UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
| (Exact name of registrant as specified in its charter) |
| N/A | ||
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
| (Address of Principal Executive Offices, including zip code) |
| (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 | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The |
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.
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).
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 |
| ☒ | 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).
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, 2023, there were ordinary shares, par value $0.001, issued and outstanding.
METAL SKY STAR ACQUISITION CORPORATION
FORM 10-Q FOR THE QUARTER ENDED September 30, 2023
TABLE OF CONTENTS
i
Part I. Financial Information
Item 1. Financial Statements
METAL SKY STAR ACQUISITION CORPORATION
BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash in escrow | $ | $ | ||||||
| Prepaid expense | ||||||||
| Marketable securities held in trust account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Due to related party | ||||||||
| Promissory note - related party | ||||||||
| Deferred underwriting commissions | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| Ordinary shares subject to possible redemption, and shares at redemption value at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Shareholders’ Deficit: | ||||||||
| Ordinary shares, $ par value; shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively, excluding 5,614,676 and 11,500,000 shares subject to possible redemption at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Shareholders’ Deficit | ( |
) | ( |
) | ||||
| TOTAL LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited financial statements.
1
METAL SKY STAR ACQUISITION CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended September 30, 2023 |
For the Three Months Ended September 30, 2022 |
For the Nine Months Ended September 30, 2023 |
For the Nine Months Ended September 30, 2022 |
|||||||||||||
| Formation and operational costs | $ | $ | $ | |
$ | |||||||||||
| Loss from operation costs | ||||||||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income: | ||||||||||||||||
| Interest earned on marketable securities held in trust account | ||||||||||||||||
| Unrealized gained on marketable securities held in trust account | ||||||||||||||||
| Total other income | ||||||||||||||||
| Income before income taxes | ||||||||||||||||
| Income tax (benefit) expense | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic and diluted weighted average shares outstanding - ordinary shares subject to redemption | ||||||||||||||||
| Basic and diluted net income per share | $ | $ | $ | $ | ||||||||||||
| Basic and diluted weighted average shares outstanding - non redeemable ordinary shares | ||||||||||||||||
| Basic and diluted net loss per share | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The accompanying notes are an integral part of the unaudited financial statements.
2
METAL SKY STAR ACQUISITION CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
| Total | ||||||||||||||||||||
| Ordinary Shares | Paid-In | Accumulated | Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | ( |
) | ( |
) | |||||||||||||||
| Subsequent measurement of ordinary shares subject to redemption (interest earned and unrealized gain on trust account) | - | ( |
) | ( |
) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | ( |
) | ( |
) | |||||||||||||||
| Subsequent measurement of ordinary shares subject to redemption (interest earned and unrealized gain on trust account) | - | ( |
) | ( |
) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Subsequent measurement of ordinary shares subject to redemption (interest earned and unrealized gain on trust account) | ( |
) | ( |
) | ||||||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (additional funding for business combination extension) | - | ( |
) | ( |
) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Total | ||||||||||||||||||||
| Ordinary Shares | Paid-In | Accumulated | Shareholders’ Equity |
|||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Issuance of public shares at initial public offering | ||||||||||||||||||||
| Underwriters’ Discount | - | ( |
) | ( |
) | |||||||||||||||
| Offering costs | - | ( |
) | ( |
) | |||||||||||||||
| Sale of shares to sponsor in private placement | ||||||||||||||||||||
| Initial value of ordinary stock subject to possible redemption | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Allocation of offering costs related to redeemable shares | - | |||||||||||||||||||
| Accretion of carrying value of redeemable shares to redemption value | - | ( |
) | ( |
) | ( |
) | |||||||||||||
| Subsequent measurement of ordinary shares subject to redemption (interest earned and unrealized gain on trust account) | - | ( |
) | ( |
) | |||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Subsequent measurement of ordinary shares subject to redemption (interest earned on trust account) | - | ( |
) | ( |
) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
3
METAL SKY STAR ACQUISITION CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine months ended September 30, 2023 |
For the Nine months ended September 30, 2022 |
|||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in trust account | ( |
) | ( |
) | ||||
| Unrealized gain on marketable securities held in trust account | ( |
) | ( |
) | ||||
| Amortization | ||||||||
| Net changes in operating assets & liabilities: | ||||||||
| Deferred offering costs | ||||||||
| Prepaid expenses | ( |
) | ( |
) | ||||
| Accrued offering costs | ( |
) | ||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities: | ||||||||
| Investment of cash in trust account | ( |
) | ( |
) | ||||
| Cash withdrawn from trust account to redeem public shares | ||||||||
| Net cash provided by (used in) investing activities | ( |
) | ||||||
| Cash flows from financing activities: | ||||||||
| Borrowings from related party | ||||||||
| Proceeds from sale of private placement units | ||||||||
| Proceeds from Sale of Units | ||||||||
| Payment of offering costs | ( |
) | ||||||
| Redemption of public shares | ( |
) | ||||||
| Net cash provided by (used in) financing activities | ( |
) | ||||||
| Net change in cash and cash equivalents | ( |
) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Deferred underwriting compensation | $ | $ | ||||||
| Initial ordinary shares subject to possible redemption | $ | $ | ||||||
| Reclassification of offering costs related to public shares | $ | $ | ( |
) | ||||
| Change in value of ordinary shares subject to redemption | $ | $ | ||||||
| Subsequent measurement of ordinary shares subject to redemption (interest earned, unrealized gain on trust account and additional funding for business combination extension) | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited financial statements.
