Industrial Human Capital, Inc. - Quarter Report: 2022 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report

Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2022

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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.

Yes ☒  No ☐

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).

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Yes ☒  No ☐

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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.

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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. ☐

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☒  No ☐

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Securities registered pursuant to Section 12(b) of the Act:

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As of August 12, 2022, there were 14,375,000 shares of the Company’s common stock.

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INDUSTRIAL HUMAN CAPITAL, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INDUSTRIAL HUMAN CAPITAL, INC.

CONDENSED BALANCE SHEETS

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The accompanying notes are an integral part of these unaudited condensed financial statements.

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INDUSTRIAL HUMAN CAPITAL, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

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The accompanying notes are an integral part of these unaudited condensed financial statements.

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INDUSTRIAL HUMAN CAPITAL, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited)

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FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022

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FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND FOR THE PERIOD FROM FEBRUARY 16, 2021 (INCEPTION) THROUGH JUNE 30, 2021

(Unaudited)

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The accompanying notes are an integral part of these unaudited condensed financial statements.

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INDUSTRIAL HUMAN CAPITAL, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

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The accompanying notes are an integral part of these unaudited condensed financial statements.

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INDUSTRIAL HUMAN CAPITAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

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Note 1 — Organization and Business Operation

Industrial Human Capital, Inc. (the “Company”) is a blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Since completing its Public Offering (as defined below), the Company has engaged in confidential discussions with various potential Business Combination partners. Nevertheless, as of the date of this Form 10-Q, the Company has not entered into a binding agreement with any specific Business Combination target.

As of June 30, 2022, the Company had not commenced any operations. All activity for the period from February 16, 2021 (inception) through June 30, 2022 relates to the Company’s formation and the Public Offering (as defined below). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash from the proceeds derived from the Public Offering (as defined below). The Company has selected December 31 as its fiscal year end.

The Company’s sponsor is ShiftPixy Investments, Inc. (the “Sponsor”), a wholly owned subsidiary of ShiftPixy, Inc.

The registration statement for the Company’s initial public offering was declared effective on October 19, 2021 (the “Effective Date”). On October 22, 2021, the Company consummated its initial public offering of 11,500,000 units (the “Units” and, with respect to the common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit (which included the full exercise of the underwriters’ over-allotment option), which is discussed in Note 3 (the “Public Offering”) and the sale of 4,639,102 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor that closed simultaneously with the Public Offering.

Transaction costs amounted to $11,381,640 consisting of $1,150,000 of underwriting commissions, $9,484,857 of fair value of the representative shares and $746,783 of other offering costs.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering and sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the net balance in the Trust Account (as defined below) (excluding the taxes payable on the income earned on the Trust Account) at the time of the signing an agreement to enter into a Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to successfully effect a Business Combination.

Following the closing of the Public Offering on October 22, 2021, $116,725,000 ($10.15 per Unit) from the net proceeds sold in the Public Offering, including the proceeds of the sale of the Private Placement Warrants, was deposited in a Trust Account (“Trust Account”) and will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to pay the Company’s tax obligations and up to $100,000 of interest that may be used for the dissolution expenses, the proceeds from the Public Offering and the sale of the Placement Warrants held in the Trust Account will not be released from the Trust Account until the earliest to occur of: (1) the completion of the initial Business Combination, (2) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend the amended and restated certificate of incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or certain amendments to the Company’s charter prior thereto or to redeem 100% of the Public Shares if the Company does not complete its initial Business Combination within 12 months from the closing of the Public Offering or (ii) with respect to any other provision relating to stockholder’s rights or pre-business combination activity, and (3) the redemption of the Public Shares if the Company is unable to complete its initial

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Business Combination within 12 months from the closing of the Public Offering, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the public stockholders.

The Company will provide its public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination either: (1) in connection with a stockholder meeting called to approve the initial Business Combination; or (2) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek stockholder approval under applicable law or stock exchange listing requirements. The Company will provide its public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then outstanding Public Shares, subject to limitations. The amount in the trust account is initially anticipated to be $10.15 per public share, however, there is no guarantee that investors will receive $10.15 per share upon redemption.

The shares of common stock subject to redemption are recorded at a redemption value and classified as temporary equity upon the completion of the Public Offering, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.

The Company has only 12 months from the closing of the Public Offering (the “Combination Period”) to complete the initial Business Combination. If the Company is unable to complete the initial Business Combination within the Combination Period (and the Company’s stockholders have not approved an amendment to its charter extending this time 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 pay the Company’s taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and its board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. 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 its initial Business Combination within the Combination Period.

