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 March 31, 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 the Company's 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 the Company's 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, the Company's 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 the Company's
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 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.
21
Table of Contents
For the three months ended March 31, 2022, we had a net income of approximately
$4.14 million, which included a gain from the change in fair value of warrant
liabilities of $4.37 million and interest income on marketable securities held
in Trust Account of $0.03 million, offset by a loss from operations of $0.25
million.
For the three months ended March 31, 2021, we had a net income of approximately
$8.79 million, which included a gain from the change in fair value of warrant
liabilities of $9.54 million and interest income on marketable securities held
in the Trust Account of $0.04 million, offset by a loss from operations of $0.09
million and warrant issuance cost of $0.7 million.
Liquidity and Capital Resources
As of March 31, 2022, we had cash outside the Trust Account of $185,667
available for working capital needs. 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 March 31, 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 March 31, 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.
The Company has until January 12, 2023 to consummate a Business Combination. It
is uncertain that the Company will be able to consummate a Business Combination
by this time. If a Business Combination is not consummated by this date, there
will be a mandatory liquidation and subsequent dissolution. Management has
determined that the 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.
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 the Company's statement
of operations. The Company's warrant liability for the Private Placement
Warrants is based on a Black-Scholes-Merton model. In March 2021, the Company's
Public Warrants began trading on the Nasdaq Capital Market. As such, the price
for the Public Warrants is based on an unadjusted market price.
22
Table of Contents
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 Statement of Operations in
the period of change.
Common Stock Subject to Possible Redemption
The Company accounts for its 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
the Company's control) is classified as temporary equity. At all other times,
common stock is classified as stockholders' equity. The Company's Class A common
stock features certain redemption rights that are considered to be outside of
the Company's control and subject to occurrence of uncertain future events. As
of March 31, 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 the
Company's balance sheets, respectively.
Net Income (Loss) Per Share of Common Stock
The Company has 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. The 14,750,000 shares of Class A common
stock underlying the outstanding warrants of the Company were excluded from
diluted earnings per share for the three months ended March 31, 2022 and 2021
because the warrants are contingently exercisable, and the contingencies have
not yet been met. As a result, diluted net income per share of common stock is
the same as basic net income 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 the Company's financial
statements.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of March 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a) (4)(ii) of Regulation S-K and did not have any
commitments or contractual obligations.
© Edgar Online, source Glimpses