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Item 2. Management’s Discussion and Analysis

2023-05-19 compared with 2022-11-18 · 77 added, 67 removed, 103 unchanged (58% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

References to the “Company,” “us,” “our” or “we” refer Data Knights Acquisition Corp.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed consolidated financial statements and related notes included herein.

References to the “Company,” “us,” “our,” or “we” refer to Data Knights Acquisition Corp.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included herein.

Cautionary Note Regarding Forward-Looking Statements

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Actual results may differ materially due to various factors, including, but not limited to:

● our ability to complete our initial business combination with the Target or an alternative business combination;

● our ability to complete our initial business combination with the Target (as defined below) or an alternative business combination;

● our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;

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● in the event the Business Combination is not consummated, the ability of our officers and directors to generate a number of potential alternative acquisition opportunities;

● our pool of prospective target businesses;

● the ability of our officers and directors to generate a number of potential acquisition opportunities;

● in the event the Business Combination is not consummated, our pool of prospective target businesses;

● our public securities’ potential liquidity and trading;

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The Company is a blank check company formed under the laws of the State of Delaware on February 8, 2021 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The Company intends to effectuate its initial Business Combination using cash from the proceeds of our Initial Public Offering and the Private Placement, the proceeds of the sale of our securities in connection with our initial Business Combination, our shares issued to the owners of the target, debt issued to the bank or other lenders or the owners of the target, or a combination of the foregoing.

The Company intends to effectuate its initial business combination using cash from the proceeds of its initial public offering (the “Initial Public Offering”) and the private placement consummated in connection therewith (the “Private Placement”), the proceeds of the sale of the Company’s securities in connection with its initial business combination, shares issued to the owners of the target of the initial business combination, debt issued to a bank or other lenders or the owners of the target, or a combination of the foregoing.

The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:

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We cannot assure you that our plans to complete our initial business combination will be successful.

Initial Business Combination

The Merger Agreement

On February 11, 2022, we, Merger Sub, and our Sponsor entered into the Merger Agreement with the Target and Casey.

Pursuant to the Merger Agreement, upon the Closing of the Business Combination, we will effect the merger of Merger Sub with and into the Target, with the Target continuing as the surviving entity (the “Merger”), as a result of which all of the issued and outstanding capital stock of the Target shall be exchanged shares of the Class A Common Stock of the Company upon the terms set forth as follows:

the Target’s shareholders collectively shall be entitled to receive from the Company, in the aggregate, a number of Company’s securities with an aggregate value equal to (a) $200,000,000 minus (b) the amount, if any, by which the Target’s net working capital amount exceeds the net working capital amount (but not less than zero), minus (c) the amount of Closing Net Indebtedness (as defined in the Merger Agreement) minus (d) the amount of any transaction expenses, provided that the merger consideration otherwise payable to the Target’s shareholders is subject to adjustment after the Closing in accordance with the terms of the Merger Agreement.

On February 11, 2022, we, Data Knights Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Data Knights, LLC, the Company’s sponsor (the “Sponsor”), entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with OneMedNet Corporation, Inc., a Delaware corporation (the “Target”, and together with the Company and Merger Sub, the “Parties”) and Paul Casey, as seller representative (“Casey”).

Pursuant to the Merger Agreement, upon the closing of the transactions contemplated thereby (the “Business Combination”), we will effect the merger of Merger Sub with and into the Target, with the Target continuing as the surviving entity (the “Merger”), as a result of which all of the issued and outstanding capital stock of the Target shall be exchanged shares of the Class A Common Stock of the Company upon the terms set forth as follows:

the Target’s stockholders collectively shall be entitled to receive from the Company, in the aggregate, a number of Company’s securities with an aggregate value equal to (a) $200,000,000 minus (b) the amount, if any, by which the Target’s net working capital amount exceeds the net working capital amount (but not less than zero), minus (c) the amount of Closing Net Indebtedness (as defined in the Merger Agreement) minus (d) the amount of any transaction expenses, provided that the merger consideration otherwise payable to the Target’s stockholders is subject to adjustment after the Closing in accordance with the terms of the Merger Agreement.

