Greenland Mines Ltd 10-Q

Item 1. Financial Statements. REDWOODS ACQUISITION CORP. UNAUDITED CONDENSED BALANCE SHEETS June 30, 2022 December 31, 2021 Assets Current Assets Cash $ 447,382 $ 4,952 Prepaid expenses 218,173 — Total Current Assets 665,555 4,952 Investments held in Trust Account 116,296,397 — Total Assets $ 116,961,952 $ 4,952 Liabilities, Temporary Equity, and Stockholders’ Deficit Current Liabilities Accrued expenses $ 30,000 $ — Franchise tax payable 39,300 — Due to related party — 8,511 Total current liabilities 69,300 8,511 Warrant liability 710,200 — Deferred underwriting fee payable 4,312,500 — Total liabilities 5,092,000 8,511 Commitments and Contingencies Common stock subject to possible redemption, 11,500,000 shares at conversion value of $ 10.10 per share 116,150,000 — Stockholders’ Deficit Common stock, $ 0.0001 par value; 50,000,000 shares authorized; 3,405,000 and 0 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 340 — Additional paid-in capital — — Accumulated deficit ( 4,280,388 ) ( 3,559 ) Total stockholders’ deficit ( 4,280,048 ) ( 3,559 ) Total Liabilities, Temporary Equity, and Stockholders’ Deficit $ 116,961,952 $ 4,952 The accompanying notes are an integral part of these unaudited condensed financial statements. 1 REDWOODS ACQUISITION CORP. UNAUDITED CONDENSED STATEMENTS OF OPERATIONS Three months ended June 30, Six months ended June 30, For the period from March 16, 2021 (inception) through June 30, 2022 2021 2022 2021 General and administrative expenses $ 193,440 $ — $ 198,450 $ 3,511 Franchise tax expenses 39,300 — 39,300 — Loss from operations ( 232,740 ) ( 237,750 ) ( 3,511 ) Interest earned on investment held in Trust Account 146,397 — 146,397 — Change in fair value of warrant liabilities ( 122,483 ) — ( 122,483 ) — Loss before income taxes ( 208,826 ) ( 213,836 ) ( 3,511 ) Income taxes provision — — — — Net loss $ ( 208,826 ) $ — $ ( 213,836 ) $ ( 3,511 ) Basic and diluted weighted average shares outstanding, redeemable common stock 11,066,667 — 5,533,333 — Basic and diluted net income per share, redeemable common stock $ 0.55 — 1.70 — Basic and diluted weighted average shares outstanding, non-redeemable common stock 3,385,583 — 3,082,375 — Basic and diluted net loss per share, non-redeemable common stock $ ( 1.86 ) $ — $ ( 3.13 ) $ — The accompanying notes are an integral part of these unaudited condensed financial statements. 2 REDWOODS ACQUISITION CORP. UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(DEFICIT) Six Months Ended June 30, 2022 Common stock Additional paid-in Accumulated Total Stockholders’ Shares Amount capital deficit deficit Balance, January 1, 2022 — $ — $ — $ ( 3,559 ) $ ( 3,559 ) Common stock issued to initial stockholders 2,875,000 287 24,713 $ — 25,000 Net loss — — — ( 5,010 ) ( 5,010 ) Balance as of March 31, 2022 2,875,000 287 24,713 ( 8,569 ) 16,431 Sale of public units in initial public offering 11,500,000 1,150 114,998,850 — 115,000,000 Sale of private placement units 530,000 53 5,299,947 — 5,300,000 Sale of unit purchase option to underwriter — — 100 — 100 Underwriter commissions — — ( 7,187,500 ) — ( 7,187,500 ) Offering costs — — ( 462,536 ) — ( 462,536 ) Warrant Liabilities — — ( 587,717 ) — ( 587,717 ) Reclassification of common stock subject to redemption ( 11,500,000 ) ( 1,150 ) ( 96,337,784 ) — ( 96,338,934 ) Allocation of offering costs to common stock subject to redemption — — 6,901,405 — 6,901,405 Accretion of common stock to redemption value — — ( 22,649,478 ) ( 4,062,993 ) ( 26,712,471 ) Net loss — — — ( 208,826 ) ( 208,826 ) Balance as of June 30, 2022 3,405,000 $ 340 $ — $ ( 4,280,388 ) $ ( 4,280,048 ) For the period from March 16, 2021 (inception) through June 30, 2021 Common Stock Additional Paid-In Accumulated Total Stockholder’s Shares Amount Capital Deficit Deficit Balance as of March 16, 2021 (inception) — $ — $ — $ — $ — Net loss — — — ( 3,511 ) ( 3,511 ) Balance as of June 30, 2021 — $ — $ — $ ( 3,511 ) $ ( 3,511 ) The accompanying notes are an integral part of these unaudited condensed financial statements. 3 REDWOODS ACQUISITION CORP. UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS Six months ended June 30, 2022 For the period from March 16, 2021 (inception) through June 30, 2021 Cash flows from operating activities: Net loss $ ( 213,836 ) $ ( 3,511 ) Adjustments to reconcile net cash used in operating activities: Interest earned on investment held in Trust Account ( 146,397 ) — Change in fair value of warrant liabilities 122,483 — Prepaid expenses ( 218,173 ) — Accrued expenses 30,000 — Franchise tax payable 39,300 Formation costs paid by related party — 3,511 Net cash used in operating activities ( 386,623 ) — Cash Flows from Investing Activities: Purchase of investment held in Trust Account ( 116,150,000 ) — Net cash used in financing activities ( 116,150,000 ) — Cash Flows from Financing Activities: Proceeds from issuance of insider shares to the initial stockholders 25,000 — Proceeds from sale of public units through public offering 115,000,000 — Proceeds from sale of private placement units 5,300,000 — Proceeds from sale of unit purchase option 100 — Proceeds from issuance of promissory note to related