Item 1. Financial Statements (Unaudited)
SPK Acquisition Corp.
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CONDENSED
BALANCE SHEET
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June 30, 2021
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(Unaudited)
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ASSETS
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CURRENT ASSETS
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Cash
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$
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557,128
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Prepaid expenses and other current assets
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201,957
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Marketable securities held in trust account
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50,000,000
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TOTAL ASSETS
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$
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50,759,085
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
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CURRENT LIABILITIES
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Accounts payable
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$
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2,455
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|
Franchise taxes payable
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7,700
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Note payable- related party
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125,000
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Deferred underwriting fee payable
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1,500,000
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Total liabilities
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1,635,155
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COMMITMENTS AND CONTINGENCIES
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-
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Redeemable Common Stock
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Common stock subject to possible redemption, $0.0001 par value, 5,000,000 shares at redemption value of $10.00 per share at June 30, 2021.
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50,000,000
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STOCKHOLDERS’ EQUITY (DEFICIT)
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Common Stock; $0.0001 par value; 10,000,000 shares authorized; 1,667,500 shares issued and outstanding (excluding 5,000,000 shares subject to possible redemption)
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167
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Additional paid-in capital
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$
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—
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Accumulated deficit
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(876,237
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)
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Total stockholders’ equity (deficit)
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(876,070
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)
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
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$
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50,759,085
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The accompanying notes are an integral
part of these financial statements
SPK Acquisition Corp.
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CONDENSED
STATEMENTS OF OPERATIONS
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For the three months
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For the six months
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ended June 30,
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ended June 30,
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2021
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2021
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(Unaudited)
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(Unaudited)
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OPERATING EXPENSES
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General and administrative
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$
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29,484
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$
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31,689
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Franchise tax
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7,700
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7,700
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Total expenses
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37,184
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39,389
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NET LOSS
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$
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(37,184
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)
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$
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(39,389
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)
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Weighted average shares outstanding of redeemable common stock
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1,153,846
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580,110
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Basic and diluted net income (loss) per share, redeemable common stock
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$
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1.53
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$
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3.96
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Weighted average shares outstanding of non-redeemable common stock
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1,297,308
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1,276,685
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Basic and diluted net income (loss) per share, non-redeemable common stock
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$
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(1.39
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)
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$
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(1.83
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)
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The accompanying notes are an integral
part of these financial statements
SPK Acquisition Corp.
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CONDENSED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
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For
the six months ended June 30, 2021 (unaudited)
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Common
stock
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Additional
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Total
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paid-in
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Retained
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stockholders’
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Shares
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Amount
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capital
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earnings
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equity
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Balance,
January 1, 2021
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—
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$
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—
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$
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—
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$
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—
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$
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—
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Net
loss
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—
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—
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—
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(2,205
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)
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(2,205
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)
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Balance,
March 31, 2021 (unaudited)
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1,437,500
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$
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144
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$
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24,856
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$
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(2,205
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)
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$
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22,795
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Sale
of public units in initial public offering
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5,000,000
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500
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49,999,500
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|
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—
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50,000,000
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Issuance
of shares to underwriter
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25,000
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3
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249,997
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—
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250,000
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Sale
of private units to insiders
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205,000
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20
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2,049,980
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—
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2,050,000
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Underwriter’s
compensation
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—
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—
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(2,500,000
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)
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—
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(2,500,000
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)
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Initial
measurement of Common Stock Subject to Redemption under ASC 480-10-S99 against additional paid-in capital
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(5,000,000
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)
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(500
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)
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(49,784,500
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)
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—
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(49,785,000
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)
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Offering costs
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—
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—
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(661,681
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)
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—
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(661,681
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)
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Deduction
for increase of carrying value of redeemable shares
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—
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—
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(2,526,237
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)
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(836,848
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)
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(3,363,085
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)
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Allocation of offering costs to common stock subject
to redemption
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—
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—
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3,148,085
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—
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3,148,085
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Net
loss
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—
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—
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—
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(37,184
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)
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(37,184
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)
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Balance,
June 30, 2021 (unaudited)
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1,667,500
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$
|
167
|
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$
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—
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|
|
$
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(876,237
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)
|
|
$
|
(876,070
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)
|
The accompanying notes are an integral
part of these financial statements
SPK Acquisition Corp.
