References in this report (this "Report") to "we," "us" or the "Company" refer
to Redwoods Acquisition Corp. References to our "management" or our "management
team" refer to our officers and directors. 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 Report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
8
Overview
We are a blank check company incorporated in Delaware on March 16, 2021. We were
formed for the purpose of entering into a merger, share exchange, asset
acquisition, stock purchase, recapitalization, reorganization or other similar
business combination with one or more target businesses, which we refer to
herein as our "initial business combination" or "Business Combination." Our
efforts to identify a prospective target business are not limited to any
particular industry or geographic region, although we intend to focus on the
carbon neutral and energy storage industries. We intend to utilize cash derived
from the proceeds of our initial public offering ("IPO" as defined below) and
the private placement of private units (as defined below), our securities, debt
or a combination of cash, securities and debt, in effecting our initial business
combination.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities through December 31, 2022 were organizational
activities and those necessary to prepare for our IPO, which is described below,
and subsequent to the IPO, identifying a target company for an initial business
combination. We do not expect to generate any operating revenues until after the
completion of our initial business combination. We generate non-operating income
in the form of interest income on cash and cash equivalents held in the Trust
Account, which is described below. There has been no significant change in our
financial or trading position and no material adverse change has occurred since
the date of our audited financial statements. We incur expenses as a result of
being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses in connection with searching
for, and completing, an initial business combination.
For the year ended December 31, 2022, we had net income of $1,233,352 which
consisted of interest earned on the investments held in the Trust Account of
$1,656,478and change in fair value of warrant liabilities of $555,917, offset by
general and administrative expenses of $533,992, franchise tax of $123,026, and
income tax expense of $322,025. For the period from March 16, 2021 (inception)
through December 31, 2021, we had net loss of $3,559 which consisted of
formation costs.
Liquidity, Capital Resources and Going Concern
On April 4, 2022, we completed our initial public offering ("IPO") of 10,000,000
units (the "Public Units"), at $10.00 per Public Unit, generating gross proceeds
of $100,000,000. Each Public Unit consisted of one share of common stock, par
value $0.0001, one redeemable warrant and one right to receive one-tenth (1/10)
of a share of common stock upon the consummation of an initial business
combination. Simultaneously with the closing of the IPO, we completed the sale
of 477,500 units (the "Private Units") in a private placement, at a price of
$10.00 per Private Unit, generating gross proceeds of $4,775,000. The Private
Units are identical to the Public Units sold in the IPO, except that the private
warrants will be non-redeemable and may be exercised on a cashless basis, in
each case so long as they continue to be held by their initial purchasers or
their permitted transferees.
We granted the underwriters in the IPO a 45-day option to purchase up to
1,500,000 additional Public Units to cover over-allotments, if any. On April 7,
2022, the underwriters exercised the over-allotment option in full and purchased
an additional 1,500,000 Public Units (the "Over-Allotment Units"), at a price of
$10.00 per unit, generating gross proceeds of $15,000,000. Simultaneously with
the closing of the exercise of the over-allotment option, we consummated the
sale of 52,500 Private Units (the "Over-Allotment Private Units") in a private
placement, at a purchase price of $10.00 per Private Unit, generating gross
proceeds of $525,000.
Simultaneously with the closing of the IPO, we issued to Chardan Capital
Markets, LLC, the representative of the underwriters, for an aggregate of
$100.00, an option (the "UPO") to purchase up to 345,000 units. The UPO is
exercisable at any time, in whole or in part, commencing on the later of the
consummation of the initial business combination and six months from the date of
the prospectus for the IPO and expiring on the fifth anniversary of the date of
the prospectus, at a price of $11.50 per unit.
9
Following the IPO and the private placement (including the Over-Allotment Units
and the Over-Allotment Private Units), a total of $116,150,000 was placed in a
trust account located in the United States established for the benefit of the
Company's public stockholders (the "Trust Account"). We incurred $8,365,339 of
transaction costs, consisting of $2,875,000 of underwriting fees, $4,312,500 of
deferred underwriting fees (payable only upon completion of an initial business
combination) and $1,177,839 of other offering costs.
As of December 31, 2022, we had marketable securities held in the Trust Account
of $117,806,478 consisting of securities held in a treasury trust fund that
invests in U.S. "government securities," within the meaning set forth in Section
2(a)(16) of the Investment Company Act, with a maturity of 185 days or less.