party 200,000 Repayment of promissory note to related party ( 200,000 ) — Repayment of advance from related party ( 8,511 ) — Payment of underwriters’ commissions ( 2,875,000 ) — Payment of deferred offering costs ( 462,536 ) — Net cash provided by financing activities 116,979,053 — Net change in cash 442,430 — Cash, beginning of the period 4,952 — Cash, end of the period $ 447,382 $ — Supplemental Disclosure of Non-cash Financing Activities Initial classification of common stock subject to redemption $ 96,338,934 $ — Initial recognition of warrant liabilities $ 587,717 $ — Deferred underwriting fee payable $ 4,312,500 $ — Allocation of offering costs to common stock subject to redemption $ 6,901,405 $ — Accretion of Common stock to redemption value $ 26,712,471 $ — The accompanying notes are an integral part of these unaudited condensed financial statements. 4 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 Note 1 — Description of Organization and Business Operations Redwoods Acquisition Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on March 16, 2021. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (“Business Combination”). The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. As of June 30, 2022, the Company had not commenced any operations. All activities through June 30, 2022 are related to the Company’s formation, the initial public offering (“IPO” as defined below in Note 4) and, subsequent to the 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 proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end. The Company’s sponsor is Redwoods Capital LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s IPO became effective on March 30, 2022. On April 4, 2022, the Company consummated the IPO of 10,000,000 units at an offering price of $ 10.00 per unit (the “Public Units’), generating gross proceeds of $ 100,000,000 . Simultaneously with the closing of the IPO, the Company sold to the Sponsor and Chardan Capital Markets LLC (“Chardan”), in a private placement, 377,500 units and 100,000 units, respectively, at $ 10.00 per unit (the “Private Units”), generating total gross proceeds of $ 4,775,000 , which is described in Note 5. The Company granted the underwriters a 45-day option to purchase up to 1,500,000 additional Public Units to cover over-allotments, if any. On April 7, 2022, the underwriters exercised the over-allotment option in full and purchased 1,500,000 Public Units at a price of $ 10.00 per Public Unit, generating gross proceeds of $ 15,000,000 . Simultaneously with the closing of the over-allotment option, the Company consummated the sale of an additional aggregate of 52,500 Private Units with the Sponsor and Chardan at a price of $ 10.00 per Private Unit, generating total proceeds of $ 525,000 . Transaction costs amounted to $ 8,365,339 , consisting $ 2,875,000 of underwriting fees, $ 4,312,500 of deferred underwriting fees (payable only upon completion of a Business Combination) and $ 1,177,839 of other offering costs. Upon the closing of the IPO and the sale of Private Units on April 4, 2022, and the exercise of the over-allotment option and the sale of the additional Private Units on April 7, 2022, a total of $ 116,150,000 was placed in a trust account (the “Trust Account”) maintained by Continental Stock Transfer & Trust Company as a trustee and will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and that invest only in direct U.S. government treasury obligations. These funds will not be released until the earlier of the completion of the initial Business Combination and the liquidation due to the Company’s failure to complete a Business Combination within the applicable period of time. 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. In addition, interest income earned on the funds in the Trust Account may be released to the Company to pay its income or other tax obligations. With these exceptions, expenses incurred by the Company may be paid prior to a business combination only from the net proceeds of the IPO and private placement not held in the Trust Account. Pursuant to Nasdaq listing rules, the Company’s initial Business Combination must occur with one or more target businesses having an aggregate fair market value equal to at least 80% of the value of the funds in the Trust account (excluding any deferred underwriting discounts and commissions and taxes payable on the income earned on the Trust Account), which the Company refers to as the 80% test, at the time of the execution of a definitive agreement for its initial Business Combination, although the Company may structure a Business Combination with one or more target businesses whose fair market value significantly exceeds 80% of the trust account balance. If the Company is no longer listed on Nasdaq, it will not be required to satisfy the 80% test. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. 