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CONDENSED
STATEMENT OF CASH FLOWS
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For the six months ended June 30, 2021
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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$
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(39,389
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)
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Adjustments to reconcile net income to net cash used in operating activities:
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Prepaid expenses and other assets
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(201,957
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)
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Accounts payable
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2,455
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Franchise taxes payable
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7,700
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Net cash flows used in operating activities
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(231,191
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)
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CASH FLOWS FROM INVESTING ACTIVITIES
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Cash remitted to Trust Account
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(50,000,000
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)
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Net cash flows used investing activities
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(50,000,000
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)
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from sale of private units
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2,050,000
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Proceeds from Initial Public Offering
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50,000,000
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Proceeds from issuance of common stock to Sponsor
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25,000
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Payment of underwriter compensation
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(1,000,000
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)
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Payment of offering costs
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(411,681
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)
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Proceeds from Sponsor note
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200,000
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Net cash flows provided by financing activities
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50,788,319
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NET INCREASE (DECREASE) IN CASH
|
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|
557,128
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CASH, BEGINNING OF PERIOD
|
|
|
—
|
|
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CASH, END OF PERIOD
|
|
$
|
557,128
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|
|
|
|
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Supplemental disclosure of noncash activities:
|
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|
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Deferred underwriting compensation
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|
$
|
1,500,000
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Representative shares issued and charged to offering costs
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$
|
250,000
|
|
The accompanying notes are an integral
part of these financial statements
SPK ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Organization
and Business Operation
SPK Acquisition Corp. (the “Company”)
is a newly organized blank check company incorporated pursuant to the General Corporation Law of the State of Delaware on December
31, 2020 that was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization
or similar business combination with one or more businesses (the “initial business combination”). The Company’s
efforts to identify a prospective target business will not be limited to a particular industry or geographic region, although the
Company intends to focus on operating businesses in the sectors of telecommunications, media, and technology (“TMT”)
in Asia. The Company has not selected any specific business combination target with respect to the initial business combination.
As of June 30, 2021, the Company had
not commenced any operations. All activity for the period from December 31, 2020, the Company’s inception, through June 30,
2021, relates to the Company’s formation and the proposed public offering (as defined below). The Company has selected December
31 as its fiscal year end.
The Company’s sponsor is SPK Acquisition
LLC, a Delaware limited liability company (the “sponsor”). The Company’s ability to commence operations was satisfied
upon obtaining adequate financial resources through the closing of the public offering (the “public offering,” see
Note 3) and the private placement by the sponsor (the “private placement,” see Note 4.
The registration statement for the Company’s
Proposed Public Offering was declared effective on June 7, 2021. On June 10, 2021, the Company consummated the Proposed Public
Offering of 5,000,000 units (the “Units”) and, with respect to the shares of common stock included in the Units sold,
the public shares at $10.00 per Unit, generating gross proceeds of $50,000,000.
Simultaneously with the closing of the
Proposed Public Offering, the Company consummated the sale of 205,000 units (the “Private Units”) at a price of $10.00
per Private Unit in a private placement to SPK Acquisition LLC (the “Sponsor”), generating gross proceeds of $2,050,000.
Transaction costs amounted to $3,161,681
consisting of $1,000,000 of underwriting fees, $1,500,000 of deferred underwriting fees and $661,681 of other offering costs.
Following the closing of the Proposed
Public Offering on June 10, 2021, an amount of $50,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in
the Proposed Public Offering and the sale of the Private Units was placed in a trust account (the “Trust Account”),
which may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund
meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the
consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account as described below.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Proposed Public Offering and the sale of the Private
Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
The Company’s initial Business Combination must be with one or more target businesses that together have a fair market value
equal to at least 80% of the balance in the Trust Account (less any deferred underwriting commissions and net of amounts previously
released to the Company to pay its tax obligations) at the time of the signing of an agreement to enter into a Business Combination.
