The accompanying notes are an integral part of these unaudited condensed financial statements.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1—Description of Organization and Business Operations
KKR Acquisition Holdings I Corp. (the “Company”) is a blank check company incorporated in Delaware on January 14, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an early stage emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2021,2022, the Company had not commenced any operations. All activity for the period from January 14, 2021 (inception) through March 31, 20212022 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is KKR Acquisition Sponsor I LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on March 16, 2021. On March 19, 2021, the Company consummated its Initial Public Offering of 138,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including the exercise of the underwriters’ option to purchase 18,000,000 additional Units (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of approximately $1.4 billion, and incurring offering costs of approximately $77.4 million (net of reimbursement from underwriters of $13.8 million), of which $48.3 million was for deferred underwriting commissions (Note 5).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 21,733,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of $32.6 million (Note 4).
Upon the closing of the Initial Public Offering and the Private Placement, approximately $1.4 billion ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete its initial Business Combination with one1 or more operating businesses or assets having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide the holders (the “Public Stockholders”) of the Company’s outstanding shares of Class A common stock, par value $0.0001 per share, included in the Units sold in the Initial Public Offering (the “Public Shares”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion, subject to applicable law
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
and stock exchange listing requirements. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
discussed in Note 5). CertainAll Public Shares have been recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination only if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 or any greater net tangible asset or cash requirement that may be contained in the agreement relating to the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (the “SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) have agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination or to not vote at all. In addition, the initial stockholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
The Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its Public Shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.
The Sponsor and the Company’s officers and directors (the “initial stockholders”) have agreed not to propose an amendment to the Certificate of Incorporation to modify the substance or timing of the Company’s obligation to allow redemptions in connection with its initial Business Combination or redeem 100% of the Public Shares if the Company does not complete a Business Combination within the initial Combination Period (as defined below) or with respect to any other material provisions relating to stockholders’ rights or pre-initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 19, 2023 (as such period may be extended by the Company’s stockholders in accordance with the Certificate of Incorporation, the “Combination Period”), the Company will (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds in the Trust Account (net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, liquidate and dissolve, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to the deferred
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value in the Trust Account will be only $10.00 or potentially less. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement (a “Target”), reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, Targets and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Capital Resources
PriorAs of March 31, 2022, the Company had investments held in the Trust Account of $1.4 billion consisting of cash and U.S. government securities. Interest income on the balance in the Trust Account may be used by the Company to pay taxes, and to pay up to $100,000 of any dissolution expenses. The Company’s liquidity needs to date have been satisfied through a contribution of $25,000 from Sponsor to cover for certain expenses in exchange for the issuance of the Class B common stock, a loan from the Sponsor pursuant to the completionpromissory note (see Note 4), and the proceeds from the consummation of the Initial Public Offering,Private Placement not held in the Trust Account. The Company repaid the promissory note during 2021.
As of March 31, 2022, the Company lackedhad current liabilities of $3.4 million and approximately $1.6 million in its operating bank account. The Company does not have sufficient liquidity to meet its anticipated obligations over the liquidity it needednext year from the date of issuance of these financial statements. 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 sustain operationsContinue as a Going Concern,” management has determined that if the Company is unsuccessful in consummating an initial Business Combination, the mandatory liquidation and subsequent dissolution raises substantial doubt about the ability to continue as a going concern for a reasonable period of time, which is considered to beat least one year from the issuance date of the financial statements. The Company has since completed its Initial Public Offering at which timeaccess to funds from the Sponsor that are sufficient to fund the working capital in excessneeds of the funds depositedCompany until a potential business combination or up to the mandatory liquidation as stipulated in the trust and/or used to fund offering expenses was released to the Company for generalcertificate of incorporation. As of March 31, 2022, there were no amounts outstanding under any working capital purposes. Accordingly, management has since reevaluatedloan (see Note 4). Management further intends to close a Business Combination before the Company’s liquidity and financial condition and determined that sufficient capital exists to sustain operations one year from the date these condensed financial statements are issued and therefore substantial doubt has been alleviated.mandatory liquidation date.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and the invasion by Russia of Ukraine and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2—Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the period from January 14, 2021 (Inception) through December 31, 2021.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the final prospectusCompany's Annual Report on Form 10-K filed by the Company with the SEC on March 18, 2021.31, 2022.
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may taketakes advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents held outside the Trust Account as of March 31, 2022 and as of December 31, 2021.
