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 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. The
Company's securities filings can be accessed 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, 2022 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 revenues 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.
For the nine months ended September 30, 2022, we had a net income of $220,668,
which consists of operating costs of $472,504, offset by interest income on
marketable securities held in the Trust Account of $693,167 and other income $5.
For the period from March 11, 2021 (inception) to September 30, 2021, we had a
net loss as $11,850, which consist with the operating cost of $11,850.
For the three months ended September 30, 2022 and 2021, we had a net income and
net loss respectively of, $415,467 and $800. The operating costs of $104,983 and
$800, offset by interest income on marketable securities held in the Trust
Account of $520,450 and nil, respectively.
15
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of ordinary shares by the Sponsor and loans
from our Sponsor.
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. Except for
$25,000 of 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, 2022, net cash used in operating
activities was $257,692. Net income of $220,668 was consistent with formation
and operating costs $472,504 and offset by interest earned on marketable
securities held in trust of $693,167 and other income $5. Net cash provided by
financing activities was $383,333 from the proceeds of sponsor promissory note.
Net cash used by investing activities is $383,333 to invest the cash into the
marketable security held in trust account.
For the period ended from March 11, 2021 to September 30, 2021, net cash used in
operating activities was $206,156. Net cash provided by financing activities was
$325,000, which the Company received from the Sponsor on the promissory note of
$300,000 for funding the preparation of IPO, and the Sponsor's subscription for
the 2,875,000 ordinary shares at $0.001 par value, for a total of $25,000.
At September 30, 2022, we had marketable securities held in the trust account of
$116,077,245. 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.
At September 30, 2022, we had cash of $130,166 held outside of the Trust
Account. We intend to use the funds held outside the Trust Account primarily to
identify and evaluate target businesses, perform business due diligence on
prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners,
review corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. Such Working Capital Loans would be evidenced
by promissory notes. If we complete a Business Combination, we may repay such
notes out of the proceeds of the Trust Account released to us. In the event that
a Business Combination does not close, we may use a portion of the working
capital held outside the Trust Account to repay such notes, but no proceeds from
our Trust Account would be used for such repayment. Up to $1,500,000 of notes
may be convertible into units, at a price of $10.00 per unit, at the option of
the lender. The units would be identical to the Private Units. The Sponsor
convertible loan payable for this Working Capital Loans is nil as of September
30, 2022 and December 31, 2021.
On September 13, 2022, the Company issued a promissory note (the "Note") in the
principal amount of up to $1,000,000 to the Sponsor, pursuant to which the
Sponsor shall loan to the Company up to $1,000,000 to pay the extension fee and
transaction cost. On September 13, 2022, the Company requested to draw the funds
of $383,333 and deposited it into the trust account to extend the period of time
the Company has to consummate a business combination by one month to October 15,
2022. The $383,333 extension fee represents approximately $0.033 per public
share. The Notes bear no interest and are repayable in full upon the earlier of
(a) September 15, 2023 or (b) the date of the consummation of the Company's
initial business combination. The Note have no conversion feature., and no
collateral. The issuance of the Note was made pursuant to the exemption from
registration contained in Section 4(a)(2) of the Securities Act of 1933, as
amended. Sponsor promissory note balances were 383,333 and nil as of September
30, 2022 and December 31, 2021 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 are less than the actual amount necessary to
do so, we may have insufficient funds available to operate our business prior to
our initial Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon completion of
our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
16
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities that would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
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 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 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 accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
specific terms and applicable authoritative guidance in Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 480,
Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and
Hedging ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own ordinary shares and whether the
warrant holders could potentially require "net cash settlement" in a
circumstance outside of the Company's control, among other conditions for equity
classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
equity at the time of issuance. For issued or modified warrants that do not meet
all the criteria for equity classification, the warrants are required to be
recorded as liabilities at their initial fair value on the date of issuance, and
each balance sheet date thereafter. Changes in the estimated fair value of the
warrants are recognized as a non-cash gain or loss on the statements of
operations.
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.
17
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 income (loss) per ordinary shares does not consider
the effect of the warrants issued in connection with the (i) Initial Public
Offering, and (ii) the private placement since the exercise of the warrants is
contingent upon the occurrence of future events. The warrants are exercisable to
purchase 5,915,000 shares of ordinary shares in the aggregate. As of September
30, 2022, 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. 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.
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 financial statements.
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