Alpha Star Acquisition Corp.
11/14/2024 | Press release | Distributed by Public on 11/14/2024 15:19
Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-41153
ALPHA STAR ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
| Cayman Islands | N/A | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
100 Church Street, 8th Floor
New York, New York 10004
(Address of Principal Executive Offices, including zip code)
(332) 233-4356
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one ordinary share, one redeemable warrant, and one right | ALSAU | The Nasdaq Stock Market LLC | ||
| Ordinary Shares, $0.001 par value | ALSA | The Nasdaq Stock Market LLC | ||
| Redeemable warrants entitle the holder to purchase one-half (1/2) of one ordinary share | ALSAW | The Nasdaq Stock Market LLC | ||
| Rights entitle the holders to receive one-seventh (1/7) of one Ordinary Share | ALSAR | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer | |
| ☒ | Non-accelerated filer | ☒ | Smaller reporting company | |
| ☒ | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒No ☐
Indicate the number of shares outstanding of each of the registrant's classes of ordinary shares, as of the latest practicable date: As of November 14, 2024, there were 4,107,999ordinary shares, respectively, with par value of $0.001, issued and outstanding (assuming all of the units issued in our initial public offering completed on December 15, 2021 were split on such date).
ALPHA STAR ACQUISITION CORPORATION
FORM 10-Q FOR THE QUARTER ENDED September 30, 2024
TABLE OF CONTENTS
| Page | |||
| Part I. Financial Information | |||
| Item 1. | Consolidated Financial Statements | 1 | |
| Consolidated Balance Sheets (Unaudited) | 1 | ||
| Consolidated Statements of Operations (Unaudited) | 2 | ||
| Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) | 3 | ||
| Consolidated Statements of Cash Flows (Unaudited) | 4 | ||
| Notes to Unaudited Consolidated Financial Statements | 5 | ||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 17 | |
| Item 3. | Quantitative and Qualitative Disclosures Regarding Market Risk | 21 | |
| Item 4. | Controls and Procedures | 21 | |
| Part II. Other Information | |||
| Item 1. | Legal Proceedings | 22 | |
| Item 1A. | Risk Factors | 22 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 | |
| Item 3. | Defaults Upon Senior Securities | 23 | |
| Item 4. | Mine Safety Disclosures | 23 | |
| Item 5. | Other Information | 23 | |
| Item 6. | Exhibits | 23 | |
| Part III. Signatures | 24 |
| i |
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ALPHA STAR ACQUISITION CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Prepaid expense | $ | 25,125 | $ | 12,500 | ||||
| Total current assets | 25,125 | 12,500 | ||||||
| Noncurrent assets: | ||||||||
| Marketable securities held in trust account | 10,962,587 | 101,590,662 | ||||||
| Total noncurrent assets | 10,962,587 | 101,590,662 | ||||||
| Total assets | $ | 10,987,712 | $ | 101,603,162 | ||||
| Liabilities and stockholders' deficit | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses and other liability | $ | 613,242 | $ | 220,401 | ||||
| Promissory note - Sponsor | 35,000 | 5,755,961 | ||||||
| Due to Sponsor | - | 212,660 | ||||||
| Total current liabilities | 648,242 | 6,189,022 | ||||||
| Noncurrent liabilities: | ||||||||
| Deferred underwriting commissions | 2,875,000 | 2,875,000 | ||||||
| Total noncurrent liabilities | 2,875,000 | 2,875,000 | ||||||
| Total liabilities | 3,523,242 | 9,064,022 | ||||||
| Commitment and contingencies (Note 6) | ||||||||
| Ordinary shares subject to possible redemption, 902,999and 9,063,503shares at redemption value of $12.05and $11.21per share at September 30, 2024 and December 31, 2023, respectively | 10,880,063 | 101,605,662 | ||||||
| Stockholders' deficit: | ||||||||
| Ordinary shares, par value $0.001, authorized 50,000,000shares; 3,205,000and 3,205,000shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively, excluding 902,999and 9,063,503shares subject to possible redemption | 3,205 | 3,205 | ||||||
| Additional paid-in capital | 6,984,730 | - | ||||||
| Accumulated deficit | (10,403,528 | ) | (9,069,727 | ) | ||||
| Total stockholders' deficit | (3,415,593 | ) | (9,066,522 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 10,987,712 | $ | 101,603,162 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 1 |
ALPHA STAR ACQUISITION CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
For the three months ended September 30, 2024 |
For the three months ended September 30, 2023 |
For the nine months ended September 30, 2024 |
For the nine months ended September 30, 2023 |
|||||||||||||
| Operating expenses: | ||||||||||||||||
| Formation and operational costs | $ | 459,346 | $ | 104,592 | $ | 808,801 | $ | 316,908 | ||||||||
| Loss from operations | (459,346 | ) | (104,592 | ) | (808,801 | ) | (316,908 | ) | ||||||||
| Other income: | ||||||||||||||||
| Interest and dividends earned in trust account | 320,078 | 1,337,332 | 2,131,683 | 4,035,277 | ||||||||||||
| Total other income | 320,078 | 1,337,332 | 2,131,683 | 4,035,277 | ||||||||||||
| (Loss) income before income taxes | (139,268 | ) | 1,232,740 | 1,322,882 | 3,718,369 | |||||||||||
| Income tax expense | - | - | - | - | ||||||||||||
| Net (loss) income | $ | (139,268 | ) | $ | 1,232,740 | $ | 1,322,882 | $ | 3,718,369 | |||||||
| Basic and diluted weighted average shares outstanding | ||||||||||||||||
| Redeemable ordinary shares, basic and diluted | 1,579,639 | 9,593,176 | 4,451,437 | 10,857,407 | ||||||||||||
| Redeemable ordinary shares, basic and diluted net income per share | 0.15 | 0.15 | 0.42 | 0.42 | ||||||||||||
| Non-redeemable ordinary shares, basic and diluted | $ | 3,205,000 | $ | 3,205,000 | $ | 3,205,000 | $ | 3,205,000 | ||||||||
| Non-redeemable ordinary shares, basic and diluted net loss per share | $ | (0.12 | ) | $ | (0.08 | ) | $ | (0.17 | ) | $ | (0.25 | ) |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 2 |
ALPHA STAR ACQUISITION CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(Unaudited)
For the nine months ended September 30, 2024 and 2023
| Ordinary Shares |
Additional Paid-In |
Accumulated |
Total Stockholders' |
|||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance at December 31, 2023 | 3,205,000 | $ | 3,205 | $ | - | $ | (9,069,727 | ) | $ | (9,066,522 | ) | |||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned and unrealized gain on trust account) | - | - | - | (962,977 | ) | (962,977 | ) | |||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | - | - | (210,000 | ) | (210,000 | ) | |||||||||||||
| Net income | - | - | - | 724,045 | 724,045 | |||||||||||||||
| Balance at March 31, 2024 | 3,205,000 | $ | 3,205 | $ | - | $ | (9,518,659 | ) | $ | (9,515,454 | ) | |||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned and unrealized gain on trust account) | - | - | - | (848,628 | ) | (848,628 | ) | |||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | - | - | (210,000 | ) | (210,000 | ) | |||||||||||||
| Net income | 738,105 | 738,105 | ||||||||||||||||||
| Balance at June 30, 2024 | 3,205,000 | $ | 3,205 | $ | - | $ | (9,839,182 | ) | $ | (9,835,977 | ) | |||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned and unrealized gain on trust account) | - | - | - | (320,078 | ) | (320,078 | ) | |||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | - | - | (105,000 | ) | (105,000 | ) | |||||||||||||
| Debt forgiveness by Sponsor (Note 5) | - | - | 6,984,730 | - | 6,998,730 | |||||||||||||||
| Net Loss | - | - | - | (139,268 | ) | (139,268 | ) | |||||||||||||
| Balance at September 30, 2024 | 3,205,000 | $ | 3,205 | $ | 6,984,730 | $ | (10,403,528 | ) | $ | (3,415,593 | ) |
