| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States of
America (“GAAP”). The Company’s unaudited condensed interim financial statements have been prepared in accordance
with U.S. GAAP and the rules and regulations of the SEC for interim financial information and the instructions to Form 10-Q. Accordingly,
the financial statements do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all
adjustments considered for a fair presentation have been included. Operating results for the six months ended June 30, 2022 are
not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any other period. The accompanying
unaudited condensed interim financial statements should be read in conjunction with the Company’s audited financial statements
and notes thereto included in the Company’s Form 10-K filed with the SEC on March 29, 2022. Emerging
Growth Company The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and
it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are
not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting
firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not previously approved. Use
of Estimates The
preparation of the 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 financial statement.
Estimates are used when accounting for certain items such as valuation of investments held in Trust Account, derivative and warrant liabilities,
and accounting for income tax valuation allowances. 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 statement, 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 date of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of June 30, 2022 and December 31, 2021. Investments
Held in Trust Account As
of June 30, 2022 and December 31, 2021, the Company had $172,752,590 and $172,507,535, respectively, in investments held in the
Trust Account. The assets held in the Trust Account were held in a mutual fund that invests in U.S. Treasury securities. Class
A Common Stock Subject to Possible Redemption All
of the 17,250,000 shares of Class A common stock sold as part of the Public Units in the Public Offering 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 Initial Business Combination and in connection with certain amendments to the Company’s
Amended Charter. In accordance with the Securities and Exchange Commission (“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
shares of common stock subject to redemption to be classified outside of permanent equity. Therefore, all of the shares of Class A common
stock sold in the Public Offering 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 and December 31, 2021, the shares of Class A common stock reflected in the Condensed Balance Sheets are reconciled in
the following table:
Gross proceeds $ 172,500,000
Less:
Proceeds allocated to Public Warrants (5,347,500 )
Proceeds allocated to derivative liability (84,985 )
Issuance costs allocated to Class A ordinary shares (3,896,314 )
Plus:
Remeasurement of carrying value to redemption value 9,298,579
Reclassification of derivative liability upon exercise of overallotment option 30,220
Class A ordinary shares subject to possible redemption $ 172,500,000 Warrant
Liability The
Company accounts for warrants to purchase shares of the Company’s common stock that are not indexed to its own stock as liabilities
at fair value on the balance sheet in accordance with subtopic ASC 815-40-15, “Derivatives and Hedging - Contract’s in Entity’s
Own Equity”. The warrants are re-evaluated for the proper accounting treatment at each reporting period and are subject to remeasurement
at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the statement
of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration
of the Warrants. At that time, the portion of the liability related to the Warrants will be reclassified to additional paid-in capital.
At June 30, 2022 and December 31, 2021, there were 5,950,000 Warrants issued in connection with the Public Offering (the 5,750,000 public
Warrants and the 200,000 Private Placement Warrants). Offering
Costs Associated with the Public Offering The
Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin 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 Public
Offering. Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction
in equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred
offering costs amounting to $4,021,103 as a result of the Public Offering (consisting of underwriting commissions of $3,450,000 (2%
of the gross proceeds of the Public Offering) and other offering costs of $571,103). The Company recorded $3,896,314 of offering
costs as a reduction of temporary equity in connection with the shares of Class A common stock included in the Units. The Company immediately
expensed $124,789 of offering costs during 2021 in connection with the Public Warrants and Private Placement Warrants that were
classified as liabilities. Income
Taxes Prior
to the change in ownership on May 11, 2021 as a result of the Public Offering, the Company was included in the consolidated tax return
of B. Riley Financial (the “Parent”). During this period, the Company calculated the provision for income taxes by using
a “separate return” method. Under this method the Company is assumed to file a separate return with the tax authority, thereby
reporting its taxable income or loss and paying the applicable tax to, or receiving the appropriate refund from, the Parent. The current
provision was the amount of tax payable or refundable on the basis of a hypothetical, current year, separate return. Following changes
in ownership on May 11, 2021, the Company deconsolidated from the Parent for tax purposes. Beginning May 11, 2021, the Company files
separate corporate federal and state and local income tax returns. Any
difference between the tax provision (or benefit) allocated to the Company under the separate return method and payments to be made by
(or received from) the Parent for tax expense are treated as either dividends or capital contribution. Accordingly, the amount by which
the Company’s tax liability under the separate return method exceeds the amount of tax liability ultimately settled as a result
of using incremental expenses of the Parent is periodically settled as a capital contribution from the Parent to the Company. The
Company complies with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset
and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed
for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible
amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The
Company’s effective tax rate was 0.51% and 0.00% for the three months ended June 30, 2022 and 2021, respectively, and was 0.23%
and 0.00% for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of
21% for the three and six months ended June 30, 2022 and 2021, due to changes in fair value of warrant liability and the valuation allowance
on the deferred income tax assets. ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than
not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of June 30, 2022 and December 31, 2021, there were no unrecognized tax benefits and no amounts
accrued for interest and penalties. 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 may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal, state and city 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. Unrecognized
Tax Benefits The
Company recognizes tax positions in its financial statements only when it is more likely than not that the position will be sustained
on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is
measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences
between positions taken in a tax return and amounts recognized in the financial statements. There were no unrecognized tax benefits as
of June 30, 2022 and December 31, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as
income tax expense. No amounts were accrued for interest expense and penalties related to income tax matters as of June 30,
2022 and December 31, 2021. The Company is subject to income tax examinations by major taxing authorities since inception. Net
Income (Loss) Per Common Share The
Company has two classes of shares, which are referred to as Class A common stock and Class B common stock (the “Founder Shares”).
