NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE
1 – ORGANIZATION AND BUSINESS BACKGROUND
Inception
Growth Acquisition Limited (the “Company”) is a newly organized blank check company incorporated on March 4, 2021, under
the laws of the State of Delaware for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation,
purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging in any other similar business
combination with one or more businesses or entities (“Business Combination”).
Although
the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company
intends to focus on businesses that have a connection to the Asian market and shall not undertake an initial business combination with
any entity with its principal business operations in China (including Hong Kong and Macau). 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. The
Company has selected December 31 as its fiscal year end.
At
March 31 2023, the Company had not yet commenced any operations. All activities through December 13, 2021 relate to the Company’s
formation and the initial public offering (the “Initial Public Offering”). The Company will not generate any operating revenues
until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of
interest income from the proceeds derived from the Initial Public Offering.
Financing
The registration statement for the Company’s Initial Public Offering
became effective on December 8, 2021. On December 13, 2021, the Company 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 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the
Company consummated the sale of 4,721,250 Warrants (the “Private Warrants”) at a price of $1.00 per warrant in a private placement
to Soul Venture Partners LLC (the “Sponsor”), generating gross proceeds of $4,721,250, which is described in Note 4.
Transaction costs amounted to $4,832,697, consisting of $1,811,250
of underwriting fees, $2,587,500 of deferred underwriting fees and $433,947 of other offering costs.
Trust
Account
Following
the closing of the Initial Public Offering and exercise of the over-allotment option on December 13, 2021, the aggregate amount of 104,535,000
($10.10 per Public Unit) held in Trust Account will be 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 185 days or less, or in any open-ended investment company that holds itself
out as a money market fund meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until
the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s
stockholders, as described below, except that interest earned on the Trust Account can be released to the Company to pay its tax obligations.
Business
Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and sale of the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. NASDAQ rules provide that the Business Combination must be with one or more target businesses that together have
a fair market value equal to at least 80% of the balance in the Trust Account (as defined below) (less any deferred underwriting commissions
and taxes payable on interest earned) at the time of the signing of an agreement to enter into a Business Combination. The Company will
only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register
as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). There is no
assurance that the Company will be able to successfully effect a Business Combination.
The
Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a
Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. In connection with an Initial Business Combination, the Company may seek stockholder approval of a Business Combination
at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against
a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least
$5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding
shares voted are voted in favor of the Business Combination.
Notwithstanding
the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public stockholder,
together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from seeking redemption rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.
If
a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the
Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, offer such redemption pursuant to the tender
offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the
same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The stockholders will be entitled to redeem their Public Shares for
a pro rata portion of the amount then in the Trust Account ($10.30 per Public Share, subject to increase of up to an additional $0.30
per Public Share in the event that the Sponsor elects to extend the period of time to consummate a Business Combination (see below), plus
any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The per-share amount to be distributed to stockholders who redeem their Public Shares will not be reduced by the deferred underwriting
commissions the Company will pay to the underwriter (as discussed in Note 8). There will be no redemption rights upon the completion of
a Business Combination with respect to the Company’s rights or warrants. The common stock will be recorded at redemption value and
classified as temporary equity upon the completion of the Initial Public Offering, in accordance with Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”).
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation
of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor
of the Business Combination. If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business
or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant
to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially
the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Sponsor and any of the Company’s officers or directors that
may hold Founder Shares (as defined in Note 5) (the “stockholders”) and the underwriters will agree (a) to vote their Founder
Shares, the common stock included in the Private Units (the “Private Shares”) and any Public Shares purchased during or after
the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated
Memorandum and Articles of Association with respect to the Company’s pre-Business Combination activities prior to the consummation
of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares
in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) and Private Shares into the right
to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares
in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith)
or a vote to amend the provisions of the Amended and Restated Memorandum and Articles of Association relating to stockholders’ rights
of pre-Business Combination activity and (d) that the Founder Shares and Private Shares shall not participate in any liquidating distributions
upon winding up if a Business Combination is not consummated. However, the stockholders will be entitled to liquidating distributions
from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to
complete its Business Combination.
