NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Mountain
Crest Acquisition Corp. V (the “Company”) is a newly organized blank check company that was incorporated in Delaware on April 8,
2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses (the “Business Combination”). Although the Company is not limited
to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on private
companies in North America and Asia Pacific regions that have positive operating cash flow or compelling economics and clear paths to
positive operating cash flow, significant assets, and successful management teams that are seeking access to the U.S. public capital
markets. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated
with early stage and emerging growth companies.
As
of September 30, 2022, the Company had not commenced any operations. All activity for the period from April 8, 2021 (inception)
through September 30, 2022 relates to the Company’s formation, the initial public offering (“Initial Public Offering”),
which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The
Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The
Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on November 12, 2021. On November 16,
2021, the Company consummated the Initial Public Offering of 6,000,000 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 $60,000,000, which is
described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of units (the “Private Units”)
at a price of $ per Private Unit in a private placement to Mountain Crest Global Holdings LLC (the “Sponsor”) generating
gross proceeds of $, which is described in Note 4.
Following
the closing of the Initial Public Offering on November 16, 2021, an amount of $60,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial 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 of 1940, as amended, (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.
On
November 18, 2021, the underwriters fully exercised their over-allotment option, resulting in an additional 900,000 Units issued
for an aggregate amount of $9,000,000. In connection with the underwriters’ full exercise of their over-allotment option, the Company
also consummated the sale of an additional 18,000 Private Units at $10.00 per Private Unit, generating total proceeds of $180,000. A
net total of $9,000,000 was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $69,000,000.
Transaction
costs amounted to $5,090,361 consisting of $1,380,000 of underwriting fees, $2,070,000 of deferred underwriting fees and $1,640,361 of
other offering costs (which includes $1,383,617 of Representative Shares at fair value See Note 6).
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private 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 (as defined below) (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. There is no assurance that the Company
will be able to successfully effect a Business Combination.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
The
Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The 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 Insider 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 Insider Shares, Private Shares and any Public Shares it may acquire
during or after the Initial 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).
The
Company will have until November 16, 2022 (or until February 16, 2023 if the Company has executed a definitive agreement for
a Business Combination by November 16, 2022 but has not completed the Business Combination by such date) to consummate a Business
Combination. However, if the Company anticipates that it may not be able to consummate a Business Combination within 12 months, and the
Company has not entered into a definitive agreement for a Business Combination by such date, 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 18 months to complete a Business
Combination (the “Combination Period”). As of the date of the filing of these financial statements, the period of time for
the Company to complete a Business Combination under its amended and restated certificate of incorporation is extended for a period of
3 months from November 16, 2022 to February 16, 2023 based upon the execution of a Business Combination Agreement on October 19,
2022 (Note 9).
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
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 Initial Public
Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a
Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting
commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination
Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund
the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining
available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a 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 Initial Public Offering against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed
waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such
third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to
claims of creditors by endeavoring to have all vendors, service providers, 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.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the
specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
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 condensed consolidated
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 condensed consolidated financial statements.
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides
for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded
domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed
on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the
abuse or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
Any
redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or
otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection
with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of
the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business
Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination
(or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination)
and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the
Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing
could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete
a Business Combination.
Going
Concern
In
connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board
(“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s
Ability to Continue as a Going Concern,” the Company has until November 16, 2022 to consummate the proposed Business Combination.
It is uncertain that the Company will be able to consummate the proposed Business Combination by this time. If a business combination
is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined
that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt
about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after November 16, 2022. The Company intends to complete the proposed Business
Combination before the mandatory liquidation date. However, there can be no assurance that the Company will be able to consummate any
business combination by November 16, 2022.
As
of the date of the filing of these financial statements, the period of time for the Company to complete a Business Combination under
its amended and restated certificate of incorporation is extended for a period of 3 months from November 16, 2022 to February 16,
2023 based upon the execution of a Business Combination Agreement on October 19, 2022 (Note 9).
