The accompanying notes are an integral
part of these unaudited condensed financial statements.
The accompanying notes
are an integral part of these unaudited condensed financial statements.
The accompanying notes
are an integral part of these unaudited condensed financial statements.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
TG Venture Acquisition Corp. (the
“Company”) is a blank check company incorporated as a Delaware corporation on February 8, 2021, for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses
(the “Business Combination”).
As of June 30, 2022, the Company had
not commenced any operations. All activity for the period from February 8, 2021 (inception) through June 30, 2022 relates to the Company’s
formation and the initial public offering described below. The Company will not generate any operating revenues until after the completion
of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on
cash and cash equivalents from the proceeds derived from the Initial Public Offering (the “IPO”).
The Company’s sponsor is Tsangs
Group Holdings Limited (the “Sponsor”). The registration statement for the Company’s IPO was declared effective on November
2, 2021 (the “Effective Date”). On November 5, 2021, the Company consummated the IPO of 11,500,000 units (the “Units”
and, with respect to the Common stock included in the Units being offered, the “Public Shares” and the warrants included in
the Units being offered, the “Public Warrants”) at $10.00 per Unit, including the full exercise of the underwriters’
over-allotment of 1,500,000 Units, generating gross proceeds to the Company of $115,000,000, which is discussed in Note 3.
Simultaneously with the consummation
of the IPO, the Company consummated the private placement of 5,500,000 Warrants (the “Private Placement Warrants”) at a price
of $1.00 per Private Placement Warrant to the Sponsor, generating gross proceeds to the Company of $5,500,000, which is described in Note
4.
Transaction costs amounted to $3,040,822
consisting of $1,150,000 of underwriting commissions, $575,000 of fair value of the Units issued to ThinkEquity LLC (“ThinkEquity”),
the representative of the underwriters (see Note 6), $579,110 of fair value of the Founder Shares (as defined in Note 5) sold to advisors
in excess of proceeds (see Note 5), and $736,712 of other offering costs, and was all charged to stockholders’ equity.
While the Company’s management
has broad discretion with respect to the specific application of the cash held outside of the Trust Account (as hereinafter defined),
substantially all of the net proceeds from the Initial Public Offering and the sale of the Private Placement Warrants, which are placed
in the Trust Account, are intended to be applied generally toward completing a Business Combination. The Company’s Business Combination
must be with one or more target businesses that together have a fair market value equal to at least 80% of the value of the assets held
in the Trust Account (excluding the taxes payable on the interest earned on the Trust Account) at the time of the signing a definitive
agreement in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-Business
Combination company owns or acquires 50% or more of the 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 (the “Investment Company Act”). There is no assurance that the Company will be able to successfully effect a Business
Combination.
Following the closing of the IPO on
November 5, 2021, $117,300,000 ($10.20 per Unit) from the net proceeds of the sale of Units in the IPO and a portion of the proceeds of
the sale of the Private Placement Warrants were deposited into a trust account (the “Trust Account”) located in the United
States with Continental Stock Transfer & Trust Company acting as trustee, and are invested only in U.S. government securities with
a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which
invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account
that may be released to the Company to pay its franchise and income tax obligations (less up to $100,000 of interest to pay dissolution
expenses), the proceeds from the IPO and the sale of the Private Placement Warrants will not be released from the Trust Account until
the earliest of: (a) the completion of the initial Business Combination; (b) the redemption of any Public Shares properly submitted in
connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation: (i) to modify the substance
or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or certain amendments
to the Company’s charter prior thereto or to redeem 100% of the Public Shares if the Company does not complete the initial Business
Combination within 18 months from the closing of this offering May 5, 2023; or (ii) with respect to any other provision relating to stockholders’
rights or pre-Business Combination activity; and (c) the redemption of 100% of the Public Shares if the Company is unable to complete
the initial Business Combination within the required time frame (subject to the requirements of applicable law).
