Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
References to the “Company,” “Inflection
Point Acquisition Corp. II,” “our,” “us” or “we” refer to Inflection Point Acquisition Corp.
II. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction
with our audited financial statements and the notes related thereto which are included in “ Item 8. Financial Statements and Supplementary
Data ” of this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors,
including those set forth under “ Special Note Regarding Forward-Looking Statements ,” “ Item 1A. Risk Factors ”
and elsewhere in this Annual Report.
Overview
We are a SPAC incorporated in the Cayman Islands
on March 6, 2023, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other
similar business combination with one or more businesses. We intend to effectuate our business combination using cash derived from the
proceeds of the IPO and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, our shares and debt.
We expect to continue to incur significant
costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
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Results of Operations
We have neither engaged in any
operations nor generated any revenues to date. Our only activities from March 6, 2023 (inception) through December 31, 2023 were
organizational activities, those necessary to prepare for our IPO, described below, and subsequent to the IPO, identifying a target
company for a business combination. We do not expect to generate any operating revenues until after the completion of our business
combination. We generate non-operating income in the form of dividend income on marketable securities held in the Trust Account. We
incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well
as for due diligence expenses.
For the period from March 6, 2023
(inception) through December 31, 2023, we had net income of $6,748,069, which consists of dividend income earned on marketable
securities held in the Trust Account of $7,721,518 and interest income from bank of $11,763, partially offset by formation and
operating costs of $985,212.
Liquidity and Capital Resources
Until the consummation of the IPO, our only source
of liquidity was an initial purchase of shares of Class B ordinary shares, par value $0.0001 per share, by the Sponsor and loans
from the Sponsor.
On May 30, 2023, we consummated the IPO of
25,000,000 Units, which included the partial exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units,
at $10.00 per Unit, generating gross proceeds of $250,000,000. Simultaneously with the closing of the IPO, we consummated the sale of
7,650,000 Private Placement Warrants to the Sponsor and Cantor Fitzgerald & Co., the representative of the underwriters of the IPO,
at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $7,650,000.
Following the IPO and the private placements,
a total of $251,250,000 ($10.05 per Unit) was placed in the Trust Account. We incurred transaction costs of $18,361,877 consisting of
$4,400,000 of cash underwriting discount, $13,100,000 of deferred underwriting fees, and $861,877 of other offering costs.
For the period from March 6, 2023
(inception) through December 31, 2023, cash used in operating activities was $948,006. Net income of $6,748,069 was affected by
dividend income earned on marketable securities held in the Trust Account of $7,721,518 and formation costs paid by the Sponsor in
exchange for issuance of Class B Ordinary shares of $5,845. Changes in operating assets and liabilities provided $19,598 of cash for
operating activities.
As of December 31, 2023, we had marketable securities
held in the Trust Account of $258,971,518 consisting of investments in money market funds. We may withdraw interest from the Trust Account
to pay taxes, if any. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest
earned on the Trust Account (less deferred underwriting commissions and taxes payable), to complete our initial business combination.
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.
As of December 31, 2023, we had cash of $275,665.
We intend to use the funds held outside the Trust Account primarily 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, structure, negotiate and
complete a business combination, to pay for directors and officers liability insurance premiums and to pay an aggregate of $27,083 per
month to The Venture Collective LLC (“ TVC ”), an affiliate of one of our directors, Nicholas Shekerdemian, for the services
of Peter Ondishin, Chief Financial Officer, and Kevin Shannon, Chief of Staff. On March 28, 2024, we entered into the Amendment to the
Services and Indemnification Agreement, pursuant to which, the Monthly Fee paid to TVC, effective as of January 1, 2024, was reduced from
$27,083.33 to (i) $17,708.33 for the period from January 1, 2024 to January 31, 2024 and (ii) $24,091 for the period starting February
1, 2024.
In order to finance working capital or to finance
transaction costs in connection with an intended initial business combination, the Sponsor or an affiliate of the Sponsor or certain of
the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes
an initial business combination, the Company would repay the working capital loans (the “Working Capital Loans). In the event that
the initial business combination does not close, the Company may use a portion of the working capital held outside the Trust Account to
repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000
of the Working Capital Loans may be convertible into private placement warrants of the post business combination entity at a price of
$1.00 per private placement warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants.
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We
believe that amounts not held in trust is not sufficient to pay the costs and expenses to which such proceeds are allocated that are
payable prior to the closing of our initial business combination. However, if our estimate of the costs of identifying a target business,
undertaking in-depth due diligence and negotiating a business combination are less than the actual amount necessary to do so, we may
have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain
additional financing either to complete our business combination or because we become obligated to redeem a significant number of our
Public Shares upon completion of our business combination, in which case we may issue additional securities or incur debt in connection
with such business combination.
We may need to raise additional capital through
loans or additional investments from our Sponsor, shareholders, officers, directors, or third parties. Our officers, directors and our
Sponsor may, but are not obligated to, loan us funds as may be required. Accordingly, we may not be able to obtain additional financing.
If we are unable to raise additional capital, we 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.
We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions
raise substantial doubt about our ability to continue as a going concern for a reasonable period of time which is considered to be one
year from the date of the issuance of the financial statements, or, if earlier, the date that we will be required to cease all operations,
except for the purpose of winding up, if a business combination is not consummated. The 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 we be unable to
continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of December 31, 2023. 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.
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 an aggregate of $27,083 per month to
TVC, for the services of Peter Ondishin, Chief Financial Officer, and Kevin Shannon, Chief of Staff. We began incurring such fees on May
24, 2023, and will continue to incur these fees monthly until the earlier of the completion of a business combination or our liquidation.
On March 28, 2024, we entered into the Amendment to the Services and Indemnification Agreement pursuant to which, the Monthly Fee paid
to TVC, effective as of January 1, 2024, was reduced from $27,083.33 to (i) $17,708.33 for the period from January 1, 2024 to January
31, 2024 and (ii) $24,091 for the period starting February 1, 2024. Upon completion of a business combination or its liquidation, we will
cease paying the Monthly Fee.
The underwriters are entitled to a deferred underwriting
commission of 5.0% on the base deal and an additional 7.0% on the Units sold pursuant to the underwriters’ option to purchase additional
Units, or $13,100,000 in the aggregate, of the gross proceeds of the IPO held in the Trust Account upon the completion of the Company’s
initial business combination subject to the terms of the underwriting commission.
Critical Accounting Policies
The preparation of financial statements and related
disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
We have identified the following critical accounting policies:
Net Income per Share
Net income per share is computed by dividing net
income by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture.
Weighted average shares were reduced for the effect of an aggregate of 825,000 Class B ordinary shares that were subject to forfeiture
if the over-allotment option was not exercised by the underwriters. At December 31, 2023, the Company did not have any dilutive securities
and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company.
As a result, diluted income per share is the same as basic income per share for the periods presented.
Recent Accounting Standards
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.
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk
We are a smaller reporting company as
defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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