Investments Held in Trust Account
The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the unaudited condensed balance sheet at fair value at the end of each reporting period. Gains and losses from changes in fair value, and dividends and interest relating to these investments are included in Income from investments held in Trust Account in the accompanying unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000, and investments held in Trust Account. At March 31, 2022 and December 31, 2021, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurements” approximates the carrying amounts represented in the balance sheet.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
|
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
•Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;•Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
•Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480 and FASB ASC Topic 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The 34,500,000 warrants issued in connection with the Initial Public Offering and exercise of the over-allotment (the “Public Warrants”) and the 21,733,333 Private Placement Warrants are recognized as derivative liabilities in accordance with FASB ASC Topic 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at the end of each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The estimated fair value of the Public Warrants and Private Placement Warrants areis measured at fair value using a Monte Carlo simulation and Black-Scholes valuation model respectively.as of March 31, 2022 and December 31, 2021, while the Public Warrants were valued using a Monte-Carlo simulation model as of March 31, 2021 and is based on their quoted market price as of March 31, 2022.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering on a relative residual method, compared to total proceeds received. Offering costs associated with derivative warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to stockholders’ equityClass A common stock upon the completion of the Initial Public Offering.
Class A 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 FASB ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable Class A common stock (including Class A 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, Class A 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 the occurrence of uncertain future events. Accordingly, at March 31, 2022 and December 31, 2021, 126,154,299all 138,000,000 shares of Class A common stock subject to
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s unaudited condensed balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.9 | | | | | |
| Gross Proceeds | $ | 1,380,000,000 | |
| Less: | |
| Proceeds allocated to Public Warrants | (38,985,000) | |
| Class A common stock issuance costs | (75,170,778) | |
| Plus: | |
| Accretion of carrying value to redemption value | 114,155,778 | |
| Contingently redeemable Class A common stock | $ | 1,380,000,000 | |
Stock-Based Compensation Expenseexpense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred.KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Income Taxes
The Company follows the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
For tax benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2022 and December 31, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of March 31, 2022 and 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. The provision for income taxes as of March 31, 2022 and 2021 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to the establishment of a full valuation allowance against the Company’s deferred tax asset. The Company’s effective tax rate differs from the federal statutory rate primarily due to the fair value on instruments treated as debt for GAAP and equity for tax purposes, which is not deductible or taxable for income tax purposes.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Net LossIncome (Loss) Per Common Share
Net income (loss) per share is computed by dividing net lossincome (loss) by the weighted-average number of common stock outstanding during the periods. The Company has not considered the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase up to an aggregate of 56,233,333 shares of the Company’s Class A common stock in the calculation of the diluted income per share, sincebecause the warrants are contingently exercisable, and the contingencies have not yet been met and, additionally, their inclusion would be anti-dilutive under the treasury stock method.
Similarly, for the purpose of calculating the diluted income (loss) per share for the Class A common stock, the Company has not considered the conversion of the Class B common stock, because the contingency for the conversion into Class A common stock was not met as of the reporting date.
The Company’s unaudited condensed statement of operations includes a presentation of lossincome (loss) per common share for common shares subject to possible redemption in a manner similar to the two-class method of lossincome (loss) per common share. Net lossFor purposes of calculating net income (loss) per share, the Company allocated the amount using a ratio reflective of the respective participation right and the weighted average of each class of common share, basic and diluted,stock. The allocation for the period from Inception through March 31, 2021 also considered the accretion of temporary equity related to the Class A common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on investments held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of common stock subject to possible redemption outstanding since original issuance.
Net loss per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or loss on investments held in the Trust Account attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable shares of Class A common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on investments held in the Trust Account based on non-redeemable shares’ proportionate interest.
stock.
