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Item 1. Financial Statements

2023-05-24 compared with 2022-11-14 · 310 added, 232 removed, 698 unchanged (44% of the section changed)

Financial Statements.

REDWOODS ACQUISITION CORP.

ACQUISITION CORP.

CONDENSED BALANCE SHEETS

September 30,

2022 (Audited)

Current Assets

3 unchanged sentences

$ 119,756,603

$ 118,246,636

Liabilities, Temporary Equity, and Stockholders’ Deficit

3 unchanged sentences

Income tax payable

Due to related party

Exercise tax liability

Redeemed common stock payable to public stockholders

Total Current Liabilities

Warrant liability

Deferred tax liability

Convertible promissory note - related party

Deferred underwriting fee payable

1 unchanged sentence

Commitments and Contingencies

Common stock subject to possible redemption, 11,500,000 shares at conversion value of $ 10.14 per share

Common stock subject to possible redemption, 5,396,650 shares and 11,500,000 shares at redemption value of $ 10.29 and $ 10.21 per share as of March 31, 2023 and December 31, 2022, respectively

Stockholders’ Deficit

1 unchanged sentence

50,000,000 shares authorized;

3,405,000 and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

shares issued and outstanding

Additional paid-in capital

1 unchanged sentence

( 4,878,132 )

( 4,044,852 )

Total Stockholders’ Deficit

( 4,877,792 )

( 4,044,512 )

Total Liabilities, Temporary Equity, and Stockholders’ Deficit

$ 119,756,603

$ 118,246,636

The accompanying notes are an integral part of

these unaudited condensed financial statements.

REDWOODS ACQUISITION

REDWOODS ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended

September 30,

General and administrative expenses

1 unchanged sentence

Loss from operations

Interest earned on investment held in Trust Account

Interest earned on investments held in Trust Account

Unrealized gain on investment held in Trust Account

Change in fair value of convertible notes

Change in fair value of warrant liabilities

Income (loss) before income taxes

Income taxes provision

Income tax provision

Net income (loss)

2 unchanged sentences

Basic and diluted weighted average shares outstanding, non-redeemable common stock

2,500,000 (1)

Basic and diluted net loss per share, non-redeemable common stock

(1) Excludes up to 375,000 shares of common stock subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised in full or in part (see Note 5).

As a result of the underwriters’ full exercise their over-allotment option, no insider shares are subject to forfeiture after April 7, 2022.

The accompanying notes are an integral part of

these unaudited condensed financial statements.

REDWOODS ACQUISITION

REDWOODS ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(DEFICIT)

Nine Months Ended September 30,

For the Three Month Ended March 31, 2023

Stockholders’

Balance, January 1, 2023

Common stock issued to initial stockholders

Balance as of March 31, 2022

Sale of public units in initial public offering

Sale of private placement units

Sale of unit purchase option to underwriter

Underwriter commissions

Offering costs

Warrant Liabilities

Reclassification of common stock subject to redemption

Allocation of offering costs to common stock subject to redemption

Accretion of common stock to redemption value

Balance as of June 30, 2022

$ ( 4,044,852 )

$ ( 4,044,512 )

Accretion of common stock to redemption value

Balance as of September 30, 2022

For the period from March 16, 2021 (inception) through September

( 1,322,195 )

Exercise tax liability

Balance as of March 31, 2023

$ ( 4,878,132 )

$ ( 4,877,792 )

For the Three Month Ended March 31, 2022

Stockholder’s

Balance as of March 16, 2021 (inception)

Balance as of June 30, 2021

Balance as of September 30, 2021

Balance as of January 1, 2022

Common stock issued to initial stockholders (1)

Balance as of March 31, 2022

(1) Includes up to 375,000 shares of common stock subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised in full or in part (see Note 5).

As a result of the underwriters’ full exercise their over-allotment option, no insider shares are currently subject to forfeiture after April 7, 2022.

The accompanying notes are an integral part of

these unaudited condensed financial statements.

REDWOODS ACQUISITION

REDWOODS ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

September 30,

Three Months Ended

Cash flows from operating activities:

2 unchanged sentences

Interest earned on investment held in Trust Account

Unrealized gain on investment held in Trust Account

Change in fair value of convertible notes

Change in fair value of warrant liabilities

4 unchanged sentences

Income tax payable

Formation costs paid by related party

Net cash used in operating activities

Deferred income tax liability

Net cash provided by (used in) operating activities

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 deposited in Trust Account

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of insider shares to the initial stockholders

Proceeds from sale of public units through public offering

Proceeds from sale of private placement units

Proceeds from sale of unit purchase option

Proceeds from issuance of promissory note to related party

Repayment of promissory note to related party

Repayment of advance from related party

Payment of underwriters’ commissions

( 2,875,000 )

Proceeds from issuance of convertible promissory notes to related party

Payment of deferred offering costs

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net change in cash

2 unchanged sentences

Supplemental Disclosure of Non-cash Financing Activities

Initial classification of common stock subject to redemption

Initial recognition of warrant liabilities

Deferred underwriting fee payable

Allocation of offering costs to common stock subject to redemption

Accretion of Common stock to redemption value

Exercise tax liability

The accompanying notes are an integral part of

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for purposes of consummating a Business Combination.

As of September 30, 2022, the Company had not

commenced any operations.

All activities through September 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.

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.

As of March 31, 2023, the Company had not commenced

any operations.

All activities through March 31, 2023 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 generates 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

The Company’s sponsor is Redwoods Capital

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in the Trust Account.

On March 31, 2023, the Company held a special meeting

of stockholders, at which the Company’s stockholders approved (i) an amendment to the Company’s amended and restated certificate

of incorporation (the “Extension Amendment”) and (ii) an amendment (the “Trust Amendment”) to the Investment Management

Trust Agreement, dated March 30, 2022, by and between the Company and Continental Stock Transfer & Trust Company, as trustee, extending

the date by which the Company must consummate a Business Combination from April 4, 2023 to July 4, 2023, with the ability to further extend

the deadline on a monthly basis up to five times from July 4, 2023 to December 4, 2023.

In connection with the stockholders’ vote

at the special meeting, an aggregate of 6,103,350 shares with redemption value of approximately $ 63,169,451 (or $ 10.35 per share) of the

Company’s common stock were tendered for redemption.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

As a result of the stockholder approval of the Extension

Amendment and the Trust Amendment, the Sponsor, or any of their respective affiliates or designees, agreed to deposit into the Trust Account

$ 360,000 for the initial three-month extension and $ 120,000 per month for each subsequent one-month extension.

The extension payment(s)

will bear no interest and will be repayable by the Company to the contributors upon consummation of the Business Combination.

will be forgiven by the contributors if the Company is unable to consummate the Business Combination except to the extent of any funds

held outside of the Trust Account.

Pursuant to Nasdaq listing rules, the Company’s

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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

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

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

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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

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

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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.

The Company has until July 4, 2023 to consummate

a Business Combination.

In addition, if the Company anticipates that it may not be able to consummate a Business Combination by such date,

the Sponsor or its affiliates may extend the period of time to consummate a Business Combination five times by an additional one month

each time (for a total of 20 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 Sponsor or its affiliates or designees, within two business days

prior to the applicable deadline, must deposit into the Trust Account $120,000 for each subsequent one-month extension.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

If the Company is unable to complete a Business

1 unchanged sentence

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

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.

The Initial Stockholders and Chardan have agreed

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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

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”).

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.

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, Capital Resources and Going Concern

As of September 30, 2022, the Company had cash

of $ 414,144 and a working capital of $ 336,777 .

The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business.

However, if the estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business

Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business

prior to a Business Combination.

Moreover, the Company may need to obtain additional financing or draw on the Working Capital Loans (see

Note 6) either to complete a Business Combination or because it becomes obligated to redeem a significant number of the Public Shares

upon consummation of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with

such Business Combination.

Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously

with the completion of its Business Combination.

If the Company is unable to complete the Business Combination because it does not have

sufficient funds available, the Company will be forced to cease operations and liquidate the Trust Account.

In addition, following the

Business Combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations.

In connection with the Company’s assessment of going concern considerations

in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures

of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, the Company has until April 4, 2023 (or October

4, 2023, if the Company extends the time to complete a Business Combination) to complete a Business Combination.

It is uncertain that

the Company will be able to consummate a Business Combination by this time.

If a Business Combination is not consummated by such date

and an extension has not been requested by the Sponsor and approved by the Company’s stockholders, there will be a mandatory liquidation

and subsequent dissolution of the Company.

Management has determined that the mandatory liquidation, should a Business Combination not

occur and an extension not be requested by the Sponsor, and potential subsequent dissolution raise substantial doubt about the Company’s

ability to continue as a going concern.

The financial statement does not include any adjustments that might result from the outcome of

this uncertainty.

As of March 31, 2023, the Company had cash of $ 117,985 and a working

capital of $ 598,362 (excluding redemptions payable to public stockholders and income tax and franchise tax payable as the taxes will be

paid out of the Trust Account).

On March 22, 2023 and March 30, 2023, the Sponsor provided a loan of $ 150,000 and $ 360,000 , respectively,

to be used, in part, for transaction costs related to the Business Combination (see Note 6).

The Company has until July 4, 2023 (or December

4, 2023, if the time to complete a business combination is extended as described herein) to consummate a Business Combination.

It is uncertain

that the Company will be able to consummate a Business Combination by this time.

If a Business Combination is not consummated by this

date, there will be a mandatory liquidation and subsequent dissolution.

The Company expects to continue to incur significant

professional costs to remain as a publicly traded company and to incur significant transaction costs in pursuit of the consummation of

a Business Combination.

The Company may need to obtain additional financing either to complete its Business Combination or because it

becomes obligated to redeem a significant number of public shares upon consummation of its Business Combination, in which case the Company

may issue additional securities or incur debt in connection with such Business Combination.

Subject to compliance with applicable securities

laws, the Company would only complete such financing simultaneously with the completion of our Business Combination.

If the Company is

unable to complete its Business Combination because it does not have sufficient funds available, it will be forced to cease operations

and liquidate the Trust Account.

In addition, following the Business Combination, if cash on hand is insufficient, the Company may need

to obtain additional financing in order to meet its obligations.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

In connection with the Company’s assessment of going concern

considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15,

“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, the Company has until July

4, 2023 (or December 4, 2023, if the Company extends the time to complete a Business Combination) to complete a Business Combination.

It is uncertain that the Company will be able to consummate a Business Combination by this time.

If a Business Combination is not consummated

by such date and an extension has not been requested by the Sponsor and approved by the Company’s stockholders, there will be a

mandatory liquidation and subsequent dissolution of the Company.

Management has determined that the date for liquidation and subsequent

dissolution as well as liquidity concerns raise substantial doubt about the Company’s ability to continue as a going concern.

financial statement does not include any adjustments that might result from the outcome of this uncertainty.

Risks and Uncertainties

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Combination and in the Company’s ability to complete a Business Combination.

At this time, it has been determined that none

of the IR Act tax provisions have an impact to the Company’s fiscal 2022 tax provision.

The Company will continue to monitor for

updates to the Company’s business along with guidance issued with respect to the IR Act to determine whether any adjustments are

needed to the Company’s tax provision in future periods.

At this time, it has been determined that the IR Act

tax provisions would have an impact to the Company’s fiscal 2023 tax provision as there were redemptions by the public stockholders

in March 2023;

as a result, the Company recorded $631,696 exercise tax liability as of March 31, 2023.

The Company will continue to monitor

for updates to the Company’s business along with guidance issued with respect to the IR Act to determine whether any adjustments

are needed to the Company’s tax provision in future periods.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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.

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.

Operating results for the three months ended

March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any future

These financial statements should be read in conjunction with the Company’s 2022 Annual Report on Form 10-K as filed with

the SEC on April 10, 2023.

Emerging Growth Company

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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 $ 414,144 and $ 4,952 in cash and did not have any cash equivalents

as of September 30, 2022 and December 31, 2021, respectively.

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 $ 117,985 and $ 340,962 in cash

and did not have any cash equivalents as of March 31, 2023 and December 31, 2022, respectively.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Investments Held in Trust Account

As of September 30, 2022, the assets held in the

Trust Account were held in cash and U.S.

As of March 31, 2023, 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.

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 balance sheets at fair value at the end of each reporting period.

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

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established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

The Company’s effective tax rate was 7.07 % and 0.0 % for the three

months ended September 30, 2022 and 2021, respectively, and 13.36 % and 0.0 % for the nine months ended September 30, 2022 and for the period

from March 16, 2021 (inception) through September 30, 2021, respectively.

The effective tax rate differs from the statutory tax rate of

21 % for the three months ended September 30, 2022 and 2021, for the nine months ended September 30, 2022 and for the period from March

16, 2021 (inception) through September 30, 2021, due to the valuation allowance on the deferred tax assets.

The Company’s effective tax rate was 18.58 %

and 0.00 % for the three months ended March 31, 2023 and 2022, respectively.

The effective tax rate differs from the statutory tax rate

of 21 % for the three months ended March 31, 2023 and 2022, due to change in fair value of warrants and convertible notes and the change

in valuation of deferred tax assets.

ASC 740 also clarifies the accounting for uncertainty

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guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.

The Company recognizes accrued interest and penalties related to unrecognized

tax benefits as income tax expense.

There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September

30, 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.

While ASC 740 identifies usage of an effective

annual tax rate for purposes of an interim provision, it does allow for estimating individual elements in the current period if they are

significant, unusual or infrequent.

Computing the effective tax rate for the Company is complicated due to the potential impact of the

timing of any Business Combination expenses and the actual interest income that will be recognized during the year.

The Company has taken

a position as to the calculation of income tax expense in a current period based on ASC 740-270-25-3 which states, “If an entity

is unable to estimate a part of its ordinary income (or loss) or the related tax (benefit) but is otherwise able to make a reasonable

estimate, the tax (or benefit) applicable to the item that cannot be estimated shall be reported in the interim period in which the item

is reported.” The Company believes its calculation to be a reliable estimate and allows it to properly take into account the usual

elements that can impact its annualized book income and its impact on the effective tax rate.

As such, the Company is computing its taxable

income (loss) and associated income tax provision based on actual results through March 31, 2023.

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 March 31, 2023 and December 31, 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.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Company has identified the United States and

the State of New York 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.

Net Loss Per Share

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of the common shares subject to possible redemption was considered to be dividends paid to the public shareholders.

As of September 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:

September 30,

As of March 31, 2023,

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

The net income (loss) per share presented in the

unaudited condensed statement of operations is based on the following:

Three Months Ended

Net income (loss)

Accretion of common stock to redemption value

( 1,322,195 )

( 27,171,067 )

Net loss including accretion of common stock to redemption value

$ ( 26,439,946 )

$ ( 26,653,781 )

Three Months Ended

March 31, 2023

Three Months Ended

September 30, 2022

September 30, 2021

Basic and diluted net loss per common stock

Allocation of net loss

$ ( 20,399,824 )

$ ( 6,040,122 )

Accretion of ordinary shares subject to possible redemption to redemption value

Allocation of net income (loss)

$ ( 6,040,122 )

Basic and diluted weighted average shares outstanding

Basic and diluted net loss per ordinary share

Nine Months Ended

September 30, 2022

September 30, 2021

March 31, 2022

Basic and diluted net income (loss) per common stock

1 unchanged sentence

$ ( 155,110 )

$ ( 7,918,248 )

Accretion of ordinary shares subject to possible redemption to redemption value

Allocation of net income (loss)

$ ( 7,918,248 )

Basic and diluted weighted average shares outstanding

Basic and diluted net income (loss) per common stock

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Concentration of Credit Risk

3 unchanged sentences

on such account.