4
METAL SKY STAR ACQUISITION CORPORATION
UNAUDITED NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General
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”). On September 30, 2023, the Company had not yet commenced any operations. All activities through September 30, 2023 relate to the Company’s formation and the initial public offering (“IPO”) and its Business Combination. 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 has up to 22 months from the closing of our initial public offering if we extend the period of time 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 units which includes an additional units as a result of the underwriter’s fully exercise of the over-allotment, at $ per Unit, generating gross proceeds of $
On October 30, 2023 during the Extraordinary General Meeting, the shareholders approved an amendment to the company’s Amended and Restated Memorandum and Articles of Association to extend the date up to six (6) months which the company must consummate a business combination to August 5, 2024. As of September 30, 2023, the Company have approximately 10 months to consummate a business combination if fully extend the period of time as the Amended and Restated Memorandum and Articles of Association.
The Trust Account
As
of April 5, 2022, a total of $
On
October 30, 2023, an Extraordinary General Meeting of shareholders was held to approve the proposal to amend the Company’s
amended and restated memorandum and articles of association to extend the date by which the Company has to consummate a business
combination six (6) times for an additional one (1) month each time from February 5, 2024 to August 5, 2024. To effectuate each
monthly extension, the Sponsor and/or its will deposit the lesser of (i) $
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.
5
Merger Agreement
On April 12, 2023, Metal Sky entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Future Dao Group Holding Limited, a Cayman Islands exempted company (the “Future Dao”), and Future Dao League Limited, a Cayman Islands exempted company and wholly owned subsidiary of Future Dao (the “Merger Sub”). Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, (i) Merger Sub will merge with and into Metal Sky (the “First Merger”), with Metal Sky surviving the First Merger as a wholly owned subsidiary of Future Dao, and (ii) Metal Sky will merge with and into Future Dao (the “Second Merger” and together with the First Merger, the “Mergers”), with Future Dao surviving the Second Merger (the “Second Business Combination”). Immediately prior to the First Effective Time, Future Dao will effect a recapitalization of its equity securities (the “Recapitalization”) including a share split of each outstanding Future Dao Ordinary Share into such number of Future Dao Ordinary Shares, calculated in accordance with the terms of the Merger Agreement, such that, based on a value of $
Termination of Merger Agreement
On October 6, 2023, the parties to the Merger Agreement entered into a Termination of Agreement and Plan of Merger (the “Termination Agreement”), pursuant to which, among other things, the parties agreed to mutually terminate the Merger Agreement, pursuant to Section 10.01 (a) of the Merger Agreement, effective as of October 6, 2023 (the “Termination”).
As a result of the Termination, the Merger Agreement will be of no further force and effect except as provided in Section 10.02 of the Merger Agreement, and the Transaction Agreements (as defined in the Merger Agreement) will either be terminated in accordance with their terms or be of no further force and effect. Neither party will be required to pay the other any fees or expenses as a result of the Termination. Metal Sky, Future Dao and Merger Sub have also agreed on behalf of themselves and their respective related parties, to a release of claims relating to the transactions contemplated under the Merger Agreement.
Liquidity
On April 5, 2022, the Company consummated the IPO of units (including the exercise of the over-allotment option by the underwriters in the IPO) at $ per unit (the “Public Units’), generating gross proceeds of $
Simultaneously with the consummation of the IPO, the Company sold to its Sponsor units at $ per unit in a private placement, generating total gross proceeds of $
Offering costs amounted to $
As of
September 30, 2023, the Company had $
As of December 31, 2022, the Company had $
In September 2021, the Company repurchased of founder shares for $
Going Concern and Management Liquidity Plan
As
of September 30, 2023, the Company had $
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.
