References in this report (the "Quarterly Report") to "we," "us," "Isleworth," or the "Company" refer to Isleworth Healthcare Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Isleworth Healthcare Sponsor I, LLC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements



This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this
Form10-Q,
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form
10-K filed
with the U.S. Securities and Exchange Commission (the "SEC"). The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.

Overview

We are a blank check company incorporated on December 15, 2020 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 (a "Business Combination"). We consummated our Public Offering (as defined below) on March 2, 2021 and are currently in the process of locating suitable targets for our business combination. We intend to use the cash proceeds from our Public Offering and the Private Placement described below as well as additional issuances, if any, of our capital stock, debt or a combination of cash, stock and debt to complete the Business Combination.

We expect to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.

We completed the sale of 20,700,000 units (the "Units" and, with respect to the shares of common stock included in the Units being offered, the "Public Shares") at $10.00 per Unit on March 2, 2021. Simultaneous with the closing of the Public Offering, we completed the sale of 5,600,000 Private Warrants (the "Private Warrants") at a price of $1.00 per Private Warrant in a private placement to the Sponsor and I-Bankers.

As of March 31, 2022, a total of $207,000,000 of the net proceeds from the IPO (including the full exercise of the over-allotment option) and the Private Placements were in a trust account established for the benefit of the Company's public stockholders. The trust fund account is invested in interest-bearing U.S. government securities and the income earned on those investments is also for the benefit of our public stockholders.

Our management has broad discretion with respect to the specific application of the net proceeds of IPO and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination.

Proposed Business Combination

On April 26, 2022, we entered into an Merger Agreement and Plan of Reorganization (as it may be amended, supplemented or otherwise modified from time to time, the "Merger Agreement"), by and among Isleworth, IHAC First Merger Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Isleworth ("First Merger Sub"), IHAC Second Merger Sub LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of Isleworth ("Second Merger Sub"), Cytovia Holdings, Inc. a Delaware corporation ("Cytovia"), and Isleworth Healthcare Sponsor I, LLC, a Delaware limited liability company (the "Sponsor").

The Merger Agreement and the transactions contemplated thereby were approved by the boards of directors or board of managers, as applicable, of each of Isleworth, Cytovia and the Sponsor.

The Business Combination

The Merger Agreement provides for, among other things, the following transactions at the closing: (i) First Merger Sub will merge with and into Cytovia (the "First Merger"), with Cytovia as the surviving company in the First Merger as a wholly-owned subsidiary of Isleworth (the "Surviving Corporation"), and immediately following the First Merger and as part of the same overall transaction as the First Merger, the Surviving Corporation will merge with and into Second Merger Sub (the "Second Merger" and, together with First Merger, the "Mergers"), with Second Merger Sub being the surviving entity of the Second Merger (Second Merger Sub, in its capacity as the surviving entity of the Second Merger, is sometimes referred to herein as the "Surviving Entity"). In connection with the Mergers, Isleworth will change its name to "Cytovia Therapeutics, Inc." The Mergers and the other transactions contemplated by the Merger Agreement are hereinafter referred to as the "Business Combination."


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The Business Combination is expected to close in the third quarter of 2022, following the receipt of the required approval by Isleworth's stockholders and the fulfillment (or waiver) of other customary closing conditions.

Business Combination Consideration

In accordance with the terms and subject to the conditions of the Merger Agreement, each share of Cytovia Class A common stock, par value $0.000001, and Cytovia Class B common stock, par value $0.000001 per share (collectively, "Cytovia Common Stock"), issued and outstanding shall be converted into a number of shares of Isleworth common stock, par value $0.0001 ("Isleworth Common Stock") equal to the Exchange Ratio, plus the right to receive a pro rata portion of up to 4,000,000 additional shares of Isleworth Common Stock ("Earnout Shares") if certain milestone events occur within two years after the closing.

Additionally, at the Closing and as set forth in the Merger Agreement, (i) each warrant to purchase Cytovia Common Stock ("Cytovia Warrants") will be converted into a warrant to purchase shares of combined company common stock, (ii) each option to purchase Cytovia Common Stock ("Cytovia Options"), whether vested or unvested, will be assumed and converted into an option to purchase a number of shares of combined company common stock, (iii) each restricted share award of Cytovia Common Stock will be exchanged for restricted share awards of Cytovia Common Stock subject to the same terms and conditions as were applicable to such restricted shares and (iv) each restricted stock unit award of Cytovia ("Cytovia RSU") will be converted into the right to receive restricted stock units based on shares of combined company common stock.



