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 (the "Business Combination").
On November 8, 2021, the Company consummated its initial public offering (the
"initial public offering") 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 initial public offering
(or up to 18 months from the closing of the initial public offering 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 a trust account located in the United
States with Continental Stock Transfer & Trust Company acting as trustee (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. 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.
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.
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.
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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 and unrealized gains 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 expense related to the search for a prospective initial Business
Combination.
For the three months ended September 30, 2022, we had net income of $2,123,597,
which consisted of general and administrative costs of $1,004,386, offset by a
favorable change in fair value of warrant liabilities of $1,980,000 and income
earned on cash and marketable securities held in Trust Account of $1,147,983.
For the three months ended September 30, 2021, we had a net loss of $809, which
consisted entirely of general and administrative costs.
For the nine months ended September 30, 2022, we had net income of $9,221,194,
which consisted of general and administrative costs of $2,682,391, offset by a
favorable change in fair value of warrant liabilities of $10,660,000 and income
earned on cash and marketable securities held in Trust Account of $1,243,585.
For the period from April 20, 2021 (inception) through September 30, 2021, we
had a net loss of $32,266, which consisted entirely of general and
administrative costs.
Liquidity and Capital Resources
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.
As of September 30, 2022, we had cash and marketable securities held in the
Trust Account of $236,976,167 (including approximately $1,218,585 of income from
the change in value of marketable securities held in the Trust Account)
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.
As of September 30, 2022, we had cash of $461,603 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.
The Company has incurred and expects to continue to incur significant costs in
pursuit of its financing and acquisition plans. As of September 30, 2022, the
Company had $236,976,167 cash and investments held in its Trust Account for use
in a potential Business Combination. The Company has until February 8, 2023 to
complete a Business Combination. If a Business Combination is not consummated by
this date, there will be a mandatory liquidation, should a Business Combination
not occur, and potential subsequent dissolution.
As of September 30, 2022, the Company had $461,603 in cash and working capital
of $430,691. The Company has incurred and expects to continue to incur
significant costs in pursuit of its acquisition plans. 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
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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.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. No adjustments have been made to the carrying amounts of
assets or liabilities as a result of this uncertainty.
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
September 30, 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.
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 adopted ASU 2020-06 on January 1, 2022 and it did
not impact the Company's financial position, results of operations, or cash
flows.
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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.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans, if any (and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital Loans), are entitled to
registration rights pursuant to a registration rights agreement. These holders
are entitled to certain demand and "piggyback" registration rights. However, the
registration rights agreement provides that we will not be required to effect or
permit any registration or cause any registration statement to become effective
until termination of the applicable lock-up period. The Company will bear the
expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
$4,600,000 in the aggregate, payable upon the closing of the initial public
offering. An additional fee of $0.35 per Unit, or $8,050,000 in the aggregate,
will be payable to the underwriters for deferred underwriting commissions. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
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 initial public offering or until we otherwise no longer qualify as an
"emerging growth company."
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TALON 1 ACQUISITION CORP. 