6
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 22 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.
On October 30, 2023 during the Extraordinary General Meeting, the shareholders approved an amendment to the company’s Amended and Restated Memorandum and Articles of Association to extend the date up to six (6) months which the company must consummate a business combination to August 5, 2024. As of September 30, 2023, the Company have approximately 10 months to consummate a business combination if fully extend the period of time as the Amended and Restated Memorandum and Articles of Association.
In connection with the Company’s assessment of going concern considerations in accordance with the Accounting Standards Codification (the “ASC”) issued by Financial Accounting Standards Board (the “FASB”) 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 shareholders’ 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.
7
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 have cash held in escrow $
Marketable Securities Held in Trust Account
As per ASC Topic 230, “Statement of Cash Flows” (“ASC 230”), operating cash flows include interest and dividend income receipts related to investments in other reporting entities or deposits with financial institutions (i.e., returns on investment). Interest income earned on Investments held in Trust Account is fully reinvested into the Trust Account and therefore considered as an adjustment to reconcile net income/(loss) to net cash used in operating activities in the Statements of Cash Flows. Such interest income reinvested will be used to redeem all or a portion of the ordinary shares upon the completion of a business combination.
At September 30, 2023, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities. The Company’s marketable securities held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of marketable securities 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 securities are presented on the balance sheets at fair value at the end of each reporting period. Earnings on these securities are included in dividends, interest earned, and unrealized gain on marketable securities held in Trust Account in the accompanying statements of operations and are automatically reinvested. The fair value for these securities is determined using quoted market prices in active markets for identical assets.
During
the three months ended September 30, 2023, interest earned from the Trust account amounted to $
During
the nine months ended September 30, 2023, interest earned from the Trust account amounted to $
During nine months ended September 30, 2023, $
During
the three months ended September 30, 2022, interest earned from the Trust account amounted to $
During
the nine months ended September 30, 2022, interest earned from the Trust account amounted to $
8
Deferred Offering Costs
Offering
costs consist of underwriting, legal, accounting, registration and other expenses incurred through the balance sheet date that are
directly related to the IPO. As of April 5, 2021, offering costs amounted to $
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
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 loss per share is computed by dividing net loss by the weighted average number of ordinary share outstanding during the period, excluding ordinary shares subject to forfeiture. The calculation of diluted income (loss) per ordinary share 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
9
The net income (loss) per share presented in the statement of operations is based on the following:
| For the Three Months Ended September 30, 2023 |
For the Three Months Ended September 30, 2022 |
For the Nine Months Ended September 30, 2023 |
For the Nine Months Ended September 30, 2022 |
|||||||||||||||||||||||||||||
| 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 loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||
| Accretion of temporary equity | ||||||||||||||||||||||||||||||||
| Accretion of temporary equity – (interest earned and unrealized gain on trust account) | ||||||||||||||||||||||||||||||||
| Allocation of net income (loss) | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||
| Denominators: | ||||||||||||||||||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||||||||||||||||||
| Basic and diluted net income (loss) per share | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||
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.
10
Recently Issued Accounting Standards
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 FASB ASC 480, and 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.
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 are classified as a liability instrument and are 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 are 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.
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NOTE 3. INITIAL PUBLIC OFFERING
On April 5, 2022, the Company sold 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 $ per Unit, generating gross proceeds of $
The Company granted the underwriter a 45-day option from the date of the IPO to purchase up to an additional 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 $ per Public Unit, generating gross proceeds to the Company of $
At September 30, 2023, the ordinary shares reflected in the balance sheet are reconciled in the following tables:
| Gross proceeds from public shares | $ | |||
| Less: | ||||
| Proceeds allocated to public rights | ( |
) | ||
| Proceeds allocated to public warrants | ( |
) | ||
| Allocation of offering costs related to ordinary shares | ( |
) | ||
| Redemption of Public Shares | ( |
) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned and unrealized gain on trust account) | ||||
| Ordinary shares subject to possible redemption (plus any interest earned on the Trust Account) | $ |
NOTE 4. PRIVATE PLACEMENT
The Sponsor has committed to purchase an aggregate of Placement Units (or Placement Units if the underwriters’ over-allotment is exercised in full) at a price of $ per Placement Unit, ($
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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 $
The founder shares (for purposes hereof referred to as the “Founder Shares”) include an aggregate of up to 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 of Founder Shares for $
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 $
For the three months ended as of September 30, 2023 and 2022, the Company incurred $
For the nine months ended as of September 30, 2023 and 2022, the Company incurred $
Sponsor 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 $
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On January 3, 2023, the Company issued a promissory note in the principal amount of up to $
On
April 18, 2023, the Company amended and restated Promissory Note (the Amended Promissory Note”) in order to increase the
available principal amount from $1,000,000 to $
Due to Related Party
During the nine months ended September 30,
2023, the Company has amounts due to the Sponsor of $
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”.
