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 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 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 Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 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 in
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 three months endedMarch 31, 2022 and 2021, were organizational activities and those necessary to prepare for the Initial Public Offering, described below, the identification and evaluation of prospective acquisition targets for a Business Combination and ongoing administrative and compliance matters. 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 three months endedMarch 31, 2022 and 2021, we had a net income (loss) of$3,960,254 and ($426,367 ) respectively, which consisted of formation and operating costs, net of interest income and change in fair value of Public Warrants liability and Private Placement Warrant liability.
Liquidity and Capital Resources
OnMarch 19, 2021 , the Company consummated the IPO of 17,500,000 units (the "Units") 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
Following the closing of the IPO,
As of
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Prior to the completion of the Public Offering, the Company's liquidity needs
were satisfied through a capital contribution of
The Company has incurred and expects to incur additional significant costs in pursuit of its financing and acquisition plans. Also, the Company is subject to mandatory liquidation and subsequent dissolution if no business combination is consummated within twenty-four months from the IPO filing date. In connection with the Company's assessment of going concern considerations in accordance with FASB ASC 205-40, "Basis of Presentation - Going Concern," management has determined that the limited amounts of cash and working capital and risk of mandatory liquidation raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the accompanying unaudited condensed financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate afterMarch 19, 2023 . The unaudited condensed financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in
Shares of Class A Common Stock Subject to Possible Redemption
The 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 condensed balance sheet.
Derivative Financial Instruments
Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate
of 4,875,000 Private Placement Warrants at a price of
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, as discussed in Note 3.
The Private Placement Warrants and the shares of common stock issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement 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 Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company evaluated the Public Warrants, Private Placement Warrants and
Working Capital Loan conversion option (collectively, the "Instruments") in
accordance with the guidance contained in 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 and must
be recorded as liabilities. Specifically, the exercise of the Public Warrants
and Private Placement 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.
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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 Placement Warrants do not meet the conditions to be classified in equity. Since the Public Warrants and Private Placement Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the condensed balance sheet at its initial fair value, with subsequent changes in their respective fair values recognized in the condensed statement of operations at each reporting date.
The conversion feature within the Working Capital Loan gives the Sponsor an option to convert the loan to warrants of the Company's Class A common stock. This bifurcated feature is assessed at the end of each reporting period to conclude whether additional liability should be recorded. The Instruments are subjected to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's statements of operations. See Note 4 for further discussion of the pertinent terms of the Working Capital Loan.
Net Income (Loss) Per Common Share
Net income (loss) 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 both effects of the conversion of the Working Capital Loan warrants to Class A common shares upon merger and 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 net income (loss) per share, since the exercise of the conversion option and warrants are contingent upon the occurrence of future events and the inclusion of such conversion option and warrants would be anti-dilutive.
The Company's statement of operations includes a presentation of net income per share for common shares subject to possible redemption in a manner similar to the two-class method of net loss per share. Net income (loss) per common share, basic and diluted, for class A Common stock subject to possible redemption is calculated by dividing the net income or loss by the weighted average number of shares of Common stock subject to possible redemption outstanding since original issuance.
Non-redeemable
common stock includes Founder Shares class B common stock as these shares do not have any redemption features.
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 , 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 unaudited condensed financial statements.
Off-Balance
Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as ofMarch 31, 2022 andDecember 31, 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
On
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Working Capital Loan so converted divided by
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. The underwriters did not exercise any of the over-allotment units which expired onMay 3, 2021 . Because the underwriters did not exercise their over-allotment option, 656,250 shares of ClassB Common Stock were forfeited at no cost onMay 3, 2021 , so that total ClassB Common Stock were reduced from 5,031,250 to 4,375,000 shares (Note 4). The forfeited shares returned to the authorized but unissued shares of the ClassB Common Stock of the Company.
The underwriter is entitled to a deferred underwriting discount of 3.5% of the
gross offering proceeds of the IPO, or
The holders of Founder Shares and Working Capital 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 on
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