Item
1. Financial Statements
Deep
Medicine Acquisition Corp.
Balance
Sheets
The
accompanying notes are an integral part of unaudited financial statement
DEEP
MEDICINE ACQUISITION CORP.
Statements
of Operations
The
accompanying notes are an integral part of unaudited financial statement
Deep
Medicine Acquisition Corp.
Statement
of Changes in Stockholders’ (Deficit)
The
accompanying notes are an integral part of unaudited financial statement
Deep
Medicine Acquisition Corp.
Statements
of Cash Flows
(Unaudited)
The
accompanying notes are an integral part of unaudited financial statement
DEEP
MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Note
1 - Basis of Presentation
The
accompanying unaudited financial statements of Deep Medicine Acquisition Corp. (the “Company”) have been prepared in accordance
with the generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information
and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information or footnote disclosures normally
included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the applicable rules and
regulations for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited 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 financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended March
31, 2022. The interim results for the three months ended June 30, 2022 are not necessarily indicative of the results to be expected for
the year ending March 31, 2023 or for any future interim periods.
Note
2 - Organization and Description of Business Operations
The
Company is a blank check company incorporated on July 8, 2020, under the laws of the State of Delaware for the purpose of entering into
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or
more businesses or entities (a “Business Combination”). While the Company may, subject to certain limitations, pursue a Business
Combination target with operations or prospects in the digital healthcare and AI in medicine sector in the global market.
As
of June 30, 2022, the Company had not commenced any operations. All activity for the period from July 8, 2020 (inception) through June
30, 2022, relates to the Company’s formation and its initial public offering (“IPO”), which is described below, and
subsequent to IPO, identifying a target company for a Business Combination. The Company will not generate any operating revenues until
after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest
income from the cash and marketable securities held in the Trust Account (as defined below). The Company has selected March 31 as its
fiscal year end.
On
October 29, 2021, the Company consummated its IPO of 12,650,000 units (the “Units” and, with respect to the shares of Class
A common stock included in the Units, the “Public Shares”) at $10.00 per unit, which included 1,650,000 Units issued pursuant
to the full exercise by the Underwriters (as defined below) of their over-allotment option, and the private sale of an aggregate of 519,500
Units (the “Private Placement Units” and with respect to the shares of Class A common stock included in the Units, the “Private
Placement Shares”) to its sponsor, Bright Vision Sponsor LLC (the “Sponsor”) and I-Bankers Securities, Inc. (“I-Bankers”)
at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds of $5,195,000 to the Company that closed simultaneously
with the closing of the IPO. The Company’s securities have been listed on the Nasdaq Global Market (“Nasdaq”). On December
2, 2021, the Company’s Units no longer traded, and shares of the Company’s Class A common stock and rights underlying the
Units commenced trading separately.
Transaction
costs amounted to $7,282,500 consisting of $2,530,000 in cash of underwriting commissions, $4,427,500 of business combination marketing
fee, and $325,000 of other offering costs.
Upon
the closing of the IPO on October 29, 2021, the Company deposited $127,765,000 ($10.10 per Unit) from the proceeds of the IPO and certain
proceeds of the sales of Private Placement Units in the trust account (“Trust Account”), located in the United States and
invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity
of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting
certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion
of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
Following
the closing of the IPO, cash of $764,101 was held outside of the Trust Account (as defined below) and is available for working capital
purposes. As of June 30, 2022, the Company had available cash of $707,977 on its balance sheet and a working capital of $385,860. 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.
DEEP
MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
On
July 12, 2022, the Company entered into a definitive Business Combination Agreement (the “Business Combination Agreement”)
with Chijet Inc., each of the holders of Chijet’s outstanding shares (collectively, the “Sellers”),
Chijet Motor Company, Inc., a wholly-owned subsidiary of Chijet (“Pubco”), and Chijet Motor (USA) Company,
Inc., a wholly-owned subsidiary of Pubco (“Merger Sub”). Chijet indirectly holds an over 85% interest in Shandong
Baoya New Energy Vehicle Co., Ltd., a Chinese company (“Baoya”), which is a producer and manufacturer of electric
vehicles. In addition, Chijet indirectly holds an over 64% interest in FAW Jilin Automobile Co., Ltd., a Chinese company (“FAW
Jilin”), which manufactures and sells traditional fuel vehicles. The transactions contemplated by the Business Combination
Agreement are referred to herein as the “Proposed Business Combination”. (see Note 12).
The
Company must complete a Business Combination with one or more operating businesses or assets that together have an aggregate fair market
value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes,
if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the Company’s signing a definitive
agreement in connection with its initial Business Combination. The Company will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target
business or assets sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940,
as amended (the “Investment Company Act”).
