NOTES
TO CONDENSED FINANCIAL STATEMENTS
MARCH
31, 2022 (UNAUDITED)
Note
1 — Description of Organization and Business Operations
Athena
Consumer Acquisition Corp. (the “Company”) was incorporated in Delaware on June 4, 2021. The Company is a blank check company
formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization
or other similar business combination with one or more businesses or entities (the “Business Combination”)
The
Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. 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 March 31, 2022, the Company had not commenced any operations. All activity through March 31, 2022, relates to the Company’s
formation and Initial Public Offering (“IPO”), which is described below and, since the offering, the search for a prospective
initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business
Combination, at the earliest. The Company generates non-operating income in the form of interest income earned on investments from the
proceeds derived from the IPO.
The
registration statement for the Company’s IPO was declared effective on October 19, 2021. On October 22, 2021, the Company consummated
the IPO and overallotment option (“Overallotment Units”) of 23,000,000 units (“Units”) with respect to the Class
A common stock included in the Units being offered (the “Public Shares”) at $10.00 per Unit generating gross proceeds of
$230,000,000, which is discussed in Note 3.
Simultaneously
with the closing of the IPO, the Company consummated the sale of 1,060,000 units (“Private Placement Units”) at a price of
$10.00 per Private Placement Unit in a private placement to the Company’s sponsor, Athena Consumer Acquisition Sponsor LLC (the
“Sponsor”) generating gross proceeds of $10,600,000, which is described in Note 4.
Offering
costs for the IPO and the exercise of the underwriters’ over-allotment option amounted to $13,116,818, consisting of $4,000,000
of underwriting fees, $8,650,000 of deferred underwriting fees payable (which are held in the Trust Account (defined below)) and $466,818
of other costs. As described in Note 6, the $8,650,000 of deferred underwriting fee payable is contingent upon the consummation of a
Business Combination by January 22, 2023, subject to the terms of the underwriting agreement.
Following
the closing of the IPO and exercise of the over-allotment, $234,600,000 ($10.20 per Unit) from the net proceeds of the sale of the Units
in the IPO and the Private Placement Units was placed in a Trust Account (“Trust Account”) and 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 185 days or less or in any open-ended investment company that holds itself out as a money market
fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act,
as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust
Account, as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale
of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the
Trust Account excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account at the time of
the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction
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 the Company will be able to successfully effect a Business Combination.
The
Company will provide the 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. The Public Stockholders will be entitled to
redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20 per Public
Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights with respect to
the Company’s warrants.
All
of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the
Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Company’s Business
Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In
accordance with ASC 480-10-S99, redemption provisions not solely within the control of a company require Class A common stock
subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other
freestanding instruments (i.e., public warrants), the initial carrying value of Class A common stock classified as temporary equity
will be the allocated proceeds determined in accordance with ASC 470-20. The Class A common stock are subject to ASC 480-10-S99. If
it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the
redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will
become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value
immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each
reporting period. The Company has elected to recognize the changes immediately. While redemptions cannot cause the Company’s
net tangible assets to fall below $5,000,001, the Public Shares are redeemable and are classified as such on the balance sheet until
such date that a redemption event takes place.
Redemptions
of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to
an agreement relating to the Company’s Business Combination. If the Company seeks stockholder approval of the Business Combination,
the Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination,
or such other vote as required by law or stock exchange rule. 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 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 (as defined in Note 5) and any Public Shares purchased during or after the IPO 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.
Notwithstanding
the foregoing, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or
any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of 15% or more of the Class A common stock sold in the IPO, without the prior consent of the Company.
The
Company’s Sponsor, officers and directors (the “Initial Stockholders”) have agreed not to propose an amendment to the
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 with the opportunity
to redeem their shares of Class A common stock in conjunction with any such amendment.
If
the Company is unable to complete a Business Combination by January 22, 2023, 15 months from the closing of the IPO (“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 us to pay the Company’s franchise and income 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 Company’s board
of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
The
Initial Stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete
a Business Combination within the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the
IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails
to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to its 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 residual assets remaining available for distribution (including Trust Account assets) will be only $10.20 per shares held in the
Trust Account. 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 amount of funds in the Trust Account. This liability will
not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or
to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the IPO against certain
liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the
event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent
of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent
registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements
waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Risks
and Uncertainties
In
March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues
to spread throughout the United States and the world. As of the date the financial statements were issued, there was considerable uncertainty
around the expected duration of this pandemic. Management continues to evaluate the impact of the COVID-19 pandemic and the Company has
concluded that while it is reasonably possible that COVID-19 could have a negative effect on completing the IPO and subsequently identifying
a target company for a Business Combination, the specific impact is not readily determinable as of the date of the financial statements.