| Ordinary Shares |
Additional Paid-In |
Accumulated | Total Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance at December 31, 2022 | 3,205,000 | $ | 3,205 | $ | - | $ | (4,522,095 | ) | $ | (4,518,890 | ) | |||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned and unrealized gain on trust account) | - | - | - | (1,268,393 | ) | (1,268,393 | ) | |||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | - | - | (1,149,999 | ) | (1,149,999 | ) | |||||||||||||
| Net income | - | - | - | 1,147,084 | 1,147,084 | |||||||||||||||
| Balance at March 31, 2023 | 3,205,000 | $ | 3,205 | $ | - | $ | (5,793,403 | ) | $ | (5,790,198 | ) | |||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned and unrealized gain on trust account) | - | - | - | (1,429,552 | ) | (1,429,552 | ) | |||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | - | - | (1,150,000 | ) | (1,150,000 | ) | |||||||||||||
| Net income | - | - | - | 1,338,545 | 1,338,545 | |||||||||||||||
| Balance at June 30, 2023 | 3,205,000 | $ | 3,205 | $ | - | $ | (7,034,410 | ) | $ | (7,031,205 | ) | |||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned and unrealized gain on trust account) | - | - | - | (1,337,332 | ) | (1,337,332 | ) | |||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | - | - | (906,348 | ) | (906,348 | ) | |||||||||||||
| Net income | - | - | - | 1,232,740 | 1,232,740 | |||||||||||||||
| Balance at September 30, 2023 | 3,205,000 | $ | 3,205 | $ | - | $ | (8,045,350 | ) | $ | (8,042,145 | ) |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 3 |
ALPHA STAR ACQUISITION CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
For the Nine Months Ended September 30, 2024 |
For the Nine Months Ended September 30, 2023 |
|||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,322,882 | $ | 3,718,369 | ||||
| Net changes in operating assets & liabilities: | ||||||||
| Prepaid expenses | (12,625 | ) | (17,500 | ) | ||||
| Interest and dividends earned in trust account | (2,131,683 | ) | (4,035,277 | ) | ||||
| Due to Sponsor | 511,109 | 190,963 | ||||||
| Accrued expenses and other liability | 392,841 | 16,648 | ||||||
| Net cash provided by (used in) operating activities | 82,524 | (126,796 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Investment of cash in Trust Account | (525,000 | ) | (3,206,347 | ) | ||||
| Cash withdrawn from Trust Account to redeem public shares | 93,299,758 | 26,094,884 | ||||||
| Cash withdrawn from Trust Account for account service fee | - | 7,500 | ||||||
| Net cash provided by investing activities | 92,774,758 | 22,896,037 | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from promissory notes | 525,000 | 3,316,281 | ||||||
| Redemption of Public Shares | (93,382,282 | ) | (26,094,884 | ) | ||||
| Net cash used in financing activities | (92,857,282 | ) | (22,778,603 | ) | ||||
| Net decrease in cash in escrow | - | (9,362 | ) | |||||
| Cash in escrow at beginning of period | - | 110,991 | ||||||
| Cash in escrow at end of period | $ | - | $ | 101,629 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Subsequent measurement of ordinary shares subject to possible redemption | $ | 2,656,683 | $ | 7,241,624 | ||||
| Debt forgiveness by Sponsor | $ | 6,984,730 | $ | - |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 4 |
ALPHA STAR ACQUISITION CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Description of Organization and Business Operations
Organization and General
Alpha Star Acquisition Corporation (the "Company") is a blank check company incorporated in the Cayman Islands on March 11, 2021. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses ("Business Combination"). The Company has selected December 31 as its fiscal year end.
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. 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's sponsor is A-Star Management Corporation, a British Virgin Islands incorporated company (the "Sponsor"). 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 (the "IPO").
The Company initially had 9 months from the closing of the IPO (or up to 21 months from the closing of IPO) to consummate a Business Combination (the "Combination Period"). If the Company fails to consummate a Business Combination within the Combination Period, it will trigger its automatic winding up, liquidation and subsequent dissolution pursuant to the terms of the Company's 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 the Company's shareholders to commence such a voluntary winding up, liquidation and subsequent dissolution.
The Company's IPO was declared effective on December 13, 2021. On December 15, 2021, the Company consummated the IPO of 11,500,000units which include an additional 1,500,000units as a result of the underwriters' full exercise of the over-allotment, at $10.00per Unit, generating gross proceeds of $115,000,000, which is described in Note 3.
Concurrently with the closing of the IPO, the Company consummated the sale of 330,000units (the "Private Placement") at a price of $10.00per Private Unit in a private placement to the Sponsor, generating gross proceeds of $3,300,000, which is described in Note 4.
In connection with the stockholders' extension vote at the Annual General Meeting held on July 13, 2023, 2,436,497public shares were rendered for redemption. The total redemption payment was $26,094,883and all distributed during July and August 2023.
Extraordinary General Meeting
On January 10, 2024, the Company held an Extraordinary General Meeting, where shareholders approved the amendments of the Company's Amended and Restated Memorandum and Articles of Association to (i) extend the date by which the Company must consummate a business combination to September 15, 2024 (33 months from the consummation of the IPO) (the "Combination Period"); (ii) allow the Company to undertake an initial business combination with an entity or business ("Target Business"), with a physical presence, operation, or other significant ties to China (a "China-based Target") or which may subject the post-business combination business or entity to the laws, regulations and policies of China (including Hong Kong and Macao), or an entity or business that conducts operations in China through variable interest entities, or VIEs, pursuant to a series of contractual arrangements ("VIE Agreements") with the VIE and its shareholders on one side, and a China-based subsidiary of the China-based Target (the "WFOE"), on the other side (the "Target Limitation Amendment Proposal"); and (iii) eliminate the limitation that the Company shall not redeem its public shares to the extent that such redemption would result in the ordinary shares, or the securities of any entity that succeeds the Company as a public company, becoming "penny stock" (as defined in accordance with Rule 3a51-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), or cause the Company to not meet any greater net tangible asset or cash requirement which may be contained in the agreement relating to a Business Combination (the "Redemption Limitation Amendment Proposal").
| 5 |
In connection with the stockholders' extension vote at the Extraordinary General Meeting held on January 10, 2024, a total of 3,319,923public shares were rendered for redemption. The total redemption payment was $37,183,138and all distributed in January and February 2024.
On July 12, 2024, the Company held an Annual General Meeting of its shareholders. At the Annual General Meeting, the shareholders approved certain amendments to the Company's Amended and Restated Memorandum and Articles of Association to extend the date by which the Company must consummate a business combination to December 15, 2024.
