Alpha Star Acquisition (ALSA) - 2022 Q4 - Annual Report

Part I Item 1. Business The company is a blank check company seeking a business combination with an Asian-market-connected target valued between $300 million and $600 million Company Profile The company is a SPAC that raised $115 million in its IPO and reported a working capital deficit of $1.64 million as of year-end 2022 - The company is a blank check company incorporated on March 11, 2021, for the purpose of effecting a business combination[13] - As of December 31, 2022, the company reported a working capital deficit of $1,643,890, excluding marketable securities held in the trust account and deferred underwriting commissions[16] Initial Public Offering and Private Placement Details | Item | Details | | :--- | :--- | | IPO Units Sold | 11,500,000 | | IPO Gross Proceeds | $115,000,000 | | Private Placement Units | 330,000 | | Private Placement Proceeds | $3,300,000 | | Amount Placed in Trust | $115,000,000 | Recent Developments The company has entered a non-binding letter of intent for a business combination with global payments and SaaS provider Cyclebit Group - Entered into a non-binding letter of intent (LOI) for a business combination with Cyclebit Group, a global payments and SaaS provider[18] - The proposed transaction structure involves Cyclebit's existing equity holders rolling 100% of their equity into the combined public company[18] Acquisition Strategy and Investment Criteria The acquisition strategy targets middle-market growth businesses connected to Asia, excluding China, with strong cash flow potential - The company will focus on businesses connected to the Asian market but will not consider targets with principal operations in the People's Republic of China (including Hong Kong and Macau)[19] - Primary acquisition targets are middle-market growth businesses with a total enterprise value between $300 million and $600 million[22] - Target sectors include clean energy, internet and high technology, financial technology, health care, consumer and retail, energy and resources, manufacturing, and education[22] - The company seeks targets with potential for strong free cash flow generation and predictable revenue streams[23] Initial Business Combination Timeframe and Nasdaq Rules The company has an extendable timeframe of up to 21 months to complete a business combination, funded by sponsor deposits into the trust account - The initial 9-month period to consummate a business combination can be extended up to 12 times, for a total of up to 21 months[37] - To extend the deadline, the sponsor must deposit $383,332 ($0.033 per public share) into the trust account for each one-month extension[37] - The company began making monthly extension deposits of $383,332 into the trust account starting September 15, 2022[38] - NASDAQ rules require the initial business combination target to have an aggregate fair market value equal to at least 80% of the trust account balance at the time of the agreement[39] Corporate Information The company qualifies as an "emerging growth company" and "smaller reporting company," allowing for reduced disclosure requirements - The company is an "emerging growth company" under the JOBS Act, allowing it to use exemptions from certain reporting requirements, such as reduced executive compensation disclosure and an extended transition period for new accounting standards[52][53] - The company is also a "smaller reporting company," permitting reduced disclosure obligations, such as providing only two years of audited financial statements[54] Item 1A. Risk Factors The company faces significant risks related to its blank check status, including potential failure to complete a business combination and shareholder redemptions - As a blank check company with no operating history, there is no basis for investors to evaluate its ability to achieve its business objective[56][57] - The company must complete its initial business combination within 9 months (or up to 21 months with extensions) from its IPO, or it will be forced to liquidate, rendering rights and warrants worthless[79][80] - A high number of shareholder redemptions could make the company's financial condition unattractive to targets or prevent a deal from closing due to minimum cash conditions or falling below the $5,000,001 net tangible asset threshold[71][72] - The sponsor, officers, and directors will lose their entire investment in founder shares and private placement units if a business combination is not completed, creating a potential conflict of interest[165][166] - The sponsor is controlled by a non-U.S. person, which could subject a potential business combination with a U.S. target to review by the Committee on Foreign Investment in the United States (CFIUS), potentially delaying or blocking a transaction[183][184] - The company's working capital position and the requirement to consummate a business combination within the specified timeframe raise substantial doubt about its ability to continue as a going concern[102][103] Item 2. Properties The company's executive offices are located in New York, with costs covered by a monthly fee paid to its sponsor for administrative services - The company's executive offices are located at 80 Broad Street, 5th Floor, New York, NY 10004[252] - A monthly fee of $10,000 is paid to the sponsor for office space and administrative support services[252] Item 3. Legal Proceedings As of year-end 2022, the company was not involved in any material legal proceedings - There is no material litigation, arbitration, or governmental proceeding pending against the company as of December 31, 2022[253] Part II Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The company's securities trade on The Nasdaq Global Market, and it has not paid any cash dividends since its inception - The company's securities trade on The Nasdaq Global Market; units began trading on December 13, 2021, and the component ordinary shares, rights, and warrants began separate trading on January 18, 2022[256] - The company has not paid any cash dividends and does not plan to before completing its initial business combination[257] - Gross proceeds from the IPO ($115 million) and private placement ($3.3 million) were used to fund the trust account ($115 million) and cover transaction costs ($5.67 million)[259][261] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net income of $1.1 million for 2022 from trust account interest, but its limited liquidity raises going concern doubts Results of Operations Net income of $1.1 million in 2022 was