The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of
the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not
to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company
Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its holders
of the outstanding Public Shares 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 stockholders will be entitled to redeem their shares
for a pro rata portion of the amount then on deposit in the Trust Account (initially $10.00 per share, plus any pro rata interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share
amount to be distributed to stockholders who redeem their shares will not be reduced by the deferred underwriting commission the
Company will pay to the underwriters (as discussed in Note 6).
The Company will proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 immediately prior to or upon such consummation 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 a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for
business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, conduct the
redemptions pursuant to the tender offer rules of the 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 other legal reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the
Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to (a) vote
its Founder Shares (as defined in Note 5), Private Shares (as defined in Note 4) and any Public Shares held by it in favor of a
Business Combination and (b) not to redeem any shares in connection with a stockholder vote to approve a Business Combination
or sell any such shares to the Company in a tender offer in connection with a Business Combination. Additionally, each public stockholder
may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the above, if the Company
seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the
Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed to (i) waive
its redemption rights with respect to Founder Shares, Private Shares and any Public Shares it may acquire during or after the Proposed
Public Offering in connection with the consummation of a Business Combination and (ii) not to propose an amendment to the
Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s
obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides
the public stockholders an opportunity to redeem their Public Shares in conjunction with any such amendment. However, the Sponsor
will be entitled to liquidating distributions with respect to any Public Shares acquired if the Company fails to consummate a Business
Combination or liquidates within the Combination Period (defined below).
We will have until 9 months from the closing of this offering (or
12 months from the closing of this offering if we have filed a proxy statement, registration statement or similar filing for an initial
business combination within 9 months from the closing of this offering but have not completed the initial business combination within
such 9-month period) to consummate our initial business combination. In addition, if we anticipate that we may not be able to consummate
our initial business combination (i) within 9 months in the situation that we have not filed a proxy statement, registration statement
or similar filing for an initial business combination within such 9-month period, or (ii) within 12 months in the situation that we have
filed within such 9-month period, our insiders or their affiliates may, but are not obligated to, extend the period of time to consummate
a business combination by an additional three months each time for a total of up to 15 months to complete a business combination, provided
that, pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement to be entered into between
us and Continental Stock Transfer & Trust Company on the date of this prospectus, our insiders or their affiliates or designees, upon
five days’ advance notice prior to the applicable deadline, deposit into the trust account $500,000, or $575,000 if the over-allotment
option is exercised in full ($0.10 per share in either case, or an aggregate of $1,000,000 (or $1,150,000 if the over-allotment option
is exercised in full)), on or prior to the date of the applicable deadline.
If the Company is unable to complete
a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of
winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares,
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned
on the funds held in the Trust Account and not previously released to the Company to pay taxes, divided by the number of then outstanding
Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right
to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board
of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to the Company’s obligations
under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Sponsor has agreed to waive its
liquidation rights with respect to the Private Shares if the Company fails to complete a Business Combination within the Combination
Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares after the Proposed Public Offering, such
Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business
Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission
(see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination
Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available
to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the
assets remaining available for distribution will be less than the Proposed Public Offering price per Unit ($10.00).
In order to protect the amounts held
in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a
transaction agreement, reduce the amounts in the Trust Account to below the lesser of (i) $10.00 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 $10.00
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 who executed a waiver of any and all rights to the monies held in the Trust Account nor will
it apply to any claims under the Company’s indemnity of the underwriters of Proposed Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that
an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any
liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, 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.
Note 2 — Significant Accounting
Policies
Basis of Presentation
The accompanying unaudited financial
statements are presented in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
The accompanying unaudited financial
statements as of June 30, 2021 have been prepared in accordance with U.S. GAAP for interim financial information and Article 8
of Regulation S-X. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation
have been included. Operating results for the three months ended June 30, 2021 are not necessarily indicative of the results that
may be expected for the period ending December 31, 2021, or any future period.