The
Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a
Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender
offer will be made by the Company. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount held
in the Trust Account (initially $10.10 per share), calculated as of two business days prior to the completion of a Business Combination,
including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax
obligations. The shares of Class A common stock will be recorded at redemption value and classified as temporary equity upon the completion
of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from
Equity.”
The
Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such completion
of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor
of the Business Combination.
If
the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to (i) waive its redemption
rights with respect to their Private Placement Shares in connection with the completion of the Business Combination, (ii) waive its redemption
rights with respect to their Private Placement Shares in connection with a stockholder vote to approve an amendment to the Company’s
second amended and restated certificate of incorporation (a) to modify the substance or timing of the Company’s obligation to redeem
100% of the Public Shares if the Company does not complete the Business Combination within the Combination Period (as defined below)
or (b) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity and (iii)
waive its rights to liquidating distributions from the Trust Account with respect to their Private Placement Shares if the Company fails
to complete the Business Combination within the Combination Period. In addition, the Sponsor has agreed to vote any share it held in
favor of the Business Combination.
Additionally,
each public stockholder may elect to redeem its Public Shares, without voting, and if they do vote, irrespective of whether they vote
for or against a proposed Business Combination.
Notwithstanding
the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Company’s second amended and restated certificate of incorporation provides that a public stockholder,
together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares without the Company’s prior written
consent.
DEEP
MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
The
Company will have until October 29, 2022 (or April 29, 2023 if the Company may extend the period of time to consummate a Business Combination)
(the “Combination Period”) to complete a Business Combination. If the Company is unable to complete a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but no more than 10 business days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned (less up to $50,000 of interest to
pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public
stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), and (iii) as promptly
as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board
of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
The
Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares (as defined below) and Private Placement Shares
if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares
in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to
complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their business combination
marketing fees (see Note 9) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination
Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the
redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available
for distribution will be less than the IPO price per Unit ($10.10).
The
Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a third party for services rendered or products
sold to the Company, or by a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below (1) $10.10 per Public Share or (2) such lesser amount per Public Share held
in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of trust assets, in each case
net of the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third
party who executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under the Company’s
indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended
(the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party,
the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility
that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers
(other than the Company’s independent auditors), prospective target businesses or other entities with which the Company does business,
execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Underwriting
Agreement and Business Combination Marketing Agreement
The
Company engaged I-Bankers as the representative of the underwriters (the “Underwriters”) in the IPO of the Company’s
Class A common stock, par value of $0.0001 per share (“Shares”), for $110 million and the simultaneous listing on Nasdaq.
Pursuant to that certain underwriting agreement, I-Bankers acted as the representative of the Underwriters of the IPO for 11,000,000
Units at $10.00 per Unit, plus an over-allotment option equal to 15% of the number of Units offered, or 1,650,000 Units, which was exercised
in full simultaneously upon the closing of the IPO. The Company paid I-Bankers underwriters’ commission of $2,530,000, equal to
2.0% of the gross proceeds raised in the IPO for such services upon the consummation of the IPO (exclusive of any applicable finders’
fees which might become payable).
Upon
the closing of the IPO, the Company issued to I-Bankers a five-year warrant to purchase 632,500 Shares of Class A common stock, equal
to 5.0% of the Shares issued in the IPO (“Representative Warrants”). The exercise price of Representative Warrants is $12.00
per Share. In addition, I-Bankers was issued 101,200 shares of Class A common stock upon the consummation of IPO (“Representative
Shares”).
DEEP
MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
In
addition, under a business combination marketing agreement, the Company has engaged I-Bankers as an advisor in connection with the Business
Combination and will pay I-Bankers a cash fee for such marketing services upon the consummation of the Business Combination in an amount
equal to, in the aggregate, 3.5% of the gross proceeds of the IPO, including any proceeds from the exercise of the underwriters’
over-allotment option. The fee will become payable to the Underwriters from the amounts held in the Trust Account solely in the event
that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Liquidity
and Capital Resources
The
Company has principally financed its operations from inception using proceeds from the sale of its equity securities to its shareholders
prior to the IPO, proceeds from related party loan and such amount of proceeds from the IPO that were placed in an account outside of
the Trust Account for working capital purposes. 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.
As
of June 30, 2022 and March 31, 2022, the Company had a loan payable to the Sponsor in amount of $ with zero interest (the “Loan”).
Pursuant to the promissory note between the Company and the Sponsor, the Loan is unsecured, and the Sponsor agrees to fund the Company
in amount of up to $. Under no circumstances shall any individual, including but not limited to any officer, director, employee
or stockholder of the Company, be obligated personally for any obligations or liabilities of the Loan. These amounts will be repaid upon
completion of an initial Business Combination.
