Financial Strategies Acquisition Corp. [FXCO] Filings

10-Q 1 fxco-20220930x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 001-41133

FINANCIAL STRATEGIES ACQUISITION CORP.

(Exact name of registrant as specified in its charter)


Delaware		85-1792560
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2626 Cole Avenue, Suite 300
Dallas, Texas		75204
(Address of principal executive offices)		(Zip Code)

(972) 560-4815

Registrant’s telephone number, including area code


N/A
(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	FXCO	The Nasdaq Stock Market LLC
Redeemable Warrants, each exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share, subject to adjustment	FXCOW	The Nasdaq Stock Market LLC
Rights to acquire one-tenth of one share of Class A common stock	FXCOR	The Nasdaq Stock Market LLC

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 (1) has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 11, 2022, there were 10,903,700 shares of Class A common stock, par value $0.0001 per share and 2,501,250 shares of Class B common stock, par value $0.0001 per share of the registrant issued and outstanding.

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FINANCIAL STRATEGIES ACQUISITION CORP.

FORM 10-Q

Quarterly report for the period ended September 30, 2022

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Cautionary Note Regarding Forward-Looking Statements		ii

PART I	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1

	Condensed Balance Sheets (Unaudited)	1

	Condensed Statements of Operations (Unaudited)	2

	Condensed Statement of Changes in Shareholders’ Equity (Deficit) (Unaudited)	3

	Condensed Statements of Cash Flows (Unaudited)	4

	Notes to the Condensed Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

PART II	OTHER INFORMATION	28

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	31

Item 3.	Defaults upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	33

SIGNATURES		34

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Quarterly Report on Form 10-Q may constitute “forward looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” and variations and similar words and expressions may identify forward looking statements, but the absence of these words does not mean that a statement is not forward looking. The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including, but not limited to:

●

our ability to select an appropriate target business or businesses;

●

the approval of the Charter Extension (as defined below) and our ability to complete our initial business combination;

●

the recent issuance by the Securities and Exchange Commission of proposed rules to regulate special purpose acquisition companies;

●

the risk of us being deemed an “investment company” for purposes of the Investment Company Act;

●

the possibility that we may liquidate the securities held in the trust account to avoid being deemed an investment company;

●

the potential impact of the new federal 1% excise tax;

●

the possibility that if we were considered to be a “foreign person,” we might not be able to complete an initial business combination with a U.S. target company if such initial business combination is subject to U.S. foreign investment regulations or review by a U.S. government entity, such as the Committee on Foreign Investment in the United States

●

our expectations around the performance of the prospective target business or businesses;

●

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

●

our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;

●

our potential ability to obtain additional financing to complete our initial business combination;

●

our pool of prospective target businesses;

●

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

●

our public securities’ potential liquidity and trading;

●

the lack of a market for our securities;

●

the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;

●

the trust account not being subject to claims of third parties; or

●

our financial performance.

For a more detailed discussion of these and other factors that could cause the actual results to differ materially from those anticipated in the forward-looking statements, see the factors described under the heading “Risk Factors” in our Annual Report on Form 10-K, filed on March 31, 2022, and in our other reports filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FINANCIAL STRATEGIES ACQUISITION CORP.

CONDENSED BALANCE SHEETS


	September 30, 2022
	(Unaudited)		December 31, 2021
(Amounts in USD)
ASSETS
Current Assets
Cash	$	23,645	$	365,399
Prepaid Expenses		232,187		826,027
Total Current Assets		255,832		1,191,426
Marketable investments held in Trust Account		101,634,366		101,050,971
TOTAL ASSETS	$	101,890,198	$	102,242,397

LIABILITIES & SHAREHOLDER’S EQUITY (DEFICIT)
Liabilities
Current Liabilities
Accounts payable & accrued expenses	$	189,384	$	74,515
Tax Provisions		472,654		200,141
Total Current Liabilities		662,038		274,656
Non-current Liabilities
Promissory notes		655,000		450,000
Derivative warrant liabilities		535,352		9,339,501
Total Non-Current Liabilities		1,190,352		9,789,501
Total Liabilities		1,852,390		10,064,157
Commitments & Contingencies
Temporary Equity:
Class A common stock subject to redemption, 10,005,000 shares at $10.10 per share		101,050,500		101,050,500
Shareholder’s Equity
Class A common stock, $0.0001 par value, 100,000,000 shares authorized, shares issued and outstanding: 524,950		53		51
Class B common stock, $0.0001 par value, 10,000,000 shares authorized, shares issued and outstanding: 2,501,250		250		250
Representative shares, 373,750 shares issued and outstanding		37		37
Additional paid in Capital and Reclassifications		(10,260,423)		(10,260,421)
Accumulated Profit /(Deficit)		9,247,391		1,387,823
Total Shareholder’s Equity (Deficit)		(1,012,692)		(8,872,260)
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY (DEFICIT)	$	101,890,198	$	102,242,397

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

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FINANCIAL STRATEGIES ACQUISITION CORP.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the three months		For the three months		For the nine months		For the nine months
	ended September 30, 2022		ended September 30, 2021		ended September 30, 2022		ended September 30, 2021
(Amounts in USD)
General & Administrative expenses	$	503,543	$	—	$	1,384,263	$	—
Operating Loss		(503,543)		—		(1,384,263)		—
Interest expense		(21,200)		—		(21,200)		—
Interest income on marketable investments held in Trust Account		446,120		—		583,395		—
Change in fair value of Warrant Liabilities		346,128		—		8,804,149		—
Income before Income Tax		267,505		—		7,982,081		—
Tax on Interest income		(93,685)		—		(122,513)		—
Net Income	$	173,820	$	—	$	7,859,568	$	—

Basic and diluted Earnings/(Loss) per share
Class A common stock	$	0.019	$	—	$	0.595	$	—
Class B common stock	$	(0.013)	$	—	$	0.553	$	—
Weighted average common shares outstanding
Class A common stock		10,893,483		—		10,886,997		—
Class B common stock		2,501,250		2,501,250		2,501,250		2,501,250

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

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FINANCIAL STRATEGIES ACQUISITION CORP.

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY/(DEFICIT)

(UNAUDITED)

Retained

Additional

Earnings

Total

Common Stock Class A

Common Stock Class B

paid in

(Accumulated

Shareholder’s

Shares

Amount

Shares

Amount

Capital

Deficit)

Equity (Deficit)

(Amounts in USD)

Balance - December 31, 2020

—

2,501,250

250

24,750

(5,000)

20,000

Net Income / (Loss)

—

Balance - March 31, 2021

—

2,501,250

250

24,750

(5,000)

20,000

Net Income / (Loss)

—

Balance - June 30, 2021

—

2,501,250

250

24,750

(5,000)

20,000

Net Income / (Loss)

—

Balance - September 30, 2021

—

2,501,250

250

24,750

(5,000)

20,000


									Retained
							Additional		Earnings		Total
	Common Stock Class A			Common Stock Class B			paid in		(Accumulated		Shareholder’s
	Shares	Amount		Shares	Amount		Capital		Deficit)		Equity (Deficit)
(Amounts in USD)
Balance - December 31, 2021	10,883,700	$	88	2,501,250	$	250	$	0.0	$	(8,872,598)	$	(8,872,260)