Interest income on the balance in the Trust Account may be used by us to pay
taxes. For the year ended December 31, 2022, we did not withdraw any interest
earned on the Trust Account to pay our taxes. We intend to use substantially all
of the funds held in the Trust Account, to acquire a target business and to pay
our expenses relating thereto. To the extent that our capital stock is used in
whole or in part as consideration to effect a Business Combination, the
remaining funds held in the Trust Account will be used as working capital to
finance the operations of the target business. Such working capital funds could
be used in a variety of ways including continuing or expanding the target
business' operations, for strategic acquisitions and for marketing, research and
development of existing or new products. Such funds could also be used to repay
any operating expenses or finders' fees which we had incurred prior to the
completion of our Business Combination if the funds available to us outside of
the Trust Account were insufficient to cover such expenses.
As of December 31, 2022, the Company had cash of $340,962 and working capital of
$299,788 (excluding income tax and franchise tax payable). On March 22 and March
30, 2023, the Sponsor provided a loan of up to $150,000 and $360,000,
respectively, to be used, in part, for transaction costs related to the Business
Combination. Until consummation of the Business Combination, we intend to use
the funds held outside the Trust Account for identifying and evaluating
prospective acquisition candidates, performing business due diligence on
prospective target businesses, traveling to and from the offices, plants or
similar locations of prospective target businesses, reviewing corporate
documents and material agreements of prospective target businesses, selecting
the target business to acquire and structuring, negotiating and consummating the
Business Combination. 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 Business
Combination. In this event, our officers, directors or their affiliates may, but
are not obligated to, loan us funds as may be required. If we consummate an
initial Business Combination, we would repay such loaned amounts out of the
proceeds of the Trust Account released to us upon consummation of the Business
Combination. In the event that a Business Combination does not close, we may use
a portion of the working capital held outside the Trust Account to repay such
loaned amounts, but no proceeds from our Trust Account would be used for such
repayment. The terms of such loans by our initial shareholders, officers and
directors, if any, have not been determined and no written agreements exist with
respect to such loans.
The Company has incurred and 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. If the Company is unable to complete the Business Combination
because it does not have sufficient funds available, the Company will be forced
to cease operations and liquidate the Trust Account. In addition, following the
Business Combination, if cash on hand is insufficient, the Company may need to
obtain additional financing in order to meet its obligations. In connection with
the Company's assessment of going concern considerations in accordance with
Financial Accounting Standard Board's Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," the Company has until April 4, 2023 (or October 4, 2023, if
the Company extends the time to complete a Business Combination) to complete a
Business Combination. It is uncertain that the Company will be able to
consummate a Business Combination by this time. If a Business Combination is not
consummated by such date and an extension has not been requested by the Sponsor
and approved by the Company's stockholders, there will be a mandatory
liquidation and subsequent dissolution of the Company. Management has determined
that the 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.
10
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
Registration Rights
The holders of our insider shares, as well as the holders of the private units,
the securities underlying the unit purchase option and any securities our
insiders, officers, directors or their affiliates may be issued in payment of
working capital loans made to us (and any shares of common stock issuable upon
the exercise of the underlying private warrants and any shares of common stock
issuable upon conversion of the underlying the private rights), will be entitled
to registration rights pursuant to registration rights agreement. 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
we 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 we consummate
our initial business combination. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to our consummation of our initial business combination. We will bear
the expenses incurred in connection with the filing of any such registration
statements.
Administrative Services Agreement
We have entered into an administrative services agreement pursuant to which we
will pay the Sponsor a total of $10,000 per month (subject to deferral as
described herein) for office space, utilities, secretarial and administrative
support services. Upon completion of our initial business combination or our
liquidation, we will cease paying these monthly fees.
Underwriting Agreement
Pursuant to an underwriting agreement in connection with the IPO, the
underwriters were paid a cash underwriting discount of $0.25 per unit, or
$2,875,000 in the aggregate, upon the closing of the IPO and full exercise of
the over-allotment option. In addition, $0.375 per unit, or $4,312,500 in the
aggregate, will be payable to the underwriters for deferred underwriting
commissions. The deferred commissions will become payable to the underwriters
from the amounts held in the trust account solely in the event that we complete
an initial business combination, subject to the terms of the underwriting
agreement.
