). In
addition, under a business combination marketing agreement, the Company has engaged I-Bankers as an advisor in connection with the Business
Combination and will pay I-Bankers a cash fee for such marketing services upon the consummation of the Business Combination in an amount
equal to, in the aggregate, 3.5% of the gross proceeds of the IPO, including any proceeds from the exercise of the underwriters’
over-allotment option. The 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.
Liquidity and
Capital Resources
Prior to the completion of
the IPO, the Company lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be
one year from the issuance date of the financial statement. The Company has since competed its IPO at which time capital in excess
of the funds deposited in the Trust Account and/or used to fund offering expenses was released to the Company for general working
capital purposes. Accordingly, management has since re-evaluated the Company’s liquidity and financial condition and
determined that sufficient capital exists to sustain operations for at least one year
from the date that the financial statement was issued, and therefore substantial doubt has been alleviated.
Note 1 — Organization and Business Operations
(Continued)
Going Concern Consideration
The Company expects to incur
significant costs in pursuit of its financing and acquisition plans. In connection with the Company’s assessment of going concern
considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties
about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unsuccessful
in consummating an initial business combination within the prescribed period of time from the closing of the IPO, the requirement that
the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve raises substantial doubt about the ability
to continue as a going concern. The balance sheet does not include any adjustments that might result from the outcome of this uncertainty.
Management has determined that the Company has funds that are sufficient to fund the working capital needs of the Company until the consummation
of an initial business combination or the winding up of the Company as stipulated in the Company’s amended and restated memorandum
of association. The accompanying financial statement has been prepared in conformity with generally accepted accounting principles in
the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern.
Risks and Uncertainties
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 this financial statement. The financial statement does not include any adjustments
that might result from the outcome of this uncertainty.
NOTE 2 ─ SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying financial
statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the rules and regulations of US Securities and Exchange Commission (“SEC”).
Emerging Growth Company Status
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act and modified by the Jumpstart our Business Startups Act of 2012,
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of
the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
NOTE 2 ─ SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts
of expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably
possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement,
which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual
results could differ from those estimates.
Cash and Cash Equivalents
The Company had $1,245,647 in
cash as of March 31, 2022. The Company considers all short-term investments with an original maturity of three months or less when purchased
to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2022.
Marketable Securities Held in Trust Account
At March 31, 2022, substantially
all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury securities. All
of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on
the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments
held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements
of operations. The estimated fair values of investments held in Trust Account are determined using available market information. At March
31, 2022, $139,367,155 was held in the Trust Account.
Offering Costs Associated with the IPO
The Company complies with the
requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through
the IPO that were directly related to the IPO. The Company incurred offering costs amounting to $7,985,917 as a result of the IPO consisting
of $2,760,000 in cash of underwriting commissions, $4,830,000 of business combination marketing fee, and $395,917 of other offering costs.
As of March 31, 2022, offering costs in the aggregate of $7,985,917 have been charged to stockholders’ equity.
Class A Common Stock Subject to Possible Redemption
All of the 13,800,000 shares
of Class A common stock sold as part of the Units in the IPO contain a redemption feature. In accordance with the Accounting
Standards Codification 480-10-S99-3A “Classification and Measurement of Redeemable Securities”, redemption provisions
not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation
events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the
provisions of ASC 480. The change in the carrying value of redeemable shares of common stock resulted in charges against additional
paid-in capital and accumulated deficit. Accordingly, at March 31, 2022, the shares of Class A common stock subject to possible
redemption in the amount of $139,380,000 were presented as temporary equity, outside of the stockholders’ equity section of
the Company’s balance sheet.
NOTE 2 ─ SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may exceed the
federal depository insurance coverage corporation limit of $250,000. The Company has 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 fair value of the Company’s
assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
Business Combination Marketing Fee
Pursuant to the business combination
marketing agreement, the Company has engaged I-Bankers as an advisor in connection with the Business Combination and will pay I-Bankers
a cash fee for such marketing services upon the consummation of the Business Combination in an amount equal to, in the aggregate, 3.5%
of the gross proceeds of the IPO, including any proceeds from the full or partial exercise of the underwriters’ over-allotment option.
