NOTES
TO UNAUDITED CONDENSED UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
Note
1 — Organization and Business Operations
Parsec
Capital Acquisitions Corp. (the “Company”) is a newly-organized blank check company incorporated on February 11, 2021 as
a Delaware corporation whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses (the “Business Combination”). The Company has not selected any
specific Business Combination target and the Company has not, nor has anyone on its behalf, initiated any substantive discussions, directly
or indirectly, with any Business Combination target.
As
of October 8, 2021, the Company has neither engaged in any operations nor generated any revenues. All activity through September 30,
2021 relates to the Company’s formation and preparation for the Initial Public Offering (the “Public Offering” or “IPO”)
as described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination,
at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the
proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
The
Company’s sponsor is Parsec Acquisitions Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). Subsequent
to September 30, 2021, the registration statement for the Company’s IPO was declared effective on October 5, 2021 (the “Effective
Date”). On October 8, 2021, the Company consummated the IPO of 8,625,000
units at $10.00
per unit (the “Units”),
including the full exercise of the underwriters’ over-allotment of 1,125,000
units, generating gross
proceeds to the Company of $86,250,000,
which is discussed in Note 3.
Simultaneously
with the consummation of the IPO, the Company consummated the private placement of 4,518,750 warrants (the “Private Placement Warrants”)
to the Sponsor, at a price of $1.00 per Private Placement Warrant in a private placement, generating gross proceeds to the Company of
$4,518,750, which is described in Note 4.
Transaction
costs amounted to $5,174,429
consisting of $1,725,000
of underwriting commissions,
$3,018,750
of deferred underwriting
commissions, and $430,679
of other offering costs,
and was all charged to stockholders’ equity.
Following
the closing of the IPO on October 8, 2021, $87,543,750
($10.15
per Unit) from the net
proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was deposited into a trust account (the “Trust
Account”), located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will invest
only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, having a maturity
of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act
which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust
Account that may be released to the Company to pay its tax obligations and up to $100,000
of interest that may
be used for the Company’s dissolution expenses, the proceeds from the Initial Public Offering and the sale of the placement warrants
held in the Trust Account will not be released from the Trust Account until the earliest to occur of: (a) the completion of the initial
Business Combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s
certificate of incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection
with the initial Business Combination or certain amendments to the Company’s charter prior thereto or to redeem 100%
of the public shares
if the Company does not complete its initial Business Combination within 12 months from the closing of the Initial Public Offering
(or up to 18 months from the closing of the IPO at the election of the Company subject to satisfaction of certain conditions or as extended
by the Company’s stockholders in accordance with the Company’s amended and restated certificate of incorporation) or (ii)
with respect to any other provision relating to stockholders’ rights or pre-Business Combination activity, and (c) the redemption
of the public shares if the Company is unable to complete its initial Business Combination within 12 months from the closing of the Initial
Public Offering (or up to 18 months from the closing of the IPO at the election of the Company subject to satisfaction of certain
conditions or as extended by the Company’s stockholders in accordance with the Company’s amended and restated certificate
of incorporation), subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s
creditors, if any, which could have priority over the claims of the Company’s public stockholders.
The
Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion
of the initial 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 proposed initial Business
Combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors
such as the timing of the transaction and whether the terms of the transaction would require the Company to seek stockholder approval
under applicable law or stock exchange listing requirements. The stockholders will be entitled to redeem all or a portion of their public
shares upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then
outstanding public shares, subject to the limitations described herein. The amount in the Trust Account is $10.15 per public share, however, there is no guarantee that investors will receive $10.15 per share upon redemption. The per-share amount
the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions
the Company will pay to the underwriters.
The
Company will have only 12 months from the closing of the IPO (or up to 18 months from the closing of the IPO at the election of the Company
subject to satisfaction of certain conditions or as extended by the Company’s stockholders in accordance with the Company’s
amended and restated certificate of incorporation) to complete the initial Business Combination (the “Combination Period”).
