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Item 2. Management’s Discussion and Analysis

2026-05-11 compared with 2025-11-12 · 129 added, 115 removed, 46 unchanged (84% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Management’s Discussion and

Analysis of Financial Condition and Results of Operations

References in this report (the “Quarterly

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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.

discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed

consolidated 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 and Section 21E of 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.

statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of a proposed Business Combination,

the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking

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

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 a 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 Annual Report on Form 10-K for the year ended December 31, 2024, as filed with 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 on June 19,

2024 as a Cayman Islands exempted company, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,

reorganization or similar business combination with one or more businesses.

We intend to effectuate our initial business combination using

cash derived from the proceeds of our IPO and the sale of the Private Placement Securities, our shares, debt or a combination of cash,

shares and debt.

statements” within the meaning of applicable securities laws 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 a proposed business combination, our 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 a 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 our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange

Commission (“SEC”).

Our 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, we disclaim 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 on

June 19, 2024 as a Cayman Islands exempted company, formed for the purpose of effecting a merger, share exchange, asset acquisition,

share purchase, reorganization or similar business combination with one or more businesses.

We intend to effectuate our initial business

combination using cash derived from the proceeds of our initial public offering (“IPO”) and the sale of our securities in

a private placement that closed simultaneously with the closing of the IPO, our shares, debt or a combination of cash, shares and debt.

We expect to continue to incur significant costs

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We cannot assure you that our plans to complete a business combination will be successful.

Business Combination Agreement

On November 26, 2025, we entered into a Business

Combination Agreement (the “Business Combination Agreement”) with Sponsor HoldCo, Patriot Merger Subsidiary, Inc., a Florida

corporation and our direct, wholly-owned subsidiary (“Merger Sub”) and Precision Aerospace & Defense Group, Inc., a Florida

corporation (“PAD”).

The Business Combination Agreement provides, among other things, that on the terms and subject to the

conditions set forth therein:

(i) we will domesticate as a Delaware corporation in accordance with Section 388 of the Delaware General

Corporation Law and Part XII of the Companies Act (As Revised) of the Cayman Islands (the “Domestication”);

and (ii) following

the Domestication, Merger Sub will merge with and into PAD with PAD surviving the merger as our wholly-owned subsidiary (the “Merger”),

in accordance with the Business Combination Agreement and the Florida Business Corporation Act.

Results of Operations

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generated any revenues to date.

Our only activities from June 19, 2024 (inception) through September 30, 2025 were organizational activities,

those necessary to prepare for our IPO, described below, and identifying a target company for our initial business combination.

not expect to generate any operating revenues until after the completion of our initial business combination.

Subsequent to our IPO, we

generate non-operating income in the form of interest income on cash held in the trust account established in connection with our IPO

(the “Trust Account”).

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, 2025,

we had net income of $1,266,719, which consists of interest income on cash held in the Trust Account of $1,860,392 and interest earned

Our only activities from June 19, 2024 (inception) through March 31, 2026 were organizational activities,

those necessary to prepare for our IPO, described below, and subsequent to the IPO, identifying a target company for our initial business

combination and negotiating and attempting to complete the proposed PAD Business Combination.

We do not expect to generate any operating

revenues until after the completion of our initial business combination.

Subsequent to our IPO, we have generated non-operating income

in the form of interest income on cash held in the trust account established in connection with our IPO (the “Trust Account”).

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 March 31, 2026, we

had net income of $1,034,133, which consists of interest income on cash held in the Trust Account of $1,548,784, and interest earned

on bank account of $2,965, offset by general and administrative expenses of $517,616.

For the nine months ended September 30, 2025,

we had net income of $4,346,140, which consists of interest income on cash held in the Trust Account of $5,465,237, change on overallotment

liability of $26,558 and interest earned on bank account of $20,498, offset by general and administrative expenses of $1,166,153.

For the three months ended September 30, 2024

and for the period from June 19, 2024 (inception) through September 30, 2024, we had a net loss of $104,287, which consisted of general

and administrative costs.

