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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-12 · 60 added, 57 removed, 41 unchanged (74% of the section changed)

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 Melar Acquisition Corp.

References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Melar Acquisition Sponsor I LLC.

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 of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (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 Quarterly Report including, without limitation, statements in this “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” regarding the completion of the Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.

Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations 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, including that the conditions of the Business Combination are not satisfied.

For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the “Risk Factors” section of the Company’s final prospectus (the “IPO Prospectus”) for its initial public offering (the “Initial Public Offering”) filed with the U.S.

Securities and Exchange Commission (the “SEC”).

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.

We are a blank check company incorporated in the Cayman Islands on March 11, 2024 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants (as defined below), our shares, debt or a combination of cash, shares and debt.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (this “Report”) including, without limitation, statements under this Item regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.

When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements.

Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.

Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.

All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Report under Item 1.

“Financial Statements.”

We are a blank check company incorporated in the Cayman Islands on March 11, 2024 formed for the purpose of effecting a Business Combination.

We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt.

We expect to continue 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.

The SEC has adopted new rules and regulations relating to special purpose acquisition companies (SPACs"), which became effective on July 1, 2024 (the "2024 SPAC Rules").

The 2024 SPAC Rules require, among other matters, (i) additional disclosures relating to SPAC sponsors and related persons;

(ii) additional disclosures relating to SPAC business combination transactions;

(iii) additional disclosures relating to dilution and to conflicts of interest involving sponsors and their affiliates in both SPAC initial public offerings and business combination transactions;

(iv) additional disclosures regarding projections included in SEC filings in connection with proposed business combination transactions;

and (v) the requirement that both the SPAC and its target company be co - registrants for business combination registration statements.

In addition, the SEC's adopting release provided guidance describing circumstances in which a SPAC could become subject to regulation under the Investment Company Act of 1940, as amended, including its duration, asset composition, business purpose, and the activities of the SPAC and its management team in furtherance of such goals.

In 2024, the SEC adopted additional rules and regulations relating to special purpose acquisition companies (“SPACs”).

The rules and regulations for SPACs adopted by the SEC on January 24, 2024, which became effective on July 1, 2024 (the “2024 SPAC Rules”) require, among other matters, (i) additional disclosures relating to SPAC sponsors and related persons;

(ii) additional disclosures relating to SPAC business combination transactions; (iii) additional disclosures relating to dilution and to conflicts of interest involving sponsors and their affiliates in connection with proposed business combination transactions;

(iv) additional disclosures regarding projections included in SEC filings in connection with proposed business combination transactions; and (v) the requirement that both the SPAC and its target company be co-registrants in connection with registration statements relating to proposed business combination transactions.

In addition, the SEC’s adopting release provided guidance describing circumstances in which a SPAC could become subject to regulation under the Investment Company Act, including its duration, asset composition, business purpose, and the activities of the SPAC and its management team.

The 2024 SPAC Rules may materially affect our ability to negotiate and complete our initial Business Combination and may increase the costs and time related thereto.

We may seek to extend the Completion Window consistent with applicable laws, regulations and stock exchange rules by amending our amended and restated memorandum and articles of association.

Such an amendment would require the approval of our public shareholders, who will be provided the opportunity to redeem all or a portion of their Public Shares in connection with the vote on such approval.

Such redemptions will decrease the amount held in our Trust Account and our capitalization, and may affect our ability to maintain our listing on The Nasdaq Stock Market LLC (“Nasdaq”).

In addition, the continued listing rules of Nasdaq, as they exist as of the date of this Report (the “Nasdaq Rules”) currently require SPACs (such as us) to complete our initial Business Combination in accordance with the requirement pursuant to the Nasdaq Rules that a SPAC must complete one or more Business Combinations within 36 months following the effectiveness of its initial public offering registration statement (the “Nasdaq 36-Month Requirement”).

If we do not meet the Nasdaq 36-Month Requirement, our will likely be subject to a suspension of trading and delisting from Nasdaq.

Our Sponsor may also, in its discretion, explore transactions under which it would sell its interest in our Company to another sponsor entity, which may result in a change to our management team.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date.

Our only activities from March 11, 2024 (inception) through September 30, 2024 were organizational activities, those necessary to prepare for the Initial Public Offering, as described below, and identifying a target company for a Business Combination.