Stock-Based Compensation
The Company recognizes compensation
costs to employees under FASB Accounting Standards Codification 718 “Compensation - Stock Compensation” (“ASC 718”).
Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date
fair value and recognize the costs in the financial statements over the period during which employees are required to provide services.
Share based compensation arrangements include stock options and warrants. As such, compensation cost is measured on the date of grant
at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
On September 14, 2021, the
inception date, the Company adopted Accounting Standards Update (“ASU”) No. 2018-07 “Compensation - Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation
- Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees
for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.
Income Taxes
The Company complies with
the accounting and reporting requirements of FASB ASC, 740, “Income Taxes”. 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 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 as of March 31, 2022. Deferred tax assets were deemed to be de
minimis as of March 31, 2022.
FASB 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. No amounts were accrued for the payment of interest
and penalties at March 31, 2022.
NOTE 2 ─ SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Income Taxes (continued)
The Company is currently not aware
of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is
subject to income tax examinations by major taxing authorities since inception.
The provision for income taxes
was deemed to be de minimis for the three months ended March 31, 2022.
Warrants
ASC 480 requires a reporting entity
to classify certain freestanding financial instruments as liabilities (or in some cases as assets). ASC 480-10-S99 addresses concerns
raised by the SEC regarding the financial statement classification and measurement of securities subject to mandatory redemption requirements
or whose redemption is outside the control of the issuer. If the stock subject to mandatory redemption provisions represents the only
shares in the reporting entity, it must report instruments in the liabilities section of its statement of financial position. The stock
subject must then describe them as shares subject to mandatory redemption, so as to distinguish the instruments from other financial statement
liabilities. The Company concludes that the warrants to I-Bankers do not exhibit any of the above characteristics and, therefore, are
outside the scope of ASC 480. The warrants were issued in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging
— Contracts in Entity’s Own Equity. Such guidance provides that because the warrants meet the criteria for equity treatment.
Recent Accounting Pronouncements
Management does not believe that
any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s
financial statement.
NOTE 3 ─ PUBLIC OFFERING
At the IPO, the Company sold 13,800,000
Units at a purchase price of $10.00 per Unit, which included 1,800,000 Units issued pursuant to the full exercise by the Underwriters
of their over-allotment option, generating gross proceeds to the Company of $138,000,000. Each Unit consists of one share of Class A common
stock of the Company, par value $0.0001 per share (“Class A common stock”), and one right to receive one-eighth of one share
of Class A common stock upon the consummation of the Company’s initial business combination (see Note 6).
A total of $139,380,000 of the
net proceeds from the IPO and the sale of the Private Placement Units was placed in a U.S.-based Trust Account maintained by American
Stock Transfer & Trust Company, LLC, acting as trustee.
NOTE 4 ─ RELATED PARTY TRANSACTIONS
Founder Shares
On September 20, 2021, the Sponsor
purchased 2,875,000 shares of the Company’s Class B common stock (the “Founder Shares”) for an aggregate purchase price
of $50,000.
NOTE 4 ─ RELATED PARTY TRANSACTIONS
(Continued)
Founder Shares (continued)
In December 2021, the Company
effected a 0.2 for 1 stock dividend for each share of Class B common stock outstanding (which has been accounted for as a stock split)
of 575,000 shares of Class B common stock, which resulted in an aggregate of 3,450,000 shares of Class B common stock outstanding. All
share and associated amounts have been retroactively restated to reflect the share dividend.
The Founder Shares include an
aggregate of up to 450,000 shares of Class B common stock subject to forfeiture by the Sponsor to the extent that the underwriters’
over-allotment is not exercised in full or in part, so that the number of Founder Shares will collectively represent 20% of the Company’s
issued and outstanding shares upon the completion of the IPO. On December 9, 2021, the Underwriter exercised the over-allotment option
in full. As a result, no Founder Shares is subject to for forfeiture (see Note 3).