Public stockholders have the opportunity
to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to voting on the initial Business
Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise
and income taxes, divided by the number of then outstanding Public Shares, subject to the limitations described herein. The amount in
the Trust Account is initially anticipated to be $10.20 per public share.
The Company will only proceed with
a Business Combination if the Company has net tangible assets of at least $5,000,001 immediately prior to or upon the consummation of
such Business Combination, and, if the Company seeks public stockholder approval, a majority of the shares voted are voted in favor of
the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company
does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate
of incorporation, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “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 applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business
or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has
agreed to vote its Founder Shares and any Public Shares purchased during or after the Initial Public Offering in favor of approving a
Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares without voting, and if they do vote,
irrespective of whether they vote for or against the proposed transaction.
The Company has 18 months from the
closing of the IPO until May 5, 2023 to complete the initial Business Combination (the “Combination Period”). If the Company
is unable to complete the initial 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 ten business days thereafter subject to lawfully
available funds therefor, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay
its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which
redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating
distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to
the approval of the Company’s remaining stockholders and the board of directors, dissolve and liquidate, subject in the case of
clauses (ii) and (iii) above to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law. There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire
worthless if the Company fails to complete the initial Business Combination within the Combination Period.
The initial stockholders, Sponsor,
executive officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) to waive
their redemption rights with respect to their Founder Shares if we are forced to liquidate; (ii) to waive their redemption rights with
respect to their Founder Shares and Public Shares in connection with a stockholder vote to approve an amendment to the Company’s
amended and restated certificate of incorporation: (A) to modify the substance or timing of the Company’s obligation to allow redemption
in connection with the Company’s initial Business Combination or certain amendments to the charter prior thereto or to redeem 100%
of the Company’s Public Shares if the Company does not complete the initial Business Combination within the Combined Period or (B)
with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity; and (iii) to
waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to complete
the initial Business Combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust
Account with respect to any Public Shares they hold if the Company fails to complete the initial Business Combination within the Combination
Period; (iv) the Founder Shares are shares of the Company’s Class B common stock that will automatically convert into shares of
the Company’s Class A common stock at the time of the initial Business Combination, on a one-for-one basis, subject to adjustment
as described herein, and (v) are entitled to registration rights. If the Company submits the initial Business Combination to the public
stockholders for a vote, the initial stockholders, officers and directors have agreed pursuant to the letter agreement to vote any shares
held by them and any Public Shares purchased during or after this offering (including in open market and privately negotiated transactions)
in favor of the initial Business Combination.
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 a
prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or
Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.20 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
$10.20 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to
any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust
Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters
of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked the Sponsor
to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to
satisfy its indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company
cannot assent that the Sponsor would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify
the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Liquidity, Capital Resources
and Going Concern
The Company’s liquidity needs
up to June 30, 2022 had been satisfied through a payment from the Sponsor of $25,000
(see Note 5) for the Founder Shares and the loan under an unsecured promissory note from the Sponsor of up to $400,000
(see Note 5). As of June 30, 2022, the Company had $289,892
in its operating bank account and working capital of $515,467.
In addition, in order to finance transaction
costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s
officers and directors may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5) and proceeds
outside of the Trust account and Private Placement Warrants. As of June 30, 2022 and December 31, 2021, there were no amounts outstanding
under any Working Capital Loans.
Based on the foregoing, management
believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation
of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing
accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective
target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating
and consummating the Business Combination.
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update
(“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,”
management has determined that the date for mandatory liquidation and dissolution raises substantial doubt about the Company’s ability
to continue as a going concern through May 5, 2023, the scheduled liquidation date of the Company if it does not complete a Business Combination
prior to such date.
Risks and Uncertainties
In February 2022, the Russian Federation
and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United
States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company’s
financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
Management continues to evaluate the
impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus and war could have a negative effect
on the Company’s financial position, results of its operations and search for a target company, the specific impact is not readily
determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial
information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote
disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the
rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary
for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying
unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair
presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read
in conjunction with the Company’s Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 31, 2022, which
contains the audited financial statements and notes thereto. The interim results for the three and six months ended June 30, 2022 are
not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in
Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), and
it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are
not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy
statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and approval of any golden
parachute payments not previously approved.
