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 June 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: 001-41281

SIGNAL HILL ACQUISITION CORP.

(Exact name of registrant as specified in its charter)


Delaware		86-2579543
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2810 N. Church Street, Suite 94644

Wilmington, DE 19802-8172


(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (646) 504-8172

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Units, which consist of one share of Class A common stock, par value $0.0001 per share, and one-half of one redeemable warrant to purchase one share of Class A common stock	SGHLU	The Nasdaq Global Market

Class A Common Stock, par value $0.0001 per share	SGHL	The Nasdaq Global Market

Warrants, each whole warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share	SGHLW	The Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 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 Exchange Act). Yes ☐ No ☒

As of August 10, 2022, there were 10,000,000 shares of Class A common stock, par value $0.0001 per share, and 2,500,000 shares of Class B common stock, par value $0.0001 per share, issued and outstanding.

Table of Contents

SIGNAL HILL ACQUISITION CORP.

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

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021	1
	Unaudited Condensed Statements of Operations for the Three and Six Months Ended June 30, 2022, for the Three Months Ended June 30, 2021 and For the Period From February 18, 2021 (Inception) to June 30, 2021	2
	Unaudited Condensed Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2022 and For the Period From February 18, 2021 (Inception) to June 30, 2021	3
	Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2022 and For the Period From February 18, 2021 (Inception) to June 30, 2021	4
	Notes to Unaudited Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	23

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	25
Item 6.	Exhibits	26
	Signatures	27

Table of Contents

CERTAIN TERMS

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

●	“amended and restated certificate of incorporation” are to the Second Amended and Restated Certificate of the Company;

●	“B. Riley” are to B. Riley Securities, Inc., the representative of the underwriters in our initial public offering;

●	“common stock” are to our Class A common stock and our Class B common stock, collectively;

●	“founder shares” are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to this offering, and the shares of our Class A common stock issuable upon the conversion thereof as provided herein;

●

 “initial public offering” or “IPO” means the initial public offering of 10,000,000 of our units, each unit consisting of one share of Class A common stock and one-half of one redeemable public warrant, where each whole public warrant entitles the holder to purchase one share of Class A common stock, which was consummated on February 15, 2022;

●	“initial stockholders” are to our sponsor and any other holders of our founder shares as of the closing of this offering (or their permitted transferees);

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

●	“private placement warrants” are to the warrants issued to our sponsor and certain of our initial stockholders in a private placement simultaneously with the closing of our initial public offering;

●	“public shares” are to shares of our Class A common stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market);

●

 “public stockholders” are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares;

●

 “public warrants” are to our redeemable warrants sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market), to the private placement warrants if held by third parties other than our initial stockholders 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 purchasers or executive officers or directors (or permitted transferees), in each case, following the consummation of our initial business combination;

●	“sponsor” are to Signal Hill Acquisition Sponsor, LLC, a Delaware limited liability company;

●	“warrants” are to our redeemable warrants, which includes the public warrants as well as the private placement warrants; and

●	“we,” “us,” “Company,” “the Company,” or “our Company” are to Signal Hill Acquisition Corp.

Table of Contents

SIGNAL HILL ACQUISITION CORP.

CONDENSED BALANCE SHEETS


		June 30,		December 31,
		2022		2021
		(Unaudited)
ASSETS
Current Assets:
Cash	$	663,859	$	1,170
Prepaid expenses		379,583		—
Total Current Assets		1,043,442		1,170
Deferred offering costs		—		320,716
Cash and cash equivalents held in Trust Account		102,133,707		—
Total Assets	$	103,177,149	$	321,886

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	20,526	$	237,636
Accrued expenses		147,340		431
Accrued offering costs		—		25,000
Notes payable - related party		—		35,000
Accrued interest - related party		—		21
Total Current Liabilities		167,866		298,088
Total Liabilities		167,866		298,088

Commitments and Contingencies (Note 6)
Class A common stock subject to possible redemption; 10,000,000 and 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively, at redemption value (at $10.20 per share)		102,033,277		—

Stockholders' Equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding		—		—
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 0 shares issued and outstanding (excluding 10,000,000 shares subject to possible redemption)		—		—
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 2,500,000 and 2,875,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively (1)		250		288
Additional paid-in capital		1,000,038		24,712
Retained earnings (accumulated deficit)		(24,282)		(1,202)
Total Stockholders' Equity		976,006		23,798
Total Liabilities, Temporary Equity and Stockholders’ Equity	$	103,177,149	$	321,886

(1) Balance at December 31, 2021 included 375,000 shares of Class B common stock that were subject to forfeiture if the option to purchase additional units was not exercised in full or in part by the underwriter. On April 2, 2022, the option expired unexercised, such that 375,000 shares of Class B common stock were forfeited by the Sponsor (see Note 5).

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

Table of Contents

SIGNAL HILL ACQUISITION CORP.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)


			For the Period				For the Period
			From February 18,				From February 18,
	For the Three Months		2021 (Inception)		For the Six		2021 (Inception)
	Ended June 30,		Through		Months Ended		Through
	2022		March 31, 2021		June 30, 2022		June 30, 2021
Operating Expenses:
Formation and operating costs	$	142,738	$	370	$	310,857	$	370
Franchise tax expense		50,000		—		100,000		—
Total Operating Expenses		192,738		370		410,857		370
Loss From Operations		(192,738)		(370)		(410,857)		(370)

Other Expenses (Income):
Change in fair value of overallotment liability		603,284		—		603,284		—
Interest income		83,057		—		133,707		—
Interest expense		—		—		(39)		—
Offering costs		—		—		(16,511)		—
Bank fees		(49)		—		(479)		(25)
Total Other Income (Expense)		686,292		—		719,962		(25)

Net Income (Loss)	$	493,554	$	(370)	$	309,105	$	(395)

Basic and diluted weighted average shares outstanding, Class A common stock		10,000,000		—		7,472,527		—
Basic and diluted net income per common stock, Class A common stock	$	0.04	$	—	$	0.03	$	—
Basic and diluted weighted average shares outstanding, Class B common stock (1)		2,500,000		2,500,000		2,500,000		2,500,000
Basic and diluted net income (loss) per common stock, Class B common stock	$	0.04	$	(0.00)	$	0.03	$	(0.00)

(1) Excludes 375,000 shares of Class B common stock that were subject to forfeiture if the option to purchase additional units was not exercised in full or in part by the underwriter. On April 2, 2022, the option expired unexercised, such that 375,000 shares of Class B common stock were forfeited by the Sponsor (see Note 5).

On March 23, 2021, the Sponsor paid $25,000 in consideration for an aggregate of 3,750,000 founder shares. In December 2021, the Sponsor surrendered an aggregate of 875,000 founder shares for no consideration, thereby reducing the aggregate number of founder shares outstanding to 2,875,000. All shares and related amounts have been retroactively adjusted to reflect to the forfeiture.

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

Table of Contents

SIGNAL HILL ACQUISITION CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)


	For the Six Months Ended June 30, 2022
						(Accumulated
				Additional		Deficit)		Total
	Class B Common Stock			Paid-In		Retained		Stockholders'
	Shares	Amount		Capital		Earnings		Equity
Balance - January 1, 2022 (1)	2,875,000	$	288	$	24,712	$	(1,202)	$	23,798
Issuance of public warrants, net of offering costs allocated to public warrants of $136,842	—		—		4,863,158		—		4,863,158
Issuance of private placement warrants	—		—		6,000,000		—		6,000,000
Accretion of Class A common stock to redemption value	—		—		(9,887,870)		(298,908)		(10,186,778)
Net loss	—		—		—		(184,449)		(184,449)
Balance - March 31, 2022 (1)	2,875,000		288		1,000,000		(484,559)		515,729
Forfeiture of Class B common stock by Sponsor (2)	(375,000)		(38)		38		—		—
Accretion of Class A common stock to redemption value	—		—		—		(33,277)		(33,277)
Net income	—		—		—		493,554		493,554
Balance - June 30, 2022	2,500,000	$	250	$	1,000,038	$	(24,282)	$	976,006


	For the Period From February 18, 2021 (Inception) Through June 30, 2021
				Additional				Total
	Class B Common Stock			Paid-In		Accumulated		Stockholders'
	Shares	Amount		Capital		Deficit		Equity
Balance - February 18, 2021 (Inception)	—	$	—	$	—	$	—	$	—
Issuance of Class B common stock to Sponsor (1)	2,875,000		288		24,712		—		25,000
Net loss	—		—		—		(370)		(370)
Balance - March 31, 2021	2,875,000		288		24,712		(370)		24,630
Net loss	—		—		—		(25)		(25)
Balance - June 30, 2021	2,875,000	$	288	$	24,712	$	(395)	$	24,605

(1) Included 375,000 shares of Class B common stock that were subject to forfeiture if the option to purchase additional units was not exercised in full or in part by the underwriter. See note (2) below.

(2) On April 2, 2022, the option to purchase additional units expired unexercised, such that 375,000 shares of Class B common stock were forfeited by the Sponsor (see Note 5).

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

Table of Contents

SIGNAL HILL ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)


			For the Period From
	For the Six		February 18, 2021
	Months Ended		(Inception) Through
	June 30, 2022		June 30, 2021
Cash Flows from Operating Activities:
Net income (loss)	$	309,105	$	(395)
Non-cash offering costs		16,511		—
Interest earned on investments held in Trust Account		(133,707)		—
Change in fair value of overallotment liability		(603,284)		—
Changes in operating assets and liabilities:
Prepaid expenses		(379,583)		—
Accounts payable		20,156		370
Accrued expenses		146,909		—
Accrued interest - related party		(21)		—
Net Cash Used In Operating Activities		(623,914)		(25)

Cash Flows from Investing Activities:
Investment of cash in Trust Account		(102,000,000)		—
Net Cash Used In Investing Activities		(102,000,000)		—

Cash Flows from Financing Activities:
Proceeds from initial public offering		100,000,000		—
Proceeds from private placement warrants		6,000,000		—
Proceeds from issuance of Class B common stock to Sponsor		—		25,000
Proceeds from issuance of note payable - related party		335,000		—
Repayment of note payable - related party		(370,000)		—
Advance from related party		—		10,000
Repayment of advance to related party		—		(10,000)
Payment of offering costs		(2,678,397)		(15,450)
Net Cash Provided By Financing Activities		103,286,603		9,550

Net Increase in Cash		662,689		9,525

Cash - Beginning of the Period		1,170		—
Cash - End of the Period	$	663,859	$	9,525

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	60	$	—
Income taxes	$	—	$	—

Non-cash investing and financing activities:
Reversal of deferred offering costs included in accrued offering costs	$	(25,000)	$	—
(Reversal) accrual of deferred offering costs included in accounts payable	$	(237,266)	$	106,242
Accretion of Class A common stock to redemption value	$	332,185	$	—

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

Table of Contents

SIGNAL HILL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION, PLAN OF BUSINESS OPERATIONS, GOING CONCERN AND MANAGEMENT’S PLANS, RISKS AND UNCERTAINTIES, AND BASIS OF PRESENTATION

Signal Hill Acquisition Corp. (the “Company”) was incorporated in Delaware on February 18, 2021. The Company was 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 (the “Business Combination”).

The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

All activity for the period from February 18, 2021 (inception) through June 30, 2022 relates to the Company’s formation and the initial public offering (“IPO”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.

The registration statement for the Company’s IPO was declared effective on February 10, 2022. On February 15, 2022, the Company consummated the IPO of 10,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “public shares” or the “Class A Common Stock”), generating gross proceeds of $100,000,000, which is described in Note 3.

Simultaneously with the closing of the IPO and in a second closing on February 28, 2022, the Company consummated the sale of an aggregate of 6,000,000 private placement warrants at a price of $1.00 per private placement warrant in a private placement to Signal Hill Acquisition Sponsor, LLC (the “sponsor”) and certain initial stockholders, generating gross proceeds to the Company of $6,000,000, which is described in Note 4.