The following table reflects the calculation of basic and diluted net loss per common share:
| | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2022 | | For the period from January 14, 2021 (inception) through March 31, 2021 | | |
| Class A common stock subject to possible redemption | | | | | |
| Numerator: Earnings (losses) allocable to common stock subject to possible redemption | | | | | |
| Allocation of net income (loss), including accretion of temporary equity | $ | 15,050,665 | | | $ | (57,207,820) | | | |
| Net income (loss) attributable to Class A common stock subject to redemption | $ | 15,050,665 | | | $ | (57,207,820) | | | |
| Denominator: Weighted average Class A common stock subject to possible redemption | | | | | |
| Basic and diluted weighted average shares outstanding | 138,000,000 | | | 23,298,701 | | | |
| Basic and diluted net income (loss) per Class A shares | $ | 0.11 | | | $ | (2.46) | | | |
| | | | | |
| Class B common stock | | | | | |
| Numerator: Earnings (losses) allocable to Class B common stock | | | | | |
| Allocation of net income (loss), including accretion of temporary equity | 3,762,666 | | | (63,011,511) | | | |
| Net income (loss) attributable to Class B common stock | $ | 3,762,666 | | | $ | (63,011,511) | | | |
| Denominator: weighted average Class B common stock | | | | | |
| Basic and diluted weighted average shares outstanding, Class B common stock | 34,500,000 | | | 25,662,338 | | | |
| Basic and diluted net income (loss) per share, Class B common stock | $ | 0.11 | | | $ | (2.46) | | | |
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| | | For the Period from January 14, 2021 (Inception) through March 31, 2021
| |
| Class A Common stock subject to possible redemption | | | |
| Numerator: Earnings allocable to Common stock subject to possible redemption | | | |
| Income from investments held in Trust Account | | $ | 5,899 | |
| Less: Company’s portion available to be withdrawn to pay taxes | | | (5,899 | ) |
| Net income attributable | | $ | - | |
| Denominator: Weighted average Class A common stock subject to possible redemption | | | | |
| Basic and diluted weighted average shares outstanding | | | 126,530,686 | |
| Basic and diluted net income per share | | $ | - | |
| | | | | |
| Non-Redeemable Common Stock | | | | |
| Numerator: Net Loss minus Net Earnings | | | | |
| Net loss | | $ | (6,063,553 | ) |
| Net income allocable to Class A common stock subject to possible redemption | | | - | |
| Non-redeemable net loss | | $ | (6,063,553 | ) |
| Denominator: weighted average Non-redeemable common stock | | | | |
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | | | 33,145,471 | |
| Basic and diluted net loss per share, Non-redeemable common stock | | $ | (0.18 | ) |
Recent Accounting Pronouncements
In August 2020, the FASB issued 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. ASU 2020-06 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. The Company adopted ASU 2020-06 on January 14, 2021. Adoption of ASU 2020-06 did not impact the Company’s 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 the accompanying financial statement.
Note 3—Initial Public Offering
On March 19, 2021, the Company consummated its Initial Public Offering of 138,000,000 Units, including 18,000,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of approximately $1.4 billion, and incurring offering costs of
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
approximately $77.4 million (net of reimbursement from underwriters of $13.8 million), of which $48.3 million was for deferred underwriting commissions and $0.1 million for other deferred financing costs.
Each Unit consists of one1 share of Class A common stock, and one-fourth of one Public Warrant. Each whole Public Warrant entitles the holder to purchase one1 share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 4 — Related Party Transactions
Founder Shares
On January 25, 2021, the Sponsor paid $25,000 to cover certain offering costs on behalf of the Company in exchange for issuance of 28,750,000 shares of the Company’s Class B common stock, par value $0.0001 per share, (the “Founder Shares”). On March 16, 2021, the Company effected a stock dividend of 5,750,000 shares with respect to Class B common stock, resulting in an aggregate of 34,500,000 shares of Class B common stock outstanding. The Sponsor agreed to forfeit up to 4,500,000 Founder Shares to the extent that the option to purchase the Over-Allotment Units was not exercised in full by the underwriters, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On March 19, 2021, the underwriter fully exercised its option to purchase the Over-Allotment Units; thus, these 4,500,000 Founder Shares were no longer subject to forfeiture.
The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (1) one year after the completion of the initial Business Combination; and (2) subsequent to the initial Business Combination (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20-trading days within any 30-trading day period commencing at least 120 days after the initial Business Combination or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”)Placement of 21,733,333 warrants (each, a “PrivatePrivate Placement Warrant” and collectively, the “Private Placement Warrants”)Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of $32.6 million.
Each whole Private Placement Warrant is exercisable for one1 whole share of Class A common stock at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the sale of the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash (except in certain limited circumstances) and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Related Party Loans
On January 25, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable upon the completion of the Initial Public Offering. As of March 19, 2021, the Sponsor had loaned $300,000 under the Note and advanced approximately $150,000 to the Company. The Company fully repaid the Note and the advance for a total of approximately $450,000 to the Sponsor on March 22, 2021.
In addition, in order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lenders’ discretion, up to $3.0 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. The terms of such Working Capital Loans, if any,
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
have not been determined and no written agreements exist with respect to such loans. As of March 31, 2022 and December 31, 2021, the Company had no borrowings under the Working Capital Loans.
As of March 31, 2022 and December 31, 2021, the Company had a $2.1 million and $1.7 million payable outstanding to a related party of the Sponsor for the reimbursement of operating expenses incurred on behalf of the Company, respectively.
Financial Advisory Services
For financial advisory services provided by KKR Capital Markets LLC (“KCM”), a registered broker-dealer and a related party to the Sponsor in connection with the Initial Public Offering, the Company agreed to pay KCM a fee in an amount equal to (1) 50% of the upfront underwriting commissions payable to the underwriters, or $13.8 million, and (2) 50% of the deferred underwriting commissions payable to the underwriters, or approximately $24.2 million, which will be paid to KCM upon the closing of the initial Business Combination. The underwriters agreed to reimburse the Company for the fee to KCM as it becomes payable out of the underwriting commission.
