References to the "Company," "KnightSwan Acquisition Corporation," "our," "us"
or "we" refer to KnightSwan Acquisition Corporation, references to "management"
or "management team" refer to the Company's officers and directors and
references to the "Sponsor" refer to KnightSwan Sponsor LLC. 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 Quarterly Report on
Form 10-Q (this "Quarterly 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 includes, and oral statements made from time to time by
representatives of the Company may include, forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act and are intended to be covered by the safe
harbor created thereby. The Company has based these forward-looking statements
on management's current expectations, projections and forecasts about future
events. These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about the Company that may cause its actual
business, financial condition, results of operations, performance and/or
achievements to be materially different from any future business, financial
condition, results of operations, performance and/or achievements expressed or
implied by these forward-looking statements. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those
described in the Company's other filings with the SEC. All of these factors are
subject to additional uncertainty in the context of the COVID-19 pandemic and
the conflict in Ukraine, which are having impacts on our business and markets
generally and the economy as a whole. The words "anticipate," "believe,"
"continue," "could," "estimate," "expect," "intends," "may," "might," "plan,"
"possible," "potential," "predict," "project," "target," "goal," "shall,"
"should," "will," "would" and similar expressions may identify forward-looking
statements, but the absence of these words does not mean that a statement is not
forward-looking. In addition, any statements that refer to expectations,
projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, consolidation, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar initial business
combination with one or more businesses or entities. We intend to effectuate our
initial business combination using cash derived from the proceeds of the initial
public offering (the "Initial Public Offering") and the sale of the private
placement warrants, our share capital, debt or a combination of cash, share
capital and debt.
We expect to continue to incur significant costs in the pursuit of our initial
business combination. We cannot assure you that our plans to complete our
initial business combination will be successful.
Results of Operations
All activity for the period from August 13, 2021 (inception) through
September 30, 2022 were organizational activities, those necessary to prepare
for the Initial Public Offering as described below and, subsequent to the
closing of 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 initial business combination. We generate
non-operating income in the form of interest income on investments 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 expenses.
For the period August 13, (inception) to September 30, 2021, we reported a net
loss of $19,496 which consists of $15,190 of consulting fees.
For the three months ended September 30, 2022, we reported net income of
$143,212, which consists of operating costs of $657,883, an income tax provision
of $262,971 due to an increase in interest income during the period, offset by
interest income on investments held in the trust account of $1,064,066.
Operating costs for the three months ended September 30, 2022, consist mostly of
legal fees ($58,000), profits interest expense ($148,784), sponsor management
fee ($60,000), consulting fees ($208,378), directors and officers insurance
($108,976), franchise taxes ($50,411) and listing fees ($0).
For the nine months ended September 30, 2022, we reported a net loss of
$1,464,193, which consists of operating costs of $2,606,412, an income tax
provision of $262,971 due to an increase in interest income during the period,
offset by interest income on investments held in the trust account of
$1,405,190. Operating costs for the nine months ended September 30, 2022 consist
of legal fees ($464,000), profits interest expense ($401,070), sponsors
management fee ($163,871), consulting fees ($934,474), directors and officers
insurance ($210,762), franchise tax ($149,041) and listing fees ($165,478).
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Liquidity and Capital Resources
On January 25, 2022, we consummated the Initial Public Offering of 23,000,000
Units at $10.00 per Unit, including the issuance of 3,000,000 Units as a result
of the underwriter's exercise of its over-allotment option, generating gross
proceeds of $230,000,000 as described in Note 3 to the condensed financial
statements. Simultaneously with the closing of the Initial Public Offering, we
consummated the sale of 13,100,000 private placement warrants (the "Private
Placement Warrants") at a price of $1.00 per Private Placement Warrant in a
private placement transaction to the Sponsor, generating gross proceeds of
$13,100,000 as described in Note 4 to the condensed financial statements.