As of September 30, 2022 and December 31, 2021, approximately $ 116.6 million and $ Nil , respectively, was over the Federal

Deposit Insurance Corporation (FDIC) limit.

Fair Value of Financial Instruments

24 unchanged sentences

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 September 30, 2022 and December 31,

current assets, accrued expenses, due to sponsor are estimated to approximate the carrying values as of March 31, 2023 and December 31,

2022 due to the short maturities of such instruments.

1 unchanged sentence

were measured at fair value on a recurring basis.

Promissory Note

accounts for their convertible promissory notes under ASC 815, “Derivatives and Hedging” (“ASC 815”).

815-15-25, the election can be at the inception of a financial instrument to account for the instrument under the fair value option under

The Company has made such election for their convertible promissory notes.

Using the fair value option, each convertible promissory

note is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter.

the estimated fair value of the notes are recognized as a non-cash gain or loss on the statements of operations.

The Company accounts for warrants (Public Warrants

17 unchanged sentences

for its Public Warrants as equity and the Private Warrants as liabilities.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Common Stock Subject to Possible Redemption

34 unchanged sentences

Trust Account

As of September 30, 2022, investment securities

in the Company’s Trust Account consisted of $ 116,608,596 cash and U.S.

Treasury securities.

The Company did not have a Trust Account

at December 31, 2021.

As of March 31, 2023 and December 31, 2022, investment

securities in the Company’s Trust Account consisted of $ 119,416,545 and $ 117,806,478 in cash and U.S.

Treasury securities, respectively.

The following table presents information about

the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2022 and indicates the fair value

hierarchy of the valuation inputs the Company utilized to determine such fair value.

September 30,

the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2023 and indicates the fair value hierarchy

of the valuation inputs the Company utilized to determine such fair value.

Markets (Level 1)

2 unchanged sentences

$ 119,416,545

Markets (Level 1)

Marketable securities held in Trust Account

$ 117,806,478

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 4 — Initial Public Offering

30 unchanged sentences

retained earnings, additional paid-in capital).

As of September 30, 2022, the shares of common

stock reflected on the balance sheet are reconciled in the following table.

September 30,

As of March 31, 2023, the shares of common stock

reflected on the balance sheet are reconciled in the following table.

Gross proceeds

7 unchanged sentences

Accretion of carrying value to redemption value

Class A Common stock subject to possible redemption

Class A Common stock subject to possible redemption– December 31, 2022

$ 117,361,652

Accretion of carrying value to redemption value – three months period ended March 31, 2023

Redeemed common stock payable to public stockholders

( 63,169,451 )

Class A Common stock subject to possible redemption– March 31, 2023

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 5 — Private Placement

21 unchanged sentences

are currently subject to forfeiture.

As of September 30, 2022, there were 2,875,000 Insider Shares issued and outstanding.

As of March 31, 2023, there were 2,875,000 Insider Shares issued and outstanding.

The Initial Stockholders have agreed, subject

12 unchanged sentences

The Company repaid the outstanding balance of $ 200,000 to the Sponsor on April 7 and April 8, 2022.

As of September 30, 2022, the Company

had no borrowings under the Promissory Note.

As of March 31, 2023, the Company

had no borrowings under the Promissory Notes.

On March 22, 2023, the Company issued an unsecured, non-interest bearing

promissory note in the principal amount of $ 150,000 to the Sponsor (“Convertible Note 1”).

On March 30, 2023, the Company

issued an unsecured, non-interest bearing promissory note in the principal amount of $ 360,000 to the Sponsor (“Convertible Note

Both convertible promissory notes are payable upon the closing of the Business Combination or the liquidation of the Company.