Net Income / (Loss)	—		—	—		—		—		7,056,509		7,056,509

Balance - March 31, 2022	10,883,700	$	88	2,501,250	$	250	$	0.0	$	(1,816,089)	$	(1,815,751)

Net Income / (Loss)	—		—	—		—		—		629,240		629,240

Balance - June 30, 2022	10,883,700	$	88	2,501,250	$	250	$	0.0	$	(1,186,850)	$	(1,186,512)

Issuance Class A common stock (Private sale)	20,000		2	—		—		—		(2)		—

Net Income / (Loss)	—		—	—		—		—		173,820		173,820

Balance - September 30, 2022	10,903,700	$	90	2,501,250	$	250	$	0.0	$	(1,013,032)	$	(1,012,692)

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

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FINANCIAL STRATEGIES ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the nine months ended		For the nine months ended
	September 30, 2022		September 30, 2021
(Amounts in USD)
Cash Flows from Operating Activities
Net Income	$	7,859,568	$	—
Adjustments to reconcile net income to net cash used in operating activities:
Change in Prepaid Expenses		593,840		—
Changes in Accounts Payable and Accrued Liabilities		114,869		—
Changes in Tax Provisions		272,513		—
Add-back of interest earned in Trust Account		(583,395)		—
Change in fair value of Warrant Liabilities		(8,804,149)		—
Net Cash used in Operating activities		(546,754)		—

Cash Flows from Financing Activities
Proceeds from short term loans		205,000		5,000
Payment of Offering Cost		—		(116,566)
Net Cash used in Financing activities		205,000		(111,566)

Net decrease in Cash	$	(341,754)	$	(111,566)
Cash at beginning of period	$	365,399	$	296,500
Cash at end of period	$	23,645	$	184,934

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

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Notes to the Condensed Financial Statements (Unaudited)

NOTE 1 ─ ORGANIZATION AND DESCRIPTION OF BUSINESS OPERATIONS

Financial Strategies Acquisition Corp. (the “Company”) is a blank check company incorporated on July 1, 2020, under the laws of the State of Delaware for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses or entities (a “Business Combination”). We may pursue an initial business combination target in any stage of its corporate evolution or in any industry, sector or geographic region.

As of December 14, 2021, the Company had not commenced any operations. All activity for the period from July 1, 2020 (inception) through December 14, 2021, relates to the Company’s formation and its initial public offering (“IPO”), which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.

On December 14, 2021, the Company consummated its IPO of 10,005,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units, the “Public Shares”) at $10.00 per unit, which included 1,305,000 Units issued pursuant to the full exercise by the Underwriters (as defined below) of their over-allotment option, and the private sale of an aggregate of 504,950 Units (the “Private Placement Units” and with respect to the shares of Class A common stock included in the Units, the “Private Placement Shares”) to its co-sponsors, FSC Sponsor LLC and Celtic Sponsor VII LLC (together, the “Co-Sponsors”), anchor investors (comprised of Eagle Point Credit Management LLC, Greentree Financial Group Inc., Sea Otter Securities Group LLC, Sixth Borough Capital Fund LP (and certain members of its general partner), as used herein, collectively the “anchor investors”) and I-Bankers Securities, Inc. (“I-Bankers”) at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds of $5,049,500 to the Company that closed simultaneously with the closing of the IPO (see Note 3). The Company’s Units have been listed on the Nasdaq Global Market (“Nasdaq”).

Transaction costs amounted to $3,312,653 consisting of $2,501,250 in underwriting commissions and $811,403 in additional offering costs, the sum of which includes $332,315 in deferred offering costs which were incurred prior to the IPO closing. In addition, as of December 14, 2021, cash of $554,057 was held outside of the Trust Account (as defined below) and available for working capital purposes. We held cash outside of the Trust Account of $365,399 at December 31, 2021 and $23,645 as of September 30, 2022.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination with one or more operating businesses or assets that together have an aggregate fair market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the Company’s signing a definitive agreement in connection with its initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target business or assets 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”).

Upon the closing of the IPO on December 14, 2021, the Company deposited $101,050,500 ($10.10 per Unit) from the proceeds of the IPO and certain proceeds of the sales of Private Placement Units in the trust account (“Trust Account”), located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.

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The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account (initially $10.10 per share), calculated as of two business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations. The shares of Class A common stock will be recorded at redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.”

The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such completion of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.

The Co-Sponsors, initial stockholders and I-Bankers have entered into a letter agreement with the Company, pursuant to which they have agreed (A) to waive their redemption rights with respect to any Founder Shares, Private Placement Shares or Public Shares held by them in connection with the completion of an initial Business Combination, (B) to waive their redemption rights with respect to their Founder Shares, Private Placement Shares and Public Shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (x) to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if it does not complete an initial Business Combination within the Combination Period (as defined below) or (y) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity.

Each public stockholder may elect to redeem its Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.

Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares without the Company’s prior written consent.

The Company will have until 12 months from the closing of the IPO to complete a Business Combination; provided, however, if the Company anticipates that it may not be able to consummate a Business Combination within 12 months, the Company may, by resolution of its board of directors if requested by the Co-Sponsors, extend the period up to two times, each by an additional three months (for a total of up to 18 months to complete a Business Combination) (the “Combination Period”) to complete a Business Combination. Pursuant to the terms of the Company’s amended and restated certificate of incorporation, in order for the time available for the Company to consummate an initial Business Combination to be extended, our Co-Sponsors or their affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the trust account $1,000,500 ($0.10 per unit) on or prior to the date of the applicable deadline, for each three-month extension. Any such payments would be made in the form of a non-interest bearing loan and would be repaid, if at all, from funds released to the Company upon completion of a Business Combination.

If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than 10 business days thereafter, redeem 100% of the outstanding 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 franchise and income 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 liquidation distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants or rights, which will expire worthless if we fail to complete our initial Business Combination within the 12-month period (or up to 18-month period).

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Our Co-Sponsors, initial stockholders and I-Bankers have entered into a letter agreement with us, pursuant to which they have agreed to waive their liquidation rights with respect to the Founder Shares (as defined below) and Private Placement Shares (and Representative Shares (as defined below) in the case of I-Bankers) if the Company fails to complete a Business Combination within the Combination Period. However, if the Co-Sponsors, initial stockholders or I-Bankers acquire Public Shares in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their business combination marketing fees (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the IPO price per Unit ($10.10).

The Co-Sponsors have agreed that they will be liable to the Company, if and to the extent any claims by a third party for services rendered or products sold to the Company, or by a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.10 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account, nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Co-Sponsors will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Co-Sponsors will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent auditors), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Underwriting Agreement and Business Combination Marketing Agreement

The Company engaged I-Bankers as the representative of the underwriters (the “Underwriters”) in the IPO and the simultaneous listing of the Units on Nasdaq. Pursuant to that certain underwriting agreement, I-Bankers acted as the representative of the Underwriters of the IPO for 8,700,000 Units at $10.00 per unit, plus an over-allotment option equal to 15% of the number of Units offered, or 1,305,000 Units, which was exercised in full simultaneously upon the closing of the IPO. The Company paid I-Bankers an underwriters’ commission of $2,501,250, equal to 2.5% of the gross proceeds raised in the IPO for such services upon the consummation of the IPO (exclusive of any applicable finders’ fees which might become payable).