Following the Initial Public Offering and the sale of the Private Placement
Warrants, a total of $235,750,000 was placed in the trust account. We incurred
$11,634,010 in costs related to the Initial Public Offering, consisting of
$4,200,000 of underwriting fees, $6,900,000 of deferred underwriting fees and
$534,010 of other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $1,312,338. A net loss of $1,464,193 was affected by interest earned on
investments held in the trust account of $1,405,190, non-cash profit interest
compensation of $401,070 and changes in operating assets and liabilities
provided $1,155,975 of cash for operating activities. During the nine months
ended September 30, 2022, the Company's primary use of cash were a payment for a
one-time consulting fee of $400,000, listing fees of $165,478 and management
fees of $163,871.
As of September 30, 2022, we had investments held in the trust account of
$237,155,190 (including $1,405,190 of earned interest income) consisting of U.S.
Treasury Bills with a maturity of 185 days or less. We may withdraw interest
from the trust account to pay taxes, if any. To the extent that our capital
stock or debt is used, in whole or in part, as consideration to complete our
initial 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. 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
income taxes payable), to complete our initial business combination.
As of September 30, 2022, we had cash of $1,230,213 held outside of the trust
account. 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 our initial business
combination.
In connection with the Company's assessment of going concern considerations in
accordance with Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that if the Company is unsuccessful in consummating an
initial business combination within 18 months from the closing of the IPO (July
25, 2023 - less than 12 months from the date of these unaudited financial
statements), the mandatory liquidation requirement that the Company cease all
operations, redeem the public shares and thereafter liquidate and dissolve
raises substantial doubt about the ability to continue as a going concern.
Management has determined that the Company has funds that are sufficient to fund
the working capital needs of the Company until the consummation of an initial
business combination or the winding up of the Company as stipulated in the
Company's amended and restated certificate of incorporation. The accompanying
financial statements have been prepared in conformity with GAAP, which
contemplate continuation of the Company as a going concern. These unaudited
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
In order to fund working capital deficiencies or finance transaction costs in
connection with our initial business combination, the Sponsor, or an affiliate
of the Sponsor, or certain of the Company's executive officers and directors
may, but are not obligated to, loan the Company funds as may be required. If we
complete our initial business combination, we will repay such working capital
loans. In the event that our initial business combination does not close, we may
use a portion of the working capital held outside the trust account to repay
such working capital loans but no proceeds from the trust account would be used
for such repayment. Up to $2,000,000 of such working capital loans may be
convertible into warrants at a price of $1.50 per warrant, at the option of the
lender. The warrants would be identical to the Private Placement Warrant.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating our initial business combination is 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 the Public
Shares upon consummation of our initial business combination, in which case we
may issue additional securities or incur debt in connection with such initial
business combination.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2022.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a sum of $20,000 per month for office space and
secretarial and administrative services. We began incurring these fees on
January 25, 2022 and will continue to incur these fees monthly until the earlier
of the completion of the initial business combination and our liquidation.
The underwriters and a consultant are entitled to deferred fees in the aggregate
of $0.35 per Unit, or $6,900,000 due to the underwriter and $1,150,000 pursuant
to a consulting agreement (see below). The deferred underwriting fee and the
consulting fee will become payable to the underwriters and consultant from the
amounts held in the trust account solely in the event that the Company completes
an initial business combination, subject to the terms of the underwriting
agreement.
Consulting Agreement
Prior to the consummation of the Initial Public Offering, the Company entered
into a consulting agreement with an advisory firm that will assist in the
identification, due diligence and assistance in the valuation of potential
business combination opportunities for the Company. Pursuant to the agreement,
the Company paid the advisory firm $400,000 at the consummation of the Initial
Public Offering for services rendered from the inception of the agreement
through that date. In addition, in accordance with the terms of the agreement, a
percentage of the gross proceeds from the Company's initial public offering is
to be paid to the consultant for services rendered throughout the term of the
contract to be due and payable upon the completion of a successful business
combination. The Company has included $1,150,000 in other long-term liabilities
pertaining to this amount owed.
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KNIGHTSWAN ACQUISITION CORPORATION 