Note 5 — Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares), are entitled to registration rights pursuant to a registration rights agreement. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 18,000,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts and commissions. On March 19, 2021, the underwriters fully exercised their option to purchase additional Units.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $27.6 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per Unit, or $48.3 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
In addition, the underwriters reimbursed $13.8 million to the Company for fees payable to KCM as described in Note 4.
Note 6 — Stockholders’ Equity
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue 500,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of March 31, 2022 and December 31, 2021, there were 11,845,701 shares of Class A common stock issued and outstanding, excluding 126,154,299138,000,000 shares of Class A common stock subject to possible redemption.redemption outstanding and classified as temporary equity.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class B Common Stock — The Company is authorized to issue 50,000,000 shares of Class B common stock with a par value of $0.0001 per share. On January 25, 2021, the Company issued 28,750,000 shares of Class B common stock to the Sponsor. On
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
March 16, 2021, the Company effected a stock dividend of 5,750,000 shares with respect to Class B common stock, resulting in an aggregate of 34,500,000 shares of Class B common stock outstanding. Of the 34,500,000 shares of Class B common stock outstanding, up to 4,500,000 shares of Class B common stock were subject to forfeiture, to the Company by the Sponsor for no consideration to the extent that the underwriters’ option to purchase the Over-Allotment Units was not exercised in full or in part, so that the number of shares of Class B common stock outstanding would collectively equal 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. On March 19, 2021, the underwriters fully exercised their option to purchase the Over-Allotment Units; thus, these 4,500,000 shares of Class B common stock were no longer subject to forfeiture.
Holders of Class A common stock and holders of Class B common stock will vote together as a single class, with each share entitling the holder to one1 vote; provided, however that, prior to the closing of the Company’s initial Business Combination, only holders of Class B common stock will have the right to elect or remove the Company’s directors.
The Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination on a one-for-one1-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering, plus (ii) all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (excluding any shares of Class A common stock or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination, and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time. Securities could be “deemed issued” for purposes of the conversion rate adjustment if such shares are issuable upon the conversion or exercise of convertible securities, warrants or similar securities.
Note 7 — Warrants
As of March 31, 2022 and December 31, 2021, the Company had 34,500,000 Public Warrants and 21,733,333 Private Placement Warrants outstanding.
Public Warrants may only be exercised in whole and only for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. If a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elect, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
The warrants have an exercise price of $11.50 per share, subject to adjustment. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the completion of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the shares of Class A common stock during the 20-trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 and $10.00 per share redemption trigger prices described under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” and “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to 180% and 100%, respectively, of the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants will be identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor or its permitted transferees, except in certain limited circumstances. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00: Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
•in whole and not in part;
•at a price of $0.01 per warrant;
•upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
•if, and only if, the last reported sale price of Class A common stock for any 20-trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like).
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Except as described below, none of the Private Placement Warrants will be redeemable by us so long as they are held by the Sponsor or its permitted transferees.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00: Once the warrants become exercisable, the Company may redeem the outstanding warrants:
•in whole and not in part;
•at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A common stock; and
•if, and only if, the Reference Value equals or exceeds $10.00 per share as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like);like; and
•if the Reference Value is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
The “fair market value” of Class A common stock shall mean the volume-weighted average price of Class A common stock for the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment).
If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 8—8 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 20212022 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| Description | | Quoted Prices in Active Markets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Other Unobservable Inputs (Level 3) | |
| Assets: | | | | | | | | | |
| Investments held in Trust Account - Money market funds | | $ | 1,380,005,899 | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | |
| Derivative warrant liabilities - Public warrants | | | | | | | | | | $ | 41,055,000 | |
| Derivative warrant liabilities - Private placement warrants | | $ | - | | | $ | - | | | $ | 27,384,000 | |
| | | | | | | | | | | | | | | | | | | | |
| Description | | Quoted Prices in
Active Markets
(Level 1) | | Significant Other
Observable Inputs
(Level 2) | | Significant Other
Unobservable Inputs
(Level 3) |
| Assets: | | | | | | |
| Investments held in Trust Account - Money market funds | | $ | 1,380,213,705 | | | $ | — | | | $ | — | |
| | | | | | |
| Liabilities: | | | | | | |
| Derivative warrant liabilities - Public warrants | | $ | 22,770,000 | | | $ | — | | | $ | — | |
| Derivative warrant liabilities - Private placement warrants | | $ | — | | | $ | — | | | $ | 14,561,330 | |
Transfers to or from Levels 1, 2,The following table presents information about the Company’s assets and 3liabilities that are recognizedmeasured at fair value on a recurring basis as of December 31,2021 and indicates the endfair value hierarchy of the reporting period. There were no transfers between levels forvaluation techniques that the period from January 14, 2021 (Inception)Company utilized to March 31, 2021.determine such fair value.