Liquidity
and Capital Resources
As
of September 30, 2022, the Company had $158,615 of cash held outside its Trust Account for use as working capital (the “Working
Capital”).
The
promissory note from the Sponsor was paid in full at November 16, 2021. In addition, in order to finance transaction costs in connection
with a business combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may,
but are not obligated to, provide the Company working capital loans, as defined below (see Note 5). To date, 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.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
NOTE
2. SUMMARY OF 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 Annual Report on Form 10-K
for the period ended December 31, 2021, as filed with the SEC on March 31, 2022. The interim results for the three and nine
months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31,
2022 or for any future periods.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not
being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that 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 condensed 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 condensed financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ
from those estimates.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
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.
At September 30, 2022 and December 31, 2021, the Company had no cash equivalents.
Investment
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.
treasury securities and generally have a readily determinable fair value, or a combination thereof. Gains and losses resulting from the
change in fair value of these securities are included in interest earned on marketable securities held in Trust Account in the accompanying
statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Common
Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in FASB 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 common stock (including common stock 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 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 September 30, 2022 and December 31, 2021, common
stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit
section of the Company’s condensed balance sheets.
At
September 30, 2022 and December 31, 2021, the common stock reflected in the condensed balance sheets are reconciled in the
following table:
| Scheduled of common stock subject to possible redemption | |
| | |
| Gross proceeds | |
$ | 69,000,000 | |
| Less: | |
| | |
| Allocation of offering costs related to redeemable shares | |
| (4,657,681 | ) |
| Proceeds allocated to Public Rights | |
| (5,865,000 | ) |
| Plus: | |
| | |
| Accretion of carrying value to redemption value | |
| 10,522,681 | |
| | |
| | |
| Common stock subject to possible redemption, December 31, 2021 | |
| 69,000,000 | |
| Plus: | |
| | |
| Accretion of carrying value to redemption value | |
| 260,501 | |
| Common
stock subject to possible redemption, September 30, 2022 | |
$ | 69,260,501 | |
Offering
Costs
Offering
costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the
Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based
on a relative fair value basis, compared to total proceeds received. Offering costs associated with the common stock issued were initially
charged to temporary equity and then accreted to common stock subject to redemption upon the completion of the Initial Public Offering.
Offering costs amounted to $5,090,361 consisting of $1,380,000 of underwriting fees, $2,070,000 of deferred underwriting fees and $1,640,361
of other offering costs. These were charged to stockholders’ deficit upon the completion of the Initial Public Offering. $4,657,681
was allocated to Public Shares and charged to temporary equity, and $432,681 was allocated to public rights and charged to stockholders’
deficit.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
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 September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation
allowance recorded against it.
ASC
740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in
interim periods under ASC 740-270-30-5. The Company’s effective tax rate was 58.49% and 0.00% for the three months ended September 30,
2022 and 2021, respectively, and 132.66% and 0.00% for the nine months ended September 30, 2022 and for the period from April 8,
2021 (inception) through September 30, 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for
the three and nine months ended September 30, 2022 and for the three months and for the period from April 8, 2021 (inception)
through September 30, 2021, due to expenditures, other than franchise taxes, treated as startup costs prior to operations which
a valuation allowance on the deferred tax assets is applied.
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 September 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.