5 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 The Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $ 10.10 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income tax obligations). If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor and any of the Company’s officers or directors that may hold Insider Shares (as defined in Note 6) (the “Initial Stockholders”) and Chardan have agreed (a) to vote their Insider Shares, the shares underlying the Private Units (“Private Shares”) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination and (b) not to convert any shares (including the Insider Shares) in connection with a stockholder vote to approve, or sell the shares to the Company in any tender offer in connection with, a proposed Business Combination. The Initial Stockholders and Chardan have agreed (a) to waive their redemption rights with respect to the Insider Shares, Private Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose, or vote in favor of, an amendment to the Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100 % of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment. The Company will have until 12 months from the closing of the IPO to consummate a Business Combination. In addition, if the Company anticipates that it may not be able to consummate initial business combination within 12 months, the Company’s insiders or their affiliates may, but are not obligated to, extend the period of time to consummate a business combination two times by an additional three months each time (for a total of 18 months to complete a business combination) (the “Combination Period”). In order to extend the time available for the Company to consummate a Business Combination, the Company’s insiders or their affiliates or designees, upon five days’ advance notice prior to the applicable deadline, must deposit into the Trust Account $1,150,000 ($0.10 per Public Share or an aggregate of $2,300,000), on or prior to the date of the applicable deadline. 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 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 (which interest shall be net of taxes payable, and less certain amount of interest to pay dissolution expenses) divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. 6 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 The Initial Stockholders and Chardan have agreed to waive their liquidation rights with respect to the Insider Shares and Private Shares, as applicable, if the Company fails to complete a Business Combination within the Combination Period. However, if any Initial Stockholder or Chardan 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 deferred underwriting commissions (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than $ 10.10 . In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party (excluding the Company’s independent registered public accounting firm) 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) $ 10.10 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 $ 10.10 per share due to reductions in the value of the trust assets, in each case 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 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. Liquidity and Capital Resources As of June 30, 2022, the Company had cash of $ 447,382 and a working capital of $ 596,255 . The Company’s liquidity needs prior to the closing of IPO were satisfied through a payment from the Sponsor of $ 25,000 (see Note 6) for the insider shares to cover certain offering costs and the loan under an unsecured promissory note from the Sponsor of $ 200,000 (see Note 6). Subsequent to the closing of the IPO, the Company’s liquidity has been satisfied through the net proceeds of $ 1,215,100 from the consummation of the IPO (including the over-allotment option) and the private placements held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, Initial Shareholders or their affiliates may, but are not obligated to, provide the Company working capital loans (see Note 6). As of June 30, 2022, there were no amounts outstanding under any working capital loans. Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity 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 use these funds to pay existing accounts payable, identify and evaluate prospective initial Business Combination candidates, perform due diligence on prospective target businesses, pay for travel expenditures, select the target business to merge with or acquire, and structure, negotiate and consummate the Business Combination. Note 2 — Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC, and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results. Interim results are not necessarily indicative of results to be expected for any other interim period or for the full year. 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 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. 7 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company 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 In preparing these unaudited condensed financial statements in conformity with U.S. GAAP, the Company’s management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported expenses during the reporting period. 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 unaudited condensed 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 had $ 447,382 in cash and did not have any cash equivalents as of June 30, 2022. Investments Held in Trust Account As of June 30, 2022, the assets held in the Trust Account were held in cash and U.S. Treasury securities. The Company classifies its U.S. Treasury securities as trading securities in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320, “Investments—Debt and Equity Securities.” Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on investments held in Trust Account in the accompanying statement of operations. The estimated fair values of all assets held in the Trust Account are determined using available market information and classified as Level 1 measurements. Offering Costs The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials” (“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Offering costs were $ 8,365,339 consisting principally of underwriting, legal, accounting and other expenses that are directly related to the IPO and charged to stockholders’ equity upon the completion of the IPO. Income Taxes The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. 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. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. The Company has identified the United States as its only “major” tax jurisdiction. The Company may be subject to potential examination by federal and state 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 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. 8 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 The provision for income taxes was deemed to be immaterial for the six months ended June 30, 2022. Net Loss Per Share The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The unaudited condensed statements of operations include a presentation of income (loss) per redeemable share and income (loss) per non-redeemable share following the two-class method of income per share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the common shares subject to possible redemption was considered to be dividends paid to the public shareholders. As of June 30, 2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented. The net income (loss) per share presented in the unaudited condensed statement of operations is based on the following: Three months ended Six months ended June 30, 2022 June 30, 2022 Net Loss $ ( 208,826 ) $ ( 213,836 ) Accretion of common stock to redemption value ( 26,712,471 ) ( 26,712,471 ) Net loss including accretion of common stock to redemption value $ ( 26,921,297 ) $ ( 26,926,307 ) Three Months Ended Three Months Ended June 30, 2022 June 30, 2021 Redeemable share Non- redeemable shares Redeemable shares Non- redeemable shares Basic and diluted net loss per common stock Numerator: Allocation of net loss $ ( 20,614,715 ) $ ( 6,306,582 ) $ — $ — Accretion of ordinary shares subject to possible redemption to redemption value 26,712,471 — — — Allocation of net income (loss) $ 6,097,756 $ ( 6,306,582 ) $ — $ — Denominator: Basic and diluted weighted average shares outstanding 11,066,667 3,385,583 — — Basic and diluted net loss per ordinary share $ 0.55 $ ( 1.86 ) $ — $ — For the Period from March 16, 2021 (Inception) Six Months Ended through June 30, 2022 June 30, 2021 Redeemable shares Non- redeemable shares Redeemable shares Non- redeemable shares Basic and diluted net loss per common stock Numerator: Allocation of net loss $ ( 17,293,091 ) $ ( 9,633,216 ) $ — $ ( 3,511 ) Accretion of ordinary shares subject to possible redemption to redemption value 26,712,471 — — — Allocation of net income (loss) $ 9,419,380 $ ( 9,633,216 ) $ — $ ( 3,511 ) Denominator: Basic and diluted weighted average shares outstanding 5,533,333 3,082,375 — — Basic and diluted net loss per ordinary share $ 1.70 ( 3.13 ) $ — $ — 9 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 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 and money market funds held in the Trust Account. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account. As of June 30, 2022 and December 31, 2021, approximately $ 116 million and $Nil, respectively, was over the Federal Deposit Insurance Corporation (FDIC) limit. Fair Value of Financial Instruments FASB ASC Topic 820 “Fair Value Measurements and Disclosures” defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. Level 2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the consolidated balance sheet. The fair values of cash and cash equivalents, and other current assets, accrued expenses, due to sponsor are estimated to approximate the carrying values as of June 30, 2022 and December 31, 2021 due to the short maturities of such instruments. See Note 9 for the disclosure of the Company’s assets and liabilities that were measured at fair value on a recurring basis. Warrants The Company accounts for warrants (Public Warrants or Private Warrants) as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 of 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 equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company has elected to account for its Public Warrants as equity and the Private Warrants as liabilities. 10 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 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) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature 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. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. 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 shares of redeemable common stock are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals to zero. 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, 2024 for the Company and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows. Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements. Note 3 — Cash and Investment Held in Trust Account As of June 30, 2022, investment securities in the Company’s Trust Account consisted of $ 116,296,397 cash and U.S. Treasury securities. The Company did not have a Trust Account at December 31, 2021. The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. June 30, 2022 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) Assets Marketable securities held in trust account $ 116,296,397 $ 116,296,397 — — Note 4 — Initial Public Offering On April 4, 2022, pursuant to its initial public offering (the “IPO”), the Company sold 10,000,000 Public Units at $ 10.00 per Public Unit, generating gross proceeds of $ 100,000,000 . The Company granted the underwriters a 45-day option to purchase up to 1,500,000 additional Public Units to cover over-allotments, if any. On April 7, 2022, the underwriters exercised the over-allotment option in full and purchased 1,500,000 Public Units at a price of $ 10.00 per Public Unit, generating gross proceeds of $ 15,000,000 . Each Public Unit consists of one share of common stock (“Public Share”), one right (“Public Right”) and one redeemable warrant (“Public Warrant”). Each Public Right will convert into one-tenth (1/10) of one share of common stock upon the consummation of a Business Combination. Each Public Warrant entitles the holder to purchase one share of common stock at a price of $ 11.50 per share, subject to adjustment. The Public Warrants will become exercisable on the later of the completion of the Company’s initial Business Combination or 12 months from the closing of the IPO, and will expire five years after the completion of the Company’s initial Business Combination or earlier upon redemption or liquidation. All of the 11,500,000 Public Shares sold as part of the Public Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares 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, or in connection with the Company’s liquidation. In accordance with 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. 11 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 The Company’s redeemable common stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). As of June 30, 2022, the shares of common stock reflected on the balance sheet are reconciled in the following table. As of June 30, 2022 Gross proceeds $ 115,000,000 Less: Proceeds allocated to Public Warrants ( 9,917,024 ) Proceeds allocated to Public Rights ( 8,744,042 ) Offering costs of Public Shares ( 6,901,405 ) Plus: Accretion of carrying value to redemption value 26,712,471 Class A Common stock subject to possible redemption $ 116,150,000 Note 5 — Private Placement Simultaneously with the closing of the IPO, the Sponsor and Chardan purchased an aggregate of 477,500 Private Units at a price of $ 10.00 per Private Unit for an aggregate purchase price of $ 4,775,000 in a private placement. Simultaneously with the closing of the over-allotment option, the Company consummated the sale of an additional aggregate of 52,500 Private Units with the Sponsor and Chardan at a price of $ 10.00 per Private Unit, generating total proceeds of $ 525,000 . The Private Units are identical to the Public Units except with respect to certain registration rights and transfer restrictions and the private warrants, which have terms and provisions that are identical to those of the warrants being sold as part of the units in the IPO, except that the private warrants (i) will be exercisable either for cash or on a cashless basis at the holder’s option and (ii) will not be redeemable by the Company, in either case as long as the private warrants are held by the initial purchasers or any of their permitted transferees. The net proceeds from the Private Units were added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Units and all underlying securities will expire worthless. Note 6 — Related Party Transactions Insider Shares On January 4, 2022, the Company issued 2,875,000 shares of common stock (the “Insider Shares”) to the Initial Stockholders for an aggregate consideration of $ 25,000 , or approximately $ 0.009 per share. As a result of the underwriters’ full exercise of their over-allotment option on April 7, 2022, no insider shares are currently subject to forfeiture. As of June 30, 2022, there were 2,875,000 Insider Shares issued and outstanding. The Initial Stockholders have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of their Insider Shares until, with respect to 50% of the Insider Shares, the earlier of six months after the consummation of a Business Combination and the date on which the closing price of the common stock equals or exceeds $12.50 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 after a Business Combination and, with respect to the remaining 50% of the Insider Shares, until the six months after the consummation of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property. 