HENNESSY CAPITAL INVESTMENT CORP. V MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the condensed financial
statements and the notes thereto contained elsewhere in this report.



Special note regarding forward-looking statements



All statements other than statements of historical fact included in this section
and elsewhere in this Form 10-Q regarding the Company's financial position,
business strategy and the plans and objectives of management for future
operations, are forward-looking statements. When used in this Form 10-Q, words
such as "anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to us or the Company's management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements as a result of certain
factors detailed in our filings with the SEC.



Overview



We are a blank check company incorporated as a Delaware corporation on October
6, 2020. We were 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 ("Initial Business Combination"). We
intend to effectuate our Initial Business Combination using cash from the
proceeds of our initial public offering that was completed in January 2021 (the
"Public Offering") and the sale of warrants in a private placement (the "Private
Placement") that occurred simultaneously with the completion of the Public
Offering (the "Private Placement Warrants"), our capital stock, debt or a
combination of cash, stock and debt.



The issuance of additional shares of our shares in a first business combination:

? may significantly dilute the ownership of our shareholders;

? may subordinate the rights of holders of our common stock if preferred stock is

issued with rights greater than those granted to our ordinary shares;

? could result in a change of control if a substantial number of shares of our common stock

stock is issued, which may affect, among other things, our ability to use our

net operating losses carried forward, if any, and could lead to the resignation

or the removal of our current officers and directors;

? may have the effect of delaying or preventing a change of control of us by

dilute the shareholding or voting rights of a person seeking to obtain

   control of us; and




? may adversely affect prevailing market prices for our Class A common stock

   and/or warrants.



Similarly, if we issue debt securities or incur other indebtedness to fund our Initial Business Combination, it could result in:

? default and seizure of our assets if our operating income after a

The Initial Business Combination is insufficient to repay our debts;

? acceleration of our debt repayment obligations even if we do everything

principal and interest payments when due if we fail to comply with certain covenants

require the maintenance of certain financial ratios or reserves without

waiver or renegotiation of this commitment;

? our immediate payment of all principal and accrued interest, if any, if the

the debt obligation is payable on sight;

? our inability to obtain necessary additional financing if the debt obligation or

other debts contain covenants limiting our ability to obtain such

financing while the debt obligation or other indebtedness is outstanding;



                                       16




? our inability to pay dividends on our common stock;

? use a significant portion of our cash flow to pay principal and interest on

our debt, which will reduce the funds available for dividends on our shares

inventory if declared, or limit our ability to pay expenses, make capital

expenses and acquisitions and fund other general corporate purposes;

? limits on our flexibility in planning and reacting to changes in our

business and in the industry in which we operate;

? increased vulnerability to adverse changes in the general economy, industry and

   competitive conditions and adverse changes in government regulation;

? the limits on our ability to borrow additional money for expenses, capital

expenditures, acquisitions, debt service requirements, execution of our

strategy and for other purposes and

? other disadvantages compared to our less indebted competitors.




At March 31, 2022, we had approximately $446,000 in cash outside of the Trust
Account, current liabilities of approximately $7,990,000 and negative working
capital of approximately $7,115,000. We are incurring and expect to incur
significant costs in the pursuit of an Initial Business Combination and we
cannot assure you that our plans to complete an Initial Business Combination
will be successful.


Termination of merger agreement and plan of reorganization



On May 7, 2021, the Company entered into a Merger Agreement and Plan of
Reorganization (as amended and restated on June 19, 2021, the "Merger
Agreement") with PlusAI Corp, an exempted company incorporated with limited
liability in the Cayman Islands ("Plus") and certain other partiesfor an initial
business combination. Effective November 8, 2021 the Company and Plus mutually
terminated the Merger Agreement. Neither party was required to pay the other a
termination fee as a result of the mutual decision to terminate the Merger
Agreement.



Results of Operations


For the period from October 6, 2020 (date of inception) to March 31, 2022, our
activities consisted of formation and preparation for the Public Offering and,
subsequent to completion of the Public Offering on January 20, 2021, identifying
and completing a suitable Initial Business Combination. As such, in 2021 we had
no operations or significant operating expenses until after the completion of
the Public Offering in January 2021.