Further, Section102 (b)(1) of the JOBS Act exempts emerging growth companies
from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not
had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act)
are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out
of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to
opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is
issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company,
can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the
Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company
which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use of Estimates
The preparation of the unaudited condensed 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 unaudited condensed financial statements. Making
estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates. The significant accounting estimate reflected in the Company’s financial
statements includes, but is not limited to, valuation of Founder Shares.
Cash and Cash Equivalents
The Company considers all short-term
investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had cash of $289,892
and $664,626 as of June 30, 2022 and December 31, 2021, respectively. The Company did not have any cash equivalents as of June 30, 2022
and December 31, 2021.
Investments Held in Trust Account
As of June 30, 2022, substantially
all of assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury securities.
As of December 31, 2021, the assets
held in the Trust Account consist of United States Treasury Bills. The Company classifies its United States Treasury securities as held-to-maturity
in accordance with FASB ASC Topic 320 “Investments—Debt and Equity Securities.” Held-to-maturity securities are those
securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized
cost and adjusted for the amortization or accretion of premiums or discounts.
During the three and six months ended
June 30, 2022 and the period from February 8, 2021 (inception) through December 31, 2021, the Company did not withdraw any of the interest
income from the Trust Account to pay its tax obligations, however, may in the future periods as permitted under the Trust Agreement.
A decline in the market value of held-to-maturity
securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’
fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment
is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery
and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered
in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent
to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the
investee operates.
Premiums and discounts are amortized
or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such
amortization and accretion are included in the “interest income” line item in the statements of operations. Interest income
is recognized when earned.
Deferred Offering Costs
The Company complies with the requirements
of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 340-10-S99-1, “Other
Assets and Deferred Costs”. Deferred offering costs consists of legal, accounting, underwriting fees and other costs incurred through
the balance sheet date that are directly related to the Public Offering. Offering costs are allocated to the separable financial instruments
to be issued in the IPO based on a relative fair value basis, compared to total proceeds received. Upon closing of the IPO on November
5, 2021, offering costs associated with the Class A common stock and the warrants were charged to stockholders’ equity. Upon the
IPO on November 5, 2021 offering costs amounted to $3,040,822, all of which was allocated to stockholders’ equity.
Share Based Compensation
The Company complies with ASC 718
Compensation- Stock Compensation, regarding interests in founder shares acquired by directors and advisors of the Company as compensation.
The interests in the founder shares vested upon the Company completing the initial public offering and compensation expense has been recorded
accordingly at that date based upon the initial grant date fair value. The determination of the fair value of the share-based compensation
awards represents a significant estimate within the financial statements. The fair value is based upon a Monte Carlo valuation that considers
the probability of an initial public offering, business combination and other risk factors.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet, primarily due to its short-term nature.
Fair Value Measurements
Fair value is defined as the price
that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants
at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● |
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
|
|
● |
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
|
|
● |
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy.
In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement. |
Common stock Subject to Possible Redemption
The Company will account for its common
stock subject to possible redemption in accordance with the guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity.”
Common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally
redeemable common stock (including shares of common stock that feature redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary
equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Common stock will feature certain
redemption rights that are considered to be outside of the Company’s control and will be subject to the occurrence of uncertain
future events. Accordingly, common stock subject to possible redemption will be presented at redemption value as temporary equity, outside
of the stockholders’ equity section of the Company’s condensed balance sheets.
The Company recognizes changes in
redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to
equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also
the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion
from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and
accumulated deficit. There was no change to redemption value at June 30, 2022 since the incurred taxes exceed the interest earned inception
to date. The dissolution expense of $100,000 is not included in the redemption value of the shares subject to redemption since it is only
taken into account in the event of the Company’s liquidation.