In connection with the stockholders' extension vote at the Annual General Meeting held on July 12, 2024, a total of 4,840,581public shares were rendered for redemption at $11.61per share. The total redemption payment was $56,199,145and was distributed in July and October 2024.
Extension fees
From September 13, 2022 to June 30, 2023, the Company was requested to draw the funds of $383,333and deposited the amount into the Trust Account monthly to extend the period of time the Company had to consummate a business combination. The $383,333extension fee representedapproximately $0.033per public share. The extension funds will decrease if certain shareholders redeem the shares. In July 2023, due to the Annual General Meeting discussed above and the redemption of public shares, the monthly extension fees were reduced to $302,116, which represented$0.033per public share. In January 2024, after shareholders' approval at the Extraordinary General Meeting discussed above, the Company decreased the monthly extension fees to the lower of $70,000for all remaining public shares and $0.033for each remaining public share. On July 12, 2024, after shareholders' approval at the Annual General Meeting, the Company decreased the monthly extension fees to $35,000for all remaining public shares, starting from July 2024.
Business Combination Agreement
On September 12, 2024, the Company entered into a Business Combination Agreement with OU XDATA GROUP ("XDATA"), a Company incorporated in Estonia, and Roman Eloshvili, the sole shareholder of XDATA. The Business Combination Agreement provides for: (1) the Company will incorporate a Cayman Islands exempted company ("PubCo") in accordance with the Companies Act (Revised) of the Cayman Islands, (2) the merger of the Company with and into PubCo (the "Reincorporation Merger"), with PubCo surviving the Reincorporation Merger, and (3) the share exchange between PubCo and the shareholder of XDATA, resulting in XDATA being a wholly owned subsidiary of PubCo. Following the Business Combination, PubCo will be a publicly traded company.
Pursuant to the Business Combination Agreement and subject to the approval of the shareholders of the Company and XDATA, among other things, at the effective time of the Reincorporation Merger , each ordinary share of the Company, par value $0.001per share issued and outstanding, will automatically be converted into the right of the holder thereof to receive one ordinary share of PubCo; each issued and outstanding warrant of the Company sold to the public and to A-Star Management Corporation, in a private placement in connection with the Company's initial public offering will automatically and irrevocably be assumed by PubCo and converted into one corresponding warrant exercisable to purchase one-half (1/2) of one PubCo Ordinary Share, subject to the same terms and conditions prior to the First Effective Time; and each seven issued and outstanding Rights of the Company will automatically and irrevocably be assumed by PubCo and converted into one corresponding PubCo Ordinary Share. No fractional PubCo Ordinary Shares will be issued in connection with such conversion and the number of PubCo Ordinary Shares to be issued to such holder upon such conversion will be rounded down to the nearest whole number and no cash will be paid in lieu of such Rights of the Company. Immediately prior to the First Effective Time, each issued and outstanding unit of the Company, each consisting of one Ordinary Share, one Right and one Warrant of the Company, will be automatically separated and the holder thereof will be deemed to hold one Ordinary Share, one Right and one Warrant of the Company.
On September 4, 2024, Xdata Group ("PubCo") was incorporated as a Cayman Islands exempted company and the wholly owned subsidiary of the Company in accordance to the Business Combination Agreement.
On September 21, 2024, the Company, PubCo and XDATA entered into an Expense Settlement Agreement, pursuant to which, XDATA agreed to bear and cover the cost in relation to Pubco's business operating cost starting from September 1, 2024. PubCo and the Company agreed that XDATA will assume financial responsibility for such expenses as detailed in expense reports or invoices provided by third parties or directly incurred by PubCo. As a result of the Expense Settlement Agreement, the Company recognized an other income against the liabilities the Company would otherwise assume for PubCo during the period from September 4, 2024 (Inception) to September 30, 2024, which was offset with PubCo's expenses. As of September 30, 2024, PubCo received invoices amounting to $13,341which was subsequently paid by XDATA.
| 6 |
The Trust Account
As of December 15, 2021, a total of $115,682,250of the net proceeds from the IPO and the Private Placement transaction completed with the Sponsor was deposited in a trust account (the "Trust Account") established for the benefit of the Company's public stockholders with Wilmington Trust, National Association acting as trustee. The amount exceeding $115,000,000, $682,254, had been transferred to the Company's escrow cash account as its working capital.
The funds held in the Trust Account are invested only in United States government treasury bills, bonds or notes having a maturity of 180 days or less, or in money market funds meeting the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 and investing solely in United States government treasuries. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its income or other tax obligations, the proceeds will not be released from the Trust Account until the earlier of the completion of a Business Combination or the Company's liquidation.
Liquidity and Going Concern
As of September 30, 2024 and December 31, 2023, the Company had nocash balance in the escrow account and had a working capital deficit of $638,117and $6,191,522, including the $82,524of the share redemption return and the over-draft of $15,000from Marketable Security held in trust, respectively. The $15,000overdraft was repaid by the Sponsor during the nine months ended September 30, 2024, and the $82,524returned redemption was distributed in October 2024.
In order to finance transaction costs in connection with a 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, provide the Company related party loans up to $1,500,000. On August 26, 2024, the Company entered into a Loan Agreement with the Sponsor, pursuant to which the Company may borrow up to $1,500,000from the Sponsor for costs reasonably related to the Company's transaction cost and extension fee. (See Note 5)
On September 13, 2022, December 31, 2022, March 13, 2023, September 20, 2023 and August 26, 2024, the Company issued four promissory notes (collectively, the "Notes") in the principal amount of up to $1,000,000, $1,300,000, $2,500,000, and $2,500,000 to the Sponsor, respectively, pursuant to which the Sponsor shall loan to the Company up to the corresponding principal to pay the extension fee and transaction cost. See Note 5 for further information.
If the Company underestimates the costs of identifying a target business, undertaking due diligence and negotiating a Business Combination or the actual amount necessary is higher, the Company may have insufficient funds available to operate its business prior to the initial Business Combination. Moreover, the Company may need to obtain additional financing either to complete its Business Combination or because the Company has become obligated to redeem a significant number of its Public Shares upon completion of its Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. In addition, the Company has until December 15, 2024 (the "Liquidation Date") to consummate a business combination.
In connection with the Company's assessment of going concern considerations in accordance with Accounting Standards Codification ("ASC") 205-40, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," management has determined that if the Company is unable to complete a Business Combination by the Liquidation Date, then the Company may cease all operations except for the purpose of liquidating. The uncertainty surrounding the date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company's ability to continue as a going concern. These consolidated 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.
Management believes that, as of September 30, 2024, the Company hadinsufficient working capital to cover its short-term operating needs. The Company hadno revenue before the Business Combination. It incurred and expects to continue to incur significant professional costs to remain a publicly traded company and to incur significant transaction costs in pursuit of the consummation of a Business Combination. The Company's cash and working capital as of September 30, 2024 were not sufficient to complete its planned activities for the upcoming year. These factors raise substantial doubt about the Company's ability to continue as a going concern one year from the date the financial statement is issued.
| 7 |
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), specifically Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2024 are not necessarilyindicative of the results that may be expected for the period ending December 31, 2024, or any future period.
These unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto included in the Annual Report for the year ended December 31, 2023, which are included in the Form 10-K filed on July 3, 2024.
Basis of Consolidation
The unaudited consolidated financial statements include the accounts of the Company and PubCo, its wholly owned subsidiary newly established on September 4, 2024. All significant intercompany accounts and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an emerging growth company as defined by Section 2(a) of 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 no limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosures obligations regarding executive compensation in its periodic reports and proxy statements, and exceptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payment 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 an 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, it has different application dates than public 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 consolidated financial statements with those of 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.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events.
Cash in Escrow
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had nocash held in escrow and did not have any cash equivalents as of September 30, 2024 and December 31, 2023, respectively.
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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 which at times may exceed the Federal Depository Insurance Coverage of $250,000. As of September 30, 2024 and December 31, 2023, the Company does not have a cash account in any financial institutions, respectively.
Marketable Securities Held in Trust Account
The Company's investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned and unrealized gain on marketable securities held in Trust Account in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information. The Company had $10,962,587and $101,590,662of marketable securities held in the Trust Account as of September 30, 2024 and December 31, 2023, respectively.
In January, February, and July, 2024, the total amount of $93,299,758was withdrawn from the Trust Account for the redemption of 8,160,504public shares.
During the three months ended September 30, 2024 and 2023, interest earned from the Trust Account amounted to $320,078and $1,337,332, of which $278,247and $916,726were reinvested in the Trust Account, respectively. $41,831and 420,606were recognized as unrealized gain on investments held in the Trust Account during the three months ended September 30, 2024 and 2023, respectively.
During the nine months ended September 30, 2024 and 2023, interest earned from the Trust Account amounted to $2,131,683and $4,035,277, of which $2,089,852and $3,614,671were reinvested in the Trust Account, respectively. $41,831and $420,606were also recognized as unrealized gain on investments held in the Trust Account during the nine months ended September 30, 2024 and 2023, respectively.
Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory redemption are classified as a liability instrument and measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) are classified as temporary equity. At all other times, ordinary shares are classified as stockholders' equity. The Company's ordinary shares feature certain redemption rights that are considered to be outside of the Company's control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders' equity section of the Company's balance sheets.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A - "Expenses of Offering". Offering costs consisted principally of professional and registration fees incurred that were directly related to the Initial Public Offering. Upon completion of the Initial Public Offering, offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to the Rights were charged to the shareholders' equity. Offering costs allocated to the ordinary shares were charged against the carrying value of ordinary shares subject to possible redemption upon the completion of the Initial Public Offering.
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All of the 11,500,000ordinary shares sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company's liquidation, 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 Certificate of Incorporation. Accordingly, all of the 11,500,000shares of ordinary shares were presented as temporary equity upon closing of the IPO.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid-in capital and accumulated deficit if additional paid in capital equals to zero. The interest earned by the marketable security held in trust, and the extension fee invested into the marketable security held in trust, were also recognized in redemption value against additional paid-in capital and accumulated deficit immediately. The proceeds on the deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less up to $50,000of interest to pay dissolution expenses) will be used to fund the redemption of the public shares.
Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities approximates the carrying amounts represented in the accompanying balance sheets, primarily due to the short-term nature.
Net Income (Loss) per Share
The Company complies with the accounting and disclosure requirements of FASB 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 shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net income (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 shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public stockholders.
The calculation of diluted income (loss) per ordinary shares does not consider the effect of the warrants and rights issued in connection with the (i) Initial Public Offering, (ii) the private placement since the exercise of the warrants and rights are contingent upon the occurrence of future events, and (iii) the effect of the rights to receive 1,690,000shares. The warrants are exercisable to purchase 5,915,000ordinary shares in the aggregate. As of September 30, 2024, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares in the earnings of the Company. As a result, diluted net income (loss) per ordinary shares is the same as basic net income (loss) per ordinary share for the periods presented.
The net income (loss) per share presented in the statements of operations is based on the following:
|
For the Three Months Ended September 30, 2024 |
For the Three Months Ended September 30, 2023 |
For the Nine Months Ended September 30, 2024 |
For the Nine Months Ended September 30, 2023 |
|||||||||||||
| Net (loss) income | $ | (139,268 | ) | $ | 1,232,740 | $ | 1,322,882 | $ | 3,718,369 | |||||||
| Remeasurement to redemption value - interest income earned | (320,078 | ) | (1,337,332 | ) | (2,131,683 | ) | (4,035,277 | ) | ||||||||
| Remeasurement to redemption value - extension fee | (105,000 | ) | (906,348 | ) | (525,000 | ) | (3,206,347 | ) | ||||||||
| Net loss including accretion of temporary equity to redemption value | $ | (564,346 | ) | $ | (1,010,940 | ) | $ | (1,333,801 | ) | $ | (3,523,255 | ) |
|
For the Three Months Ended September 30, 2024 |
For the Three Months Ended September 30, 2023 |
For the Nine Months Ended September 30, 2024 |
For the Nine Months Ended September 30, 2023 |
|||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||
| Non- redeemable shares | Redeemable shares | Non- redeemable shares | Redeemable shares | Non- redeemable shares | Redeemable shares | Non- redeemable shares | Redeemable shares | |||||||||||||||||||||||||
| Basic and Diluted net (loss) income per share: | ||||||||||||||||||||||||||||||||
| Numerators: | ||||||||||||||||||||||||||||||||
| Allocation of net losses | $ | (378,028 | ) | $ | (186,318 | ) | $ | (253,166 | ) | $ | (757,774 | ) | $ | (558,332 | ) | $ | (775,469 | ) | $ | (802,994 | ) | $ | (2,720,261 | ) | ||||||||
| Accretion of extension fee | - | 105,000 | - | 906,348 | - | 525,000 | - | 3,206,347 | ||||||||||||||||||||||||
| Accretion of temporary equity- interest income earned | - | 320,078 | - | 1,337,332 | - | 2,131,683 | - | 4,035,277 | ||||||||||||||||||||||||
| Allocation of net (loss) income | $ | (378,028 | ) | $ | 238,760 | $ | (253,166 | ) | $ | 1,485,906 | $ | (558,332 | ) | $ | 1,881,214 | $ | (802,994 | ) | $ | 4,521,363 | ||||||||||||
| Denominators: | ||||||||||||||||||||||||||||||||
| Weighted-average shares outstanding | 3,205,000 | 1,579,639 | 3,205,000 | 9,593,176 | 3,205,000 | 4,451,437 | 3,205,000 | 10,857,407 | ||||||||||||||||||||||||
| Basic and diluted net (loss) income per share | $ | (0.12 | ) | $ | 0.15 | $ | (0.08 | ) | $ | 0.15 | $ | (0.17 | ) | $ | 0.42 | $ | (0.25 | ) | $ | 0.42 |
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Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes ("ASC 740"). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the consolidated financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise's consolidated financial statements and prescribes a recognition threshold and measurement process for consolidated financial statements recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company has identified the Cayman Islands as its only "major" tax jurisdiction, as defined. Any interest payable in respect of U.S. debt obligations (if any) held by the Trust Account is intended to qualify for the portfolio interest exemption or otherwise be exempt from U.S. withholding taxes. Based on the Company's evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company's consolidated financial statements. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in material changes to its financial position. The Company's policy for recording interest and penalties associated with audits is to record such items as a component of income tax expense.
