Charlton Aria Acquisition Corp-A(CHAR) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION This part presents the unaudited financial information, including financial statements and management's discussion and analysis, for Charlton Aria Acquisition Corporation Item 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents Charlton Aria Acquisition Corporation's unaudited financial statements, including balance sheets, operations, equity changes, cash flows, and explanatory notes, for the period ended March 31, 2025 Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' deficit as of March 31, 2025, and December 31, 2024 Balance Sheet Highlights (Unaudited) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Cash | $186,232 | $447,419 | | Prepaid expenses | $105,285 | $9,365 | | Cash and investments held in Trust Account | $86,769,326 | $85,870,124 | | Total Assets | $87,060,843 | $86,326,908 | | Accounts payable and accrued expenses | $38,562 | $35,884 | | Deferred underwriting commission payable | $1,700,000 | $1,700,000 | | Class A ordinary shares subject to possible redemption | $86,769,326 | $85,870,124 | | Accumulated deficit | $(1,461,042) | $(1,293,097) | - The company's cash decreased from $447,419 to $186,232, while prepaid expenses significantly increased from $9,365 to $105,285 between December 31, 2024, and March 31, 2025[9] - Cash and investments held in the Trust Account increased by approximately $0.9 million, from $85,870,124 to $86,769,326, reflecting interest and dividends earned[9] Statements of Operations This section details the company's revenues, expenses, and net income or loss over specific periods, highlighting operational performance and income sources Statements of Operations Highlights (Unaudited) | Item | Three Months Ended March 31, 2025 | Period from March 22, 2024 (Inception) Through March 31, 2024 | | :-------------------------------------------------------------------------------- | :-------------------------------- | :---------------------------------------------------------------- | | Formation and operating costs | $170,252 | $20 | | Loss from operations | $(170,252) | $(20) | | Interest and dividends earned on cash and investments held in Trust Account | $899,202 | $- | | Interest income | $2,307 | $- | | Total other income | $901,509 | $- | | Net income (loss) | $731,257 | $(20) | | Basic and diluted income per share, Class A ordinary shares subject to possible redemption | $0.07 | $- | | Basic and diluted net loss per share, non-redeemable Class A and Class B ordinary shares | $0.07 | $- | - The company reported a net income of $731,257 for the three months ended March 31, 2025, a significant improvement from a net loss of $20 for the period from inception through March 31, 2024[11] - The net income was primarily driven by $899,202 in interest and dividends earned on cash and investments held in the Trust Account, offsetting $170,252 in formation and operating costs[11] Statements of Changes in Shareholders' Deficit This section outlines the changes in the company's shareholders' deficit over time, reflecting the impact of net income, remeasurements, and other equity adjustments Shareholders' Deficit Changes (Unaudited) | Item | December 31, 2024 | March 31, 2025 | | :-------------------------------------- | :---------------- | :------------- | | Balance as of | $(1,292,850) | $(1,460,795) | | Remeasurement of carrying value to redemption value | - | $(899,202) | | Net income | - | $731,257 | | Accumulated Deficit | $(1,293,097) | $(1,461,042) | - The total shareholders' deficit increased from $(1,292,850) as of December 31, 2024, to $(1,460,795) as of March 31, 2025[14] - This increase was primarily due to a remeasurement of the carrying value to redemption value of $(899,202), partially offset by a net income of $731,257[14] Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities, showing how the company generates and uses cash Cash Flow Highlights (Unaudited) | Item | Three Months Ended March 31, 2025 | Period from March 22, 2024 (Inception) Through March 31, 2024 | | :-------------------------------------------------------------------------------- | :-------------------------------- | :---------------------------------------------------------------- | | Net income (loss) | $731,257 | $(20) | | Interest and dividends earned on cash and investments held in Trust Account | $(899,202) | $- | | Prepaid expenses | $(95,920) | $- | | Accounts payable and accrued expenses | $2,678 | $- | | Net Cash Used in Operating Activities | $(261,187) | $- | | Cash, beginning of period | $447,419 | $- | | Cash, end of period | $186,232 | $- | - Net cash used in operating activities for the three months ended March 31, 2025, was $(261,187), primarily due to the non-cash impact of interest and dividends earned on the trust account and an increase in prepaid expenses[17] - The company's cash balance decreased from $447,419 at the beginning of the period to $186,232 at the end of the period[17] Notes to Unaudited Financial Statements This section provides detailed notes to the unaudited financial statements, explaining accounting policies, IPO, related party transactions, and other significant financial disclosures Note 1 — Organization, Business Operation and Going Concern Consideration