Transaction costs related to the IPO amounted to $2,736,847, consisting of $2,000,000 of underwriting fees and $736,847 of other offering costs. In addition, cash of $1,012,777 was held outside of the Trust Account (as defined below) and is available for the payment of offering costs and for working capital purposes. As described in Note 6, $3,500,000 of business combination marketing fees become due and payable upon the consummation of the Business Combination. Transaction costs related to the private placement amounted to $7,483,393 as of February 15, 2022, which represented the estimated fair value of Class B common stock to be transferred to investors in the offering, which is described in Note 4.

Following the closing of the IPO on February 15, 2022, an amount of $102,000,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the private placement warrants was placed in a trust account (the “Trust Account”), to be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (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 meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of private placement warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating one or more Business Combinations. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (as defined below) (excluding the taxes payable on the interest earned on the Trust Account). 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 a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.

Table of Contents

The Company will provide the holders of the outstanding public shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their public shares either (i) in connection with a stockholder meeting called to approve a Business Combination or (ii) by means of a tender offer in connection with a Business Combination. 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 Public Stockholders will be entitled to redeem their public shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20 per public share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

The Company will not redeem public shares in an amount that would cause the Company’s net tangible assets to be less than $5,000,001 or any greater net tangible asset or cash requirement which may be contained in the agreement relating to the Business Combination. If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the sponsor has agreed to vote its founder shares and any public shares purchased during or after the IPO in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their public shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.

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 Certificate of Incorporation will provide 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 prior consent of the Company.

The sponsor has agreed (a) to waive its redemption rights with respect to the founder shares and public shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its public shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other material provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their public shares in conjunction with any such amendment.

The Company has 15 months from closing of the IPO, which is extendable at our option to up to 21 months from the closing of the IPO, as described below, (the “Combination Period”) to complete a Business Combination. If the Company has not completed 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 not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s 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 the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

If the Company is unable to complete a Business Combination within 15 months from the closing of the IPO, the Company may, by resolution of its board if requested by its sponsor, extend the period of time to consummate a Business Combination up to two times, each by an additional three months (for a total of up to 21 months from the closing of the IPO), subject to the sponsor depositing additional funds into the Trust Account as set out below. Public Stockholders, in this situation, will not be offered the opportunity to vote on or redeem their shares in connection with such extensions. Pursuant to the terms of the Company’s second amended and restated

Table of Contents

certificate of incorporation and the trust agreement, in order for the time available for the Company to consummate the Business Combination to be extended, the sponsor or its affiliates or designees, upon five business days advance notice prior to the applicable deadline, must deposit into the trust account $1,000,000 ($0.10 per public share), on or prior to the date of the applicable deadline, for each of the available three-month extensions, providing a total possible Business Combination period of up to 21 months at a total payment value of $2,000,000 ($0.20 per share). Any such payments would be made in the form of non-interest bearing loans. If the Company completes a Business Combination, it will, at the option of the sponsor, repay such loaned amounts out of the proceeds of the Trust Account released to the Company or convert a portion or all of the total loan amount into warrants at a price of $1.00 per warrant, which warrants will be identical to the private placement warrants. If the Company does not complete a Business Combination, it will repay such loans only from funds held outside of the Trust Account. Furthermore, the letter agreement with the Company’s initial stockholders contains a provision pursuant to which the sponsor has agreed to waive its right to be repaid for such loans to the extent there is insufficient funds held outside of the Trust Account in the event that the Company does not complete a Business Combination. The sponsor and its affiliates or designees are not obligated to fund the Trust Account to extend the time for the Company to complete a Business Combination. In the event the Company receives notice from the sponsor five days prior to the applicable deadline of their intent to effect an extension, the Company intends to issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, the Company intends to issue a press release the day after the applicable deadline announcing whether or not the funds had been timely deposited.