Net
Income (Loss) per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The statement of operations includes
a presentation of income (loss) per redeemable public share and income (loss) per non-redeemable share following the two-class method
of loss per share. In order to determine the net income (loss) attributable to both the public redeemable shares and non-redeemable shares,
the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income
(loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption
value of the redeemable shares subject to possible redemption was considered to be dividends paid to the public stockholders. Subsequent
to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated using a ratio of
76% for the redeemable Public Shares and 24% for the non-redeemable shares for the three and nine months ended September 30, 2022,
reflective of the respective participation rights.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
The
earnings per share presented in the statement of operations is based on the following:
| Scheduled of basic and diluted net loss per share | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
For the
three months
ended
September 30, | | |
For the
nine months
ended
September 30 | | |
For the
Period from
April 8, 2021
(Inception) Through
September 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
Non- | | |
| | |
Non- | | |
| | |
Non- | | |
| | |
Non- | |
| | |
Redeemable | | |
Redeemable | | |
Redeemable | | |
Redeemable | | |
Redeemable | | |
Redeemable | | |
Redeemable | | |
Redeemable | |
| | |
Shares | | |
Shares | | |
Shares | | |
Shares | | |
Shares | | |
Shares | | |
Shares | | |
Shares | |
| Basic and diluted net income (loss) per share: | |
| | | |
| | | |
| | | |
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| | | |
| | | |
| | |
| Numerators: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Allocation of net loss including accretion of temporary equity | |
$ | (143,457 | ) | |
| (44,199 | ) | |
$ | - | | |
| - | | |
$ | (291,984 | ) | |
| (89,961 | ) | |
$ | - | | |
| - | |
| Accretion of temporary equity to redemption value | |
| 229,305 | | |
| - | | |
| - | | |
| - | | |
| 260,501 | | |
| - | | |
| - | | |
| - | |
| Allocation of net income (loss) | |
$ | 85,848 | | |
$ | (44,199 | ) | |
$ | - | | |
$ | (1,200 | ) | |
$ | (31,483 | ) | |
$ | (89,961 | ) | |
$ | - | | |
$ | (2,200 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Weighted-average shares outstanding | |
| 6,900,000 | | |
| 2,125,900 | | |
| - | | |
| 1,500,000 | | |
| 6,900,000 | | |
| 2,125,900 | | |
| - | | |
| 1,500,000 | |
| Basic and diluted net income (loss) per share | |
$ | 0.01 | | |
$ | (0.02 | ) | |
$ | - | | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.04 | ) | |
$ | - | | |
$ | (0.00 | ) |
As
of September 30, 2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised
or converted into common shares and then share in the Company’s earnings. As a result, diluted income (loss) per share is the same
as basic income (loss) per share for the periods presented.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At September 30, 2022 and December 31, 2021,
the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such
accounts.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the condensed balance sheets,
primarily due to their short-term nature.
Recent
Accounting Standards
In
August 2020, the FASB issued ASU 2020-06, Debt -- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments.
ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s
own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed
to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement
to use the if-converted method for all convertible instruments. As a smaller reporting company, ASU 2020-06 is effective December 1,
2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early
adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have
on its financial position, results of operations or cash flows. The Company has not adopted this guidance as of September 30, 2022.
The
Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently
adopted, would have a material effect on the Company’s condensed financial statements.
NOTE
3. PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 6,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consisted of one
share of common stock and one right (“Public Right”). Each Public Right entitled the holder to receive one-tenth of one share
of common stock at the closing of a Business Combination (see Note 7). On November 18, 2021, the underwriters fully exercised their
over-allotment option, resulting in an additional 900,000 Units issued for an aggregate amount of $9,000,000.
