References to the "Company," "us," "our" or "we" refer to KL Acquisition Corp.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022 (the
"Quarterly Report") including, without limitation, statements under this "Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding our financial position, business strategy and the plans
and objectives of management for future operations, are forward-looking
statements. When used in this Quarterly Report, words such as "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions, as they
relate to us or our management, identify forward-looking statements. Such
forward-looking statements are based on the beliefs of management, 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 financial statements and the
notes thereto contained elsewhere in this Quarterly Report.
Overview
We were incorporated in Delaware on August 26, 2020 for the purpose of entering
into a Business Combination with one or more businesses.
On January 12, 2021, we consummated our IPO of 28,750,000 Units, including
3,750,000 Units purchased by the underwriters pursuant to the over-allotment
option granted by the Company, generating gross proceeds to the Company of
$287,500,000. Simultaneously with the closing of the IPO, we completed the
private sale of an aggregate of 5,166,667 warrants to our Sponsor, generating
gross proceeds of approximately $7,750,000.
A total of $287,500,000, comprised of $281,750,000 of the proceeds from the IPO
and $5,750,000 of the proceeds of the sale of the Private Placement Warrants was
placed in the Trust Account maintained by Continental Stock Transfer & Trust
Company, acting as trustee.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial Business
Combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial Business Combination.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities since inception have been organizational
activities, those necessary to prepare for our IPO and identifying a target
company for our initial Business Combination. We do not expect to generate any
operating revenues until after completion of our initial Business Combination.
We generate non-operating income in the form of interest income on cash and cash
equivalents 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 in connection with our search for
targets for our initial Business Combination.
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For the three months ended June 30, 2022, we had a net income of $1,417,966,
which consists of a change in fair value of warrant liabilities of $1,252,612
and interest earned on marketable securities held in the Trust Account of
$388,316, offset by formation and operating costs of $183,701, which consisted
mostly of general and administrative expenses, and provision for income taxes of
$39,261.
For the six months ended June 30, 2022, we had a net income of $5,562,827, which
consists of a change in fair value of warrant liabilities of $5,620,211 and
interest earned on marketable securities held in the Trust Account of $417,274,
offset by formation and operating costs of $435,397, which consisted mostly of
general and administrative expenses, and provision for income taxes of $39,261.
For the three months ended June 30, 2021, we had a net loss of $4,667,277, which
consists of a change in fair value of warrant liabilities of $4,194,429 and
formation and operating costs of $488,900, which consisted mostly of general and
administrative expenses, offset by interest earned on marketable securities held
in the Trust Account of $16,052.
For the six months ended June 30, 2021, we had a net income of $4,124,084, which
consists of a change in fair value of warrant liabilities of $5,343,573 and
interest earned on marketable securities held in the Trust Account of $59,908,
offset by formation and operating costs of $577,754, which consisted mostly of
general and administrative expenses, and warrant issuance costs of $701,643.
Liquidity, Capital Resources, and Going Concern
As of June 30, 2022, we had cash outside the Trust Account of $74,264 available
for working capital needs and working capital of $396,412, which excludes
$39,261 of income taxes payable and $100,000 of franchise taxes payable that can
be paid with the interest earned on the trust and $144,294 of franchise taxes
paid from the operating account which are reimbursable with the interest earned
on the trust. All remaining cash held in the Trust Account is generally
unavailable for our use, except interests earned on the funds held in the Trust
Account and released to pay our taxes, prior to an initial Business Combination,
and is restricted for use either in a Business Combination or to redeem public
shares. As of June 30, 2022, none of the amount in the Trust Account was
available to be withdrawn, except interests earned on the funds held in the
Trust Account and released to pay our taxes.
