UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period 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) |
512-666-1277
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered: | ||
| The | ||||
| Warrants, each whole warrant exercisable for one share of Class A Common Stock for $11.50 per share | ACACW | The NASDAQ Stock Market LLC | ||
| Units, each consisting of one share of Class A Common Stock and one-half of one Warrant | ACACW | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
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 files).
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
As of August 9, 2022,
TABLE OF CONTENTS
| Part I – FINANCIAL INFORMATION | 1 | |
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 24 |
| Item 4. | Controls and Procedures | 24 |
| Part II – OTHER INFORMATION | 25 | |
| Item 1. | Legal Proceedings | 25 |
| Item 1A. | Risk Factors | 25 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 25 |
| Item 3. | Defaults Upon Senior Securities | 25 |
| Item 4. | Mine Safety Disclosures | 25 |
| Item 5. | Other Information | 25 |
| Item 6. | Exhibits | 26 |
| SIGNATURES | 27 | |
i
PART I – FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED BALANCE SHEET
JUNE 30, 2022
(Unaudited)
| Assets | ||||
| Cash | $ | |||
| Prepaid expenses | ||||
| Total Current Assets | ||||
| Investments held in Trust Account | ||||
| Total Assets | $ | |||
| Liabilities, Temporary Equity, and Stockholders’ Deficit | ||||
| Accrued expenses | $ | |||
| Franchise tax payable | ||||
| Total Current Liabilities | ||||
| Deferred underwriter’s discount | ||||
| Total Liabilities | ||||
| Commitments and Contingencies | ||||
| Common stock subject to possible redemption, | ||||
| Stockholders’ Deficit: | ||||
| Preferred stock, $ | ||||
| Class A common stock, $ | ||||
| Class B 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 unaudited condensed financial statements.
1
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
| Three Months Ended | For the Period from January 7, 2022 (inception) through | |||||||
| June 30, 2022 | June 30, 2022 | |||||||
| Formation and operating costs | $ | $ | ||||||
| Franchise tax expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Income taxes provision | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| $ | $ | |||||||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIOD FROM JANUARY 7, 2022 (INCEPTION) THROUGH JUNE 30, 2022
(Unaudited)
| Preferred Stock | Common Stock | Additional | Total | |||||||||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance as of January 7, 2022 (inception) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Founder shares issued to initial stockholder | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance as of March 31, 2022 | - | $ | - | - | $ | - | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Sale of public units through public offering | - | - | ||||||||||||||||||||||||||||||||||
| Sale of private placement warrants | - | - | - | |||||||||||||||||||||||||||||||||
| Underwriters’ discount | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Other offering expenses | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Reclassification of common stock subject to redemption | - | ( | ) | ( | ) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Allocation of offering costs to common stock subject to redemption | - | - | - | |||||||||||||||||||||||||||||||||
| Accretion of carrying value to redemption value | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 7, 2022 (INCEPTION) THROUGH JUNE 30, 2022
(Unaudited)
| Cash Flows from Operating Activities: | ||||
| Net loss | $ | ( | ) | |
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | ( | ) | ||
| Accrued expenses | ||||
| Franchise tax payable | ||||
| Net Cash Used in Operating Activities | ( | ) | ||
| Cash Flows from Investing Activities: | ||||
| Purchase of investment held in trust account | ( | ) | ||
| Net Cash Used in investing Activities | ( | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from issuance of founder shares | ||||
| Proceeds from promissory note to related party | ||||
| Repayment of promissory note to related party | ( | ) | ||
| Proceeds from public offering | ||||
| Proceeds from private placement | ||||
| Payment of underwriter discount | ( | ) | ||
| Payment of deferred offering costs | ( | ) | ||
| Net Cash Provided by Financing Activities | ||||
| Net Change in Cash | ||||
| Cash, January 6, 2022 (inception) | ||||
| Cash, June 30, 2022 | $ | |||
| Supplemental Disclosure of Cash Flow Information: | ||||
| Deferred underwriters’ marketing fees | $ | |||
| Change in value of common stock subject to redemption | $ | |||
| Allocation of offering costs to common stock subject to redemption | $ | |||
| Accretion of carrying value to redemption value | $ | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 1 — Organization and Business Operation
Acri Capital Acquisition Corporation (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on January 7, 2022. The Company was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is actively searching and identifying suitable Business Combination target but has not selected any Business Combination target and it has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any Business Combination target. The company is not limited to a particular industry or geographic region for purposes of consummating an initial Business Combination. The Company will not undertake its initial Business Combination with any company being based in or having the majority of the company’s operations in China (including Hong Kong and Macau). The Company has selected December 31 as its fiscal year end.