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, on November 16, 2021, the Sponsor purchased an aggregate of Private Units
at a price of $per Private Unit, for an aggregate purchase price of $, in a private placement. In connection with the
underwriters’ full exercise of their over-allotment option, on November 18, 2021, the Company also consummated the sale of
an additional 18,000 Private Units at $10.00 per Private Unit, generating total proceeds of $180,000. Each Private Unit consists of one
share of common stock (“Private Share”) and one right (“Private Right”). Each Private Right entitles the holder
to receive one-tenth of one share of common stock at the closing of a Business Combination. The proceeds from the Private Units were
added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination
within the Combination Period, the proceeds from the sale of the Private Units will be used to fund the redemption of the Public Shares
(subject to the requirements of applicable law), and the Private Units and all underlying securities will expire worthless.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
On
April 8, 2021, the Company issued shares of common stock (the “Insider Shares”) to the Sponsor for an aggregate
purchase price of $. The 1,437,500 Insider Shares include an aggregate of up to 187,500 shares subject to forfeiture by the Sponsor
to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the Sponsor will collectively
own 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor does not purchase
any Public Shares in the Initial Public Offering and excluding the Private Shares). In connection with the increase in the size of the
offering, on November 2, 2021, the company declared a 20% stock dividend on each insider share thereby increasing the number of
issued and outstanding Insider Shares to 1,725,000, including up to an aggregate of 225,000 shares of common stock subject to forfeiture
by our insiders to the extent that the underwriters’ over-allotment option is not exercised in full or in part. The stock dividend
was considered in substance a recapitalization transaction, which was recorded and presented retroactively. As a result of the underwriters’
election to fully exercise their over-allotment option on November 18, 2021, no Insider Shares are currently subject to forfeiture.
Administrative
Services Agreement
The
Company agreed, commencing on November 12, 2021, to pay the Sponsor, affiliates, or advisors a total of up to $10,000 per month
for office space, utilities, out of pocket expenses, and secretarial and administrative support. The arrangement will terminate upon
the earlier of the Company’s consummation of a Business Combination or its liquidation. For the three and nine months ended September 30,
2022, the Company incurred and paid $30,000 and $90,000 in fees for these services, respectively. For the three months ended September 30,
2021 and for the period from April 8, 2021 (inception) through September 30, 2021, the Company did not incur any fees for these
services.
Promissory
Note — Related Party
On
April 9, 2021, the Sponsor agreed to loan the Company an aggregate of up to $500,000 to cover expenses related to the Initial Public
Offering pursuant to a promissory note (the “Note”). This Note was non-interest bearing and payable on the completion of
the closing of the Initial Public Offering. The Note was paid in full on November 16, 2021. The Company can no longer borrow against
this note.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s
officers and directors may, but are not obligated to, loan the Company funds from time to time or at any time, as may be required (“Working
Capital Loans”). Each Working Capital Loan would be evidenced by a promissory note. The Working Capital Loans would either be paid
upon consummation of a Business Combination, without interest, or, at the holder’s discretion, 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. In the event that a Business Combination does not close, the Company may use a portion of the proceeds held outside the Trust
Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
As of September 30, 2022 and December 31, 2021, no Working Capital Loans were outstanding.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
NOTE
6. COMMITMENTS & CONTINGENCIES
Professional
Fee
The
Company paid legal counsel a retainer of $25,000 upon filing the registration statement and $100,000 upon the closing of the Initial
Public Offering and agreed to pay $50,000 upon closing of a business combination.
Underwriting
Agreement
The
Company paid an underwriting fee of $0.20 per Unit (6,900,000 Units), or $1,380,000, in total which includes the fee due upon the full
exercise of the underwriters’ over-allotment option.
The
underwriters are entitled to a deferred fee of $0.30 per unit, or $2,070,000 in the aggregate will be payable to the underwriters for
deferred underwriting commissions. 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.