We anticipate that the cash outside of the Trust Account as of June 30, 2022
will not be sufficient to allow us to operate until January 12, 2023. Until
consummation of our Business Combination, we will be using the funds not held in
the Trust Account, and any additional Working Capital Loans from the initial
stockholders, our officers and directors, or their respective affiliates, 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 the Business Combination is less than the actual amount necessary to
do so, we may have insufficient funds available to operate our business prior to
the Business Combination. Moreover, we will need to raise additional capital
through loans from our Sponsor, officers, directors, or third parties. None of
our Sponsor, our officers or directors are under any obligation to advance funds
to, or to invest in, us. If we are unable to raise additional capital, we may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing operations, suspending the pursuit
of our business plan, and reducing overhead expenses. We cannot provide any
assurance that new financing will be available to us on commercially acceptable
terms, if at all.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's ASU 2014-15, "Disclosures of Uncertainties about an
Entity's Ability to Continue as a Going Concern," management has determined that
if the Company is unable to raise additional funds to alleviate liquidity needs
as well as complete a Business Combination by January 12, 2023, then the Company
will cease all operations except for the purpose of liquidating. Management has
determined that the liquidity condition and mandatory liquidation, should a
Business Combination not occur, and potential subsequent dissolution raises
substantial doubt about the Company's ability to continue as a going concern for
a reasonable period of time, which is considered to be one year from the
issuance of the financial statements. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after January 12, 2023.
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Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is reassessed
at the end of each reporting period.
We issued an aggregate of 14,750,000 warrants in connection with our IPO and
private placement, which, are recognized as derivative liabilities in accordance
with ASC 815-40. Accordingly, we recognize the warrants as liabilities at fair
value and adjust the instruments to fair value at each reporting period. The
liabilities are subject to remeasurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statements of
operations. Our warrant liability for the Private Placement Warrants is based on
a Black-Scholes-Merton model. In March 2021, our Public Warrants began trading
on the Nasdaq Capital Market. As such, the price for the Public Warrants is
based on an unadjusted market price.
Critical Accounting Policies
The preparation of the financial statements and related disclosures in
conformity with U.S. 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 period reported. Actual results could materially
differ from those estimates. We have not identified any critical accounting
policies.
Warrant Liabilities
We account for the warrants issued in connection with our IPO in accordance with
ASC 815-40, under which the warrants do not meet the criteria for equity
classification and must be recorded as liabilities. As the warrants meet the
definition of a derivative as contemplated in ASC 815, the warrants are measured
at fair value at inception and at each reporting date in accordance with ASC
820," with changes in fair value recognized in the Statements of Operations in
the period of change.
Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480. Common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including 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, 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 the occurrence of uncertain future events. As of June 30, 2022 and December
31, 2021, 28,750,000 and 28,750,000 shares of Class A common stock subject to
possible redemption were presented at redemption value as temporary equity,
outside of the stockholders' equity section of our balance sheets, respectively.
Net Income (Loss) Per Share of Common Stock
We have two classes of common stock, which are referred to as "Class A common
stock" and "Class B common stock". Earnings and losses are shared pro rata
between the two classes of shares. Our 14,750,000 shares of Class A common stock
underlying the outstanding warrants were excluded from diluted earnings per
share for the three and six months ended June 30, 2022 and 2021 because the
warrants are contingently exercisable, and the contingencies have not yet been
met. As a result, diluted net income (loss) per share of common stock is the
same as basic net income (loss) per share of common stock.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, which simplifies accounting for
convertible instruments by removing major separation models required under
current U.S. GAAP. ASU 2020-06 removes certain settlement conditions that are
required for equity contracts to qualify for the derivative scope exception and
it also simplifies the diluted earnings per share calculation in certain areas.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023.
Management is currently evaluating the new guidance but does not expect the
adoption of this guidance to have a material impact on our financial statements.
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Our management does not believe that any other recently issued, but not
effective, accounting standards, if currently adopted, would have a material
effect on the Company's financial statements.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of June 30, 2022, we did not have any off-balance sheet arrangements and did
not have any commitments or contractual obligations.
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