On
March 3, 2023, the Company and Sponsor entered into non-redemption agreements (“Non-Redemption Agreement”) with an unaffiliated
third parties in exchange for such third party agreeing not to redeem an aggregate of 400,000 shares of the Company’s common stock
sold in its initial public offering (“Non-Redeemed Shares”) in connection with the annual meeting of the stockholders called
by the Company and held on March 13, 2023 (the “Meeting”) to consider and approve, among other things, an amendment to the
Company’s investment management trust agreement dated December 8, 2021, (the “Trust Amendment Proposal”) to extend
the time for the Company to complete its initial business combination for a period of six months without having to make any payment to
the trust account established in connection with the Company’s initial public offering. In exchange for the foregoing commitments
not to redeem such Non-Redeemed Shares, the Sponsor has agreed to transfer to such third party an aggregate of up to 120,000 shares of
the Common Stock held by the Sponsor following the Meeting if they continue to hold such Non-Redeemed Shares through the Meeting. The
Company has waived the transfer restrictions set forth in the Letter Agreement dated December 8, 2021, between the Company and Sponsor
(the “Letter Agreement”), regarding the transfers of the shares contemplated by the Non-Redemption Agreement. Pursuant to
the Underwriting Agreement, dated as of December 8, 2021, by and between the Company and EF Hutton, division of Benchmark Investments,
LLC (“EF Hutton”). EF Hutton has consented in writing to waive the transfer restrictions set forth in Sections 15 and 18
of the Letter Agreement in connection to the transfers of the shares contemplated by the Non-Redemption Agreements.
On
March 6, 2023, the Company and the Sponsor entered into Non-Redemption Agreement with certain unaffiliated third parties in exchange
for such third parties agreeing not to redeem an aggregate of 2,100,000 shares of the Common Stock sold in its initial public offering
(“Non-Redeemed Shares”) in connection with the annual meeting of the stockholders called by the Company and held on March
13, 2023 (the “Meeting”) to consider and approve, among other things, an amendment to the Company’s investment management
trust agreement dated December 8, 2021, (the “Trust Amendment Proposal”) to extend the time for the Company to complete its
initial business combination for a period of six months without having to make any payment to the trust account established in connection
with the Company’s initial public offering. In exchange for the foregoing commitments not to redeem such Non-Redeemed Shares, the
Sponsor has agreed to transfer to such third party an aggregate of up to 630,000 shares of the Common Stock held by the Sponsor following
the Meeting if they continue to hold such Non-Redeemed Shares through the Meeting.
On
March 7, 2023, the Company and the Sponsor entered into additional Non-Redemption Agreements with certain unaffiliated third parties
in exchange for such parties agreeing not to redeem an aggregate of 625,000 Non-Redeemed Shares. In exchange for the foregoing commitments
not to redeem such Non-Redeemed Shares, the Sponsor has agreed to transfer to such third party an aggregate of up to 187,500 shares of
the Common Stock held by the Sponsor following the Meeting if they continue to hold such Non-Redeemed Shares through the Meeting.
On
March 8, 2023, the Company and the Sponsor entered into Non-Redemption Agreement with certain unaffiliated third parties in exchange
for such third parties agreeing not to redeem an aggregate of 1,200,000 shares of the Common Stock sold in its initial public offering
(“Non-Redeemed Shares”) in connection with the annual meeting of the stockholders called by the Company and held on March
13, 2023 (the “Meeting”) to consider and approve, among other things, an amendment to the Company’s investment management
trust agreement dated December 8, 2021, (the “Trust Amendment Proposal”) to extend the time for the Company to complete its
initial business combination for a period of six months without having to make any payment to the trust account established in connection
with the Company’s initial public offering. In exchange for the foregoing commitments not to redeem such Non-Redeemed Shares, the
Sponsor has agreed to transfer to such third party an aggregate of up to 360,000 shares of the Common Stock held by the Sponsor following
the Meeting if they continue to hold such Non-Redeemed Shares through the Meeting.
