KLUDEIN I ACQUISITION CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to KludeIn I Acquisition Corp. and its wholly-owned subsidiaries. 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 sections of the Company's final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the "SEC"), our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on April 12, 2022, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, which was filed with the SEC on May 16, 2022, our Registration Statement on Form S-4, as amended, which was initially filed with the SEC on July 1, 2022, along with subsequent amendments on September 9, 2022, October 19, 2022, and November 10, 2022, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which was filed with the SEC on August 16, 2022. 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.

On May 18, 2022, the Company entered into the Merger Agreement. Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, immediately prior to Closing, the Mergers will be consummated. In connection with the Mergers, the Company will change its corporate name to "Near Intelligence, Inc."

At the special meeting of stockholders on July 7, 2022 in connection with the Extension, stockholders holding 6,845,606 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, $68,488,348 (approximately $10.00 per share), which included $32,631 of interest earned on the Trust Account which was not previously used to pay the Company's tax obligation, was removed from the Trust Account to pay such holders. Following these redemptions, the Company had 10,404,394 Public Shares outstanding and the aggregate amount remaining in the Trust Account at the time was $104,093,013.

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 September 30, 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 and subsequent to entering into a Merger Agreement on May 18, 2022, pursuing the completion of the business combination transaction. 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 Working Capital Loan. 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 September 30, 2022, we had net loss of $97,696, which consists of formation and operational costs of $643,147, change in fair value of the warrant liabilities of $141,203 and provision for income taxes of $51,742, partially offset by a change in fair value of the Working Capital Loan of $175,732, interest earned on marketable securities held in the Trust Account of $537,869 and an unrealized gain on marketable securities held in the Trust Account of $24,795.

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For the nine months ended September 30, 2022, we had net income of $4,816,310, which consists of change in fair value of the warrant liabilities of $6,652,710, change in fair value of the Working Capital Loan of $182,135, interest earned on marketable securities held in the Trust Account of $855,534 and an unrealized gain on marketable securities held in the Trust Account of $9,440, partially offset by formation and operational costs of $2,758,585 and provision for income taxes of $124,924.

For the three months ended September 30, 2021, we had net income of $1,025,128, which consists of change in fair value of the warrant liabilities of $1,290,176, an unrealized gain on marketable securities held in the Trust Account of $3,734 and interest earned on marketable securities held in the Trust Account of $18,051, partially offset by formation and operational costs of $286,833.

For the nine months ended September 30, 2021, we had net loss of $434,039, which consists of transaction costs allocated to warrants of $523,013 and formation and operational costs of $931,960, partially offset by change in fair value of the warrant liabilities of $961,676, an unrealized gain on marketable securities held in the Trust Account of $1,361 and interest earned on marketable securities held in the Trust Account of $57,897.

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 nine months ended September 30, 2022, net cash used in operating activities was $1,681,820. Net income of $4,816,310 was affected by change in fair value of the warrant liabilities of $6,652,710, change in fair value of the Working Capital Loan of $182,135, interest earned on marketable securities held in the Trust Account of $855,534 and an unrealized gain on marketable securities held in Trust Account of $9,440. Changes in operating assets and liabilities provided $1,201,689 of cash for operating activities primarily because of the increase in accounts payable and accrued expenses.

For the nine months ended September 30, 2021, net cash used in operating activities was $897,443. Net loss of $434,039 was affected by change in fair value of the warrant liabilities of $961,676, interest earned on marketable securities held in the Trust Account of $57,897, transaction costs allocated to warrants of $523,013 and an unrealized loss on marketable securities held in Trust Account of $1,361. Changes in operating assets and liabilities provided $34,517 of cash for operating activities primarily because of an increase in accounts payable and accrued expenses, partially offset by an increase in prepaid expenses.

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At September 30, 2022, we had cash and marketable securities held in the Trust Account of $105,664,618 (including $590,643 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 September 30, 2022, we had withdrawn $322,309 of interest earned from the Trust Account to pay for the Company's previously unpaid and accrued tax obligations.

We intend to use substantially all of the funds held in the Trust Account and any additional funds available under the financing arrangement described in Note 5 to the accompanying condensed consolidated financial statements, 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 September 30, 2022, we had cash of $113,062 and borrowing capacity under the Working Capital Loans of $427,500. As of September 30, 2022, $1,072,500 was borrowed under the Working Capital Loan. The fair value of the note as of September 30, 2022 was $528,300. We intend to use the funds held outside the Trust Account and this borrowing capacity primarily for completing the Company's Target Business Combination.

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 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. 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 (see Note 8). As of September 30, 2022, the Company had drawn $1,072,500 on the Working Capital Loan and had $427,500 available to draw.

As indicated in the accompanying condensed consolidated financial statements, at September 30, 2022, the Company had $113,062 in cash, $105,664,618 in cash and marketable securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of $2,601,113, which excludes $154,924 of interest earned on the Trust Account which is available to pay Delaware franchise taxes payable and income taxes payable. As of September 30, 2022, $590,643 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company's tax obligations.

Until the consummation of a Business Combination, the Company has used and will be using the funds not held in the Trust Account and any additional funds available under the financing arrangement described below for completing the Company's Target Business Combination.

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 January 11, 2023, 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 consolidated 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 January 11, 2023.

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Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 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 consolidated 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 consolidated 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 Working Capital Loan at fair value, as described in Note 9 to the accompanying condensed consolidated financial statements.

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 consolidated financial statements.

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