Our only activities from March 11, 2024 (inception) through March 31, 2025 were organizational activities, those necessary to prepare for the Initial Public Offering, as described below, and identifying a target company for a Business Combination.

We do not expect to generate any operating revenues until after the completion of our Business Combination.

We generate non-operating income in the form of interest income on cash and marketable securities held in the trust account (the “Trust Account”), located in the United States, with Continental Stock Transfer & Trust Company acting as trustee.

We generate non-operating income in the form of dividend and interest income on marketable securities and cash held in the Trust Account, located in the United States, with Continental Stock Transfer & Trust Company acting as trustee.

We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended September 30, 2024, we had a net income of $2,375,937, which consists of interest income on cash and marketable securities held in the Trust Account of $2,363,818, interest on cash of $743 and an unrealized gain on over-allotment liability of $141,754, offset by operating costs of $130,378.

For the period from March 11, 2024 (inception) through September 30, 2024, we had net income of $2,463,105, which consists of interest income on cash and marketable securities held in the Trust Account of $2,531,350, interest on cash of $743 and an unrealized gain on over-allotment liability of $169,119, offset by operating costs of $238,107.

For the three months ended March 31, 2025, we had net income of $1,579,993, which consists of dividends and interest earned on marketable securities and cash held in the Trust Account of $1,736,734 and interest on cash held in the operating account of $207, partially offset by general and administrative costs of $156,948.

For the period from March 11, 2024 through March 31, 2024, we had a net loss of $19,135, which consists of general and administrative costs.

Factors That May Adversely Affect Our Results of Operations

Our results of operations and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control.

Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, public health considerations, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East.

Our results of operations and our ability to consummate an initial Business Combination could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, fluctuation in interest rates, increase in tariffs, supply chain disruptions, declines in consumer confidence and spending, public health considerations, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East.

We cannot at this time predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial Business Combination.

Liquidity and Capital Resources

On June 20, 2024, we consummated the Initial Public Offering of 16,000,000 units (the “Units”), which includes the partial exercise by the underwriters of their over-allotment option in the amount of 1,000,000 Units (Note 6), at $10.00 per Unit, generating gross proceeds of $160,000,000.

Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 5,000,000 private placement warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant, in a private placement to the Sponsor generating gross proceeds of $5,000,000.

On June 20, 2024, we consummated the Initial Public Offering of 16,000,000 Units, which includes the partial exercise by the underwriters of their over-allotment option in the amount of 1,000,000 Units, at $10.00 per Unit, generating gross proceeds of $160,000,000.

Simultaneously with the closing of the Initial Public Offering and pursuant to the Private Placement Warrants Purchase Agreements, we consummated the sale of 5,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, in a private placement to the Sponsor and the representatives of the underwriters of the Initial Public Offering generating gross proceeds of $5,000,000.

Following the Initial Public Offering, the partial exercise of the over-allotment option, and the sale of the Units and the sale of the Private Placement Warrants, a total of $160,000,000 was placed in the Trust Account.

We incurred $10,184,856 in Initial Public Offering related costs, consisting of $3,000,000 of cash underwriting fee, $6,600,000 of deferred underwriting fee and $584,856 of other offering costs.

For the period from March 11, 2024 (inception) through September 30, 2024, cash used in operating activities was $489,390.

Net income of $2,463,105 was affected by interest earned on marketable securities held in the Trust Account of $2,531,350, formation costs paid by the Sponsor in exchange for issuance of Class B ordinary shares of $6,236, payment of operation costs through promissory note of $10,420, and unrealized gain on over-allotment liability of $169,119.

For the three months ended March 31, 2025, cash used in operating activities was $185,142.

Net income of $1,579,993 was affected by dividend and interest earned on marketable securities and cash held in the Trust Account of $1,736,734.

Changes in operating assets and liabilities used $28,401 of cash for operating activities.

As of September 30, 2024, we had marketable securities held in the Trust Account of $162,531,350 consisting of U.S.

Treasury Bills with a maturity of 185 days or less.

For the period from March 11, 2024 through March 31, 2024, cash used in operating activities was $0.

Net loss of $19,135 was affected by formation costs paid by Sponsor in exchange for issuance of Class B ordinary shares.

Changes in operating liabilities provided $13,070 of cash for operating activities.

At March 31, 2025, substantially all of the assets held in the Trust Account were held in U.S.

Treasury Bills.

At December 31, 2024, primarily all of the assets held in the Trust Account were held in money market funds which were invested in U.S.

Treasury securities.

The Company accounts for its marketable securities as trading securities under ASC 320, “Investments—Debt and Equity Securities,” where securities are presented at fair value on the unaudited condensed balance sheets.

Trading securities are presented on the unaudited condensed balance sheets at fair value at the end of each reporting period.

Gains and losses resulting from the change in fair value of investments held in the Trust Account are included in dividends and interest earned on marketable securities and cash held in Trust Account in the accompanying unaudited condensed statements of operations.

The estimated fair values of investments held in the Trust Account are determined using available market information.

Fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.

At March 31, 2025, substantially all of the assets held in the Trust Account were held in U.S.

Treasury Bills.

At December 31, 2024, primarily all of the assets held in the Trust Account were held in money market funds which were invested in U.S.

Treasury securities.

We may withdraw interest from the Trust Account to pay taxes, if any.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our Business Combination.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing dividends and interest earned on the Trust Account (less income taxes payable, if any), to complete our Business Combination.

To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our 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.

As of September 30, 2024, we had cash of $934,098.

To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that we hold investments in the Trust Account, we may, at any time (based on the management team’s ongoing assessment of all factors related to the potential status under the Investment Company Act), instruct the trustee to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash or in an interest-bearing demand deposit account at a bank.

As of March 31, 2025 and December 31, 2024, we had cash of $693,112 and $878,254, respectively.

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.

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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 consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.

We have until June 20, 2026, to consummate the initial Business Combination (assuming no extensions).

If we do not complete a Business Combination within the Completion Window, the Company will trigger an automatic winding up, dissolution and liquidation pursuant to the terms of the amended and restated memorandum and articles of association.

In connection with our assessment of going concern considerations in accordance with Accounting Standards Update 2014 - 15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management believes that the funds which we have available following the completion of the Initial Public Offering will enable us to sustain operations for a period of at least one year from the issuance date of these unaudited condensed financial statements.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024.

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2025.

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.

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On June 20, 2024, simultaneously with the closing of the Initial Public Offering, the underwriters partially exercised the over-allotment option to purchase an additional 1,000,000 Units.

The underwriters had 45 days from the date of the IPO Prospectus to purchase the remaining 1,250,000 Units.

The underwriters had 45 days from the date of our Registration Statement on Form S-1, initially filed with the SEC on May 31, 2024, as amended, and declared effective on June 17, 2024 (File No.

333-279899) (the “IPO Registration Statement”) to purchase the remaining 1,250,000 Units.

On August 4, 2024, the underwriters’ remaining over-allotment option expired worthless.

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The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely on amounts remaining in the Trust Account following all properly submitted shareholder redemption in connection with the consummation of the initial Business Combination.

Critical Accounting Policies and Estimates

The preparation of condensed 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.

Critical Accounting Estimates and Policies

The preparation of the unaudited condensed financial statements and related disclosures included in this Report under Item 1.

“Financial Statements” in conformity with GAAP 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 unaudited condensed financial statements, and income and expenses during the periods reported.

Actual results could materially differ from those estimates.

The Company has not identified any critical accounting estimates but has identified the following critical accounting policies:

Warrant Instruments

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 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 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 additional paid-in capital 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 at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Accordingly, the Company evaluated and classified the warrant instruments under equity treatment at its assigned fair value.

Ordinary Shares Subject to Possible Redemption

We account for our ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and 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 our control) are classified as temporary equity.

At all other times, ordinary shares are classified as shareholders’ equity (deficit).

Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events.

Accordingly, as of September 30, 2024, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of our balance sheets.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period.

Increases or decreases in the carrying amount of the redeemable ordinary shares are affected by charges against additional paid-in capital (to the extent available) and accumulated deficit.

The Company has not identified any critical accounting estimates that have a significant impact to our unaudited condensed financial statements.

Recent Accounting Pronouncements

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our unaudited condensed financial statements.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis