Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Report including, without limitation, statements under this Item regarding our financial position, possible Business Combinations and the financing thereof, and related matters, and the plans and objectives of Management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. When used in this Report, words such as "may," "should," "could," "would," "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to us or our Management, identify forward-looking statements. We have based these forward-looking statements on our Management's current expectations and projections about future events, as well as assumptions made by, and information currently available to our Management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Report under Item 1. "Financial Statements."

Overview

We are a blank check company incorporated in the Cayman Islands on March 16, 2026 for the purpose of effecting a Business Combination. Our Sponsor is PAC Sponsor, LLC.

Although we are not limited in our search for prospective Business Combination targets to a particular business, industry, sector or geographic region for the purpose of consummating the Business Combination, we are focusing our search on businesses with growth platforms, strong management teams, and opportunities to drive value creation such as the ability to pursue further accretive acquisitions or capital structure optimization. We are an early stage and emerging growth company and, as such, we are subject to all of the risks associated with early stage and emerging growth companies. We expect to incur significant costs in the pursuit of our acquisition plans. There can be no assurance that our plans to complete a Business Combination will be successful.

Our IPO Registration Statement became effective on August 6, 2026. On August 10, 2026, we consummated our Initial Public Offering of 20,000,000 Public Units. Each Public Unit consists of one Public Share and one Public Right. The Public Units were sold at a price of $10.00 per Public Unit, generating gross proceeds to us of $200,000,000.

Simultaneously with the closing of the Initial Public Offering and pursuant to the Private Placement Units Purchase Agreement, we completed the sale of an aggregate of 225,000 Private Placement Units to the Sponsor in the Private Placement at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds to us of $2,250,000. The Private Placement Units (and underlying securities) are identical to the Public Units (and underlying securities), except as otherwise disclosed in the IPO Registration Statement.

Following the closing of the Initial Public Offering and Private Placement, the amount of $200,000,000 from the proceeds of the Initial Public Offering and the Private Placement was initially placed in the Trust Account located in the United States with Continental acting as trustee. Pursuant to the Trust Agreement, the Trust Account may be invested only (i) in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act with a maturity of 185 days or less, (ii) in any open-ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, (iii) as uninvested cash or (iv) in an interest or non-interest bearing demand deposit account, until the earlier of: (x) the completion of the Business Combination and (y) the distribution of the Trust Account, as described below.

We have until May 10, 2028 (21 months from the closing of the Initial Public Offering) to consummate the Business Combination, or until such (x) earlier date as our Board may approve or (y) other period during which we must consummate an initial Business Combination pursuant to an amendment to the Amended and Restated Articles and consistent with applicable laws, regulations and stock exchange rules. If we are unable to complete the Business Combination by the end of the Combination Period, we 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 earned on the funds held in the Trust Account and not previously released to us to pay taxes, if any, divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders' rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our Board, dissolve and liquidate, subject, in each case, to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

We may seek to extend the Combination Period consistent with applicable laws, regulations and stock exchange rules by amending our Amended and Restated Articles. Any such amendment would require the approval of our shareholders, and our Public Shareholders will be provided the opportunity to redeem all or a portion of their Public Shares in connection with the vote on such approval. Such redemptions would likely decrease the amount held in our Trust Account and our capitalization, and may affect our ability to maintain our listing on NYSE. In addition, the NYSE Rules currently require SPACs (such as us) to complete their initial Business Combination in accordance with the NYSE Three Year Requirement. If we do not meet the NYSE Three Year Requirement, our securities would likely be subject to a suspension of trading and delisting from NYSE. Our Sponsor may also, in its discretion, consider selling its interest in our Company to another sponsor entity, which may result in a change to our Management Team.

Recent Developments

On August 5, 2026, the Sponsor granted membership interests equivalent to an aggregate of 225,000 Founder Shares to our Chief Financial Officer and three independent directors in exchange for their services as an officer or independent directors through our initial Business Combination. The Founder Shares will remain with the Sponsor if the holders of the Founder Shares are no longer serving our Company prior to the initial Business Combination.

The IPO Registration Statement became effective on August 6, 2026.

Pursuant to the Administrative Services Agreement, we have agreed to pay the Sponsor an aggregate of $10,000 per month for accounting, bookkeeping, office space, information technology support, research, professional, secretarial and administrative services commencing on August 7, 2026, the date our securities were first listed on the NYSE. Upon completion of a Business Combination or its liquidation, we will cease paying these monthly fees.

On August 10, 2026, we consummated the Initial Public Offering of 20,000,000 Public Units, at $10.00 per Public Unit, generating gross proceeds of $200,000,000. At the closing of the Initial Public Offering, an officer and the directors of our Company, including an affiliate of a director, purchased in their individual capacities an aggregate of 2,305,000 Public Units sold at the Initial Public Offering at a price of $10.00 per Public Unit, for an aggregate purchase price of $23,050,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of an aggregate of 225,000 Private Placement Units to the Sponsor, at a price of $10.00 per Private Placement Unit, generating gross proceeds of $2,250,000.

Following the closing of the Initial Public Offering and the Private Placement, on August 10, 2026, an amount of $200,000,000 ($10.00 per Unit) from the net proceeds of the Initial Public Offering and the Private Placement was placed in the Trust Account, with U.S.-based trust account, Continental, acting as trustee.

As of August 10, 2026, we had borrowed $199,067 under the IPO Promissory Note, of which $187,274 was repaid by us at the closing of the Initial Public Offering and subsequently on August 21, 2026, the remaining balance of $11,793 was repaid. Borrowings under the IPO Promissory Note are no longer available.

On August 10, 2026, the Underwriters received a cash underwriting commission of $250,000 upon the closing of the Initial Public Offering. Additionally, the Underwriters are entitled to the Deferred Fee of 3.0% of the gross proceeds of the Public Units sold to the Public Shareholders in the Initial Public Offering held in the Trust Account, or $6,000,000 in the aggregate upon the completion of the initial Business Combination, subject to the terms of the Underwriting Agreement. Of this Deferred Fee, the Underwriters have agreed to waive any deferred underwriting discount in relation to the gross proceeds of the Public Units purchased in the Initial Public Offering by Steven K. Hudson and AVR Capital Holdings, LLC, an affiliate of Andrew Rechtschaffen, each a co-managing member of the Sponsor totaling to $675,000. As a result, $5,325,000 of the Deferred Fee is payable to the Underwriters from the Trust Account upon the completion of initial Business Combination.

In addition to the Underwriting Agreement, in connection with the Initial Public Offering, we entered into an agreement with the Underwriters in which the Underwriters are entitled to an advisory fee equal to 3.0% of the gross proceeds of the Public Units sold to the Public Shareholders in the Initial Public Offering upon and subject to the closing of the initial Business Combination. However, the Underwriters have agreed not to charge an advisory fee in relation to the gross proceeds of the Public Units purchased in the Initial Public Offering by Steven K. Hudson and AVR Capital Holdings, LLC, an affiliate of Andrew Rechtschaffen, each a co-managing member of the Sponsor totaling to $675,000. The termination clause in such agreement deems the fee earned and recorded as of August 10, 2026.

On August 14, 2026, we entered into an amendment to the Underwriting Agreement, which amends Section 3(c) of the Underwriting Agreement to provide that the deferred underwriting discount of $0.30 per Public Unit shall not accrue or be payable with respect to the aggregate of 2,250,000 Public Units purchased in the Initial Public Offering by Steven K. Hudson and AVR Capital Holdings, LLC, an affiliate of Andrew Rechtschaffen, each a co-managing member of the Sponsor. As a result, the maximum deferred discount payable is $5,325,000 in the aggregate (or up to $6,225,000 in the aggregate if the Underwriters exercise the Over-Allotment Option).

On September 20, 2026, the Over-Allotment Option expired unexercised and, on September 21, 2026, the Sponsor forfeited 750,000 Founder Shares for no consideration. Such forfeited shares were cancelled by us.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities since March 16, 2026 (inception) through September 30, 2026 have been (i) organizational activities and (ii) activities relating to (x) the Initial Public Offering and (y) identifying and evaluating prospective acquisition candidates and activities in connection with the initial Business Combination. We will not generate any operating revenues until after completion of our initial Business Combination. We expect to generate non-operating income in the form of interest or dividend income on investments held in the Trust Account after the Initial Public Offering. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance, among other things), as well as for due diligence expenses.

For the three months ended September 30, 2026, we had a net loss of $4,266,376, which consisted of general and administrative expenses of $185,723 and advisory fee expense of $5,325,000, offset by interest earned on investments held in the Trust Account of $1,063,247 and change in fair value of Over-Allotment Option liability of $181,100.

For the period from March 16, 2026 (inception) through September 30, 2026, we had a net loss of $4,323,503, which consisted of general and administrative expenses of $242,850 and advisory fee expense of $5,325,000, offset by interest earned on investments held in the Trust Account of $1,063,247 and change in fair value of Over-Allotment Option liability of $181,100.

Liquidity and Capital Resources

Our liquidity needs through September 30, 2026, were satisfied through (i) a payment of $25,000 from the Sponsor in exchange for the issuance of our Founder Shares and (ii) a loan pursuant to the IPO Promissory Note and, subsequent to the Initial Public Offering, through the proceeds of the Initial Public Offering and the Private Placement held outside the Trust Account. As of September 30, 2026, we had $1,280,766 of cash and working capital of $1,208,243.