The Company’s initial stockholders, officers and directors entered into a letter agreement with the Company, pursuant to which they have agreed to: (1) waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with the completion of the initial Business Combination, (2) waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with its initial Business Combination or certain amendments to the Company charter prior thereto or to redeem 100% of its Public Shares if the Company does not complete its initial Business Combination within the Combination Period or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (3) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete its initial Business Combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete its initial Business Combination within the Combination Period.

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 a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.15 per public share and (2) the actual amount per public share held in the Trust Account as of the date of the liquidation

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of the Trust Account, if less than $10.15 per public share due to reductions in the value of the Trust Assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Public Offering against certain liabilities, including liabilities under the Securities Act. 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 its indemnity obligations. Therefore, the Company cannot assure that the 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.

Liquidity and Capital Resources

As of June 30, 2022, the Company had $2,813 in cash and a working capital deficit of $2,205,849.

The Company’s liquidity needs up to June 30, 2022 have been satisfied through a payment from the Company’s Sponsor of $25,000 for the Founder Shares, the loan under an unsecured promissory note from the Sponsor of up to $500,000, the net proceeds from the consummation of the Public Offering, the Private Placement Warrants held outside of the Trust Account located in the United States at J.P. Morgan Chase Bank, N.A. and a working capital loan from the Company’s Sponsor as disclosed in Note 5 (“Related Party Transactions”). As of June 30, 2022 and December 31, 2021, there was $0 and $150,000 of unsecured promissory notes outstanding, respectively. For the six months ended June 30, 2022 and for the period from February 16, 2021 (inception) through June 30, 2021, we received $0 and $75,000 of proceeds from issuance of promissory note, respectively. As of June 30, 2022, the promissory note has been paid in full. Furthermore, as of June 30, 2022 and December 31, 2021, the Company had $195,000 and $0 loans outstanding under the working capital loan, respectively. For the six months ended June 30, 2022 and for the period from February 16, 2021 (inception) through June 30, 2021, we received $195,000 and $0 of proceeds from issuance of working capital loan, respectively.

As of June 30, 2022 and December 31, 2021, the Company had cash and marketable securities in the Trust Account of approximately $116.8 million. The Company intends to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions) to complete its initial Business Combination. The Company may withdraw interest to pay taxes. To the extent that the Company’s capital stock or debt is used, in whole or in part, as consideration to complete its initial 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.

Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. The Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s Sponsor, officers and directors may, but are not obligated to, loan the Company funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.

Going Concern

We cannot provide any assurance that new financing along the lines detailed above will be available to us on commercially acceptable terms, if at all. Further, we have until October 22, 2022 to consummate a Business Combination, but we cannot provide assurance that we will be able to consummate a Business Combination by that date. If a Business Combination is not consummated by the required date, there will be a mandatory liquidation and subsequent dissolution. In connection with our assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”, management has determined that the capital and liquidity shortage and the uncertainty surrounding obtaining new financing, along with the possibility of mandatory liquidation and subsequent dissolution should we be unable to complete a business combination, raise substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets and liabilities should we be required to liquidate after October 22, 2022, nor do these unaudited condensed financial statements include any adjustments relating

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to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.

Risks and Uncertainties

Management is currently evaluating the impact of the COVID-19 pandemic and Russia-Ukraine war and has concluded that while it is reasonably possible that the virus and war 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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Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on the Company’s Form 10-K/A for Fiscal 2021 filed with the SEC on May 16, 2022, which contain the audited financial statements and notes thereto. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.

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 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 non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.

Use of Estimates

The preparation of these 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 unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

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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 has $2,813 and $495,251 in cash as of June 30, 2022 and December 31, 2021, respectively. The Company has no cash equivalents as of June 30, 2022 and December 31, 2021.

Cash and Marketable Securities Held in Trust Account

At June 30, 2022 and December 31, 2021, the assets held in the Trust Account were held in money market funds and in U.S. Treasury Bills with a maturity of 185 days, respectively. During the three and six months ended June 30, 2022, the Company did not withdraw any of the interest income from the Trust Account to pay its tax obligations.

The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB 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 and adjusted for the amortization or accretion of premiums or discounts.

A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates.

Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “interest income” line item in the unaudited condensed statements of operations. Interest income is recognized when earned.

The carrying value, excluding gross unrealized holding loss and fair value of held to maturity securities on June 30, 2022 and December 31, 2021 are as follows:

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Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Deposit Insurance Company coverage of $250,000. The Company has not experienced losses in these accounts.

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Offering Costs Associated with Initial Public Offering

The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A—”Expenses of Offering”. Offering costs consist of legal, accounting, underwriting and other costs incurred through the balance sheet date that are related to the Public Offering. Offering costs amounted to $11,381,640 and were charged to temporary equity upon the completion of the Public Offering.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to its short-term nature.

