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

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

References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Talon Capital Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Talon Capital Sponsor, 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 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, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (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. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, the Company's 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. 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 Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (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.

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 (the "business combination"). We intend to effectuate our business combination using cash derived from the proceeds of the Initial Public Offering (as defined below) 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.

Recent Developments

On September 9, 2026, the board of directors (the "Board") of the Company appointed Dr. Victoria Ivashina to serve as an independent director of the Company, effective as of September 11, 2026. Dr. Ivashina was also appointed to serve on the Board's audit committee effective September 11, 2026.

In connection with her appointment, Dr. Ivashina signed joinders to (i) that certain insider letter agreement, dated September 8, 2025, by and among the Company, Talon Capital Sponsor LLC, its officers, its directors and (ii) that certain registration rights agreement, dated September 8, 2025, by and among the Company and certain security holders. Dr. Ivashina also entered into a standard director indemnity agreement with the Company, a form of which was filed as Exhibit 10.7 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 12, 2025. Pursuant to a Securities Assignment Agreement dated September 11, 2026, Talon Capital Sponsor LLC transferred 20,000 Class B ordinary shares of the Company, par value $0.0001 per share, to Dr. Ivashina at a purchase price of approximately $0.003 per share.

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 September 30, 2026 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 three months ended September 30, 2026, we had a net income of $1,985,587, which consists of interest income on cash held in the trust account of $2,411,274, offset by general and administrative expenses of $335,948, and compensation expense of $89,739.

For the nine months ended September 30, 2026, we had a net income of $5,279,431, which consists of interest income on cash held in the trust account of $7,057,830, offset by general and administrative expenses of $1,688,660, and compensation expense of $89,739.

For the three months ended September 30, 2025, we had a net income of $383,939, which consists of interest income on cash held in the trust account of $617,036, offset by general and administrative expenses of $159,097 and compensation expense of $74,000.

For the period from May 1, 2025 (inception) through September 30, 2025, we had a net income of $346,682, which consists of interest income on cash held in the trust account of $617,036, offset by general and administrative expenses of $196,354 and compensation expense of $74,000.

Liquidity and Capital Resources

On September 10, 2025, we consummated the initial public offering (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 (the "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 a trust account located in the United States managed by Odyssey Transfer and Trust Company acting as trustee (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 $940,000 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 $2,344,991 as of September 30, 2026. Such funds are being used primarily to enable us to identify a target and to negotiate and consummate our initial business combination.

For the nine months ended September 30, 2026, cash used in operating activities was $882,568. Net income of $5,279,431 was affected by interest earned on cash held in the Trust Account of $7,057,830. Changes in operating assets and liabilities provided $806,092 of cash for operating activities.

For the period from May 1, 2025 (inception) through September 30, 2025, cash used in operating activities was $263,849. Net income of $346,682 was affected by interest earned on cash held in the Trust Account of $617,036. Changes in operating assets and liabilities used $77,915 of cash for operating activities.

As of September 30, 2026, we had cash held in the Trust Account of $258,798,537 (including approximately $9,798,536 of interest income, net of permitted withdrawals), which was held as uninvested cash in an interest-bearing demand deposit account. 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.

As of September 30, 2026, we had cash of $2,344,991. 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 the 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 September 30, 2026.

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 an expense reimbursement of $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, for working capital from the Trust Account.

Critical Accounting Estimates

The preparation of the unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America ("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 unaudited condensed 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 unaudited condensed 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.

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 unaudited condensed financial statements.