The obligations of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain customary closing conditions of the respective parties, including, without limitation:

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(h) the entry into certain ancillary agreements as of the Closing;

(i) the lack of any notice or communication from, or position of, the SEC requiring the Company to amend or supplement the Prospectus and Proxy Statement (as defined below);

(i) the lack of any notice or communication from, or position of, the U.S.

Securities and Exchange Commission (the “SEC”) requiring the Company to amend or supplement the Prospectus and Proxy Statement (as defined below);

and (j) the receipt of certain closing deliverables.

In connection with entry into the Merger Agreement, the Company entered into Voting Agreements with the Target’s stockholders pursuant to which the Target’s stockholders have agreed to vote their securities in favor of the approval of the Merger Agreement and the Business Combination, be bound by certain covenants and agreements related to the Business Combination and to take other customary actions to cause the Business Combination to occur.

The Company, the Sponsor, and the Target also entered into a Sponsor Support Agreement pursuant to which the Sponsor has agreed to vote its Company securities in favor of the approval of the Merger Agreement and the Business Combination and to take other customary actions to cause the Business Combination to occur.

The Merger Agreement and agreements related thereto are further described in the Form 8-K, filed by us on April 25, 2022.

The Special Meeting

On October 27, 2022, the Company filed a definitive proxy statement with the SEC in connection with the Company’s solicitation of proxies for the vote by the stockholders of the Company at a special meeting of the Company’s stockholders to be held on November 11, 2022 (the “Special Meeting”).

On the Special Meeting, the Stockholders of the Company approved amendments to its second amended and restated certificate of incorporation (the “Extension Amendment”) and the investment management trust agreement (the “Trust Agreement”) between Continental Stock Transfer & Trust Company, as trustee (“Continental”) and the Company governing the trust account (the “Trust Account”) established in connection with the Company’s initial public offering dated May 11, 2021 (the “Trust Amendment”), which together would allow the Company to extend the deadline by which it must complete its initial business combination by up to nine one-month periods from the current outside date of November 11, 2022.

In connection with each such extension, Data Knights, LLC, the Company’s sponsor, caused $0.045 per outstanding share of the Company’s Class A Common Stock, or approximately $122,920 deposited in the Trust Account in connection with the exercise of the first monthly extension of the Extended Date to December 11, 2022.

The First Amendement to the Second Amended and Restated Certificate of Incorporation and the Amendment No,1 to Investment Management Trust Agreement related thereto are further described in the Form 8-K, filed by us on November 15, 2022.

Business Combination Period

At a special meeting of the Company’s stockholders held on November 11, 2022, the stockholders of the Company approved the First Amendment to the Second Amended and Restated Certificate of Incorporation of the Company, giving the Company the right to extend the date by which the Company must (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses, (ii) cease its operations if it fails to complete such business combination, and (iii) redeem or repurchase 100% of the Company’s Class A Common Stock included as part of the units sold in the Initial Public Offering from November 11, 2022 up to nine (9) one-month extensions to August 11, 2023.

In connection with approval of the First Amendment to the Second Amended and Restated Certificate of Incorporation of the Company, the Sponsor caused $0.045 per outstanding share of Class A Common Stock, giving effect to redemptions made in connection with the special meeting, or approximately $122,920, to be deposited in the Trust Account in connection with the exercise of the first monthly extension of the Extended Date to December 11, 2022.

The six subsequent monthly extensions have since been exercised.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date.

Our only activities from inception to September 30, 2022, were organizational activities, those necessary to prepare for the Initial Public Offering and identifying a target company for a business combination.

Our only activities from inception through March 31, 2023 were organizational activities, those necessary to prepare for our Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for an initial Business Combination.

We do not expect to generate any operating revenues until after the completion of our initial Business Combination.

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We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended September 30, 2022, we had a net loss of $153,275, which consists of unrealized gain from marketable securities held in the Trust Account of $587,303, change in fair value of warrant liabilities of $113,829 and offset by operating costs of $520,025 and provision for income taxes of $106,724.