Fair Value Measurement

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s financial instruments are classified as either Level 1, Level 2 or Level 3. These tiers include:

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s condensed balance sheets, primarily due to their short-term nature.

Common Stock Subject to Possible Redemption

The Company accounts for its shares of common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares 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, shares of common stock are classified as stockholders’ equity (deficit). The Company’s shares of common stock sold in the Public Offering feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2022 and December 31, 2021, 11,500,000 shares of common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity (deficit) section of the Company’s condensed balance sheets.

Warrants

The Company must 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 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

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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.

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 additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for the warrants as equity-classified.

Net Loss Per Common Stock

Net loss per share of common stock is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted loss per share does not consider the effect of the 16,139,102 warrants issued in connection with the Public Offering and private placement since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net loss per share:

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Income Taxes

The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

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Our effective tax rate was 0.00% for all reporting periods included in this report. The effective tax rate differs from the statutory tax rate of 21% for the three months and six months ended June 30, 2022 and 2021, due the change in valuation allowance on the deferred tax assets.

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 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Recent Accounting Standards

Management does not believe that there are any recently issued, but not effective, accounting standards, which, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.

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Note 3 — Initial Public Offering

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On October 22, 2021, the Company consummated its Public Offering of 11,500,000 Units, which included the full exercise of the underwriters’ over-allotment option, at a price of $10.00 per Unit, generating gross proceeds of $115,000,000. Each Unit consists of one share of Common Stock, par value $0.0001 per share and one redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment. Each warrant will become exercisable on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the Public Offering and will expire five years after the completion of the initial Business Combination, or earlier upon redemption or liquidation.

All of the 11,500,000 shares of common stock sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s certificate of incorporation. In accordance with SEC guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.

The shares of common stock are accounted for in accordance with 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 recognizes changes in redemption value immediately as they occur. Immediately upon the closing of the Public Offering, the Company recognized the remeasurement from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital and accumulated deficit.

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As of June 30, 2022 and December 31, 2021, the common stock reflected on the condensed balance sheets is reconciled in the following table:

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Note 4 — Private Placement

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Simultaneously with the closing of the Public Offering and the sale of the Units, the Sponsor purchased an aggregate of 4,639,102 Private Placement Warrants at a price of $1.00 per Private Placement Warrants, for an aggregate purchase price of $4,639,102. Each Private Placement Warrant entitles the holder thereof to purchase one share of the Company’s common stock at a price of $11.50 per share, subject to adjustment, and will expire worthless if the Company does not complete the initial Business Combination.

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Private Placement Warrants

The Private Placement Warrants are identical to the warrants sold in the Public Offering except that the Private Placement Warrants will not be transferable, assignable or saleable except as defined in the warrant agreement.

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Note 5 - Related Party Transactions

Founder Shares

On February 18, 2021, the Sponsor purchased 4,312,500 Founder Shares (the “Founder Shares”) for an aggregate purchase price of $25,000, or approximately $0.006 per share. On March 22, 2021, the Company issued a dividend of 0.2 Founder Shares for every issued and outstanding Founder Share resulting in the Sponsor holding 5,187,500 Founder Shares. On April 9, 2021, the Company issued the representative an aggregate of 2,000,000 Founder Shares (the “Representative Founder Shares”), of which 260,869 would be forfeited if the over-allotment option was not exercised, for an aggregate purchase price of $9,639. On August 2, 2021, the Sponsor and the representative forfeited for no consideration 2,075,000 Founder Shares and 800,000 Representative Founder Shares, respectively, which were cancelled, resulting in a decrease in the total number of Founder Shares and Representative Founder Shares outstanding from 7,187,500 shares to 4,312,500 shares, comprised of 3,112,500 Founder Shares and 1,200,000 Representative Founder Shares (see Note 6). On October 12, 2021, the Sponsor and the representative forfeited for no consideration 987,500 Founder Shares and 450,000 Representative Founder Shares, respectively, resulting in a decrease in the total number of Founder Shares outstanding from 4,312,500 shares to 2,875,000 shares, with the Sponsor holding 2,125,000 Founder Shares and the Representative holding 750,000 Representative Founder Shares. Prior to the closing of the Public Offering, our Sponsor transferred an aggregate of 15,000 Founder Shares to our independent directors, which resulted in the Sponsor holding 2,110,000 Founder Shares. All shares and associated amounts have been retroactively restated to reflect the forfeiture.