The Company performed a valuation of the shares
of common stock the Sponsor agreed to transfer to the non-redeeming third parties and determined the shares had a value of $452,026.
On
March 13, 2023, in connection with the stockholders vote at the Annual Meeting, 5,873,364 shares were redeemed by certain shareholders
at a price of approximately $10.29 per share, including interest generated and extension payments deposited in the Trust Account, in an
aggregate amount of $60,411,251. The amount was paid
on April 4, 2023.
On March 13, 2023, the Company entered into an
amendment to the investment management trust agreement with Continental Stock Transfer & Trust Company, allowing to extend the time
available for us to consummate an initial business combination for an additional six (6) months from March 13, 2023 to September 13, 2023
without having to make any extension payment. On March 13, 2023, the Company decided to extend the available time to complete a business
combination for an additional six (6) months from March 13, 2023 to September 13, 2023. Public stockholders were not offered the opportunity
to vote on or redeem their shares in connection with any such extension.
Liquidation
If
the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of
the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account,
including interest earned (net of taxes payable and less interest to pay dissolution expenses up to $50,000), divided by the number of
then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including
the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed
to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide
for claims of creditors and the requirements of applicable law. The underwriter has agreed to waive its rights to the deferred underwriting
commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period
and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption
of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for
distribution will be less than the Initial Public Offering price per Unit ($10.00).
The
Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor 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 amounts in the Trust Account to below (i) $10.10 per 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 due to reductions in the value of the trust assets, 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 underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the “Securities Act”). 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, prospective target businesses or other entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity
and going concern
As of March 31, 2023, the Company had cash balance
of $81,400 and working capital deficit of $1,000,115. The Company has incurred and expects to continue to incur significant costs in pursuit
of its acquisition plans. Based on the foregoing, the Company believes it will not have sufficient cash to meet its needs to execute its
intended initial Business Combination in the next twelve months from the date of the issuance of the accompanying unaudited condensed
financial statements.
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 21 months from the consummation of the Public Offering to complete a business combination). If Company is
unable to consummate the Company’s initial business combination by September 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.
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 by September 13, 2023. These unaudited condensed 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.
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
These
accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”). The interim financial information provided is unaudited, but includes all adjustments which management considers
necessary for the fair presentation of the results for these periods. Operating results for the interim period ended March 31, 2023 are
not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023. The information included
in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the audited financial statements
and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April
14, 2023.
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously
approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another
public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
In
preparing these unaudited condensed financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited
condensed financial statements and the reported expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, Actual
results may differ from these estimates.
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of March 31, 2023 and December 31, 2022.
| ● | Cash and investment held in trust account |
At March 31, 2023 and December 31, 2022, substantially all of the assets
held in the Trust Account were held in money market funds, which are invested primarily in U.S. Treasury securities. These securities
are presented on the Balance Sheets at fair value at the end of each reporting period. Earnings on these securities is included in dividend
income in the accompanying statement of operations and is automatically reinvested. The fair value for these securities is determined
using quoted market prices in active markets.
The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in Financial 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 the Company’s own common
stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s
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.
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 |
The Company accounts for its common stock subject to possible redemption
in accordance with the guidance in ASC Topic 480. 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 the
Company’s control) are classified as temporary equity. At all other times, common stocks are classified as stockholders’ equity.
The Company’s common stocks feature certain redemption rights that are subject to the occurrence of uncertain future events and
considered to be outside of the Company’s control. Accordingly, at March 31, 2023 and December 31, 2022, 4,476,636 and 10,350,000
shares of common stock subject to possible redemption, respectively, are presented as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheet. The redemption liability $60,411,251 and $0 has been recorded as of March 31, 2023
and December 31, 2022, respectively.