The sponsor, certain initial stockholders of the Company and its officers and directors entered into a letter agreement with the Company, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to any founder shares held by them if the Company fails to complete the initial Business Combination within the Combination Period. However, if the sponsor, initial stockholders, officers or directors acquire public shares in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if the Company fails to complete the initial Business Combination within the Combination Period.

In order to protect the amounts held in the Trust Account, the sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.20 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.20 per public share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriter 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 sponsor 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 sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered accounting firm), prospective target businesses and 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.

Going Concern and Management’s Plans

At June 30, 2022, the Company had $663,859 of cash and working capital of $975,576.

Management has determined that the possibility that the Company may be unsuccessful in consummating an initial Business Combination within 15 months (or up to 21 months if the Company extends the period of time to consummate a business combination for total payment value of $2,000,000) from the closing of the IPO, and thereby be required to cease all operations, redeem the public shares and thereafter liquidate and dissolve, raises substantial doubt about the ability to continue as a going concern for at least one year from the date these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management has determined that the Company has funds that are sufficient to fund the working capital needs of the Company until the consummation of an initial Business Combination or the winding up of the Company as stipulated in the Company’s second amended and restated certificate of incorporation. The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Table of Contents

Risks and Uncertainties

The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected. Additionally, the Company’s ability to complete an Initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an Initial Business Combination in a timely manner. The Company’s ability to consummate an Initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed financial statements of the Company as of June 30, 2022 and for the three and six months ended June 30, 2022. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the operating results for the full year ending December 31, 2022 or any other period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and related disclosures as of December 31, 2021 and for the year then ended which are included the Annual Report filed on Form 10-K on March 31, 2022.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of June 30, 2022, there have been no material changes to the significant accounting policies included in the audited financial statements as of December 31, 2021 and for the year then ended, which were included in the Company’s Annual Report on Form 10 K filed with the SEC on March 31, 2022, except as disclosed in this note.

Shares Subject to Possible Redemption

The Company accounts for shares subject to possible redemption in accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity. Shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable shares (including shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified within temporary equity. Changes in redemption value are reflected in additional paid in capital or, in the absence of additional capital, in accumulated deficit. At all other times, shares are classified within shareholders’ equity. Accordingly, at June 30, 2022, Class A Common Stock subject to possible redemption are presented at redemption value as temporary equity, outside of stockholders’ deficiency on the Company’s balance sheet.

Under ASC 480-10-S99, the Company recognizes changes in the redemption value immediately as they occur and adjusts the carrying value of the security to equal the redemption value at the end of each reporting period. This method views the end of the reporting period as if it were also the redemption date for the security. At February 15, 2022, in connection with the IPO, the Company recorded an immediate remeasurement adjustment of its Class A Common Stock of $10,186,778, such that the shares were recorded at redemption value of $10.20 per share as of such date. During the three and six months ended June 30, 2022, the Company recorded remeasurement adjustments of its Class A Common Stock of $33,277 and $10,220,055, respectively, such that the shares were recorded at redemption value of $10.20 per share as of June 30, 2022.

Table of Contents

Offering Costs

The Company’s accounting for offering costs 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 of underwriting, legal, accounting and other cash expenses incurred through the closing of the IPO that are directly related to the IPO. In addition, the fair value of shares of Class B common stock that were issued to investors in the private placement were determined to be offering costs, which is described in Note 4. Offering costs are allocated to the separable financial instruments on a relative fair value basis compared to total proceeds received. Offering costs related to the IPO amounted to $2,736,847 which were allocated to the Class A Common Stock (temporary equity), overallotment liability (recognized as expense immediately) and public warrants (stockholders’ equity) and recognized upon the completion of the IPO. Offering costs related to the private placement amounted to $7,483,893 which represented the estimated fair value of Class B common stock to be transferred to investors in the offering and, accordingly, the offering costs were recognized by debiting and crediting additional paid-in capital upon the completion of the offering.