driven by non-operating interest income and gains, offset by operational costs Results of Operations for the Year Ended December 31, 2022 | Line Item | Amount (USD) | | :--- | :--- | | Formation and operational costs | ($587,614) | | Interest income on marketable securities | $1,312,585 | | Unrealized gain on marketable securities | $382,154 | | Other income | $5 | | Net Income | $1,107,130 | Liquidity and Capital Resources The company relies on sponsor loans to fund working capital, with limited cash outside its $118.2 million trust account - As of December 31, 2022, the company had $110,991 in cash outside the Trust Account and $118,228,816 in investments held inside the Trust Account[268][269] - The company has issued multiple non-interest-bearing promissory notes to its Sponsor to fund extension fees and transaction costs, with a balance of $1,533,332 outstanding as of December 31, 2022[272] - Management has concluded that the company's limited liquidity and reliance on completing a business combination raise substantial doubt about its ability to continue as a going concern[271] Contractual Obligations The company's primary contractual obligations include a monthly administrative fee to its sponsor and a deferred underwriting fee - The company pays its Sponsor a monthly fee of $10,000 for administrative services[276] - A deferred underwriting fee of $2,875,000 is payable to the underwriters from the Trust Account upon completion of a Business Combination[276] Item 7A. Quantitative and Qualitative Disclosures about Market Risk The company has no material market or interest rate risk as its trust account funds are invested in short-term U.S. government securities - The company's funds held in the Trust Account are invested in short-term U.S. government securities or money market funds, which minimizes exposure to interest rate risk[285] Item 8. Financial Statements and Supplementary Data The auditor's report on the financial statements expresses substantial doubt about the company's ability to continue as a going concern - The independent auditor's report highlights a "Substantial Doubt about the Company's Ability to Continue as a Going Concern" due to its lack of revenue and dependence on completing a business combination[336] Balance Sheet Summary (as of Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Total Assets | $118,339,807 | $115,530,794 | | Marketable securities in trust | $118,228,816 | $115,000,744 | | Total Liabilities | $4,629,881 | $2,927,999 | | Deferred underwriting commissions | $2,875,000 | $2,875,000 | | Promissory note - related party | $1,533,332 | $0 | | Total Stockholders' Deficit | ($4,518,890) | ($2,397,205) | Statement of Operations Summary | Account | For the Year Ended Dec 31, 2022 | For the period from Mar 11, 2021 to Dec 31, 2021 | | :--- | :--- | :--- | | Formation and operational costs | ($587,614) | ($53,258) | | Interest earned on marketable securities | $1,312,585 | $749 | | Unrealized gain on marketable securities | $382,154 | $0 | | Net Income (Loss) | $1,107,130 | ($52,509) | Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[288] - The report does not include a management's assessment of internal control over financial reporting due to the transition period for newly public companies[290] Part III Item 10. Directors, Executive Officers and Corporate Governance The company's board consists of five members, including three independent directors, and has established audit and compensation committees - The Board of Directors has a majority of independent directors, with Xiaofeng Zhou, Patrick Swint, and Huei-Ching (Tina) Huang qualifying as independent under NASDAQ and SEC rules[301] - The Board has two standing committees: an audit committee and a compensation committee, both comprised solely of independent directors[302] Executive Officers and Directors | Name | Age | Title | | :--- | :--- | :--- | | Zhe Zhang | 48 | Chairman, Chief Executive Officer and Director | | Guojian Chen | 30 | Chief Financial Officer and Director | | Patrick Swint | 55 | Director | | Xiaofeng Zhou | 41 | Director | | Huei-Ching Huang | 55 | Director | Item 11. Executive Compensation No executive officers received cash compensation in 2022, and they are only entitled to reimbursement for out-of-pocket expenses - No executive officer received any cash compensation for services rendered during the year ended December 31, 2022[305] - Founders, officers, and directors are not paid finder's or consulting fees for services related to the business combination but are reimbursed for out-of-pocket expenses[306] Item 12. Security Ownership of Certain Beneficial Owners and Management The company's sponsor and management group beneficially own 21.88% of the outstanding ordinary shares as of year-end 2022 Beneficial Ownership as of December 31, 2022 | Name of Beneficial Owner | Amount of Beneficial Ownership | Approximate Percentage | | :--- | :--- | :--- | | A-Star Management Corporation (Sponsor) | 3,205,000 | 21.88% | | Zhe Zhang (Chairman & CEO) | 3,205,000 | 21.88% | | All directors and officers as a group | 3,205,000 | 21.88% | | Lighthouse Investment Partners, LLC | 1,004,081 | 8.73% | | Weiss Asset Management LP | 860,000 | 5.85% | | Saba Capital Management, L.P. | 769,511 | 5.2% | | Mizuho Financial Group, Inc. | 1,027,250 | 7% | Item 13. Certain Relationships and Related Transactions The company engages in multiple related-party transactions with its sponsor, including share purchases, service fees, and loans - The sponsor, A-Star Management Corporation, purchased 2,875,000 founder shares for $25,000 and 330,000 private placement units for $3.3 million[318][319] - The company pays the sponsor $10,000 per month for office space and administrative support services[320] - The sponsor has provided multiple loans to the company via promissory notes to fund extension fees and transaction costs; the outstanding balance was $1,533,332 as of December 31, 2022[322] Item 14. Principal Accountant Fees and Services The company paid its principal accountant, UHY LLP, $81,375 in audit fees for the 2022 fiscal year Accountant Fees for Fiscal Year 2022 | Fee Category | Amount (USD) | | :--- | :--- | | Audit Fees | $81,375 | | Audit-Related Fees | $0 | | Tax Fees | $0 | | All Other Fees | $0 | Part IV Item 15. Exhibits, Financial Statement Schedules This section lists all financial statements and exhibits, such as security descriptions and certifications, filed with the Form 10-K - This section contains the financial statements and a list of all exhibits filed with the Form 10-K[332]