| | | | | | | | | | | | | | | | | | | | |
| Description | | Quoted Prices in
Active Markets
(Level 1) | | Significant Other
Observable Inputs
(Level 2) | | Significant Other
Unobservable Inputs
(Level 3) |
| Assets: | | | | | | |
| Investments held in Trust Account - Money market funds | | $ | 1,380,085,256 | | | $ | — | | | $ | — | |
| | | | | | |
| Liabilities: | | | | | | |
| Derivative warrant liabilities - Public warrants | | $ | 34,500,000 | | | $ | — | | | $ | — | |
| Derivative warrant liabilities - Private placement warrants | | $ | — | | | $ | — | | | $ | 22,602,670 | |
The estimated fair value of the
Public Warrants and Private Placement Warrants
areis measured at fair value using a
Monte CarloBlack-Scholes valuation model as of March 31, 2022 and December 31, 2021, while the Public Warrants were valued using a Monte-Carlo simulation
model as of March 31, 2021 and
Black-Scholes option pricing model, respectively.is based on their quoted market price as of March 31, 2022. The estimated fair value of the
Public Warrants and Private Placement Warrants is determined using Level 3 inputs. Inherent in option pricing and simulation models are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock assumption based on the implied volatility of
comparable SPAC public warrants.the Public Warrants. The risk-free interest rate is based on the U.S. Treasury constant maturity rate on the issuance date for a maturity similar to the expected remaining life of the warrants.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| | | | March 19, 2021 | | March 31, 2021 | | | March 31, 2022 | | December 31, 2021 |
| Exercise price | | $ | 11.50 | | $ | 11.50 | | Exercise price | | $ | 11.50 | | | $ | 11.50 | |
Class A common share value
| | $ | 9.65 | | $ | 9.64 | | Class A common share value | | $ | 9.83 | | | $ | 9.74 | |
| Term | | 5 | | 5 | | Term | | 5 | | 5 |
| Volatility | | 21.0 | % | | 22.0 | % | Volatility | | 10.3 | % | | 17.8 | % |
| Risk-free rate | | 1.87 | % | | 1.88 | % | Risk-free rate | | 2.57 | % | | 1.59 | % |
The change in the fair value of Level 3 derivative warrant liabilities for the three months ended March 31, 20212022 is summarized as follows:
| Level 3 - Derivative warrant liabilities at March 19, 2021 (inception) | | $ | - | |
| Issuance of Public and Private Warrants | | | 64,847,670 | |
| Change in fair value of derivative warrant liabilities | | | 3,591,330 | |
| Level 3 - Derivative warrant liabilities at March 31, 2021 | | $ | 68,439,000 | |
| | | | | |
| Level 3 - Derivative warrant liabilities at January 1, 2022 | $ | 22,602,670 | |
| Change in fair value of derivative warrant liabilities | (8,041,340) | |
| Level 3 - Derivative warrant liabilities at March 31, 2022 | $ | 14,561,330 | |
| |
| Unrealized gain on level 3 derivative warrant liabilities held at March 31, 2022 | $ | 8,041,340 | |
Note 9 — Revision to Prior Period Financial Statements
DuringThe change in the coursefair value of preparing the quarterly report on Form 10-QLevel 3 derivative warrant liabilities for the period from January 14, 2021 (Inception)(inception) through March 31, 2021 is summarized as follows:
| | | | | |
| Level 3 - Derivative warrant liabilities at January 14, 2021 (inception) | $ | — | |
| Issuance of Public and Private Warrants | 64,847,670 | |
| Change in fair value of derivative warrant liabilities | 3,591,330 | |
| Level 3 - Derivative warrant liabilities at March 31, 2021 | $ | 68,439,000 | |
| |
| Unrealized loss on level 3 derivative warrant liabilities held at March 31, 2021 | $ | (3,591,330) | |
Transfers to or from Levels 1, 2, and 3 are recognized at the Company identified a misstatement in its application of accounting guidance related to the Company’s Public Warrants and Private Placement Warrants (collectively, the “Warrants”) in the Company’s previously issued audited balance sheet dated March 19, 2021, filed on Form 8-K on March 25, 2021 (the “Post-IPO Balance Sheet”).
On April 12, 2021, the staffend of the SEC (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accountingreporting period. There were no transfers between levels for the period for the quarter ended March 31, 2022 and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity.March 31, 2021.
The Warrants were reflected as a component of equity in the Post-IPO Balance Sheet as opposed to liabilities on the balance sheet, based on the Company’s application of FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions of the Warrants and the Company’s application of ASC 815-40. After discussion and evaluation, management concluded that the Warrants should be presented as liabilities with subsequent fair value remeasurement.