The 750,000 representative Founder Shares have been deemed compensation by FINRA. The excess of the fair value over the purchase price of $9,639, is deemed to be stock compensation, which is considered an offering cost. A value of $4.75 per share was estimated to be the fair value based in comparison to similar transactions. Accordingly, a value of $9,484,857 is considered an element of offering cost of the Public Offering.

The Company’s Founder Shares are subject to transfer restrictions pursuant to lock-up provisions in a letter agreement with the Company entered into by the initial stockholders, and officers and directors. Those lock-up provisions provide that such securities are not transferable or salable until the earlier to occur of: (1) one year after the completion of the initial Business Combination, and (2) subsequent to the initial business combination if 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 Public Shares for cash, securities or other property. Notwithstanding the foregoing, the Sponsor has the right to transfer its ownership in the Founder Shares at any time, and to

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any transferee, to the extent that the sponsor determines, in good faith, that such transfer is necessary to ensure that it and/or any of its parents, subsidiaries or affiliates are in compliance with the Investment Company Act of 1940. Further, and notwithstanding the foregoing, if subsequent to the initial Business Combination the reported last sale price of the common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, all of the Founder Shares will be released from the lock-up. Any permitted transferees will be subject to the same restrictions and other agreements of the initial stockholders with respect to any Founder Shares.

As noted above, prior to the closing of the Public Offering, our Sponsor transferred 15,000 Founder Shares to our independent directors in recognition of and as compensation for their future services to the Company. The transfer of Founder Shares to these directors is within the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The fair value of the 15,000 shares granted to our independent directors was $95,529 or $6.37 per share. Compensation expense related to the Founder Shares is recognized only when the performance condition (i.e. the remediation of the lock-up provision) is probable of achievement under the applicable accounting literature. Stock-based compensation would be recognized at the date the lock-up provisions have been remediated, or are probable to be remediated, in an amount equal to the number of Founder Shares times the grant date fair value per share (unless subsequently modified) less the amount initially received for the transfer of the Founder Shares. As of June 30, 2022 and December 31, 2021, the Company has not yet entered into any definitive agreements in connection with any Business Combination and as such, the lock-up provisions have not been remediated and are not probable to be remediated. Any such agreements may be subject to certain conditions to closing, such as, for example, approval by the Company’s stockholders. As a result, the Company determined that, taking into account that there is a possibility that a Business Combination might not happen, no stock-based compensation expense should be recognized.

Promissory Note — Related Party

The Sponsor has agreed to loan the Company up to $500,000 to be used for a portion of the expenses of the Public Offering. These loans are non-interest bearing, unsecured and due at the date on which the Company consummates the Public Offering. As of December 31, 2021, the Company had $150,000 outstanding under the promissory note, which has been paid in full as of June 30, 2022. For the period from February 16, 2021 (inception) through June 30, 2021, the Company received $75,000 in proceeds from issuance of promissory note.

Working Capital Loans

In order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor, 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 (the “Working Capital Loans”). Terms of the working capital loan were finalized on August 1, 2022, as described in the Note 9 (“Subsequent Events”) below.

If the Company completes an initial Business Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account released to the Company. Otherwise, such loans would be repaid on demand of the Sponsor only out of funds held outside the Trust Account. 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 to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into Private Placement Warrants of the post Business Combination entity, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to the Sponsor. As of June 30, 2022 and December 31, 2021, the company had $195,000 and $0 loans outstanding under the working capital loan, respectively.

Administrative Service Fee

The Company entered into an administrative services agreement pursuant to which the Company will pay an affiliate of the Sponsor a total of $10,000 per month for office space, administrative and support services commencing on the date of the Public Offering. Upon completion of the Company’s Business Combination or its liquidation, the Company will cease paying these monthly fees. For the three months ended June 30, 2022 and 2021, the Company had incurred $30,000 and $0, respectively. For the six months ended June 30, 2022

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and for the period from February 16, 2021 (inception) through June 30, 2021, the Company had incurred $60,000 and $0 , respectively. These were accrued in “Due to related party” pursuant to this agreement.

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Note 6 — Commitments & Contingencies

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Registration Rights

The holders of the Founder Shares, Private Placement Warrants (including the underlying shares of common stock) and warrants (including the underlying shares of common stock) that may be issued upon conversion of Working Capital Loans, are entitled to registration rights pursuant to a registration rights agreement signed as of the effective date of the Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to common stock). The holders of the majority 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 the Company’s completion of the initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the underwriters a 45-day option to purchase up to 1,500,000 additional Units to cover any over-allotments, if any, at the Public Offering price less the underwriting discounts and commissions. The underwriters exercised the full over-allotment at the consummation of the Public Offering on October 22, 2021.

