UNAUDITED
NOTES TO FINANCIAL STATEMENTS
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Metal
Sky Star Acquisition Corporation (the “Company”) is a blank check company incorporated in the Cayman Islands on May 5,
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’s efforts in identifying prospective target businesses will not be limited to a particular geographic region. 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 M-Star Management Corporation, a British Virgin Islands incorporated company (the “Sponsor”).
At September 30, 2022, the Company had not yet commenced any operations. All activity through September 30, 2022 relates
to the Company’s formation and the proposed initial public offering (“IPO”). 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 IPO. The Company has selected December 31 as its
fiscal year-end.
The
Company will have 9 months from the closing of the IPO (or up to 21 months from the closing of our initial public offering if
we extend the period of time to consummate a business combination) 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.
On
April 5, 2022, the Company consummated the IPO of 11,500,000 units which includes an additional 1,500,000 units as a result
of the underwriters’ fully exercise of the over-allotment, at $10.00 per Unit, generating gross proceeds of $115,000,000,
which is described in Note 3.
The
Trust Account
As
of April 5, 2022, a total of $115,682,250 of the net proceeds from the IPO and the private placement transaction completed
with the Sponsor, was deposited in a trust account established for the benefit of the Company’s public shareholders with
Wilmington Trust, National Association acting as trustee. The amount of funds currently held in the trust account in excess of
$115,000,000 will be transferred to the Company’s escrow cash account for use as its working capital. As of September 30,
2022 and December 31, 2021, the Company had $115,680,827 and 0nil held in the Wilmington Trust account respectively.
The
funds held in the Trust Account will be 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 and that invest 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
On
April 5, 2022, 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 ordinary share (each a “Warrant”, and,
collectively, the “Warrants”), and one right to receive one-tenth (1/10) of an ordinary share upon the consummation
of a Business Combination.
Simultaneously
with the consummation of 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 which is described in Note 4.
Offering
costs amounted to $5,704,741 consisting of $2,300,000 of underwriting fees, $2,875,000 of deferred underwriting fees, and $529,741
of other offering costs. Except for $25,000 of subscription of ordinary shares (as defined in Note 5), the Company received net
proceeds of $115,682,250 from the IPO and the private placement.
As
of September 30, 2022 and December 31, 2021, the Company had $188,402 and $95,978 of cash held in escrow for use as
working capital , which excludes $115,680,827 and 0nil of marketable securities held in trust
account and the liability for deferred underwriting commissions of $2,875,000 and 0nil, respectively.
In
September 2021, the Company repurchased 1,437,500 of founder shares for $25,000. In September 2021, the Company issued
of founder shares for $ which include an aggregate of up to 375,000 ordinary shares subject to forfeiture by the
Sponsor to the extent that the underwriter’s over-allotment is not exercised in full or in part, so that the Sponsor will
collectively own 20% of the Company’s issued and outstanding ordinary shares after the IPO.
The
founder shares (for purposes hereof referred to as the “Founder Shares”) include an aggregate of up to 375,000
ordinary shares subject to forfeiture by the Sponsor to the extent that the underwriter’s over-allotment is not exercised
in full or in part, so that the Sponsor will collectively own 20% of the Company’s issued and outstanding ordinary shares
after the IPO. On April 5, 2022, the underwriter exercised the over-allotment option in full, accordingly, no Founder Shares
are subject to forfeiture.
Going
Concern and Management Liquidity Plan
As
of September 30, 2022, the Company had $188,402 in cash and working capital of $188,140, which excludes $115,680,827 of marketable securities held in trust account
and the liability for deferred underwriting commissions of $2,875,000.
The
Company’s liquidity needs up to the closing of the IPO on April 5, 2022 had been satisfied through proceeds from notes
payable and advances from related party and from the issuance of common stock.
In
order to finance transaction costs in connection with a Business Combination, the Company’s 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 with working
capital. The Company’s management plans to continue its efforts to complete a Business Combination within the Combination
Period after the closing of the Initial Public Offering.
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 business combination. Moreover, we may need to obtain other financing either to complete our business combination or because
we become obligated to redeem a significant number of our public shares upon consummation of our business combination, in which
case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with
applicable securities laws, we would only complete such financing simultaneously with the completion of our business combination.
If
we are unable to complete our business combination because we do not have sufficient funds available to us, we will be forced
to cease operations and liquidate the Trust Account. In addition, following our business combination, if cash on hand is insufficient,
we may need to obtain additional financing in order to meet our obligations.
