Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2025

Summary of Significant Accounting Policies

Note 2 –Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC, specifically Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the period ending December 31, 2025, or any future period.

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Annual Report for the year ended December 31, 2024, which are included in the Form 10-K filed on March 31, 2025.

Basis of Consolidation

The unaudited consolidated financial statements include the accounts of the Company and its subsidiary, which was newly established on February 7, 2025. All significant intercompany accounts and transactions have been eliminated in consolidation.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated 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 consolidated 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 consolidated 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 consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company has nil cash held in escrow as of September 30, 2025, and December 31, 2024, respectively. The Company did not have any cash equivalents as of September 30, 2025, and December 31, 2024.

Marketable Securities Held in Trust Account

As per ASC Topic 230, “Statement of Cash Flow” (“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 profit/(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.

As of September 30, 2025, 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 statement 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, 2025, other income from the Trust account amounted to $9,202 which $6,164 was reinvested in the Trust Account. $3,038 was also recognized as unrealized gain on investments held in the Trust account during the three months ended September 30, 2025.

During the three months ended September 30, 2024, other income from the Trust account amounted to $473,741 , which $331,529 was reinvested in the Trust Account. $142,212 was also recognized as unrealized gain on investments held in the Trust account during the three months ended September 30, 2024.

During the nine months ended September 30, 2025, other income from the Trust account amounted to $107,727 which $104,689 was reinvested in the Trust Account. $3,038 was also recognized as unrealized gain on investments held in the Trust account during the nine months ended September 30, 2025.

During the nine months ended September 30, 2024, other income from the Trust account amounted to $1,398,893, which $1,256,681 was reinvested in the Trust Account. $142,212 was also recognized as unrealized gain on investments held in the Trust account during the nine months ended September 30, 2024.

Deferred Offering Costs

Offering costs consisted of underwriting, legal, accounting, registration and other expenses incurred through the balance sheet date that directly related to the IPO. As of April 5, 2021, offering costs amounted to $5,704,741 consisting of $2,300,000 of underwriting fees, $2,875,000 of deferred underwriting fees, and $529,741 of other offering costs. The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering”. The Company allocates offering costs between public shares, public rights and public warrants based on the estimated fair values of public shares and public rights at the date of issuance.

Income Taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the consolidated 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 consolidated 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. The Company had generated interest income from the Marketable securities held in trust that is the Unite States sources investment, which is tax exemption interest and dividends. There were no unrecognized tax benefits as of September 30, 2025, and December 31, 2024, and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

On August 16, 2022, the U.S. Government enacted legislation commonly referred to as the Inflation Reduction Act. The main provisions of the Inflation Reduction Act (the IRA) that we anticipate may impact us is a 1% excise tax on share repurchases. 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. Because there is possibility that the Company may acquire a U.S. domestic corporation or engage in a transaction in which a domestic corporation becomes parent or affiliate to the Company and the Company may become a “covered corporation” as a listed Company in Nasdaq. On July 13, 2023, 2,436,497 public shares were rendered for redemption in connection with an extension vote (see Note 1). The management team has evaluated the IRA as of September 30, 2025, and does not accrue any excise tax related to the redemption as the Company believes it is not a “covered corporation” under Internal Revenue Code Section 4501. The management team will continue to evaluate its impact.

The provision for income taxes was deemed to be immaterial for the three months and nine months ended September 30, 2025 and 2024.

Net Income (Loss) Per Share

Net income (loss) per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. The calculation of diluted income (loss) per ordinary shares does not consider the effect of the warrants issued in connection with the (i) IPO; and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 5,915,000 shares of ordinary shares in the aggregate. As of September 30, 2025, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted net income (loss) per ordinary shares is the same as basic net income (loss) per ordinary shares for the periods presented.

The net income (loss) per share presented in the consolidated statement of operations is based on the following:

Schedule of Statement of Operations

	For the Three Months Ended September 30, 2025			For the Three Months Ended September 30, 2024			For the Nine months Ended September 30, 2025			For the Nine months Ended September 30, 2024
Net (loss) income	$	(92,708	)	$	144,123		$	(443,906	)	$	833,308
Remeasurement to redemption value – interest income earned		(9,201	)		(473,741	)		(107,727	)		(1,398,893	)
Remeasurement to redemption value – extension fee		(75,000	)		(150,000	)		(300,000	)		(450,000	)
Net loss including accretion of temporary equity to redemption value	$	(176,909	)	$	(479,618	)	$	(851,633	)	$	(1,015,585	)

	Non-redeemable shares			Redeemable shares			Non-redeemable shares			Redeemable shares			Non-redeemable shares			Redeemable shares			Non-redeemable shares			Redeemable shares
	Three Months Ended of September 30, 2025						Three Months Ended of September 30, 2024						Nine months ended September 30, 2025						Nine months ended September 30, 2024
	Non- redeemable shares			Redeemable shares			Non- redeemable shares			Redeemable shares			Non- redeemable shares			Redeemable shares			Non- redeemable shares			Redeemable shares
Basic and Diluted net income (loss) per share:
Numerators:
Allocation of net losses	$	(173,630	)	$	(3,279	)	$	(239,906	)	$	(239,712	)	$	(788,017	)	$	(63,616	)	$	(507,997	)	$	(507,588	)
Accretion of temporary equity		-			75,000			-			150,000			-			300,000			-			450,000
Accretion of temporary equity - interest		-			9,201			-			473,741			-			107,727			-			1,398,893
Allocation of net income (loss)	$	(173,630	)	$	80,922		$	(239,906	)	$	384,029		$	(788,017	)	$	344,111		$	(507,997	)	$	1,341,305

Denominators:
Weighted-average shares outstanding		3,205,000			60,523			3,205,000			3,202,416			3,205,000			258,736			3,205,000			3,202,416
Basic and diluted net income (loss) per share	$	(0.05	)	$	1.34		$	(0.07	)	$	0.12		$	(0.25	)	$	1.33		$	(0.16	)	$	0.42

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.

Recently Issued Accounting Standards

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 consolidated 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 issued were classified in shareholders’ equity.

Ordinary Shares Subject to Possible Redemption

The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, ordinary shares is classified as shareholders’ equity. The Company’s ordinary shares features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption is presented at redemption value (plus any interest earned on the Trust Account) as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.

Metal Sky Star Acquisition Corp 10-Q