References in this report (the "Quarterly Report") 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 financial statements and related notes included herein. Certain
capitalized terms used but not defined in the below discussion and elsewhere in
this Quarterly Report have the meanings ascribed to them in the footnotes to the
accompanying financial statements included as part of this Quarterly Report.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this
Quarterly Report including, without limitation, statements under this section
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.
Overview
We were incorporated in Delaware on August 26, 2020 for the purpose of entering
into a Business Combination.
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.
Recent Development
The Company filed a preliminary proxy statement on Schedule 14A on November 16,
2022 in order to schedule a special meeting, pursuant to which it will seek
stockholder approval to, among other matters, amend the Company's amended and
restated certificate of incorporation to change the date by which the Company
must either (i) consummate its initial Business Combination or (ii) cease all
operations, except for the purpose of winding up, and, subject to and in
accordance with the terms of the Charter, redeem all of its public shares. The
proposed amendment would change the original termination date from January 12,
2023 to such other date as shall be determined by the Company's board of
directors in its sole discretion and publicly announced by the Company, provided
that such other date shall be no later than December 30, 2022.
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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.
For the three months ended September 30, 2022, we had a net income of
$2,900,745, which consists of a change in fair value of warrant liabilities of
$1,471,608 and interest earned on marketable securities held in the Trust
Account of $1,297,971, offset by operating costs of $216,760, which consisted
mostly of general and administrative expenses, and provision for income taxes of
$262,074.
For the nine months ended September 30, 2022, we had a net income of $7,853,572,
which consists of a change in fair value of warrant liabilities of $7,091,819
and interest earned on marketable securities held in the Trust Account of
$1,715,245, offset by operating costs of $652,157, which consisted mostly of
general and administrative expenses, and provision for income taxes of $301,335.
For the three months ended September 30, 2021, we had a net income of
$3,184,434, which consists of a change in fair value of warrant liabilities of
$3,203,728, interest earned on marketable securities held in the Trust Account
of $3,701, offset by operating costs of $22,995.
For the nine months ended September 30, 2021, we had a net income of $7,308,518,
which consists of a change in fair value of warrant liabilities of $8,547,301,
interest earned on marketable securities held in the Trust Account of $63,609,
offset by operating costs of $600,749 and offering expenses related to warrant
issuance of $701,643.
Liquidity, Capital Resources, and Going Concern
As of September 30, 2022, we had cash outside the Trust Account of $19,995
available for working capital needs and working capital of $360,044, which
excludes $301,335 of income taxes payable and $150,000 of franchise taxes
payable that can be paid with the interest earned on the trust and $274,686 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 September 30, 2022, interest of $726,021 in the
Trust Account was available to be withdrawn to pay our taxes.
We anticipate that the cash outside of the Trust Account as of September 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 Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," 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 and an extension
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has not been approved by the Company's stockholders, there will be a mandatory
liquidation and subsequent dissolution of the Company. Management has determined
that the liquidity condition, mandatory liquidation, should a Business
Combination not occur and an extension not approved by the Company's
stockholders, and potential subsequent dissolution raise 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 January 12, 2023. The Company intends to continue to
search for and seek to complete a Business Combination before the mandatory
liquidation date. The Company is within 12 months of its mandatory liquidation
date as of the time of filing of this Quarterly Report.
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' deficit. 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 September 30, 2022
and December 31, 2021, 28,750,000 and 28,750,000 shares of Class A common stock,
respectively, subject to possible redemption were presented at redemption value
as temporary equity, outside of the stockholders' deficit section of our balance
sheets, respectively.
Net Income 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 nine months ended September 30, 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.
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Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06 to simplify accounting for certain
financial instruments. ASU 2020-06 eliminates the current models that require
separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
As a smaller reporting company, ASU 2020-06 is effective January 1, 2024 for
fiscal years beginning after December 15, 2023 and should be applied on a full
or modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. Management is currently assessing the impact, if any, that ASU
2020-06 would have on its financial position, results of operations or cash
flows. Management has not adopted this guidance as of September 30, 2022.
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 September 30, 2022, we did not have any off-balance sheet arrangements and
did not have any commitments or contractual obligations.
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