KADEM SUSTAINABLE IMPACT CORPORATION References in this quarterly report on Form 10-Q (the " Quarterly Report ") to "we," "us" or the "Company" refer toKadem Sustainable Impact Corporation . References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer toKadem Management, LLC . 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. 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 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 Form 10-Q 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" 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 final prospectus for its Initial Public Offering filed with theU.S. Securities and Exchange Commission (the "SEC "). The Company's securities filings can be accessed on the EDGAR section of theSEC'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 inDelaware onDecember 29, 2020 . The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or 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 Warrants, 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 operating revenues to date. Our only activities for the six months endedJune 30, 2021 , were organizational activities and those necessary to prepare for the Initial Public Offering, described below. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We expect that we will 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 in connection with searching for, and completing, a Business Combination. For the six months endedJune 30, 2021 , we had a net income of$1,439,155 , which consisted of formation and operating costs, net of interest income and change in fair value of Public and Private Placement Warrant Liabilities. 20 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources OnMarch 19, 2021 , the Company consummated the IPO of 17,500,000 units (the " Units "), with respect to the shares of the Company's Class A common stock, par value$0.0001 per share, at$10.00 per Unit, generating gross proceeds of$175,000,000 . Each Unit consists of one Public Share, and one-half of one warrant which entitles the holder to purchase one share of Class A Common Stock at a price of$11.50 per share. Simultaneously with the closing of the IPO, the Company consummated the sale of 4,875,000 warrants at a price of$1.00 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of$4,875,000 . Following the closing of the IPO,$175,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and certain of the proceeds of the Private Placement was placed in a trust account. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. As ofJune 30, 2021 , the Company had$209,156 of cash in its operating bank account and working capital of approximately$702,025 . The Company's liquidity needs up toJune 30, 2021 , had been satisfied through a capital contribution from the Sponsor of$25,000 , to cover certain offering costs, for the Founder Shares and issued warrants for$4,875,000 (see Note 4). In addition, per the Sponsor's commitment letter, the Sponsor will provide funds to the Company, as needed to meet its operational needs through the earlier of the consummation of a business combination or one year from this filing Based on the foregoing, management believes that the Company will have sufficient working capital to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective Initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Initial Business Combination. Critical Accounting Policies The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted inthe 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 condensed financial statements, and income and expenses during the period reported. Actual results could materially differ from those estimates. The Company has identified the following as its critical accounting policies. Shares of Class A Common Stock Subject to Possible RedemptionThe Company accounts for its shares of Class A Common Stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (" ASC ") Topic 480 "Distinguishing Liabilities from Equity." The Company's shares of Class A Common Stock feature certain redemption rights that is considered to be outside of the Company's control and subject to the occurrence of uncertain future events. Accordingly, shares of Class A Common Stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders' equity (deficit) section of the Company's balance sheet. Remaining shares of Class A Common Stock not subject to possible redemption are presented in equity. Public and Private Placement Warrants Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 4,875,000 Private Placement Warrants at a price of$1.00 per whole Warrant ($4,875,000 in the aggregate) in the Private Placement. Each whole Private Placement Warrant is exercisable for one whole share of the Company's Class A common stock at a price of$11.50 per share. 21 -------------------------------------------------------------------------------- Table of Contents Pursuant to the IPO, the Company sold 17,500,000 units at a price of$10.00 per unit for a total of$175,000,000 (the " Units "). Each Unit consists of one Public Share, and one-half of one warrant (" Public Warrants "). Each whole Warrant entitles the holder to purchase one share of Class A Common Stock at a price of$11.50 per share. The Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable for cash or on a cashless basis, at the holder's option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrant. The Company evaluated the Public and Private Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity's Own Equity , and concluded that they do not meet the criteria to be classified in stockholders' equity (deficit). Specifically, the exercise of the Public and Private Warrants may be settled in cash upon the occurrence of a tender offer or exchange that involves 50% or more of the Company's outstanding shares of Common Stock. Because not all of the Company's shareholders need to participate in such tender offer or exchange to trigger the potential cash settlement and the Company does not control the occurrence of such an event, the Company concluded that the Public Warrants and Private Warrants do not meet the conditions to be classified in equity. Since the Public and Private Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the balance sheet at its initial fair value, with subsequent changes in their respective fair values recognized in the statement of operations at each reporting date. Net Income Per Common Share Net income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, excluding shares of common stock forfeited. The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 13,625,000 shares in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The Company's statement of operations includes a presentation of income per share for common shares subject to possible redemption in a manner similar to the two-class method of loss per share. Net income per common share, basic and diluted, for class A Common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on investments held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of shares of Common stock subject to possible redemption outstanding since original issuance. Net income per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or income on investments attributable to class A Common stock subject to possible redemption, by the weighted average number of shares of non-redeemable class A and B common stock outstanding for the period. Non-redeemable common stock includes Founder Shares class B common stock and non-redeemable shares of class A common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on investment securities based on non-redeemable shares' proportionate interest. Recent Accounting Pronouncement InAugust 2020 , the FASB issued Accounting Standards Update ("ASU") No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The new standard will become effective for the Company beginningJanuary 1, 2024 , can be applied using either a modified retrospective or a fully retrospective method of transition and early adoption is permitted. Management is currently evaluating the impact of the new standard on the Company's unaudited condensed financial statements. The Company's management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's financial statements. Off-Balance Sheet Financing Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as ofJune 30, 2021 . 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 an agreement to pay an affiliate of the Sponsor a monthly fee of$10,000 for office space, utilities and secretarial, and administrative support services provided to the Company. We began incurring these fees onMarch 19, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company's liquidation. The Company granted the underwriters a 45-day option fromMarch 16, 2021 , to purchase up to 2,625,000 additional Units to cover any over-allotments at the initial public offering price less the underwriting discounts and commissions. AtJune 30, 2021 , the underwriters had not exercised any of the over-allotment units. Because the underwriters did not exercise their over-allotment option, 656,250 shares of Class B Common Stock were forfeited at no cost onMay 3, 2021 , so that total Class B Common Stock were reduced from 5,031,250 to 4,375,000 shares (Note 5). The forfeited shares returned to the authorized but unissued shares of the Class B Common Stock of the Company. 22 -------------------------------------------------------------------------------- Table of Contents The underwriter is entitled to a deferred underwriting discount of 3.5% of the gross offering proceeds of the IPO, or$6,125,000 (the " Deferred Discount "), andBMO Capital Markets Corp. will be entitled to a cash fee (the " Advisory Fee ") equal to 0.5% of the gross offering proceeds of the IPO, or$875,000 , for providing certain capital markets advisory services to the Company. Each of the Deferred Discount and the Advisory Fee will be payable upon the Company's completion of its Initial Business Combination. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its Initial Business Combination The holders of Founder Shares, Private Placement Warrants that may be issued upon conversion of working capital loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement signed onMarch 16, 2021 . These holders will be entitled to certain demand and "piggyback" registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
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