Right of First Refusal
Subject to certain conditions, we granted Chardan, for a period of 18 months
after the date of the consummation of our initial business combination, a right
of first refusal to act as a book-running manager or placement agent, with at
least 30% of the economics, for any and all future public and private equity,
equity linked and debt offerings by us or any of our successors or subsidiaries.
11
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
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.
Fair Value of Financial Instruments
FASB ASC Topic 820 "Fair Value Measurements and Disclosures" defines fair value,
the methods used to measure fair value and the expanded disclosures about fair
value measurements. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the
valuation techniques consistent with the market approach, income approach and
cost approach shall be used to measure fair value. FASB ASC Topic 820
establishes a fair value hierarchy for inputs, which represent the assumptions
used by the buyer and seller in pricing the asset or liability. These inputs are
further defined as observable and unobservable inputs. Observable inputs are
those that buyer and seller would use in pricing the asset or liability based on
market data obtained from sources independent of the Company. Unobservable
inputs reflect the Company's assumptions about the inputs that the buyer and
seller would use in pricing the asset or liability developed based on the best
information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as
follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access. Valuation adjustments and block discounts are not being applied.
Since valuations are based on quoted prices that are readily and
regularly available in an active market, valuation of these securities
does not entail a significant degree of judgment.
Level 2 - Valuations based on (i) quoted prices in active markets for similar
assets and liabilities, (ii) quoted prices in markets that are not
active for identical or similar assets, (iii) inputs other than quoted
prices for the assets or liabilities, or (iv) inputs that are derived
principally from or corroborated by market through correlation or other
means.
Level 3 - Valuations based on inputs that are unobservable and significant to the
overall fair value measurement.
The fair value of the Company's certain assets and liabilities, which qualify as
financial instruments under ASC Topic 820, "Fair Value Measurements and
Disclosures," approximates the carrying amounts represented in the 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 to financial statements 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.
12
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
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480,
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and measured at fair value.
Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets. We
recognize 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.
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, we 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. We then allocated
the undistributed income (loss) ratably based on the weighted average number of
shares outstanding between the redeemable and non-redeemable shares. Any
re-measurement of the accretion to redemption value of the common shares subject
to possible redemption was considered to be dividends paid to the public
shareholders.
Offering Costs
Offering costs were consisting principally of underwriting, legal, accounting
and other expenses incurred through the balance sheet date that are related to
the IPO and were charged to stockholders' equity upon the completion of the IPO.
The Company allocates offering costs between public shares, public warrants and
public rights based on the relative fair values of public shares, public
warrants and public rights.
Risks and Uncertainties
Our management continues 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 the financial statements contained in this Report. 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 an initial business
combination, or the operations of a target business with which the Company
ultimately consummates an initial 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
an initial business combination are not yet determinable. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
13
Securities Held in Trust Account
The funds in the trust account have, since the closing of our IPO, been held
only in U.S. government treasury obligations with a maturity of 185 days or less
or in money market funds investing solely in U.S. government treasury
obligations and meeting certain conditions under Rule 2a-7 under the Investment
Company Act. However, to mitigate the risk of us being deemed to be an
unregistered investment company (including under the subjective test of Section
3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under
the Investment Company Act, we intend to liquidate the U.S. government treasury
obligations or money market funds held in the trust account on or prior to March
30, 2024, and thereafter to hold all funds in the trust account in cash until
the earlier of consummation of our initial business combination or liquidation
of the Company. Following such liquidation, we would likely receive minimal
interest, if any, on the funds held in the trust account. However, interest
previously earned on the funds held in the trust account still may be released
to us to pay our taxes, if any, and certain other expenses as permitted. As a
result, any decision to liquidate the securities held in the trust account and
thereafter to hold all funds in the trust account in cash would reduce the
dollar amount our public stockholders would receive upon any redemption or
liquidation of the Company.
In addition, even prior to the 24-month anniversary (March 30, 2024) of the
effective date of the IPO registration statement, we may be deemed to be an
investment company. The longer that the funds in the trust account are held in
short-term U.S. government treasury obligations or in money market funds
invested exclusively in such securities, even prior to the 24-month anniversary,
the greater the risk that we may be considered an unregistered investment
company, in which case we may be required to liquidate the Company. Accordingly,
we may determine, in our discretion, to liquidate the securities held in the
trust account at any time, even prior to the 24-month anniversary, and instead
hold all funds in the trust account in cash, which would further reduce the
dollar amount our public stockholders would receive upon any redemption or
liquidation of the Company.