The underwriters earned an underwriting discount of one percent (1%) of the gross proceeds of the Public Offering, or $1,150,000, which was paid in cash at closing of the offering. In addition, AGP purchased 750,000 Representative Founder Shares , of which 97,826 were subject to forfeiture if the over-allotment option was not exercised, at a purchase price of $9,639. Due to the underwriters’ full exercise of their over-allotment option on October 22, 2021, these 97,826 Representative Founder Shares are no longer subject to forfeiture.

Business Combination Marketing Agreement

The Company has engaged AGP as an advisor in connection with its Business Combination to assist the Company in holding meetings with stockholders to discuss the potential business combination and the target businesses’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with its initial Business Combination, assist the Company in obtaining stockholder approval for the business combination, and assist the Company with press releases and public filings in connection with the initial Business Combination. The Company will pay AGP a cash fee for such services upon the consummation of its initial Business Combination in an amount equal to 3% of the gross proceeds of our Public Offering, exclusive of any applicable finders’ fees which might become payable. If the Business Combination is not consummated for any reason, no fee shall be due or payable to AGP.

Representative Founder Shares

The representative purchased an aggregate of 750,000 Representative Founder Shares, of which 97,826 were subject to forfeiture if the over-allotment option was not exercised, at a purchase price of $9,639. The underwriters’ over-allotment option was exercised in full on October 22, 2021 and thus no Representative Founder Shares are subject to forfeiture. The Company’s Founder Shares are subject to transfer restrictions pursuant to lock-up provisions in a letter agreement with the Company entered into by the Representative, the Sponsor, and officers and directors (see Note 5). In addition, the holders of the Representative Founder Shares have agreed (i) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete our initial business combination within 12 months from the closing of our Public Offering. The Representative Founder Shares have been deemed compensation by FINRA and are therefore subject to a lock-up until October 14, 2022, pursuant to Rule 5110(e)(1) of the FINRA Manual.

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Note 7 - Stockholder’s (Deficit) Equity

Common Stock — The Company is authorized to issue 500,000,000 shares of Common Stock with a par value of $0.0001 per share. As of June 30, 2022 and December 31, 2021, there were 2,875,000 shares of Common Stock issued or outstanding, excluding 11,500,000 shares of common stock subject to possible redemption. Prior to the Public Offering, there were 4,312,500 shares of common stock issued and outstanding, of which 562,500 shares were subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full. On August 2, 2021, the Sponsor and the representative forfeited for no consideration 2,075,000 Founder Shares and 800,000 Founder Shares, respectively, which were cancelled, resulting in a decrease in the total number of Founder Shares outstanding from 7,187,500 shares to 4,312,500 shares, with the Sponsor holding 3,112,500 Founder Shares and the Representative holding 1,200,000 Founder Shares. On October 12, 2021, the Sponsor and the Representative forfeited for no consideration 987,500 Founder Shares and 450,000 Founder Shares, respectively, resulting in a decrease in the total number of Founder Shares outstanding from 4,312,500 shares to 2,875,000 shares, with the Sponsor holding 2,125,000 Founder Shares and the Representative holding 750,000 Representative Founder Shares. Prior to the closing of the Public Offering, our Sponsor transferred an aggregate of 15,000 Founder Shares to our independent directors, which resulted in the Sponsor holding 2,110,000 Founder Shares. All shares and associated amounts have been retroactively adjusted to reflect the forfeiture described above.

Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Unless specified in our amended and restated certificate of incorporation or bylaws, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of shares of common stock that are voted is required to approve any such matter voted on by the stockholders. The Company’s board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. The holders of more than 50% of the shares that vote for the election of directors can elect all of the directors. The stockholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.

Warrants — Each warrant entitles the holder to purchase one share of the Company’s common stock at a price of $11.50 per share, subject to adjustment. In addition, if (1) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor and the representative or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (2) 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 initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (3) the volume weighted average trading price of common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummate the initial Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.

The warrants will expire at 5:00 p.m., New York City time on the warrant expiration date, which is five years after the completion of the initial Business Combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to the Company and not placed in the Trust Account.

The Company will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of common stock upon exercise of a warrant unless the common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of common stock underlying such unit.

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The Company has not registered the shares of common stock issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the shares of common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of common stock issuable upon exercise of the warrants is not effective by the 52nd business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company has failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement covering the common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company has failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, or the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.

Redemption of warrants

Once the warrants become exercisable, the Company may redeem the outstanding warrants

The “fair market value” for this purpose shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.

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Note 8 — Fair Value Measurements

The following table presents information about the Company’s assets that is measured at fair value on June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

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Note 9 — Subsequent Events

The Company has evaluated events that have occurred after the date of these condensed balance sheets though the date that the condense financial statements were issued, and has determined that, other than those listed below, no such reportable subsequent events exist through the date the financial statements were issued in accordance with FASB ASC Topic 855, “Subsequent Events.”