The
Company may need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors,
or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to (other than as described above),
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.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target
company, the specific impact is not readily determinable as of the date of this financial statement. The financial statement does not
include any adjustments that might result from the outcome of this uncertainty.
Going
Concern and Management’s Plan
The
Company expects to incur significant costs in pursuit of its acquisition plans and will not generate any operating revenues until after
the completion of its initial business combination. In addition, the Company expects to have negative cash flows from operations as it
pursues an initial business combination target. In connection with the Company’s assessment of going concern considerations in
accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s
Ability to Continue as a Going Concern” the Company does not currently have adequate liquidity to sustain operations, which consist
solely of pursuing a Business Combination.
The
Company may raise additional capital through loans or additional investments from the Sponsor or its shareholders, officers, directors,
or third parties. The Company’s officers and directors and the Sponsor may, but are not obligated to (except as described above),
loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s
working capital needs. Based on the foregoing, the Company believes it will have sufficient cash to meet its needs through the earlier
of consummation of a Business Combination or the deadline to complete a Business Combination pursuant to the Company’s Amended
and Restated Certificate of Incorporation (unless otherwise amended by shareholders).
DEEP
MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
While
the Company expects to have sufficient access to additional sources of capital if necessary, there is no current commitment on the part
of any financing source to provide additional capital and no assurances can be provided that such additional capital will ultimately
be available. These conditions raise substantial doubt about the Company’s ability to continue as a going concern until the consummation
of a Business Combination or for a period of time within one year after the date that these unaudited financial statements are issued.
There is no assurance that the Company’s plans to raise additional capital (to the extent ultimately necessary) or to consummate
a Business Combination will be successful or successful within the Combination Period. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As
is customary for a special purpose acquisition company, if the Company is not able to consummate a Business Combination during the Combination
Period, it will cease all operations and redeem the Public Shares. Management plans to continue its efforts to consummate a Business
Combination during the Combination Period.
Note
3 - Recent Accounting Pronouncements
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s
financial statements.
Management
does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material
effect on the Company’s financial statements.
Note
4 - Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents
are carried at cost, which approximates fair value. The Company had $707,977 and $877,099 in cash as of June 30, 2022 and March 31, 2022,
respectively, and no cash equivalent as of June 30, 2022 and March 31, 2022.
Note
5 - Marketable Securities Held in Trust Account
At
June 30, 2022, substantially all of the assets held in the Trust Account were held in money market funds, which are invested primarily
in U.S. Treasury securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading
securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the
change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account
in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available
market information. As of June 30, 2022 and March 31, 2022, the marketable securities held in the Trust Account were $127,876,280 and
$127,760,867, respectively.
DEEP MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Note
6 -Common Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption are
classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that
feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock are classified
as shareholders’ equity. The Company’s common stock feature certain redemption rights that are considered to be outside of
the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption
are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance
sheet.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to
equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the remeasurement
from initial book value to redemption value. The change in the carrying value of redeemable common stock resulted in charges against
additional paid-in capital and accumulated deficit.
At
June 30, 2022, the common stock subject to redemption reflected in the balance sheet are reconciled in the following table:
Schedule
of Common Stock Subject to Redemption
| | |
| | |
| Gross proceeds | |
$ | 126,500,000 | |
| Less: | |
| | |
| Common stock issuance costs | |
| (2,855,000 | ) |
| Plus: | |
| | |
| Remeasurement of carrying
value to redemption value | |
| 4,231,280 | |
| Common
stock subject to possible redemption | |
$ | 127,876,280 | |
Note
7 - Net Loss per Share of Common Stock
The
Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings per Share”. Net loss per share of common
stock is computed by dividing net loss by the weighted average number of shares of common stock issued and outstanding for the period,
excluding shares of common stock subject to forfeiture. During the three months ended June 30, 2022 and 2021, 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 (loss) of the Company. As a result, diluted loss per share of common stock is the same as basic loss per share of common
stock for the period.