On August 10, 2026, following the closing of the Initial Public Offering and the Private Placement, a total of $200,000,000 was placed in the Trust Account. We incurred total transaction costs of $6,093,029 in the Initial Public Offering, consisting of $250,000 of cash underwriting commissions, the Deferred Fee of $5,325,000, and $518,029 of other offering costs.

For the period from March 16, 2026 (inception) through September 30, 2026, net cash used in operating activities was $259,410. Net loss of $4,323,503 was affected by formation costs applied against prepaid expenses of $11,582, payment of general and administrative expenses through the IPO Promissory Note of $44,342, change in fair value of Over-Allotment Option liability of $181,100 and interest earned on investments held in the Trust Account of $1,063,247. Changes in operating assets and liabilities provided $5,252,516 of cash for operating activities.

For the period from March 16, 2026 (inception) through September 30, 2026, net cash used in investing activities was $200,000,000, which consisted of the investment of cash into the Trust Account.

For the period from March 16, 2026 (inception) through September 30, 2026, net cash provided by financing activities was $201,540,176, which consisted of proceeds from the sale of Public Units, net of underwriting discount paid, of $199,750,000, proceeds from the sale of Private Placement Units of $2,250,000 and proceeds from the IPO Promissory Note of $50, offset by the repayment of the IPO Promissory Note of $199,067 and the payment of offering costs of $260,807.

As of September 30, 2026, we had investments held in the Trust Account of $201,063,247 (including $1,063,247 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 to pay taxes, if any. 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 taxes payable and exclude the Deferred Fee), 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.

To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that we hold investments in the Trust Account, we may, at any time, (based on our Management Team's ongoing assessment of all factors related to our potential status under the Investment Company Act) instruct Continental to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash or in an interest-bearing demand deposit account at a bank.

As of September 30, 2026, we had $1,280,766 of cash held outside of the Trust Account. Subsequent to the closing of Initial Public Offering and the Private Placement, we will 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.

IPO Promissory Note

Prior to the closing of our Initial Public Offering, on April 7, 2026, our Sponsor agreed to loan us an aggregate of up to $300,000 under the IPO Promissory Note to cover expenses related to the Initial Public Offering. Such loans and advances were non-interest bearing and payable on the earlier of December 31, 2026 or the completion of our Initial Public Offering. As of September 30, 2026, there was no amount outstanding under the IPO Promissory Note. As of August 10, 2026, we borrowed $199,067, of which $187,274 was repaid upon the consummation of our Initial Public Offering and subsequently on August 21, 2026, the remaining balance of $11,793 was repaid. Borrowings under the IPO Promissory Note are no longer available.

Working Capital Loans

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 Working Capital Loans, as may be required. If we complete a Business Combination, we intend to repay such Working Capital Loans. 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 Working Capital Loans, but no proceeds from our Trust Account will be used for such repayment. Up to $1,500,000 of such Working Capital Loans may be converted into units of the post-Business Combination entity at a price of $10.00 per unit. Such units (and underlying securities) would be identical to the Private Placement Units (and underlying securities). As of September 30, 2026, we did not have any borrowings under any Working Capital Loans.

In connection with our assessment of going concern considerations in accordance with FASB ASC Topic 205-40, "Presentation of Financial Statements - Going Concern," we do not currently believe we will need to raise additional funds 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 September 30, 2026. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as follows:

Administrative Services Agreement

Commencing on August 7, 2026, the date when our securities were first listed with NYSE, and until the completion of our Business Combination or liquidation, we will reimburse the Sponsor $10,000 per month for accounting, bookkeeping, office space, information technology support and professional, secretarial and administrative support services pursuant to the Administrative Services Agreement. For the three months ended September 30, 2026 and for the period from March 16, 2026 (inception) through September 30, 2026, we incurred $18,667 in fees for these services, which amount is included in accounts payable and accrued expenses in our unaudited condensed balance sheet.

Underwriting Agreement

We granted the Underwriters a 45-day option from August 6, 2026 to purchase up to an additional 3,000,000 Units to cover over-allotments, if any at the Initial Public Offering price less the underwriting discounts. The Over-Allotment Option expired unexercised on September 20, 2026.

The Underwriters were paid a cash underwriting commission of $250,000 upon the closing of the Initial Public Offering. Additionally, the Underwriters are entitled to the Deferred Fee of 3.0% of the gross proceeds of the base Initial Public Offering held in the Trust Account following any exercise of the Over-Allotment Option and is payable to the Underwriters, upon the completion of the initial Business Combination subject to the terms of the Underwriting Agreement. Of this Deferred Fee, the Underwriters have agreed to waive any deferred underwriting discount in relation to the gross proceeds of the Public Units purchased in the Initial Public Offering by Steven K. Hudson and AVR Capital Holdings, LLC, an affiliate of Andrew Rechtschaffen, each a co-managing member of the Sponsor totaling to $675,000. As a result, $5,325,000 of the Deferred Fee is payable to the Underwriters from the Trust Account upon the completion of initial Business Combination (assuming no exercise of the Over-Allotment Option).