Earnings and losses are shared pro rata between the two classes of shares. Private Placement Warrants and public Warrants to purchase 5,950,000 shares
of Class A common stock at $11.50 per share were issued in connection with the Public Offering and exercise of the overallotment.
At June 30, 2022, no Warrants have been exercised. The 5,950,000 potential shares of Class A common stock issuable upon exercise
of the 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, because the Warrants are contingently exercisable, and the contingencies have not yet been met. Basic and
diluted earnings per share for the three and six months ended June 30, 2021 gives effect retroactively as of January 1, 2021 to the shares
of Class B common stock that were outstanding as a result of the Public Offering. During the three and six months ended June 30, 2021,
the dilutive impact of the 562,500 shares of Class B common stock that were subject to forfeiture and contingently issuable
upon completion of the Public Offering were antidilutive. The table below presents a reconciliation of the numerator and denominator
used to compute basic and diluted net income (loss) per share for each class of common stock:
Three
Months Ended June 30,
2022 2021
Class
A Class
B Class
A Class
B
Basic and diluted net income per share:
Numerator:
Allocation of net income (loss) $ 949,432 $ 229,380 $ (959,822 ) $ (439,935 )
Denominator:
Weighted average shares outstanding 17,850,000 4,312,500 8,950,220 4,102,335
Basic and diluted net income (loss) per share $ 0.05 $ 0.05 $ (0.11 ) $ (0.11 )
Six
Months Ended June 30,
2022 2021
Class
A Class
B Class
A Class
B
Basic and diluted net income per share:
Numerator:
Allocation of net income (loss) $ 2,133,581 $ 515,466 $ (723,663 ) $ (676,544 )
Denominator:
Weighted average shares outstanding 17,850,000 4,312,500 4,499,834 4,206,837
Basic and diluted net income (loss) per share $ 0.12 $ 0.12 $ (0.16 ) $ (0.16 ) Concentration
of Credit Risk Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts. Fair
Value of Financial Instruments The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature. The
Company follows the guidance in ASC Topic 820 for its financial assets and liabilities that are re-measured and reported at fair value
at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company
seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is
used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities:
Level
1: Quoted
prices in active markets for identical assets or liabilities. An active market for an asset
or liability is a market in which transactions for the asset or liability occur with sufficient
frequency and volume to provide pricing information on an ongoing basis.
Level
2: Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active
markets for similar assets or liabilities and quoted prices for identical assets or liabilities
in markets that are not active.
Level
3: Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing
the asset or liability. The
Company’s Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities
on the condensed balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes
in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations. The public Warrants
commenced separate trading on June 28, 2021. See
Note 4 for additional information on assets and liabilities measured at fair value. Recent
Accounting Pronouncements In
August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 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): Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity”, which simplifies accounting for convertible instruments
by removing major separation models required under current U.S. GAAP. The ASU also removes certain settlement conditions that are required
for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation
in certain areas. The new standard is effective for the Company on January 1, 2024, although early adoption is permitted. The ASU allows
the use of the modified retrospective method or the fully retrospective method. The Company is still in the process of evaluating the
impact of this new standard; however, the Company does not believe the initial impact of adopting the standard will result in any changes
to the Company’s statements of financial position, operations or cash flows. In
June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale
Restrictions”. The ASU amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity
security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that
are measured at fair value. The ASU applies to both holders and issuers of equity and equity-linked securities measured at fair value.
The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within
those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made
available for issuance. The Company is considering the impact of this pronouncement on the financial statements. |