We have 21 months from the closing of the Initial Public Offering to consummate a Business Combination. It is uncertain that we
will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there
will be a mandatory liquidation and subsequent dissolution.
In
connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation
of Financial Statements — Going Concern,” management has determined that mandatory liquidation, should a Business
Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue
as a going concern for a reasonable period of time, which is considered to be one year from the issuance of the financial statements.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements are presented in U.S. Dollars and conformity with accounting principles generally accepted in
the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not emerging growth companies including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
financial statements with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires 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 financial
statements and the reported amounts of expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of September 30, 2022. The Company have cash held in escrow $188,402 and
$95,978 as of September 30, 2022 and December 31, 2021 respectively.
Deferred
Offering Costs
Offering
costs consist of underwriting, legal, accounting, registration and other expenses incurred through the balance sheet date that
directly related to the IPO. As of April 5, 2021, offering costs amounted to $5,704,741 consisting of $2,300,000 of underwriting
fees, $2,875,000 of deferred underwriting fees, and $529,741 of other offering costs. The Company complies with the requirements
of Accounting Standards Codification (“ASC”) 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses
of Offering”. The Company allocates offering costs between public shares, public rights and public warrants based
on the estimated fair values of public shares and public rights at the date of issuance.
Income
Taxes
The
Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future
taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the
Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax
benefits, if any, as income tax expense. There were no unrecognized tax benefits as of September 30, 2022 and no amounts
accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position.
The
Company may be subject to potential examination by foreign taxing authorities in the area of income taxes. These potential examinations
may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with foreign tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will
materially change over the next twelve months.
The
Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently
not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s
tax provision was zero for the periods presented.
Net
Income (Loss) Per Share
Net
loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period,
excluding ordinary shares subject to forfeiture. 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 shares for the periods presented.
The
net income (loss) per share presented in the statement of operations is based on the following:
| Schedule of earning per shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
For
the
three months ended
September 30,
2022 | | |
For
the
three months ended
September 30,
2021 | | |
For
the
nine months ended
September 30,
2022 | | |
For
the
Period ended from
May 5, 2021
(inception) to
September 30,
2021 | |
| Basic
and Diluted net income (loss) per share: | |
Non-redeemable
shares | | |
Redeemable
shares | | |
Non-redeemable
shares | | |
Redeemable
shares | | |
Non-redeemable
shares | | |
Redeemable
shares | | |
Non-redeemable
shares | | |
Redeemable
shares | |
| Numerators: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Allocation
of net losses | |
$ | (23,998 | ) | |
$ | (86,106 | ) | |
$ | (3,900 | ) | |
$ | - | | |
$ | (5,554,424 | ) | |
$ | (13,548,017 | ) | |
$ | (15,650 | ) | |
$ | - | |
| Accretion
of temporary equity | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 18,820,172 | | |
| - | | |
| - | |
| Accretion
of temporary equity - interest | |
| - | | |
| 519,917 | | |
| - | | |
| - | | |
| - | | |
| 680,827 | | |
| - | | |
| - | |
| Allocation
of net income (loss) | |
$ | (23,998 | ) | |
$ | 433,811 | | |
$ | (3,900 | ) | |
$ | - | | |
$ | (5,554,424 | ) | |
$ | 5,952,982 | | |
$ | (15,650 | ) | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Denominators: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Weighted-average
shares outstanding | |
| 3,205,000 | | |
| 11,500,000 | | |
| 2,875,000 | | |
| - | | |
| 3,091,374 | | |
| 7,540,293 | | |
| 2,875,000 | | |
| - | |
| Basic
and diluted net income (loss) per share | |
$ | (0.01 | ) | |
$ | 0.04 | | |
$ | (0.00 | ) | |
$ | - | | |
$ | (1.80 | ) | |
$ | 0.79 | | |
$ | (0.01 | ) | |
$ | - | |
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution.
The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks
on such account.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily
due to their short-term nature.
Recently
Issued Accounting Standards
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in
Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments.
ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s
own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are
indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022
and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations
or cash flows.
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic
(i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the
repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1%
of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax,
repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock
repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury
(the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse
or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022.
Because there is a possibility that the Company may acquire a U.S. domestic corporation or engage
in a transaction in which a domestic corporation becomes our parent or our affiliate and our securities will trade on Nasdaq following
the date of this prospectus, we may become a “covered corporation”.
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 financial statements.