Schedule
of Diluted Loss Per Share of Common Stock
| | |
For
the Three
Months Ended June
30, 2022 | | |
For
the Three
Months Ended June
30, 2021 | |
| | |
| | |
| |
| Numerator: | |
| | | |
| | |
| Net loss | |
$ | (154,420 | ) | |
$ | (16,499 | ) |
| | |
| | | |
| | |
| Denominator: | |
| | | |
| | |
| Basic and diluted loss
per share – Class A | |
$ | (0.01 | ) | |
| — | |
| Basic and diluted loss
per share – Class B | |
$ | (0.02 | ) | |
$ | (0.01 | ) |
| Basic and diluted loss
per share | |
$ | (0.02 | ) | |
$ | (0.01 | ) |
| Denominator
for basic and diluted earnings per share – Weighted-average shares of Class A common stock issued and outstanding during the
period | |
| 13,270,700 | | |
| — | |
| Denominator
for basic and diluted earnings per share -– Weighted-average shares of Class B common stock issued and outstanding during the
period | |
| 3,162,500 | | |
| 3,162,500 | |
| Denominator
for basic and diluted earnings per share -– Weighted-average shares issued and outstanding during the
period | |
| 3,162,500 | | |
| 3,162,500 | |
DEEP
MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Note
8 - Related Party Transactions
Accrued
Expenses - Related Parties
As
of June 30, 2022 and March 31, 2022, the Company had accrued expenses – related parties in amount of $6,000 and $21,000, respectively,
of which $6,000 was in connection with the accrued non-cash compensation to the Company’s management and directors. Pursuant to
the executed Offer Letters, the Company agreed to pay the Company’s Chief Financial Officer $5,000 in cash per month starting from
August 1, 2020, and the Company’s officers and directors an aggregate of 300,000 post Business Combination shares within 10 days
following a Business Combination, with the same lock-up restrictions and registration rights as the Founder Shares. The fair value of
this stock issuance was determined by the fair value of the Company’s Common Stock on the grant date, at a price of $0.02 per share.
As of June 30, 2022 and March 31, 2022, the accrued expenses related to the cash compensation to the Company’s Chief Financial
Officer was $0 and $15,000, respectively.
Loan
Payable – Related Party
As
of June 30, 2022 and March 31, 2022, the Company had a loan payable to the Sponsor in amount of $ with zero interest (the “Loan”).
Pursuant to the promissory note between the Company and the Sponsor, the Loan is unsecured, and the Sponsor agrees to fund the Company
in amount of up to $. Under no circumstances shall any individual, including but not limited to any officer, director, employee
or stockholder of the Company, be obligated personally for any obligations or liabilities of the Loan. The proceeds of the Loan were
used to pay a portion of the offering expenses of the IPO. These amounts will be repaid upon completion of an initial Business Combination.
Working
Capital Loans
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor,
or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as
may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working
Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid
only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion
of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used
to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without
interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into private placement-equivalent
units at a price of $10.00 per unit at the option of the lender. Such units would be identical to the Private Placement Units. Except
for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect
to such loans. As of June 30, 2022 and March 31, 2022, no Working Capital Loans were outstanding.
Note
9 - Commitments and Contingency
Registration
Rights
The
holders of the Founder Shares, Private Placement Units (and their underlying securities), the Representative Shares, the Representative
Warrants (and their underlying securities), the 300,000 shares of Class A common stock issuable to the Company’s directors and
officers within 10 days following the Business Combination and any Units that may be issued upon conversion of the Working Capital Loans
(and their underlying securities) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior
to or on the effective date of the IPO requiring the Company to register such securities for resale (in the case of the Founder Shares,
only after conversion to Class A common stock). The holders of these securities are entitled to make up to three demands, excluding short
form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the
Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does
not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities.
The Company will bear the expenses incurred in connection with the filing of any such registration statements.
DEEP MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Underwriting
Agreement
The
Company had granted the Underwriters a 30-day option from the date of IPO to purchase up to 1,650,000 additional Units to cover over-allotments,
if any, at the IPO price less the underwriting discounts and commissions.
Simultaneously
upon the closing of the IPO, the Underwriters exercised the over-allotment option in full. As such, the Underwriters were paid an underwriting
discount and commission of $0.20 per Unit, or $2,530,000 in the aggregate payable upon the closing of the IPO, and I-Bankers was entitled
to a business combination marketing fee of $4,427,500 in the aggregate, which is held in the Trust Account and payable upon completion
of the Business Combination.
Note
10 - Stockholders’ Equity
The
Company is authorized to issue a total of 111,000,000 shares, par value of $0.0001 per share, consisting of (a) 110,000,000 shares of
common stock, including (i) 100,000,000 shares of Class A common stock, and (ii) 10,000,000 shares of Class B common stock, and (b) 1,000,000
shares of preferred stock (the “Preferred Stock”).
As
of June 30, 2022 and March 31, 2022, there were 620,700 shares of Class A common stock issued and outstanding, excluding 12,650,000 shares
of Class A common stock subject to possible redemption which are presented as temporary equity.
As
of June 30, 2022 and March 31, 2022, there were 3,162,500 shares of Class B common stock issued and outstanding.
As
of June 30, 2022 and March 31, 2022, no shares of Preferred Stock were issued or outstanding. The designations, voting and other rights
and preferences of the Preferred Stock may be determined from time to time by the Company’s board of directors.