Emerging Growth Company Status
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”),
as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act, 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 shareholder 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 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 financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers cash equivalents
to be highly liquid investments with a maturity at the date of purchase of three months or less. The Company did not have any cash
equivalents at June 30, 2021.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may
exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.
Investments Held in Trust Account
The Company’s portfolio of
investments held in the Trust Account is comprised of investments in money market funds that invest in U.S. government securities.
The estimated fair value of investments held in the Trust Account are determined using available market information.
Offering Costs
Offering costs were $3,161,681 consisting principally of underwriting,
legal, accounting and other expenses incurred through the balance sheet date that are related to the Public Offering and are charged to
stockholders’ equity upon the completion of the Public Offering. The Company complies with the requirements of the ASC 340-10-S99-1
and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. The Company allocated offering costs between public shares and public
rights based on the relative fair values of public shares and public rights. Accordingly, $3,148,085 was allocated to public shares
and charged to temporary equity, and $13,596 was allocated to public rights and charged to shareholders’ equity.
Common stock subject to possible
redemption
The Company accounts for its common stock subject to possible
redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Shares of common stock subject to mandatory redemption (if any) is classified as a liability instrument
and is measured at fair value. Conditionally redeemable common stock (including common stock that features 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, common stock is classified as stockholders’
equity. The Company’s 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, at June 30, 2021, 5,000,000 shares of common stock subject
to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s
balance sheet.
Net Income (Loss) per Share
The Company complies with
accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable
to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable
to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss
less any dividends paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares
outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the common
shares subject to possible redemption was considered to be dividends paid to the public shareholders. As of June 30, 2021, the
Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary
shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for
the period presented.
The net income (loss) per
share presented in the condensed statement of operations is based on the following:
Schedule of net income (loss) per
share presented in the condensed statement of operations
|
|
|
|
|
|
|
For the three months ended
|
|
For the six months ended
|
|
|
June 30, 2021
|
|
June 30, 2021
|
Net Loss
|
|
|
(37,184
|
)
|
|
|
(39,389
|
)
|
Accretion of temporary equity into redemption value
|
|
|
(3,363,085
|
)
|
|
|
(3,363,085
|
)
|
Net loss including accretion of equity into redemption value
|
|
|
(3,400,269
|
)
|
|
|
(3,402,474
|
)
|
Schedule of Net Income/Loss Basic and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2021
|
|
For the six months ended June 30, 2021
|
|
|
Redeemable shares
|
|
Non-redeemable shares
|
|
Redeemable shares
|
|
Non-redeemable shares
|
Basic and diluted net income/(loss) per share:
|
|
|
|
|
|
|
|
|
Numerators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net loss including accretion of temporary equity
|
|
|
(1,600,629
|
)
|
|
|
(1,799,640
|
)
|
|
|
(1,063,020
|
)
|
|
|
(2,339,454
|
)
|
Accretion of temporary equity to redemption value
|
|
|
3,363,085
|
|
|
|
—
|
|
|
|
3,363,085
|
|
|
|
—
|
|
Allocation of net income/(loss)
|
|
|
1,762,456
|
|
|
|
(1,799,640
|
)
|
|
|
2,300,065
|
|
|
|
(2,339,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding
|
|
|
1,153,846
|
|
|
|
1,297,308
|
|
|
|
580,110
|
|
|
|
1,276,685
|
|
Basic and diluted net income/(loss) per share
|
|
$
|
1.53
|
|
|
$
|
(1.39
|
)
|
|
$
|
3.96
|
|
|
$
|
(1.83
|
)
|
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their
short-term nature.
Income Taxes
The Company accounts for income taxes
under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to
be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. Deferred
tax assets were $ 8,272 and
were offset entirely by a valuation allowance as of June 30, 2021.