On July 7, 2022, Heath Hawker indicated his intention to withdraw as Director of the Company, the same to be effective July 11, 2022.

On July 12, 2022, Bennet Tchaikovsky also indicated his intention to withdraw as Director of the Company the same to be effective July 14, 2022.

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On July 12, 2022, the Directors of the Company initiated discussions regarding the approaching deadline to complete the initial business combination and the possible need to seek a vote of the Company’s stockholders to approve an amendment to the Company’s charter extending the time period in which to complete an initial business combination and to take such other actions as may be necessary in connection with such extension.

On July 15, 2022, Gabriel Rodriguez resigned as Chief Financial Officer of the Company, the same to be effective July 29, 2022.

On July 25, 2022, the Board of Directors of Industrial Human Capital, Inc. (“AXH” or the “Company”), appointed Manny Rivera, 47, to the position of CFO and Treasurer of the Company, effective immediately.

The above resignations were not in connection with any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.

On August 2, 2022, the Company and the Sponsor formalized terms of the Working Capital Loan Agreement, as describe in the Note 5 (“Related Party Transactions”) above.

On August 3, 2022, the Company received an email communication from the NYSE regarding the fact that the price of the Company’s warrants (NYSE: AXH WS) had fallen to $0.02 as of 8/3/2022.  Referring to Section 802.01D of the NYSE Listed Company Manual, the NYSE noted that, in the context of a warrant, the NYSE considers the price of less than $0.01 to be abnormally low.  The NYSE further noted that if a security trades or closes at a price that it considers to be abnormally low, the NYSE could take action to immediately suspend trading (i.e., the warrants would not trade on the NYSE) and to commence delisting procedures for such security.

On August 11, 2022, the Company received a notice from the NYSE regarding the Company’s noncompliance with (a) the Section 303A.01 requirement regarding the need for a majority of independent directors on the board, and (b) the Section 303A.07(a) requirement regarding having at least 3 members on the audit committee.  The NYSE noted that (i) if the Company is not able to cure this deficiency by August 18, 2022, it will be deemed noncompliant, (ii) the NYSE is required to disseminate a below compliance (“BC”) indicator over the consolidated tape when an issuer is noncompliant with NYSE quantitative and/or corporate governance listing standards, enabling data vendors to append this indicator to the ticker symbol of such an issuer, (iii) the NYSE also publishes a list of noncompliant issuers and displays the BC indicator on its website, (d) if the Company is not able to cure its corporate governance noncompliance by August 18, 2022, a BC indicator will be disseminated on August 22, 2022, (e) the Company will also be added to the list of noncompliant issuers on the NYSE website and the BC indicator will be displayed on the profile, data and news pages of each listed security impacted by the noncompliance, and (f) the BC indicator and all references on the NYSE website will be removed when the Company becomes compliant with all NYSE quantitative and corporate governance listing standards.  The Company communicated its response indicating that it is taking action to recruit new board members.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References to the “Company,” “our,” “us” or “we” refer to Industrial Human Capital, Inc. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report, as well as the information contained in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 (“Fiscal 2021”), filed with the SEC on May 16, 2022.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings, including those found in Item 1A of our Annual Report on Form 10-K/A for Fiscal 2021, filed with the SEC on May, 2022.

Overview

We are a blank check company incorporated as a Delaware corporation on February 16, 2021. We were incorporated for the purpose of effecting a Business Combination.

Our Sponsor is ShiftPixy Investments, Inc., a wholly owned subsidiary of ShiftPixy, Inc.

The registration statement for our IPO was declared effective on October 19, 2021 (the “Effective Date”). On October 22, 2021, we consummated our IPO of 11,500,000 units (the “Units” and, with respect to the common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit (which included the full exercise of the underwriters’ over-allotment option), which is discussed in Note 3 (the “IPO”) and the sale of 4,639,102 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor that closed simultaneously with the IPO.

Transaction costs amounted to $11,381,640 consisting of costs of $1,896,783 including $1,150,000 of underwriting commissions, and $746,783 of other offering costs and $9,484,857 of non-cash costs representing excess fair value attributable to the representative shares transferred in April, 2021 to the underwriter of our IPO, AGP.