The Exchange Ratio will be determined by dividing (i) the Cytovia Reference
Share Value by (ii) $10 and further dividing by the number of outstanding shares
of Cytovia Common Stock on a fully-diluted basis, which excludes shares of
Cytovia Common Stock (x) issuable upon conversion of Cytovia's convertible
instruments, including the Convertible Note (as defined below), Cytovia Warrants
and any financing that Cytovia is permitted to undertake under the Merger
Agreement, (y) issuable in connection with a certain license agreement by and
between Cytovia and Cellectis (as defined below) and (z) issuable upon any
Cytovia RSUs or Cytovia Options that, in each case, are not vested as of the
Closing. The Cytovia Reference Share Value shall be equal to $300,000,000, plus
the aggregate exercise price of outstanding warrants and options to purchase
Cytovia Common Stock, minus
one-half
the value of up to 4,000,000 shares of Isleworth Common Stock (valued at $10 per
share) ("Inducement Shares") that Isleworth may issue in connection with
obtaining financing for the Business Combination. The Sponsor has agreed to
forfeit a number of promote shares equal to
one-half
the aggregate number of Inducement Shares that are issued.

One-half

of the aggregate number of Earnout Shares will be issued if, during the period beginning on the first anniversary and ending on the second anniversary of the closing, the combined company's common stock achieves a market price of $15 per share for a specified number of days, or the combined company consummates a transaction in which its stockholders have the right to receive consideration implying a value of at least $15 per share. The second half of the Earnout Shares will be issued if, during the period beginning 180 days after the closing date and ending on the second anniversary of the closing date, the combined company's common stock achieves a market price of $20 per share for a specified number of days, or the combined company consummates a transaction in which its stockholders have the right to receive consideration implying a value of at least $20 per share.

Governance

Isleworth has agreed to take actions such that, effective immediately after the closing of the Business Combination, Isleworth's board of directors shall consist of seven directors, which directors shall be nominated pursuant to the Merger Agreement, which nominees include two Isleworth designees. Additionally, certain current Cytovia management personnel will join Isleworth as officers of the company and current members of the Cytovia board of directors will join the board of directors of combined company following consummation of the Mergers.

Representations and Warranties; Covenants


The Merger Agreement contains representations, warranties and covenants of each
of the parties thereto that are customary for transactions of this type,
including, among others, covenants providing for (i) certain limitations on the
operation of the parties' respective businesses prior to consummation of the
Business Combination, (ii) the parties' efforts to satisfy conditions to
consummation of the Business Combination, including by obtaining necessary
approvals from governmental agencies (including U.S. federal antitrust
authorities and under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act")), (iii) prohibitions on the parties soliciting
alternative transactions, (iv) Isleworth preparing and filing a registration
statement on Form
S-4
with the Securities and Exchange Commission (the "SEC") and taking certain other
actions to obtain the requisite approval of Isleworth's stockholders to vote in
favor of certain matters, including the adoption of the Merger Agreement and
approval of the Business Combination, at a special meeting to be called for the
approval of such matters, and (v) the protection of, and access to, confidential
information of the parties.

In addition, Isleworth has agreed to adopt an equity incentive plan and an employee stock purchase plan, each as described in the Merger Agreement.

Conditions to Each Party's Obligations

The obligations of Isleworth and Cytovia to consummate the Business Combination are subject to certain closing conditions, including, but not limited to, (i) the expiration or termination of the applicable waiting period under the HSR Act, (ii) the approval of Isleworth's stockholders, (iii) the approval of Cytovia's stockholders and (iv) the Registration Statement (as defined below) becoming effective.

In addition, the obligation of Isleworth, First Merger Sub, and Second Merger Sub to consummate the Business Combination is subject to the fulfillment (or waiver) of other closing conditions, including, but not limited to, (i) the representations and warranties of Cytovia being true and correct to the standards applicable to such representations and warranties and each of the covenants of Cytovia having been performed or complied with in all material respects, (ii) delivery of certain ancillary agreements required to be executed and delivered in connection with the Business Combination; and (iii) no Material Adverse Effect (as defined in the Merger Agreement) having occurred.