Representative
Shares
The
Company issued to the underwriter and/or its designees 177,900 shares of common stock (the “Representative Shares”). The
Company accounted for the Representative Shares as an expense of the Initial Public Offering, resulting in a charge directly to stockholder’s
equity. The Company estimates the fair value of Representative Shares to be $1,383,617 based upon the offering price of the shares of
$7.78 per share. The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period
of 180 days immediately following the effective date of the registration statement related to the Initial Public Offering pursuant to
Rule 5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject
of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any
person for a period of 180 days immediately following the effective date of the registration statements related to the Initial Public
Offering, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective
date of the registration statements related to the Initial Public Offering except to any underwriter and selected dealer participating
in the Initial Public Offering and their bona fide officers or partners.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
NOTE
7. STOCKHOLDERS’ DEFICIT
Common
Stock
The
Company is authorized to issue 30,000,000 shares of common stock with a par value of $0.0001 per share. At May 27, 2021, there were
1,437,500 shares of common stock issued and outstanding, of which up to an aggregate of 187,500 shares are subject to forfeiture to the
extent that the underwriters’ over-allotment option is not exercised in full so that the Sponsor will own 20% of the issued and
outstanding shares after the Initial Public Offering (assuming the Sponsor does not purchase any Public Shares in the Initial Public
Offering and excluding the Private Shares). In connection with the increase in the size of the offering, on November 2, 2021, the
Company declared a 20% stock dividend on each insider share thereby increasing the number of issued and outstanding Insider Shares to
1,725,000, including up to an aggregate of 225,000 shares of common stock subject to forfeiture by our insiders to the extent that the
underwriters’ over-allotment option is not exercised in full or in part. According to ASC 260-10-55, the stock dividend was considered
in substance a recapitalization transaction, which was recorded and presented retroactively.
As
a result of the underwriters’ election to fully exercise their over-allotment option on November 18, 2021, no Insider Shares
are currently subject to forfeiture. At September 30, 2022 and December 31, 2021, there were 2,125,900 shares of common stock
issued and outstanding, excluding 6,900,000 of common stock subject to possible redemption which are presented as temporary equity.
Rights
Except
in cases where the Company is not the surviving company in a Business Combination, each holder of a Public Right will automatically receive
one-tenth (1/10) of one share of common stock upon consummation of a Business Combination, even if the holder of a Public Right converted
all shares held by him, her or it in connection with a Business Combination or an amendment to the Company’s Amended and Restated
Certificate of Incorporation with respect to its pre-business combination activities. In the event that the Company will not be the surviving
company upon completion of a Business Combination, each holder of a Public Right will be required to affirmatively convert his, her or
its rights in order to receive the one-tenth (1/10) of a share underlying each Public Right upon consummation of the Business Combination.
The
Company will not issue fractional shares in connection with an exchange of Public Rights. Fractional shares will either be rounded down
to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General Corporation Law.
As a result, the holders of the Public Rights must hold rights in multiples of 10 in order to receive shares for all of the holders’
rights upon closing of a Business Combination.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
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. |
The
Company classifies its securities in the Trust Account that are invested in funds, such as Mutual Funds or Money Market Funds, that primarily
invest in U.S. Treasury and equivalent securities as Trading Securities in accordance with ASC Topic 320 “Investments - Debt and
Equity Securities. Trading Securities are recorded at fair market value on the accompanying condensed balance sheets.
At
September 30, 2022, assets held in the Trust Account were comprised of $69,399,348 in a mutual fund that is invested primarily in
U.S. Treasury Securities. Through September 30, 2022, the Company has withdrawn $13,001 of the interest earned on the Trust Account.
At
December 31, 2021, assets held in the Trust Account were comprised of $69,000,843 in a mutual fund that is invested primarily in
U.S. Treasury Securities. Through December 31, 2021, the Company did not withdraw any of the interest earned on the Trust Account.
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30,
2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such
fair value:
| Scheduled of fair value measurements | |
| |
| | |
| | |
| | |
Trading Securities | |
Level | | |
Fair Value | |
| September 30, 2022 | |
Investments held in Trust Account - Mutual Fund | |
1 | | |
$ | 69,399,348 | |
| | |
| |
| | |
| | |
| December 31, 2021 | |
Investments held in Trust Account - Mutual Fund | |
1 | | |
$ | 69,000,843 | |
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
NOTE
9. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial
statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent other events
that would have required adjustment or disclosure in the condensed financial statements.
Business
Combination Agreement
On
October 19, 2022, the Company entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified
from time to time, the “Business Combination Agreement”) with AUM Biosciences Pte. Ltd., a private company limited by shares
incorporated in Singapore, with company registration 201810204D (the “Target”).