ASC 740 also clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
The Company
may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations
may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with
federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will
materially change over the next twelve months. The Company is subject to income tax examinations by major taxing authorities since inception.
Recent Accounting Pronouncements
Management does not believe that any
recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
financial statements.
Note 3 — Public
Offering
Pursuant to the Initial Public
Offering, the Company sold 5,000,000 units at a price of $10 per unit (the “public units”) for gross proceeds of
$50,000,000. The units consist of one share of common stock and the right to receive one-tenth (1/10) of a share of common
stock upon consummation of an initial business combination. The underwriting agreement calls for an over-allotment option equal to
15% of the total number of units initially offered to the public. On June 10, 2021, the Company completed the Initial Public
Offering (See Note 7) and on July 20, 2021 the underwriters’ over-allotment option was partially exercised (See Note 10).
Note 4 — Private Placement
The sponsor purchased units from the
Company (“private units”) at $10.00 per private unit. These purchases took place on a private placement basis simultaneously
with the consummation of the offering. All of the proceeds the Company receive from these sales were placed in the trust account
described in Note 1. If the over-allotment option is exercised by the underwriters, the sponsor has offered to purchase from the
Company at a price of $10.00 per private unit an additional number of private units pro rata with the amount of
the over-allotment option exercised.
Note 5 — Related Party Transactions
Founder Shares
Pursuant to a subscription agreement
dated January 28, 2021, the Company issued 1,437,500 shares of common stock to the sponsor for $25,000, or approximately $0.017
per share (“insider shares”). The 1,437,500 founder shares held or controlled by the insiders include an aggregate
of up to 187,500 shares subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised
in full or in part.
Sponsor Promissory Note
On February 10, 2021, the Company issued an
unsecured promissory note to the sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $200,000 to
be used for a portion of the expenses of the offering. This loan is non-interest bearing, unsecured, and is due at the consummation of
a proposed public offering of the Company’s securities or the date on which the Company determines not to conduct a proposed public
offering of its securities. The outstanding principal balance of the sponsor promissory note on June 30, 2021 was $200,000. A portion
of the outstanding balance under the Promissory Note of $75,000 was repaid at the closing of the Proposed Public Offering on June 10,
2021. The remainder of the Promissory Note was repaid except for a portion that was be converted to equity as part of the underwriters’
exercise of the over-allotment option closed on July 22, 2021 (see Note 10). On June 30, 2021, the outstanding balance of the promissory
note was $125,000.
Additionally, if the funds held outside
the trust account after the consummation of the proposed public offering are insufficient to meet the Company’s working capital
needs, the Company’s sponsor or their affiliates may, but are not obligated to loan the Company funds, from time to time
or at any time in an amount they deem reasonable at their sole discretion. Each loan would be evidenced by a promissory note. The
notes would either be paid upon consummation of the Company’s initial business combination without interest, or at the discretion
of the holder up to $1,500,000 of the notes may be converted upon consummation of the Company’ initial business combination
into private units at a price of $10.00 per unit. If the Company does not complete a business combination, the loans will only
be repaid with funds not held in the trust account, to the extent available.
Related Party Extension Loans
As discussed in Note 1, the Company
may extend the period of time to consummate a Business Combination up to two times, each by an additional three months (for a total
of 15 months to complete a Business Combination). In order to extend the time available for the Company to consummate a Business
Combination, the Sponsor or its affiliates or designees must deposit into the Trust Account $500,000, or $575,000 if the underwriters’
over-allotment option is exercised in full ($0.10 per Public Share in either case, or an aggregate of $1,000,000 (or $1,150,000
if the over-allotment option is exercised in full)), on or prior to the date of the applicable deadline, for each three month extension.
Any such payments would be made in the form of a non-interest bearing, unsecured promissory note. Such notes would either be paid
upon consummation of a Business Combination, or, at the relevant insider’s discretion, converted upon consummation of a Business
Combination into additional Private Units at a price of $10.00 per Private Unit. The Sponsor and its affiliates or designees are
not obligated to fund the Trust Account to extend the time for the Company to complete a Business Combination.