KKR ACQUISITION HOLDINGS I CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company concluded that the misstatement was not material to the Post-IPO Balance Sheet. The effect of the revisions to the Post-IPO Balance Sheet are as follows:
| | | As of March 19, 2020 | |
| | | As Previously Reported | | | Revision Adjustments | | | As Revised | |
| | | | | | | | | | |
| Balance Sheet | | | | | | | | | |
| Total assets | | $ | 1,398,826,800 | | | $ | - | | | $ | 1,398,826,800 | |
| Liabilities and stockholders’ equity | | | | | | | | | | | | |
| Total current liabilities | | $ | 15,372,264 | | | $ | - | | | $ | 15,372,264 | |
| Deferred underwriting commissions | | | 48,300,000 | | | | - | | | | 48,300,000 | |
| Derivative warrant liabilities | | | - | | | | 64,847,670 | | | | 64,847,670 | |
| Total liabilities | | | 63,672,264 | | | | 64,847,670 | | | | 128,519,934 | |
| Class A common shares, $0.0001 par value; shares subject to possible redemption | | | 1,330,154,530 | | | | (64,847,670 | ) | | | 1,265,306,860 | |
| Stockholders’ equity | | | | | | | | | | | | |
| Preferred shares- $0.0001 par value | | | - | | | | - | | | | - | |
| Class A common shares - $0.0001 par value | | | 498 | | | | 649 | | | | 1,147 | |
| Class B common shares - $0.0001 par value | | | 3,450 | | | | - | | | | 3,450 | |
| Additional paid-in-capital | | | 5,106,454 | | | | 2,188,641 | | | | 7,295,095 | |
| Accumulated deficit | | | (110,396 | ) | | | (2,189,290 | ) | | | (2,299,686 | ) |
| Total stockholders’ equity | | | 5,000,006 | | | | - | | | | 5,000,006 | |
| Total liabilities and stockholders’ equity | | $ | 1,398,826,800 | | | $ | - | | | $ | 1,398,826,800 | |
Note 10—9 — Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring through the date the financial statements were issued require potential adjustment to or disclosure in the financial statements and has concluded that all such events that would require recognition or disclosure have been recognized or disclosed.
18
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to KKR Acquisition Holdings I Corp. 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 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 on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in the Risk Factors section of our final prospectus for our Initial Public Offering (as defined below) and in our other Securities and Exchange Commission (“SEC”) filings. Except as expressly required by applicable securities law, we disclaim 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 incorporated in Delaware on January 14, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We are an early-stage emerging growth company and, as such, subject to all of the risks associated with early stage and emerging growth companies. Our sponsor is KKR Acquisition Sponsor I LLC, a Delaware limited liability company (our “Sponsor”).
Our registration statement for our Initial Public Offering (the “Initial Public Offering”) became effective on March 16, 2021. On March 19, 2021, we consummated an Initial Public Offering of 138,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including the exercise of the underwriters’ option to purchase 18,000,000 additional Units (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of approximately $1.4 billion, and incurring offering costs of approximately $77.4 million (net of reimbursement from underwriters of $13.8 million), of which $48.3 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 21,733,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant to our Sponsor, generating proceeds of $32.6 million.
Upon the closing of the Initial Public Offering and the Private Placement, approximately $1.4 billion ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 19, 2023 (as such period may be extended by our stockholders in accordance with the Certificate of Incorporation, the “Combination Period”), we will (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds in the Trust Account (net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to
receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Results of Operations
Our entire activity since inception through March 31, 20212022 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of gain on investment (net), dividends and interest held in Trust Account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses related to prospective business combination candidates. There can be no assurance that our plans to complete a Business Combination will be successful.
For the three months ended March 31, 2022 we had net income of approximately $18.8 million, which consisted of a loss from operations of approximately $1.1 million, a non-operating income of approximately $19.8 million for changes in fair value of derivative liabilities, and income from investments held in the Trust Account of approximately $128,000. The loss from operations consisted of approximately $1.0 million of general and administrative expenses and approximately $50,000 in franchise tax expense.For the period from January 14, 2021 (inception) through March 31, 2021, we had net loss of approximately $6 million, which consisted of a loss from operations of approximately $289,000, a non-operating expense of approximately $2.2 million for offering costs associated with derivative warrant liabilities, a non-operating loss of approximately $3.6 million for changes in fair value of derivative liabilities, and income from investments held in the Trust Account of approximately $6,000. The loss from operations consisted of approximately $248,000 of general and administrative expenses and approximately $41,000 in franchise tax expense.
Liquidity and Capital Resources
Prior to the completion of the Initial Public Offering, our liquidity needs were satisfied through expenses totaling $25,000 being paid by our Sponsor in exchange for issuance of 28,750,000 shares of the Company’s Class B common stock, par value $0.0001 per share, (the “Founder Shares”) to our Sponsor, the proceeds of a promissory note (the “Note”) from the Sponsor in the amount of $300,000 and an advancement of approximately $150,000. We fully repaid the Note and the advance for a total of approximately $450,000 to the Sponsor on March 22, 2021. We have since completed our Initial Public Offering at which time capital in excess of the funds deposited in the Trust Account and/or used to fund offering expenses was released to us for general working capital purposes. Accordingly, management has since reevaluated
As of March 31, 2022, we had current liabilities of $3.4 million and approximately $1.6 million in our operating bank account. We do not have sufficient liquidity and financial condition and determined that sufficient capital exists to sustain operations onemeet our anticipated obligations over the next year from the date of issuance of the financial statements included in this report. 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,” our management has determined that if the Company is unsuccessful in consummating an initial business combination, the mandatory liquidation and subsequent dissolution raise substantial doubt about our ability to continue as a going concern. We have access to funds from our Sponsor that are sufficient to fund the working capital needs of the Company until a potential business combination or up to the mandatory liquidation date as stipulated in the certificate of incorporation. As of March 31,2022, there were no amounts outstanding under any working capital loan (see Note 4 to our unaudited condensed financial statements is issued and therefore substantial doubt has been alleviated.
contained elsewhere in this Quarterly Report on Form 10-Q). As of March 31, 2022, We do not believe we will needhad a $2.1 million payable outstanding to raise additional funds in order to meeta related party of our Sponsor for the expenditures required forreimbursement of operating our business prior to our initial Business Combination. However, if our estimatesexpenses incurred on behalf of the costs of identifying a target business, undertaking in-depth due diligence and negotiatingCompany. Management further intends to close an initial Business Combination are less thanbusiness combination before 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 our shares of Class A common stock upon completion of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination (including from our affiliates or affiliates of our Sponsor).
mandatory liquidation date.
We continue to evaluate the impact of the COVID-19 pandemic and Russia-Ukraine conflict and have concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
20
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than a contingent obligation to pay the underwriters to our Initial Public Offering $48.3 million in the aggregate for deferred underwriting commissions. 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
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company has identifiedFor a discussion of the following as itscompany’s critical accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate allpolicies, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in 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 FASB ASC Topic 480 and FASB ASC Topic 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The 34,500,000 warrants issued in connection with the Initial Public Offering and exercise of the over-allotment (the “Public Warrants”) and the 21,733,333 Private Placement Warrants are recognized as derivative liabilities in accordance with FASB ASC Topic 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The estimated fair value of the Public Warrants and Private Placement Warrants are measured at fair value using a Monte Carlo simulation and Black-Scholes option pricing model, respectively.
Class A Common Stock Subject to Possible Redemption
Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable Class A common stock (including Class A 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, Class A common stock is classified as stockholders’ equity. Our outstanding 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. Accordingly, atAnnual Report on Form 10-K filed March 31, 2021, 126,154,299 shares of Class A common stock subject2022. There have been no significant changes to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the unaudited condensed balance sheet.our critical accounting estimates since our Annual Report on Form 10-K.
Recent Accounting Pronouncements
In August 2020, the FASB issued 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. ASU 2020-06 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 adopted ASU 2020-06 on January 14, 2021. Adoption of the ASU 2020-06 did not impact our financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2021,2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
We do not believe that inflation had a material impact on our business, revenues or operating results during the period presented.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we mayand are not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act. Due to the short-term nature of these investments, we believe that there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
General
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial and accounting officer, to allow timely decisions regarding required disclosure.
Previously Disclosed Restatement and Material Weakness
As disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K, we previously identified a material weakness in our internal control over financial reporting related to the classification of our Class A common stock and related restatement of the Company's previous financial statements to classify all Class A common stock as temporary equity and to recognize accretion from the initial book value to redemption value at the time of the Company's Initial Public Offering and in accordance with ASC 480, as discussed in Note 9 to the interim financial statements included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (the “Restatement”).
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021,2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our chiefprincipal executive officer and principal financial and accounting officer has concluded that during the period covered by this report,Quarterly Report on Form 10-Q and solely due to the events that led to the Restatement, our disclosure controls and procedures were effective.not effective because of the material weakness in our internal control over financial reporting.
Remediation of Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for certain complex features of the Class A common stock issued by the Company was not effectively designed or maintained. This material weakness resulted in the Restatement of the Company’s financial statements as described above.
In response to this material weakness, we have evaluated what actions to take to further enhance our processes to identify and appropriately apply applicable accounting requirements in the preparation of our financial statements, which are still in progress. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we are improving these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. We continue to make progress in having increased communication and involvement among our personnel, our Sponsor and third-party professionals with whom we consult and depend upon regarding the application of complex accounting standards. The elements of our plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
22
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
As noted in Note 9 to the interim financial statements, during the course of preparing this Quarterly Report on Form 10-Q, we identified a misstatement in our application of accounting guidance related to our Public Warrants and Private Placement Warrants (collectively, the “Warrants”) on our previously issued audited balance sheet dated March 19, 2021, filed on Form 8-K on March 25, 2021 (the “Post-IPO Balance Sheet”).