Upon the closing of the IPO, the Company issued to I-Bankers a five-year warrant to purchase 800,400 Shares of Class A common stock (“Representative Warrants”). The exercise price of Representative Warrants is $12.00 per Share. In addition, I-Bankers was issued 373,750 shares of Class A common stock upon the consummation of IPO (“Representative Shares”).

In addition, under a business combination marketing agreement, the Company has engaged I-Bankers as an advisor in connection with the Business Combination and will pay I-Bankers a cash fee for such marketing services upon the consummation of the Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the IPO, including any proceeds from the exercise of the underwriters’ over-allotment option. The $3,501,750 fee will become payable to the Underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Liquidity and Capital Resources; Going Concern

Prior to the completion of the IPO, the Company lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the unaudited condensed financial statements. The Company has since completed its IPO, in which an amount of $411,372 in excess of the funds deposited in the Trust Account and/or used to fund offering expenses was released to the Company for general working capital purposes. As of September 30, 2022, the Company had $23,645 in cash outside of the Trust Account available for working capital needs ($365,399 at December 31, 2021; $211,886 at March 31, 2022 and $1,433 at June 30, 2022 respectively) and $101,634,366 of cash and investment in liquid securities held in trust, which is not available for working capital needs. The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans.

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On August 17, 2022, the Company entered into a securities purchase agreement (the “Gaylor Securities Purchase Agreement”) with Greg Gaylor, as trustee of the William C Gaylor and Dorothy J Gaylor Rev. Trust (the “Purchaser”). Pursuant to the Gaylor Securities Purchase Agreement, the Company sold to the Purchaser, for an aggregate purchase price of $200,000, a promissory note in the aggregate principal amount of $200,000, 20,000 shares of Class A common stock and warrants to purchase 2,000 shares of Class A common stock, and the Purchaser committed to purchase upon the same terms at the request of the Company up to $150,000 of additional securities, consisting of an additional promissory note in the aggregate principal amount of up to $150,000, an additional 15,000 shares of Class A common stock and warrants to purchase up to 1,500 shares of Class A common stock.

For the nine months ended September 30, 2022, cash used in operating activities was $546,754, mainly due to cash paid for professional services, including legal, filing, target due diligence, financial reporting, accounting and auditing compliance expenses. The Company intends to use its operating cash held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination. Due to the limited funds currently available to the Company for working capital needs, the Company believes it may not have sufficient liquidity through the date of a Business Combination, if extended through December 14, 2023.

The accompanying unaudited condensed financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. As of September 30, 2022, the Company had not commenced any operations. All activity for the period from July 1, 2020 (inception) through September 30, 2022 related to the Company’s formation, the IPO, and its search for a target company. The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from its IPO. The Company’s ability to commence operations is contingent upon consummating an Initial Business Combination. We may seek to raise additional capital through debt or equity offerings to cover operating expenses or to complete our initial business combination, which may be from third parties or insiders. There can be no assurance that we will be able to raise additional capital on favorable terms, or at all, and any such capital raise may be dilutive to existing holders. Furthermore, the Company’s ability to consummate its Initial Business Combination within the contractual time period is uncertain. The Company has until December 14, 2022, 12 months from the closing of its IPO, to consummate its Business Combination. Pursuant to a definitive proxy statement filed with the Securities and Exchange Commission (“SEC”) on November 14, 2022, the Company will hold a special meeting of its stockholders (the “Special Meeting”) to propose the amendment of its amended and restated certificate of incorporation to extend the date (the “Termination Date”) by which the Company has to consummate a Business Combination from the original Termination Date of December 14, 2022 to January 14, 2023 (the “Charter Extension Date”) upon the deposit into the Trust Account of the lesser of (a) $50,000 or (b) $0.05 for each Public Share that is not redeemed in connection with the Special Meeting, which amount will be loaned to the Company by one or both of the Co-Sponsors or one or more of their respective affiliates, members or third-party designees, and to allow the Company, without another stockholder vote, to elect to extend the Termination Date on a monthly basis for up to eleven times by an additional one month each time after the Charter Extension Date (each, an “Additional Extension”), by resolution of the Company’s board of directors, if requested by one or both of the Co-Sponsors, and upon five days’ advance notice prior to the applicable Termination Date, until December 14, 2023, or a total of up to 12 months after the original Termination Date of December 14, 2022, unless the closing of an Initial Business Combination shall have occurred prior thereto, subject to an additional deposit in the amount of the lesser of (a) $50,000 or (b) $0.05 for each Public Share that is not redeemed in connection with the Special Meeting per Additional Extension into the Trust Account by one or both of the Co-Sponsors or one or more of their respective affiliates, members or third-party designees. If the proposal to extend the Termination Date is approved and effective, the Company’s stockholders may elect to redeem their Public Shares. An electing stockholder will be entitled to receive a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (net of taxes payable), divided by the number of then-outstanding Public Shares. This redemption right will apply to each holder of Public Shares regardless of whether and how such holder votes on the proposal. The removal from the Trust Account of such amounts would reduce the amount remaining in the Trust Account and increase the percentage interest of the Company held by the Company’s Co-Sponsors, anchor investors and other initial stockholders, the Purchaser and I-Bankers. The Company’s amended and restated certificate of incorporation provides that it cannot redeem or repurchase Public Shares to the extent such redemption would result in the Company’s failure to have at least $5,000,001 of net tangible assets. Based on these circumstances, management has determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern.

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Accordingly, the accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and contemplate continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Risks and Uncertainties

Management continues to evaluate the impact of the current political and economic situation on the industry and has concluded that while it is reasonably possible that the war in the Ukraine 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.

NOTE 2 ─ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with 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 financial statements prepared in accordance with 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 Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 31, 2022, which contains the audited financial statements and notes thereto for the year ended December 31, 2021. The interim results for the three and nine months ended September 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 and modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another public company which is either not an emerging growth company or an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company had $23,645 in cash as of September 30, 2022, compared to $365,399 as of December 31, 2021. The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2022.

Marketable Investments held in Trust Account

A total of $101,050,500 of the net proceeds from the IPO and the sale of the Private Placement Units was placed in a U.S.-based Trust Account maintained by Continental Stock Transfer & Trust Company, LLC, acting as trustee.

At September 30, 2022, assets of $101,634,366 ($101,050,971 at December 31, 2021) – including $583,866 of interest earned ($471 at December 31, 2021) – held in the Trust Account were invested 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, none of which was available for working capital needs.

Offering Costs Associated with the IPO

The Company complies with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO that were directly related to the IPO. The Company incurred offering costs amounting to $3,312,653 as a result of the IPO, consisting of $2,501,250 in underwriting commissions and $811,403 in additional offering costs. As of December 31, 2021, $2,981,229 of the aggregate offering costs have been charged to shareholders’ equity and the remaining amount of $331,424 was expensed.

Common Stock Subject to Possible Redemption

All of the 10,005,000 shares of Class A common stock sold as part of the Units in the IPO contain a redemption feature. In accordance with Accounting Standards Codification 480-10-S99-3A, “Classification and Measurement of Redeemable Securities,” redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. The change in the carrying value of redeemable shares of common stock resulted in charges against additional paid-in capital and accumulated deficit. Accordingly, at September 30, 2022 and at December 31, 2021, the shares of Class A common stock subject to possible redemption in the amount of $101,050,500 were presented as temporary equity, outside of the shareholders’ equity section of the Company’s unaudited condensed balance sheets.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may exceed the federal depository insurance coverage corporation limit of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

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Business Combination Marketing Fee

Pursuant to the business combination marketing agreement, the Company has engaged I-Bankers as an advisor in connection with the Business Combination and will pay I-Bankers a cash fee for marketing services upon the consummation of the Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the IPO, including any proceeds from the full or partial exercise of the underwriters’ over-allotment option.