However, if the Company is unable to complete the initial Business Combination within the Combination Period (and the Company’s
stockholders have not approved an amendment to the Company’s charter extending this time period), the Company will (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter,
redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000
of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject
to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s
remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject to our obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable law.
The
Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive
their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of the initial
Business Combination, (ii) waive their redemption rights with respect to any founder shares and public shares held by them in connection
with a stockholder vote to approve an amendment to the Company’s certificate of incorporation (A) to modify the substance or timing
of the Company’s obligation to allow redemption in connection with the initial Business Combination or certain amendments to the
Company’s charter prior thereto or to redeem 100%
of the public shares
if the Company does not complete its initial Business Combination within the Combination Period or (B) with respect to any other provision
relating to stockholders’ rights or pre-initial Business Combination activity, (iii) waive their rights to liquidating distributions
from the Trust Account with respect to any founder shares held by them if the Company fails to complete its initial Business Combination
within the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any
public shares they hold if the Company fails to complete its initial Business Combination within the prescribed time frame, and (iv)
vote any founder shares held by them and any public shares purchased during or after the Initial Public Offering (including in
open market and privately-negotiated transactions) in favor of the initial Business Combination.
The
Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products
sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality
or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.15
per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust
Account, if less than $10.15 per public share due to reductions in the value of the trust assets,
less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed
a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply
to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act. However, the Company has not asked the Sponsor to reserve for such indemnification obligations,
nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believe
that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure you that the Sponsor would be
able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties
including, without limitation, claims by vendors and prospective target businesses.
Liquidity
and Capital Resources
As
of September 30, 2021, the Company had $1,408
in cash and a working capital deficit of $136,167.
The Company’s liquidity needs up to September 30, 2021 had been satisfied through a capital contribution from the Sponsor
of $(see Note 5) for the founder shares and the loan
under an unsecured promissory note from the Sponsor of up to $(see Note 5).
After
consummation of the IPO on October 8, 2021, the Company had approximately $1.3 million in its operating bank account, and working capital
of approximately $0.9 million. In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s
Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide
the Company Working Capital Loans, as defined below (see Note 5). As of September 30, 2021, there were no amounts outstanding under any
Working Capital Loans.
Based
on the foregoing, management believes that the Company will have sufficient working capital to meet its needs
through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will
be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with
or acquire, and structuring, negotiating and consummating the Business Combination.
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position and/or search for a target company, 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.
Note
2 — Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial
reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position,
results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include
all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating
results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Prospectus, which contains
the initial audited financial statements and notes thereto for the period from February 11, 2021 (inception) to March 12, 2021 as filed
with the SEC on October 7, 2021, and the Company’s report on Form 8-K, which contains the Company’s audited balance sheet
and notes thereto as of October 8, 2021, as filed with the SEC on October 15, 2021. The interim results for the three months ended
September 30, 2021 and for the period from February 11, 2021 (inception) through September 30, 2021 are not necessarily indicative of
the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Emerging
Growth Company Status
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities
Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth
companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period
difficult or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the
estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements,
which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly,
the actual results could differ significantly from those estimates.
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 September 30, 2021.
Deferred
Offering Costs
The
Company complies with the requirements of the ASC 340-10-S99-1. Deferred offering costs consists of legal, accounting, underwriting fees
and other costs incurred through the balance sheet date that are directly related to the Public Offering. Offering costs are allocated
to the separable financial instruments to be issued in the IPO based on a relative fair value basis, compared to total proceeds received.
Upon closing of the IPO on October 8, 2021, offering costs associated with the Class A common stock and the warrants were
charged to stockholders’ equity. Transaction costs amounted to $5,174,429,
all of which was allocated to stockholders’ equity.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term
nature.
Common
stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured
at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)
is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s
Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject
to the occurrence of uncertain future events. Accordingly, all shares of Class A common stock subject to possible redemption are presented
at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Warrants
The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”)
and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements
for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether
the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control,
among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the
time warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For
issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component
of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity
classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet
date thereafter. The Company accounts for its outstanding warrants as equity-classified instruments.
