UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
For the fiscal year ended
or
For the transition period from _____________ to ________________
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes
☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ☐ Yes
☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such fi les). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | ☒ | Smaller reporting company | |
| Emerging Growth Company |
If an emerging growth company, indicate by
check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of June 30, 2022, the aggregate market value
of the registrant’s common stock held by non-affiliates of the registrant was approximately $
As of April 7, 2023, there were
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
This Amendment No. 1 to the Annual Report on Form 10-K (this “Amendment”) amends the Annual Report of Redwoods Acquisition Corp. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2022, which was originally filed with the Securities and Exchange Commission (“SEC”) on April 10, 2023 (the “Original Filing”). This Amendment is being filed solely to replace the report of Friedman LLP, the Company’s independent registered public accounting firm, included in the Original Filing with respect to the audited consolidated financial statements of the Company as of December 31, 2021 and for the period from March 16, 2021 (inception) through December 31, 2021, with a dual-dated report.
In connection with the filing of this Amendment and pursuant to the rules of the SEC, we are including with this Amendment new certifications by our principal executive and principal financial officers. Accordingly, Item 15 of Part IV has also been amended to reflect the filing of these new certifications.
Accordingly, this Amendment consists of a cover page, this Explanatory Note, a revised Part II, Item 8, an updated Exhibit Index, new consents of the Company’s independent registered public accounting firms and new certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002.
This Amendment does not modify, amend or update in any way the financial statements and other disclosures set forth in the Original Filing and there have been no changes to the XBRL data filed in Exhibit 101 of the Original Filing. In addition, this Amendment does not reflect events occurring after the filing of the Original Filing, nor does it modify or update disclosures therein in any way other than as required to reflect the revisions described above. Among other things, forward-looking statements made in the Original Filing have not been revised to reflect events that occurred or facts that became known to us after the filing of the Original Filing, and any such forward looking statements should be read in their historical context. Accordingly, this Amendment should be read in conjunction with the Original Filing.
| i |
REDWOODS ACQUISITION CORP.
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2022
| Page | ||
| EXPLANATORY NOTE | i | |
| PART II | 1 | |
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 1 |
| PART IV | 2 | |
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 2 |
| ii |
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information required by this Item 8 is included at the end of this Annual Report on Form 10-K beginning on page F-1.
| 1 |
part IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | The following documents are filed as part of this Annual Report on Form 10-K: |
| (1) | Financial Statements: |
| (2) | Financial Statement Schedules: |
None.
| (3) | Exhibits |
The following exhibits are filed with this report. Exhibits which are incorporated herein by reference can be obtained from the SEC’s website at sec.gov.
| 2 |
| + | Previously filed. |
| * | Filed herewith. |
| ** | Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
| 3 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: October 17, 2023 | REDWOODS ACQUISITION CORP. |
| By: | /s/ Jiande Chen | |
| Name: | Jiande Chen | |
| Title: | Chief Executive Officer |
| 4 |
REDWOODS ACQUISITION CORP
INDEX TO FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Redwoods Acquisition Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Redwoods Acquisition Corporation (the “Company”) as of December 31, 2022, the related statements of operations, stockholders’ deficit and cash flows for year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working capital as of December 31, 2022 are not sufficient to complete its planned activities for a reasonable period of time, which is considered to be one year from the issuance date of the financial. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
Marcum llp
We have served as the Company’s auditor since 2021 (such date takes into account the acquisition of certain assets of Friedman LLP by Marcum LLP effective September 1, 2022)
April 10, 2023
| F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Redwoods Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Redwoods Acquisition Corp. (the “Company”) as of December 31, 2021 and the related statements of operations, changes in stockholders’ equity and cash flows for the period from March 16, 2021 (inception) through December 31, 2021 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and the results of its operations and its cash flows for the period from March 16, 2021 (inception) through December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph — Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, its business plan is dependent on the completion of a financing and the Company’s cash and working capital as of December 31, 2021 are not sufficient to complete its planned activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Notes 1 and 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Friedman LLP
Friedman LLP
We have served as the Company’s auditor from 2021 through 2022.