Income Taxes

The Company complies with the accounting and reporting requirements of FASB ASC, 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. There were no unrecognized tax benefits as of September 30, 2022, nor as of December 31, 2021.

FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2022, nor at 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 is subject to income tax examinations by major taxing authorities since inception.

The provision for income taxes was deemed to be immaterial for the year ended December 31, 2021. As of September 30, 2022, the Company has established a provision for income taxes in the amount of $122,654.

Franchise Tax

Being incorporated in Delaware, the Company is subject to Delaware franchise tax. The calculation of the potential tax liability for the business year 2021, applying the “Authorized Shares Method” as well as the “Assumed Par Value Capital Method,” has shown that under both methods the maximum annual tax of $200,000 is reached. Accordingly, the Company has established a provision for franchise tax in the amount of $200,000 as per December 31, 2021. As of September 30, 2022 the Company has increased its provision for franchise tax to a total position of $350,000.

Warrants

ASC 480 requires a reporting entity to classify certain freestanding financial instruments as liabilities (or in some cases as assets). ASC 480-10-S99 addresses concerns raised by the SEC regarding the financial statement classification and measurement of securities subject to mandatory redemption requirements or whose redemption is outside the control of the issuer. If the stock subject to mandatory redemption provisions represents the only shares in the reporting entity, it must report instruments in the liabilities section of its statement of financial position. The stock subject must then describe them as shares subject to mandatory redemption, so as to distinguish the instruments from other financial statement liabilities.

Recent Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820) (“ASU 2022-03”). The amendments in ASU 2022-03 clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments in this Update also require additional disclosures for equity securities subject to contractual sale restrictions. The provisions in this Update are effective for fiscal years beginning after December 15, 2023, for public business entities. Early adoption is permitted. The Company does not expect to early adopt this ASU. The Company is currently evaluating the impact of adopting this guidance on the balance sheets, results of operations and cash flows.

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In August 2020, FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis.

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

Net Income (Loss) Per Common Share

Net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. In order to determine the net income (loss) attributable to both the Class A common stock and Class B common stock, the Company first considered the total income (loss) allocable to both sets of shares. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated pro rata between Class A and Class B common stock for the period from January 1, 2022, through September 30, 2022, reflective of the respective participation rights. With respect to the accretion of redeemable Class A common shares subject to possible redemption and consistent with ASC Topic 480-10-S99-3A, the Company treated the accretion in the same manner as a dividend, paid to the Class A shareholders in the calculation of net income (loss) per share.

The following table reflects the calculation of basic and diluted net income per common share:


	Three months ended		Nine months ended
	September 30, 2022		September 30, 2022
Earnings per Share calculation
Class B shares outstanding		2,501,250		2,501,250
Class A shares Issued upon IPO		10,883,700		10,883,700
Class A shares Issued upon Private Financing		20,000		20,000
Net Income available to stockholders	$	173,820	$	7,859,568


	Class A		Class B			Class A		Class B
Allocation of Net Income available to ordinary shares	$	207,173	$	(33,353)	$	6,477,314	$	1,382,254
Weighted Average Shares outstanding		10,893,483		2,501,250		10,886,997		2,501,250
EPS	$	0.019	$	(0.013)	$	0.595	$	0.553

As of September 30, 2022, no Founder Shares are subject to forfeiture and the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and share in earnings. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the period presented.

NOTE 3 ─ PUBLIC OFFERING

At the IPO, the Company sold 10,005,000 Units at a purchase price of $10.00 per Unit, which included 1,305,000 Units issued pursuant to the full exercise by the Underwriters of their over-allotment option, generating gross proceeds to the Company of $100,050,000. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (“Class A common stock”), one redeemable warrant, with each warrant exercisable for one share of Class A common stock at a price of $11.50 per share (the “Public Warrants”) and one right to receive one-tenth of one share of Class A common stock upon the consummation of the Company’s initial Business Combination (the “Public Rights”) (see Note 6).

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NOTE 4 ─ RELATED PARTY TRANSACTIONS

Founder Shares

On October 23, 2020, our Co-Sponsor, FSC Sponsor LLC, acquired 2,371,875 shares of the Company’s Class B common stock (the “Founder Shares”), and Celtic Asset & Equity Partners, Ltd. acquired 503,125 Founder Shares, in exchange for an aggregate capital contribution of $25,000, at a purchase price of approximately $0.001 per share, in connection with our organization. On December 9, 2021, FSC Sponsor transferred and assigned an aggregate of 1,310,038 Founder Shares amongst certain of our initial stockholders, including Celtic Sponsor VII LLC, Caliente Management, LLC, Frio Investments, LLC, Celtic Asset & Equity Partners, Ltd., and each of the anchor investors.

On September 21, 2021, the Company effected a 7-for-10 reverse stock split of all issued and outstanding shares of our Class B common stock, which reduced the number of issued and outstanding shares of Class B common stock from 2,875,000 shares to 2,012,500 shares. On October 13, 2021 the Company effected a 7.2-for-7 stock split of all issued and outstanding shares of our Class B common stock, which increased the number of issued and outstanding shares of Class B common stock from 2,012,500 shares to 2,070,000 shares. On November 23, 2021, the Company effected a 87-for-72 forward stock split of all issued and outstanding shares of our Class B common stock, which increased the number of issued and outstanding shares of Class B common stock from 2,070,000 shares to 2,501,250. Unless otherwise indicated, all share and per share information contained herein has been adjusted to give effect to such stock splits.

The Founder Shares included an aggregate of up to 326,250 shares of Class B common stock subject to forfeiture by the initial stockholders to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares would collectively represent 20% of the Company’s issued and outstanding shares upon the completion of the IPO. On December 14, 2021, the Underwriter exercised the over-allotment option in full. As a result, no Founder Shares are subject to forfeiture.

The Co-Sponsors and initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (i) one year after the date of the consummation of our initial Business Combination or (ii) the date on which we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and other agreements of the initial stockholders with respect to any Founder Shares.

Private Placement

Concurrently with the closing of the IPO, our Co-Sponsors, anchor investors and I-Bankers purchased an aggregate of 504,950 Private Placement Units, generating gross proceeds of $5,049,500 in aggregate in a private placement. Each Private Placement Unit consists of one share of Class A common stock, one redeemable warrant, exercisable for one share of Class A common stock at a price of $11.50 per share (each, a “Private Placement Warrant”), and one right. Each right underlying the Private Placement Unit (each, a “Private Placement Right”) will entitle the holder to receive one-tenth of one share of Class A common stock at the closing of a Business Combination. The proceeds from the sale of the Private Placement Units have been added to the net proceeds from the IPO held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placements Units and all underlying securities will expire worthless.