The
Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A –
“Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through
the balance sheet date that are related to the Public Offering and that were charged to shareholders’ equity upon the completion
of the Public Offering.
| ● | Fair value of financial instruments |
ASC
Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, the methods used to
measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining
fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure
fair value. ASC 820 establishes a fair value hierarchy for inputs, which represents the assumptions used by the buyer and seller in pricing
the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer
and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable
inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability
developed based on the best information available in the circumstances.
The
fair value hierarchy is categorized into three levels based on the inputs as follows:
Level
1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the
Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted
prices that are readily and regularly available in an active market, the valuation of these securities does not entail a significant
degree of judgment.
Level
2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices
in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities,
or (iv) inputs that are derived principally from or corroborated by the market through correlation or other means.
Level
3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain assets and liabilities,
which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying
amounts represented in the balance sheet. The fair values of cash and cash equivalents, and other current assets, accrued expenses, due
to the sponsor are estimated to approximate the carrying values as of March 31, 2023 due to the short maturities of such instruments.
See Note 7 for the disclosure of the Company’s assets and liabilities that were measured at fair value on a recurring basis.
The
Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset
and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed
for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible
amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the unaudited condensed 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 March 31, 2023 and December 31, 2022. 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 may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits
will materially change over the next twelve months.
Our effective tax rate was 31.9% and 2.86% for
the three months ended March 31, 2023 and 2022, respectively. The effective tax rate differs from the statutory tax rate of 21% for the
three months ended March 31, 2023 and 2022, due to the valuation allowance on the deferred tax assets.
On
August 16, 2022, the Inflation Reduction (the IR) Act was signed into law, which, beginning in 2023, will impose a 1% excise tax on public
company stock buybacks. The company is assessing the potential impact of the Act.
The
IR Act imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The
total taxable value of shares repurchased is reduced by the fair market value of newly issued shares during the taxable year. Redemption
rights are ubiquitous to nearly all SPACs. Shareholders have the ability to require the SPAC to repurchase their shares prior to the
merger in what is known as a redemption right, essentially getting their money back. There are two possible scenarios in which redemption
rights come into play. First, they can be exercised by the shareholders themselves because they are exiting the transaction, or second,
they can be triggered because the SPAC did not find a target with which to merge. There will certainly need to be more clarity from the
Internal Revenue Service on the application of the excise tax to SPAC redemptions. Until there is further guidance from the IRS, the
Company will continue to assess the potential impact of the IR Act. For the three months ended March 31, 2023 and 2022, the Company has
incurred $604,113 and $0, respectively.
The
Company calculates 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, the Company 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. The Company 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
of March 31, 2023, the Company has 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 the Company did not have
any other dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share
in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
The
net income (loss) per share presented in the statement of operations is based on the following:
| | |
For the
Three Months
Ended | | |
For the
Three Months
Ended | |
| | |
March 31,
2023 | | |
March 31,
2022 | |
| Net income (loss) | |
$ | 487,015 | | |
$ | (217,899 | ) |
| Accretion of carrying value to redemption value | |
| (473,741 | ) | |
| (10,878 | ) |
| Net income (loss) including accretion of carrying value to redemption value | |
$ | 13,274 | | |
$ | (228,777 | ) |
| | |
For the Three Months ended March 31, 2023 | | |
For the Three Months ended March 31, 2022 | |
| | |
Redeemable
Ordinary Share | | |
Non-
Redeemable
Ordinary Share | | |
Redeemable
Ordinary
Share | | |
Non-
Redeemable
Ordinary
Share | |
| Basic and diluted net income (loss) per share: | |
| | |
| | |
| | |
| |
| Numerators: | |
| | |
| | |
| | |
| |
| Allocation of net income (loss) including carrying value to redemption value | |
$ | 10,310 | | |
$ | 2,964 | | |
$ | (182,317 | ) | |
$ | (46,460 | ) |
| Accretion of carrying value to redemption value | |
| 473,741 | | |
| - | | |
| 10,878 | | |
| - | |
| Allocation of net income (loss) | |
$ | 484,051 | | |
$ | 2,964 | | |
$ | (171,439 | ) | |
$ | (46,460 | ) |
| Denominators: | |
| | | |
| | | |
| | | |
| | |
| Weighted-average shares outstanding | |
| 9,175,327 | | |
| 2,637,500 | | |
| 10,350,000 | | |
| 2,637,500 | |
Basic and diluted net income (loss) per share | |
$ | 0.05 | | |
$ | 0.00 | | |
$ | (0.02 | ) | |
$ | (0.02 | ) |
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also
considered to be related if they are subject to common control or common significant influence.
