References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to KludeIn I Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to KludeIn Prime 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 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 Form 10-Q including, without
limitation, statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the completion of the
proposed Business Combination (as defined below), 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, including that the conditions of the Proposed
Business Combination are not satisfied. 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 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 formed under the laws of the State of Delaware on
September 24, 2020, for the purpose of effecting a Business Combination. We
intend to effectuate our Business Combination using cash from the proceeds of
the Initial Public Offering and the sale of the Private Placement Warrants, our
capital stock, debt or a combination of cash, stock 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 revenues to date.
Our only activities from September 24, 2020 (inception) through March 31, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering and subsequent to the 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. We
generate non-operating income in the form of interest income and unrealized
gains on marketable securities held in the Trust Account, and gains or losses
from the change in fair value of the warrant liabilities and the convertible
promissory note. 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 March 31, 2022, we had net income of $5,780,589,
which consists of changes in fair value of the warrant liabilities of
$6,376,210, change in fair value of convertible promissory note - related party
of $5,400 and interest earned on marketable securities held in the Trust Account
of $41,450, partially offset by formation and operational costs of $640,840 and
an unrealized loss on marketable securities held in the Trust Account of $1,631.
For the three months ended March 31, 2021, we had net income of $1,388,100,
which consists of changes in fair value of the warrant liabilities of $2,212,000
and interest earned on marketable securities held in the Trust Account of
$33,277, partially offset by formation and operational costs of $333,548,
transaction costs allocated to warrants of $523,013 and an unrealized loss on
marketable securities held in the Trust Account of $616.
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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.
Liquidity and Going Concern
On January 11, 2021, we consummated the Initial Public Offering of 17,250,000
units, at a price of $10.00 per unit, which included the full exercise by the
underwriters of their over-allotment option in the amount of 2,250,000 units,
generating gross proceeds of $172,500,000. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 5,200,000 Private
Placement Warrants to the Sponsor at a price of $1.00 per Private Placement
Warrant generating gross proceeds of $5,200,000.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $172,500,000
was placed in the Trust Account. We incurred $14,303,235 in transaction costs,
including $3,450,000 of underwriting fees, $6,037,500 of deferred underwriting
fees, $4,411,238 of fair value of the Founder Shares attributable to the Anchor
Investor and $404,497 of other offering costs.
For the three months ended March 31, 2022, cash used in operating activities was
$706,734. Net income of $5,780,589 was affected by changes in fair value of the
warrant liabilities of $6,376,210, change in fair value of convertible
promissory note - related party of $5,400, interest earned on marketable
securities held in the Trust Account of $41,450 and an unrealized loss on
marketable securities held in Trust Account of $1,631. Changes in operating
assets and liabilities used $65,894 of cash for operating activities.
For the three months ended March 31, 2021, cash used in operating activities was
$740,392. Net income of $1,388,100 was affected by change in fair value of the
warrant liabilities of $2,212,000, interest earned on marketable securities held
in the Trust Account of $33,277, transaction costs allocated to warrants of
$523,013 and an unrealized loss on marketable securities held in Trust Account
of $616. Changes in operating assets and liabilities used $406,844 of cash for
operating activities.
At March 31, 2022, we had cash and marketable securities held in the Trust
Account of $172,620,428 (including approximately $120,428 of interest income,
including unrealized loss) consisting of U.S. treasury bills with a maturity of
185 days or less. Interest income on the balance in the Trust Account may be
used by us to pay taxes. Through March 31, 2022, we had not withdrawn any
interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
deferred underwriting commissions and income taxes payable), to complete our
Business Combination. To the extent that our capital stock 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.
At March 31, 2022, we had cash of $43,339 and borrowing capacity under the
convertible promissory note of $1,150,000. On April 1, 2021 an additional
$112,500 was borrowed under the convertible promissory note agreement. We intend
to use the funds held outside the Trust Account and this borrowing capacity
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.
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In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
make Working Capital Loans. Such Working Capital Loans would be evidenced by
promissory notes. If we complete a Business Combination, we may repay the notes
out of the proceeds of the Trust Account released to us. 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 the notes, but no proceeds from our
Trust Account would be used for such repayment. On January 21, 2022, we issued a
promissory in the principal amount of up to $1,500,000 to our Sponsor and to
date have drawn $462,500 under this arrangement. The note is non-interest
bearing and payable upon the consummation of a Business Combination or 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.
As indicated in the accompanying condensed financial statements, at March 31,
2022, the Company had $43,339 in cash, and a working capital deficit of
$478,142, which excludes $50,000 of interest earned on Trust which is available
to pay Delaware franchise taxes payable. As of March 31, 2022, approximately
$120,000 of the amount on deposit in the Trust Account represented interest
income, which is available to pay the Company's tax obligations and up to
$100,000 of dissolution expenses.
The Company's liquidity needs prior to the consummation of the Initial Public
Offering were satisfied through the proceeds of $25,000 from the sale of Founder
Shares, and loans from the Sponsor of approximately $89,000. The loan was repaid
in full on January 11, 2021. Subsequent to the consummation of the Initial
Public Offering, the Company's liquidity has been satisfied through the net
proceeds received from the consummation of the Initial Public Offering and the
sale of Private Placement Warrants.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standards Board's Accounting Standards
Codification Subtopic 205-40, "Presentation of Financial Statements - Going
Concern," the Company has until July 11, 2022, to consummate an initial Business
Combination. It is uncertain that the Company will be able to consummate an
initial Business Combination by this time. If an initial Business Combination is
not consummated by this date, there will be a mandatory liquidation and
subsequent dissolution of the Company. Additionally, the Company may not have
sufficient liquidity to fund the working capital needs of the Company through
one year from the issuance of these condensed financial statements. Management
has determined that the liquidity condition and mandatory liquidation, should an
initial Business Combination not occur, and potential subsequent dissolution
raises substantial doubt about the Company's ability to continue as a going
concern. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after July 11, 2022.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2022. 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.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $6,037,500
in the aggregate. The deferred fee will become payable to the underwriters from
the amounts held in the Trust Account solely in the event that we complete a
Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with 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 condensed financial statements, and
income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have not identified any material changes to the
critical accounting policies included in our Annual Report on Form 10-K filed
with the SEC on April 12, 2022, except as follows:
Convertible Instruments
The Company evaluated the accounting for its promissory notes that feature
conversion options in accordance with ASC 815, Derivatives and Hedging
Activities ("ASC 815"). ASC 815 requires companies to bifurcate conversion
options from their host instruments and account for them as freestanding
derivative financial instruments according to certain criteria. The criteria
includes circumstances in which (a) the economic characteristics and risks of
the embedded derivative instrument are not clearly and closely related to the
economic characteristics and risks of the host contract, (b) a promissory note
that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under otherwise applicable GAAP with changes in
fair value reported in earnings as they occur and (c) a separate instrument with
the same terms as the embedded derivative instrument would be considered a
derivative instrument. However, the Company has elected to account for its
promissory notes at fair value, as described in Note 9.
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
condensed financial statements.
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