On August 16, 2022, the U.S. Government enacted legislation commonly referred to as the Inflation Reduction Act. The main provision of the Inflation Reduction Act (the IRA) that we anticipate may impact us is a 1% excise tax on share repurchases. Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Because there is possibility that the Company may acquire a U.S. domestic corporation or engage in a transaction in which a domestic corporation becomes a parent or affiliate to the Company, the Company may become a "covered corporation" as a listed Company in Nasdaq. On July 13, 2023, January 10, 2024 and July 12, 2024, 2,436,497, 3,319,923and 4,840,581public shares were rendered for redemption in connection with an extension vote, respectively (see Note 1). The management team has evaluated the IRA as of September 30, 2024, and does not accrue any excise tax related to the redemption as the Company believes it is not a "covered corporation" under Internal Revenue Code Section 4501. The management team will continue to evaluate its impact.
The provision for income taxes was deemed to be immaterial for the nine months ended September 30, 2024 and 2023.
Warrants
The Company evaluates the Public and Private Warrants as either equity-classified or liability-classified instruments based on an assessment of the warrants' specific terms and applicable authoritative guidance in FASB 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 that 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 ordinary shares, among other conditions for equity classification. Pursuant to such an evaluation, both Public and Private Warrants are classified as stockholders' equity.
Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's consolidated financial statements.
Note 3 - Initial Public Offering
On December 15, 2021, the Company consummated the initial public offering and sale of 11,500,000units (including the issuance of 1,500,000units as a result of the underwriters' full exercise of the over-allotment) at a price of $10.00per Unit, generating gross proceeds of $115,000,000. Each Unit consists of one ordinary share, one redeemable warrant (each a "Warrant", and, collectively, the "Warrants"), and one right to receive one-seventh (1/7) of an ordinary share upon the consummation of a Business Combination. Each two redeemable warrants entitle the holder thereof to purchase one ordinary share, and each seven rights entitle the holder thereof to receive one ordinary share at the closing of a Business Combination. No fractional shares were issued upon separation of the Units, and only whole Warrants will trade.
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Note 4 - Private Placement
Concurrently with the consummation of the IPO, A-Star Management Corporation, the Sponsor, purchased an aggregate of 330,000units at a price of $10.00per Private Unit for an aggregate purchase price of $3,300,000in a private placement. The Private Units are identical to the public Units except with respect to certain registration rights and transfer restrictions. The proceeds from the Private Units were added to the proceeds from the IPO to be 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 Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Units and all underlying securities will expire worthless.
Note 5 - Related Party Transactions
Founder Shares
On April 6, 2021, the Sponsor purchased 2,875,000ordinary shares for an aggregate price of $25,000.
The 2,875,000founder shares (the "Founder Shares") included an aggregate of up to 375,000shares subject to forfeiture by the Sponsor to the extent that the underwriters' over-allotment was not exercised in full or in part, so that the Sponsor will collectively own 20% of the Company's issued and outstanding shares after the Proposed Offering. On December 15, 2021, the underwriters exercised the over-allotment option in full, so there are no Founder Shares subject to forfeiture as of September 30, 2024 and December 31, 2023.
The Sponsor and each Insider agree that it, he or she shall not (a) transfer 50% of their Founder Shares until the earlier of (A) six months after the consummation of the Company's initial Business Combination or (B) the date on which the closing price of the Ordinary Shares equals or exceeds $12.50per share (as adjusted for share splits, share capitalizations, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing after the Company's initial Business Combination or (b) transfer the remaining 50% of their Founder Shares until six months after the date of the consummation of the Company's initial Business Combination, or earlier in either case, if subsequent to the Company's initial Business Combination the Company completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of the Company's stockholders having the right to exchange their Ordinary Shares for cash, securities or other property (the "Founder Shares Lock-up Period").
Administrative Services Agreement
The Company entered into an administrative services agreement, commencing on December 13, 2021, through the earlier of the Company's consummation of a Business Combination or its liquidation, to pay to the Sponsor a total of $10,000per month for office space, secretarial and administrative services provided to members of the Company's management team. For each of the nine months ended September 30, 2024 and 2023, the Company incurred $90,000in fees for these services, respectively. For each of the three months ended September 30, 2024 and 2023, the Company incurred $30,000in fees for these services, respectively. As of September 30, 2024, the balance of administrative service fees was $291,129which remained unpaid and included in accrued expenses and other liability.
Promissory Note - Sponsor
The Company had issued the following promissory notes (collectively, the "Notes"):
On September 13, 2022, December 13, 2022. March 13, 2023, September 20, 2023 and August 26, 2024 the Company issued four promissory notes in the principal amount of up to $1,000,000, $1,300,000, $2,500,000, and $2,500,000, respectively, to the Sponsor, pursuant to which the Sponsor shall loan to the Company up to the related amount to pay the extension fee and transaction cost. The Notes are repayable in full upon the date of the consummation of the Company's initial business combination pursuant to the Notes and related amendments. The Notes have no conversion feature, no collateral and bear no interest.
During the nine months ended September 30, 2024, the Company drew down $525,000from the Notes to pay the extension contribution of $70,000each month from January to June 2024, and $35,000each month from July to September 2024, respectively. The full amounts were deposited into the Trust Account immediately.
On September 25, 2024, the Company entered into an agreement with its Sponsor, pursuant to which the Sponsor agrees to waive the principal balance of the Notes with a total amount of $6,245,961.
After the waiver, the balance of the Notes was $35,000and $5,755,961as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, the remaining balance available under the Notes was $1,019,039.
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Loan Agreement with Sponsor
On August 26, 2024, the Company entered into a Loan Agreement with the Sponsor, pursuant to which the Sponsor shall loan to the Company up to $1,500,000 to pay the extension fee and transaction cost. The loan bears no interest and are repayable in full upon the date of the consummation of the Company's initial business combination.
The drawdown of the loan includes a balance of $738,769due to the Sponsor for operating expenses paid by the Sponsor on behalf of the Company prior to the Loan Agreement.
On September 25, 2024, the Company entered into an agreement with its Sponsor, pursuant to which the Sponsor agrees to waive the principal balance of the loan with a total amount of $746,270.
After the waiver, the balance of loan was nil. As of September 30, 2024, the remaining balance available under the Loan Agreement was $761,231.
Due to Sponsor
As describe above in "Loan Agreement with Sponsor", all balance of due to Sponsor was deemed a drawdown under the Loan Agreement, which was then waived by the Sponsor on September 25, 2024.
After the waiver, as of September 30, 2024 and December 31, 2023, the Company hada balance of due to Sponsor of niland $212,660, respectively, representing the amount of operating expenses paid by the Sponsor on behalf of the Company.
The waiver of the Sponsor liabilities was accounted as a debt extinguishment in accordance to ASC470-50-40-2, and the waived balance of $6,984,730is recognized in additional paid-in capital, as the extinguishment transactions between related parties were deemed to be capital transactions.
Note 6 - Commitments and Contingencies
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action against the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these unaudited condensed consolidated financial statements. The specific impact on the Company's financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed consolidated financial statements. The management will continuously evaluate the effect of these events on the Company.