| ● | Concentration of credit risk |
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution.
The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such
account.
| ● | Recent accounting pronouncements |
The
Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material
impact on the results of operations, financial condition, or cash flows, based on the current information.
NOTE
3 – INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 10,350,000 Units, which includes a full exercise by the underwriters of their over-allotment
option in the amount of 1,350,000 Public Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of common stock,
one-half (1/2) of one redeemable warrant (“Public Warrant”) and one right (“Public Right”) to receive one-tenth
(1/10) of one share of common stock. Each Public Warrant will entitle the holder to purchase one share of common stock at an exercise
price of $11.50 per whole share.
All
of the 10,350,000 (including over-allotment shares) Public Shares sold as part of the Public Units in the IPO contain a redemption feature
which allows for the redemption of such Public Shares if there is a stockholder vote or tender offer in connection with the Business
Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation, or in
connection with the Company’s liquidation. In accordance with the SEC and its staff’s guidance on redeemable equity instruments,
which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stocks subject
to redemption to be classified outside of permanent equity.
The
Company’s redeemable common stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has
been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either
accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the
instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption
value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting
period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend
(i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital).
As
of March 31, 2023 and December 31, 2022, the shares of common stock reflected on the balance sheet are reconciled in the following table.
| |
|
Amount |
|
| Gross proceeds |
|
$ |
103,500,000 |
|
| Less: |
|
|
|
|
| Proceeds allocated Public Warrants |
|
|
(2,572,990 |
) |
| Proceeds allocated Public Rights |
|
|
(7,418,984 |
) |
| Offering costs of Public Shares |
|
|
(2,511,906 |
) |
| Plus: |
|
|
|
|
| Accretion of carrying value to redemption value - 2021 |
|
|
13,538,880 |
|
| Accretion of carrying value to redemption value - 2022 |
|
|
1,516,986 |
|
| Common stock subject to possible redemption as of December 31, 2022 |
|
|
106,051,986 |
|
| Accretion of carrying value to redemption value - 2023 |
|
|
473,741 |
|
| Share redemption |
|
|
(60,411,251 |
) |
| |
|
|
|
|
| Common stock subject to possible redemption as of March 31, 2023 |
|
$ |
46,114,476 |
|
NOTE
4 – PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor and the underwriters purchased an aggregate of 4,721,250 Warrants at a price
of $1.00 per Warrant, ($4,721,250 in the aggregate), in each case, in a private warrant that will occur simultaneously with the closing
of the Initial Public Offering (the “Private Warrants”). Each Private Warrant is exercisable to purchase one share of common
stock at a price of $11.50 per whole share. The Private Warrants may only be exercised for a whole number of shares. The proceeds from
the sale of the Private Placement Warrants will be added to the net proceeds from the Initial Public Offering held in the Trust Account.
If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Warrants
will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Warrants will
expire worthless.
NOTE
5 – RELATED PARTY TRANSACTIONS
Founder
Shares
On
March 4, 2021, the Company issued an aggregate of 2,587,500 founder shares to the initial shareholder for an aggregate purchase price
of $25,000.
On
December 13, 2021, the Company issued an aggregate of 50,000 representative shares to the underwriter.