For the three months ended March 31, 2025, we

had net income of $1,447,897, which consists of interest income on cash held in the Trust Account of $1,785,684 and change on overallotment

liability of $26,558, offset by operating costs of $364,345.

Liquidity and Capital Resources

Our liquidity needs have been satisfied prior

to the consummation of our IPO through receipt from our Sponsor of $25,000 for the sale of the founder shares.

We consummated our IPO of 17,500,000 units at

$10.00 per unit, generating gross proceeds of $175,000,000.

Simultaneously with the closing of our IPO, we consummated the sale of 663,125

private placement units at a price of $10.00 per private placement unit, generating gross proceeds of $6,631,250, as follows:

private placement units ($175,000 in the aggregate) with the Sponsor, (B) (i) 260,000 private placement units and (ii) 162,500 private

placement units and 325,000 restricted Class A ordinary shares ($4,225,000 in the aggregate) with Sponsor HoldCo, (C) 178,500 private

placement units ($1,785,000 in the aggregate) with CCM and (D) 44,625 private placement units with Seaport ($446,250 in the aggregate).

On November 25, 2024, the registration statement

relating to our IPO was declared effective by the SEC.

On November 27, 2024, we consummated our IPO of 17,500,000 units at $10.00 per

unit, generating gross proceeds of $175,000,000.

Cohen & Company Capital Markets, a division of J.V.B.

Financial Group, LLC (“CCM”),

and Seaport Global Securities LLC (“Seaport”) acted as underwriters of the IPO, which has now terminated.

Simultaneously with the closing of our IPO, we

consummated the sale of 663,125 private placement units at a price of $10.00 per private placement unit, generating gross proceeds of

$6,631,250, as follows:

(A) 17,500 private placement units ($175,000 in the aggregate) with the Sponsor, (B) (i) 260,000 private placement

units and (ii) 162,500 private placement units and 325,000 restricted Class A ordinary shares ($4,225,000 in the aggregate) with Sponsor

HoldCo, (C) 178,500 private placement units ($1,785,000 in the aggregate) with CCM and (D) 44,625 private placement units with Seaport

($446,250 in the aggregate).

Following the closing of our IPO and the concurrent

private placement, a total of $175,875,000 was placed in the Trust Account.

We incurred $11,028,226 of transaction costs, consisting of

$3,500,000 of cash underwriting fee, $7,000,000 of deferred underwriting fee, and $528,226 of other offering costs.

For the nine months ended September 30, 2025,

cash used in operating activities was $440,295.

We incurred $11,028,226 of transaction costs, consisting

of $3,500,000 of cash underwriting fee, $7,000,000 of deferred underwriting fee, and $528,226 of other offering costs.

No offering expenses

were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity

securities, or to any of our affiliates.

For the three months ended March 31, 2026, cash

used in operating activities was $131,882.

Net income of $1,034,133 was affected by interest earned on cash held in the Trust Account

of $1,548,784 and net change in operating assets and liabilities of $382,769.

For the three months ended March 31, 2025, cash

used in operating activities was $225,895.

Net income of $1,447,897 was affected by interest earned on cash held in the Trust Account

of $1,785,684, change in fair value of overallotment liability of $26,558, and net change in operating assets and liabilities of $138,450.

For the period from June 19, 2024 (inception)

through September 30, 2024, cash used in operating activities was $50,996.

Net loss of $104,287 was affected by formation costs paid by

Sponsor in exchange for issuance of Class B ordinary shares of $19,795 and net change in operating assets and liabilities of $705,359.

As of September 30, 2025, we had cash held in

the Trust Account of $182,062,506.

As of March 31, 2026, we had cash held in the

Trust Account of $185,334,240.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing

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capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As of September 30, 2025, we had cash of $1,007,626

in our operating bank 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 an initial business combination.

As of March 31, 2026, we had cash and cash

equivalents of $412,909 in our operating bank account.

We intend to use the funds held outside the Trust Account primarily to

complete our initial business combination pursuant to the Business Combination Agreement, or in the event that we are unable to

complete such business combination, 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

an initial business combination.

