INCEPTION GROWTH ACQUISITION LIMITED The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. We are a blank check company incorporated as aDelaware corporation onMarch 4, 2021 and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination and (pursuant to backstop agreements we may enter into following the consummation of this offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. 30
Our sponsor is controlled by
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
? may significantly dilute the equity interest of investors in this offering;
? may subordinate the rights of holders of our common stock if preferred
stock is authorized and issued with rights senior to those afforded our
common stock;
? could cause a change in control if a substantial number of shares of our
common stock is issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and could
result in the resignation or removal of our present officers and
directors;
? may have the effect of delaying or preventing a change of control of us
by diluting the stock ownership or voting rights of a person seeking to
obtain control of us; and
? may adversely affect prevailing market prices for our common stock,
warrants and/or rights.
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
? default and foreclosure on our assets if our operating revenues after an
initial business combination are insufficient to repay our debt
obligations;
? acceleration of our obligations to repay the indebtedness even if wemake all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if
the debt security is payable on demand;
? our inability to obtain necessary additional financing if the debt
security contains covenants restricting our ability to obtain such
financing while the debt security is outstanding;
? our inability to pay dividends on our common stock;
? using a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available fordividends on our common stock if declared, our ability to pay expenses,
make capital expenditures and acquisitions, and fund other general
corporate purposes;
? limitations on our flexibility in planning for and reacting to changes
in our business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry
and competitive conditions and adverse changes in government regulation;
? limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements, and
execution of our strategy; and
? other purposes and other disadvantages compared to our competitors who
have less debt.
31
Results of Operations
Our entire activity from inception up to December 13, 2022 was in preparation
for the initial public offering. Since the initial public offering, our activity
has been limited to the evaluation of business combination candidates, and we
will not be generating any operating revenues until the closing and completion
of our initial business combination. We expect to incur increased expenses as a
result of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses. We expect our
expenses to increase substantially after this period.
For the year ended December 31, 2022 , we had a net income of $475,491 , which was
comprised of dividend income of $1,217,668 and interest income of $299,318 ,
offset by formation, general and administrative expenses of $742,265 and income
taxes of $299,230 .
For the period from
Liquidity and Capital Resources
As ofDecember 31, 2022 , we had cash of$680,812 and investments held in the Trust Account of$106,052,337 . Until the consummation of the initial public offering, the only source of liquidity was an initial purchase of ordinary shares by our Sponsor, monies loaned by the Sponsor under a certain unsecured promissory note and advances from our Sponsor. OnDecember 13, 2021 , we drew$134,885 against the promissory note and the entire balance was repaid onDecember 16, 2021 . OnDecember 13, 2021 , we consummated the Initial Public Offering of 10,350,000 ordinary units (the "Public Units"), which includes the full exercise by the underwriter of its over-allotment option in the amount of 1,350,000 Public Units, at$10.00 per Public Unit, generating gross proceeds of$103,500,000 . Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,721,250 Warrants (the "Private Warrants") at a price of$1.00 per warrant in a private placement toSoul Venture Partners LLC (the "Sponsor"), generating gross proceeds of$4,721,250 . We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account to complete our initial business combination (less deferred underwriting commissions). We may withdraw interest to pay taxes. We estimate our annual franchise tax obligations, based on the number of shares of our common stock authorized and outstanding after the completion of this offering, to be$200,000 , which is the maximum amount of annual franchise taxes payable by us as aDelaware corporation per annum, which we may pay from funds from this offering held outside of the trust account or from interest earned on the funds held in our trust account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income and franchise taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies. 32 Prior to the completion of our initial business combination, we will have available to us the approximately$1,100,000 of proceeds held outside the trust account. We will use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination. The Company initially had 15 months from the consummation of this offering to consummate the initial business combination. If the Company does not complete a business combination within 15 months from the consummation of the Public Offering, the Company will trigger an automatic winding up, dissolution and liquidation pursuant to the terms of the amended and restated memorandum and articles of association. As a result, this has the same effect as if the Company had formally gone through a voluntary liquidation procedure under the Companies Law. Accordingly, no vote would be required from our shareholders to commence such a voluntary winding up, dissolution and liquidation. However, the Company may extend the period of time to consummate a business combination two times by an additional three months each time (for a total of up to 27 months from the consummation of the Public Offering to complete a business combination). The Company is unable to consummate the Company's initial business combination bySeptember 13, 2023 (unless further extended), the Company will, as promptly as possible but not more than ten business days thereafter, redeem 100% of the Company's outstanding public shares for a pro rata portion of the funds held in the Trust Account, including a pro rata portion of any interest earned on the funds held in the Trust Account and not necessary to pay taxes, and then seek to liquidate and dissolve. However, the Company may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of the Company's public shareholders. In the event of dissolution and liquidation, the public rights will expire and will be worthless.