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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 registers 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 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 (
Professional Fees
The Company has paid professional fees of $
On
April 12, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Future Dao
Group Holding Limited, a Cayman Islands exempted company and its subsidiary (the “Future Dao”). Due to these
recapitalization and business combination activities, the Company incurred professional fees with amounts of approximately $
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NOTE 7. SHAREHOLDERS’ DEFICIT
Ordinary Shares
The Company is authorized to issue ordinary shares, with a par value of $ per share.
Public Warrants
Each warrant entitles the holder to purchase one ordinary share at a price of $ per share commencing 30 days after the completion of its initial business combination and expiring five years 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 $ per warrant upon
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
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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 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.
On September 30, 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 on September 30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Assets September 30, 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 | $ | $ | $ | |||||||||
| Assets December 31, 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 | $ | $ | $ | |||||||||
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NOTE 9. 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 14, 2023, 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 except the following:
Termination of Merger Agreement
On October 6, 2023, the parties to the Merger Agreement entered into a Termination of Agreement and Plan of Merger (the “Termination Agreement”), pursuant to which, among other things, the parties agreed to mutually terminate the Merger Agreement, pursuant to Section 10.01 (a) of the Merger Agreement, effective as of October 6, 2023 (the “Termination”).
As a result of the Termination, the Merger Agreement will be of no further force and effect except as provided in Section 10.02 of the Merger Agreement, and the Transaction Agreements (as defined in the Merger Agreement) will either be terminated in accordance with their terms or be of no further force and effect. Neither party will be required to pay the other any fees or expenses as a result of the Termination. Metal Sky, Future Dao and Merger Sub have also agreed on behalf of themselves and their respective related parties, to a release of claims relating to the transactions contemplated under the Merger Agreement.
Amended Articles of Association
On October 30, 2023, Metal Sky Star Acquisition Corporation (the “Company” or “Metal Sky Star”) held its Extraordinary General Meeting (the “Extraordinary General Meeting”) at which the Company’s shareholders approved proposals to (i) amend the Company’s amended and restated memorandum and articles of association to extend the date by which the Company has to consummate a business combination to August 5, 2024 and to reduce the amount of the fee to extend such time period (the “Charter Amendment Proposal”) and (ii) amend the Investment Management Trust Agreement dated March 30, 2022 among the Company, Wilmington Trust, National Association (the “Trustee”) and Vstock Transfer LLC (“Vstock”) to reflect the Charter Amendment Proposal.
Following the Extraordinary General Meeting, effective as of October 31, 2023, the Company, the Trustee and Vstock entered into an amendment to the Investment Management Trust Agreement (the “Amendment Agreement”) to change the date on which the Company’s ability to complete a business combination may be extended by up to six (6) additional increments of one-month each until August 5, 2024, subject to the payment into the Trust Account by the Sponsor (or its designees or affiliates) of an amount for each one-month extension equal to the lesser of (i) $ for all remaining public shares and (ii) $ per public share for each remaining Ordinary Share held by a Public Stockholder (the “Monthly Extension Payment”), and which Monthly Extension Payments, if any, shall be added to the Trust Account.
Public Shares Redemption
In connection with the shareholders meeting to vote for the proposal to amend the Company’s amended and restated memorandum and articles of association, the public shares are entitled to exercise the redemption right and public shares tendered for redemption. As a result of the exercise of the redemption right, public shares remain unredeemed.
Related Party Transactions
On October 9, 2023,
the Company drew down $
On November 6, 2023, the Company drew down $
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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 Metal Sky Star Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to M-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. 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 May 5, 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.
On September 28, 2023, the Board of Directors of the Company (the “Board”) appointed Wenxi He to serve as the Chief Executive Officer and director of the Company.
On September 28, 2023, the Board approved Man Chak Leung’s resignation letter to resign as the Chief Executive Officer and director of the Company.