Our normal operating costs since January 20, 2021 include costs associated with
our search for an Initial Business Combination (see below), costs associated
with our governance and public reporting (see below), state franchise taxes of
approximately $17,000 per month (see below), a charge of $15,000 per month from
our Sponsor for administrative services and $29,000 per month ($14,000 of which
is deferred as to payment until closing of our Initial Business Combination) for
compensation to each of our Chief Operating Officer and Chief Financial Officer.
Our costs in the three months ended March 31, 2022 and 2021 also include
professional and consulting fees and travel associated with evaluating various
Initial Business Combination candidates, as well as the costs of our public
reporting and other costs, subsequent to the Public Offering. Professional and
consulting fees, regulatory and travel costs associated with investigating
potential Initial Business Combination candidates were approximately $10,000 and
$1,263,000, respectively, for the three months ended March 31, 2022 and 2021. As
we identified an Initial Business Combination candidate, our costs increased
significantly in the three months ended March 31, 2021 in connection with
negotiating and executing a definitive agreement and related agreements as well
as additional professional, due diligence and consulting fees and travel costs
required in connection with an Initial Business Combination. As that transaction
was terminated in November 2021, transaction related costs have decreased in the
three months ended March 31, 2022. Costs associated with our governance and
public reporting have increased since the Public Offering and were approximately
$219,000 and $93,000 for the three months ended March 31, 2022 and 2021. In
addition, since our operating costs are not expected to be deductible for
federal income tax purposes, we are subject to federal income taxes on the
interest income earned from the Trust Account less taxes. Such federal income
taxes were $-0-, for both the three months ended March 31, 2022 and 2021 because
the cost of deductible franchise taxes exceeded the interest income earned on
the Trust Account. We are permitted to withdraw interest earned from the Trust
Account for the payment of taxes to the extent of interest income earned. We did
not withdraw any interest from the Trust Account in the three months ended
March
31, 2022.



                                       17




The Public Offering and the Private Placement closed on January 20, 2021 as more
fully described in "Liquidity and Capital Resources" below. At that time, the
proceeds in the Trust Account were initially invested in a money market fund
that invested solely in direct U.S. government obligations meeting the
applicable conditions of Rule 2a-7 of the Investment Company Act of 1940. At
March 31, 2022, proceeds in the Trust Account are invested in cash as described
in Note 5 to the condensed financial statements. As a result of market
conditions occurring in connection with the Covid-19 pandemic, low interest
rates on available investments have been insufficient to cover our franchise tax
obligations although interest rates did start to rise during the three months
ended March 31, 2022.



As discussed further in Note 7 to the condensed financial statements, the
Company accounts for its outstanding public and private warrants as components
as derivative liabilities in the accompanying unaudited condensed financial
statements.  As a result, the Company is required to measure the fair value of
the public and private warrants at the end of each reporting period and
recognize changes in the fair value from the prior period in the Company's
operating results for each current period. The condensed statement of operations
for the three months ended March 31, 2022 and 2021 reflects other income from
change in fair value of the warrant liability of approximately $6,690,000 and
$623,000, respectively. Also reflected in other income (expense) for the three
months ended March 31, 2021 are charges to other expense aggregating
approximately $-0- and $1,471,000, respectively, for warrant liability
transaction costs (approximately $639,000) and transaction date expenses related
to the issuance of the Private Placement Warrants (approximately $832,000).
There were no such expense charges in the three months ended March 31, 2022.



Cash and capital resources

On January 20, 2021, we consummated the Public Offering of an aggregate of
34,500,000 Units at a price of $10.00 per unit generating gross proceeds of
approximately $345,000,000 before underwriting discounts and expenses.
Simultaneously with the consummation of the Public Offering, we consummated the
Private Placement of 6,933,333 Private Placement Warrants, each exercisable to
purchase one share of our Class A common stock at $11.50 per share, to the
Sponsor and certain funds and accounts managed by subsidiaries of BlackRock,
Inc. and D.E. Shaw Valance Portfolios,L.L.C. (collectively, the "Direct Anchor
Investors"), at a price of $1.50 per Private Placement Warrant, generating gross
proceeds, before expenses, of approximately $10,400,000.



The net proceeds from the Public Offering and Private Placement were
approximately $347,776,000, net of the non-deferred portion of the underwriting
commissions of $6,900,000 and offering costs and other expenses of approximately
$724,000. $345,000,000 of the proceeds of the Public Offering and the Private
Placement have been deposited in the Trust Account and are not available to us
for operations (except amounts to pay taxes). At March 31, 2022, we had
approximately $446,000 of cash available outside of the Trust Account to fund
our activities until we consummate an Initial Business Combination.



Until the consummation of the Public Offering, the Company's only sources of
liquidity were an initial purchase of shares of our Class B common stock for
$25,000 by the Sponsor, and a total of $150,000 loaned by the Sponsor against
the issuance of an unsecured promissory note (the "Note"). The Note was
non-interest bearing and was paid in full on January 20, 2021 in connection with
the closing of the Public Offering.