The Class A common stock subject to
possible redemption reflected on the balance sheets as of June 30, 2022 and December 31, 2021 is reconciled in the following table:
Schedule of reconciliation |
|
|
|
|
Gross
Proceeds |
|
$ |
115,000,000 |
|
Less: |
|
|
|
|
Proceeds
allocated to Public Warrants |
|
|
(6,725,456 |
) |
Issuance
cost of redeemable Class A common stock |
|
|
(3,040,822 |
) |
Plus: |
|
|
|
|
Remeasurement
adjustment on redeemable common stock |
|
|
12,066,278 |
|
Class
A common stock subject to possible redemption |
|
$ |
117,300,000 |
|
Derivative Financial Instruments
The Company evaluates its financial
instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with
FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). Derivative instruments are initially recorded at fair
value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement
or conversion of the instrument could be required within 12 months of the balance sheet date.
Warrants
The Company accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable
authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815. The
assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net
cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This
assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
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 redemptions provisions represents the only
shares in the reporting entity, it must report instruments in the liabilities section of its statements 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 Company’s warrants defined in Note 7 do not exhibit any of the above characteristics
and, therefore, are outside the scope of ASC 480.
For issued or modified warrants that
meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital
at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants
are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts
for the 11,500,000 Public Warrants (Note 3) and 5,500,000 Private Placement Warrants (Note 4) as equity-classified instruments.
Net Loss Per Common Share
The Company complies with accounting
and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per share is computed by dividing net loss
by the weighted average number of shares of common stock outstanding during the period. The Company has two classes of shares, which are
referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares.
The Company had not considered the effect of the Private Placement to purchase an aggregate of 5,500,000 of our Class A common stock in
the calculation of diluted loss per share, since their exercise is contingent upon future events. As a result, diluted net loss per common
stock is the same as basic net loss per common stock. The table below presents a reconciliation of the numerator and denominator used
to compute basic and diluted net loss per share for each class of common stock.
Reconciliation of Net Loss per
Common Stock
Basic and diluted net loss per share
for Class A common stock and for Class B common stock is calculated as follows:
Schedule of Earnings Per Share, Basic and Diluted |
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2022 |
|
For the Six Months Ended June 30, 2022 |
Net loss per share for Class A common stock: |
|
|
|
|
Allocation of net loss to Class A common stock |
|
$ |
(88,611 |
) |
|
$ |
(297,967 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares, Class A common stock |
|
|
11,557,500 |
|
|
|
11,557,500 |
|
Basic and diluted net loss per share |
|
$ |
(0.01 |
) |
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share for Class B common stock: |
|
|
|
|
|
|
|
|
Allocation of net loss to Class B common stock |
|
$ |
(22,151 |
) |
|
$ |
(74,486 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares, Class B common stock |
|
|
2,889,149 |
|
|
|
2,889,149 |
|
Basic and diluted net loss per share |
|
$ |
(0.01 |
) |
|
$ |
(0.03 |
) |
|
|
For
the Three Months Ended June 30, 2021 |
|
For
the period from February 8, 2021 (inception) through June 30, 2021 |
Net
loss per share for Class A common stock: |
|
|
|
|
Allocation
of net loss to Class A common stock |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average shares, Class A common stock |
|
|
— |
|
|
|
— |
|
Basic
and diluted net loss per share |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Net
loss per share for Class B common stock: |
|
|
|
|
|
|
|
|
Allocation
of net loss to Class B common stock |
|
$ |
(442 |
) |
|
$ |
(442 |
) |
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average shares, Class B common stock |
|
|
2,514,149 |
|
|
|
2,514,149 |
|
Basic
and diluted net loss per share |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
Income Taxes
The Company accounts for income taxes under ASC 740,
“Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the unaudited condensed financial statements 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. As of June 30, 2022 and
December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
Our effective
tax rate was (0.40%) and 0.00% for the three months ended June 30, 2022 and 2021, respectively, and (1.36%) and 0.00% for the six months ended
June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and six months ended
June 30, 2022 and 2021, due to changes in the valuation allowance on the deferred tax assets.
