References to the "Company," "us," "our" or "we" refer to KludeIn I 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.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form
10-K.
Restatement of Previously Issued Financial Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of March 31, 2021, June 30, 2021, and September 30,
2021 (the "Affected Periods").
Subsequent to the filing of the Form 10-Q/A, Amendment No. 1 for the quarterly
period ended September 30, 2021, management identified an error made in its
historical Financial Statements where at the closing of the Initial Public
Offering, we did not properly record the Founders Shares attributable to the
Anchor Investor by our Sponsor. We concluded that the fair value of the Founder
Shares should be recorded as an offering cost with corresponding credit to
additional paid-in-capital, in accordance with Staff Accounting Bulletin Topic
5A and Topic 5T. As a result, the offering costs should be allocated to the
separable financial instruments issued in the Initial Public Offering using the
with-and-without method, compared to total proceeds received. This resulted in
restatement to the Affected Periods.
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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 merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses. 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.
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 December 31,
2021 were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and subsequent to the initial public offering,
identifying a target company for a business combination. 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 a Trust Account, and gains or
losses from the change in fair value of the warrant liabilities. 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 year ended December 31, 2021, we had a net loss of $406,026, which
consists of the change in fair value of the warrant liabilities of $1,642,290,
unrealized gain on marketable securities held in Trust Account of $2,211 and
interest earned on marketable securities held in the Trust Account of $78,398,
offset by formation and operational costs of $1,605,912 and transaction costs
allocated to warrant liabilities of $523,013.
For the nine months ended September 30, 2021, we had a net loss of $434,039,
which consists of formation and operational costs of $931,960 and transaction
costs allocated to warrants of $523,013, partially offset by the change in fair
value of the warrant liabilities of $961,676, unrealized gain on marketable
securities held in Trust Account of $1,361, and interest earned on marketable
securities held in the Trust Account of $57,897.
For the six months ended June 30, 2021, we had a net loss of $1,459,167, which
consists of formation and operational costs of $645,127, change in fair value of
the warrant liability of $328,500, transaction costs allocated to warrants of
$523,013 and unrealized loss on marketable securities held in Trust Account of
$2,373, offset by interest earned on marketable securities held in the Trust
Account of $39,846.
For the three months ended March 31, 2021, we had net income of $1,388,100,
which consists of changes in fair value of the warrant liability of $2,212,000
and interest earned on marketable securities held in the Trust Account of
$33,277, partially offset by operating and formation costs of $333,548,
transaction costs allocated to warrants of $523,013 and an unrealized loss on
marketable securities held in Trust Account of $616.
For the period from September 24, 2020 (inception) through December 31, 2020, we
had a net loss of $1,893, which consisted of formation and operational costs.
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.
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For the year ended December 31, 2021, cash used in operating activities was
$970,669. Net loss of $406,026 was affected by changes in fair value of the
warrant liabilities of $1,642,290, interest earned on marketable securities held
in the Trust Account of $78,398, transaction costs allocated to warrants of
$523,013 and an unrealized gain on marketable securities held in Trust Account
of $2,211. Changes in operating assets and liabilities provided $635,243 of cash
for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $897,443. Net loss of $434,039 was affected by changes 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 gain on marketable securities held in Trust Account
of $1,361. Changes in operating assets and liabilities provided $34,517 of cash
for operating activities.
For the six months ended June 30, 2021, cash used in operating activities was
$858,964. Net loss of $1,459,167 was affected by changes in fair value of the
warrant liability of $328,500, interest earned on marketable securities held in
the Trust Account of $39,846, transaction costs allocated to warrants of
$523,013 and an unrealized loss on marketable securities held in Trust Account
of $2,373. Changes in operating assets and liabilities used $213,837 of cash for
operating activities.
For the three months ended March 31, 2021, cash used in operating activities was
$740,392. Net income of $1,388,100 was affected by changes in fair value of the
warrant liability of $2,212,000, interest earned on marketable securities held
in the Trust Account of $33,277, transaction costs incurred in connection with
the Initial Public Offering of $523,013 and an unrealized loss on marketable
securities held in Trust Account of $616. Changes in operating assets and
liabilities used $406,844 of cash for operating activities.