At March 31, 2022, the Company has approximately $446,000 in cash, approximately
$7,990,000 of current liabilities and approximately $7,115,000 in negative
working capital. The Company has incurred and expects to continue to incur
significant costs in pursuit of its Business Combination. Further, if the
Company cannot complete a Business Combination prior to January 20, 2023, it
could be forced to wind up its operations and liquidate unless it receives
approval from its stockholders to extend such date. These conditions raise
substantial doubt about the Company's ability to continue as a going concern for
a period of time within one year after the date that the financial statements
are issued. The Company's plan to deal with these uncertainties is to preserve
cash by deferring payments with anticipated cooperation from its service
providers and to complete a Business Combination prior to January 20, 2023.
There is no assurance that the Company's plans to consummate a Business
Combination will be successful or successful within the period permitted to
complete the Business Combination. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. In an
attempt to preserve cash, beginning in November 2021, the Company's Chief
Operating Officer and Chief Financial Officer, as well as the Sponsor and
certain service providers have agreed to defer cash payments for an indefinite
period. Further, in January 2022, the Company elected to pay certain insurance
payments over a time payment plan and such remaining liability, approximately
$240,000 at March 31, 2022 is including in accrued and other liabilities in the
accompanying unaudited condensed balance sheet.



                                       18





The preponderance of the current liabilities (approximately $6,755,000) results
from amounts accrued as payable to professional service firms who indicated
their intention to accept deferred payment terms, or success fees, that are
payable at the closing of the proposed Business Combination. As a result, the
Company believes, but cannot assure, that it has the liquidity to complete
a
Business Combination.


The Company has only until January 20, 2023 to complete an Initial Business
Combination. If the Company does not complete an Initial Business Combination by
January 20, 2023, the Company will (i) cease all operations except for the
purposes of winding up; (ii) as promptly as reasonably possible, but not more
than ten business days thereafter, redeem the public shares of Class A common
stock for a pro rata portion of the Trust Account, including interest, but less
taxes payable (and less up to $100,000 of such net interest to pay dissolution
expenses) and (iii) as promptly as reasonably possible following such
redemption, dissolve and liquidate the balance of the Company's net assets to
its creditors and remaining stockholders, as part of its plan of dissolution and
liquidation. The initial stockholders have waived their redemption rights with
respect to their founder shares; however, if the initial stockholders or any of
the Company's officers, directors or their affiliates acquire shares of Class A
common stock in or after the Public Offering, they will be entitled to a pro
rata share of the Trust Account upon the Company's redemption or liquidation in
the event the Company does not complete an Initial Business Combination within
the required time period.



In the event of such liquidation, it is possible that the per share value of the
residual assets remaining available for distribution (including Trust Account
assets) will be less than the price per unit in the Public Offering.



Off-balance sheet financing



As of March 31, 2022, we have no obligations, assets or liabilities which would
be considered off-balance sheet arrangements. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.



We have not entered into any off-balance sheet financing arrangements, established special purpose entities, guaranteed any debts or commitments of other entities, or entered into any arrangements for non-financial assets.


Contractual obligations



At March 31, 2022, we did not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities. In connection
with the Public Offering, we entered into an Administrative Support Agreement
with Hennessy Capital Group LLC, an affiliate of our Sponsor, pursuant to which
the Company pays Hennessy Capital Group LLC $15,000 per month for office space,
utilities and secretarial and administrative support.



Also, commencing on the date the securities are first listed on the Nasdaq
Capital Market, the Company has agreed to compensate each of its President and
Chief Operating Officer as well as its Chief Financial Officer $29,000 per month
prior to the consummation of the Company's initial Business Combination, of
which $14,000 per month is payable upon the completion of the Company's initial
Business Combination and $15,000 per month is payable currently for their
services. Beginning in November 2021, these two officers agreed to defer
collection of their compensation for an indefinite period. During the three
months ended March 31, 2022 and 2021, $174,000 and $147,000, respectively, was
charged to operations for these arrangements including approximately $174,000
and 71,000, respectively, that was added to accrued deferred compensation at
March 31, 2022 and 2021. The amount of deferred compensation accrued as well as
the cash portion of compensation that the two officers agreed to defer totals
approximately $557,000 at March 31, 2022.



Upon completion of the Initial Business Combination or liquidation of the Company, the Company will cease to pay or accrue such monthly fees.