The Private Placement Units (including the underlying Private Placement Rights, Private Placement Warrants, the Private Placement Shares and the shares of Class A common stock issuable upon conversion of the Private Placement Rights and the exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination (except as described under the section of the IPO prospectus entitled “Principal Stockholders — Restrictions on Transfers of Founder Shares and Private Placement Units”). Following such period, the Private Placement Units (including the underlying Private Placement Rights, the Private Placement Shares and the shares of Class A common stock issuable upon conversion of the Private Placement Rights and the exercise of the Private Placement Warrants) will be transferable, assignable or salable, except that the Private Placement Units will not trade.

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Promissory Notes – Related Party

Our liquidity needs have been satisfied prior to the completion of the IPO through a capital contribution from our initial stockholders of $25,000 for the Founder Shares and loans of $450,000, comprised of a $200,000 unsecured promissory note from our Co-Sponsor, FSC Sponsor LLC, and a convertible loan of $250,000 from an investor in FSC Sponsor LLC, Emil Assentato, under an unsecured promissory note, of which $250,000 has been drawn upon. The convertible note was issued on July 8, 2020 to Mr. Assentato for the principal amount of $250,000 to cover expenses related to the offering. The note is non-interest bearing and is payable on the date of the initial business combination. At the holder’s discretion, upon maturity, up to $250,000 of the note may be converted into warrants at a price of $1.00 per warrant. These warrants would be identical to the warrants comprising the Private Placement Units. On August 17, 2022, the Company entered into the Gaylor Securities Purchase Agreement, pursuant to which the Company agreed to issue a promissory note in the aggregate principal amount of $200,000, 20,000 shares of Class A common stock and warrants to purchase 2,000 shares of common stock to the Purchaser for an aggregate purchase price of $200,000. The promissory note bears interest at the rate of 10% per annum, and the warrants issued are identical to the private warrants issued as part of the Private Placement Units. We intend to repay these loans of the proceeds of the Trust Account released to the Company upon successful consumption of the business combination.

Working Capital Loans

In addition, in order to finance transaction costs in connection with a Business Combination, the Co-Sponsors, an affiliate of the Co-Sponsors, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into private placement-equivalent units at a price of $10.00 per unit at the option of the lender. Such units would be identical to the Private Placement Units. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. Neither as of September 30, 2022, nor as of December 31, 2021, any Working Capital Loans were outstanding.

Administrative Services and Consulting Arrangements

The Company entered into an agreement, commencing on the effective date of the Initial Public Offering through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay Celtic Asset & Equity Partners, Ltd. a monthly fee of $15,000, up to a maximum of $180,000 in the aggregate, for office space, utilities and secretarial, data room and administrative services. The Company has paid such aggregate amount in advance and charged one monthly fee of $15,000 against General & Administrative Expenses in December 2021. Accordingly, nine monthly fees of a total amount of $135,000 were charged against General & Administrative Expenses in the nine months ended September 30, 2022.

NOTE 5 ─ COMMITMENTS AND CONTINGENCIES

Registration Rights

The holders of the Founder Shares, the Private Placement Units (and their underlying securities), the Representative Shares, the Representative Warrants (and their underlying securities) and any Units that may be issued upon conversion of the Working Capital Loans (and their underlying securities) will be entitled to registration rights pursuant to a registration rights agreement requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a 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.

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Underwriting Agreement

The Company had granted the Underwriters a 30-day option from the date of IPO to purchase up to 1,305,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions.

Simultaneously with the closing of the IPO, the Underwriters exercised the over-allotment option in full. As such, the Underwriters were paid an underwriting discount and commission of $0.25 per Unit, or $2,501,250 in the aggregate, payable upon the closing of the IPO, and I-Bankers was entitled to a business combination marketing fee of $3,501,750 in the aggregate, which is held in the Trust Account and payable upon completion of the Business Combination.

NOTE 6 ─ SHAREHOLDERS’ EQUITY

The Company is authorized to issue a total of 111,000,000 shares, par value of $0.0001 per share, consisting of (a) 110,000,000 shares of common stock, including (i) 100,000,000 shares of Class A common stock, and (ii) 10,000,000 shares of Class B common stock, and (b) 1,000,000 shares of preferred stock (the “Preferred Stock”).

As of December 31, 2021, there were 10,903,700 shares of Class A common stock issued and outstanding, which includes 10,005,000 shares issued in the public offering, 504,950 shares issued in the private placement, 373,750 representative shares and 20,000 shares issued pursuant to the Gaylor Securities Purchase Agreement. Furthermore, we have 2,501,250 shares of Class B common stock issued and outstanding. Pursuant to the Gaylor Securities Purchase Agreement, dated August 17, 2022, we have the option to sell to the Purchaser an additional 15,000 shares of Class A common stock. As of September 30, 2022 there were 10,903,700 shares of Class A common stock issued and outstanding.

Of the 2,501,250 shares of Class B common stock outstanding, an aggregate of up to 326,250 shares of Class B common stock were subject to forfeiture, to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the initial stockholders would collectively own 20% of the Company’s issued and outstanding common stock after the IPO (assuming the initial stockholders did not purchase any Public Shares in the IPO). As a result of the Underwriters’ full exercise of the over-allotment option, as of September 30, 2022, no share of Class B common stock was subject to forfeiture.

As of September 30, 2022, no share of preferred stock was issued or outstanding. The designations, voting and other rights and preferences of the preferred stock may be determined from time to time by the Company’s board of directors.

Rights

As of September 30, 2022, there were 10,005,000 Public Rights and 504,950 Private Placement Rights outstanding, respectively.

Each holder of a right will receive one-tenth (1/10) of one share of Class A common stock upon consummation of a Business Combination. In the event the Company will not be the surviving entity upon completion of the Company’s initial Business Combination, each holder of a Public Right will automatically receive the 1/10 share of Class A common stock underlying such Public Right (without paying any additional consideration); and each holder of a Private Placement Right or right underlying Units to be issued upon conversion of the Working Capital Loans will be required to affirmatively convert its rights in order to receive the 1/10 share of Class A common stock underlying each right (without paying any additional consideration). If the Company is unable to complete an initial Business Combination within the required time period and public stockholders redeem the public shares for the funds held in the Trust Account, holders of rights will not receive any such funds in exchange for their rights and the rights will expire worthless. The Company will not issue fractional shares upon conversion of the rights. If, upon conversion of the rights, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exchange, comply with Section 155 of the Delaware General Corporation Law. Any fractional shares will be rounded down to the nearest whole share, and any rounding down and extinguishment may be done with or without any in lieu cash payment or other compensation being made to the holder of the relevant rights.

If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire worthless.

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Public Warrants and Private Placement Warrants

As of September 30, 2022, there were 10,005,000 Public Warrants and 506,950 Private Placement Warrants outstanding, respectively. Furthermore, we have the option to sell additional 1,500 Private Placement Warrants pursuant to the Gaylor Securities Purchase Agreement.

Each warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 12 months from the closing of our initial public offering (or up to 18 months from the closing of our initial public offering if we extend the period of time to consummate a business combination) or 30 days after the completion of our initial business combination. The warrants will expire five years after the completion of our initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

We will not be obligated to deliver any shares of Class A 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 Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless the Class A 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 we 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 Class A common stock underlying such unit.

We have not registered the shares of Class A common stock issuable upon exercise of the warrants. However, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement covering the shares of Class A 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 Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have 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 above, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

Once the warrants become exercisable, we may call the warrants for redemption (excluding the Private Placement Warrants but including any outstanding Representative Warrants):

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in whole and not in part;

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at a price of $0.01 per warrant;

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upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

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if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before we send the notice of redemption to the warrant holders.

