Talon Capital Corp. 10-K/A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. 57 Overview We are a blank check company incorporated in the Cayman Islands on May 1, 2025, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses. 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 units, 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. Results of Operations We have neither engaged in any operations nor generated any revenues to date. Our only activities from May 1, 2025 (inception) through December 31, 2025 were organizational activities and those necessary to prepare for the initial public offering, described below, and, after our initial public offering, 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. Subsequent to the initial public offering, we generate non-operating income in the form of interest income on cash held in 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 period from May 1, 2025 (inception) through December 31, 2025, we had a net income of $2,625,175, which consists of interest income on cash held in the trust account of $3,171,560, offset by general and administrative expenses of $547,385. Liquidity and Capital Resources On September 10, 2025, we consummated the initial public offering of 24,900,000 units, which includes the partial exercise by the underwriters of their over-allotment option in the amount of 2,400,000 units, at $10.00 per unit, generating gross proceeds of $249,000,000. Simultaneously with the closing of the initial public offering, we consummated the sale of 779,000 private placement units at a price of $10.00 per private placement unit, in a private placement to the Sponsor and Cohen and Company Capital Markets, a division of Cohen & Company Securities, LLC (“Cohen”), generating gross proceeds of $7,790,000. Of those 779,000 private placement units, the Sponsor purchased 530,000 private placement units and Cohen purchased 249,000 private placement units. Following the closing of the initial public offering and the private placement, a total of $249,000,000 was placed in the trust account. The proceeds held in the trust account will be invested or held only in either (i) U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”) which invest only in direct U.S. government treasury obligations, (ii) as uninvested cash, or (iii) an interest or non-interest bearing bank demand deposit account or other accounts at a bank. We are permitted to withdraw amounts from the trust account (i) to fund our working capital requirements, which amount will be the lesser of $500,000 or 5% of the interest earned on the trust account per annum, and/or (ii) to pay our taxes (other than excise taxes, if any), provided that all permitted withdrawals can only be made (x) from interest and not from the principal held in the trust account and (y) only to the extent such interest is in amount sufficient to cover the permitted withdrawal amount (“permitted withdrawals”). We incurred $14,742,001, consisting of $4,040,000 of cash underwriting fee (net of $700,000 underwriters’ reimbursement), $10,200,000 of deferred underwriting fee, and $502,001 of other offering costs. The remaining proceeds from the initial public offering and the private placement are held outside the trust account, in the cash operating account amounting to $2,872,627 as of December 31, 2025. Such funds are being used primarily to enable us to identify a target and to negotiate and consummate our initial business combination. For the period from May 1, 2025 (inception) through December 31, 2025, cash used in operating activities was $464,952. Net income of $2,625,175 was affected by interest earned on cash held in the trust account of $3,171,560, cash withdrawn from Trust Account for working capital purposes of $75,921, payment of general and administrative costs through advances from related party of $10,420 and compensation expense of $74,000. Changes in operating assets and liabilities used $78,908 of cash for operating activities. As of December 31, 2025, we had cash held in the trust account of $252,095,639 (including approximately $3,171,560 of interest income) consisting of U.S. Treasury Bills with a maturity of 185 days or less. We may withdraw interest from the trust account as described above. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (which interest shall be net of any permitted withdrawals and excluding deferred underwriting commissions), 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. 58 As of December 31, 2025, we had cash of $2,872,627. 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. In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we would repay such loaned amounts. In the event that a 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 working capital loans may be convertible into units of the post-business combination entity at a price of $10.00 per unit. The private placement units issued upon conversion of any such loans would be identical to the private placement units sold in a private placement concurrently with the initial public offering. 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 a 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 business combination. 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. Off-Balance Sheet Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2025. Contractual Obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor and/or its affiliates $40,000 per month for office space, secretarial and administrative services. The underwriters were entitled to a cash underwriting discount amounting to $240,000 which is payable to the underwriters upon the completion of an initial business combination. In addition, the underwriters were entitled to $0.40 per unit sold in the offering, or up to $9,960,000 in the aggregate, payable to the underwriters based on the percentage of funds remaining in the trust account after redemptions of public shares, for deferred underwriting commissions, and to be released to the underwriters only upon the completion of an initial business combination. Furthermore, 50% of such deferred underwriting commissions will be contingent upon permitted withdrawals of interest, at the lesser of $500,000 or 5% of the interest earned per annum, on the trust account per annum, for working capital from the trust account. Critical Accounting Estimates The preparation of the financial statements and related disclosures 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 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. Accordingly, the actual results could materially differ from those estimates. Warrant Instruments The Company accounted for the Public Warrants and Private Placement Warrants issued in connection with the Initial Public Offering and the private placement in accordance with the guidance contained in FASB ASC Topic 815, “Derivatives and Hedging”. Accordingly, the Company evaluated and classified the warrant instruments under equity treatment at their assigned values. Stock Compensation Expense The Company accounts for stock-based compensation expense in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred (see Note 5 for more discussion about the details). For the period from May 1, 2025 (Inception) through December 31,2025, share-based compensation expenses recognized by the Company were $74,000. 59 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 our condensed financial statements. ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk Not required for smaller reporting companies. ITEM 8. Financial Statements and Supplementary Data This information appears following Item 15 of this Report and is included herein by reference. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.