Underwriters Agreement
The Company granted the underwriters a 45-day option to purchase up to 1,500,000Units (over and above the 10,000,000units referred to above) solely to cover over-allotments at $10.00per Unit. On December 15, 2021, the underwriters exercised the over-allotment option in full to purchase 1,500,000Units at a purchase price of $10.00per Unit.
On December 15, 2021, the Company paid a cash underwriting commission of 2.0% of the gross proceeds of the IPO, or $2,300,000.
The underwriters are entitled to a deferred underwriting commission of 2.5% of the gross proceeds of the IPO, or $2,875,000, which will be paid from the funds held in the Trust Account upon completion of the Company's initial Business Combination subject to the terms of the underwriting agreement. The Company has deferred underwriting commissions of $2,875,000and $2,875,000as of September 30, 2024 and December 31, 2023, respectively.
Registration Rights
The holders of the Founder Shares will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Contingencies and Dismissal of the Then-Legal Counsel
The Company may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. As of September 30, 2024 and December 31, 2023, there were no legal or administrative proceedings for which a loss was probable and expected to be material to the consolidated financial statements.
On February 5, 2024, the management and the Sponsor determined to dismiss the Company's then-legal counsel and also terminated its services of maintaining and managing the escrow account. The former legal counsel alleged that there was an approximate $200,000balance due with the Sponsor and disputed legal fee due from the Company. On May 23, 2024, the Sponsor and the Company entered into an indemnity agreement that contractually indemnifies, holds harmless, and exonerates the Company from any potential litigation or related proceedings arising from the service termination with the former legal counsel. The Company does not believe that either the above Sponsor Balance due to the former legal counsel or the disputed legal fee would have a material impact on the Company's unaudited consolidated financial statements.
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Note 7 - Stockholders' Deficit
Ordinary Shares
The Company is authorized to issue 50,000,000ordinary shares, with a par value of $0.001per share. Holders of the ordinary shares are entitled to one vote for each ordinary share. As of September 30, 2024 and December 31, 2023, there were 3,205,000ordinary shares issued and outstanding, excluding 902,999and 9,063,503shares subject to possible redemption.
Public Warrants
Pursuant to the Initial Public Offering, the Company sold 11,500,000Units at a price of $10.00per Unit for a total of $115,000,000. The total amount of ordinary shares subject to possible redemption is 11,500,000. Each Unit consists of one ordinary share, one right to acquire one-seventh (1/7) of an ordinary share, and one redeemable warrant ("Public Warrant") to purchase one-half of one ordinary share at a price of $11.50per share, subject to adjustment. As of September 30, 2024 and December 31, 2023, the Company had 11,500,000and 11,500,000public warrants outstanding, respectively.
Each warrant entitles the holder to purchase one-half ordinary share at a price of $11.50per share commencing 30 days after the completion of its initial business combination and expiring five years from after the completion of an initial business combination. No fractional warrant will be issued and only whole warrants will trade. The Company may redeem the warrants at a price of $0.01per warrant upon 30 days' notice, only in the event that the last sale price of the ordinary shares is at least $18.00per share for any 20trading days within a 30-trading day period ending on the third day prior to the date on which notice of redemption is given, provided there is an effective registration statement and current prospectus in effect with respect to the ordinary shares underlying such warrants during the 30-day redemption period. If a registration statement is not effective within 60days following the consummation of a business combination, warrant 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 warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act.
In addition, if (a) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20per share (with such issue price or effective issue price to be determined in good faith by our board of directors), (b) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination, and (c) the volume weighted average trading price of the ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial Business Combination (such price, the "Market Value") is below $9.20per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the Market Value, and the last sales price of the ordinary shares that triggers the Company's right to redeem the Warrants will be adjusted (to the nearest cent) to be equal to 180% of the Market Value.
Private warrants
The private warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in this offering. As of September 30, 2024 and December 31, 2023, the Company had 330,000private warrants outstanding, respectively.
Rights
Except in cases where the Company is not the surviving Company in a business combination, the holders of the rights will automatically receive 1/7 of a share of ordinary shares upon consummation of the Company's initial business combination. In the event the Company will not be the surviving company upon completion of the initial business combination, each holder of a right will be required to affirmatively convert his, her or its rights in order to receive the 1/7 of a share underlying each right upon consummation of the business combination. As of September 30, 2024 and December 31, 2023, no rights had been converted into shares.
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Note 8 - Fair Value Measurements
The Company complies with ASC 820, "Fair Value Measurements", for its financial assets and liabilities that are re-measured and reported at fair value for each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. ASC 820 determines fair value to be the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
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 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 our assessment of the assumptions that market participants would use in pricing the asset or liability.
At September 30, 2024 and December 31, 2023, assets held in the Trust Account were entirely comprised of marketable securities.
The following table presents information about the Company's assets that are measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| As of September 30, 2024 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
|||||||||
| Marketable Securities held in Trust Account | $ | 10,962,587 | $ | - | $ | - |
| As of December 31, 2023 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
|||||||||
| Marketable Securities held in Trust Account | $ | 101,590,662 | $ | - | $ | - |
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Note 9 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the unaudited consolidated financial statements were issued. Based upon the review, the Company did not identify other subsequent events that would have required adjustment or disclosure in the financial statement except those have been disclosed elsewhere in the Note to the unaudited consolidated financial statements and the following:
Notice of Failure to Satisfy a Continued Listing Rule
On October 1, 2024, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC stating that the Company's listed securities fail to comply with the minimum of $50,000,000market value of listed securities requirement for continued listing on the Nasdaq Global Market in accordance with Nasdaq Listing Rule 5450(b)(2)(A) based upon the Company's Market Value of Listed Securities from August 12, 2024 to September 30, 2024.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(C), the Company has been provided a compliance period of 180 calendar days, or until March 31, 2025, to regain compliance with the Rule. To regain compliance, the Company's Market Value of Listed Securities must meet or exceed $50,000,000for a minimum of ten consecutive business days prior to March 31, 2025. If at any time during this compliance period the Company's Market Value of Listed Securities closes at $50,000,000or more for a minimum of ten consecutive business days, Nasdaq will provide the Company with written confirmation of compliance and the matter will be closed.
However, if the Company fails to timely regain compliance with the Rule, the Company's securities will be subject to delisting from Nasdaq. Alternatively, the Company may consider applying for a transfer to the Nasdaq Capital Market.
The Letter has no immediate effect on the listing of the Company's securities on the Nasdaq Global Market under the symbols "ALSAU," "ALSA," "ALSAR," and "ALSAW." The Company intends to actively monitor the Company's Market Value of Listed Securities and will take all reasonable measures available to the Company to regain compliance with the Rule within the 180-calendar-day compliance period. However, there can be no assurance that the Company will be able to regain or maintain compliance with the applicable continued listing standards set forth in the Nasdaq Listing Rules.
Subsequent drawdown of the Sponsor loan and the promissory note
Subsequent to September 30, 2024, in addition to the monthly admin service fee charged by the Sponsor which is recorded under the "Accrued expenses and other liability", the Sponsor paid a total of $55,445 operating expenses on behalf of the Company, which was deemed to be a drawdown under the Loan Agreement.