The obligation of Cytovia to consummate the Business Combination is also subject to the fulfillment (or waiver) of other closing conditions, including, but not limited to, (i) the representations and warranties of Isleworth, First Merger Sub and Second Merger Sub being true and correct to the standards applicable to such representations and warranties and each of the covenants of Isleworth, First Merger Sub and Second Merger Sub having been performed


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or complied with in all material respects, (ii) the aggregate cash proceeds from Isleworth's trust account, together with the proceeds from the PIPE Financing (as defined below), equaling no less than $50,000,000 (after deducting any amounts paid to Isleworth stockholders that exercise their redemption rights in connection with the Business Combination and net of unpaid transaction expenses incurred or subject to reimbursement by Isleworth), and (iii) the shares of Isleworth Common Stock being listed on the Nasdaq in connection with the Business Combination.

Termination

The Merger Agreement may be terminated under certain customary and limited circumstances prior to the closing of the Business Combination, including, but not limited to, (i) by mutual written consent of Isleworth and Cytovia, (ii) by Isleworth, on the one hand, or Cytovia, on the other hand, if there is any breach of the representations, warranties, covenant or agreement of the other party as set forth in the Merger Agreement, in each case, such that certain conditions to closing cannot be satisfied and the breach or breaches of such representations or warranties or the failure to perform such covenant or agreement, as applicable, are not cured or cannot be cured within certain specified time periods, (iii) by either Isleworth or Cytovia if the Business Combination is not consummated by December 31, 2022, provided the failure to close by such date is not due to a breach by the terminating party, (iv) by either Isleworth or Cytovia if certain required approvals for the Business Combination are not obtained from Isleworth stockholders after the conclusion of a meeting of Isleworth's stockholders held for the purpose of voting on such approvals, and (v) by Isleworth if the Cytovia stockholders do not approve the Merger Agreement.

If the Merger Agreement is validly terminated, none of the parties to the Merger Agreement will have any liability or any further obligation under the Merger Agreement other than customary confidentiality obligations, except in the case of Willful Breach (as defined in the Merger Agreement).

Isleworth Sponsor Support Agreement

Concurrently with the execution of the Merger Agreement, Isleworth, the Sponsor and certain directors of the Sponsor entered into a Sponsor Support Agreement (the "Sponsor Support Agreement") pursuant to which the Sponsor and each such director agreed to, among other things, (i) vote at any meeting of the stockholders of Isleworth all of its shares of Isleworth Common Stock held of record or thereafter acquired in favor of the Parent Proposals (as defined in the Merger Agreement), (ii) be bound by certain other covenants and agreements related to the Business Combination and (iii) be bound by certain transfer restrictions with respect to such securities, prior to the closing of the Business Combination, in each case, on the terms and subject to the conditions set forth in the Sponsor Support Agreement.

Cytovia Support Agreement

In accordance with the Merger Agreement, certain stockholders of Cytovia representing the requisite votes necessary to approve the Merger Agreement are expected to enter into support agreements (the "Stockholder Support Agreement") with Isleworth and Cytovia, pursuant to which each such holder will agree to (i) vote at any meeting of the stockholders of Cytovia all of its Cytovia Common Stock and Cytovia preferred stock held of record or thereafter acquired in favor of the approving and adopting the Merger Agreement, (ii) be bound by certain other covenants and agreements related to the Business Combination and (iii) be bound by certain transfer restrictions with respect to such securities (i.e., a "lock-up") to be provided in the amended and restated bylaws of Isleworth, in each case, on the terms and subject to the conditions set forth in the form of Stockholder Support Agreement.

PIPE Financing (Private Placement)

Concurrently with the execution of the Merger Agreement, Isleworth entered into a subscription agreement (the "Subscription Agreement") with certain investors (the "PIPE Investors"). Pursuant to the Subscription Agreements, the PIPE Investors agreed to subscribe for and purchase, and Isleworth agreed to issue and sell to such investors, immediately prior to the closing under the Merger Agreement, an aggregate of 2,600,000 shares of Isleworth Common Stock for aggregate gross proceeds of $20,000,000 (the "PIPE Financing"). Pursuant to the terms of the Subscription Agreement, Isleworth has agreed to file with the SEC (at Isleworth's sole cost and expense) a registration statement registering the resale of the shares issued pursuant to the Subscription Agreement that are eligible for registration and use its commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof.

The closing of the PIPE Financing is contingent upon, among other things, the substantially concurrent consummation of the Business Combination.