Rights
Each
holder of a right will receive one-tenth (1/10) of one share of Class A common stock upon consummation of a Business Combination. In
the event the Company will not be the surviving entity upon completion of the Company’s initial Business Combination, each holder
of a public right will automatically receive the 1/10 share of Class A common stock underlying such public right (without paying any
additional consideration); and each holder of a Private Placement Right or right underlying Units to be issued upon conversion of the
Working Capital Loans will be required to affirmatively convert its rights in order to receive the 1/10 share of Class A common stock
underlying each right (without paying any additional consideration). If the Company is unable to complete an initial Business Combination
within the required time period and public stockholders redeem the public shares for the funds held in the Trust Account, holders of
rights will not receive any such funds in exchange for their rights and the rights will expire worthless. The Company will not issue
fractional shares upon conversion of the rights. If, upon conversion of the rights, a holder would be entitled to receive a fractional
interest in a share, the Company will, upon exchange, comply with Section 155 of the Delaware General Corporation Law. The Company will
make the determination of how to treat fractional shares at the time of its initial Business Combination and will include such determination
in the proxy materials that it will send to stockholders for their consideration of such initial Business Combination.
If
the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the
Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless.
Further, there are no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of a Business
Combination.
Additionally,
in no event will the Company be required to net cash settle the rights, and the rights may expire worthless.
DEEP MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Representative
Warrants and Representative Shares
Upon
the closing of the IPO, the Company issued to the Underwriters Representative Warrants, the exercise price of which will be $12.00 per
Share, and 101,200 Representative Shares.
The
Representative Warrants shall be exercisable, in whole or in part, commencing the later of October 26, 2022 and the closing of the Company’s
initial Business Combination and terminating on October 29, 2026. The Company accounted for the 632,500 warrants as an expense of the
IPO resulting in a charge directly to stockholders’ equity. The fair value of Representative Warrants was estimated to be approximately
$1,333,482 (or $2.11 per warrant) using the Black-Scholes option-pricing model. The fair value of the Representative Warrants granted
to the Underwriters was estimated as of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free
interest rate of 1.18% and (3) expected life of five years. The Representative Warrants and the shares of Class A common stock underlying
Representative Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up immediately following October
29, 2021 pursuant to FINRA Rule 5110(e)(1).
The
Representative Warrants grants to holders demand and “piggy back” rights for periods of five and seven years from October
29, 2021. The Company will bear all fees and expenses attendant to registering the securities, other than underwriting commissions which
will be paid for by the holders themselves. The exercise price and number of shares issuable upon exercise of the Representative Warrants
may be adjusted in certain circumstances including in the event of a stock dividend, or the Company’s recapitalization, reorganization,
merger or consolidation. However, the Representative Warrants will not be adjusted for issuances of Class A common stock at a price below
its exercise price.
The
Underwriters agreed not to transfer, assign or sell any of the Representative Shares without the Company’s prior written consent
until the completion of the Business Combination. The Underwriters agreed (i) to waive its redemption rights with respect to such shares
in connection with the completion of the initial Business Combination and (ii) to waive its rights to liquidating distributions from
the Trust Account with respect to the Representative Shares if the Company fails to complete its initial Business Combination within
Combination Period. The shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days
immediately following October 29, 2021 pursuant to FINRA Rule 5110(e)(1).
Note
11 - Fair Value Measurements
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30,
2022 and March 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Schedule
of Fair Value Hierarchy Valuation
| | |
| | |
June 30, | | |
March 31, | |
| Description | |
Level | | |
2022 | | |
2022 | |
| Assets: | |
| | | |
| | | |
| | |
| Marketable securities held in Trust
Account | |
| 1 | | |
$ | 127,876,280 | | |
$ | 127,760,867 | |
Note
12 – Subsequent Events
On
July 12, 2022, the Company entered into a definitive Business Combination Agreement (the “Business Combination Agreement”)
with Chijet Inc., a Cayman Islands exempted company (together with its subsidiaries, “Chijet”), each of the
referenced holders of Chijet’s outstanding shares (collectively, the “Sellers”), Chijet Motor Company,
Inc., a Cayman Islands exempted company and wholly-owned subsidiary of Chijet (“Pubco”), and Chijet Motor (USA)
Company, Inc., a Delaware corporation and a wholly-owned subsidiary of Pubco (“Merger Sub”). Chijet indirectly
holds an over 85% interest in Shandong Baoya New Energy Vehicle Co., Ltd., a Chinese company (“Baoya”), which
is a producer and manufacturer of electric vehicles. In addition, Chijet indirectly holds an over 64% interest in FAW Jilin Automobile
Co., Ltd., a Chinese company (“FAW Jilin”), which manufactures and sells traditional fuel vehicles. The transactions
contemplated by the Business Combination Agreement are referred to herein as the “Proposed Business Combination”.