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, 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
will be classified in shareholders’ equity.
Ordinary
Shares Subject to Possible Redemption
The
Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Ordinary shares subject to mandatory redemption is classified as a liability instrument and is
measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that
is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) is classified as temporary equity. At all other times, ordinary shares is classified as shareholders’
equity. The Company’s ordinary shares features 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 is presented
at redemption value (plus any interest earned on the Trust Account) as temporary equity, outside of the shareholders’ equity
section of the Company’s balance sheet.
NOTE
3. INITIAL PUBLIC OFFERING
On
April 5, 2022, the Company sold 11,500,000 Units (including the issuance of 1,500,000 Units as a result of the underwriter’s
fully exercise of the over-allotment) at a price of $10.00 per Unit, generating gross proceeds of $115,000,000 related to the
IPO. Each Unit consists of one ordinary share, one redeemable warrant (each a “Warrant”, and, collectively, the “Warrants”),
and one right to receive one-tenth (1/10) of an ordinary share upon the consummation of an Initial Business Combination. Each
one redeemable warrants entitle the holder thereof to purchase one ordinary share, and each ten rights entitle the holder thereof
to receive one ordinary share at the closing of a Business Combination. No fractional shares issued upon separation of the Units,
and only whole Warrants will trade.
The
Company granted the underwriter a 45-day option from the date of the IPO to purchase up to an additional 1,500,000 Public Units
to cover over-allotments. On April 5, 2022, the underwriter exercised the over-allotment option in full to purchase 1,500,000
Public Units, at a purchase price of $10.00 per Public Unit, generating gross proceeds to the Company of $15,000,000 (see Note
7).
At
September 30, 2022, the ordinary share reflect in the balance sheet are reconciled in the following tables:
| Schedule of balance sheet are reconciled | |
| | |
| Gross
proceeds from public shares | |
$ | 115,000,000 | |
| Less: | |
| | |
| Proceeds
allocated to public rights | |
| (8,510,000 | ) |
| Proceeds
allocated to public warrants | |
| (5,290,000 | ) |
| Allocation
of offering costs related to ordinary shares | |
| (5,020,172 | ) |
| Plus: | |
| | |
| Accretion
of carrying value to redemption value | |
| 18,820,172 | |
| Subsequent
measurement of Class A ordinary shares subject to possible redemption (interest earned on trust account) | |
| 680,827 | |
| Ordinary
shares subject to possible redemption (plus any interest earned on the Trust Account) | |
$ | 115,680,827 | |
NOTE
4. PRIVATE PLACEMENT
The
Sponsor has committed to purchase an aggregate of 300,000 Placement Units (or 330,000 Placement Units if the underwriters’
over-allotment is exercised in full) at a price of $10.00 per Placement Unit, ($3,000,000 in the aggregate, or $3,300,000 in the
aggregate if the underwriters’ over-allotment is exercised in full), from the Company in a private placement that will occur
simultaneously with the closing of the IPO (the “Private Placement”). On April 5, 2022, simultaneously with the
consummation of the IPO transaction, the Company received Private Placement funds of $from the Sponsor and consummated
the Private Placement transaction. The private units are identical to the Public Units sold in the IPO.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
In
May 2021, Harneys Fiduciary (Cayman) Limited transferred one ordinary share to the Sponsor for par value. On July 5,
2021 the Company redeemed the one share for par value and the Sponsor purchased ordinary shares for an aggregate price
of $25,000.
The
1,437,500 founder shares (for purposes hereof referred to as the “Founder Shares”) include an aggregate of up to 187,500
shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment is 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 IPO.
In
September 2021, the Company repurchased 1,437,500 of founder shares for $25,000. In September 2021, the Company issued
of founder shares for $which include an aggregate of up to 375,000 shares subject to forfeiture by the Sponsor
to the extent that the underwriters’ over-allotment is 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 IPO. On April 5, 2022, the underwriter exercised its
over-allotment option, as a result, no Founder Shares are subject to forfeiture.
Administrative
Services Agreement
The
Company entered into an administrative services agreement, commencing on April 5, 2022, through the earlier of the Company’s
consummation of a Business Combination or its liquidation, to pay to the Sponsor a total of $10,000 per month for office space,
secretarial and administrative services provided to members of the Company’s management team. For the period from April 5,
2022 through June 30, 2022, the Company incurred $28,333 in fees for these services. For the three months ended as of September 30, 2022, the Company incurred $30,000 in fees for these services. For the nine months ended as of September 30, 2022, the Company incurred $58,333 in fees for these services.