As of June 30, 2022, the Company had not commenced any operations. For the period from January 7, 2022 (inception) through June 30, 2022, the Company’s efforts have been limited to organizational activities as well as activities related to the initial public offering (the “IPO”). 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 registration statement
for the Company’s IPO became effective on June 9, 2022. On June 14, 2022 the Company consummated the IPO of
Substantially concurrently
with the closing of the IPO, the Company completed the sale of
Transaction costs amounted
to $
The Company’s initial
Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least
5
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 1 — Organization and Business Operation (cont.)
Following the closing of the
IPO, $
The shares of Class A common
stock subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO,
in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
In such case, the Company will consummate a Business Combination and, solely if the Company has net tangible assets of at least $
If the Company is unable to
complete the initial 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 earned
on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes (less up to $
There will be no redemption
rights or liquidating distributions with respect to the Company’s Warrants, which will expire worthless if the Company fails to
complete the Business Combination within the Combination Period. The Sponsor, directors and officers of the Company (the “founders”)
have entered into a letter agreement with the Company, pursuant to which they have agreed (i) to waive their redemption rights with
respect to any Founder Shares (as defined in Note 5) and any Public Shares held by them in connection with the completion of the
initial Business Combination, (ii) waive their redemption rights with respect to their Founder Shares and Public Shares in connection
with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify
the substance or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or to
redeem
6
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 1 — Organization and Business Operation (cont.)
The Sponsor has agreed that
it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or by a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds
in the Trust Account to below (i) $
However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy their indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its sponsor would be able to satisfy those obligations. None of the officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Note 2 — Significant accounting policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC, and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results. Interim results are not necessarily indicative of results to be expected for any other interim period or for the full year.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (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 of 2002, 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 of 1934, as amended (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.
7
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 2 — Significant accounting policies (cont.)
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash
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 no cash equivalent as of June 30, 2022.
Investments held in Trust Account
At June
30, 2022, $
All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are accounted as interest income in the statement of operations.
Fair Value of Financial Instruments
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. ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
| ☐ | Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| ☐ | Level 2 - Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
| ☐ | Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Warrants
The Company accounts for 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”) 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 shares of Class A common stock 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.
8
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 2 — Significant accounting policies (cont.)
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 are either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.
At all other times, common stock are classified as stockholders’ equity.
The Company’s Public Shares feature certain redemption rights that are considered to be outside of the Company’s control and
subject to occurrence of uncertain future events. Accordingly, as of June 30, 2022, common
stock subject to possible redemption are presented at redemption value of $
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 $
Net Loss Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings 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 common stock and non-redeemable common stock 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 common stock. Any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. As of June 30, 2022, the Company has not considered the effect of the Warrants sold in the IPO and private placement in the calculation of diluted net income (loss) per share, since the exercise of the Warrants is contingent upon the occurrence of future events and the inclusion of such Warrants would be anti-dilutive and the Company did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic (income) loss per share for the periods presented.
9
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 2 — Significant accounting policies (cont.)
The net income (loss) per share presented in the statement of operations is based on the following:
| For the three months ended June 30, 2022 | For the Period from January 7, 2022 (inception) through June 30, 2022 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) | ||
| For the Period from | ||||||||||||||||
| For the three months ended | January 7, 2022 (inception) through | |||||||||||||||
| June 30, 2022 | June 30, 2022 | |||||||||||||||
| Non- | Non- | |||||||||||||||
| Redeemable | Redeemable | Redeemable | Redeemable | |||||||||||||
| Common | Common | Common | Common | |||||||||||||
| Stock | Stock | Stock | Stock | |||||||||||||
| Basic and diluted net income/(loss) per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net loss including carrying value to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion of carrying value to redemption value | ||||||||||||||||
| Allocation of net income/(loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| $ | $($ | ) | $ | $($ | ) | |||||||||||
| For the Period from January 7, 2022 (inception) through June 30, 2022 | ||||||||
| Redeemable Common Stock | Non- Redeemable Common Stock | |||||||
| Basic and diluted net income/(loss) per share: | ||||||||
| Numerators: | ||||||||
| Allocation of net loss including carrying value to redemption value | $ | (2,377,067 | ) | $ | (5,697,211 | ) | ||
| Accretion of carrying value to redemption value | 7,913,696 | — | ||||||
| Allocation of net income/(loss) | $ | 5,536,629 | $ | (5,697,211 | ) | |||
| Denominators: | ||||||||
| Weighted-average shares outstanding | 793,103 | 1,900,862 | ||||||
| Basic and diluted net income/(loss) per share | $ | 6.98 | $ | (3.00 | ) | |||
10
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 2 — Significant accounting policies (cont.)