This note describes the company's formation, operational status, and the significant uncertainties regarding its ability to continue as a going concern - Charlton Aria Acquisition Corporation is a blank check company incorporated on March 22, 2024, for the purpose of effecting a business combination, and has not commenced operations as of March 31, 2025[19][20] - The company consummated its IPO on October 25, 2024, selling 7,500,000 units at $10.00 per unit, generating $75,000,000, and a private placement of 240,000 units to the sponsor for $2,400,000[23][24] - Management has identified substantial doubt about the company's ability to continue as a going concern within one year due to significant professional and transaction costs and the uncertainty of completing an initial business combination by the April 25, 2026 deadline[37] Note 2 — Significant accounting policies This note outlines the key accounting principles and methods used in preparing the financial statements, ensuring transparency and comparability - The financial statements are prepared in conformity with US GAAP and the company is an 'emerging growth company,' electing not to opt out of the extended transition period for new accounting standards[39][40][41] - Cash and investments held in the trust account, totaling $86,769,326 as of March 31, 2025, are primarily invested in money market funds and are measured at fair value using Level 1 inputs[44][53] - Class A ordinary shares subject to possible redemption are classified as temporary equity and adjusted to equal their redemption value at the end of each reporting period[54] Note 3 — Initial Public Offering This note details the specifics of the company's IPO, including the number of units sold, pricing, and the composition of each unit - The company sold 7,500,000 Units in its IPO on October 25, 2024, and an additional 1,000,000 Units through the partial exercise of the over-allotment option on November 19, 2024, each at $10.00 per Unit[62] - Each Unit consists of one Class A ordinary share and one right, with each right entitling the holder to receive one-eighth of one Class A ordinary share upon completion of the initial business combination[62] Note 4 — Private Placement This note describes the private placement of units to the sponsor, including the terms, total value, and restrictions on these securities - The sponsor purchased an aggregate of 255,000 Private Placement Units at $10.00 per Unit, totaling $2,550,000, simultaneously with the IPO and Option Units closing[63] - These Private Placement Units are identical to the IPO Units but are not redeemable, transferable, assignable, or salable by the sponsor until the completion of the initial business combination (with limited exceptions)[63] Note 5 — Related Party Transactions This note discloses transactions and arrangements between the company and its related parties, such as the sponsor, officers, and directors - The sponsor initially purchased 2,156,250 Class B ordinary shares (founder shares) for $25,000, with 31,250 shares forfeited to maintain 20.0% insider ownership post-IPO[64] - Founder shares were transferred to the CEO, CFO, and independent directors, resulting in recognized share-based compensation expenses of $185,345 and $64,350, respectively[65][66] - The CEO receives $7,500 monthly compensation, and the CFO receives $5,000 monthly compensation, with $8,750 and $5,000 payable to them, respectively, as of March 31, 2025[70][71][72] Note 6 — Commitments and Contingencies This note details the company's contractual obligations and potential future liabilities, including registration rights and deferred underwriting fees - Holders of founder shares, Private Placement Units, and Working Capital Units are entitled to registration rights, requiring the company to register such securities for resale[76] - The underwriter received $1,275,000 in cash underwriting discounts and commissions and will be entitled to a deferred underwriting fee of $1,700,000 upon the closing of an initial business combination[78][79] Note 7 — Shareholder's Equity This note provides information on the company's equity structure, including the number of ordinary shares outstanding, voting rights, and the terms of rights - As of March 31, 2025, the company had 340,000 Class A ordinary shares issued and outstanding (excluding 8,500,000 shares subject to possible redemption) and 2,125,000 Class B ordinary shares issued and outstanding[82][83] - Prior to a business combination, only Class B ordinary shareholders have the right to vote on director appointments, and Class B shares automatically convert to Class A shares at a one-to-one ratio upon the initial business combination[86][87] - Holders of rights will receive one-eighth of one Class A ordinary share upon consummation of the initial business combination; if no combination occurs, the rights will expire worthless[88] Note 8 — Segment Information This note clarifies that the company operates as a single segment, with the CEO overseeing its financial performance and resource allocation - The company operates as a single operating segment, with the Chief Executive Officer (CODM) reviewing formation and operating costs and interest/dividends earned on the trust account to make resource allocation and performance