In order to fund working capital deficiencies

or finance transaction costs in connection with an initial business combination, either of Sponsor HoldCo, the Sponsor, any of their respective

affiliates or certain of our directors and officers may, but are not obligated to, loan us funds as may be required.

If we complete an

initial business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us.

In the event that

an 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 $2,000,000 of any such working capital

loans for each such person may be convertible into a price of $10.00 per Class A ordinary share or unit, as applicable, at the option

of such lender.

Such Class A ordinary shares would be identical to the private placement shares, and such units would be identical to

the private placement units.

We do not believe we will need to raise additional

funds in order to meet the expenditures required for operating our business.

However, if our estimate 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.

Moreover, we may

need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant

number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur

debt in connection with such business combination.

Nonetheless, the mandatory liquidation date, should

a Business Combination not occur by May 27, 2026, and the potential subsequent dissolution raise substantial doubt about the Company’s

ability to continue as a going concern.

or finance transaction costs in connection with an initial business combination, either of Sponsor HoldCo, the Sponsor, any of their

respective affiliates or certain of our directors and officers may, but are not obligated to, loan us funds as may be required.

complete an initial business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us.

the event that an 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 $2,000,000 of any such working

capital loans for each such person may be convertible into a price of $10.00 per Class A ordinary share or unit, as applicable, at the

option of such lender.

Such Class A ordinary shares would be identical to the shares underlying the private placement units, and such

units would be identical to the private placement units.

Nonetheless, the mandatory liquidation date,

should our initial business combination not occur by November 27, 2026, and the potential subsequent dissolution raise substantial doubt

about our ability to continue as a going concern.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities,

which would be considered off-balance sheet arrangements as of September 30, 2025.

which would be considered off-balance sheet arrangements as of March 31, 2026.

We do not participate in transactions that create relationships

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obligations, operating lease obligations or long-term liabilities.

The underwriters had a 45-day option from the

date of our IPO to purchase up to an additional 2,625,000 units to cover over-allotments, if any.

The over-allotment option expired unexercised

on January 10, 2025 and Sponsor HoldCo forfeited 875,000 founder shares upon expiration of the over-allotment option on January 10, 2025.

The underwriters of our IPO had a 45-day option

from the date of our IPO to purchase up to an additional 2,625,000 units to cover over-allotments, if any.

The over-allotment option

expired unexercised on January 10, 2025 and Sponsor HoldCo forfeited 875,000 founder shares upon expiration of the over-allotment option

on January 10, 2025.

The underwriters were entitled to a cash underwriting

discount of $0.20 per Unit, or $3,500,000 in the aggregate, which was paid upon the closing of the IPO.

discount of $0.20 per Unit, or $3,500,000 in the aggregate, which was paid upon the closing of our IPO.

In addition, the underwriters

were entitled to a deferred fee of (i) $0.40 per Unit sold in the offering of the IPO, or $7,000,000 in the aggregate, payable based

on the percentage of funds remaining in the trust account after redemptions of public shares, solely in the event that the Company completes

an initial business combination, subject to the terms of the underwriting agreement.

were entitled to a deferred fee of $0.40 per Unit sold in the offering of our IPO, or $7,000,000 in the aggregate, payable based on the

percentage of funds remaining in the Trust Account after the redemption of public shares, solely in the event that we complete an initial

business combination, subject to the terms of the underwriting agreement.

Critical Accounting 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.

Making estimates requires management to

exercise significant judgement.

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of

circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change

in the near term due to one or more future confirming events.

The preparation of unaudited condensed consolidated

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 unaudited condensed consolidated financial statements, and income and expenses during the periods

Making estimates requires management to exercise significant judgement.

It is at least reasonably possible that the estimate

of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial

statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming

Accordingly, the actual results could materially differ from those estimates.

As of September 30, 2025, we did not have any critical accounting estimates to be disclosed.

As of March 31, 2026, we did not have any critical

accounting estimates to be disclosed.

Recent Accounting Standards

Management does not believe that any recently

issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial

issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed consolidated

financial statements.

Quantitative and Qualitative Disclosures

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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