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. The Company has
not experienced losses on this account and management believes the Company is not exposed to significant risks on such account. As of
June 30, 2022, approximately $
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement 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 June 30, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only major tax jurisdiction.
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.
11
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 2 — Significant accounting policies (cont.)
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Note 3 —Investments Held in Trust Account
As
of June 30, 2022, assets held in the Trust Account were comprised of $
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | June 30, 2022 | ||||
| Assets: | ||||||
| Trust Account - U.S. Treasury Securities Money Market Fund | 1 | $ | ||||
Note 4 — Initial Public Offering
Pursuant to the IPO, the
Company sold
All
of the
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).
12
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 4 — Initial Public Offering (cont.)
As of June 30, 2022, the common stock reflected on the balance sheet are reconciled in the following table.
As of June 30, | ||||
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Offering costs of Public Shares | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Common stock subject to possible redemption | $ | |||
Note 5 — Private Placement
Substantially concurrently
with the closing of the IPO on June 14, 2022, the Company completed the sale of
Note 6 — Related Party Transactions
Founder Shares
On February 4, 2022, the
Sponsor acquired
The number of Founder Shares
issued was determined based on the expectation that such Founder Shares would represent
The Founder Shares are identical to the Public Shares. However, the founders have agreed (A) to vote their Founder Shares in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, prior to and unrelated to an initial Business Combination, an amendment to the Company’s certificate of incorporation that would affect the substance or timing of the Company’s redemption obligation to redeem all Public Shares if the Company cannot complete an initial Business Combination within the Combination Period, unless the Company provides public stockholders an opportunity to redeem their Public Shares in conjunction with any such amendment, (C) not to redeem any shares, including Founder Shares and Public Shares into the right to receive cash from the Trust Account in connection with a stockholder vote to approve the Company’s proposed initial Business Combination or sell any shares to us in any tender offer in connection with the Company’s proposed initial Business Combination, and (D) that the Founder Shares shall not participate in any liquidating distribution upon winding up if a Business Combination is not consummated.
13
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 6 — Related Party Transactions (cont.)
The founder has agreed not
to transfer, assign or sell its Founder Shares until the earlier to occur of: (A) six months after the completion of the Company’s
initial Business Combination, or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar
transaction that results in all of the public stockholders having the right to exchange their shares of common stock for cash, securities
or other property, and (C) the date on which the last reported sale price of the Company’s Class A common stock equals or exceeds
$
Promissory Note — Related Party
On
January 20, 2022, the Sponsor has agreed to loan the Company up to $
Related Party Loans
In addition, in order to finance
transaction costs in connection with an intended initial Business Combination, the Sponsor, or an affiliate of the Sponsor or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company
completes the initial Business Combination, it would repay such loaned amounts. 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. Up to $
As of June 30, 2022, the Company had no borrowings under the working capital loans.
Administrative Services Fees
The Company has agreed, commencing
on the effective date of the prospectus, to pay the Sponsor the monthly fee of an aggregate of $
Note 7 — Commitments & Contingencies
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 7 — Commitments & Contingencies (cont.)
Registration Rights
The holders of the Founder Shares and Private Warrants and Warrants issuable upon the conversion of certain working capital loans will be entitled to registration rights pursuant to a registration rights agreement signed on June 9, 2022 requiring the Company to register such securities for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the Company’s initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters of the IPO
(the “underwriters”) exercised the option to purchase an additional
The Company paid an underwriting
discount of
Right of First Refusal
For a period of twelve (12) months
from the closing of a Business Combination the Company shall give underwriter a right of first refusal to act as lead left bookrunner
and lead left manager and/or lead left placement agent with at least seventy-five percent (
Note 8 — Stockholders’ Deficit
Preferred Stock — The
Company is authorized to issue
Class A Common Stock — The Company is authorized to issue
Class B Common
Stock — The Company is authorized to issue
15
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 8 — Stockholder’s Equity (cont.)
Common stockholders of record
are entitled to
The Class B common stock will automatically convert into shares of the Class A common stock at the time of the initial Business Combination, or at any time prior thereto at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution right.