On October 21 and November 8, 2024, the Sponsor deposited $35,000into its Trust account for its monthly extension fee respectively, which was deemed drawdown of the promissory note.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Alpha Star Acquisition Corporation. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to A-Star Management Corporation. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please consult the Company's securities filings on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on March 11, 2021 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Units, our shares, debt or a combination of cash, shares and debt.
We expect 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.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through September 30, 2024 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenue until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We expect that we will 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 in connection with searching for, and completing, a Business Combination.
On September 4, 2024, we established a wholly owned subsidiary, Xdata Group, in Cayman Islands, and serves as PubCo for our initial business combination in accordance to the Business Combination Agreement entered on September 12, 2024. Xdata Group ("PubCo)" has no operations, and only had limited activities. By arrangement, all financial liabilities of PubCo will be assumed by the third-party target company.
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For the three and nine months ended September 30, 2024, we had a net (loss) income of $(139,268) and $1,322,882, which consistedof operating costs of $459,346 and $808,801, offset by interest income on marketable securities held in the Trust Account of $ 278,247 and $2,089,852 and unrealized interest income on marketable securities held in the Trust Account of $41,831 and $41,831, respectively.
For the three and nine months ended September 30, 2023, we had a net income of $1,232,740 and $3,718,369, which consistedof operating costs of $104,592 and $316,908, offset by interest income on marketable securities held in the Trust Account of $916,726 and $3,614,671 and unrealized interest income on marketable securities held in the Trust Account of $420,606 and 420,606, respectively.
Liquidity and Capital Resources
On December 15, 2021, the Company consummated the IPO of 11,500,000 units (including the exercise of the over-allotment option by the underwriters in the IPO) at $10.00 per unit (the "Public Units"), generating gross proceeds of $115,000,000. Each Unit consists of one ordinary share, one redeemable warrant to purchase one-half (1/2) ordinary share (each a "Warrant", and, collectively, the "Warrants"), and one right to receive one-seventh (1/7) of an ordinary share upon the consummation of a Business Combination. Simultaneously with the IPO, the Company sold to its Sponsor 330,000 units at $10.00 per unit in a private placement generating total gross proceeds of $3,300,000. Offering costs amounted to $5,669,696 consisting of $2,300,000 of underwriting fees, $2,875,000 of deferred underwriting fees, and 494,696 of other offering costs. Apart from $25,000 for the subscription of ordinary shares, the Company received net proceeds of $115,682,250 from the IPO and the private placement.
For the nine months ended September 30, 2024, net cash provided by operating activities was $82,524. Net income of $1,322,882 consisted of formation and operating costs $808,801, offset by interest earned on marketable securities held in trust of $2,089,852 and unrealized interest earned on marketable securities held in trust of $41,831. Net cash used in financing activities was $92,857,282, consisting of $93,382,282 for the redemption of public shares offset by the proceed of sponsor promissory note $525,000. Net cash provided by investing activities was $92,774,758, consisting of $525,000 extension contributions deposited into the marketable security held in trust account and offset by $93,299,758 cash withdrawn from trust account to redeem public shares.
For the nine months ended September 30, 2023, net cash used in operating activities was $126,796. Net income of $3,718,369 consisted of formation and operating costs $316,908, offset by interest earned on marketable securities held in trust of $3,614,671 and unrealized interest earned on marketable securities held in trust of $420,606. Net cash used in financing activities was $22,896,037 which consisted of $3,316,281 from the proceeds of the sponsor promissory note, offset by $26,094,884 redemption of public shares. Net cash provided by investing activities was $3,206,347 extension contributions deposited into the marketable security held in trust account, offset by $7,500 operating expense paid out of the Trust Account and $26,094,884 cash withdrawn from the Trust Account to redeem public shares.
At September 30, 2024, we had marketable securities held in the Trust Account of $10,962,587. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a 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.
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At September 30, 2024, we had cash in escrow of nil held outside of the Trust Account. We intend to raise funds through borrowing from Sponsor, and use the 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 a Business Combination.
In order to complete a Business Combination, the Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company's officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company's working capital needs. 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 if a Business Combination is not consummated.
The Company had issued the following promissory notes (collectively, the "Notes"):
On September 13, 2022, December 13, 2022. March 13, 2023, September 20, 2023 and August 26, 2024 the Company issued four promissory notes in the principal amount of up to $1,000,000, $1,300,000, $2,500,000, and $2,500,000, respectively, to the Sponsor, pursuant to which the Sponsor shall loan to the Company up to the related amount to pay the extension fee and transaction cost. The Notes are repayable in full upon the date of the consummation of the Company's initial business combination pursuant to the Notes and related amendments. The Notes have no conversion feature, no collateral and bear no interest.
During the nine months ended September 30, 2024, the Company drew down $525,000 from the Notes to pay the extension contribution of $70,000 each month from January to June 2024, and $35,000 each month from July to September 2024, respectively. The full amounts were deposited into the Trust Account immediately.
On August 26, 2024, we entered into a Loan Agreement with our Sponsor for a $1.5 million loan to cover transaction costs and extension fee. The loan is non-interest bearing and payable upon the completion of the initial business combination. The loan also covers amount we received prior to the agreement, that was the Sponsor's payments on behalf of us in prior period which was the balance of due to Sponsor of $738,769.
On September 25, 2024, the Company entered into supplemental agreements with its Sponsor, pursuant to which the Sponsor agrees to waive the principal balance of the Notes and the Sponsor loan in the amount of $6,245,961 and $746,270, respectively.
After the waiver, as of September 30, 2024, the balance of the Notes and the Sponsor loan was $35,000 and nil, respectively, and the remaining balance available under the Notes and the Sponsor loan was $1,019,039 and $761,231, respectively.
We believe we will need to raise additional funds in order to meet the expenditures required for operating our business. If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination is 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.
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Off-Balance Sheets Financing Arrangements
We have no obligations, assets or liabilities that would be considered off-balance sheets arrangements as September 30, 2024. 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 sheets arrangements. We have not entered into any off-balance sheets 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 the Sponsor a monthly fee of $10,000 for certain general and administrative services, including office space, utilities and administrative services, provided to the Company. We began incurring these fees on December 15, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company's liquidation.
The underwriters are entitled to a deferred fee of two and one-half percent (2.5%) of the gross proceeds of the Initial Public Offering, or $2,875,000. The deferred fee will be paid in cash upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed consolidated 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 condensed consolidated 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:
Warrants
The Company evaluates the Public and Private Warrants as either equity-classified or liability-classified instruments based on an assessment of the warrants' 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 and 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 ordinary shares, among other conditions for equity classification. Pursuant to such evaluation, both Public and Private Warrants are classified in stockholders' equity.
Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) are classified as temporary equity. At all other times, ordinary shares are classified as stockholders' equity. The Company's ordinary shares feature certain redemption rights that are considered to be outside of the Company's control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders' equity section of the Company's condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid-in capital and accumulated deficit if additional paid in capital equals to zero.
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Basic and diluted net income (loss) per share
The Company complies with accounting and disclosure requirements of FASB 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 shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net income (loss) less any dividends paid. The Company then allocated the undistributed income (loss) rateably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public stockholders.