As
of March 31, 2023 and December 31, 2022, the Company’s total issued and outstanding is 2,637,500 shares of common stock, excluding
4,476,636 and 10,350,000 share of common stock subject to possible redemption.
Advance
from a Related Party
As
of March 31, 2023 and December 31, 2022, the Company had a temporary advance of $199,875 and $181,835 from the Sponsor, respectively.
The balance is unsecured, interest-free and has no fixed terms of repayment.
Administrative
Services Agreement
The
Company is obligated, commencing from March 4, 2021, to pay Soul Venture Partners LLC a monthly fee of $10,000 for general and administrative
services. This agreement will terminate upon completion of the Company’s Business Combination or the liquidation of the trust account
to public shareholders.
Non-redemption Agreements
The Sponsor entered into Non-Redemption Agreements
with various stockholders of the Company (the “Non-Redeeming Stockholders”), pursuant to which these stockholders agreed not
to redeem a portion of their shares of Company common stock (the “Non-Redeemed Shares”) in connection with the Special Meeting
held on March 13, 2023, but such stockholders retained their right to require the Company to redeem such Non-Redeemed Shares in connection
with the closing of the Business Combination. The Sponsor has agreed to transfer to such Non-Redeeming Stockholders an aggregate of 1,297,500
the Founder Shares held by the Sponsor immediately following the consummation of an initial Business Combination. The Company estimated
the aggregate fair value of such 1,297,500 Founder Shares transferrable to the Non-Redeeming Stockholders pursuant to the Non-Redemption
Agreement to be $452,026 or $0.35 per share. The fair value was determined using the probability of a successful Business Combination
of 4%, a discount for lack or marketability of 15.5%, and the average value per shares as of the valuation date of $10.30 derived from
an option pricing model for publicly traded warrants. Each Non-Redeeming Stockholder acquired from the Sponsor an indirect economic interest
in such Founder Shares. The excess of the fair value of such Founder Shares was determined to be an offering cost in accordance with Staff
Accounting Bulletin Topic 5A. Accordingly, in substance, it was recognized by the Company as a capital contribution by the Sponsor to
induce these Non-Redeeming Stockholders not to redeem the Non-Redeemed Shares, with a corresponding charge to additional paid-in capital
to recognize the fair value of the Founder Shares subject to transfer as an offering cost.
NOTE
6 – SHAREHOLDER’S EQUITY
Common
stocks
The Company is authorized to issue 26,000,000 shares of common stock
at par value $0.0001. Holders of the Company’s common stocks are entitled to one vote for each share. As of March 31, 2023 and December
31, 2022, 2,637,500 shares of common stocks were issued and outstanding, excluding 4,476,636 and 10,350,000 shares of common stock subject
to possible redemption, respectively.
Rights
Each
holder of a right will receive one-tenth (1/10) of one share of common stock upon consummation of a Business Combination, even if the
holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional shares will be issued upon
exchange of the rights. No additional consideration will be required to be paid by a holder of rights in order to receive its additional
shares upon consummation of a Business Combination as the consideration related thereto has been included in the Unit purchase price
paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement for a Business Combination in
which the Company will not be the surviving entity, the definitive agreement will provide for the holders of rights to receive the same
per share consideration the holders of the common stock will receive in the transaction on an as-converted into common stock basis and
each holder of a right will be required to affirmatively convert its rights in order to receive 1/10 share underlying each right (without
paying additional consideration). The shares issuable upon exchange of the rights will be freely tradable (except to the extent held
by affiliates of the Company).
If
the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the
Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless.
Further, there are no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of a Business
Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire
worthless.