Private Placement
Concurrently with the closing
of the IPO, the Sponsor and the Underwriters purchased an aggregate of 629,000 Private Placement Units, generating gross proceeds of $6,290,000
in aggregate in a private placement. Each Private Placement Unit will consist of one share of Class A common stock and one right. Each
right underlying the Private Placement Unit (the "Private Placement Right") will entitle the holder to receive one-eighth of
one share of Class A common stock at the closing of a Business Combination. The proceeds from the sale of the Private Placement Units
have been added to the net proceeds from the IPO held in the Trust Account. If the Company does not complete a Business Combination within
the Combination Period, the proceeds from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares
(subject to the requirements of applicable law), and the Private Placements Units and all underlying securities will expire worthless.
The Private Placement Units (including
the underlying Private Placement Rights, the Private Placement Shares and the shares of Class A common stock issuable upon conversion
of the Private Placement Rights) will not be transferable, assignable or salable until 30 days after the completion of the initial Business
Combination (except as described under the section of the IPO prospectus entitled “Principal Stockholders — Restrictions on
Transfers of Founder Shares and Private Placement Units”). Following such period, the Private Placement Units (including the underlying
Private Placement Rights, the Private Placement Shares and the shares of Class A common stock issuable upon conversion of the Private
Placement Rights) will be transferable, assignable or salable, except that the Private Placement Units will not trade.
Accrued Expenses - Related
Parties
Pursuant
to the executed Offer Letters, the Company agreed to pay the Company’s Chief Financial Officer $5,000 in cash per month starting
from December 9, 2021. As of March, 31, 2022 and September 30, 2021, the Company had accrued expenses – related parties in amount
of $18,667 and $0 in connection with the accrued compensation to the Company’s management and directors.
Sponsor Note Payable
As of September 30, 2021,
the Company had a loan payable to the Sponsor in amount of $371,650 with zero interest (the “Loan”). The Loan is unsecured.
Under no circumstances shall any individual, including but not limited to any officer, director, employee or stockholder of the Company,
be obligated personally for any obligations or liabilities of the Loan. The proceeds of the Loan are used to pay a portion of the offering
expenses of the IPO. These amounts will be repaid upon completion of an initial business combination. As of March 31, 2022, the note has
been fully repaid by cash.
NOTE 4 ─ RELATED PARTY TRANSACTIONS (Continued)
Working Capital Loans
In addition, in order to finance
transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. 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.
The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s
discretion, up to $1.5 million of such Working
Capital Loans may be convertible into private placement-equivalent units at a price of $10.00
per unit at the option of the lender. Such units would be identical to the Private Placement Units. 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.
As of March 31, 2022, no Working Capital Loans were outstanding.
NOTE 5 ─ COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares,
Private Placement Units (and their underlying securities), the Representative Shares, the Representative Warrants (and their underlying
securities), the 300,000 shares of Class A common stock issuable to the Company’s directors and officers within 10 days following
the Business Combination and any Units that may be issued upon conversion of the Working Capital Loans (and their underlying securities)
will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of
the IPO requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class
A common stock). 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 a Business Combination and rights to require the Company to register for resale such
securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other
cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred
in connection with the filing of any such registration statements.
Underwriting Agreement
The Company had granted the Underwriters
a 30-day option from the date of IPO to purchase up to 1,800,000 additional Units to cover over-allotments, if any, at the IPO price less
the underwriting discounts and commissions.
Simultaneously upon the closing
of the IPO, the Underwriters exercised the over-allotment option in full. As such, the Underwriters were paid an underwriting discount
and commission of $0.20 per Unit, or $2,760,000 in the aggregate payable upon the closing of the IPO, and I-Bankers was entitled to a
business combination marketing fee of $4,830,000 in the aggregate, which is held in the Trust Account and payable upon completion of the
Business Combination.
NOTE 6 ─ STOCKHOLDERS’ EQUITY
The Company is authorized to
issue a total of 111,000,000 shares, par value
of $0.0001 per share, consisting of (a) 110,000,000
shares of common stock, including (i) 100,000,000
shares of Class A common stock, and (ii) 10,000,000
shares of Class B common stock, and (b) 1,000,000
shares of preferred stock (the “Preferred Stock”).