Note 6 — Commitments and
Contingencies
Registration Rights
Pursuant to a registration
rights agreement entered into on January 28, 2021, the holders of the Founder Shares, the Private Units, and any shares that may
be issued in payment of Working Capital Loans (and all underlying securities) will be entitled to registration rights pursuant
to a registration rights agreement requiring the Company to register such securities for resale. The holders of a majority of these
securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the
Founders Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which
these shares of common stock are to be released from escrow. The holders of a majority of the Private Units (and underlying securities)
and securities issued in payment of Working Capital Loans can elect to exercise these registration rights at any time commencing
on the date that the Company consummates a Business Combination. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. Notwithstanding
the foregoing, Chardan may not exercise its demand and “piggyback” registration rights after five (5) and seven
(7) years, respectively, after the effective date of the Proposed Public Offering and may not exercise its demand rights on more
than one occasion. The registration rights agreement does not contain liquidating 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.
Risks and Uncertainties
Management is currently
evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the
pandemic 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 financial statements. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Legal Fees
The Company has agreed
to pay its counsel $25,000 upon closing of the initial business combination.
Underwriter’s Agreement
The Company granted
the underwriters a 45-day option from the date of the Proposed Public Offering to purchase up to 750,000 additional Units to cover
over-allotments, if any, at the Proposed Public Offering price less the underwriting discounts and commissions.
The underwriters
are entitled to a deferred fee of $0.30 per Unit, or $1,500,000, upon the completion of a Business Combination. The deferred fee
will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes
a Business Combination, subject to the terms of the underwriting agreement.
On January 21, 2021,
the Company entered into an agreement with an underwriter who acted as lead managing underwriter of the Proposed Public Offering.
Pursuant to this agreement, in addition to the above noted compensation, the Company issued to the underwriter shares of its common
stock valued at $10 per share in an amount equal to 0.5% of the gross proceeds of the offering.
The Company paid
$1,000,000 on June 10, 2021, representing the current portion of the underwriting fee due in conjunction with the offering.
Right of First Refusal
The Company has granted
the underwriter, subject to certain conditions for a period of 18 months after the date of the consummation of the initial business
combination, a right of first refusal to act as a co-manager or placement agent, with at least 25% of the economics, for any and
all future public and private equity and debt offerings. The duration of such right of first refusal is limited not more than three
years by certain regulatory rules.
Note 7 — Shareholder’s
Equity
Common Stock
The Company is authorized
to issue 10,000,000 shares of common stock with a par value of $0.0001 per share. As of June 30, 2021, there were 1,667,500 shares issued and outstanding (excluding 5,000,000 shares
subject to possible redemption), of which an aggregate of up to 187,500 shares are subject to forfeiture to the extent that the underwriters’
over-allotment option is not exercised in full or in part, so that the insiders will collectively own 20% of the Company’s
issued and outstanding common stock after the proposed public offering (assuming the insiders do not purchase any public shares
in the proposed public offering and excluding the private units).
Common Stock Subject to Possible
Redemption
As of June 30, 2021, there were 5,000,000 common shares subject
to possible redemption are presented at redemption value of $10.00 per share as temporary equity, outside of the shareholders’
equity section of the Company’s balance sheet (see Note 2).
Rights
Except in cases where
the Company is not the surviving Company in a business combination, the holders of the rights will automatically receive 1/10 of
a share of common stock upon consummation of the Company’s initial business combination. In the event the Company will not
be the surviving company upon completion of the initial business combination, each holder of a right will be required to affirmatively
convert his, her or its rights in order to receive the 1/10 of a share underlying each right upon consummation of the business
combination. The Company will not issue fractional shares in connection with an exchange of rights. Fractional shares will either
be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware
General Corporation Law. As of June 30, 2021, no rights had been issued.