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 common stock for the period, excluding the effect of 375,000 shares of Class B common stock that were subject to forfeiture if the option to purchase additional units was not exercised by the underwriter (see Note 5). The Company has two classes of stock, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of stock. The Company applies the two-class method in calculating earnings per share. Remeasurement adjustments associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

The calculation of diluted income (loss) per share does not consider the effect of the warrants issued during the three and six months ended June 30, 2022 in connection with the IPO and the private placement because the warrants are contingently exercisable and the contingencies have not yet been met. The warrants are exercisable to purchase 11,000,000 Class A common stock in the aggregate. As of June 30, 2022, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted

Table of Contents

into common stock and then share in the earnings of the Company. As a result, diluted net loss per common stock is the same as basic net loss per common stock for the periods presented.


	For the Three Months Ended
	June 30, 2022
	Class A		Class B
Basic and diluted net income per share:
Numerator:
Allocation of net income	$	394,843	$	98,711
Denominator:
Weighted-average shares outstanding including common stock subject to redemption		10,000,000		2,500,000
Basic and diluted net income per share	$	0.04	$	0.04


	For the Six Months Ended
	June 30, 2022
	Class A		Class B
Basic and diluted net income per share:
Numerator:
Allocation of net income	$	231,616	$	77,489
Denominator:
Weighted-average shares outstanding including common stock subject to redemption		7,472,527		2,500,000

Basic and diluted net income per share	$	0.03	$	0.03

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurement,” defines fair value as the amount that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants.

Fair value measurements are classified on a three-tier hierarchy as follows:

●

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 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

●

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 many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

The fair value of the Company’s assets and liabilities which qualify as financial instruments approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.

The Company used a Black-Scholes option pricing model to estimate the fair value of the overallotment liability of $0 and $603,284 as of June 30, 2022 and February 15, 2022, respectively. The Company allocated the proceeds received from the sale of Units (which is inclusive of one share of Class A common stock and one-half of one public warrant), first to the public warrants and overallotment liability based on their fair values as determined at initial measurement, with the remaining proceeds allocated to the Class A common stock subject to possible redemption (temporary equity) based on their fair values at the initial measurement date. The overallotment

Table of Contents

liability was classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs. Inherent in pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimated the volatility of its common stock based on historical volatility that matches the expected remaining life of the overallotment option. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the issuance date for a maturity similar to the expected remaining life of the overallotment option. The expected life of the overallotment option is assumed to be equivalent to its remaining contractual term.

Warrants and Overallotment Liability

The Company evaluates the public warrants, private placement warrants and overallotment option as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the instrument and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instrument is freestanding financial instruments pursuant to ASC 480, meets the definition of a liability pursuant to ASC 480, and whether the instrument meets all of the requirements for equity classification under ASC 815, including whether the instrument is indexed to the Company’s own common stock, among other conditions for equity classification. Pursuant to such evaluation, both public and private placement warrants are classified in stockholders’ equity and the overallotment option is classified as a current liability and, accordingly, was measured at fair value upon issuance and will be remeasured at each balance sheet date thereafter, with changes in the estimated fair value recognized through earnings.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes under 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.

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. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of 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.

While the Company recorded net income for book purposes for the six months ended June 30, 2022, it has a net taxable loss for income tax purposes. The Company has established valuation allowances against all deferred tax assets because realization of their income tax benefits is not deemed to be more likely than not.

Recent Accounting Standards

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify 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 for fiscal years beginning after December 15, 2021 and should be applied on a full or modified retrospective basis. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020-06 did not have a material impact on the Company’s condensed financial statements.

Table of Contents

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

NOTE 3 — INITIAL PUBLIC OFFERING

Pursuant to the IPO, on February 15, 2022, the Company sold 10,000,000 Units at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half of one redeemable Public Warrant. Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7). The Company’s underwriter had a 45-day option to purchase 1,500,000 additional Units at $9.80 per Unit, which was recorded as a liability as of February 15, 2022 with an estimated fair value of $603,284. On April 2, 2022, the overallotment option expired unexercised, such that the Company recognized the change in fair value of the overallotment liability of $

SEC Form 10-Q filed by Signal Hill Acquisition Corp.