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 recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest
and penalties as of June 30, 2022 and December 31, 2021. 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 has identified the United States as its
only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal and state 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.
Concentration of Credit Risk
Financial instruments that potentially subject the
Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal Depository
Insurance Corporation coverage of $250,000. At June 30, 2022 and December 31, 2021, the Company had not experienced losses on this account.
Recent Accounting Pronouncements
Management does not believe that any other recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial
statements.
Note 3 — Initial Public Offering
On November 5, 2021, the Company sold 11,500,000 Units,
including the full exercise of the underwriters’ over-allotment option to purchase 1,500,000 Units, at a purchase price of $10.00
per Unit. Each unit consists of one Public Share, an aggregate of 11,500,000 Public Shares, and one redeemable Public Warrant, an aggregate
of 11,500,000 Public Warrants. Each Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price
of $11.50 per share, subject to adjustment (see Note 7).
Note 4 — Private Placement
Simultaneously with the closing of the IPO, the Sponsor
purchased an aggregate of 5,500,000 Private Placement Warrants at a price of $1.00 per warrant in a private placement, for an aggregate
purchase price of $5,500,000. Each Private Placement Warrant entitles the holder thereof to purchase one share of the Company’s
Class A common stock at a price of $11.50 per share, subject to adjustments (see Note 7), and will expire worthless if the Company does
not complete the initial Business Combination.
The Private Placement Warrants are identical to the
Public Warrants except that they will not be transferable, assignable or saleable until 30 days after the Business Combination except
to certain permitted transferees.
Note 5 — Related Party Transactions
Founder Shares
In 2021, the Sponsor and other founders (the “Initial
Stockholder”) paid $ in exchange for shares of Common stock (the “Founder Shares”). The number of Founder
Shares outstanding was determined based on the expectation that the total size of the IPO would be a maximum of 11,500,000 Units if the
underwriter’s over-allotment option was exercised in full, and therefore that such Founder Shares represent 20% of the outstanding
shares after the IPO.
Two of the initial stockholders, TriPoint Capital
Management, LLC (“TriPoint”), a Delaware limited liability company, and HFI Limited (“HFI”), a Cayman Islands
company, serve in an advisory capacity to the Sponsor with the Company being a primary beneficiary, and their participation in the purchase
of Founder Shares is considered as part of their compensation as advisors. Accordingly, upon consummation of the IPO on November 5, 2021,
the Company recorded the excess fair value above the purchase price of the 300,000 Founder Shares purchased by TriPoint and HFI as an
offering cost of $579,110, which were charged to stockholders’ equity.
On November 2, 2021, the Sponsor entered into an
Agreement with the .
The Initial Stockholders have agreed not to transfer,
assign, or sell any of their Founder Shares until the earlier to occur of: (A) six months after the completion of the initial Business
Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds
$12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days
within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company
completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s
stockholders having the right to exchange their shares of common stock for cash, securities or other property, except with respect to
permitted transferees.
Promissory Note — Related Party
The Sponsor issued a promissory note allowing the
Company to borrow up to $400,000 under an unsecured promissory note to be used for a portion of the expenses of the IPO. The Company had
borrowed $227,690 under the promissory note. At December 31, 2021, the Company fully repaid the outstanding promissory note. At June 30,
2022, the Company did not have any outstanding promissory notes.
Working Capital Loans
Our sponsor has committed that they are willing and
able to provide the Company with any additional funds it needs to carry out its operations. In order to finance transaction costs in connection
with an intended initial Business Combination, the Sponsor, an affiliate of the Sponsor or certain of the Company’s officers and
directors have committed to loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes
an initial Business Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account released to the
Company. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. In the event that the initial Business
Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts
but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $3,000,000 of such loans may be convertible into
Private Placement Warrants of the post Business Combination entity, at a price of $1.00 per warrant at the option of the lender. The warrants
would be identical to the Private Placement Warrants issued to the Sponsor. As of June 30, 2022 and December 31, 2021, the Company had
no borrowings under the Working Capital Loans.