For the three months ended September 30, 2021, we had a net income of $1,292,965, which consists of unrealized gain from marketable securities held in the Trust Account of $2,897, change in fair value of warrant liabilities of $1,388,792 and offset by operating costs of $98,724.

For the nine months ended September 30, 2022, we had a net income of $2,992,171, which consists of unrealized gain from marketable securities held in the Trust Account of $779,706, change in fair value of warrant liabilities of $4,243,893 and offset by operating costs of $1,924,704 and provision for income taxes of $106,724.

For the period from February 8, 2021 (inception) through September 30, 2021, we had a net income of 5,600,271 which consists of unrealized gain from marketable securities held in the Trust Account of $3,691, change in the fair value of warrant liabilities of $6,391,703 and offset by formation and operating costs of $170,064 and non-operating expenses of $625,059.

Liquidity and Capital Resources

On May 11, 2021, we consummated the Initial Public Offering of 11,500,000 Units, which includes the full exercise by the underwriter of the over-allotment option to purchase 1,500,000 Units at $10.00 per Unit, generation gross proceeds of $115,000,000.

Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 585,275 Private Placement Units at $10.00 per Private Placement Unit to our Sponsor, generation gross proceeds of $5,852,750.

For the Nine months ended September 30, 2022, cash used in operating activities was $796,537.

For the period from February 8, 2021 (inception) through September 30, 2021, cash used in operating activities was $297,932.

Transaction costs of the Initial Public Offering amounted to $6,771,112, consisting of $2,300,000 of underwriting fees, $4,025,000 of deferred underwriting fees (see Note 6) and $446,112 of other costs.

As of September 30, 2022, we had available to us $234,923 of cash on our condensed consolidated balance sheets and a working capital deficit of $1,218,387.

We intend to use the funds held outside of the Trust Account for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.

The interest income earned on the investments in the Trust Account are unavailable to fund operating expenses.

We currently have up to 18 months from the closing of our IPO, or until December 11, 2022, to consummate an initial business combination.

On May 5, 2022, the Company issued a press release announcing that its Sponsor has requested that the Company extend the date by which the Company has to consummate a business combination from May 11, 2022 to August 11, 2022 (the “ Extension ”).

The Extension was the first of two three-month extensions permitted under the Company’s governing documents.

On August 11, 2022, the Company extend the date by which the Company has to consummate a business combination from August 11, 2022 to November 11, 2022 (the “ 2 nd Extension ”).

The 2 nd Extension is the second of two three-month extensions permitted under the Company’s governing documents.

On November 11, 2022 (the “Special Meeting”), the Company’s stockholders approved amendments to its second amended and restated certificate of incorporation (the “Extension Amendment”) and the investment management trust agreement (the “Trust Agreement”) between Continental Stock Transfer & Trust Company, as trustee (“Continental”) and the Company governing the trust account (the “Trust Account”) established in connection with the Company’s initial public offering dated May 11, 2021 (the “Trust Amendment”), which together would allow the Company to extend the deadline by which it must complete its initial business combination by up to nine one-month periods from the current outside date of November 11, 2022.

If our initial business combination is not consummated by December 11, 2022, or such later date as extended pursuant to the foregoing, then our existence will terminate, and we will distribute all amounts in the trust account.

In order to fund working capital deficiencies or finance transaction costs in connection with our initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required.

If we complete our initial Business Combination, we would repay such loaned amounts.

In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Accounts to repay such loaned amounts but no proceeds from our Trust Accounts would be used for such repayment.

Up to $1,500,000 of such loans may be convertible into units identical to the Placement Units, at a price of $10.00 per unit at the option of the lender.

Moreover, we will need to obtain additional financing either to complete our initial Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our initial Business Combination, in which case we have entered into the Securities Purchase Agreements for the additional financing in connection with such Business Combination.

Subject to compliance with applicable securities laws, we expect to complete such financing simultaneously with the completion of our initial Business Combination.

If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Accounts.

In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.

The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

The Company intends to complete the proposed Business Combination before December 11, 2022, and we believe we have sufficient arrangements with our vendors to continue to operate until we complete our initial Business Combination.

However, there can be no assurance that the Company will be able to consummate the Business Combination by then.

