References in this report (the "Quarterly Report") to "we," "us," "our" or the "Company" refer to Parabellum Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Founder" refer to Parabellum Acquisition Partners, LLC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the 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 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. 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 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," "may," "might," "plan," "possible," "potential," "should, "would" 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 final prospectus for our initial public offering 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 newly formed blank check company, incorporated in the State of Delaware and formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We have not identified an acquisition target. We intend to effectuate our initial Business Combination using cash from the proceeds from the sale of Public Units in our Offering, the sale of the Private Placement Warrants to our Sponsor, our common equity or any preferred equity that we may create in accordance with the terms of our charter documents, debt, or a combination of cash, common or preferred equity and debt. The Public Units sold in the Offering each consisted of one share of Class A common stock, and three - quarters (3/4) of one redeemable warrant to purchase one share of Class A common stock (no fractional shares will be issued upon exercise of the warrants). The Private Placement Warrants were substantially similar to the Public Units sold in the Offering, but for certain differences in the warrants included in each of them. For clarity, the warrants included in the Public Units are referred to herein as the "public warrants", and the warrants included in the Private Placement Warrants are referred to herein as the "private warrants".

The issuance of additional shares of any class of common stock or the creation of one or more classes of preferred stock during our initial Business Combination:

? may significantly dilute the equity interest of investors in the Offering who

would not have pre-emption rights in respect of any such issue;

may subordinate the rights of holders of any class of common stock if the

? rights, preferences, designations and limitations attaching to the preferred

shares are senior to those afforded our shares of Class A common stock;




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could cause a change in control if a substantial number of shares of common

? stock 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 shares of Class A common

stock.

Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:

? default and foreclosure on our assets if our operating revenues after our

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;

our inability to obtain necessary additional financing if any document

? governing such debt contains covenants restricting our ability to obtain such

financing while the debt security is outstanding;

? our inability to pay dividends on our shares of common stock;

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 common

stock 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 acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.



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Results of Operations and Known Trends or Future Events

We have neither engaged in any operations nor generated any revenues to date. For the period from February 5, 2021 (date of inception) through September 30, 2021, our only activities have been organizational activities, those necessary to prepare for the Public Offering and to identify a target business for the Business Combination. We do not expect to generate any operating revenues until after completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on cash and marketable securities held in the Trust Account at JP Morgan Chase Bank, N.A. in New York, New York with Continental Stock Transfer & Trust Company acting as trustee, which was funded after the Public Offering to hold an amount of cash and marketable securities equal to the redemption amount of the Public Units sold in the Public Offering. We expect to incur increased 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, 2021, we had a net loss of $534,602, which consisted of the change in fair value of warrant liability of $534,602.

For the period from February 5, 2021 (date of inception) through September 30, 2021, we had a net loss of $544,602, which consisted of operating expenses of $10,000, and other expense from the change in fair value of warrant liability of $534,602.

Liquidity and Capital Resources

During the period from February 5, 2021 (date of inception) to September 30, 2021, the Founder purchased 3,593,750 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.007 per share.

The Founder agreed to forfeit up to 468,750 Founder Shares to the extent that the over-allotment option is not exercised in full by the Underwriters. The forfeiture would be adjusted to the extent that the over-allotment option was not exercised in full by the Underwriters so that the Founder and the Insiders collectively will own approximately 20% of the Company's issued and outstanding shares after the Offering. On October 15, 2021, the Underwriters exercised their full over-allotment option.

On September 30, 2021, the Company consummated the Initial Public Offering ("IPO") of 12,500,000 Public Units. The Public Units were sold at a price of $10.00 per Public Unit, generating gross proceeds to the Company of $125,000,000. Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 6,225,000 warrants (the "Private Placement Warrants") at a price of $1.00 per Private Placement Warrant in a private placement to Parabellum Acquisition Partners, LLC (the "Sponsor"), generating gross proceeds of $6,225,000. On October 15, 2021, the underwriters exercised the Over-Allotment Option in full and purchased 1,875,000 Over-Allotment Units, generating gross proceeds of $18,750,000. Simultaneously with the exercise of the Over-Allotment Option and the sale of the Over-Allotment Units, the Company consummated a second closing of the private placement ("Private Placement") of an aggregate of 375,000 additional Private Placement Warrants to the Sponsor, for the total of $375,000 in gross proceeds.

As of September 30, 2021, we held cash in the amount of $126,250,000 in the Trust Account.

For the period from February 5, 2021 (date of inception) to September 30, 2021, cash used in operating activities was $36,800, consisting of a net loss of $544,602, an increase in prepaid expenses of $26,800 partially offset by an increase in the fair value of the warrant liability of $534,602.



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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 taxes payable by us), to acquire a target business or businesses to complete our initial Business Combination and to pay our expenses relating thereto. We may withdraw interest to pay taxes. We estimate our annual franchise tax obligations to be approximately $200,000. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. To the extent that our capital stock is used in whole or in part as consideration to affect our initial Business Combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business or businesses. Such working capital funds could be used in a variety of ways including continuing or expanding the target business' operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders' fees which we had incurred prior to the completion of our initial Business Combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.

As of September 30, 2021, we had cash of approximately $2.3 million held outside the Trust Account. We believe that the proceeds not held in the Trust Account will be sufficient to allow us to operate for at least 18 months from the closing date of the Offering, assuming that a Business Combination is not consummated during that time. Over this time period, we intend to use these funds primarily for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.

If our estimates of the costs of undertaking in-depth due diligence and negotiating our 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 consummate our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. In order to finance operating and/or transaction costs in connection with a Business Combination, our Founder, executive officers, directors, or their affiliates may, but are not obligated to, loan us funds. 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.

Following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Arrangements

As of September 30, 2021, we have not entered into any off-balance sheet financing arrangements. 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

As of September 30, 2021, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay our Sponsor a monthly fee of $15,000 for office space, administrative services and secretarial support. We began incurring these fees on September 27, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination or the liquidation of the Company.



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Critical Accounting Policies

The preparation of 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 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:

Emerging Growth Company

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised accounting standard at the time private companies adopt the new or revised standard.

Net Loss Per Share of Common Stock

Net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. The Company applies the two-class method in calculating the net loss per common share. Weighted average shares for the three-months ended September 30, 2021 and the period from February 5, 2021 (inception) through September 30, 2021 were reduced for the effect of an aggregate of 468,750 Class B ordinary shares that were subject to forfeiture. When calculating its diluted net loss per share, the Company has not considered the effect of (i) the incremental number of shares of common stock to settle warrants sold in the Offering and Private Placement, as calculated using the treasury stock method. Since the Company was in a net loss position during the periods after deducting net income attributable to Class A common stock subject to redemption, diluted net loss per common share is the same as basic net loss per common share for the periods presented as the inclusion of all potential common shares outstanding would have been anti-dilutive.

Class A Common Stock subject to possible redemption

We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders' equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2021, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders' equity section of our condensed balance sheet.

Warrant Liability

The Company accounts for warrants for shares of the Company's Class A common stock that are not indexed to its own stock as liabilities at fair value on the condensed balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other expense on the condensed statement of operations and comprehensive loss. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the Class A common stock warrants. At that time, the portion of the warrant liability related to the Class A common stock warrants will be reclassified to additional paid-in capital.



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Recent Accounting Pronouncements

We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our condensed financial statements.

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