The 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 is 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 unaudited condensed financial statements.
Going
Concern
In
connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s
Ability to Continue as a Going Concern,” the Company has until January 22, 2023 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 January 22, 2023. 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 January 22, 2023.
Liquidity
and Capital Resources
As
of March 31, 2022, the Company had $632,347 in its operating bank accounts, $234,627,793 in securities held in the Trust Account to be
used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital of $893,664.
As of March 31, 2022, approximately $23,624 of the amount on deposit in the Trust Account represented interest income, which is available
to pay the Company’s tax obligations.
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating
prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to acquire, and structuring, negotiating and consummating the Business Combination. The Company will need to raise
additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The
Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time,
in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the
Company may not be able to obtain additional financing.
If
the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could
include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead
expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at
all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period
of time, which is considered to be one year from the issuance date of the financial statements. These financial statements do not include
any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should
the Company be unable to continue as a going concern.
Note
2 — Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying financial statements of the Company are presented in conformity with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. Certain information or footnote disclosures
normally included in financial statements prepared in accordance with U.S. 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 consolidated financial statements should be read in conjunction with the Company’s Annual Report
on Form 10-K, as filed with the SEC on March 24, 2022. The interim results for the period presented 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
The
Company is an emerging growth company as defined in Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”), which exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a
class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out
of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for
public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard.
This
may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company
nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use
of Estimates
The
preparation of 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 financial
statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of March 31, 2022 and December 31, 2021.
Investments
Held in Trust Account
At
March 31, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities.
The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the
balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments
held in Trust Account are included in interest earned on investments held in Trust Account in the accompanying condensed statements of
operations. The estimated fair values of investments held in Trust Account are determined using available market information.
On
March 31, 2022 and December 31, 2021, the Company had $234,627,793 and $234,604,169 in investments held in Trust Account, respectively.
Offering
Costs associated with the Initial Public Offering
Offering
costs consist principally of legal, accounting, underwriting fees and other costs directly related to the IPO. Offering costs are allocated
to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Total
offering cost amounted to $13,116,818 out of which $12,245,042 was charged against the carrying value of Class A common stock upon the
completion of the IPO.
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 Corporation coverage limit of $250,000. At March 31, 2022 and December 31,
2021, the Company has not experienced losses on these accounts.
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,” approximate the carrying amounts represented in the accompanying balance sheet, primarily due to
their short-term nature.
Income
Taxes
The
Company complies with the accounting and reporting requirements of ASC 740, “Income Taxes” (“ASC 740”), which
requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable
or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2022 and December 31, 2021.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued
for the payment of interest and penalties for March 31, 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 is subject to income
tax examinations by major taxing authorities since inception.
Deferred
tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities,
using enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the
year’s income taxable for federal and state income tax reporting purposes. Total tax provision may differ from the statutory tax
rates applied to income before provision for income taxes due principally to expenses charged which are not tax deductible.
The
total provision (benefit) for income taxes is comprised of the following:
| |
March 31,
2022 | | |
December 31,
2021 | |
Current expense | |
$ | - | | |
$ | - | |
Deferred expense | |
| 51,735 | | |
| 48,951 | |
Change in valuation allowance | |
| (42,990 | ) | |
| (33,652 | ) |
Total income tax expense (benefit) | |
$ | (8,745 | ) | |
$ | (15,299 | ) |
The
net deferred tax assets and liabilities in the accompanying balance sheets included the following components:
| |
March
31, 2022 | | |
December 31,
2021 | |
Deferred tax assets | |
$ | 100,686 | | |
$ | 48,951 | |
Deferred tax liabilities | |
| - | | |
| - | |
Valuation
allowance for deferred tax assets | |
| (76,642 | ) | |
| (33,652 | ) |
Net
deferred tax assets | |
$ | 24,044 | | |
$ | 15,299 | |
The
deferred tax assets as of March 31, 2022 and December 31, 2021 was comprised of the tax effect of cumulative temporary differences as
follows:
| |
March
31,
2022 | | |
December
31,
2021 | |
| |
| | |
| |
Capitalized expenses
before business combination | |
$ | (76,642 | ) | |
$ | (33,652 | ) |
Valuation
allowance for deferred tax assets | |
| 76,642 | | |
| 33,652 | |
Total | |
$ | - | | |
$ | - | |
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management
considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment.