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If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in our initial public offering.

We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Class A common stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued. If we call the warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.”

Private Placement Warrants

Except as described below, the Private Placement Warrants have terms and provisions that are identical to those of our Public Warrants, including as to exercise price, exercisability and exercise period. The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination (except, among other limited exceptions, to our officers and directors and certain other permitted transferees) and they will not be redeemable by us so long as they are held by our Co-Sponsors, anchor investors, I-Bankers or any of their permitted transferees. Our Co-Sponsors, anchor investors, I-Bankers, and any of their permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis. If the Private Placement Warrants are held by holders other than our Co-Sponsors, anchor investors, I-Bankers or any of their permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as our Public Warrants.

If holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A 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. The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by our Co-Sponsors, the underwriters or their permitted transferees is because it is not known at this time whether they will be affiliated with us following an initial business combination. If they remain affiliated with us, their ability to sell our securities in the open market will be significantly limited. We expect to have policies in place that prohibit insiders from selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell our securities, an insider cannot trade in our securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could sell the shares of Class A common stock issuable upon exercise of the warrants freely in the open market, the insiders could be significantly restricted from doing so. As a result, we believe that allowing the holders to exercise such warrants on a cashless basis is appropriate.

Representative Warrants and Representative Shares

Upon the closing of the IPO, the Company issued to the Underwriters Representative Warrants exercisable for 800,400 shares of the Company’s Class A common stock, the exercise price of which will be $12.00 per share, and 373,750 Representative Shares. The Representative Warrants may be exercised during the period commencing on the later of the first anniversary of the registration’s effective date of December 9, 2022 and the closing of the Company’s initial Business Combination, and ending on the fifth anniversary of the commencement of the offering on December 9, 2026. The Company accounted for these 800,400 Representative Warrants as derivative warrant liability, resulting in a charge directly to shareholders’ equity.

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At September 30, 2022, the fair value of Representative Warrants was estimated to be approximately $9,754 (or approximately $0.012 per warrant) using the Black-Scholes option-pricing model. The fair value of the Representative Warrants granted to the Underwriters were estimated as of September 30, 2022, using the following assumptions: (1) implied volatility of 0.59%, (2) risk-free interest rate of 4.06%, (3) expected life of 4.21 years and (4) probability of a successful Business Combination of 70%. The Representative Warrants and the shares of Class A common stock underlying Representative Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up immediately following December 14, 2021, pursuant to FINRA Rule 5110(e)(1). The Representative Warrants grants to holders demand and “piggy back” rights for periods of five and seven years from December 14, 2021. The Company will bear all fees and expenses attendant to registering the securities, other than underwriting commissions which will be paid for by the holders themselves. The exercise price and number of shares issuable upon exercise of the Representative Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However, the Representative Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price.

The Underwriters agreed not to transfer, assign or sell any of the Representative Shares without the Company’s prior written consent until the completion of the Business Combination. In addition, the Underwriters agreed (i) to vote such shares in favor of any proposed Business Combination, (ii) to waive its redemption rights with respect to such shares in connection with the completion of the initial Business Combination, and (iii) to waive its rights to liquidating distributions from the Trust Account with respect to the Representative Shares if the Company fails to complete its initial Business Combination within Combination Period. The shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following December 14, 2021 pursuant to FINRA Rule 5110(e)(1).

NOTE 7 – RECURRING FAIR VALUE MEASUREMENTS

At September 30, 2022, the Company’s warrant liability was valued at $535,352. Compared to the valuation at the December 31, 2021, this represents a liability decrease of $8,804,149. Under the guidance in ASC 815-40, the Public Warrants, the Private Placement Warrants and the Representative Warrants do not meet the criteria for equity treatment. As such, the Public Warrants, the Private Warrants and the Representative Warrants must be recorded on the balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, the valuations will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.

Offering Costs Associated with IPO

The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A— “Expenses of Offering.” Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. Offering costs associated with the warrant liabilities are expensed, and offering costs associated with the shares of Class A common stock are charged to shareholders’ equity. Offering costs are charged to shareholder’s equity or the statement of operations based on the relative value of the Public Warrants and the Private Warrants to the proceeds received from the Units sold upon the completion of the IPO.

Accordingly, upon completion of the proposed Public Offering, offering costs allocated to derivative warrant liabilities of $331,424 were expensed as incurred in the statement of operations. On December 14, 2021, the total offering costs added up to $3,312,653 and consisted of $2,501,250 in underwriting fees and $811,403 of actual offering costs. Therefore, an amount of $2,984,229 was allocated to the Public Shares and charged against equity, together with $11,356,592 included in accumulated deficit as an allocation for the Public Warrants, the Private Warrants and the Representative Warrants classified as liabilities; $4,077,400 were included in additional paid-in capital in connection with the shares of Class A common stock and with additional $1,387,823 of other accumulated profit, all together adds up to an accumulated deficit (including reclassifications) of $8,872,598 as per December 31, 2021. With the separate trading of the Public Warrants as from January 10, 2022 and the respective shift from Level 3 to Level 1, a substantial reduction of the deferred warrant liability by $8,804,149 took place and the accumulated deficit (including reclassifications of negative paid in capital) was reduced to $1,013,032 as per September, 2022.

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Fair Value Measurements

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). These tiers include:

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Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;

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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:


Description	September 30, 2022		Level 1		Level 2	Level 3
Assets:
Marketable investments in Trust Account	$	101,634,366	$	101,634,366	—		—
Warrant Liabilities:
Private Placement Warrants	$	25,348		—	—	$	25,348
Public Warrants	$	500,250	$	500,250
Representative Warrants	$	9,754		—	—	$	9,754

The Company utilizes the Black-Scholes Option pricing model to value the Private Placement Warrants and the Representative Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the Warrant liability is determined using Level 3 inputs. With respect to the Public Warrants, a shift from Level 3 classification (at December 31, 2021) to Level 1 (at September 30, 2022) has happened, triggered by the commencement of separate trading of the warrants as from January 10, 2022.

Inherent in the Black-Scholes pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common shares based on historical industry volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. In addition, management includes assumptions regarding the probability of a successful Business Combination.

The aforementioned Private Placement Warrant liabilities are not subject to qualified hedge accounting. Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period in which the change in valuation technique or methodology occurs.

Due to the current market conditions for special purpose acquisition companies, the observable market price for the Public Warrants as of September 30, 2022 was below what an option pricing model would return even with negligible volatility (> 0.001%) input. As a consequence, we have concluded that as of September 30, 2022, the fair value for the Private Placement Warrants is equal to the market price of the Public Warrants.

At September 30, 2022 in accordance with the market price of a Public Warrant, the fair value of a Private Warrant was $0.05.

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The aforementioned Public Warrant liabilities are not subject to qualified hedge accounting. Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period in which the change in valuation technique or methodology occurs.

On January 10, 2022 the Units issued in the Public Offering were split and the Public Shares, Public Warrants and Public Rights started to trade separately. With an observable market quote in an active market the Public Warrants transferred from Level 3 to Level 1 classification in the period ended September 30, 2022.

At September 30, 2022 the market price and accordingly the fair value of a Public Warrant was $0.05.

The aforementioned Representative Warrant liabilities are not subject to qualified hedge accounting. Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period in which the change in valuation technique or methodology occurs.