Ms. He, age 44, serves as the Chief Financial Officer of the Company. She also serves as Chief Investment Officer at Still Waters Green Technology Limited, an asset management company based in London, specializing in the development and management of renewable energy and power generation assets, since February 2019. Ms. He has over 15 years of experience in the investment banking industry. Prior to joining Still Waters Green Technology Limited, she served as the Managing Director and Global Head of Commodity Exchange Traded Products at Bank of America Merrill Lynch in London. She was responsible for initiating and executing strategic solutions and issuance, trading physical and synthetic commodity products, and managing portfolio assets in energy, metals and agriculture, with a wide variety of commodity, currency and interest-rate risk. Prior to that, Ms. He traded and structured commodity derivative products at Citigroup, fixed income security products with a focus on structured credit and rates at UBS and RBC Capital Markets. Ms. He holds master’s degrees in both Mathematical Finance and Engineering from University of Toronto, and a bachelor’s degree in Engineering from Tongji University.
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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, 2023 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 generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We 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, 2023 and September 30, 2022, we had a net income of $1,724,307 and net income of $398,558, respectively, which consists of operating costs of $598,030 and $282,269, interest income of $2,322,337 and $680,827.
For the three months ended September 30, 2023 and September 30, 2022, we had a net income of $662,376 and a net loss of $409,813, respectively, which consists of operating costs of $110,635 and $110,104, interest income of $773,011 and $519,917.
Liquidity and Capital Resources
Going Concern
The accompanying financial statements were prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit of $5,285,214 and a working capital deficit of $2,407,009 as of September 30, 2023, which raises substantial doubt about its ability to continue as a going concern.
We have incurred and expect to continue to incur significant costs in pursuit of our acquisition plans. We will need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors, or third parties. Our officers, directors and Sponsor may, but are not obligated to, loan us 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. Until the consummation of the Business Combination, we will be using the funds not held in the Trust Account.
On April 5, 2022, we consummated the Initial Public Offering of 11,500,000 Units, generating gross proceeds of $115,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 330,000 Private Units to the Sponsor at a price of $10.00 per Private Unit, generating gross proceeds of $3,300,000.
Following the Initial Public Offering and the sale of the Private Units, a total of $115,000,000 was placed in the Trust Account. We incurred $5,704,741 in transaction costs, including $2,300,000 of underwriting fees, $2,875,000 of deferred underwriting fees and $529,741 of other offering costs.
For the nine months ended September 30, 2023 and 2022, net cash used in operating activities was $422,843 and $77,835, respectively.
For the nine months ended September 30, 2023 and 2022, net cash provided by investing activities was $58,208,582 and net cash used in investing activities was $115,000,000, respectively.
For the nine months ended September 30, 2023 and 2022, net cash used in financing activities was $57,963,227 and net cash provided by financing activities was $115,170,259, respectively.
On September 30, 2023, we had investments held in the Trust Account of $60,787,237. 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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On September 30, 2023, we had cash of $1,164 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 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.
We believe we will need to raise additional funds in order to meet the expenditure required for operating our business. If our estimates 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.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of September 30, 2023. 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 April 5, 2022 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 with the underwriters’ over-allotment option exercised in full. 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.
On January 3, 2023, the Company issued a Promissory Note in the principal amount of up to $1,000,000 to M-Star Management Corp. Pursuant to which the Sponsor shall loan to the Company up to $1,000,000 to pay the extension fee and transaction cost. On January 4, 2023, 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 February 5, 2023. The $383,333 extension fee represents approximately $0.033 per public share. The Promissory Notes bear no interest and are repayable in full upon the earlier of (a) December 31, 2023 or (b) the date of the consummation of the Company’s initial business combination. On April 18, 2023, the Promissory Note was amended and restated with the principal amount up to $2,500,000. 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.
In connection with the shareholders’ meeting to vote for the proposal to amend the Company’s amended and restated memorandum and articles of association, the public shares are entitled to exercise the redemption right and 5,885,324 public shares tendered for redemption. As a result of the exercise of the redemption right, 5,614,676 public shares remain unredeemed. Pursuant to the terms of our memorandum and articles of association and the trust agreement entered into between us and Wilmington Trust, National Association and Vstock Transfer LLC in connection with our IPO, in order for the time available for us to consummate our initial business combination to be extended, our sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the trust account $187,155 ($0.033 per public share) on or prior to the date of the applicable deadline, for each monthly extension starting from February 2023.
On October 30, 2023, Metal Sky Star Acquisition Corporation (the “Company” or “Metal Sky Star”) held its Extraordinary General Meeting (the “Extraordinary General Meeting”) at which the Company’s shareholders approved proposals to (i) amend the Company’s amended and restated memorandum and articles of association to extend the date by which the Company has to consummate a business combination to August 5, 2024 and to reduce the amount of the fee to extend such time period (the “Charter Amendment Proposal”) and (ii) amend the Investment Management Trust Agreement dated March 30, 2022 among the Company, Wilmington Trust, National Association (the “Trustee”) and Vstock Transfer LLC (“Vstock”) to reflect the Charter Amendment Proposal.
Following the Extraordinary General Meeting, effective as of October 31, 2023, the Company, the Trustee and Vstock entered into an amendment to the Investment Management Trust Agreement (the “Amendment Agreement”) to change the date on which the Company’s ability to complete a business combination may be extended by up to six (6) additional increments of one-month each until August 5, 2024, subject to the payment into the Trust Account by the Sponsor (or its designees or affiliates) of an amount for each one-month extension equal to the lesser of (i) $50,000 for all remaining public shares and (ii) $0.033 per public share for each remaining Ordinary Share held by a Public Stockholder (the “Monthly Extension Payment”), and which Monthly Extension Payments, if any, shall be added to the Trust Account.
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Merger Agreement
On April 12, 2023, Metal Sky entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Future Dao Group Holding Limited, a Cayman Islands exempted company (the “Future Dao”), and Future Dao League Limited, a Cayman Islands exempted company and wholly owned subsidiary of Future Dao (the “Merger Sub”). Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, (i) Merger Sub will merge with and into Metal Sky (the “First Merger”), with Metal Sky surviving the First Merger as a wholly owned subsidiary of Future Dao, and (ii) Metal Sky will merge with and into Future Dao (the “Second Merger” and together with the First Merger, the “Mergers”), with Future Dao surviving the Second Merger (the “Second Business Combination”). Immediately prior to the First Effective Time, Future Dao will effect a recapitalization of its equity securities (the “Recapitalization”) including a share split of each outstanding Future Dao Ordinary Share into such number of Future Dao Ordinary Shares, calculated in accordance with the terms of the Merger Agreement, such that, based on a value of $350 million for all of the outstanding Future Dao Ordinary Shares, each Future Dao Ordinary Share will have a value of $10.00 per share after giving effect to such share split (the “Share Split”). The Business Combination has been unanimously approved by the boards of directors of both Metal Sky and Future Dao pursuant to a written resolution. The Business Combination is expected to close prior to the end of 2023.
On October 6, 2023, the parties to the Merger Agreement entered into a Termination of Agreement and Plan of Merger (the “Termination Agreement”), pursuant to which, among other things, the parties agreed to mutually terminate the Merger Agreement, pursuant to Section 10.01 (a) of the Merger Agreement, effective as of October 6, 2023 (the “Termination”).
As a result of the Termination, the Merger Agreement will be of no further force and effect except as provided in Section 10.02 of the Merger Agreement, and the Transaction Agreements (as defined in the Merger Agreement) will either be terminated in accordance with their terms or be of no further force and effect. Neither party will be required to pay the other any fees or expenses as a result of the Termination. Metal Sky, Future Dao and Merger Sub have also agreed on behalf of themselves and their respective related parties, to a release of claims relating to the transactions contemplated under the Merger Agreement.
Critical Accounting Policies
The preparation of 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 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 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, 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.
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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 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 shareholders’ 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 (plus any interest earned on the Trust Account) as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheets.
Net Income (Loss) Per Ordinary Share
We apply the two-class method in calculating earnings per share. Ordinary shares subject to possible redemption, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net loss per ordinary share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income (loss) is adjusted for the portion of income that is attributable to ordinary shares subject to redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.
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 financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2023, 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 185 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.
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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, 2023. 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 effective.
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.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their corporate capacity.
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 final prospectus for our Initial Public Offering filed with the SEC on April 4, 2022. 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, other than as described herein, there have been no material changes to the risk factors disclosed in our final prospectus for our Initial Public Offering filed with the SEC on April 4, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
No unregistered sales or issuances of equity occurred during the quarter ended September 30, 2023.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None
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ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
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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.
| METAL SKY STAR ACQUISITION CORPORATION | ||
| Date: November 14, 2023 | /s/ Wenxi He | |
| Name: | Wenxi He | |
| Title: | Chief Executive Officer and Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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