Administrative Service Fee
The Company entered into an administrative services
agreement on November 2, 2021, pursuant to which the Company will pay an affiliate of the Sponsor, $445 per month for office space, utilities
and secretarial and administrative support. Upon completion of the initial Business Combination or the Company’s liquidation, the
Company will cease paying these monthly fees. Total expense under the administrative services agreement during the three and six months
ended June 30, 2022, were $1,335 and $2,670, respectively. No administrative fees had been recorded
for three months ended June 30, 2021 and for the period from February 8, 2021 (inception) through June 30, 2021.
Note 6 — Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon
the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion
of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on
the Effective Date of the registration statement of which this prospectus forms a part, requiring the Company to register such securities
for resale (in the case of the Founder Shares, only after conversion to the Class A common stock). The holders of these securities will
be entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders
have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s
completion of the initial Business Combination.
Underwriting Agreement
On November 5, 2021, the Company paid a cash underwriting
discount of 1.0% per Unit, or $1,150,000. In addition, the underwriting agreement provides the option to purchase up to 1,500,000 additional
Units to cover any over-allotments, if any, at the Proposed Public Offering price of $10.00 less the underwriting discount of 1%. The
over-allotment was exercised in full upon the IPO on November 5, 2021.
Representative Units
Simultaneous with the closing of the IPO, the Company
issued to ThinkEquity, as part of representative compensation upon the consummation of the IPO, 57,500 Representative Units (the “Representative
Units”). The Representative Units consist of one share of Class A common stock and one redeemable warrant to purchase one share
of Class A common stock at a price of $11.50 per share, subject to adjustment. The Representative Units are identical to the Units except,
and so long as the Representative Units are held by ThinkEquity (and/or its designees) or its permitted transferees, they (i) may not
(including the Class A common stock issuable upon exercise of the warrants), subject to certain limited exceptions, be transferred, assigned
or sold by the holders until 30 days after the completion of the initial Business Combination, (ii) may be exercised by the holders on
a cashless basis, (iii) will be entitled to registration rights and (iv) will not be exercisable more than five years from the Effective
Date of the registration statement of which this prospectus forms a part in accordance with FINRA Rule 5110(f)(2)(G)(i). ThinkEquity has
agreed (i) to waive its redemption rights with respect to the warrants underlying the Representative Units in connection with the completion
of the initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such
warrants if the Company fails to complete the initial Business Combination within 18 months from the closing of the IPO.
Note 7 — Stockholder’s Equity
Preferred Stock —
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of June
30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock —
The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. At
June 30, 2022 and December 31, 2021, there were 57,500 shares of Class A common stock issued and outstanding (excluding 11,500,000 shares
of Class A common stock subject to possible redemption).
Class B Common Stock —
The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. At
June 30, 2022 and December 31, 2021, there were 2,889,149 shares of Class B common stock issued and outstanding.
The shares of Class B common stock
will automatically convert into shares of the Class A common stock at the time of the initial Business Combination on a one-for-one basis,
subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations, and the like, and subject to further adjustment
as provided herein.