Following the closing of our IPO on October 22, 2021, $116,725,000 ($10.15 per Unit) from the net proceeds sold in the IPO, including the proceeds of the sale of the Private Placement Warrants, was deposited in a Trust Account (“Trust Account”) that has been invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to pay our tax obligations and up to $100,000 of interest that may be used for the dissolution expenses, the proceeds from the IPO and the sale of the Placement Warrants held in the Trust Account will not be released from the Trust Account until the earliest to occur of: (1) the completion of the initial Business Combination, (2) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend the amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with the initial Business Combination or certain amendments to our charter prior thereto or to redeem 100% of the Public Shares if we do not complete our initial Business Combination within 12 months from the closing of the IPO or (ii) with respect to any other provision relating to stockholder’s rights or pre-Business Combination activity, and (3) the redemption of the Public Shares if we are unable to complete our initial Business Combination within 12 months from the closing of the IPO, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of the public stockholders.

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If we have not completed a Business Combination within 12 months from the closing of our IPO, or October 22, 2022, we 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 us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 12-month time period.

Results of Operations

All of our activity from February 16, 2021 (inception) through October 19, 2021, was in preparation for an IPO, and since our IPO, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination.

For the three months ended June 30 2022, we had a net loss of $1,147,240, which consisted of formation costs of $1,221,344, offset by interest income and unrealized gains on cash and marketable securities held in Trust Account of $74,104.

For the six months ended June 30 2022, we had a net loss of $2,485,970, which consisted of formation costs of $2,564,136, offset by interest income and unrealized gains on cash and marketable securities held in Trust Account of $78,166.

For the three months ended June 30, 2021, we had a net loss of $5,849, which consisted solely of formation costs.

For the period from February 16, 2021 (inception) through June 30, 2021, we had a net loss of $6,214, which consisted solely of formation costs.

Liquidity and Capital Resources

As of June 30, 2022, we had $2,813 in cash and a working capital deficit of $2,205,849.

Our liquidity needs up to June 30, 2022 have been satisfied through a payment from our Sponsor of $25,000 for the Founder Shares, the loan under an unsecured promissory note from our Sponsor of up to $500,000, and the net proceeds from the consummation of the IPO, the Private Placement Warrants held outside of the Trust Account located in the United States at J.P. Morgan Chase Bank, N.A. and a working capital loan from our Sponsor as disclosed in Note 5 (“Related Party Transactions”). As of June 30, 2022 and December 31, 2021, there was $0 and $150,000 of unsecured promissory notes outstanding, respectively. For the three and six months ended June 30, 2022 and for the period from February 16, 2021 (inception) through June 30, 2021, we received $0 and $75,000 of proceeds from issuance of promissory note, respectively. As of June 30, 2022, the promissory note has been paid in full. Furthermore, as of June 30, 2022 and December 31, 2021, we had $195,000 and $0 loans outstanding under the working capital loan, respectively. For the three and six months ended June 30, 2022 and for the period from February 16, 2021 (inception) through June 30, 2021, we received $195,000 and $0 of proceeds from issuance of working capital loan, respectively.

As of June 30, 2022 and December 31, 2021, we had cash in the Trust Account of approximately $116.8 million. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions) to complete our initial Business Combination. We may withdraw interest to pay taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete its initial 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.

Until the consummation of a Business Combination, we will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures,

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selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. We will need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors, or third parties. Our Sponsor, officers and directors may, but are not obligated to, loan us funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.

Going Concern

We cannot provide any assurance that new financing along the lines detailed above will be available to us on commercially acceptable terms, if at all. Further, we have until October 22, 2022 to consummate a Business Combination, but we cannot provide assurance that we will be able to consummate a Business Combination by that date. If a Business Combination is not consummated by the required date, there will be a mandatory liquidation and subsequent dissolution. In connection with the our assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”, management has determined that the capital and liquidity shortage and the uncertainty surrounding obtaining new financing, along with the possibility of mandatory liquidation and subsequent dissolution should we be unable to complete a business combination, raise substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets and liabilities should we be required to liquidate after October 22, 2022, nor do these unaudited condensed financial statements include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.

Commitments and Contractual Obligations

Registration Rights

The holders of the Founder Shares, Private Placement Warrants (including the underlying shares of common stock) and warrants (including the underlying shares of common stock) that may be issued upon conversion of Working Capital Loans, are entitled to registration rights pursuant to a registration rights agreement signed as of the effective date of the IPO, requiring us to register such securities for resale (in the case of the Founder Shares, only after conversion to common stock). The holders of the majority 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 the initial Business Combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

We granted the underwriters a 45-day option to purchase up to 1,500,000 additional Units to cover any over-allotments, if any, at the IPO price less the underwriting discounts and commissions. The underwriters exercised the full over-allotment at the consummation of the IPO on October 22, 2021, which was the date of the IPO.