Note 8 — Fair Value Measurements
The fair value
of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly
transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs
used in order to value the assets and liabilities:
|
Level 1:
|
|
Quoted prices in active markets for identical assets or liabilities. An active market for
an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume
to provide pricing information on an ongoing basis.
|
|
|
|
|
Level 2:
|
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include
quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in
markets that are not active.
|
|
|
|
|
Level 3:
|
|
Unobservable inputs based on our assessment of the assumptions that market participants would
use in pricing the asset or liability.
|
At June 30, 2021,
assets held in the Trust Account were entirely comprised of marketable securities.
The following table presents information
about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2021 and indicates the fair value
hierarchy of the valuation inputs the Company utilized to determine such fair value.
Schedule of Fair value
hierarchy of the valuation inputs the Company
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Other Unobservable Inputs
(Level 3)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable Securities in the Trust Account
|
|
|
50,000,000
|
|
|
|
50,000,000
|
|
|
|
—
|
|
|
|
—
|
|
Note 9 — Revision of Prior
Period Financial Statements
The Company identified errors on the
Form 8-K initial public offering balance sheet as of June 10, 2021. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,”
and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements
in Current Year Financial Statements;” the Company evaluated the errors and has determined that the related impacts were
not material to the prior 8-K report, but that correcting the cumulative impact of such errors would be significant
to our balance sheet for the six months ended June 30, 2021. Accordingly, the Company has corrected such immaterial errors by adjusting
its June 10, 2021 balance sheet and classified all public shares of Common Stock as redeemable on the balance sheet. The following
summarizes the effect of the revision on each financial statement line item.
Schedule Of summarizes the effect of the revision on each
financial statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously Reported
|
|
Adjustments
|
|
As Restated
|
Revised Balance Sheet as of June 10, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to redemption
|
|
$
|
44,130,580
|
|
|
$
|
5,869,420
|
|
|
$
|
50,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value
|
|
|
225
|
|
|
|
(59
|
)
|
|
|
166
|
|
Additional paid-in-capital
|
|
|
5,000,557
|
|
|
|
(5,000,557
|
)
|
|
|
—
|
|
Accumulated Deficit
|
|
|
(780
|
)
|
|
|
(868,804
|
)
|
|
|
(869,584
|
)
|
Total stockholders’ equity
|
|
$
|
5,000,002
|
|
|
$
|
(5,869,420
|
)
|
|
$
|
(869,418
|
)
|
Note 10 — Subsequent Events
In accordance with ASC 855, Subsequent
Events, the Company has evaluated subsequent events through August 24, 2021 which was the date these financial statements were
available for issuance and determined that there were no significant unrecognized events through that date other than noted below.
On July 20, 2021, the underwriters exercised
their option to purchase 91,196 of the 750,000 units available under the underwriters’ over-allotment option, and the closing
of the sale of the additional units pursuant to the over-allotment options occurred on July 22, 2021 generated gross proceeds of
$911,960. Additionally, the sponsor purchased 1,824 private units generating gross proceeds of $18,240. Since the underwriters
did not exercise their over-allotment option in full, 164,701 shares of common stock owned by the sponsor were forfeited for no
consideration.
On
July 22, 2021, $18,240 was converted from the promissory note to equity for the private placement in conjunction with the exercise
of the over-allotment. On July 26, 2021 the remaining $106,760 of the $125,000 balance of the promissory note was paid in full
to the sponsor.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations.
References in this report (the “Quarterly
Report”) to “we,” “us” or the “Company” refer to SPK Acquisition Corp. References to
our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor”
refer to SPK Acquisition LLC. The following discussion and analysis of the Company’s financial condition and results of operations
should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are
not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected
and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation,
statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding
the completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy
and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,”
“believe,” “anticipate,” “intend,” “estimate,” “seek” and variations
and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate
to future events or future performance, but reflect management’s current beliefs, based on information currently available.
A number of factors could cause actual events, performance or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied.
For information identifying important factors that could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form S-1 filed with
the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on
the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company
disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information,
future events or otherwise.