DEEP
MEDICINE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Subject
to its terms and conditions, the Business Combination Agreement provides that Company and Chijet will become wholly-owned subsidiaries
of Pubco, a newly formed holding company. Pursuant to the Business Combination Agreement, subject to the terms and conditions set forth
therein, at the closing of the Proposed Business Combination (the “Closing”), (a) Merger Sub will merge with
and into the Company, with the Company continuing as the surviving entity and a wholly-owned subsidiary of Pubco (the “Merger”),
and with holders of Company securities receiving substantially equivalent securities of Pubco, and (b) immediately prior to the Merger,
Pubco will acquire all of the issued and outstanding ordinary shares of Chijet (the “Purchased Shares”) from
the Sellers in exchange for ordinary shares of Pubco and Chijet shall surrender for no consideration its shares in Pubco, as described
below, with Chijet likewise becoming a wholly-owned subsidiary of Pubco (the “Share Exchange”).
Effect
of Merger on Company Securities
At
the effective time of the of the Proposed Business Combination (the “Effective Time”): (i) every issued and
outstanding share of Class A Common Stock, par value $0.0001 per share of the Company (“Common Stock”) immediately
prior to that Effective Time (other than treasury stock), will be exchanged for one ordinary share, par value $0.0001 per share, of Pubco
(“Ordinary Share”), following which all shares of the Company’s Common Stock will be canceled and will
cease to exist; and (ii) each issued and outstanding right of the Company, entitling the registered holder thereof to receive one-tenth
(1/10th) of a share of the Company’s Class A Common Stock upon the consummation by the Company of its initial business combination
shall be issued equivalent shares of Common Stock of the Company, which shall be aggregated per registered holder to the amount of full
shares of Common Stock for which such holder is eligible, and which shall be automatically converted into the number of Pubco Ordinary
Shares that would have been received by the holder thereof if such right had been automatically exercised immediately prior to the Effective
Time in accordance with clause (i) of this paragraph. In addition, (iii) each share of Class B Common Stock, par value $0.0001 per share
(“Class B Common Stock”) of the Company will be exchanged for one Pubco Ordinary Share, and (iv) each privately
placed warrant of the Company to acquire Common Stock shall be exchanged for a substantially equivalent warrant to acquire Pubco Ordinary
Shares, in each case pursuant to the Company’s certificate of incorporation and the terms of these securities.
Exchange
Consideration
The
total consideration to be paid by Pubco to the Sellers for the Purchased Shares shall be an aggregate number of Pubco’s Ordinary
Shares (the “Exchange Shares”) with an aggregate value (the “Exchange Consideration”)
equal to the product of (i) 0.851717 and (ii) $2,550,000,000 (the latter amount, subject to adjustment as described below, being the
“Valuation”), with each Pubco Ordinary Share to be issued to the Sellers valued at a price equal to the price
at which each share of Company’s Common Stock is redeemed pursuant to the redemption by the Company of its public stockholders
in connection with the Company’s initial business combination, as required by its certificate of incorporation, as amended (the
“Redemption”).
During
the sixty (60) day period following the date of the Business Combination Agreement (the “Due Diligence Period”),
the Company will undertake a due diligence review of Chijet, Pubco and their subsidiaries and their respective operations and complete
the Company’s determination of the Valuation (the “Revised Valuation”). If the Company determines, in
its reasonable discretion following consultation with its financial advisors, that the Revised Valuation is equal to or greater than
$2,295,000,000 (the “Minimum Valuation”), then the Exchange Consideration shall be based upon the initial Valuation
of $2,550,000,000. If the Company determines, in its reasonable discretion following consultation with its financial advisors, that the
Revised Valuation is less than the Minimum Valuation, then for a period of five (5) days following the Company’s delivery of notice
thereof (the “Negotiation Period”), the parties will reasonably cooperate to agree on a revised amount of Exchange
Consideration. If the parties do not agree during the Negotiation Period on a revised amount of Exchange Consideration, the Company will
have the option either to terminate the Business Combination Agreement (as further described below) or to proceed to the Closing with
the Exchange Consideration being based on the Minimum Valuation.
The
Transactions were not closed as of the date of filing this Quarterly Report on Form 10-Q.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References
in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Deep
Medicine Acquisition Corp. References to our “management” or our “management team” refer to our officers and
directors, and references to the “Sponsor” refer to Bright Vision Sponsor LLC. The following discussion and analysis of the
Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes
thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special
Note Regarding Forward-Looking Statements
This
Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected
and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation,
statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding
the Company’s financial position, business strategy and the plans are, objectives of management for future operations are forward-looking
statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,”
“seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently
available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to
differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s
Annual Report on Form 10-K for the year ended March 31, 2022 filed with the U.S. Securities and Exchange Commission (the “SEC”)
on June 24, 2022. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov.
Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We
are a blank check company incorporated as a Delaware corporation and 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. We intend to effectuate
our initial Business Combination using cash from the proceeds of the IPO and the sale of the Placement Warrants that occurred simultaneously
with the closing of the IPO, our capital stock, debt or a combination of cash, stock and debt. We have until October 29, 2022 (or April
29, 2023 if we extend the period to consummate a Business Combination by the full amount) to complete a Business Combination.
On
July 12, 2022, the Company entered into a definitive Business Combination Agreement (the “Business Combination Agreement”)
with Chijet Inc., a Cayman Islands exempted company (together with its subsidiaries, “Chijet”), each of the referenced holders
of Chijet’s outstanding shares (collectively, the “Sellers”), Chijet Motor Company, Inc., a Cayman Islands exempted
company and wholly-owned subsidiary of Chijet (“Pubco”), and Chijet Motor (USA) Company, Inc., a Delaware corporation and
a wholly-owned subsidiary of Pubco (“Merger Sub”). Chijet indirectly holds an over 85% interest in Shandong Baoya New Energy
Vehicle Co., Ltd., a Chinese company (“Baoya”), which is a producer and manufacturer of electric vehicles. In addition, Chijet
indirectly holds an over 64% interest in FAW Jilin Automobile Co., Ltd., a Chinese company (“FAW Jilin”), which manufactures
and sells traditional fuel vehicles. The transactions contemplated by the Business Combination Agreement are referred to herein as the
“Proposed Business Combination”.
Subject
to its terms and conditions, the Business Combination Agreement provides that Company and Chijet will become wholly-owned subsidiaries
of Pubco, a newly formed holding company. Pursuant to the Business Combination Agreement, subject to the terms and conditions set forth
therein, at the closing of the Business Combination (the “Closing”), (a) Merger Sub will merge with and into the Company,
with the Company continuing as the surviving entity and a wholly-owned subsidiary of Pubco (the “Merger”), and with holders
of Company securities receiving substantially equivalent securities of Pubco, and (b) immediately prior to the Merger, Pubco will acquire
all of the issued and outstanding ordinary shares of Chijet (the “Purchased Shares”) from the Sellers in exchange for ordinary
shares of Pubco and Chijet shall surrender for no consideration its shares in Pubco, as described below, with Chijet likewise becoming
a wholly-owned subsidiary of Pubco (the “Share Exchange”).
For
more information regarding the Proposed Business Combination, please refer to Note 12 to the financial statements included in Item 1
of this Quarterly Report on Form 10-Q.
The
Proposed Business Combination was not closed as of the date of filing this Quarterly Report on
Form 10-Q .
Results
of Operations and Known Trends or Future Events
We
have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational
activities and those necessary to prepare for the IPO and since the IPO, identifying a target company for a Business Combination and
activities in connection with the proposed acquisition of Chijet. We do not generate any operating revenues until after completion of
our initial business combination. We expect to generate non-operating income in the form of interest income on cash and cash equivalents
after the IPO. There has been no significant change in our financial or trading position and no material adverse change has occurred
since the date of our audited financial statements. After the IPO, we expect to incur increased expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on Chijet.
We expect our expenses to increase substantially after the closing of the IPO.
For
the three months ended June 30, 2022, we had a net loss of $154,420, which consisted of operating costs of $269,833, offset by interest
earned on marketable securities held in the Trust Account of $115,413.
For
the three months ended June 30, 2021, we had a net loss of $16,499 due solely to the operating costs.
Liquidity
and Capital Resources
As
of June 30, 2022 and March 31, 2022, we had cash of $707,977 and 877,099, respectively, total current liabilities of $561,198 and $536,712,
respectively, and total current assets of $ 128,823,338 and $128,953,272, respectively. As of June 30, 2022, we had working capital of
$385,860, a decrease of working capital of $269,833 as compared to March 31, 2022, primarily as a result of a decrease in cash and prepaid
expenses and an increase in total current liabilities. Cash and marketable securities held in a trust account increased by $115,413 to
$127,876,280 as of June 30, 2022 compared to $127,760,867 as of March 31, 2022. We
expect to continue to incur significant costs in the pursuit of the Proposed Business Combination with Chijet. We cannot assure you that
our plans to complete the Proposed Business Combination will be successful.
For
the three months ended June 30, 2022, cash used in operating activities amounted to $169,122, mainly due to the net loss of $154,420,
plus the decrease in accrued expenses to related parties by $15,000, offset by the decrease in prepaid expenses by $76,225 and increase
in accrued expenses by $39,486. Comparatively, cash of $2,252 used in operating activities during the three months ended June 30, 2021
was due to the net loss of $16,499, offset by the increase in accrued expenses to related parties by $15,000.