Inflation Reduction Act of 2022
On August 16, 2022, President Biden signed into law the Inflation Reduction Act
of 2022, which, among other things, imposes a 1% excise tax on any domestic
corporation that repurchases its stock after December 31, 2022 (the "Excise
Tax"). The Excise Tax is imposed on the fair market value of the repurchased
stock, with certain exceptions. Because we are a Delaware corporation and our
securities trade on Nasdaq, we are a "covered corporation" within the meaning of
the Inflation Reduction Act. While not free from doubt, absent any further
guidance from the U.S. Department of the Treasury (the "Treasury"), who has been
given authority to provide regulations and other guidance to carry out and
prevent the abuse or avoidance of the Excise Tax, the Excise Tax may apply to
any redemptions of our common stock after December 31, 2022, including
redemptions in connection with an initial business combination, extension vote
or otherwise, unless an exemption is available. The Excise Tax would be payable
by the Company and not by the redeeming holders. Generally, issuances of
securities by us in connection with our initial business combination transaction
(including any PIPE transaction at the time of our initial business
combination), as well as any other issuances of securities not in connection
with our initial business combination, would be expected to reduce the amount of
the Excise Tax in connection with redemptions occurring in the same calendar
year. 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 vote 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.
Consequently, the Excise Tax may make a transaction with us less appealing to
potential business combination targets. Finally, based on recently issued
interim guidance from the Internal Revenue Service and Treasury in Notice
2023-2, subject to certain exceptions, the Excise Tax should not apply in the
event of our liquidation.
U.S. Foreign Investment Regulations
Our sponsor, Redwoods Capital LLC, is controlled by Min Gan, who is a permanent
resident of and based in mainland China. We are therefore considered a "foreign
person" under the regulations administered by the Committee on Foreign
Investment in the United States (CFIUS) and will continue to be considered as
such in the future for so long as our sponsor has the ability to exercise
control over us for purposes of CFIUS's regulations. As such, an initial
business combination with a U.S. business may be subject to CFIUS review, the
scope of which was expanded by the Foreign Investment Risk Review Modernization
Act of 2018 ("FIRRMA"), to include certain non-passive, non-controlling
investments in sensitive U.S. businesses and certain acquisitions of real estate
even with no underlying U.S. business. FIRRMA, and subsequent implementing
regulations that are now in force, also subjects certain categories of
investments to mandatory filings. If our potential initial business combination
with a U.S. business falls within CFIUS's jurisdiction, we may determine that we
are required to make a mandatory filing or that we will submit a voluntary
notice to CFIUS, or to proceed with the initial business combination without
notifying CFIUS and risk CFIUS intervention, before or after closing the initial
business combination. CFIUS may decide to block or delay our initial business
combination, impose conditions to mitigate national security concerns with
respect to such initial business combination or order us to divest all or a
portion of a U.S. business of the combined company without first obtaining CFIUS
clearance, which may limit the attractiveness of or prevent us from pursuing
certain initial business combination opportunities that we believe would
otherwise be beneficial to us and our shareholders. As a result, the pool of
potential targets with which we could complete an initial business combination
may be limited and we may be adversely affected in terms of competing with other
special purpose acquisition companies which do not have similar foreign
ownership issues.
14
Moreover, the process of government review, whether by the CFIUS or otherwise,
could be lengthy and we have limited time to complete our initial business
combination. If we cannot complete our initial business combination by July 4,
2023 (or December 4, 2023, if we extend the time to complete a business
combination) because the review process drags on beyond such timeframe or
because our initial business combination is ultimately prohibited by CFIUS or
another U.S. government entity, we may be required to liquidate. If we
liquidate, our public shareholders may only receive $10.10 per share, and our
warrants and rights will expire worthless. This will also cause you to lose the
investment opportunity in a target company and the chance of realizing future
gains on your investment through any price appreciation in the combined company.
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.
Off-Balance Sheet Arrangements
As of December 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Emerging Growth Company Status
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected to delay the adoption of
new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
As an "emerging growth company," we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies, (iii) comply with any
requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis), and (iv) disclose comparisons of the CEO's
compensation to median employee compensation. These exemptions will apply for a
period of five (5) years following the completion of our Initial Public Offering
or until we otherwise no longer qualify as an "emerging growth company."
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