The following table provides quantitative information regarding Level 3 fair value measurements:


	at September 30, 2022			at December 31, 2021
Stock Price	$	10.03		$	9.41
Exercise Price	$	12.00		$	12.00
Redemption Trigger Price	$	18.00		$	18.00
Term (years)		4.21			4.96
Risk Free Rate		4.06	%		1.27	%
Volatility		0.69	%		17.22	%
Probability Factor		50	%		70	%
Fair Value 1 Representative Warrant	$	0.012		$	0.57

At September 30, 2022, the fair value of a Representative Warrant was $0.012.

NOTE 8 ─ SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were available to be issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.

On November 14, 2022, the Company filed a definitive proxy statement with the SEC to amend its amended and restated certificate of incorporation to extend the Termination Date from the original Termination Date of December 14, 2022 to the Charter Extension Date upon the deposit into the Trust Account of the lesser of (a) $50,000 or (b) $0.05 for each Public Share that is not redeemed in connection with the Special Meeting, which amount will be loaned to the Company by one or both of the Co-Sponsors or one or more of their respective affiliates, members or third-party designees, and to allow the Company, without another stockholder vote, to elect to extend the Termination Date for up to 11 Additional Extensions, by resolution of the Company’s board of directors, if requested by one or both of the Co-Sponsors, and upon five days’ advance notice prior to the applicable Termination Date, until December 14, 2023, or a total of up to 12 months after the original Termination Date of December 14, 2022, unless the closing of an Initial Business Combination shall have occurred prior thereto, subject to an additional deposit in the amount of the lesser of (a) $50,000 or (b) $0.05 for each Public Share that is not redeemed in connection with the Special Meeting per Additional Extension into the Trust Account by one or both of the Co-Sponsors or one or more of their respective affiliates, members or third-party designees. If the proposal to extend the Termination Date is approved and effective, the Company’s stockholders may elect to redeem their Public Shares. An electing stockholder will be entitled to receive a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (net of taxes payable), divided by the number of then-outstanding Public Shares. This redemption right will apply to each holder of Public Shares regardless of whether and how such holder votes on the proposal. The removal from the Trust Account of such amounts would reduce the amount remaining in the Trust Account and increase the percentage interest of the Company held by the Company’s Co-Sponsors, anchor investors and other initial stockholders, the Purchaser and I-Bankers. The Company’s amended and restated certificate of incorporation provides that it cannot redeem or repurchase Public Shares to the extent such redemption would result in the Company’s failure to have at least $5,000,001 of net tangible assets.

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

Unless otherwise stated in this Quarterly Report on Form 10-Q, or unless the context otherwise requires, references to:

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“we,” “us,” “our,” “company” or “our company” are to Financial Strategies Acquisition Corp;

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“management” or our “management team” are to our directors and officers;

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our “co-sponsors” are to FSC Sponsor LLC, a Delaware limited liability company, and Celtic Sponsor VII LLC, a Delaware limited liability company and an affiliate of Celtic Asset & Equity Partners, Ltd.;

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our “advisor” are to Celtic Asset & Equity Partners, Ltd.;

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our “anchor investors” are to Greentree Financial Group Inc., Sea Otter Securities Group LLC, Sixth Borough Capital Fund LP (and certain members of its general partner), and certain accounts managed by Eagle Point Credit Management LLC;

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our “common stock” are to our Class A common stock, par value $0.0001 per share and our Class B common stock, par value $0.0001 per share, collectively;

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our “founder shares” are to shares of our Class B common stock initially purchased by our initial stockholders in a private placement prior to the initial public offering of our units (the “Initial Public Offering”), and the shares of our Class A common stock issuable upon the conversion thereof;

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our “initial stockholders” are to our co-sponsors, anchor investors, Celtic Asset & Equity Partners, Ltd., Caliente Management L.L.C., Frio Investment, L.L.C., and any other holders of our founder shares prior to the Initial Public Offering (or their permitted transferees);

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“I-Bankers” are to I-Bankers Securities, Inc., the representative of the underwriters of the Initial Public Offering;

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“private placement units” are to the units issued to our co-sponsors, anchor investors and I-Bankers in a private placement that closed simultaneously with the closing of the Initial Public Offering (the “Private Placement”), each private placement unit consisting of one private placement share, one private placement right and one private placement warrant;

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“private placement rights” are to the rights included within the private placement units sold in the Private Placement;

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“private placement shares” are to the shares of our common stock included within the private placement units sold in the Private Placement;

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“private placement warrants” are to the warrants included within the private placement units sold in the Private Placement;

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“public rights” are to the rights sold as part of the units in the Initial Public Offering;

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“public shares” are to shares of our Class A common stock sold as part of the units in the Initial Public Offering;

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“public stockholders” are to the holders of our public shares;

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“public warrants” are to our redeemable warrants sold as part of the units in the Initial Public Offering, to the private placement warrants if held by third parties other than one of our co-sponsors, anchor investors or the underwriters (or permitted transferees), and to any private placement warrants issued upon conversion of working capital loans that are sold to third parties that are not initial stockholders, anchor investors, or executive officers or directors (or permitted transferees), in each case, following the consummation of our initial business combination;

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“representative’s shares” are to the 373,750 shares of our Class A common stock issued to the representative of the underwriters and/or its designees upon the closing of the Initial Public Offering;

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“representative’s warrants” are to the warrants, exercisable for 800,400 shares of Class A common stock, issued to the representative of the underwriters and/or its designees upon the closing of the Initial Public Offering;

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“rights” are to the rights, which includes the public rights as well as the private placement rights;

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“warrants” are to our warrants, which includes the public warrants as well as the private placement warrants and representative’s warrants; and

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the “trust account” are to a trust account in the United States established for the benefit of our public stockholders and maintained by Continental Stock Transfer & Trust Company, acting as trustee, into which $101,050,500 in proceeds from the Initial Public Offering and the Private Placement were placed.

On September 21, 2021, we effected a 7-for-10 reverse stock split of all issued and outstanding shares of our Class B common stock which reduced the number of issued and outstanding shares of Class B common stock from 2,875,000 shares to 2,012,500 shares. On October 13, 2021 we effected a 7.2-for-7 forward stock split of all issued and outstanding shares of our Class B common stock which increased the number of issued and outstanding shares of Class B common stock from 2,012,500 shares to 2,070,000 shares. On November 23, 2021 we effected a 87-for-72 forward stock split of all issued and outstanding shares of our Class B common stock which increased the number of issued and outstanding shares of Class B common stock from 2,070,000 shares to 2,501,250 shares. Unless otherwise indicated, all share and per share information contained herein has been adjusted to give effect to such stock splits.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and the notes related thereto in “PART I. Financial Information” of this Quarterly Report on Form 10-Q. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “PART II. Other Information, Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering (as defined below) and the Private Placement (as defined below), the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to forward purchase agreements or backstop agreements we may enter into in the future), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.

On December 14, 2021, we completed our initial public offering of 10,005,000 public units, including the exercise in full of the underwriters’ option to purchase an additional 1,305,000 public units to cover over-allotments (the “Initial Public Offering”). On December 14, 2021, our co-sponsors, anchor investors and I-Bankers purchased 504,950 private placement units in a private placement (the “Private Placement”) at a price of $10.00 per private placement unit, generating gross proceeds of $5,049,500. An aggregate of $100,050,000 in gross proceeds has been generated from the Initial Public Offering.

