References in this Annual Report to "we," "us" or the "Company" refer to Talon 1 Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to AVi8 Acquisition LLC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Overview

We are a blank check company incorporated on April 20, 2021 as a Cayman Islands exempted company. Our business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (referred to in this Annual Report as our initial business combination). We have not selected any specific target business, and we have not, nor has anyone on our behalf, engaged in any substantive discussions, directly or indirectly, with any target business with respect to an initial business combination.

The issuance of additional shares in connection with a business combination to the owners of the target or other investors:



  •   may significantly dilute the equity interest of investors in our initial
      public offering, which dilution would increase if the anti-dilution
      provisions in the Class B ordinary shares resulted in the issuance of Class A
      ordinary shares on a greater than
      one-to-one
      basis upon conversion of the Class B ordinary shares;



  •   may subordinate the rights of holders of Class A ordinary shares if
      preference shares are issued with rights senior to those afforded our Class A
      ordinary shares;



  •   could cause a change in control if a substantial number of Class A ordinary
      shares are issued, which may affect, among other things, our ability to use
      our net operating loss carry forwards, if any, and could result in the
      resignation or removal of our present officers and directors;



  •   may have the effect of delaying or preventing a change of control of us by
      diluting the share ownership or voting rights of a person seeking to obtain
      control of us; and



  •   may adversely affect prevailing market prices for our Class A ordinary shares
      and/or warrants.

Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:



  •   default and foreclosure on our assets if our operating revenues after an
      initial business combination are insufficient to repay our debt obligations;



  •   acceleration of our obligations to repay the indebtedness even if we make all
      principal and interest payments when due if we breach certain covenants that
      require the maintenance of certain financial ratios or reserves without a
      waiver or renegotiation of that covenant;



  •   our immediate payment of all principal and accrued interest, if any, if the
      debt is payable on demand;



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  •   our inability to obtain necessary additional financing if the debt contains
      covenants restricting our ability to obtain such financing while the debt is
      outstanding;



  •   our inability to pay dividends on our Class A ordinary shares;



  •   using a substantial portion of our cash flow to pay principal and interest on
      our debt, which will reduce the funds available for dividends on our Class A
      ordinary shares if declared, expenses, capital expenditures, acquisitions and
      other general corporate purposes;



  •   limitations on our flexibility in planning for and reacting to changes in our
      business and in the industry in which we operate;



  •   increased vulnerability to adverse changes in general economic, industry and
      competitive conditions and adverse changes in government regulation; and



  •   limitations on our ability to borrow additional amounts for expenses, capital
      expenditures, acquisitions, debt service requirements, execution of our
      strategy and other purposes and other disadvantages compared to our
      competitors who have less debt.

We expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.

Results of Operations and Known Trends or Future Events



We have neither engaged in any operations nor generated any revenues to date.
Our only activities since 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.

Liquidity and Capital Resources

Until the consummation of our initial public offering, our only source of liquidity was capital contributions from related parties of $95,972 and $26,000 as of September 20, 2021 and May 3, 2021 respectively.

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 period from April 20, 2021 (inception) through December 31, 2021, net cash used in operating activities was $1,374,456.



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As of December 31, 2021, we had marketable securities held in the trust account of $235,757,582 (including approximately $7,582 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.

As of December 31, 2021, we had cash of $1,090,391 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.

Off-Balance
Sheet Arrangements

We did not have any
off-balance
sheet arrangements as of December 31, 2021.

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.

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 Loss Per Ordinary Share

Net loss per ordinary share is computed by dividing net loss by the weighted-average number of ordinary shares outstanding during the period. On December 31, 2021, the Company did not have any dilutive securities and



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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 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.

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