12 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 Promissory Note — Related Party On January 4, 2022 and February 28, 2022, the Sponsor agreed to loan the Company up to an aggregate amount of $ 200,000 to be used, in part, for transaction costs incurred in connection with the IPO (the “Promissory Notes”). The Promissory Notes were unsecured, interest-free and due on the closing the IPO. The Company repaid the outstanding balance of $ 200,000 to the Sponsor on April 7 and April 8, 2022. As of June 30, 2022, the Company had no borrowings under the Promissory Note. Related Party Loans In addition, in order to finance transaction costs in connection with searching for a target business or consummating an intended initial business combination, the initial stockholders, officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. 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 such loaned amounts, but no proceeds from the Trust Account would be used for such repayment. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lender’s discretion, up to $ 500,000 of the notes may be converted upon consummation of the Company’s business combination into private units at a price of $ 10.00 per unit. The purchase price of these units will approximate the fair value of such units when issued. However, if it is determined, at the time of issuance, that the fair value of such units exceeds the purchase price, the Company would record compensation expense for the excess of the fair value of the units on the day of issuance over the purchase price in accordance with Accounting Standards Codification (“ASC”) 718 - Compensation - Stock Compensation. As of June 30, 2022, the Company had no borrowings under the working capital loans. Administrative Services Agreement The Company entered into an agreement, commencing on the effective date of the IPO through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay the Sponsor a total of $ 10,000 per month for office space, utilities, secretarial and administrative support. However, pursuant to the terms of such agreement, the Sponsor agreed to defer the payment of such monthly fee. Any such unpaid amount will accrue without interest and be due and payable no later than the date of the consummation of initial Business Combination. For the three months and six months ended June 30, 2022, the Company incurred $ 30,000 and $ 30,000 , respectively, in fees for these services, of which $ 30,000 and none were included in accrued expenses in the accompanying condensed unaudited balance sheets as of June 30, 2022 and December 31, 2021, respectively. Note 7 — Commitments and Contingencies Risks and Uncertainties Management is currently evaluating 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 future financial position, results of its operations and/or search for a target company, there has not been a significant impact as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the future outcome of this uncertainty. Registration Rights The holders of the insider shares, the private units, securities underlying the Unit Purchase Option and any units that may be issued upon conversion of working capital loans or extension loans (and any securities underlying the private units or units issued upon conversion of the working capital loans or extension loans) will be entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the IPO. The holders of a majority of these securities are entitled to make up to two demands (or one demand with respect to the securities underlying the Unit Purchase Option) that the Company register such securities. The holders of the majority of the Insider Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the private units and units issued in payment of working capital loans made to us can elect to exercise these registration rights at any time commencing on the date that the Company consummate an initial business combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of an initial business combination. Furthermore, notwithstanding the foregoing, pursuant to FINRA Rule 5110, Chardan may not exercise its demand and “piggyback” registration rights after five and seven years, respectively, after the commencement of sales of this offering and may not exercise its demand rights on more than one occasion. The Company will bear the expenses incurred in connection with the filing of any such registration statements. 