Net
Loss Per Common Share
The
Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss per
common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period,
excluding common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 281,250
shares of common
stock that were subject to forfeiture if the over-allotment option was not exercised by the underwriter. At September 30,
2021, the Company did not
have any dilutive securities and other contracts that could, potentially, be exercised or converted into 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 periods
presented.
Income
Taxes
The
Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition
of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis
of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740
additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets
will not be realized.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income
tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021. The
Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from
its position.
The
Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income tax examinations
by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus
of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months. The provision for income taxes
was deemed to be immaterial for the three months ended September 30, 2021 and for the period from February 11, 2021(inception) through
September 30, 2021.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal depository insurance coverage of $250,000. As of September 30, 2021, the Company had not experienced
losses on this account and management believes the Company was not exposed to significant risks on such account.
Recent
Accounting Pronouncements
In
August 2020, the FASB issued ASU No. 2020-06, 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”), which simplifies the accounting for convertible instruments.
The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible
instruments. ASU 2020-06 allows for a modified or full retrospective method of transition. This update is effective for fiscal years
beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently
evaluating the impact this change will have on its financial statements.
Other
recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s financial statements.
Note
3 — Initial Public Offering
Public
Units
On
October 8, 2021, the Company sold 8,625,000 Units, including the full exercise of the underwriters’ over-allotment option to purchase
1,125,000 units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one redeemable warrant
(the “Public Warrants”). Each whole warrant entitles the registered holder to purchase one share of the Class A common stock
at a price of $11.50 per share, subject to adjustment, at any time commencing on the later of 12 months from the effective date and 30
days after the completion of the initial Business Combination (see Note 7).
The
Company paid an underwriting fee at the closing of the IPO of $1,725,000. As of October 8, 2021, an additional fee of $3,018,750 (see
Note 6) was deferred and will become payable upon the Company’s completion of an initial Business Combination. The deferred fee
will become payable to the underwriter from the amounts held in the Trust Account.
Note
4 — Private Placement
Simultaneously
with the closing of the IPO, the Company’s Sponsor purchased an aggregate of 4,518,750 Private Placement Warrants, each exercisable
to purchase one share of Class A common stock at $11.50 per share, at a price of $1.00 per warrant, or $4,518,750 in the aggregate, in
a private placement.
The
Private Placement Warrants are identical to the Public Warrants sold in the IPO except that the Private Placement Warrants, (a) may not
(including the Class A common stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred,
assigned or sold by the holders until 30 days after the completion of the initial Business Combination and (b) will be entitled to registration
rights.
Note
5 — Related Party Transactions
Founder
Shares
On
March 12, 2021, the Sponsor paid $,
or approximately $per share, in consideration
for shares of Class B common
stock, par value $(the “Founder
Shares”). In September 2021, the Company effected a stock dividend of an aggregate shares of Class B common
stock, resulting in the Sponsor holding an aggregate of 2,156,250
Founder Shares, which
included shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters.
As a result of the full exercise of the over-allotment exercise by the underwriters upon consummation of the IPO on October 8, 2021,
these shares are no longer subject to forfeiture.
On
July 9, 2021, the Sponsor entered into a Stock Grant Agreement with the Company’s independent directors and certain of the Company’s
officers, under which they are granted Founder Shares and Private Placement Warrants as an inducement to serve as directors and officers
of the Company. Under the terms of the agreement, the Sponsor will transfer Founder Shares to each of the Company’s
four independent directors, Founder Shares to the Company’s Chief Executive Officer and shares to the Company’s
Chief Financial Officer, for a sales price of $ per share, or an aggregate of $ (the “purchase price”). The transferred
shares shall vest upon the Company consummating an initial business combination. In the event that a recipient ceases to serves as either
officer or directors prior to the vesting date, the Sponsor has the option to repurchase the shares at the purchase price. The fair value
of the shares at July 9, 2021, was estimated using a Monte Carlo simulation model to be approximately $ million in the aggregate.
The Company will record the fair value of the transferred shares as Officer and director compensation expense upon consummation of an
initial business combination, in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 718 “Compensation-Stock
Compensation”, which requires deferral of the expense recognition until after the performance condition is achieved, if the performance
condition is a business combination or similar liquidity event. The transferred shares will have the same terms and restrictions as the
Founder Shares held by the Sponsor.