New York, NY
January 31, 2022, except for Notes 3, 4, 7 and 8 which are dated March 25, 2022
| F-3 |
REDWOODS
ACQUISITION CORP.
BALANCE SHEETS
| December 31, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Temporary Equity, and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accrued expenses | $ | $ | ||||||
| Franchise tax payable | ||||||||
| Income tax payable | — | |||||||
| Due to related party | ||||||||
| Total Current Liabilities | ||||||||
| Warrant liability | ||||||||
| Deferred tax liability | — | |||||||
| Deferred underwriting fee payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Common stock subject to possible redemption, | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Temporary Equity, and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
REDWOODS
ACQUISITION CORP.
STATEMENTS OF OPERATIONS
For the year ended | For the through December 31, | |||||||
| 2022 | 2021 | |||||||
| General and administrative expenses | $ | $ | ||||||
| Franchise tax expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Interest earned on investment held in Trust Account | ||||||||
| Unrealized gain on investment held in Trust Account | ||||||||
| Change in fair value of warrant liabilities | ||||||||
| Income (loss) before income taxes | ( | ) | ||||||
| Deferred income taxes provision | ( | ) | ||||||
| Income taxes provision | ( | ) | ||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| $ | ( | ) | $ | |||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
REDWOODS
ACQUISITION CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’DEFICIT
For the Year Ended December 31, 2022
| Common stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock issued to initial stockholders | $ | — | ||||||||||||||||||
| 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 | — | ( | ) | ( | ) | ( | ) | |||||||||||||
| Net income for the year | — | |||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
For the period from March 16, 2021 (inception) through December 31, 2021
| Common Stock | Additional Paid-In | Accumulated | Total Stockholder’s | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of March 16, 2021 (inception) | $ | $ | $ | $ | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
REDWOODS
ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
For the year December 31, | For the period from March 16, 2021 (inception) through December 31, 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net cash used in operating activities: | ||||||||
| Interest earned on investment held in Trust Account | ( | ) | ||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Changes in current assets and current liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accrued expenses | ||||||||
| Franchise tax payable | ||||||||
| Income tax payable | — | |||||||
| Deferred income tax liability | — | |||||||
| Formation costs paid by related party | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of investment held in Trust Account | ( | ) | ||||||
| Net cash used in financing 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 | ( | ) | ||||||
| Payment of deferred offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ||||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| 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 | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-7 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 December 31, 2022, the Company had not commenced any operations. All activities through December 31, 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
The
Company granted the underwriters a 45-day option to purchase up to
Transaction
costs amounted to $
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 $
| F-8 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 $
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, to the extent permitted by law, 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
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 $
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.
| F-9 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 $
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) $
Liquidity, Capital Resources and Going Concern
As of December 31, 2022, the Company had cash
of $
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.
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 liquidity condition, 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.
| F-10 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 financial statements. The financial statements do not include any adjustments that might result from the future outcome of this uncertainty.
Additionally, as a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. In addition, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holders, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business 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.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying audited financial statements are presented in U.S. Dollars and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, they include all of the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included.
| F-11 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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.
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 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 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 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 $
Investments Held in Trust Account
As of December 31, 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.
| F-12 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 $
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 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 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
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The 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 December 31, 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.
| F-13 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
| For the Year Ended December 31, 2022 | For the Period from March 16, 2021 (Inception) through December 31, 2021 | |||||||
| Net Income | $ | $ | ( | ) | ||||
| Accretion of common stock to redemption value | ( | ) | ||||||
| Net loss including accretion of common stock to redemption value | $ | ( | ) | $ | ( | ) | ||
| For the | ||||||||||||||||
| Period from | ||||||||||||||||
| March 16, 2021 | ||||||||||||||||
| (Inception) | ||||||||||||||||
| For the Year Ended | through | |||||||||||||||
| December 31, 2022 | December 31, 2021 | |||||||||||||||
Redeemable shares | Non- redeemable shares | Redeemable shares | Non- redeemable shares | |||||||||||||
| Basic and diluted net income (loss) per common stock | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Accretion of ordinary shares subject to possible redemption to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominator: | ||||||||||||||||
| $ | $ | ( | ) | $ | $ | |||||||||||
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.