Warrants — On
June 14, 2022, the Company issued
Each whole Warrant entitles
the registered holder to purchase one whole share of the Company’s Class A common stock at a price of $
The Company has agreed that as soon as practicable, but in no event later than 30 business days, after the closing of the initial Business Combination, it will use its reasonable best efforts to file, and within 60 business days following its initial Business Combination to have declared effective, a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Warrants. The Company will use its reasonable best efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement. No Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the Class A common stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of common stock. Notwithstanding the above, if the Company’s Class A common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event it so elect, it will not be required to file or maintain in effect a registration statement, but it will be required to use its reasonable best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
In addition, if (x) the Company issues additional shares of Class A 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 (the “Newly Issued Price”) of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s founders or their affiliates, without taking into account any founders’ shares held by the Company’s founders or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of the Company’s initial Business Combination (net of redemptions), and (z) the volume weighted average reported trading price of Class A Common Stock for the twenty (20) trading days starting on the trading day prior to the date of the consummation of the Business Combination (the “Fair Market Value”) is below $9.20 per share, the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Fair Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Fair Market Value and the Newly Issued Price.
16
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 8 — Stockholder’s Equity (cont.)
The Company may call the Warrants for redemption, in whole and not in part, at a price of $0.01 per Warrant:
The Company accounted for
the
As of June 30, 2022,
Note 9 — Income Taxes
The income tax provision (benefit) consists of the following for the three months ended June 30, 2022 and the period from January 7, 2021 (inception) through June 30, 2021:
| For the Three Months Ended June 30, 2022 | For the Period from January 7, 2022 (inception) through June 30, 2022 | |||||||
| Current | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Deferred | ||||||||
| Federal | ||||||||
| State | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Income tax provision | $ | $ | ||||||
17
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 9 — Income Taxes (cont.)
The Company’s net deferred tax assets were as follows as of June 30, 2022:
| Deferred tax assets: | ||||
| Net operating loss carryover | $ | |||
| Total deferred tax assets | ||||
| Valuation allowance | ( | ) | ||
| Deferred tax asset, net of allowance | $ | |||
As of June 30, 2022, the Company had $
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through August 12, 2022. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statement.
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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Acri Capital Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, references to the “sponsor” refer to Acri Capital Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.”
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the SEC on June 10, 2022 (dated June 9, 2022). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Delaware corporation on January 7, 2022 formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). We are actively searching and identifying suitable Business Combination target but have not selected any Business Combination target. We intend to effectuate our Business Combination using cash derived from the proceeds of our initial public offering (the “IPO”) and the sale of warrants (the “Private Placement Warrants”) in a private placement (the “Private Placement”) to the Company’s sponsor Acri Capital Sponsor LLC (the “sponsor”), potential additional shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
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Recent Development
On June 14, 2022 the Company consummated the IPO of 8,625,000 units (the “Units”) (including 1,125,000 Units issued upon the full exercise of the over-allotment option). Each Unit consists of one share of Class A common stock, $0.0001 par value per share (the “Public Shares”), and one-half of one redeemable warrant (the “Public Warrants”), each whole Warrant entitling the holder thereof to purchase one share of Class A common stock (the “Class A common stock”) at an exercise price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $86,250,000 on June 14, 2022.
On July 27, 2022, we announced that holders of our Units may elect to separately trade Public Shares and Public Warrants included in its Units, commencing on or about August 1, 2022.
The Public Shares and Public Placement Warrants are traded on the Nasdaq Global Market (“Nasdaq”) under the symbols “ACAC” and “ACACW,” respectively. Units not separated are traded on Nasdaq under the symbol “ACACU”.
As of the date of this report, we have not entered into any definitive agreements, for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar Business Combination with one or more businesses or entities. We currently have until March 10, 2023 to consummate our initial Business Combination. However, if we anticipate that we may not be able to consummate our initial Business Combination by March 10, 2023, we may, but are not obligated to, we may, but are not obligated to, extend the period of time to consummate a Business Combination for up to nine times by an additional one month each time and may have until December 10, 2023 to consummate our initial Business Combination.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date except the preparation and completion of the IPO and search for target candidate following the consummation of the IPO. Our only activities from inception through June 30, 2022 were organizational activities and those necessary to prepare for the IPO, described below. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the IPO. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.
For the three months ended June 30, 2022 and the period from January 7, 2022 (inception) through June 30, 2022, we had a net loss of $159,937 and $160,582, respectively, all of which consisted of formation and operating costs.