On April 12, 2021, the staff of the SEC issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies” (the “SEC Staff Statement”) pursuant to which it expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on a SPAC’s balance sheet as opposed to equity.
The Warrants were reflected as a component of equity in the Post-IPO Balance Sheet as opposed to liabilities on the balance sheet, based on our application of FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”). The views expressed in the SEC Staff Statement were not consistent with our historical interpretation of the specific provisions of the Warrants and our application of ASC 815-40. After discussion and evaluation, we concluded that the Warrants should be presented as liabilities with subsequent fair value remeasurement. We concluded that the misstatement was not material to the Post-IPO Balance Sheet.
In light of the misstatement in our Post-IPO Balance Sheet, however, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements in the preparation of our financial statements. Our plans at this time include having increased communication and involvement among our personnel, our sponsor and third-party professionals with whom we consult and depend upon regarding the application of complex accounting standards. The elements of our plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Other than as set forth above, there was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2021,2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. | Item 1A. Risk Factors. |
There have been no material changes from thewith respect to those risk factors previously disclosed in the Company’s final prospectusour Annual Report on Form 10-K for the Initial Public Offering as filed with the SEC on March 18,year ended December 31, 2021.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
None.On January 25, 2021, our Sponsor paid $25,000 to cover certain offering costs on our behalf in exchange for issuance of 28,750,000 Founder Shares. On March 16, 2021, we effected a stock dividend of 5,750,000 shares with respect to Class B common stock, resulting in an aggregate of 34,500,000 shares of Class B common stock outstanding. Our
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits.
23
Sponsor agreed to forfeit up to 4,500,000 Founder Shares to the extent that the option to purchase the Over-Allotment Units was not exercised in full by the underwriters, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On March 19, 2021, the underwriters fully exercised their option to purchase the Over-Allotment Units; thus, these 4,500,000 Founder Shares were no longer subject to forfeiture. Such securities were issued in connection with the Company’s organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement of 21,733,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to our Sponsor, generating proceeds of $32.6 million. These issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
No underwriting discounts or commissions were paid with respect to such sales.
Use of Proceeds
On March 19, 2021, we consummated an Initial Public Offering of 138,000,000 Units, including the exercise of the underwriters’ option to purchase 18,000,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of approximately $1.4 billion. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-252741) that became effective on March 16, 2021. Citigroup acted as the underwriter for the Initial Public Offering.
In connection with the Initial Public Offering and the sale of Over-Allotment Units, we incurred offering costs of approximately $77.4 million (net of reimbursement from underwriters of $13.8 million), of which $48.3 million was for deferred underwriting commissions. Other incurred offering costs consisted principally of preparation fees related to the Initial Public Offering. After deducting the underwriting discounts and commissions (excluding the deferred portion, which amount will be payable upon consummation of the Initial Business Combination, if consummated) and the Initial Public Offering expenses, approximately $1.4 billion of the net proceeds from our Initial Public Offering, the sale of Over-Allotment Units and certain of the proceeds from the Private Placement of the Private Placement Warrants (or $10.00 per share sold in the Initial Public Offering) was placed in the Trust Account. The net proceeds of the Initial Public Offering, the sale of Over-Allotment Units and certain proceeds from the sale of the Private Placement Warrants are held in the Trust Account and invested as described elsewhere in this Quarterly Report on Form 10-Q.
There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement as is described in the Company’s final prospectus related to the Initial Public Offering.
Item 3. | Defaults Upon Senior Securities |
None.
Exhibit
Number
| Description | | | |
31.1Exhibit
Number | Description |
| 10.1+ | |
| |
| 10.1+ | |
| |
| 31.1* | |
32.1 | |
| 32.1** | |
| |
101.INS101.INS* | XBRL Instance Document |
| |
101.SCH101.SCH* | XBRL Taxonomy Extension Schema Document |
| |
101.CAL101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
| |
101.DEF101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
| |
101.LAB101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
| |
101.PRE101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith
** Furnished herewith
+ Management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.
25
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrantRegistrant has duly caused this reportReport to be signed on its behalf by the undersigned, thereunto duly authorized on this 17th day of May 2021.
authorized. | | | | | | | | | | | |
| | KKR ACQUISITION HOLDINGS I CORP. |
| | | |
| Date: May 16, 2022 | By:
| By: | /s/ Glenn Murphy |
| Name:
| | Glenn Murphy |
| | | Title:
| Chief Executive Officer, Executive Chairman and Director
|