Based
upon the execution of the Business Combination Agreement, the period of time for the Company to complete a business combination under
its certificate of incorporation is extended for a period of three months from November 16, 2022 to February 16, 2023. Additionally,
the Company may elect to extend the time to complete the business combination for another three-month period to May 16, 2023 by
depositing certain funds into its trust account as set forth in its certificate of incorporation and its investment management trust
agreement with Continental Stock Transfer & Trust Company.
Pursuant
to the terms of the Business Combination Agreement, the Target will promptly incorporate a Cayman Islands exempted company as a direct
wholly owned subsidiary of the Target (“Holdco”). Holdco upon incorporation will form a private company limited by shares
incorporated in Singapore as a direct wholly owned subsidiary of Holdco (“Amalgamation Sub”) and a Delaware corporation as
a direct wholly owned subsidiary of Holdco (“Merger Sub” and, together with Holdco and Amalgamation Sub, each, individually,
an “Acquisition Entity” and, collectively, the “Acquisition Entities”). Each Acquisition Entity upon formation
will become a party to the Business Combination Agreement as if a party on the date of execution thereof by signing a joinder agreement.
Pursuant
to the Business Combination Agreement, subject to the terms and conditions set forth therein, (i) Amalgamation Sub will amalgamate with
and into the Target (the “Amalgamation”) whereby the separate existence of Amalgamation Sub will cease and the Target will
be the surviving corporation of the Amalgamation and become a direct wholly owned subsidiary of Holdco, and (ii) following confirmation
of the effective filing of the Amalgamation but on the same day, Merger Sub will merge with and into the Company (the “SPAC Merger”
and together with the Amalgamation, the “Mergers”), the separate existence of Merger Sub will cease and the Company will
be the surviving corporation of the SPAC Merger and a direct wholly owned subsidiary of Holdco.
As
a result of the Mergers, among other things, (i) all outstanding Company Shares will be cancelled in exchange for approximately 40 million
Holdco Ordinary Shares valued at $10 per Holdco share, subject to closing adjustments, (ii) each outstanding SPAC Unit will be automatically
detached, (iii) each unredeemed outstanding share of the Company’s Common Stock will be cancelled in exchange for the right to
receive one (1) Holdco Ordinary Share, and (iv) every ten (10) outstanding Company Rights will be cancelled and cease to exist in exchange
for one (1) Holdco Ordinary Share.
MOUNTAIN
CREST ACQUISITION CORP. V
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
Additional
Agreements Executed In Connection With the Business Combination Agreement
Shareholder
Support Agreement
Contemporaneously
with the execution of the Business Combination Agreement, the Company, the Target and Key Target Shareholders entered into a voting and
support agreement (the “Shareholder Support Agreement”), pursuant to which, among other things, certain Target Shareholders
agreed not to transfer and will vote their Shares in the Target in favor of the Business Combination Agreement (including by execution
of written resolutions), the Mergers and the other Transactions, effective at Closing. The Target Shareholders party to the Shareholder
Support Agreement collectively have a sufficient number of votes to approve the Merger. The Shareholder Support Agreement and all of
its provisions will terminate and be of no further force or effect upon the earlier of the Closing or the termination of the Business
Combination Agreement.
Sponsor
Support Agreement
Contemporaneously
with the execution of the Business Combination Agreement, the Company, Sponsor, and the Target entered into a Sponsor Support Agreement,
pursuant to which they agree that, among other things, Sponsor (i) will not transfer and will vote its shares of the Company’s
Common Stock or any additional shares of the Company’s Common Stock it acquires prior to the Company Stockholder Meeting in favor
of the Business Combination Agreement, the Mergers and the other Transactions and each of the Transaction Proposals, (ii) will not redeem
any shares of the Company’s Common Stock in connection with the SPAC Merger, and (iii) waives its anti-dilution rights under the
Company Charter. The Sponsor Support Agreement and all of its provisions will terminate and be of no further force or effect upon the
earlier of the Closing or the termination of the Business Combination Agreement.