13 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 Underwriting Agreement Pursuant to an underwriting agreement in connection with the IPO, the Company granted Chardan, the representative of the underwriters, a 45-day option from the date of the prospectus for the IPO to purchase up to 1,500,000 additional Public Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On April 7, 2022, Chardan exercised the over-allotment option in full (see Note 4). The underwriters were paid a cash underwriting discount of 2.5 % of the gross proceeds of the IPO (including the exercise of the over-allotment option), or $ 2,875,000 . In addition, the underwriters will be entitled to a deferred fee of 3.75 % of the gross proceeds of the IPO (including the exercise of the over-allotment option), or $ 4,312,500 , which will be paid upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement. Unit Purchase Option Simultaneously with the IPO (including the closing of the over-allotment option), the Company sold to Chardan, for $ 100 , an option (the “Unit Purchase Option”) to purchase 345,000 units exercisable at $ 11.50 per unit (or an aggregate exercise price of $ 3,967,500 ) commencing on the later of six months from the effective date of the registration statement related to the IPO and the consummation of a Business Combination. The Unit Purchase Option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from the effective date of the registration statement related to the IPO. The units issuable upon exercise of the Unit Purchase Option are identical to those offered in the IPO. The Company accounts for the Unit Purchase Option, inclusive of the receipt of $ 100 cash payment, as an expense of the IPO resulting in a charge directly to stockholders’ equity. The Unit Purchase Option and such units purchased pursuant to the Unit Purchase Option, as well as the common stock underlying such units, the rights included in such units, the shares of common stock that are issuable for the rights included in such units, the warrants included in such units, and the shares underlying such warrants, have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to FINRA Rule 5110(e)(1). The Unit Purchase Option grants to holders demand and “piggy back” rights for periods of five and seven years, respectively, from the effective date of the registration statement with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the Unit Purchase Option. 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 units issuable upon exercise of the Unit Purchase Option 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 option will not be adjusted for issuances of common stock at a price below its exercise price. Right of First Refusal The Company has granted Chardan a right of first refusal, for a period of 18 months after the date of the consummation of a Business Combination, to act as a book-running manager or placement agent, with at least 30% of the economics, for any and all future public and private equity, equity linked and debt offerings of the Company or any of its successors or subsidiaries. Note 8 — Stockholders’ Equity Common Stock — The Company is authorized to issue 50,000,000 shares of common stock with a par value of $ 0.0001 per share. Holders of the common stock are entitled to one vote for each share. At June 30, 2022, there were 3,405,000 shares of common stock issued and outstanding (excluding 11,500,000 shares subject to possible redemption). 14 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 Rights — Each holder of a right will receive one-tenth (1/10) of one share of common stock upon consummation of a Business Combination, even if the holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional shares will be issued upon conversion of the rights. No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of a Business Combination, as the consideration related thereto has been included in the unit purchase price paid for by investors in the IPO. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of rights to receive the same per share consideration the holders of the common stock will receive in the transaction on an as-converted into common stock basis and each holder of a right will be required to affirmatively covert its rights in order to receive 1/10 share underlying each right (without paying additional consideration). The shares issuable upon conversion of the rights will be freely tradable (except to the extent held by affiliates of the Company). 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. Accordingly, holders of the rights might not receive the shares of common stock underlying the rights. Warrants — Each redeemable warrant entitles the holder thereof to purchase one share of common stock at a price of $ 11.50 per share, subject to adjustment as described in this prospectus. The warrants will become exercisable on the later of the completion of an initial Business Combination and 12 months from the closing of the IPO. However, no Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the issuance of the common stock issuable upon exercise of the warrants and a current prospectus relating to such common stock. Notwithstanding the foregoing, if a registration statement covering the issuance of the common stock issuable upon exercise of the Public Warrants is not effective within 90 days from the closing of the Company’s initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their warrants on a cashless basis. The warrants will expire five years from the closing of the Company’s initial Business Combination at 5:00 p.m., New York City time or earlier redemption. In addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of the Company’s initial Business Combination at an issue price or effective issue price of less than $ 9.50 per share (with such issue price or effective issue price to be determined in good faith by our board of directors), (y) the aggregate gross proceeds from such issuances represent more than 60 % of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination, and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Price”) is below $ 9.50 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115 % of the Market Price, and the $ 16.50 per share redemption trigger price described below will be adjusted (to the nearest cent) to be equal to 165 % of the Market Value. 15 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 The Company may redeem the outstanding Public Warrants at any time while the warrants are exercisable: ● in whole and not in part; ● at a price of $ 0.01 per warrant; ● upon a minimum of 30 days’ prior written notice of redemption, which the Company refers to as the 30-day redemption period; ● if, and only if, the last reported sale price of the Company’s common stock equals or exceeds $ 16.50 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 ending on the third trading day prior to the date on which the Company sends the notice of redemption to the to the warrant holders. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Except as described above, no warrants will be exercisable and the Company will not be obligated to issue common stock unless at the time a holder seeks to exercise such warrant, a prospectus relating to the common stock issuable upon exercise of the warrants is current and the common stock have been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, the Company has agreed to use its best efforts to meet these conditions and to maintain a current prospectus relating to the common stock issuable upon exercise of the warrants until the expiration of the warrants. However, the Company cannot assure that it will be able to do so and, if the Company does not maintain a current prospectus relating to the common stock issuable upon exercise of the warrants, holders will be unable to exercise their warrants and the Company will not be required to settle any such warrant exercise. If the prospectus relating to the common stock issuable upon the exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, the Company will not be required to net cash settle or cash settle the warrant exercise, the warrants may have no value, the market for the warrants may be limited and the warrants may expire worthless. The private warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in the IPO, except that the private warrants (i) will be exercisable either for cash or on a cashless basis at the holder’s option and (ii) will not be redeemable by the Company, in either case as long as the private warrants are held by the initial purchasers or any of their permitted transferees. 16 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 Note 9 —Fair Value Measurements The fair value of the Company’s consolidated 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 the assessment of the assumptions that market participants would use in pricing the asset or liability. The following table presents information about the Company’s liabilities that are measured at fair value on June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: June 30, 2022 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) Liabilities: Warrant liability $ 710,200 — — $ 710,200 December 31, 2021 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) Liabilities: Warrant liability $ — — — $ — The private warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the balance sheet. Changes in the fair value of the warrants are recorded in the statement of operations each period. The table below shows the change in fair value of warrant liabilities as of June 30, 2022: Private Warrants Total Fair value at January 1, 2022 $ – $ – Initial recognition 587,717 587,717 Change in fair value 122,483 122,483 Fair value as of June 30, 2022 $ 710,200 $ 710,200 17 REDWOODS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2022 The Company established the initial fair value for the private warrants at $ 529,495 on April 4, 2022, the date of the Company’s IPO, using the Black-Scholes model. The Company allocated the proceeds received from the sale of Private Units, first to the private warrants based on their fair values as determined at initial measurement, with the remaining proceeds recorded as common shares subject to possible redemption, and common shares based on their relative fair values recorded at the initial measurement date. The warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs. The key inputs into the Black-Scholes model were as follows at their measurement date: June 30, 2022 April 4, 2022 (initial measurement) Exercise Price $ 11.50 $ 11.50 Underlying share price $ 7.88 $ 8.08 Expected Volatility 33.07 % 25.62 % Warrant life (years) 5.0 5.0 Risk-free rate 3.01 % 2.42 % Note 10 — Subsequent Events In accordance with ASC 855, “Subsequent Events,” the Company evaluated subsequent events and transactions that occurred after the balance sheet date up to August 15, 2022 on which the unaudited condensed financial statements were issued. Based on this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements. 18