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In connection with identifying an Initial Business Combination candidate and
negotiating an Initial Business Combination, the Company has and may enter into
engagement letters or agreements with various consultants, advisors,
professionals and others in connection with an Initial Business Combination. The
services under these engagement letters and agreements can be material in amount
and in some instances can include contingent or success fees. Contingent or
success fees (but not deferred underwriting compensation) would be charged to
operations in the quarter that an Initial Business Combination is consummated.
In most instances (except with respect to our independent registered public
accounting firm), these engagement letters and agreements are expected to
specifically provide that such counterparties waive their rights to seek
repayment from the funds in the Trust Account.



Critical accounting estimates and policies



The preparation of financial statements and related disclosures in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following as our critical accounting estimates
and policies:



Accounting estimates:


A critical accounting estimate to our financial statements is the estimated fair
value of our warrant liability. 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:



? Level 1, defined as observable inputs such as quoted prices (unadjusted) for

identical instruments in active markets;

? Level 2, defined as inputs other than quoted prices in active markets that are

directly or indirectly observable, such as quoted prices for

instruments in active markets or at quoted prices for the same or similar prices

instruments in markets that are not active; and

? Level 3, defined as unobservable entries in which little or no market data

exists, which requires an entity to develop its own assumptions, such as

valuations derived from valuation techniques in which one or more

   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.



At inception on January 20, 2021 and for reporting periods ended on or before
June 30, 2021, we utilized an independent valuation consultant that used a Monte
Carlo simulation model with Geometric Brownian motion to value the warrants at
each reporting period, with changes in fair value recognized in the statement of
operations. The estimated fair value of the warrant liability was determined
using Level 3 inputs. Inherent in a Monte Carlo simulation options pricing model
are assumptions related to expected share-price volatility, expected life,
risk-free interest rate and dividend yield. We estimated the volatility of our
shares based on historical volatility that matches the expected remaining life
of the warrants. The risk-free interest rate was 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
was based on the historical rate, which we anticipated to remain at zero.



Since the hierarchy gives the highest priority to unadjusted quoted prices in
active markets, subsequent to June 30, 2021 our public warrants were trading in
an active market. As such, subsequent to June 30, 2021, we transferred the
public warrants from Level 3 to Level 1 and the private placement warrants from
Level 3 to Level 2 to reflect the fact that the warrants were trading in an
active market. At March 31, 2022 and December 31, 2021, we valued our public
warrants based on publicly observable inputs (Level 1 inputs) from the trading
in the public warrants in an active market ($0.84 per warrant on December 31,
2021). Since the private placement warrants are substantially similar to the
public warrants but do not trade, we valued them based on the value of the
public warrants (significant other observable inputs - Level 2).



For reference, each $0.10 change in the fair value of our warrants translates into approximately $1,556,000 Gain or loss.


                                       20





Emerging Growth Company:



Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being
required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act
registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or
revised financial accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such an
election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when an accounting standard is
issued or revised and it has different application dates for public or private
companies, the Company, as an emerging growth company, can adopt the new or
revised standard at the time private companies adopt the new or revised
standard. This may make comparison of the Company's financial statements with
another public company which is neither an emerging growth company nor an
emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in
accounting standards used.



Net earnings (loss) per common share:



Net income (loss) per common share is computed by dividing net income (loss)
applicable to common stockholders by the weighted average number of common
shares outstanding during the period as calculated using the treasury stock
method. The Company has not considered the effect of the warrants sold in the
Public Offering and the Private Placement to purchase an aggregate of 15,558,333
shares of Class A common stock in the calculation of diluted income (loss) per
share, since their inclusion would be anti-dilutive under the treasury stock
method. As a result, diluted income (loss) per common share is the same as basic
loss per common share for the period.



The Company complies with the accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." The Company has two classes of stock, which are
referred to as Class A common stock and Class B common stock. Income and losses
are shared pro rata between the two classes of stock. Net income (loss) per
common share is calculated by dividing the net income (loss) by the weighted
average number of common shares outstanding during the respective period.



The following table reflects earnings per share after allocating income between shares based on shares outstanding.


                                                  For the three months ended          For the three months ended
                                                        March 31, 2022                      March 31, 2021
                                                    Class A           Class B           Class A           Class B

Numerator:

Allocation of net income (loss)                       4,978,000       1,244,000          (1,855,000 )      (580,000 )
Denominator:
Weighted average shares outstanding                  34,500,000       

8,625,000 26,833,000 8,385,000 Basic and diluted net earnings (loss) per share $0.14 $0.14 $(0.07) $(0.07)

Concentration of credit risk:



Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash accounts in a financial institution which, at times,
may exceed the Federal Deposit Insurance Corporation maximum coverage 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.