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.
| F-14 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 December 31, 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 accounts for its Public Warrants as equity and the Private Warrants as liabilities.
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.
| F-15 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 financial statements.
Note 3 — Cash and Investment Held in Trust Account
As of December 31, 2022, investment securities
in the Company’s Trust Account consisted of $
December 31, 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 | $ | $ | ||||||||||||||
Note 4 — Initial Public Offering
On
April 4, 2022, pursuant to its initial public offering (the “IPO”), the Company sold
All
of the
| F-16 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 December 31, 2022 | ||||
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Proceeds allocated to Public Rights | ( | ) | ||
| Offering costs of Public Shares | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Class A Common stock subject to possible redemption | $ | |||
Note 5 — Private Placement
Simultaneously
with the closing of the IPO, the Sponsor and Chardan purchased an aggregate of
Note 6 — Related Party Transactions
Insider Shares
On
January 4, 2022, the Company issued
| F-17 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 $
On March 22 and March 30, 2023, the Sponsor provided
a loan of up to $
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 $
As of December 31, 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 $
Note 7 — Commitments and Contingencies
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.
| F-18 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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
The
underwriters were paid a cash underwriting discount of
Unit Purchase Option
Simultaneously
with the IPO (including the closing of the over-allotment option), the Company sold to Chardan, for $
Right of First Refusal
Note 8 — Stockholders’ Equity
Common
Stock — The Company is authorized to issue
| F-19 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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 $
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
$
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 $ | |
| ● | 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 $ |
| F-20 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
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.
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. |
| F-21 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
| December 31, 2022 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | ||||||||||||||
| 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.
| Private Warrants | Total | |||||||
| Fair value at January 1, 2022 | $ | $ | ||||||
| Initial recognition | ||||||||
| Change in fair value | ( | ) | ( | ) | ||||
| Fair value as of December 31, 2022 | $ | $ | ||||||
The
Company established the initial fair value for the private warrants at $
| December 31, 2022 | April 4, 2022 (initial measurement) | |||||||
| Exercise Price | $ | $ | ||||||
| Underlying share price | $ | $ | ||||||
| Expected Volatility | % | % | ||||||
| Warrant life (years) | ||||||||
| Risk-free rate | % | % | ||||||
| F-22 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Note 10 — Income Taxes
| December 31 | ||||
| 2022 | ||||
| Deferred tax asset | ||||
| Net operating loss carryforward | $ | |||
| Startup/Organization Expenses | ||||
| Unrealized gain on investments held in trust account | ( | ) | ||
| Total deferred tax asset | ||||
| Valuation allowance | ( | ) | ||
| Deferred tax asset (liability), net of allowance | $ | ( | ) | |
| For the Year ended December 31, 2022 | ||||
| Federal | ||||
| Current | $ | |||
| Deferred | ( | ) | ||
| State | ||||
| Current | $ | |||
| Deferred | ||||
| Change in valuation allowance | ||||
| Income tax provision | $ | |||
| For the Year ended December 31, 2022 | ||||
| Income at U.S. statutory rate | % | |||
| State taxes, net of federal benefit | % | |||
| Change in fair value of warrants | ( | )% | ||
| Change in valuation allowance | % | |||
| % | ||||
As of December 31, 2022, the Company did not have any U.S. federal and state net operating loss carryovers available to offset future taxable income.
| F-23 |
REDWOODS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
In
assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies
in making this assessment. After consideration of all of the information available, management believes that significant uncertainty
exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. The change
in the valuation allowance was $
The provisions for U.S. federal and state income taxes were $
Note 11 — 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 the date that the financial statements were issued. Based on the review, management identified the following subsequent events that are required disclosure in the financial statements.
On March 22, 2023, the Company issued an unsecured,
non-interest bearing promissory note in the principal amount of up to $
On March 30, 2023, the Company issued an unsecured,
non-interest bearing promissory note in the principal amount of up to $
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
Subject upon 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
$
| F-24 |