In the event that we are unable to consummate the Business Combination before December 11, 2022 we anticipate identifying and accessing additional capital resources in order to extend the Business Combination period up to 18 months.

However, there can be no assurance that the Company will have access to sufficient capital to extend the deadline to consummate the Business Combination.

As a result, 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,” it is uncertain that the Company will have sufficient liquidity to fund the working capital needs of the Company beyond December 11, 2022.

Management has determined that given the liquidity condition of the Company, should a Business Combination not occur by December 11, 2022, there is substantial doubt about the Company’s ability to continue as a going concern.

No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate.

For the three months ended March 31, 2023, we had a net loss of $85,983, which consists of realized and unrealized gain and dividends of $327,399, offset with operating expense of $306,303 and franchise tax expense of $47,481 and income tax provision of $59,598.

For the three months ended March 31, 2022, we had a net income of $2,195,508 which consists of unrealized gain from marketable securities held in the Trust Account of $43,053 and change in fair value of warrant liabilities of $2,762,640 offset by operating costs of $610,185.

Going Concern, Liquidity and Capital Resources

As of March 31, 2023 and December 31, 2022, we had cash of $10,108 and $30,870 outside of the Trust Account, respectively.

We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete our initial business combination.

For the three months ended March 31, 2023, cash used in operating activities was $52,462.

For the three months ended March 31, 2022, cash used in operating activities was $294,018.

As of March 31, 2023 and December 31, 2022, we had investments of $29,725,574 and $29,029,416 held in the Trust Accounts, respectively.

We intend to use substantially all of the funds held in the Trust Accounts, including any amounts representing interest earned on the Trust Accounts (less taxes paid and deferred underwriting commissions) to complete our initial business combination.

We may withdraw interest to pay taxes.

During the three months ended March 31, 2023 and 2022, we did not withdraw any of interest earned on the Trust Account.

To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Accounts will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

The accompanying consolidated financial statements have been prepared in conformity with U.S.

GAAP, which contemplates the continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans.

Management plans to address this uncertainty during the period leading up to the business combination;

however, this cannot be guaranteed.

The Company will have until August 11, 2023, subject to nine one-month extensions, to consummate a business combination.

If our initial business combination is not consummated by August 11, 2023, less than one year after the date the financial statements are issued, then our existence will terminate, and we will distribute all amounts in the trust account.

The Company intends to complete a business combination before the liquidation date, and no adjustments have been made to the carrying amounts of assets or liabilities should the company be required to liquidate after such date.

There can be no assurance that the Company will be able to consummate an initial business combination by August 11, 2023 and/or have sufficient working capital and borrowing capacity to meet its needs.

Based upon the above analysis, management determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of September 30, 2022.

We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

We have not entered any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2023 and December 31, 2022.

We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships,

often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

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We began incurring these fees on May 7, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.

From inception to September 30, 2022, we have incurred $170,000 in fees under this agreement.

The Underwriter was paid a cash underwriting fee of 2.0% of gross proceeds of the Public Offering, or $2,300,000.

In addition, the Underwriter is entitled to aggregate deferred underwriting commissions of $4,025,000 consisting of (i) 3.5% of the gross proceeds of the Public Offering.

The deferred underwriting commissions will become payable to the Underwriter from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination, subject to the terms of the underwriting agreement.

For the three months ended March 31, 2023 and 2022, we have incurred $30,000 in fees under this agreement, respectively.

The underwriters are entitled to a deferred fee of $4,025,000 in the aggregate.

The deferred fee will become payable to the underwriters from the amounts held in the Trust Accounts solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Related Party Transactions

Working Capital Loan

In order to fund working capital deficiencies or finance transaction costs in connection with our initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (the “Working Capital Loans”).

If we complete our initial business combination, we would repay such loaned amounts.

In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment.

Up to $1,500,000 of such loans may be convertible into units identical to the Placement Units, at a price of $10.00 per unit at the option of the lender.

As of March 31, 2023 and December 31, 2022, we had $239,081 and $207,081 in Working Capital Loans outstanding, respectively.