assessment decisions[90][91][92] Note 9 — Subsequent Events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued, impacting future operations - On May 12, 2025, Sunny Tan Kah Wei, the sole shareholder of the sponsor, agreed to sell all 100 issued and outstanding ordinary shares of the sponsor to Sovereign Global Trust LLC for $4 million in cash, with the closing expected on May 13, 2025[94] - Upon closing, Sovereign Global Trust LLC is expected to become the sole director and shareholder of the sponsor, gaining exclusive investment and management authority[94] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section discusses Charlton Aria Acquisition Corporation's financial condition and results, focusing on IPO, private placements, and liquidity, with net income driven by trust account interest Special Note Regarding Forward-Looking Statements This note cautions readers that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations[97] - Readers are advised to refer to the Risk Factors section of the company's IPO prospectus for important factors that could impact actual results[97] Overview This section provides a general introduction to Charlton Aria Acquisition Corporation, outlining its purpose as a blank check company and its strategy for a business combination - Charlton Aria Acquisition Corporation is a blank check company formed to effect a business combination, intending to use IPO proceeds, equity, debt, or a combination thereof[98] - The company expects to incur significant costs in pursuit of acquisition plans and cannot assure the successful completion of a business combination[98] Our Initial Public Offering This section details the key aspects of the company's IPO, including the number of units sold, gross proceeds, and the amount deposited into the trust account - The company consummated its IPO on October 25, 2024, selling 7,500,000 Public Units at $10.00 each, generating $75,000,000 in gross proceeds[99] - Simultaneously, a private placement of 240,000 Private Placement Units to the sponsor generated $2,400,000, with $75,187,500 of net proceeds deposited into a trust account[99] - The underwriters partially exercised their over-allotment option on November 19, 2024, purchasing 1,000,000 Option Units, and an additional 15,000 Private Placement Units were sold to the sponsor, adding $10,025,000 to the trust account[101] Separation of Units This section explains when and how the company's Public Units could be separated into Class A ordinary shares and Public Rights for individual trading - Effective November 26, 2024, holders of Public Units could elect to separately trade Class A ordinary shares (CHAR) and Public Rights (CHARR) on the Nasdaq Global Market[103] Cancellation of Founder Shares This section describes the cancellation of founder shares to maintain the desired insider ownership percentage after the IPO - On December 9, 2024, 31,250 Class B ordinary shares (Founder Shares) were cancelled to ensure insiders collectively owned 20.0% of the issued and outstanding shares after the IPO[103] Sponsor Change This section details the recent change in ownership and control of the company's sponsor, transferring investment and management authority - On May 12, 2025, the sole shareholder of the sponsor, Sunny Tan Kah Wei, agreed to sell all shares of ST Sponsor II Limited to Sovereign Global Trust LLC for $4 million, transferring investment and management authority[104] Results of Operations This section analyzes the company's financial performance, focusing on the drivers of net income or loss for the reported periods - For the three months ended March 31, 2025, the company reported a net income of $731,257, primarily from $899,202 in interest and dividends earned on trust account investments[106] - This contrasts with a net loss of $20 for the period from inception (March 22, 2024) through March 31, 2024, which consisted solely of formation and operating costs[106] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations, including its cash position and funding sources Liquidity and Capital Resources (Unaudited) | Item | March 31, 2025 | | :-------------------------- | :------------- | | Cash | $186,232 | | Working capital | $239,205 | | Net Cash Used in Operating Activities (3 months ended) | $(261,187) | - The company's liquidity needs have been met through sponsor payments for founder shares and proceeds from the IPO and private placements[107] - Management has determined that conditions raise substantial doubt about the company's ability to continue as a going concern, relying on potential Working Capital Loans and the successful completion of a business combination by April 25, 2026[113] Off-Balance Sheet Financing Arrangements This section confirms the absence of any off-balance sheet arrangements or transactions with unconsolidated entities - As of March 31, 2025, the company has no off-balance sheet arrangements, nor has it entered into transactions with unconsolidated entities or special purpose entities[114] Contractual Obligations This section outlines the company's significant contractual commitments, including registration rights and deferred underwriting fees - The company has registration rights agreements for founder shares, Private Placement Units, and Working Capital Units, bearing the costs of filing related registration statements[115] - A deferred underwriting fee of $1,700,000 is payable to the underwriters upon the consummation of an initial business combination[117] Critical Accounting Policies This section discusses the accounting policies that require management's most difficult, subjective, or complex judgments and estimates - The preparation of financial statements requires management to make estimates and assumptions, but no critical accounting estimates were identified[118][119] Recent Accounting Pronouncements This section addresses the potential impact of newly issued accounting standards on the company's financial statements - Management does not believe that any recently issued, but not yet effective, accounting standards would have a material effect on the company's unaudited financial statements if currently adopted[120] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Charlton Aria Acquisition Corporation is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide disclosures about market risk[121] Item 4. CONTROLS AND PROCEDURES This section assesses the effectiveness of disclosure controls and internal control over financial reporting, noting ineffectiveness as of March 31, 2025, but no material changes - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025[122] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the fiscal quarter[125] - The company, as an emerging growth company, is not required to include an attestation report of internal controls from its independent registered public accounting firm[124] PART II – OTHER INFORMATION This part covers other information including legal proceedings, risk factors, equity sales, and exhibits Item 1. LEGAL PROCEEDINGS Charlton Aria Acquisition Corporation is not currently a party to any material legal proceedings, nor have any material legal proceedings been threatened against it - The company is not a party to any material legal proceedings, and no material legal proceedings have been threatened by or against it[128] Item 1A. RISK FACTORS As a smaller reporting company, the company is not required to include risk factors in this report, referring to its Prospectus with no material changes noted - As a smaller reporting company, the company is not required to include risk factors in this report[129] - There have been no material changes to the risk factors disclosed in the company's Prospectus as of the date of this Quarterly Report[129] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS FROM REGISTERED SECURITIES This section details unregistered equity sales, primarily private placements to the sponsor, and the use of all proceeds from registered and unregistered securities, deposited into the trust account Unregistered Sales of Equity Securities This section describes the private placement of equity securities to the sponsor, detailing the units sold, pricing, and the legal exemption used - On October 25, 2024, the company completed a private placement of 240,000 Private Placement Units to its sponsor at $10.00 per unit, generating $2,400,000 in gross proceeds[130] - On November 19, 2024, simultaneously with the partial exercise of the over-allotment option, the company sold an additional 15,000 Private Placement Units to the sponsor for $150,000[132] - These sales were issued under the exemption from registration provided by Section 4(a)(2) of the Securities Act, with no commissions paid[131][133] Use of Proceeds This section explains how the proceeds from the company's IPO and private placements were utilized, primarily for deposit into a trust account - The net proceeds of $75,187,500 from the IPO and initial private placement were placed in a trust account[135] - An additional $10,025,000 from the Option Units offering and additional private placement units was also placed in the trust account[136] Item 3. DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities - There were no defaults upon senior securities[137] Item 4. MINE SAFETY DISCLOSURES Mine safety disclosures are not applicable to Charlton Aria Acquisition Corporation - Mine safety disclosures are not applicable to the company[138] Item 5. OTHER INFORMATION This section reiterates the subsequent event regarding the change in ownership of the company's sponsor, ST Sponsor II Limited - On May 12, 2025, Sunny Tan Kah Wei, the sole shareholder of ST Sponsor II Limited, agreed to sell all shares of the Sponsor to Sovereign Global Trust LLC for $4 million in cash, with the transaction expected to close on May 13, 2025[140] - Upon closing, Sovereign Global Trust LLC will become the sole director and shareholder of the Sponsor, assuming exclusive investment and management authority[140] Item 6. EXHIBITS This section lists the exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q, including certifications and XBRL documents - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer, as well as Inline XBRL documents[142] SIGNATURES The report is duly signed on behalf of Charlton Aria Acquisition Corporation by its Chief Executive Officer, Robert W. Garner, and Chief Financial Officer, Yuanmei Ma, as of May 12, 2025 - The report was signed by Robert W. Garner, Chief Executive Officer, and Yuanmei Ma, Chief Financial Officer, on May 12, 2025[145]