Additionally,
under the terms of the agreement, the Sponsor transferred Private Placement Warrants to each of the Company’s four independent
directors, Private Placement Warrants to the Company’s Chief Executive Officer and Private Placement Warrants to
the Company’s Chief Financial Officer, for no consideration. The granted Private Placement Warrants vest upon the consummation
of the IPO. The fair value of the granted warrants at July 9, 2021, was estimated using a Monte Carlo simulation model to be $
in the aggregate. Accordingly, the Company recorded the fair value of the transferred Private Placement Warrants as Officer and director
compensation expense upon consummation of the IPO, in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 718 “Compensation-Stock Compensation”.
The
initial stockholders have agreed not to transfer, assign or sell any of their founder shares (or shares of common stock issuable upon
conversion thereof) until the earlier to occur of: (A) six months after the completion of the initial Business Combination and (B) subsequent
to the initial Business Combination, (x) if the reported 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 our 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 (the “Lock-up). Any permitted transferees will
be subject to the same restrictions and other agreements of our initial stockholders with respect to any founder shares.
Promissory
Note — Related Party
The
Sponsor issued a promissory note allowing the Company to borrow up to $300,000
under an unsecured promissory
note to be used for a portion of the expenses of the IPO. Through September 30, 2021, the Company had borrowed $137,575
under the promissory
note. Subsequent to September 30, 2021 there were no borrowings, however $137,575 still remained outstanding under the promissory
note which is currently due upon demand. On October 26, 2021, the Company fully repaid the outstanding promissory note balance of 137,575 (see Note 8).
Working
Capital Loans
In
addition, in order to finance transaction costs in connection with an intended 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
on a non-interest basis (“Working Capital Loans”). If the Company completes the initial Business Combination, it would repay
the Working Capital Loans. In the event that the initial Business Combination does not close, the Company may use a portion of the working
capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay
the Working Capital Loans. Up to $1,125,000 of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant
at the option of the lender, upon consummation of the initial Business Combination. Such warrants would be identical to the Private Placement
Warrants. Except as set forth above, the terms of Working Capital Loans by the Company’s officers and directors, if any, have not
been determined and no written agreements exist with respect to the Working Capital Loans. As of September 30, 2021, the Company had
no borrowings under the Working Capital Loans.
Administrative
Service Fee
The
Company has entered into an administrative services agreement on the effective date of the registration statement for the IPO pursuant
to which the Company will pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and
administrative support services. Upon completion of the initial Business Combination or the Company’s liquidation, the Company
will cease paying these monthly fees. As of September 30, 2021, no administrative fees had been recorded or paid.
Note
6 — Commitments and Contingencies
Registration
Rights
The
holders of the founder shares, the Private Placement Warrants (including securities contained therein) and warrants (including securities
contained therein) that may be issued upon conversion of Working Capital Loans, and any shares of Class A common stock issuable upon
the exercise of the Private Placement Warrants and any shares of Class A common stock and warrants that may be issued upon conversion
as part of the Working Capital Loans and Class A common stock issuable upon conversion of the founder shares, are entitled to registration
rights pursuant to a registration rights agreement signed on October 8, 2021, requiring the Company to register such securities for resale
(in the case of the founder shares, only after conversion to the Class A common stock). The holders of the majority of these securities
are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the
holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s
completion of its initial 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.
Underwriting
Agreement
On
October 8, 2021, the Company paid a cash underwriting discount of 2.0% per Unit, or $1,725,000.
The
underwriters are entitled to a deferred underwriting discount of 3.5% of the gross proceeds of the IPO, or $3,018,750, which will be
paid to the underwriters from the funds held in the trust account upon completion of the Company’s initial Business Combination
subject to the terms of the underwriting agreement.
Note
7 — Stockholder’s Equity
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 and provides
that shares of preferred stock may be issued from time to time in one or more series. The Company’s board of directors will be
authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special
rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. At September 30, 2021,
there were no shares of preferred stock issued or outstanding.