Warrants
The
Public Warrants will become exercisable on the later of (a) the completion of a Business Combination or (b) 15 months (or up to 21 months,
if we extend the time to complete a business combination) from the closing of this Initial Public Offering. No Public Warrants will be
exercisable for cash unless the Company has an effective and current registration statement covering the common stock issuable upon exercise
of the Public Warrants and a current prospectus relating to such common stock. Notwithstanding the foregoing, if a registration statement
covering the common stock issuable upon the exercise of the Public Warrants is not effective within 52 business days from the consummation
of a Business Combination, the holders may, until such time as there is an effective registration statement and during any period when
the Company shall have failed to maintain an effective registration statement, exercise the Public Warrants on a cashless basis pursuant
to the exemption from registration provided by Section 3(a)(9) of the Securities Act provided that such exemption is available. If an
exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis. The Public
Warrants will expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption
or liquidation.
The
Company may call the warrants for redemption (excluding the Private Warrants), in whole and not in part, at a price of $0.01 per warrant:
| |
● |
at
any time while the Public Warrants are exercisable, |
| |
● |
upon
not less than 30 days’ prior written notice of redemption to each Public Warrant holder, |
| |
● |
if,
and only if, the reported last sale price of the ordinary shares equals or exceeds $18 per share, for any 30 trading days within
a 30 trading day period ending on the third trading day prior to the notice of redemption to Public Warrant holders, and |
| |
● |
if,
and only if, there is a current registration statement in effect with respect to the issuance of the ordinary shares underlying such
warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter
until the date of redemption. |
The
Private Warrants will be identical to the Public Warrants underlying the Units being sold in the Proposed Public Offering, except that
the Private Warrants and the common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or
salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants
will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private
Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the
Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common
stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary
dividend or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of common
stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If
the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the
Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire
worthless.
NOTE
7 – FAIR VALUE MEASUREMENTS
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company
seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is
used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities:
Level
1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level
2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets
or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level
3: Unobservable inputs based on the assessment of the assumptions that market participants would use in pricing the asset or liability.
The
following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring
basis as of March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation techniques the Company utilized
to determine such fair value.
| | |
March 31,
2023 | | |
Quoted Prices In
Active Markets | | |
Significant Other
Observable Inputs | | |
Significant
Other
Unobservable
Inputs | |
| Description | |
(Unaudited) | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| Assets: | |
| | |
| | |
| | |
| |
| U.S. Treasury Securities held in Trust Account* | |
$ | 107,173,069 | | |
$ | 107,173,069 | | |
$ | - | | |
$ | - | |
| | |
December 31,
2022 | | |
Quoted Prices In
Active Markets | | |
Significant Other
Observable Inputs | | |
Significant
Other
Unobservable
Inputs | |
| Description | |
(Audited) | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| Assets: | |
| | | |
| | | |
| | | |
| | |
| U.S. Treasury Securities held in Trust Account* | |
$ | 106,047,848 | | |
$ | 106,047,848 | | |
$ | - | | |
$ | - | |
| * | included
in cash and investments held in trust account on the Company’s unaudited condensed
balance sheets. |
NOTE
8 – COMMITMENTS AND CONTINGENCIES
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target
company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited
condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration
Rights
Pursuant
to a registration rights agreement entered into on December 13, 2021 the holders of the Founder Shares, Private Warrants (and their underlying
securities) and any securities of the Company’s initial stockholders, officers, directors or their affiliates may be issued in
payment of working capital loans made to us, will be entitled to registration rights pursuant to an agreement to be signed prior to or
on the effective date of this Proposed Public Offering. 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 shares of common stock are to be released from
escrow. The holders of a majority of the Private Warrants (and underlying securities) and securities issued in payment of working capital
loans (or underlying securities) or loans to extend the life can elect to exercise these registration rights at any time after the Company
consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to
registration statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in
connection with the filing of any such registration statements.
Underwriter
Agreement
The
Company is 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.
NOTE
9 – SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date but before this unaudited condensed financial statements
are issued, the Company has evaluated all events or transactions that occurred after the balance sheet date, up through the date was
the Company issued the unaudited condensed financial statements. During the period, the Company did not have any material subsequent
events other than disclosed above.