Warrants – At
June 30, 2022 and December 31, 2021, 11,500,000 Public Warrants and 5,500,000 Private Placement Warrants are currently outstanding. Each
warrant entitles the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject
to adjustment as described herein. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities
for capital raising purposes in connection with the closing of the initial Business Combination at a Newly Issued Price of less than $9.20
per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the board of directors
and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor
or its affiliates, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total
equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of
the initial Business Combination (net of redemptions), and (z) The Market Value (defined as the volume weighted average reported trading
price of Class A Common Stock for twenty trading days starting on the trading day prior to the date of the consummation of the initial
Business Combination) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal
to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above
will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
Each warrant is exercisable at any
time commencing on the later of 30 days after the completion of our initial business combination and 12 months from the closing of the
IPO and terminating at 5:00 p.m., New York City time on the earlier to occur of (i) the date that is five (5) years after the date on
which the Company consummates a Business Combination, (ii) at 5:00 p.m., New York City time on the Redemption Date as provided in the
Warrant Agreement and (iii) the liquidation of the Trust Account (the “Expiration Date”). The Company in its sole discretion
may extend the duration of the Warrants by delaying the Expiration Date; provided, however, that the Company will provide at least twenty
(20) days’ prior written notice of any such extension to registered holders and, provided further that any such extension shall
be applied consistently to all of the Warrants. Notwithstanding anything to the contrary contained herein, for so long as any Private
Warrant is held by the Sponsor and/or their designees, such Private Warrant may not be exercised after five years from the Effective Date
of the Registration Statement. The warrants will expire at 5:00 p.m., New York City time on the warrant expiration date, which is five
years after the completion of the initial Business Combination or earlier upon redemption or liquidation. On the exercise of any warrant,
the warrant exercise price will be paid directly to the Company and not placed in the Trust Account.
The Company will not be obligated
to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant
exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants
is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations described below
with respect to registration. No warrant will be exercisable, and the Company will not be obligated to issue shares of Class A common
stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed
to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions
in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled
to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash
settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a Unit containing
such warrant will have paid the full purchase price for the Unit solely for the share of Class A common stock underlying such Unit.
The Company is not registering the
shares of Class A common stock issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable
after the closing of the initial Business Combination, the Company will use its best efforts to file with the SEC a registration statement
covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective
and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified
in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants
is not effective within 60 business days after the closing of the initial Business Combination, warrant holders may, until such time as
there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration
statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Redemption of warrants:
Once the warrants become exercisable,
the Company may redeem the outstanding warrants:
|
● |
In
whole and not in part; |
|
|
|
|
● |
at a
price of $0.01 per warrant; |
|
|
|
|
● |
upon
not less than 30 days’ prior written notice of redemption given after the warrants become exercisable to each warrant holder; and |
|
|
|
|
● |
if, and
only if, the last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day
prior to the date on which the Company sends the notice of redemption to the warrant holders. |
If the Company calls the warrants for redemption as
described above, the management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the management
will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on the stockholders
of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the warrants. In such event, each holder
would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained
by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between
the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair
market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the
third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If the Company’s management
takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Class
A common stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless
exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption.
Note 8 — Fair Value Measurements
The fair value of the Company’s certain assets
and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the balance sheets
as of June 30, 2022, and December 31, 2021. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued
expenses are estimated to approximate the carrying values as of June 30, 2022, and December 31, 2021 due to the short maturities
of such instruments.
The following table presents information about the
Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021,
and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Schedule of fair value on a recurring basis | |
| | | |
| | | |
| | | |
| | |
Description: | |
Level | |
June 30, 2022 | |
Level | |
December 31, 2021 |
Assets: | |
| | | |
| | | |
| | | |
| | |
U.S. Money Market Funds Held in Trust Account | |
| 1 | | |
| 117,435,301 | | |
| 1 | | |
$ | — | |
The carrying value, excluding gross unrealized holding
loss and fair value of held to maturity securities on December 31, 2021 are as follows:
Debt securities, available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Value as of December 31, 2021 |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair Value
as of December 31, 2021 |
U.S.
Treasury Securities (maturity 05/20/2021) |
|
$ |
117,307,072 |
|
|
$ |
— |
|
|
$ |
(21,399 |
) |
|
$ |
117,285,673 |
|
There were no transfers between Levels 1, 2 or 3 during
the three and six months ended June 30, 2022, or for the year ended December 31, 2021.
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred
after the balance sheet date up to the date the unaudited condensed financial statements were issued. Except as disclosed in the footnotes
elsewhere and below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited
condensed financial statements.