Promissory
Note — Related Party
On
June 15, 2021, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up
to an aggregate principal amount of $(the “Promissory Note”). On December 15, 2021, Company amended the
Promissory Note to extend the due date. The Promissory Note is non-interest bearing and payable on the earlier of (i) March 31,
2022 or (ii) the consummation of the IPO. As of September 30, 2022, the principal amount due and owing under the Promissory
Note was nil, which was paid off as of April 5, 2022. As of December 31, 2021, the principal amount due and owing under
the Promissory Notes was $300,000.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company,
the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
In the beginning of 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. The impact of this action and related
sanctions on the world economy are not determinable as of the date of these financial statements.
On
August 16, 2022, IR Act was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on
certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries
of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of
the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value
of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions
apply to the excise tax. The U.S. Department of the Treasury has been given authority to provide regulations and other guidance to
carry out and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022.
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. Whether
and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise
would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business
Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE”
or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination
but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury.
In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment
of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business
Combination and in the Company’s ability to complete a Business Combination.
Because there is a possibility that the Company may acquire a U.S. domestic corporation or engage
in a transaction in which a domestic corporation becomes our parent or our affiliate and our securities will trade on Nasdaq following
the date of this prospectus, we may become a “covered corporation”.
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.
Underwriting
Agreement
On
August 10, 2021, the Company engaged Ladenburg Thalmann & Co. Inc. as its underwriter. The Company will grant the underwriters
a 45-day option to purchase up to 1,500,000 additional Units to cover over-allotments at the IPO price, less the underwriting
discounts and commissions.
Ladenburg
Thalmann has agreed to revise the warrant agreement that the warrant is exercisable on the later of one year after the closing
of this offering or the consummation of an initial business combination.
The
underwriters will be entitled to a cash underwriting discount of: (i) two percent (2.0150%) of the gross proceeds of the IPO,
or $2,000,000 (or up to $2,300,000 if the underwriters’ over-allotment is exercised in full). In addition, the underwriters
are entitled to a deferred fee of two and one half percent (2.50%) of the gross proceeds of the IPO, or $2,500,000 (or up to $2,875,000
if the underwriters’ over- allotment is exercised in full) upon closing of the Business Combination. 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. As of September 30, 2022 and December 31, 2021, the Company have deferred underwriting commissions
$2,875,000 and 0nil as current liabilities.
Professional
Fees
The
Company has paid professional fees of $25,000 upon initial filing with the SEC of the registration statement for the public offering,
and $150,000 at the closing of the public offering as of April 5, 2022. The Company enter into the agreement with monthly
retainer of $5,000 starting form April 1, 2022. As of September 30, 2022, the Company incurred $30,000 in fees for these
services.
NOTE
7. SHAREHOLDER’S EQUITY
Ordinary
Shares
The
Company is authorized to issue 50,000,000 ordinary shares, with a par value of $0.001 per share. Holders of the ordinary shares
are entitled to one vote for each ordinary share. At April 5, 2022, there was 3,205,000 ordinary shares issued and outstanding,
excluding 11,500,000 ordinary shares subject to possible redemption. The Sponsor has agreed to forfeit 375,000 ordinary shares
to the extent that the over-allotment option is not exercised in full by the underwriter. On April 5, 2022, the underwriter
fully exercised the over-allotment option, as such there are no ordinary shares subject to forfeiture.
Warrants
Each
warrant entitles the holder to purchase one ordinary share at a price of $11.50 per 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 $0.01 per warrant
upon 30 days’ notice, only in the event that the last sale price of the ordinary shares is at least $18.00 per share for
any 20 trading 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 60 days 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 $9.20 per 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 $9.20 per 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.
The
Company complies with ASC 820, “Fair Value Measurements”, for its financial assets and liabilities that are re-measured
and reported at fair value at 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, 2022, 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, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company
utilized to determine such fair value.
| Schedule of Assets Measured at Fair Value on a Recurring basis | |
| | | |
| | | |
| | |
| Assets
September 30, 2022 | |
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 | |
$ | 115,680,827 | | |
$ | - | | |
$ | - | |
| Assets
December 31, 2021 | |
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 | |
$ | - | | |
$ | - | | |
$ | - | |
NOTE
8. SUBSEQUENT EVENTS
In
accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events
or transactions that occurred up to November 8, 2022, the date the financial statements were available to issue. Based upon this
review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial
statements.