For the period from September 24, 2020 (inception) through December 31, 2020,
cash provided by operating activities was $1,000. Net loss of $1,893 was
affected by formation cost paid by sponsor through promissory note of $761 and
changes in operating assets and liabilities which provided $2,132 of cash for
operating activities.
At December 31, 2021, we had cash and marketable securities held in the Trust
Account of $172,580,609 (including approximately $80,000 of interest income,
including unrealized gain) 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 December 31, 2021, we had not withdrawn any
interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account,
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 December 31, 2021, we had cash of $400,073. We intend to use the funds held
outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete a business combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, our sponsors or an affiliate of our
sponsors or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required ("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 and drew $462,500 under this arrangement. 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. The warrants would be identical to the private
placement warrants.
As indicated in the accompanying financial statements, at December 31, 2021, the
Company had $400,073 in cash, and a working capital deficit of $156,693, which
excludes $80,609 of interest earned on Trust which is available to pay Delaware
franchise taxes payable.
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.
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In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standards Board's Accounting Standards
Codification Topic 205-40, "Presentation of Financial Statements - Going
Concern," the Company has until July 11, 2022, 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 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 July 11, 2022. The
Company's sponsor, officers and directors may, but are not obligated to, loan
the Company funds from time to time or at any time, in whatever amount they deem
reasonable in their sole discretion, to meet the Company's working capital
needs. On January 21, 2022, we issued a working capital loan in the principal
amount of up to $1,500,000 to our sponsor. On January 31, 2022, the Company drew
$350,000 on the Working Capital Loan. On April 1, 2022, the Company drew an
additional $112,500 on the Working Capital Loan.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 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.
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 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 financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies.
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks. The Company accounts for warrants as either
equity-classified or liability-classified instruments based on an assessment of
the warrant's specific terms and applicable authoritative guidance in FASB ASC
480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives
and Hedging ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own shares of common stock, among other
conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of
each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. For the private placement warrants, the fair value was
estimated using a binomial lattice model incorporating the Cox-Rss-Rubenstein
methodology at the closing date of the Initial Public Offering and as of
December 31, 2021. For the public warrants, the fair value was estimated using a
binomial lattice model incorporating the Cox-Rss-Rubenstein methodology at the
closing date of the Initial Public Offering and the level 1 quoted prices in an
active market as of December 31, 2021.
Class A Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Class A common stock subject to mandatory redemption is classified as a
liability instrument and 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' equity.
Our Class A common stock features certain redemption rights that are considered
to be outside of our control and subject to occurrence of uncertain future
events. Accordingly, all shares of Class A common stock subject to possible
redemption are presented at redemption value as temporary equity, outside of the
stockholders' equity section of our balance sheets.
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Net Loss Per Share of Common Stock
Net loss per share of common stock is computed by dividing net loss by the
weighted average number of shares of common stock outstanding for the period.
The Company applies the two-class method in calculating loss per share of common
stock. Re-measurement associated with the redeemable shares of Class A common
stock is excluded from loss per common share as the redemption value
approximates fair value. Net income or loss is allocated among the classes of
ordinary shares based on weighted average shares outstanding.
The calculation of diluted loss per share of common stock does not consider the
effect of the warrants issued in connection with the (i) initial public
offering, and (ii) the private placement since the exercise of the warrants is
contingent upon the occurrence of future events. The warrants are exercisable to
purchase 13,825,000 shares of Class A common stock in the aggregate. As of
December 31, 2021 and 2020, the Company did not have any other dilutive
securities or other contracts that could, potentially, be exercised or converted
into common stock and then share in the earnings of the Company. As a result,
diluted net loss per common share is the same as basic net loss per common share
for the periods presented.
Recent Accounting Standards
In August 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 U.S. 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. We early adopted ASU 2020-06 on January 1, 2021. Adoption of the
ASU did not impact our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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