At March 31, 2022 and December 31, 2021, the valuation allowance was $76,642 and $33,652 respectively.
A
reconciliation of the statutory federal income tax rate (benefit) to the Company’s effective tax rate is as follows:
| |
March
31,
2022 | | |
December
31,
2021 | |
Statutory federal
income tax rate | |
| 21 | % | |
| 21 | % |
State taxes, net of federal
tax benefit | |
| 0.00 | % | |
| 0.00 | % |
Valuation
allowance | |
| -17.45 | % | |
| -14.40 | % |
Income
tax provision expense | |
| 3.55 | % | |
| 6.60 | % |
Class
A common stock subject to possible redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) is classified as a liability
instrument and is measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features
redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified
as stockholders’ equity. The Company’s Class A common stock sold in the IPO and over-allotment feature certain redemption
rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly,
on March 31, 2022 and December 31, 2021, 23,000,000 shares of Class A common stock subject to possible redemption is presented as temporary
equity, outside of the stockholders’ deficit section of the Company’s balance sheet.
Immediately
upon the closing of the IPO and over-allotment, the Company recognized the accretion from the initial book value to redemption amount
value. This method would view the end of the reporting period as if it were also the redemption date of the security. Immediately upon
the closing of the IPO, we recognized the accretion from initial book value to redemption amount value. The change in the carrying value
of redeemable shares of Class A common stock resulted in charges against additional paid-in capital and accumulated deficit.
As
of March 31, 2022 and December 31, 2021, the shares of Class A common stock reflected on the balance sheet are reconciled on the following
table:
Gross proceeds | |
$ | 230,000,000 | |
Less: | |
| | |
Fair value of Public Warrants
at issuance | |
| (15,310,355 | ) |
Class A shares issuance costs | |
| (12,245,042 | ) |
Add:
Accretion of carrying value to redemption value | |
| 32,155,397 | |
Class
A common stock subject to possible redemption | |
$ | 234,600,00 | |
Net
Loss per Common Share
The
Company has two classes of shares, which are referred to as Class A common stock and Class B common stock (the “Founder Shares”).
Earnings and losses are shared pro rata between the two classes of shares. On March 31, 2022, the Company did not have any dilutive securities
and other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of
the Company. As a result, diluted loss per common share is the same as basic loss per common share for the period presented. 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 stock.
| |
For
the three months ended
March 31, 2022 | |
| |
Class
A common stock | | |
Class
B common stock | |
Basic
and diluted net loss per share: | |
| | |
| |
Numerator: | |
| | |
| |
Allocation
of net loss | |
$ | (164,677 | ) | |
$ | (57,637 | ) |
| |
| | | |
| | |
Denominator: | |
| | | |
| | |
Weighted
average shares outstanding | |
| 23,000,000 | | |
| 8,050,000 | |
| |
| | | |
| | |
Basic
and diluted net loss per share | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
Accounting
for Warrants
The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’
specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment
considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant
to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments
are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments
are outstanding. Management has concluded that the Public Warrants and Placement Warrants (defined below) issued pursuant to the warrant
agreements qualify for equity accounting treatment.
Recent
Accounting Pronouncements
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 financial statements.
Note
3 — Initial Public Offering and Over-Allotment
Pursuant
to the IPO, and including the underwriters’ exercise of their over-allotment option, the Company sold 23,000,000 Units at a price
of $10.00 per Unit. Each Unit consists of one share of Class A common stock (such shares of Class A common stock included in the Units
being offered, the “Public Shares”), and one-half a redeemable warrant (each, a “Public Warrant”). Each Public
Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see
Note 7).