Liquidity and Capital Resources
The Company’s liquidity needs up to June 30, 2022 had been satisfied through a payment from the sponsor of $25,000 for the Founder Shares to cover certain offering costs and the loan under an unsecured promissory note from the sponsor of $316,627. We repaid the loan on June 21, 2022
On June 14, 2022, we consummated the IPO of 8,625,000 units at a price of $10.00 per unit (including 1,125,000 units issued upon the fully exercise of the over-allotment option, the “Public Units”), generating gross proceeds of $86,250,000. Simultaneously with the closing of the IPO and exercise of the over-allotment option in full by the underwriters, we consummated the sale of 5,240,000 warrants as Private Placement Warrants, at a price of $1.00 per warrant, with each warrant entitling the registered holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, generating gross proceeds of $5,240,000. Following the closings of the IPO and the sales of the Private Placement Warrants on June 14, 2022, a total of $87,975,000 (or $10.20 per share) was placed in a trust account, established for the benefit of the Company’s public stockholders and the underwriters of the IPO with Wilmington Trust, National Association acting as trustee (the “Trust Account”).
As of June 30, 2022, the Company had cash of $1,078,333 and a working capital of $1,128,035 (excluding deferred offering costs). Upon the closing of the IPO and the Private Placement on June 14, 2022, cash of $1,600,184 was held outside of the Trust Account and is available for the payment of offering costs and for working capital purposes.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
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, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a 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 the Company completes the initial Business Combination, it would repay such loaned amounts. In the event that the 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 the Trust Account would be used for such repayment. Up to $3,000,000 of such loans may be convertible into warrant, at a price of $1.00 per warrant at the option of the lender.
21
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of June 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 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
As of June 30, 2022, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The holders of the founder shares, the Private Placement Warrants, and any warrants that may be issued upon conversion of working capital loans (and any underlying securities) will be entitled to registration rights pursuant to a registration rights agreement entered into in connection with the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Critical Accounting Policies and Estimates
In preparing the unaudited condensed financial statements in conformity with U.S. GAAP, 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, actual results may differ from these estimates. We have identified the following critical accounting policies and estimates:
Investments held in Trust Account
At June 30, 2022, $87,975,000 of the assets held in the Trust Account were held in money market funds, which are invested in short term U.S. Treasury securities.
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments — Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.
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 consisting principally of underwriting, legal, accounting and other expenses that are directly related to the IPO and charged to shareholders’ equity upon the completion of the IPO.
Warrants
We account for 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”) 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, whether they 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 stock 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.
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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. We determined that upon further review of the proposed form of warrant agreement, management concluded that the warrants included in the units issued in the IPO pursuant to the warrant agreement qualify for equity accounting treatment.
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 are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s public shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of June 30, 2022, common stock subject to possible redemption are presented at redemption value of $10.20 per share as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals to zero.
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement 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 June 30, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only major tax jurisdiction.
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings 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 common stock and non-redeemable common stock 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 common stock. Any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders.
Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statement.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer (who also serves as our chief financial officer) (our “Certifying Officer”), the effectiveness of our disclosure controls and procedures as of June 30, 2022, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that, have concluded that during the period covered by this report, our disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
This Quarterly Report on Form 10-Q does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings and no material legal proceedings have been threatened by us or, to the best of our knowledge, against us.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus dated June 9, 2022 filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus dated June 9, 2022, filed with the SEC, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
On June 14, 2022, simultaneously with the closing of the IPO, the Company completed the Private Placement of 5,240,000 Private Placement Warrants to the Company’s sponsor, at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $5,240,000.
The above sales were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. No commissions were paid in connection with such sales.
Use of Proceeds
On June 14, 2022, we consummated the IPO of 8,625,000 Public Units (including 1,125,000 Public Units issued upon the partial exercise of the over-allotment option), at a price of $10.00 per unit, generating gross proceeds of $86,250,000. Simultaneously with the closing of the IPO, we consummated the sale of 5,240,000 Private Placement Warrants, to our sponsor in Private Placement generating gross proceeds of $5,240,000.
The net proceeds of $87,975,000 from the IPO and the Private Placement, were placed in the Trust Account established for the benefit of the Company’s public stockholders and the underwriters of the IPO with Wilmington Trust, National Association acting as trustee.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
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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.
| Acri Capital Acquisition Corporation | ||
| Date: August 12, 2022 | By: | /s/ “Joy” Yi Hua |
| Dongfeng Wang | ||
| Chief Executive Officer & Chief Financial Officer | ||
| (Principal Executive Officer & Principal Executive Officer and Principal Financial and Accounting Officer) | ||
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