There
was no cash flow from investing activities and financing activities during the three months ended June 30, 2022 and 2021.
As
of June 30, 2022, we had cash and marketable securities held in the Trust Account of $127,876,280 (including approximately unrealized
gain of $111,280 generated since the inception), substantially all of which has been invested in U.S. treasury bills with a maturity
of 180 days or less. Interest income earned on the balance in the Trust Account may be available to us to pay taxes. We intend to use
substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account to
complete our initial business combination. We may withdraw interest to pay franchise and income taxes. We estimate our annual franchise
tax obligations, based on the number of shares of our common stock authorized and outstanding after the completion of the IPO, to be
$200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from
funds from the IPO held outside of the trust account or from interest earned on the funds held in our trust account and released to us
for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held
in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To
the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination,
the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
Prior
to the completion of our initial business combination, we have available to us the $707,977 of proceeds held outside the trust account.
We will use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business
combination.
In
order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination,
our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may
be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business
combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but
no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such working capital loans may be convertible
into private placement-equivalent units at a price of $10.00 per unit (which, for example, would result in the holders being issued 165,000
shares of Class A common stock if $1,500,000 of notes were so converted since the 150,000 rights included in such units would result
in the issuance of 15,000 shares upon the closing of our business combination), at the option of the lender.
Such
units would be identical to the private placement units. The terms of such working capital loans by our sponsor or its affiliates, or
our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect
to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to
loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
We
expect our primary liquidity requirements during that period to include approximately $400,000 for our portion of legal, accounting,
due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; $50,000
for legal and accounting fees related to regulatory reporting requirements; $75,000 for Nasdaq continued listing fees; $155,000 for working
capital that will be used for miscellaneous expenses and reserves (including taxes net of anticipated interest income); and approximately
$20,000 as fees to our Chief Financial Officer.
These
amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being
placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a
down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping”
around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed
initial business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for
the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop”
provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time.
Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue
searching for, or conducting due diligence with respect to, prospective target businesses.
We
do not believe we will need to raise additional funds following the IPO in order to meet the expenditures required for conducting the
due diligence related to the Proposed Business Combination and operating our business during this process. However, if our estimates
of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination, including
the Proposed Business Combination, are less than the actual amount necessary to do so, or we are unable to complete the Proposed Business
Combination, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we
may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem
a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional
securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could
acquire with the net proceeds of the IPO and the sale of the private placement units, and may as a result be required to seek additional
financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only
complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial
business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the
trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional
financing in order to meet our obligations.
Controls
and Procedures
We
are not currently required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act.
We will be required to comply with the internal control requirements of the Sarbanes-Oxley Act for the fiscal year ending March 31, 2023.
Only in the event that we are deemed to be a large accelerated filer or an accelerated filer would we be required to comply with the
independent registered public accounting firm attestation requirement. Further, for as long as we remain an emerging growth company as
defined in the JOBS Act, we intend to 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 requirement.
Prior
to the closing of the IPO, we have not completed an assessment, nor has our independent registered public accounting firm tested our
systems, of internal controls. We expect to assess the internal controls of our target business or businesses prior to the completion
of our initial business combination and, if necessary, to implement and test additional controls as we may determine are necessary in
order to state that we maintain an effective system of internal controls. A target business may not be in compliance with the provisions
of the Sarbanes-Oxley Act regarding the adequacy of internal controls. Many small and mid-sized target businesses we may consider for
our initial business combination may have internal controls that need improvement in areas such as:
| |
● |
staffing
for financial, accounting and external reporting areas, including segregation of duties; |
| |
|
|
| |
● |
reconciliation
of accounts; |
| |
|
|
| |
● |
proper
recording of expenses and liabilities in the period to which they relate; |
| |
|
|
| |
● |
evidence
of internal review and approval of accounting transactions; |
| |
|
|
| |
● |
documentation
of processes, assumptions and conclusions underlying significant estimates; and |
| |
|
|
| |
● |
documentation
of accounting policies and procedures. |
Because
it will take time, management involvement and perhaps outside resources to determine what internal control improvements are necessary
for us to meet regulatory requirements and market expectations for our operation of a target business, we may incur significant expense
in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal and disclosure
controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing
reporting.
Once
our management’s report on internal controls is complete, we will retain our independent registered public accounting firm to audit
and render an opinion on such report when required by Section 404 of the Sarbanes-Oxley Act. The independent registered public accounting
firm may identify additional issues concerning a target business’s internal controls while performing their audit of internal control
over financial reporting.