Alpha Star Acquisition Corporation(ALSAU) - 2024 Q3 - Quarterly Report

Part I. Financial Information This section provides a comprehensive overview of the company's financial performance, position, and cash flows Item 1. Consolidated Financial Statements The consolidated financial statements detail the company's financial position, performance, and cash flows, noting significant asset changes and liquidity challenges Consolidated Balance Sheets The balance sheets show a significant decrease in total assets and liabilities, with an improved stockholders' deficit primarily due to debt forgiveness Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Marketable securities held in trust account | $10,962,587 | $101,590,662 | | Total Assets | $10,987,712 | $101,603,162 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $648,242 | $6,189,022 | | Total liabilities | $3,523,242 | $9,064,022 | | Ordinary shares subject to possible redemption | $10,880,063 | $101,605,662 | | Total stockholders' deficit | $(3,415,593) | $(9,066,522) | Consolidated Statements of Operations The statements of operations show a net loss for Q3 2024 and a decline in net income for the nine-month period, driven by reduced trust account interest Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Formation and operational costs | $459,346 | $104,592 | $808,801 | $316,908 | | Interest and dividends earned in trust | $320,078 | $1,337,332 | $2,131,683 | $4,035,277 | | Net (Loss) Income | $(139,268) | $1,232,740 | $1,322,882 | $3,718,369 | Consolidated Statements of Changes in Stockholders' Deficit Stockholders' deficit significantly improved due to a $6,984,730 debt forgiveness by the Sponsor, recorded as a capital contribution - On September 25, 2024, the Sponsor agreed to waive debt totaling $6,984,730. This amount was recognized as an increase in Additional Paid-In Capital, significantly improving the total stockholders' deficit[10][76] Consolidated Statements of Cash Flows Cash flows for the nine months ended September 30, 2024, show significant movements from trust account withdrawals and share redemptions Cash Flow Summary for Nine Months Ended Sep 30, 2024 (Unaudited) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $82,524 | | Net cash provided by investing activities | $92,774,758 | | Net cash used in financing activities | $(92,857,282) | - The company withdrew $93.3 million from its Trust Account to redeem public shares during the first nine months of 2024[12] Notes to Unaudited Consolidated Financial Statements Notes detail the Business Combination Agreement, deadline extension, going concern uncertainty, Sponsor debt waiver, and a Nasdaq delisting notice - On September 12, 2024, the Company entered into a Business Combination Agreement with OU XDATA GROUP ("XDATA"), an Estonian company[25] - The deadline to consummate a business combination has been extended to December 15, 2024[22] - Management has determined there is substantial doubt about the Company's ability to continue as a going concern due to its working capital deficit and the approaching liquidation date if a business combination is not completed[34][35] - On September 25, 2024, the Sponsor waived a total of $6,984,730 in liabilities, consisting of $6,245,961 from promissory notes and $746,270 from a loan agreement. This was treated as a capital transaction[71][74][76] - Subsequent to the quarter end, on October 1, 2024, the Company received a notice from Nasdaq for failing to meet the minimum $50 million market value of listed securities requirement[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's pre-combination status, declining net income, liquidity challenges, going concern uncertainty, and the XDATA Business Combination Agreement - The company is a blank check company with its activities limited to organizational tasks and searching for a Business Combination, having generated no operating revenue to date[102][104] Net Income (Loss) Comparison | Period | Net (Loss) Income | | :--- | :--- | | Nine Months Ended Sep 30, 2024 | $1,322,882 | | Nine Months Ended Sep 30, 2023 | $3,718,369 | | Three Months Ended Sep 30, 2024 | $(139,268) | | Three Months Ended Sep 30, 2023 | $1,232,740 | - The company has a working capital deficit and relies on loans from its Sponsor to fund operations, raising substantial doubt about its ability to continue as a going concern[113] - On September 25, 2024, the Sponsor waived debt totaling approximately $7.0 million, significantly improving the company's balance sheet[117] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports immaterial market and interest rate risk due to trust account investments in short-term U.S. government securities - The company's exposure to market and interest rate risk is considered immaterial as IPO proceeds are held in the Trust Account and invested in U.S. government securities with a maturity of 180 days or less[131] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in internal control over financial reporting, with remediation efforts underway - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of September 30, 2024[133] - A material weakness was identified in internal control over financial reporting relating to ineffective review and approval procedures over journal entries and financial statement preparation[135] - The company is devoting resources to remediate the material weakness, including enhancing access to accounting literature and increasing communication with third-party professionals[136] Part II. Other Information This section covers other pertinent information including legal proceedings, risk factors, equity sales, and regulatory disclosures Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings as of the filing date - The Company is not party to any legal proceedings as of the filing date[139] Item 1A. Risk Factors A new risk factor involves a Nasdaq non-compliance notice for market value, with a deadline to regain compliance to avoid delisting - A new risk factor has emerged from a Nasdaq notification letter received on October 1, 2024, stating non-compliance with the minimum $50,000,000 market value of listed securities requirement[141][142] - The company has a 180-day compliance period, until March 31, 2025, to regain compliance by having its market value of listed securities meet or exceed $50,000,000 for at least 10 consecutive business days[142] - Failure to regain compliance could result in the delisting of the company's securities from Nasdaq, which would adversely affect their liquidity and market price[143] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the private placement of 330,000 units to the Sponsor and the use of IPO proceeds, primarily for a trust account - Simultaneously with the IPO, the company sold 330,000 Private Units to its Sponsor at $10.00 per unit, for total proceeds of $3,300,000[144][146] - A total of $115,000,000 from the IPO and private placement was placed in a U.S.-based Trust Account[147] Other Items (Items 3, 4, 5, 6) The company reports no defaults, no mine safety disclosures, no other material information, and lists the exhibits filed - The company reports "None" for Item 3 (Defaults Upon Senior Securities) and Item 5 (Other Information), and "Not applicable" for Item 4 (Mine Safety Disclosures)[148] - Item 6 lists the exhibits filed as part of the report, including officer certifications and XBRL data files[149][150]