Other



Prior to execution of the Merger Agreement, Cytovia Therapeutics, LLC, a
wholly-owned subsidiary of Cytovia, entered into an amendment to a certain
research collaboration and
non-exclusive
license agreement (the "License Amendment") by and between Cytovia Therapeutics,
LLC and Cellectis S.A., a French corporation organized under the laws of France
and registered in the Trade and Companies Register of Paris under number 428 859
052 ("Cellectis"). In connection with the License Amendment, Cytovia and
Cellectis entered into a securities purchase agreement (the "Cellectis SPA")
pursuant to which Cytovia issued Cellectis a convertible note in the principal
amount of $20,000,000 (the "Convertible Note"). Immediately prior to the closing
of the Business Combination, the outstanding principal amount of the Convertible
Note plus any accrued and unpaid interest or other amounts payable thereunder
(the "Outstanding Amount") will automatically convert into shares of Cytovia
Common Stock at a per share price that will result in Cellectis receiving a
number of shares of Isleworth Common Stock equal to the Outstanding Amount
divided by the lowest price per share paid by any subscriber in the PIPE
Financing (such number of shares of Isleworth Common Stock, the "Note Conversion
Shares"). Also pursuant to the Cellectis SPA, Cytovia issued Cellectis a warrant
(the "Warrant") to acquire a number of shares of Isleworth Common Stock equal to
0.35 multiplied by the number of Note Conversion Shares (the "Warrant Exercise
Shares"), at an exercise price of $11.50 per share (the "Warrant Exercise
Price"), with each of the Warrant Exercise Shares and the Warrant Exercise Price
subject to adjustment pursuant to the terms of the Cellectis SPA and the
Convertible Note and Warrant issued thereunder.

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Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. As of March 31, 2022, there was $133,114 interest earned from the Trust account.

For the three months ended March 31, 2022, we had loss from operations of $591,247 which consisted of general and administrative costs, and net income of $5,037,358, which primarily consisted of a net gain from the change in the fair value of warrants.

For the three months ended March 31, 2021, we had loss from operations of $157,314 which consisted of general and administrative costs, and net income of $5,732,552, which primarily consisted of a net gain from the change in the fair value of warrants.


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Liquidity, Capital Resources and Going Concern

As of March 31, 2021, we had cash outside our trust account of $523,650, available for working capital needs. All remaining cash was held in the trust account and is generally unavailable for our use, prior to an initial business combination.

For the three months ended March 31, 2022, cash used in operating activities was $320,169; we used $78,000 from our interest earned on Trust assets to pay Delaware Franchise Taxes, in accordance with the Trust agreement.



Pursuant to the IPO on March 2, 2021 the Company sold 18,000,000 Units
(including 2,700,000 Units of over-allotment options that was fully exercised)
at a price of $10.00 per Unit. Each Unit consists of one share of common stock
and
one-half
of one warrant ("Public Warrant"). Each whole Public Warrant entitles the holder
to purchase one share of common stock at a price of $11.50 per share, subject to
adjustment (see Note 7). An aggregate of $10.00 per Unit sold in the Initial
Public Offering was held in the Trust Account and invested in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 180 days or less or in any open-ended investment
company that holds itself out as a money market fund meeting the conditions of
Rule2a-7of
the Investment Company Act, as determined by the Company. As of March 31, 2022,
we had cash and investment held in the Trust Account of $207,055,113. Interest
income on the balance in the Trust Account may be used by us to pay taxes. As of
March 31, 2022, there was $133,114 interest income earned from the Trust
account. On March 1, 2022 we withdrew $78,000 from the Trust account to be used
towards payment of franchise taxes.

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (excluding the business combination marketing fees payable to I-Bankers) to complete our initial Business Combination. We may withdraw interest to pay our taxes and liquidation expenses if we are unsuccessful in completing a Business Combination. We estimate our annual franchise tax obligations to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from the Public Offering held outside of the trust account or from interest earned on the funds held in the trust account and released to us for this purpose. Our 2021 franchise tax was calculated using a partial year proration and amounted to $170,520. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account reduced by our operating expense and franchise taxes. We expect the interest earned on the amount in the trust account will be insufficient to pay our income taxes. To the extent that our equity 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.



In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the initial stockholders or their
affiliates may, but are not obligated to, loan us funds as may be required. If
we complete a Business Combination, we would repay such loaned amounts. In the
event that a Business Combination does not close, we may use a portion of the
working capital held outside the Trust Account to repay such loaned amounts but
no proceeds from our Trust Account would be used for such repayment. Up to
$1,500,000 of such loans may be convertible into warrants identical to the
Private Placement Warrants, at a price of $1.00 per warrant at the option of the
lender. On March 15, 2022, the Sponsor agreed to loan the Company an aggregate
of up to $300,000 pursuant to a promissory note (the "Convertible Note"). The
Convertible Note is
non-interest
bearing and payable upon consummation of the Company's initial Business
Combination. At March 31, 2022, there was $300,000 of borrowings under the
Convertible Note.