NOTE 6 ─ STOCKHOLDERS’ EQUITY
(Continued)
As of March 31, 2022, there were
905,000 shares of Class A common stock and 3,450,000 shares of Class B common stock issued and outstanding, which such amount having been
restated to reflect a 0.2 for 1 stock dividend for each share of Class B common stock outstanding in December 2021 (excluding 13,800,000
shares of Class A common stock subject to possible redemption).
Of the 3,450,000 shares of Class
B common stock outstanding, an aggregate of up to 450,000 shares of Class B common stock were subject to forfeiture, to the extent that
the underwriters’ over-allotment option is not exercised in full or in part, so that the Sponsor would collectively own 20% of the
Company’s issued and outstanding common stock after the IPO (assuming Sponsor does not purchase any Public Shares in the IPO). As
a result of the Underwriters’ full exercise of the over-allotment option on December 9, 2021, no share of Class B common stock is
subject to forfeiture.
As of March 31, 2022, no share
of Preferred Stock was issued or outstanding. The designations, voting and other rights and preferences of the Preferred Stock may be
determined from time to time by the Company’s board of directors.
Rights
Each holder of a right will receive
one-eighth (1/8) of one share of Class A common stock upon consummation of a Business Combination. In the event the Company will not be
the surviving entity upon completion of the Company’s initial Business Combination, each holder of a public right will automatically
receive the 1/8 share of Class A common stock underlying such public right (without paying any additional consideration); and each holder
of a Private Placement Right or right underlying Units to be issued upon conversion of the Working Capital Loans will be required to affirmatively
convert its rights in order to receive the 1/8 share of Class A common stock underlying each right (without paying any additional consideration).
If the Company is unable to complete an initial Business Combination within the required time period and public stockholders redeem the
public shares for the funds held in the Trust Account, holders of rights will not receive any such funds in exchange for their rights
and the rights will expire worthless. The Company will not issue fractional shares upon conversion of the rights. If, upon conversion
of the rights, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exchange, comply with Section
155 of the Delaware General Corporation Law. The Company will make the determination of how to treat fractional shares at the time of
its initial Business Combination and will include such determination in the proxy materials that it will send to stockholders for their
consideration of such initial Business Combination.
If the Company is unable to complete
a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights
will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets
held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are no contractual
penalties for failure to deliver securities to the holders of the rights upon consummation of a Business Combination. Additionally, in
no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire worthless.
Representative Warrants and Representative Shares
Upon the closing of the IPO,
the Company issued to the Underwriters Representative Warrants, the exercise price of which will be $12.00 per Share, and 276,000 Representative
Shares.
The Representative Warrants shall
be exercisable, in whole or in part, commencing the later of December 9, 2022 and the closing of the Company’s initial Business
Combination and terminating on December 9, 2026.
NOTE 6 ─ STOCKHOLDERS’ EQUITY
(Continued)
Representative Warrants and Representative
Shares (continued)
The Company accounted for
the 414,000 warrants as an expense of the IPO resulting in a charge directly to stockholders’ equity. The fair value of
Representative Warrants was estimated to be approximately $1,087,164 (or $2.626 per warrant) using the Black-Scholes option-pricing
model. The fair value of the Representative Warrants granted to the Underwriters was estimated as of the date of grant using the
following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.18% and (3) expected life of five years. The
Representative Warrants and the shares of Class A common stock underlying Representative Warrants have been deemed compensation by
FINRA and are therefore subject to a 180-day lock-up immediately following December 9, 2021 pursuant to FINRA Rule 5110(e)(1). The
Representative
Warrants grants to holders demand
and “piggy back” rights for periods of five and seven years from December 9, 2021. The Company will bear all fees and expenses
attendant to registering the securities, other than underwriting commissions which will be paid for by the holders themselves. The exercise
price and number of shares issuable upon exercise of the Representative Warrants may be adjusted in certain circumstances including in
the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However, the Representative
Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price.
The Underwriters agreed not to
transfer, assign or sell any of the Representative Shares without the Company’s prior written consent until the completion of the
Business Combination. The Underwriters 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
the Representative Shares if the Company fails to complete its initial Business Combination within Combination Period. The shares have
been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following December 9, 2021
pursuant to FINRA Rule 5110(e)(1).
NOTE 7 ─ SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the financial statement was available to be issued.
The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statement.