On
Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company's ability to continue as a going concern due to business combination is not consummated bySeptember 13, 2023 (unless further extended). These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as ofDecember 31, 2022 . 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 any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets. 33 Contractual Obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an agreement to pay our Sponsor a monthly fee of$10,000 for general and administrative services, including office space, utilities and administrative services to us. We began incurring these fees onMarch 4, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation. Also, we are committed to the below: Registration Rights The holders of the Founder Shares, the Private Placement Warrants (and their underlying securities) and the warrants that may be issued upon conversion of the Working Capital Loans (and their underlying securities) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the Public Offering. The holders of a majority of these securities are entitled to make up to two demands that we register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The holders of a majority of the Private Placement Warrants and warrants issued in payment of Working Capital Loans made to us (or underlying securities) can elect to exercise these registration rights at any time after we consummate a Business Combination. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements. Underwriting Agreement
We are committed to pay the Deferred Fee committed to pay the Deferred Discount of the Initial Public Offering, to the underwriter upon the Company's consummation of the business combination. The deferred fee can be paid in cash.
Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted inthe United States of America ("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 not identified any significant accounting policies. ? Warrant accounting
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance inFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("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 our own common stock and whether the warrant holders could potentially require "net cash settlement" in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. 34 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 equity 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 liabilities 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. As the warrants issued upon the IPO and private placements meet the criteria for equity classification under ASC 480, therefore, the warrants are classified as equity. ? Common stock subject to possible redemption We account for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." Common stocks subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stocks (including common stocks that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, common stocks are classified as stockholders' equity. Our common stocks feature certain redemption rights that are subject to the occurrence of uncertain future events and considered to be outside of our control. Accordingly, atDecember 31, 2022 and 2021, 10,350,000 shares of common stock subject to possible redemption, respectively, are presented as temporary equity, outside of the shareholders' equity section
of our balance sheet. ? Offering costs We comply with the requirements of the ASC 340-10-S99-1 andSEC 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 and that were charged to shareholders' equity upon the completion of the Public Offering. ? Net loss per share
We calculate net loss per share in accordance with ASC Topic 260, "Earnings per Share." In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, we first considered the undistributed income (loss) allocable to both the redeemable common stock and non-redeemable common stock and the undistributed income (loss) is calculated using the total net loss less any dividends paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable common stock. Any remeasurement of the accretion to the redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. As ofDecember 31, 2022 , we have not considered the effect of the warrants sold in the Initial Public Offering and private warrants to purchase an aggregate of 9,896,250 shares in the calculation of diluted net loss per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive and we did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in our earnings. As a result, diluted loss per share is the same as basic loss per share for the
period presented.
35
The net income (loss) per share presented in the statement of operations is
based on the following:
Period from
March 4,
2021
(inception)
through
December 31, December 31,
2022 2021
Net income (loss) $ 475,491 $ (181,960 )
Accretion of carrying value to redemption value (1,516,986 ) (13,538,880 )
Net loss including accretion of carrying value to redemption
value $ (1,041,495 ) $ (13,720,840 )
Period from
For the year ended March 4 (inception)
December 31, through December 31,
2022 2021
Non-
Redeemable Redeemable Redeemable
Ordinary Ordinary Ordinary Non-Redeemable
Share Share Share Ordinary Share
Basic and diluted net income (loss) per
share:
Numerators:
Allocation of net loss including
carrying value to redemption value $ (829,988 ) $ (211,507 ) $ (2,638,991 ) $ (11,081,849 )
Accretion of carrying value to
redemption value 1,516,986 - 13,538,880 -
Allocation of net income (loss) $ 686,998 $ (211,507 ) $ 10,899,889 $ (11,081,849 )
Denominators:
Weighted-average shares outstanding 10,350,000 2,637,500 616,887 2,590,480
Basic and diluted net income (loss) per
share $ 0.07 $ (0.08 ) © Edgar Online, source