The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. 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. If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.



In connection with the Company's assessment of going concern considerations in
accordance with ASC Topic
205-40
Presentation of Financial Statements - Going Concern, pursuant to its Amended
and Restated Certificate of Incorporation, the Company has until September 1,
2022 to consummate a Business Combination. If a Business Combination is not
consummated by this date, or its stockholders have not approved an extension,
there will be a mandatory liquidation and subsequent dissolution of the Company.
Although the Company intends to consummate a Business Combination on or before
September 1, 2022, and may seek an extension, it is uncertain that the Company
will be able to consummate a Business Combination, or obtain an extension, by
this time. This, as well as its liquidity condition, raise substantial doubt
about the Company's ability to continue as a going concern. No adjustments have
been made to the carrying amounts of assets or liabilities should the Company be
required to liquidate after September 1, 2022.

Off-Balance
Sheet Arrangements

We did not have any
off-balance
sheet arrangements as of March 31, 2022, as defined in Item 303(a)(4)(ii) of
Regulation
S-K.

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Contractual obligations

As of March 31, 2022, we did not have any long-term debt, capital or operating lease obligations.

We entered into an administrative services agreement pursuant to which we will pay an affiliate of one of our directors for office space and secretarial and administrative services provided to members of our management team, in an amount not to exceed $5,000 per month.



We have engaged
I-Bankers
as an advisor in connection with our acquiring, engaging in a share exchange,
share reconstruction and amalgamation with, purchasing all or substantially all
of the assets of, entering into contractual arrangements with, or engaging in
any other similar Business Combination with one or more businesses or entities.
We will pay
I-Bankers
for such services a fee equal to 3.5% of the gross proceeds of the Public
Offering.

Critical Accounting Policies

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

Common Stock Subject to Possible Redemption

We account for common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. Our common stock issued in the IPO contains certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' (deficit) equity section of our condensed balance sheets.

We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital (to the extend available) and accumulated deficit.

Derivative Warrant Liabilities and Convertible Promissory Note - Related Party

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.



We account for our 16,490,000 common stock warrants issued in connection with
our Initial Public Offering (10,350,000) and Private Placement (6,140,000) as
derivative warrant liabilities in accordance with
ASC815-40.
Accordingly, we recognize the warrant instruments as liabilities at fair value
and adjust the instruments to fair value at each reporting period. The
liabilities are subject tore-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. The fair value of Private Placement Warrants issued by the Company
in connection with the Public Offering and Private Placement has been estimated
using Monte-Carlo simulations at each measurement date. The fair value of Public
Warrants issued with the Public Offering was initially measured using
Monte-Carlo simulations and then measured based trading price once they
commenced trading on March 29, 2021. The Company accounts for its Convertible
Note under ASC 815, Derivatives and Hedging ("ASC 815").
Under 815-15-25, the
election can be at the inception of a financial instrument to account for the
instrument under the fair value option under ASC 825. The Company has made such
election for its Convertible Note. Using fair value option, the Convertible Note
is required to be recorded at its initial fair value on the date of issuance,
and each balance sheet date thereafter. Changes in the estimated fair value of
the note are recognized
as non-cash
change in the fair value of the Convertible Note in the statements of
operations. The fair value of the option to convert into private warrants was
valued utilizing the closed-form model.

Offering Costs Associated with the Initial Public Offering

We allocated offering costs in accordance with the requirements of the ASC340-10-S99-1and 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 Public Offering.

We allocated the offering costs between common stock and public warrants using relative fair value method, the offering costs allocated to the public warrants will be expensed immediately, and offering costs allocated to common stock were charged to temporary equity upon the completion of the IPO.


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Net Income per Share of Common Stock

Net income per common stock is computed by dividing net income by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted income per common stock does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of over-allotment and (iii) Private Placement since the exercise price of the warrants is in excess of the average common stock price for the period and therefore the inclusion of such warrants would be anti-dilutive.

Recent Accounting Standards

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.

JOBS Act



The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" under the JOBS Act and are allowed to comply with new
or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for
non-emerging growth
companies. As a result, our unaudited condensed financial statements may not be
comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.

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

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