References to the "Company," "our," "us" or "we" refer to KKR Acquisition
Holdings I Corp. 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 report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q 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 Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in the Risk
Factors section of our final prospectus for our Initial Public Offering (as
defined below) and in our other Securities and Exchange Commission ("SEC")
filings. Except as expressly required by applicable securities law, we disclaim
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 Delaware on January 14, 2021 for
the purpose of effecting a merger, capital stock exchange, asset acquisition,
share purchase, reorganization or similar business combination with one or more
businesses (the "Business Combination"). We are an early-stage emerging growth
company and, as such, subject to all of the risks associated with early stage
and emerging growth companies. Our sponsor is KKR Acquisition Sponsor I LLC, a
Delaware limited liability company (our "Sponsor").
Our registration statement for our Initial Public Offering (the "Initial Public
Offering") became effective on March 16, 2021.  On March 19, 2021, we
consummated an Initial Public Offering of 138,000,000 units (the "Units" and,
with respect to the Class A common stock included in the Units being offered,
the "Public Shares"), including the exercise of the underwriters' option to
purchase 18,000,000 additional Units (the "Over-Allotment Units"), at $10.00 per
Unit, generating gross proceeds of approximately $1.4 billion, and incurring
offering costs of approximately $77.4 million (net of reimbursement from
underwriters of $13.8 million), of which $48.3 million was for deferred
underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 21,733,333 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to our Sponsor, generating
proceeds of $32.6 million.
Upon the closing of the Initial Public Offering and the Private Placement,
approximately $1.4 billion ($10.00 per Unit) of the net proceeds of the Initial
Public Offering and certain of the proceeds of the Private Placement was placed
in a trust account ("Trust Account") located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and invested only
in U.S. government securities with a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which invest
only in direct U.S. government treasury obligations, as determined by us, until
the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account as described below.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or March 19, 2023 (as such period may be
extended by our stockholders in accordance with the Certificate of
Incorporation, the "Combination Period"), we will (1) cease all operations
except for the purpose of winding up; (2) as promptly as reasonably possible but
not more than ten business days thereafter, redeem the Public Shares, at a
per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account, including interest earned on the funds in the Trust
Account (net of taxes payable and up to $100,000 of interest to pay dissolution
expenses), divided by the number of then issued and outstanding Public Shares,
which redemption will completely extinguish Public Stockholders' rights as
stockholders (including the right to
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receive further liquidating distributions, if any); and (3) as promptly as
reasonably possible following such redemption, subject to the approval of the
remaining stockholders and our board of directors, liquidate and dissolve,
subject in each case to our obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
Results of Operations
Our entire activity since inception through September 30, 2021 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate non-operating
income in the form of gain on investment (net), dividends and interest held in
Trust Account. 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 related to prospective
business combination candidates. There can be no assurance that our plans to
complete a Business Combination will be successful.
For the three months ended September 30, 2021, we had net income of
approximately $12.3 million, which consisted of a loss from operations of
approximately $0.8 million, a non-operating income of approximately $13 million
for changes in fair value of derivative liabilities, and income from investments
held in the Trust Account of approximately $19,000.  The loss from operations
consisted of approximately $727,000 of general and administrative expenses and
approximately $50,000 in franchise tax expense.
For the period from January 14, 2021 (inception) through September 30, 2021, we
had net income of approximately $6.3 million, which consisted of a loss from
operations of approximately $1.8 million, a non-operating expense of
approximately $2.2 million for offering costs associated with derivative warrant
liabilities, a non-operating income of approximately $10.2 million for changes
in fair value of derivative liabilities, and income from investments held in the
Trust Account of approximately $60,000.  The loss from operations consisted of
approximately $1.6 million of general and administrative expenses and
approximately $140,000 in franchise tax expense.
Liquidity and Capital Resources
Prior to the completion of the Initial Public Offering, our liquidity needs were
satisfied through expenses totaling $25,000 being paid by our Sponsor in
exchange for issuance of 28,750,000 shares of the Company's Class B common
stock, par value $0.0001 per share, (the "Founder Shares") to our Sponsor, the
proceeds of a promissory note (the "Note") from the Sponsor in the amount of
$300,000 and an advancement of approximately $150,000.  We fully repaid the Note
and the advance for a total of approximately $450,000 to the Sponsor on March
22, 2021. We have since completed our Initial Public Offering at which time
capital in excess of the funds deposited in the Trust Account and/or used to
fund offering expenses was released to us for general working capital purposes.
Accordingly, management has since reevaluated our liquidity and financial
condition and determined that sufficient capital exists to sustain operations
one year from the date the condensed financial statements is issued and
therefore substantial doubt has been alleviated.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our initial Business
Combination. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an 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 complete our initial Business Combination or because we become
obligated to redeem a significant number of our shares of Class A common stock
upon completion of our initial Business Combination, in which case we may issue
additional securities or incur debt in connection with such Business Combination
(including from our affiliates or affiliates of our Sponsor).
We continue to evaluate the impact of the COVID-19 pandemic and have concluded
that the specific impact is not readily determinable as of the date of the
balance sheet. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than a contingent obligation to pay the underwriters to our Initial Public
Offering $48.3 million in the aggregate for deferred underwriting commissions.
The deferred fee will become payable to the underwriters from the amounts
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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
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of our financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities in
our financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company has identified the following as its
critical accounting policies:
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 FASB ASC
Topic 480 and FASB ASC Topic 815-15. The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
The 34,500,000 warrants issued in connection with the Initial Public Offering
and exercise of the over-allotment (the "Public Warrants") and the 21,733,333
Private Placement Warrants are recognized as derivative liabilities in
accordance with FASB ASC Topic 815-40. Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjust the instruments to fair
value at each reporting period. The liabilities are subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in the Company's statement of operations. The estimated fair value of
the Private Placement Warrants is measured at fair value using a Black-Scholes
valuation model, while the Public Warrants were valued using a Monte-Carlo
simulation model as of March 31, 2021 and the fair value of the Public Warrants
is based on their quoted market price as of September 30, 2021.
Class A Common Stock Subject to Possible Redemption
Class A common stock subject to mandatory redemption (if any) is classified as a
liability instrument and 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 outstanding 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. Accordingly, at September 30,
2021, all 138,000,000 shares of Class A common stock subject to possible
redemption is presented as temporary equity, outside of the stockholders' equity
section of the unaudited condensed balance sheet.
Recent Accounting Pronouncements
In August 2020, the FASB issued 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 U.S. GAAP. ASU 2020-06 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. We adopted ASU 2020-06 on January 14, 2021.
Adoption of the ASU 2020-06 did not impact our financial position, results of
operations or cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying unaudited condensed financial statements.
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Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
We do not believe that inflation had a material impact on our business, revenues
or operating results during the period presented.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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