Overview
SPK Acquisition Corp. (the “Company”)
was incorporated in Delaware on December 31, 2020. The Company was formed for the purpose of entering into a merger, share exchange,
asset acquisition, stock purchase, reorganization or other similar business transaction with one or more businesses that the Company
has not yet identified (a “Business Combination”).
We expect to continue to incur significant
costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
As of June 30, 2021, the Company had
not commenced any operations. All activity through June 30, 2021 relates to the Company’s formation and the proposed public
offering (“Proposed Public Offering”). 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 Proposed Public Offering.
For the three and six months ended June
30, 2021, we had a net loss of $37,184 and $39,389, respectively, which consisted of operating costs of $37,184 and $39,389, respectively.
Liquidity and Capital Resources
The registration statement for the Company’s
Proposed Public Offering was declared effective on June 7, 2021. On June 10, 2021, the Company consummated the Proposed Public
Offering of 5,000,000 units (the “Units”) and, with respect to the shares of common stock included in the Units sold,
the Public Shares at $10.00 per Unit, generating gross proceeds of $50,000,000.
Simultaneously with the closing of the
Proposed Public Offering, the Company consummated the sale of 205,000 units (the “Private Units”) at a price of $10.00
per Private Unit in a private placement to SPK Acquisition LLC (the “Sponsor”) generating gross proceeds of $2,050,000.
Following the closing of the Proposed
Public Offering on June 10, 2021, an amount of $50,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in
the Proposed Public Offering and the sale of the Private Units was placed in a trust account (the “Trust Account”).
For the six months ended June 30, 2021,
there was $231,191 of cash used in operating activities.
We intend to use substantially all of
the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes
payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration
to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2021, we had cash of
$557,128. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform
business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies
or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or
their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would
repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital
held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment.
Up to $1,500,000 of the Working Capital Loans may be converted into private units at a price of $10.00 per unit. The private units
would be identical to the Private Units. As of June 30, 2021 we had no Working Capital Loans outstanding.
We do not believe we will need to raise
additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of
identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual
amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination.
Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated
to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional
securities or incur debt in connection with such Business Combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of June 30, 2021. We do not participate in transactions that create
relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would
have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance
sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or
purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital
lease obligations, operating lease obligations or long-term liabilities
The underwriters are entitled to a deferred
fee of up to $0.30 per Unit, or $1,500,000 if the underwriters’ overallotment option is exercised in full.
Legal counsel is entitled to a payment
of $25,000 upon the closing of a business combination. If no business combination is completed, no amounts will be due.
JOBS Act
On April 5, 2012, the JOBS Act
was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying
public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be 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 such, our
financial statements may not be comparable to companies that comply with 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 of the Sarbanes-Oxley Act, (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 PCAOB 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 executive compensation to median employee compensation. These exemptions will apply for a period
of five years following the completion of our public offering or until we are no longer an “emerging growth company,”
whichever is earlier.
Critical Accounting Policies
The preparation of condensed financial
statements and related disclosures in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common stock Subject to Possible Redemption
We account for
our ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a
liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features
redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events
not solely within our control) is classified as temporary equity. At all other times, common stock are classified as shareholders’
equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence
of uncertain future events. Accordingly, common stock subject to possible redemption is presented as temporary equity, outside
of the shareholders’ equity section of our condensed balance sheets.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to
equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock
are affected by charges against additional paid in capital and accumulated deficit.
Net
Income (Loss) per Share
The
Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income
(loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss)
allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net
loss less any dividends paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares
outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the common shares
subject to possible redemption was considered to be dividends paid to the public shareholders.
Offering
Costs
Offering
costs were consisting principally of underwriting, legal, accounting and other expenses incurred through the balance sheet date that
are related to the Public Offering and are charged to stockholders’ equity upon the completion of the Public Offering. The Company
allocates offering costs between public shares and public rights based on the relative fair values of public shares and public rights.
Management does not believe that any
other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed
financial statements.