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Results of Operations and Known Trends or Future Events

We did not commence operations until after the closing of our Initial Public Offering in December 2021, and we have not engaged in any significant operations, nor generated any operating revenues to date. We will not generate any operating revenues until after the completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. We have incurred and we expect to continue to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective business combination candidates. For the three and nine months ended September 30, 2022, we had operating losses of $503,543 and $1,384,263, respectively, for each period consisting mainly of legal and consulting fees, franchise tax provisions, directors and officers liability insurance premiums and administrative expenses. Such operating losses have been offset by interest earned on marketable securities held in the trust account of $446,120 and $583,395, respectively, and by a reduction of the derivative warrant liability of $346,128 and $8,804,149, respectively, triggered by the shift of the public warrants from Level 3 classification to Level 1 classification.

Liquidity and Capital Resources

As indicated in the accompanying unaudited condensed financial statements, at September 30, 2022, we had $23,645 in cash. We have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. We may seek to raise additional capital through debt or equity offerings to cover operating expenses or to complete our initial business combination, which may be from third parties or insiders. There can be no assurance that we will be able to raise additional capital on favorable terms, or at all, and any such capital raise may be dilutive to existing holders. Prior to the consummation of the Initial Public Offering, our liquidity needs were satisfied through a capital contribution from our initial stockholders of $25,000 for founder shares and loans of $450,000, comprised of a $200,000 unsecured promissory note from our co-sponsor, FSC Sponsor LLC, of which $200,000 has been drawn upon, and a convertible loan of $250,000 from an investor in FSC Sponsor LLC under an unsecured promissory note, of which $250,000 has been drawn upon.

Net proceeds from (i) the sale of the units in our Initial Public Offering, after deducting offering expenses of approximately $811,403 ($332,315 of which have been prepaid with the proceeds from the promissory notes) and underwriting discounts and commissions of $2,501,250, (ii) the private sale of the private placement units for a purchase price of $10.00 and (iii) the sale of representative shares to the Underwriters were $102,122,900. Of this amount, $101,050,500 is being held in the trust account. After payment of $661,028 for directors and officers liability insurance, the remaining amount of $411,372 was released to the Company’s current account. The proceeds held in the trust account have been or 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.

On August 17, 2022, we entered into a securities purchase agreement (the “Gaylor Securities Purchase Agreement”) with Greg Gaylor, as trustee of the William C Gaylor and Dorothy J Gaylor Rev. Trust (the “Purchaser”). Pursuant to the Gaylor Securities Purchase Agreement, we sold to the Purchaser, for an aggregate purchase price of $200,000, a promissory note in the aggregate principal amount of $200,000 (the “Gaylor Note”), 20,000 shares of Class A common stock and warrants to purchase 2,000 shares of Class A common stock, and the Purchaser committed to purchase upon the same terms at the request of the Company up to $150,000 of additional securities, consisting of an additional promissory note in the aggregate principal amount of up to $150,000, and to purchase up to an additional 15,000 shares of Class A common stock and warrants to purchase up to 1,500 shares of Class A common stock. The Gaylor Note bears interest at the rate of 10% per annum, and the warrants issued to the Purchaser are identical to the private warrants issued as part of the Private Placement Units.

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Pursuant to a definitive proxy statement filed with the Securities and Exchange Commission (“SEC”) on November 14, 2022, we will hold a special meeting of our stockholders (the “Special Meeting”) to propose the amendment of our amended and restated certificate of incorporation (the “Extension Amendment”) to extend the date (the “Termination Date”) by which we must consummate an initial business combination from the original Termination Date of December 14, 2022 to January 14, 2023 (the “Charter Extension Date”), upon the deposit into the Trust Account of the lesser of (a) $50,000 or (b) $0.05 for each Public Share that is not redeemed in connection with the Special Meeting, which amount will be loaned to the Company by one or both of the Co-Sponsors or one or more of their respective affiliates, members or third-party designees, and to allow the Company, without another stockholder vote, to elect to extend the Termination Date on a monthly basis for up to 11 times by an additional one month each time after the Charter Extension Date (each, an “Additional Extension”) by resolution of our board of directors, if requested by one or both of the Co-Sponsors, and upon five days’ advance notice prior to the applicable Termination Date, until December 14, 2023, or a total of up to 12 months after the original Termination Date of December 14, 2022, unless the closing of an initial business combination shall have occurred prior thereto, subject to an additional deposit in the amount of the lesser of (a) $50,000 or (b) $0.05 for each Public Share that is not redeemed in connection with the Special Meeting per Additional Extension into the Trust Account by one or both of the Co-Sponsors or one or more of their respective affiliates, members or third-party designees. If the proposal to extend the Termination Date is approved and effective, our stockholders may elect to redeem their Public Shares. An electing stockholder will be entitled to receive a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (net of taxes payable), divided by the number of then-outstanding Public Shares. This redemption right will apply to each holder of Public Shares regardless of whether and how such holder votes on the proposal. The removal from the Trust Account of such amounts would reduce the amount remaining in the Trust Account and increase the percentage interest of the Company held by the Company’s Co-Sponsors, anchor investors and other initial stockholders, the Purchaser and I-Bankers. Our amended and restated certificate of incorporation provides that we cannot redeem or repurchase Public Shares to the extent such redemption would result in the Company’s failure to have at least $5,000,001 of net tangible assets. Due to the reasons stated above, we believe we may not have sufficient liquidity through the date of an initial business combination, if extended through December 14, 2023.

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account, to complete our initial business combination. We may withdraw interest to pay franchise and income taxes and up to $100,000 in dissolution expenses. We estimate our annual franchise tax obligations, based on the number of shares of our common stock authorized and outstanding after the completion of our Initial Public Offering, to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, and which we may pay from funds from the Initial Public Offering and the Private Placement held outside of the trust account or from interest earned on the funds held in our trust account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust 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.

As of September 30, 2022, we held $23,645 outside the trust account. We expect to use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses and structure, negotiate and complete an initial business combination.

As of September 30, 2022, we had negative working capital of $406,206. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our co-sponsors or an affiliate of our co-sponsors or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts.

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In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such working capital loans may be convertible into private placement-equivalent units at a price of $10.00 per unit (which, for example, would result in the holders being issued 150,000 units if $1,500,000 of notes were so converted), at the option of the lender. The units would be identical to the private placement units. The terms of such working capital loans by our co-sponsors or their affiliates, or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our officers and directors, co-sponsors or an affiliate of our co-sponsors, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

Our primary liquidity requirements as of September 30, 2022 include approximately $300,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; $100,000 for legal and accounting fees related to regulatory reporting requirements; $50,000 for listing and filing fees and expenses; and approximately $50,000 for working capital that will be used for miscellaneous expenses and reserves (including taxes net of anticipated interest income).

These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds held outside the trust account to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.

We cannot exclude the possibility that we will need to raise additional funds in order to meet the expenditures required for operating our business. If our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of the Initial Public Offering and the sale of the priv

Financial Strategies Acquisition Corp. [FXCO] Filings
10-Q	[2022-11-14]
10-Q	[2022-08-17]
10-Q	[2022-05-16]
10-K	[2022-03-31]
S-1	[2021-10-22]