Extension Loan

As discussed above, on November 11, 2022, we held a special meeting of stockholders to seek stockholder approval of certain proposals to extend the date by which we must consummate a business combination from November 11, 2022 to August 11, 2023 subject to nine one-month extensions (each an “Extension”), each of which Extensions requiring us to cause to be deposited into the Trust Account an amount equal $0.045 per unit sold in the Initial Public Offering (each such deposit an “Extension Payment”).

In connection with the Extensions, the Sponsor agreed to loan us of the funds to make the associated Extension Payments (the “Extension Loans”).

As of March 31, 2023 and December 31, 2022, we had $2,914,598 and $2,545,838 in Extension Loans outstanding, respectively.

Introducing Advisor Agreement

On June 26, 2021, we entered into an introducing advisor agreement (the “Introducing Advisor Agreement”) with ARC Group Limited, the Company’s financial advisor (“ARC”), pursuant to which ARC will make strategic introductions to the Company of potential target companies and/or their subsidiaries, affiliates, or representatives (each an “Advisor Target”) who may be interested in potential business combinations with the Company.

In consideration for ARC’s services under the Introducing Advisor Agreement, we agreed to (i) pay to ARC (a) a retainer of $50,000 upon execution of the Introducing Advisor Agreement and (b) a success fee of $100,000 upon closing our initial business combination, and (ii) cause to be issued to ARC equity interests in the post-combination company representing a five-percent (5%) ownership interest in the post-combination company, if at any time prior to June 25, 2022 (the “Termination Date”), or within six (6) months thereafter, we closed on an initial business combination or any financing with any Advisor Target or any affiliate of an Advisor Target (the “Equity Issuance”).

On March 22, 2022, we and ARC entered into the First Amendment to the Introducing Advisor Agreement, pursuant to which both parties agreed that we would pay to ARC an additional success fee equivalent to five percent (5%) on any PIPE that was brought by ARC in connection with our initial business combination upon the closing of our initial business combination.

On December 31, 2022, we and ARC entered into the Second Amendment to the Introducing Advisor Agreement, pursuant to which both parties agreed to extend the Termination Date to December 31, 2024, and to change the performance condition for the Equity Issuance from the closing of our initial business combination to the execution of a business combination agreement.

On December 31, 2022, following the execution of the Second Amendment to the Introducing Advisor Agreement, the performance condition for the Equity Issuance was deemed to have been met, and ARC was issued 1,378,517 shares of the Company’s Class B Common Stock, up to 143,766 shares of which are subject to forfeiture if our public stockholders exercise redemption rights with respect to any of our remaining outstanding shares of Class A Common Stock.

Critical Accounting Policies

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Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

The preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment.

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Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation.

Net income per common share is computed by dividing the pro rata net loss between the redeemable shares and the non-redeemable shares by the weighted average number of common shares outstanding for each of the periods.

Net income per common share is computed by dividing the pro rata net loss between the redeemable shares and the non-redeemable shares

by the weighted average number of common shares outstanding for each of the periods.

The calculation of diluted income per common stock does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

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The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”.

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

Derivative liabilities are classified in the condensed consolidated balance sheets as current or non-current based on whether net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Derivative liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Warrant Liabilities

The Company accounts for its warrants in accordance with the guidance contained in ASC 815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities.

Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period.

This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statements of operations.

The warrants for periods where no observable traded price was available are valued using a binomial/lattice model.

For periods subsequent to the detachment of the public warrants from the public units, the public warrant quoted market price will be used as the fair value as of each relevant date.

Class A Common stock subject to possible redemption

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The Company’s common stock features certain redemption rights that are outside of the Company’s control and subject to occurrence of uncertain future events.

Accordingly, as of September 30, 2022, there were 585,275 shares of Class A Common Stock outstanding, excluding 11,500,000 shares of Class A Common Stock are subject to possible redemption.

Accordingly, as of March 31, 2023, there were 4,838,792 shares of Class A Common Stock outstanding, excluding 4,838,792 shares of Class A Common Stock are subject to possible redemption.

Recent Accounting Pronouncements

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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 2. Management’s Discussion and Analysis