Advisory Fee

In addition to the Underwriting Agreement, in connection with the Initial Public Offering, we entered into an agreement with the Underwriters in which the Underwriters are entitled to an advisory fee equal to 3.0% of the gross proceeds of the Public Units sold to the Public Shareholders in the Initial Public Offering upon and subject to the closing of the initial Business Combination. However, the Underwriters have agreed not to charge an advisory fee in relation to the gross proceeds of the Public Units purchased in the Initial Public Offering by Steven K. Hudson and AVR Capital Holdings, LLC, an affiliate of Andrew Rechtschaffen, each a co-managing member of the Sponsor totaling to $675,000. The termination clause in such agreement deems the fee earned and recorded as of August 10, 2026. As of September 30, 2026, $5,325,000 had been recorded as advisory fee payable in our unaudited condensed balance sheet.

Registration Rights Agreement

The holders of (i) the Founder Shares, (ii) the Private Placement Units and (iii) any private placement-equivalent units issued in connection with the Working Capital Loans, if any (and in each case holders of their underlying securities, as applicable) are entitled to registration rights pursuant to the Registration Rights Agreement, requiring us to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A Ordinary Shares). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain "piggyback" registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to our completion of our initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.

Letter Agreement

Our Sponsor, directors and officers have entered into the Letter Agreement with us, pursuant to which, they have waived their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if we fail to complete our initial Business Combination within the Combination Period. However, if they acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if we fail to complete our initial Business Combination within the Combination Period.

Additionally, pursuant to the Letter Agreement, our Sponsor, directors and officers will not propose any amendment to our Amended and Restated Articles to modify (i) the substance or timing of our obligation to allow redemption in connection with our initial Business Combination or to redeem 100% of our Public Shares if we do not complete our initial Business Combination within the Combination Period or (ii) any other material provisions relating to shareholders' rights or pre-initial Business Combination activity, unless we provide our Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, divided by the number of then outstanding Public Shares.

Furthermore, pursuant to the Letter Agreement, our Sponsor, directors and officers have agreed that: (x) the Founder Shares shall be subject to a transfer restrictions of the earlier of (i) one year after the completion of our initial Business Combination or earlier if, subsequent to our initial Business Combination, the closing price of the Class A Ordinary Shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial Business Combination and (ii) the date following the completion of our initial Business Combination on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our shareholders having the right to exchange their Class A Ordinary Shares for cash, securities or other property, (y) the Private Placement Units (including their underlying securities) shall be subject to transfer restriction until 30 days after the completion of our initial Business Combination and (z) any Units, Rights, Ordinary Shares or any other securities convertible into, or exercisable or exchangeable for, any Units, Ordinary Shares, Founder Shares or Rights shall be subject to transfer restriction for 180 days following the effective date of Underwriting Agreement.

Critical Accounting Estimates

The preparation of the unaudited condensed financial statements and notes thereto included in this Report under Item 1. "Financial Statements" in conformity with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and the disclosure of contingent assets and liabilities, in our unaudited condensed financial statements. These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments, and we evaluate these estimates on an ongoing basis. To the extent actual experience differs from the assumptions used, our unaudited condensed financial statements and notes thereto included in this Report under Item 1. "Financial Statements" could be materially affected. The more significant accounting estimates included in our unaudited condensed financial statements are the determination of the fair value of the Public Rights and the Over-Allotment Option issued in connection with our Initial Public Offering. As of September 30, 2026, we did not have any other critical accounting estimates to be disclosed, as the Rights are classified as equity and are not subject to remeasurement at each reporting period and the Over-Allotment Option expired unexercised on September 20, 2026.

Recent Accounting Standards

In November 2023, the FASB issued ASU Topic 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which requires the disclosure of additional segment information. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted ASU 2023-07 on March 16, 2026, the date of our incorporation.

In November 2024, the FASB issued ASU Topic 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40)" , which requires public business entities to provide additional disclosures regarding certain expense captions presented on the face of the income statement. The standard requires qualitative and quantitative disclosure of specified expense categories included within relevant expense captions. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact that the adoption of this guidance will have on our financial statement disclosures.

Management does not believe that any other recently issued, but not yet effective, accounting standards, which, if currently adopted, would have a material effect on the unaudited condensed financial statements and notes thereto included in this Report under Item 1. "Financial Statements."