Note
4 — Private Placement
On
October 22, 2021, simultaneously with the consummation of the IPO and the underwriters’ exercise of their over-allotment option,
the Company consummated the issuance and sale (“Private Placement”) of 1,060,000 Private Placement Units in a private placement
transaction at a price of $10.00 per Private Placement Unit, generating gross proceeds of $10,600,000. Each whole Private Placement Unit
will consist of one share of Class A common stock (“Placement Share”) and one-half of a redeemable warrant (“Placement
Warrant”). Each whole Placement Warrant will be exercisable to purchase one share of Class A common stock at a price of $11.50
per share. A portion of the proceeds from the Private Placement Units will be added to the proceeds from the IPO to be held in the Trust
Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private
Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private
Placement Units and all underlying securities will be worthless.
Note
5 — Related Party Transactions
Founder
Shares
On
June 4, 2021, the Sponsor was issued 5,900,000 shares of Class B common stock. Subsequently, on June 24, 2021, the Sponsor paid certain
costs totaling $25,000 on behalf of the Company as consideration for 5,900,000 issued on June 4, 2021. On September 23, 2021, the Company
effected a 1.36440678 for 1 stock split of its common stock, so that the Sponsor owns an aggregate of 8,050,000 Founder Shares. The Sponsor
paid approximately $0.003 per share for the Founder Shares. The Founder Shares will automatically convert into shares of Class A common
stock at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions, as described
in Note 7. Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of
Class A common stock, subject to adjustment, at any time. The Initial Stockholders had agreed to forfeit up to 1,050,000 Founder Shares
to the extent that the over-allotment option is not exercised in full by the underwriters. Since the underwriters exercised the over-allotment
option in full, the Sponsor did not forfeit any Founder Shares.
The
Initial Stockholders will agree, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier
to occur of: (A) one year 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
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.
Related
Party Loans
On
June 4, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the IPO pursuant to
a promissory note (the “Note”). This loan was non-interest bearing and payable on the earlier of December 31, 2021, or the
completion of the IPO. $117,994 was borrowed under the Note and repaid on October 22, 2021. There was no balance outstanding as of March
31, 2022 and December 31, 2021. This facility is no longer available.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust
Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with
respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest,
or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into Units of the post Business
Combination entity at a price of $10.00 per Unit. The Units would be identical to the Private Placement Units. As of March 31, 2022 and
December 31, 2021, there were no Working Capital Loans outstanding.
Support
Services
The
Company intends to pay an entity affiliated with the Sponsor a fee of approximately $10,000 per month following the consummation of the
IPO until the earlier of the consummation of the Business Combination or liquidation for office space and administrative support services.
As of March 31, 2022, $30,000 has been incurred under this agreement.
Note
6 — Commitments and Contingencies
Registration
Rights
The
holders of Founder Shares, Private Placement Units and warrants that may be issued upon conversion of Working Capital Loans, if any,
will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A
common stock) pursuant to a registration rights agreement to be signed on or before the date of the prospectus for the IPO. These holders
will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides
that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination
of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with
the filing of any such registration statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from the final prospectus relating to the IPO to purchase up to 3,000,000 additional
Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On October 22, 2021, the underwriters
elected to fully exercise the over-allotment option purchasing 3,000,000 Units.
The
underwriters were paid a cash underwriting discount of $0.20 per unit on the offering not including the Units issued with the underwriter’s
exercise of their over-allotment option, or $4,000,000 in the aggregate at the closing of the IPO. The underwriters have agreed to defer
the cash underwriting discount of $0.20 per share related to the over-allotment to be paid at Business Combination ($600,000 in the aggregate).
In addition, the underwriters are entitled to a deferred underwriting commissions of $0.35 per unit, or $8,050,000 from the closing of
the IPO. The total deferred fee is $8,650,000 consisting of the $8,050,000 deferred portion and the $600,000 cash discount agreed to
be deferred until Business Combination. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account
solely if the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note
7 — Stockholders’ Deficit
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. As of March 31, 2022 and December 31, 2021, there were 1,060,000 shares of Class A common stock issued or outstanding (excluding
23,000,000 shares 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. Holders of Class B common stock are entitled to one vote for each share. As of March 31, 2022 and December 31, 2021, there were
8,050,000 shares of Class B common stock outstanding.
Holders
of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders
except as required by law.
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business Combination
on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in the IPO and related to the closing of the initial Business Combination,
the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed
issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal,
in the aggregate, on an as-converted basis, approximately 26.0% of the sum of the total number of all shares of common stock outstanding
upon the completion of the IPO plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection
with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the
initial Business Combination and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of
loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number
of shares of Class A common stock, subject to adjustment as provided above, at any time.
Preferred
Stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per shares with such
designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
For the periods presented, there were no shares of preferred stock issued or outstanding.
Warrants—As
of March 31, 2022 and December 31, 2021, the Company has 11,500,000 Public Warrants and 530,000 Placement Warrants outstanding (together,
the “Warrants”). Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise
of the Warrants. The Warrants will become exercisable on the later of (a) the completion of a Business Combination and (b) 12 months
from the closing of the IPO. The Warrants will expire five years from the completion of a Business Combination or earlier upon redemption
or liquidation.
The
Company will not be obligated to deliver any shares of 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 common stock underlying
the Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect
to registration. No Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares
to holders seeking to exercise their Warrants, unless the issuance of the shares upon such exercise is registered or qualified under
the securities laws of the state of the exercising holder, or an exemption is available.
The
Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination,
it will use its best efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration
statement covering the offer and sale of the shares of common stock issuable upon exercise of the Warrants. The Company will use its
best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus
relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreements. No Warrants will
be exercisable for cash unless the Company has an effective and current registration statement covering the offer and sale of the shares
of common stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of common stock. Notwithstanding
the foregoing, if a registration statement covering the offer and sale of the shares of common stock issuable upon exercise of the Warrants
is not effective within a specified period following the consummation of a Business Combination, Warrant holders may, until such time
as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration
statement, exercise Warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided
that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their
Warrants on a cashless basis.
Once
the Warrants become exercisable, the Company may redeem the 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, to each Warrant holder; and |
| ● | if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share consolidations, share capitalizations, rights issuances, 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 the Company sends the notice of redemption to the Warrant holders. |
If
and when the Warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares upon
exercise of the Warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable
to effect such registration or qualification.
If
the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants
to do so on a “cashless basis,” as described in the Public Warrant agreement and Private Warrant agreement. The exercise
price and number of shares of common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including
in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the
Warrants will not be adjusted for issuances of shares of common stock at a price below its exercise price. Additionally, in no event
will the Company be required to net cash settle the Warrants. If the Company is unable to complete a Business Combination within the
Combination Period and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds
with respect to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account
with the respect to such Warrants. Accordingly, the Warrants may expire worthless.
In
addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection
with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of common
stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in
the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or
such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from
such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s
initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume
weighted average trading price of the Company’s shares of common stock during the 20 trading day period starting on the trading
day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is
below $9.20 per share, 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.
The
Placement Warrants are identical to the Public Warrants underlying the Units being sold in the IPO, except that the Placement Warrants
and the shares of common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or saleable
until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants
will be exercisable at the election of the holder on a “cashless basis”.
Neither
the Placement Warrants nor the Public Warrants contain any provision that change dependent upon the characteristics of the holder of
the Warrant.
Note
8 — Fair Value Measurements
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company
seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is
used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities:
Level
1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level
2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets
or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level
3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
At
March 31, 2022 and December 31, 2021, the assets held in the Trust Account were held in treasury funds. All of the Company’s investments
held in the Trust Account are classified as trading securities.
The
following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at March
31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine
such fair value.
| |
| |
Quoted Prices in | | |
Significant Other | | |
Significant Other | |
| |
| |
Active Markets | | |
Observable Inputs | | |
Unobservable Inputs | |
March 31, 2022 | |
Level | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| |
| | |
| | |
| |
U.S. Treasury
Securities | |
1 | |
$ | 234,627,793 | | |
| — | | |
| — | |
| |
| |
Quoted Prices in | | |
Significant Other | | |
Significant Other | |
| |
| |
Active Markets | | |
Observable Inputs | | |
Unobservable Inputs | |
December 31, 2021 | |
Level | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| |
| | | |
| | | |
| | |
U.S.
Treasury Securities | |
1 | |
$ | 234,604,169 | | |
| — | | |
| — | |
Note
9 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements
were issued. Based on this review, the Company did not identify any subsequent events that would have required adjustment or disclosure
in the financial statements.