Class
A Common stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001
per share. At September 30, 2021, there were no shares of Class A common stock issued and outstanding.
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 are entitled to one vote for each share of Class B common stock. At September 30, 2021, there were 2,156,250 shares
of Class B common stock issued and outstanding.
Holders
of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to
a vote of the Company’s stockholders, except as required by law. Unless specified in the Company’s certificate of incorporation
or bylaws, or as required by applicable provisions of the Delaware General Corporate Law (“DGCL”) or applicable stock exchange
rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such
matter voted on by its stockholders.
The
shares of Class B common stock will automatically convert into shares of the Class A common stock at the time of the consummation of
the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations
and the like, and subject to further adjustment as provided herein. 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, 20% of the sum of the total number of all shares of common stock outstanding
upon the completion of the IPO (excluding the placement warrants and underlying securities) 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 or placement equivalent warrants to our Sponsor
or its affiliates upon conversion of Working Capital Loans made to the Company). The term “equity-linked securities” refers
to any debt or equity securities that are convertible, exercisable or exchangeable for shares of Class A common stock issued in a financing
transaction in connection with our initial Business Combination, including but not limited to a private placement of equity or debt.
Securities could be “deemed issued” for purposes of the conversion rate adjustment if such shares are issuable upon the conversion
or exercise of convertible securities, warrants or similar securities.
Warrants
– As of October 8, 2021, there were 8,625,000 Public Warrants and 4,518,750 Private Placement Warrants outstanding. Each
whole warrant entitles the registered holder to purchase one share of the Class A common stock at a price of $11.50 per share, subject
to adjustment as discussed below, at any time commencing on the later of 12 months from the effective date of the registration statement
for the IPO and 30 days after the completion of the initial Business Combination. Pursuant to the warrant agreement, a warrant holder
may exercise its warrants only for a whole number of shares of Class A common stock. This means that only a whole warrant may be exercised
at any given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will
trade. The warrants will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New
York City time, or earlier upon redemption or liquidation.
The
Company has agreed that the Company will use its best efforts to file with the SEC a registration statement covering the shares of Class
A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current
prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement.
If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the
60th business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective
registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise
warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding
the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective
within a specified period following the consummation of the initial Business Combination, warrant holders may, until such time as there
is an effective registration statement and during any period when the Company 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 of 1933,
as amended (the “Securities Act”), provided that such exemption is available.
Once
the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the placement
warrants):
●
at a price of $0.01 per warrant;
●
upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable (the “30-day redemption
period”) to each warrant holder; and
●
if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once
the warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders.
In
addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes
in connection with the closing of the initial Business Combination at a Newly Issued Price of less than $9.20 per share of Class A common
stock (with such issue price or effective issue price to be determined in good faith by the 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), (y) the aggregate gross proceeds from such issuances represent more than 60%
of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the
consummation of the initial Business Combination (net of redemptions), and (z) the Market Value is below $9.20 per share, then the exercise
price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued
Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of
the greater of the Market Value and the Newly Issued Price.
Note
8 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the financial statements
were issued. Except as disclosed in the footnotes elsewhere and below, the Company did not identify any subsequent events that would have required adjustment
or disclosure in the financial statements.
On
October 8, 2021, the Company’s consummated the IPO of 8,625,000
units at $10.00
per unit (the “Units”),
including the full exercise of the underwriters’ over-allotment of 1,125,000
units, generating gross
proceeds to the Company of $86,250,000.
Simultaneously with the consummation of the IPO, the Company consummated the private placement of 4,518,750
warrants (the “Private
Placement Warrants”) to the Sponsor, at a price of $1.00
per Private Placement
Warrant in a private placement, generating gross proceeds to the Company of $4,518,750.
Transaction costs of the IPO amounted to $5,174,429
consisting of $1,725,000
of underwriting commissions,
$3,018,750
of deferred underwriting
commissions, and $430,679
of other offering costs,
and was all charged to stockholders’ equity.
On October 26, 2021, the Company
fully repaid the Promissory Note — Related Party balance of $137,575.