Financial Instruments:



The fair value of the Company's assets and liabilities (excluding the warrant
liability), which qualify as financial instruments under FASB Accounting
Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures,"
approximates the carrying amounts represented in the condensed financial
statements primarily due to their short-term nature.



                                       21





Use of Estimates:



The preparation of condensed financial statements in conformity with U.S. 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 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 financial
statements, which management considered in formulating its estimate, could
change in the near term due to one or more future confirming events. One of the
more significant estimates included in these financial statements is the
determination of the fair value of the warrant liability. Such estimates may be
subject to change as more current information becomes available and accordingly
the actual results could differ significantly from those estimates.



Deferred Offering Costs:


The Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC
Staff Accounting Bulletin (SAB) Topic 5A - "Expenses of Offering." Costs
incurred in connection with preparation for the Public Offering were
approximately $19,689,000, including the underwriting discount of $18,975,000.
Such costs were allocated among the equity and warrant liability components
based on their fair values and approximately $19,050,000 of such costs have been
charged to temporary equity and the remainder, approximately $639,000, have been
charged to the condensed statement of operations upon completion of the Public
Offering in January 2021.



Income Taxes:


The Company follows the asset and liability method of accounting for income
taxes under FASB ASC 740, "Income Taxes." Deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statements 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.



The Company's currently taxable income consists of interest income on the Trust
Account net of taxes. The Company's general and administrative costs are
generally considered start-up costs and are not currently deductible. During the
three months ended March 31, 2022, and 2021 the Company recorded income tax
expense of approximately $-0- in both periods because the cost of deductible
franchise taxes exceeded the interest income earned on the Trust Account so
there was no income for tax purposes. The Company's effective tax rate for the
three months ended March 31, 2022 and 2021 was approximately -0-% in both
periods which differs from the expected income tax rate due to the start-up
costs (discussed above) which are not currently deductible and business
combination and warrant costs which may not be deductible. At March 31, 2022 and
December 31, 2021, the Company has a deferred tax asset of approximately
$400,000 and $300,000, respectively, primarily related to start-up costs.
Management has determined that a full valuation allowance of the deferred tax
asset is appropriate at this time.



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. There were no unrecognized tax benefits as of March 31, 2022 or
December 31, 2021. 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 March 31, 2022 and December 31, 2021.
The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position. The
Company is subject to income tax examinations by major taxing authorities since
inception.



                                       22





Redeemable Common Stock:


As discussed in Note 4, all of the 34,500,000 public shares sold as part of the
Units in the Public Offering contain a redemption feature which allows for the
redemption of public shares if the Company holds a stockholder vote or there is
a tender offer for shares in connection with a Business Combination. In
accordance with FASB ASC 480, 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 FASB ASC 480. Although the Company did not specify a maximum
redemption threshold, its charter provides that in no event will it redeem its
public shares in an amount that would cause its net tangible assets to be less
than $5,000,001 upon the closing of a Business Combination. However, because all
of the shares of Class A common stock are redeemable, all of the shares are
recorded as Class A common stock subject to redemption on the enclosed unaudited
condensed balance sheet.



The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of the securities at the end of each reporting
period. Increases or decreases in the carrying amount of redeemable common stock
are affected by adjustments to additional paid-in capital. Accordingly, at March
31, 2022 and December 31, 2021, 34,500,000 of the 34,500,000 public shares were
classified outside of permanent equity. Class A common stock subject to
redemption consists of:



Gross proceeds of Public Offering                       $ 345,000,000
Less: Proceeds allocated to Public Warrants               (13,973,000 )
  Offering costs                                          (19,050,000 )

Plus: Increase in book value to redemption value 33,023,000 Class A common shares subject to redemption

             $ 345,000,000




Warrant Liability



The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
specific terms and applicable authoritative guidance in FASB ASC 480,
Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and
Hedging ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own shares, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.



For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded as a liability at their initial fair value
on the date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of the warrants are recognized as a non-cash gain or loss
on the statements of operations. Costs associated with issuing the warrants
accounted for as liabilities are charged to operations when the warrants are
issued. The fair value of the warrants was estimated in the initial periods
using a Monte Carlo simulation approach for the public and private warrants and
in the current period based upon, or derived from, the public warrants in an
active, open market.


Recent accounting statements:



In August 2020, the 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 in the fiscal year beginning after December 15, 2023,
which in our case would be January 1, 2024 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company is currently evaluating the impact that the pronouncement
will have on the financial statements.



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


Subsequent Events:



Management has evaluated subsequent events and transactions that occurred after
the balance sheet date and up to the date that the financial statements were
issued and has concluded that all such events that would require adjustment or
disclosure have been recognized or disclosed.



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