| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the SEC’s rules
and regulations found in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required
by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal
recurring adjustments necessary for the fair statement of the balances and results for the period presented. Operating results for the
three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected through December 31,
2022. The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K
for the year ended December 31, 2021, as filed with the SEC on April 13, 2022 (our “Annual Report”). Emerging
Growth Company The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not
being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley
Act of 2002, 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 statement with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used. Use
of Estimates The
preparation of the unaudited condensed financial statements in conformity with 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 balance
sheet. Actual results could differ from those estimates. Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Cash
and Securities Held in Trust Account At
June 30, 2022, the assets held in the Trust Account consisted of $220,807,449 held in mutual funds invested in U.S. Treasury securities
and $247 held in cash. At December 31, 2021, the assets held in the Trust Account consisted of $220,487,514 held in mutual funds
invested in U.S. Treasury securities and $247 held in cash. Fair
Value Measurements Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● Level 1,
defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
● Level 2,
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
● Level 3,
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement. See Note 7 for details. The
fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value
Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and
cash equivalents, prepaid expenses, and accrued expenses are estimated to approximate the carrying values as of June 30, 2022 and December
31, 2021 due to the short maturities of such instruments. Common
Stock Subject to Possible Redemption The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards
Codification ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory
redemption are classified as a liability instrument and are measured at redemption value. Conditionally redeemable common stock (including
common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock
is classified as stockholders’ equity. All
of the 22,047,293 shares of Class A common stock sold as part of the Units in the IPO contain a redemption feature which
allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote
or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended
and restated certificate of incorporation. In accordance with the Securities and Exchange Commission (the “SEC”) and its
staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely
within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.
Therefore, all Class A common stock has been classified outside of permanent equity. 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. Increases or decreases in the carrying amount of redeemable common stock
are affected by charges against additional paid in capital and accumulated deficit. As
of June 30, 2022, the Class A common stock reflected on the balance sheet are reconciled in the following table:
Gross proceeds from IPO $ 220,472,930
Less:
Proceeds allocated to Public Warrants (14,120,504 )
Class A common stock issuance costs (11,880,948 )
Plus:
Remeasurement of carrying value to redemption value 26,079,936
Class A common stock subject to possible redemption $ 220,551,414 As of December 31, 2021, the Class A common stock
reflected on the balance sheet are reconciled in the following table:
Gross proceeds from IPO $ 220,472,930
Less:
Proceeds allocated to Public Warrants (14,120,504 )
Class A common stock issuance costs (11,880,948 )
Plus:
Remeasurement of carrying value to redemption value 26,001,452
Class A common stock subject to possible redemption $ 220,472,930 Net
Income Per Share of Common Stock The
Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared
pro rata between the two classes of shares. The 18,633,106 potential common shares for outstanding warrants to purchase
the Company’s stock were excluded from diluted earnings per share for the three and six months ended June 30, 2022 and for the
three months ended June 30, 2021 and for the period from January 19, 2021 (inception) through June 30, 2021 because the warrants are
contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per common share is the same as
basic net income per common share for such periods. The table below presents a reconciliation of the numerator and denominator used
to compute basic and diluted net income per share for each class of common stock:
Three Months Ended Three Months Ended June 30, 2021 Six Months Ended For the Period from
Class A Class B Class A Class B Class A Class B Class A Class B
Basic and diluted net income per share:
Numerator:
Allocation of net income $ 3,405,902 $ 851,476 $ 2,981,595 745,399 $ 6,904,316 $ 1,726,079 $ 213,248 $ 81,367
Denominator:
Weighted-average shares outstanding 22,047,293 5,511,823 22,047,293 5,511,823 22,047,293 5,511,823 13,910,791 5,307,763
Basic and diluted net income per share $ 0.15 $ 0.15 $ 0.14 0.14 $ 0.31 $ 0.31 $ 0.02 $ 0.02 Offering
Costs associated with the Initial Public Offering The
Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses
of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date
that are related to the IPO. Accordingly, as of March 31, 2021, offering costs of $12,693,922 (consisting of $4,409,459 of
underwriting commissions, $7,716,553 of deferred underwriters’ commission, and $567,910 other cash offering costs) have
been incurred. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis
compared to total proceeds received. Offering costs associated with warrant liabilities is expensed, and offering costs associated with
the Class A common stock are charged to the stockholders’ equity. Accordingly, $812,974 of offering costs associated with
warrant liabilities is expensed in the statement of operations for the period from January 19, 2021 (inception) through March 31, 2021. Derivative
Financial Instruments The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value
on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative
assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative
instrument and should be accounted for as liabilities. As such, the Company recognizes the warrant liabilities at fair value at each
reporting period and records the change in fair value in the statements of operations. FASB
ASC 470-20, “Debt with Conversion and Other Options,” addresses the allocation of proceeds from the issuance of convertible
debt into its equity and debt components. The Company applies this guidance to allocate initial public offering proceeds from the Units
between Class A common stock and warrants, using the residual method by allocating initial public offering proceeds first to fair value
of the warrants and then the Class A common stock. Income
Taxes The
Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred
tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis
of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740
additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets
will not be realized. As of June 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance
recorded against it. Our effective tax rate was 0.32% and 0.16% for the three and six months ended June 30, 2022, 0.00% for three months
ended June 30, 2021 and 0.00% for the period from January 19, 2021 (inception) through June 30, 2021. The effective tax rate differs
from the statutory tax rate of 21% for the three and six months ended June 30, 2022, due to changes in fair of warrant liabilities, and
the valuation allowance on the deferred tax assets. ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition. The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of June 30, 2022 and December 31, 2021. The Company is currently not
aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The
Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation
by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus
of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months. Recent
Accounting Pronouncements In
August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
— Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features
from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts
in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments
that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for smaller reporting companies
for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company continues to evaluate
the impact of ASU 2020-06 to its unaudited condensed 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 unaudited condensed financial statements. |