The underwriters earned an underwriting discount of one percent (1%) of the gross proceeds of the IPO, or $1,150,000, which was paid in cash at closing of the offering. In addition, AGP purchased 750,000 Representative Founder Shares, of which 97,826 were subject to forfeiture if the over-allotment option was not exercised, at a purchase price of $9,639. Due to the underwriters’ full exercise of their over-allotment option on October 22, 2021, these 97,826 Representative Founder Shares are no longer subject to forfeiture.

Business Combination Marketing Agreement

We engaged AGP as an advisor in connection with our initial Business Combination to assist us in structuring and negotiating a definitive purchase agreement with respect to an initial Business Combination, holding meetings with our stockholders to discuss the potential Business Combination and the target businesses’ attributes, introduce us to potential investors that are interested in purchasing our

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securities in connection with our initial Business Combination, assist us in obtaining stockholder approval for the Business Combination, and assist us with press releases and public filings in connection with the initial Business Combination. We will pay AGP a cash fee for such services upon the consummation of our initial Business Combination in an amount equal to 3% of the gross proceeds of our IPO, exclusive of any applicable finders’ fees which might become payable. If the Business Combination is not consummated for any reason, no fee shall be due or payable to AGP.

Representative Founder Shares

The representative purchased an aggregate of 750,000 Representative Founder Shares, of which 97,826 were subject to forfeiture if the over-allotment option was not exercised, at a purchase price of $9,639. The underwriters’ over-allotment option was exercised in full on October 22, 2021 and thus no Representative Founder Shares are subject to forfeiture. Our Founder Shares are subject to transfer restrictions pursuant to lock-up provisions in a letter agreement with us entered into by the Representative, the Sponsor, and officers and directors. In addition, the holders of the Representative Founder Shares have agreed (i) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete our initial business combination within 12 months from the closing of our IPO. The Representative Founder Shares have been deemed compensation by FINRA and are therefore subject to a lock-up until October 14, 2022 pursuant to Rule 5110(e)(1) of the FINRA Manual.

Critical Accounting Policies and Estimates

This management’s discussion and analysis of our financial condition and result of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. We will evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We will base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the application of the following accounting policies, each of which require significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results. Our significant accounting policies are more fully described in Note 2, Summary of Significant Accounting Policies, to our unaudited condensed financial statements appearing elsewhere in this Form 10-Q.

Offering Costs Associated with Initial Public Offering

We comply with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A—“Expenses of Offering”. Offering costs consist of legal, accounting, underwriting and other costs incurred through the balance sheet date that are related to the IPO. Offering costs amounted to $11,381,640 and were charged to temporary equity upon the completion of the IPO.

Common Stock Subject to Possible Redemption

We account for our shares of common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares 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 our control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ equity (deficit). Our shares of common stock sold in the IPO feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2022 and December 31, 2021, 11,500,000 shares of common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity (deficit) section of our condensed balance sheets.

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Net Loss Per Common Stock

Net loss per share of common stock is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted loss per share does not consider the effect of the 16,139,102 warrants issued in connection with the IPO and Private Placement since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

Recent Accounting Standards

We do not believe that there are any recently issued, but not effective, accounting standards, which, if currently adopted, would have a material effect on our unaudited condensed financial statements.

JOBS Act

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing 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, the unaudited condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB 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 certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.

Off-Balance Sheet Arrangements

As of June 30, 2022 and December 31, 2021, we did not have any off-balance sheet arrangements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company,” we are not required to provide the information called for by this Item.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (Principal Executive Officer) and the Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control

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objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Under the supervision of our Chief Executive Officer and our Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was not effective as of June 30, 2022 due to a material weakness relating to the accounting treatment for complex financial instruments and improper accounting for accruals. A material weakness, as defined in the SEC regulations, is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. This material weakness resulted in the restatement of the Company’s audited financial statements as of December 31, 2021 to correct improper accounting for accruals.

We have enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our unaudited condensed financial statements. Our updated processes include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. We have also enhanced our controls relating to accounting for accruals through the implementation of the company’s enterprise resource planning system. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

Changes in Internal Control over Financial Reporting

Other than the material weakness and remediation efforts mentioned above, 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) of the Exchange Act) during the most recent fiscal quarter that have 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

None.

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ITEM 1A. RISK FACTORS

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K/A for Fiscal 2021, filed with the SEC on May 16, 2022, except as described below. 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. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”) relating, among other items, to disclosures in SEC filings in connection with business combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with the SPAC Rule Proposals, as proposed or as adopted, or pursuant to the SEC’s views expressed in the SPAC Rule Proposals, may increase the costs and time of negotiating and completing an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4. MINE SAFETY DISCLOSURES

None.

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ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

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SIGNATURES

In accordance with the requirements 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.

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