The calculation of diluted net income (loss) per ordinary shares and related weighted average of the ordinary shares does not consider the effect of the warrants and rights issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants and rights are contingent upon the occurrence of future events. The warrants are exercisable to purchase 5,915,000 shares of ordinary shares in the aggregate, and the rights are exercisable to convert 1,690,000 shares of ordinary shares in the aggregate. As of September 30, 2024, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company other than above. As a result, diluted net income (loss) per ordinary shares is the same as basic net income (loss) per ordinary shares 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 our interim condensed consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2024, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in certain U.S. government securities with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024. Based upon their evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of September 30, 2024.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
We have identified a material weakness in our internal control over financial reporting as of December 31, 2023, relating to ineffective review and approval procedures over journal entries and financial statement preparation which resulted in errors not being timely identified in previously issued consolidated financial statements, such as the misclassification of the trust account balance and deferred underwriting commissions payable as current assets and current liabilities instead of non-current assets and non-current liabilities, respectively. We concluded that the failure to timely identify such accounting errors constituted a material weakness as defined in the SEC regulations. As such, management determined that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of September 30, 2024.
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the complex accounting standards that apply to our consolidated financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects, or that any additional material weaknesses or of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. Even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not party to any legal proceedings as of the filing date of this Form 10-Q.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our annual report on the Form 10K for the fiscal year ended December 31, 2023 under Forward-Looking Statements and Item 1A - Risk Factors, filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, other than those set out below.
If we fail to meet applicable continued listing requirements, Nasdaq may delist our securities from trading, in which case the liquidity and market price of our securities could decline.
On October 1, 2024, we received a written notification (the "Notification Letter") from Nasdaq stating that the Company was not in compliance with the minimum market value of listed securities set forth in Nasdaq's rules for continued listing on The Nasdaq Global Market. Nasdaq Listing Rule 5450(b)(2)(A) requires primary securities listed on the Nasdaq Global Market to maintain a minimum market value of listed securities of $50,000,000, and Listing Rule 5810(c)(3)(C) provides that a failure to meet the minimum market value of listed securities requirement exists if a deficiency under Rule 5450(b)(2)(A) continues for a period of 30 consecutive business days. Based on the market value of listed securities for the 30 consecutive business days beginning August 12, 2024, and continuing to the present, the Company is not in compliance with the minimum market value of listed securities requirement. In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company has been provided a cure period of 180 calendar days, or until March 31, 2025, to regain compliance with the minimum market value of listed securities requirement (the "Compliance Period"). To regain compliance, the market value of listed securities must meet or exceed $50,000,000 for at least 10 consecutive business days during the Compliance Period. If the Company does not regain compliance during such cure period, the Company's securities will be subject to delisting. In that event, the Company may appeal such determination to a hearing panel. The Company will make its best efforts to regain compliance with Listing Rule 5450(b)(2)(A) prior to the expiration of the Compliance Period.
If our securities are delisted by Nasdaq, our securities may be eligible for quotation on an over-the-counter quotation system or on "the pink sheets" but will lack the benefits and market efficiencies associated with a Nasdaq listing. Upon delisting, our securities would become subject to the regulations of the SEC relating to the market for penny stocks. The regulations applicable to penny stocks may severely affect market liquidity in respect of our securities and could limit the ability of shareholders to obtain accurate quotations as to the market value of and/or dispose of our securities. In such case, there can be no assurance that our securities will be again be eligible for listing on any recognized exchange.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Simultaneously with the closing of the Company's IPO, the Company consummated the private placement ("Private Placement") with its sponsor, A-Star Management Corp., a British Virgin Islands company ("Sponsor") for the purchase of 330,000 Units (the "Private Units") at a price of $10.00 per Private Unit, generating total proceeds of $3,300,000, pursuant to the Private Placement Unit Purchase Agreement dated December 13, 2021. Each Private Unit purchased by the Sponsor consists of one Shares, one right to receive one-seventh 1/7) of a Share upon the consummation of a business combination and one private placement warrant exercisable to purchase one-half (1/2) of one Share at a price of $10.00 per Share. The Private Units were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions did not involve a public offering.
Use of Proceeds
The registration statement for our initial public offering was declared effective by the Securities and Exchange Commission on December 13, 2021. We completed our initial public offering on December 15, 2021. In our initial public offering, we sold units at an offering price of $10.00 and consisting of one ordinary share, one right and one redeemable warrant. Each right entitles the holders thereof to receive one seventh (1/7) of one ordinary shares upon the consumption of the initial business combination. Each warrant entitles the holder thereof to purchase one-half of one ordinary share. We will not issue fractional shares in connection with the exercise of the warrants. In connection with our initial public offering, we sold 11,500,000 units, generating gross proceeds of $115,000,000.
Simultaneously with the closing of the IPO, pursuant to the Private Placement Units Purchase Agreement by and between the Company and our sponsor, A-Star Management Corporation, the Company completed the private sale of an aggregate of 330,000 units (the "Private Placement Units") to the Sponsor at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds to the Company of $3,300,000.
Transaction costs related to our IPO amounted to $5,669,696, consisting of $2,300,000 of underwriting fees, $2,875,000 of deferred underwriting fees and $494,696 of other offering costs. A total of $115,000,000, comprised of $112,700,000 of the proceeds from the IPO (which amount includes up to $2,875,000 of the underwriter's deferred discount) and $2,300,000 of the proceeds of the sale of the Private Placement Units, was placed in a U.S.-based Trust Account maintained at Wilmington Trust, National Association, acting as trustee. Except with respect to interest earned on the funds in the Trust Account that may be released to the Company to pay its taxes, the funds held in the Trust Account will not be released from the Trust Account until the earliest of (i) the completion of the Company's initial business combination, (ii) the redemption of any of the Company's public shares properly tendered in connection with a shareholder vote to amend the Company's amended and restated memorandum and articles of association to (A) modify the substance or timing of its obligation to redeem 100% of the Company's public shares if it does not complete its initial business combination within 9 months from the closing of the IPO (or up to 21 months from the closing of the IPO if we extend the period of time to consummate a business combination), or (B) with respect to any other provision relating to shareholders' rights or pre-business combination activity, and (iii) the redemption of the Company's public shares if it is unable to complete its initial business combination within 9 months from the closing of the IPO (or up to 27 months from the consummation of the IPO if we extend the period of time to consummate a business combination). At the Annual General Meeting held on July 13, 2023, shareholders approved the amendments of the Company's Amended and Restated Memorandum and Articles of Association to extend the date by which the Company must consummate a business combination to March 15, 2024. At the Extraordinary General Meeting held on January 10, 2024, shareholders approved the amendments of the Company's Amended and Restated Memorandum and Articles of Association extend the date by which the Company must consummate a business combination to September 15, 2024 (33 months from the consummation of the IPO). At the Annual General Meeting held on July 12, 2024, shareholders approved the amendments of the Company's Amended and Restated Memorandum and Articles of Association to extend the date by which the Company must consummate a business combination to December 15, 2024.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Amendment.
| No. | Description of Exhibit | |
| 31.1 | Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ALPHA STAR ACQUISITION CORPORATION | ||
| Date: November 14, 2024 | /s/ Zhe Zhang | |
| Name: | Zhe Zhang | |
| Title: | Chief Executive Officer (Principle Executive Officer) | |
| Date: November 14, 2024 | /s/ Guojian Chen | |
| Name: | Guojian Chen | |
| Title: | Chief Financial Officer (Principle Financial Officer) |
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