References to "we", "us", "our" or the "Company" are to Talon 1 Acquisition Corp., except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed financial statements and related notes thereto included elsewhere in this report.

Cautionary Note Regarding Forward-Looking Statements



This Quarterly Report on Form
10-Q
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "should," "could,"
"would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or
the negative of such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not limited to, those
described in our other Securities and Exchange Commission ("SEC") filings.

Overview

We were incorporated as a Cayman Islands exempted company and incorporated with limited liability on April 20, 2021. The Company was incorporated for the purpose of effecting a merger capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.



On November 8, 2021, the Company consummated its initial public offering (the
"IPO") of 23,000,000 units (including the underwriters' full exercise of their
over-allotment option) at $10.00 per unit (each, a "Unit"). Each Unit consists
of one Class A ordinary share and
one-half
of one redeemable warrant. Each whole warrant entitles the holder to purchase
one Class A ordinary share at a price of $11.50 per share.

The Company will have 15 months from the closing of the IPO (or up to 18 months from the closing of the IPO if the Company extends the period of time to consummate the Business Combination) (the "Completion Window") to consummate the initial Business Combination by depositing $2,300,000 ($0.10 per share) in the Trust Account.



Pursuant to the terms of the Company's second amended and restated memorandum
and articles of association and the Trust Agreement entered into between the
Company and Continental Stock Transfer & Trust Company, in order to extend the
time available for the Company to consummate its initial Business Combination by
an additional three months, the Company's Sponsor or its affiliates or designees
must provide advance notice at least five days prior to the date which is 15
months from the closing of our initial public offering and must deposit into the
trust account $2,300,000 ($0.10 per share), on or prior to the date which is 15
months from the closing of our initial public offering. Any such payments would
be made in the form of a
non-interest
bearing loan (an "Extension Loan"). If the Company completes its initial
business combination, it will, at the option of the Company's initial
shareholders or their affiliates or designees, repay such loaned amounts out of
the proceeds of the Trust Account released to the Company or convert a portion
or all of the total loan amount into warrants at a price of $1.00 per warrant
(the "Extension Loan Warrants"). If the Company does not complete its initial
Business Combination, it will repay such loans only from funds held outside of
the Trust Account. The Company's initial shareholders or their affiliates or
designees are not obligated to fund the Trust Account to extend the time for the
Company to complete its initial Business Combination. If the Company is unable
to consummate its initial Business Combination within the applicable time
period, it will, as promptly as reasonably possible but not more than five
business days thereafter, redeem the public shares for a pro rata portion of the
funds held in the Trust Account and as promptly as reasonably possible following
such redemption, subject to the approval of the Company's remaining shareholders
and its board of directors, liquidate and dissolve, subject in each case to the
Company's obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable
law.

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If the Company is unable to complete our initial Business Combination within the Completion Window, the Company will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders' rights as stockholders (including the right to receive further liquidation distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company's remaining stockholders and its board of directors, liquidate and dissolve, subject in each case to the Company's obligations under Cayman Islands law to provide for claims of creditors and other requirements of applicable law. There will be no redemption rights or liquidating distributions with respect to the Company's warrants, which will expire worthless if the Company fails to complete the initial Business Combination within the Completion Window.

Results of Operations



We have neither engaged in any operations nor generated any revenues to date.
Our only activities since April 20, 2021 (inception) have been organizational
activities and those necessary to prepare for our initial public offering. We do
not expect to generate any operating revenues until after completion of our
initial business combination. We generate
non-operating
income in the form of interest income on investments held in our trust account.
Our expenses have increased substantially after the closing of our initial
public offering. 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 period from April 20, 2021 (inception) through December 31, 2021, we had a net loss of $468,403, which resulted primarily from operating and formation costs and offering costs relating to warrant liabilities, partially offset by a change in the fair value of derivative warrant liabilities.

For the three months ended March 31, 2022, we had net income of $4,090,105, which consisted of general and administrative costs of $886,928, offset by a favorable change in fair value of warrant liabilities of $4,967,500 and interest earned on marketable securities held in trust account of $9,533.

Liquidity and Capital Resources

As of March 31, 2022, we had $836,878 in cash and working capital of $1,385,523.

On November 8, 2021, we consummated our initial public offering of 20,000,000 units (the "Units" and, with respect to the Class A ordinary shares included in the Units sold, the "Public Shares"), at $10.00 per Unit, generating gross proceeds of $200,000,000. Simultaneously with the closing of our initial public offering, the underwriters fully exercised the over-allotment option, generating gross proceeds of $30,000,000.

Simultaneously with the closing of our initial public offering, the Company consummated the sale of 13,250,000 warrants at a price of $1.00 per Private Placement Warrant in a private placement to our Sponsor generating gross proceeds of $13,250,000.

A total of $235,750,000 of the proceeds from our initial public offering, a portion of the sale of the private placement warrants, the sale of the over-allotment units and the sale of the over-allotment warrants were placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee.

For the three months ended March 31, 2022, net cash used in operating activities was $251,013.

As of March 31, 2022, we had marketable securities held in the trust account of $235,754,615 (including approximately $9,533 of interest income) consisting of securities held in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule2a-7 under the Investment Company Act which invest only in direct U.S. government treasury.


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As of March 31, 2022, we had cash of $836,878 held outside 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.



We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our initial business
combination. However, if our estimates of the costs of identifying a target
business, undertaking
in-depth
due diligence and negotiating an initial 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. In order to fund
working capital deficiencies or finance transaction costs in connection with an
intended initial business combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete our initial business
combination, we would repay such loaned amounts. In the event that our initial
business combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts but no proceeds from
our trust account would be used for such repayment. Up to $1,500,000 of such
loans may be convertible into warrants of the post business combination entity
at a price of $1.00 per warrant at the option of the lender. The warrants would
be identical to the private placement warrants. The terms of such loans, if any,
have not been determined and no written agreements exist with respect to such
loans. Prior to the completion of our initial business combination, we do not
expect to seek loans from parties other than our Sponsor or an affiliate of our
Sponsor as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
trust account.

Critical Accounting Policies

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. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Net Income Per Ordinary Share

Net income per ordinary share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period. On March 31, 2022, the Company did not have any dilutive securities and 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 income per share is the same as basic income per share for the period presented.

Derivative Financial Instruments


The Company evaluates its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC 815, Derivatives and Hedging. For derivative financial
instruments that are accounted for as assets or liabilities, the derivative
instrument is initially recorded at its fair value on the grant date and is then
re-valued
at each reporting date, with changes in the fair value reported in the
statements of operations. Derivative instruments are classified in the balance
sheet as current or
non-current
based on whether or not
net-cash
settlement or conversion of the instrument could be required within 12 months of
the balance sheet date.

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Recent Accounting Standards



In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU")
2020-06, Debt -
Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic
815-40) ("ASU
2020-06")
to simplify accounting for certain financial instruments. ASU
2020-06
eliminates the current models that require separation of beneficial conversion
and cash conversion features from convertible instruments and simplifies the
derivative scope exception guidance pertaining to equity classification of
contracts in an entity's own equity. The new standard also introduces additional
disclosures for convertible debt and freestanding instruments that are indexed
to and settled in an entity's own equity. ASU
2020-06
amends the diluted earnings per share guidance, including the requirement to use
the
if-converted
method for all convertible instruments. ASU
2020-06
is effective January 1, 2022 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company is currently assessing the impact, if any, that ASU
2020-06
would have on its financial position, results of operations or cash flows.

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

Off-Balance

Sheet Arrangements



As of the date of this Quarterly Report on Form
10-Q,
we did not have any
off-balance
sheet arrangements.

Commitments and Contractual Obligations

We do not have any long term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long term liabilities, other than an agreement to pay our Sponsor a monthly fee of $10,000 for office space and administrative support. We began incurring these fees on November 3, 2021 and will continue to incur these fees monthly until the earlier of the completion of the initial business combination or our liquidation.

JOBS Act



On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected to delay the adoption of
new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for
non-emerging
growth companies. As a result, our financial statements may not be comparable to
companies that comply with new or revised accounting pronouncements as of public
company effective dates.

As an "emerging growth company," we are not required to, among other things,
(i) provide an auditor's attestation report on our system of internal controls
over financial reporting, (ii) provide all of the compensation disclosure that
may be required of
non-emerging
growth public companies, (iii) comply with any requirement that may be adopted
by the Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional
information about the audit and the financial statements (auditor discussion and
analysis), and (iv) disclose comparisons of the chief executive officer's
compensation to median employee compensation. These exemptions will apply for a
period of five (5) years following the completion of our IPO or until we
otherwise no longer qualify as an "emerging growth company."

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