The holder of the convertible promissory notes, in its sole discretion, may convert any or all of the unpaid principal under the convertible

promissory notes into Private Units of the Company, at a price of $ 10.00 per unit, upon consummation of the Business Combination.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Related Party Loans

14 unchanged sentences

Codification (“ASC”) 718 - Compensation - Stock Compensation.

As of September 30, 2022, the Company had no borrowings

As of March 31, 2023, the Company had no borrowings

under the working capital loans.

7 unchanged sentences

interest and be due and payable no later than the date of the consummation of initial Business Combination.

For the three months and nine

months ended September 30, 2022, the Company incurred $ 30,000 and $ 60,000 , respectively, in fees for these services, of which $ 60,000

and none were included in accrued expenses in the accompanying condensed unaudited balance sheets as of September 30, 2022 and December

31, 2021, respectively.

For the three months ended

March 31, 2023 and 2022, the Company incurred $ 30,000 and $ 0 , respectively, in fees for these services, of which $ 30,000 and $ 90,000 were

included in accrued expenses in the accompanying condensed unaudited balance sheets as of March 31, 2023 and December 31, 2022, respectively.

Note 7 — Commitments and

30 unchanged sentences

to the terms of the underwriting agreement.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Unit Purchase Option

34 unchanged sentences

entitled to one vote for each share.

At September 30, 2022, there were 3,405,000 shares of common stock issued and outstanding (excluding

At March 31, 2023, there were 3,405,000 shares of common stock issued and outstanding (excluding

11,500,000 shares subject to possible redemption).

21 unchanged sentences

Accordingly, holders of the rights might not receive the shares of common stock underlying

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Warrants — Each

55 unchanged sentences

the warrants may expire worthless.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The private warrants have terms and provisions

18 unchanged sentences

The following table presents information about

the Company’s liabilities that are measured at fair value on September 30, 2022 and December 31, 2021, and indicates the fair value

the Company’s liabilities that are measured at fair value on March 31, 2023 and December 31, 2022, and indicates the fair value

hierarchy of the valuation inputs the Company utilized to determine such fair value:

September 30,

Warrant liability

Convertible Note 1

Convertible Note 2

Warrant liability

Convertible Note 1

Convertible Note 2

The private warrants are accounted for as liabilities

2 unchanged sentences

are recorded in the statement of operations each period.

REDWOODS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The table below shows the change in fair value of warrant liabilities

as of September 30, 2022:

as of March 31, 2023:

Fair value at January 1, 2023

Initial recognition

Change in fair value

Fair value as of September 30, 2022

Fair value as of March 31, 2023

The Company established the initial fair value

7 unchanged sentences

as follows at their measurement date:

September 30,

Exercise Price

3 unchanged sentences

Risk-free rate

The fair value of the Convertible Note 1 was estimated

at the as converted value at March 31, 2023 and initial measurement date of March 22, 2023 to be $ 13,930 and $ 13,910 , respectively.

fair value of the Convertible Note 2 was estimated at the as converted value at March 31, 2023 and initial measurement date of March 30,

2023 to be $ 33,400 and $ 33,400 , respectively.

The binomial tree model was used for the underlying warrants based on the following key

assumptions which were unchanged as of March 31, 2023.

Convertible Note 2

Convertible Note 1

Time to maturity

Business combination success rate

Expected Volatility

Expected dividend rate

Risk-free rate

The following table presents the changes in the fair value of the Level

3 Convertible Notes:

Fair value as of January 1, 2023

Proceeds received through Convertible Note 1 on March 22, 2023

Proceeds received through Convertible Note 2 on March 30, 2023

Change in valuation inputs or other assumptions

Fair value as of March 31, 2023

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 November

14, 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.

Events,” the Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that

the unaudited condensed financial statements were issued.

Based on this review, the Company did not identify any subsequent events that

would have required disclosure in the unaudited condensed financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements