10-Q 1 brhc10025231_10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to________________

KERNEL GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Cayman Islands	001-39983	98-1567976
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

2 Rousseau Street San Francisco, California		94112
(Address Of Principal Executive Offices)		(Zip Code)

(415) 404-6356

Registrant’s telephone number, including area code

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Units, each consisting of one Class A ordinary share, $0.0001 par value, and one-half of one redeemable warrant	KRNLU	Nasdaq Capital Market
Class A ordinary shares included as part of the units	KRNL	Nasdaq Capital Market
Redeemable warrants included as part of the units	KRNLW	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

As of June 4, 2021, 30,475,000 Class A ordinary shares, par value $0.0001 per share, and 7,618,750 Class B ordinary shares, par value $0.0001 per share, were issued and outstanding, respectively.

KERNEL GROUP HOLDINGS, INC.

Form 10-Q

For the Quarter Ended March 31, 2021

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements	1
	Condensed Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020	1
	Condensed Statement of Operations for the three months ended March 31, 2021 (Unaudited)	2
	Condensed Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2021 (Unaudited)	3
	Condensed Statement of Cash Flows for the three months ended March 31, 2021 (Unaudited)	4
	Notes to Unaudited Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	24
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

	March 31, 2021			December 31, 2020
	(Unaudited)
Assets:
Current assets:
Cash	$	853,921		$	-
Prepaid expenses		800,711			7,291
Total current assets		1,654,632			7,291
Investments held in Trust Account		304,754,173			-
Deferred offering costs associated with the initial public offering		-			323,450
Total Assets	$	306,408,805		$	330,741

Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable	$	16,739		$	25,848
Accrued expenses		70,000			263,000
Accrued expenses - related party		20,000			-
Note payable - related party		-			40,000
Advance from related party		13,095			-
Total current liabilities		119,834			328,848
Deferred underwriting commissions		10,666,250			-
Warrant liabilities		37,660,375			-
Total liabilities		48,446,459			328,848

Commitments and Contingencies

Class A ordinary shares, $0.0001 par value; 25,296,234 and 0 shares subject to possible redemption at $10.00 per share as of March 31, 2021 and December 31, 2020, respectively		252,962,340			-

Shareholders' Equity:
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding		-			-
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 5,178,766 and 0 shares issued and outstanding (excluding 25,296,234 and 0 shares subject to possible redemption) as of March 31, 2021 and December 31, 2020, respectively		517			-
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 7,618,750 shares issued and outstanding as of March 31, 2021 and December 31, 2020		762			762
Additional paid-in capital		11,716,346			24,238
Accumulated deficit		(6,717,619	)		(23,107	)
Total shareholders' equity		5,000,006			1,893
Total Liabilities and Shareholders' Equity	$	306,408,805		$	330,741

	For the Three Months Ended March 31, 2021 (Unaudited)
Operating expenses
General and administrative expenses	$	432,147
Administrative fees - related party		20,000
Loss from Operations		(452,147	)
Change in fair value of warrant liabilities		175,000
Loss on issuance of Private Placement Warrants		(5,162,500	)
Offering costs associated with issuance of warrants		(1,259,038	)
Income from investments held in Trust Account		4,173
Net loss	$	(6,694,512	)

Weighted average shares outstanding of Class A ordinary shares, basic and diluted		30,475,000
Basic and diluted net income per share, Class A ordinary shares	$	0.00
Weighted average shares outstanding of Class B ordinary shares, basic and diluted		7,232,292
Basic and diluted net loss per share, Class B ordinary shares	$	(0.93	)

	Ordinary Shares										Additional						Total
	Class A						Class B				Paid-in			Accumulated			Shareholders'
	Shares			Amount			Shares		Amount		Capital			Deficit			Equity
Balance - December 31, 2020		-		$	-			7,618,750	$	762	$	24,238		$	(23,107	)	$	1,893
Sale of units in initial public offering, less allocation to derivative warrant liabilities		30,475,000			3,047			-		-		280,824,077			-			280,827,124
Offering costs		-			-			-		-		(16,172,159	)		-			(16,172,159	)
Class A ordinary shares subject to possible redemption		(25,296,234	)		(2,530	)		-		-		(252,959,810	)		-			(252,962,340	)
Net loss		-			-			-		-		-			(6,694,512	)		(6,694,512	)
Balance - March 31, 2021 (unaudited)		5,178,766		$	517			7,618,750	$	762	$	11,716,346		$	(6,717,619	)	$	5,000,006

	For the Three Months Ended March 31, 2021 (Unaudited)
Cash Flows from Operating Activities:
Net loss	$	(6,694,512	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of warrant liabilities		(175,000	)
Loss on issuance of Private Placement Warrants		5,162,500
Income from Investments held in Trust Account		(4,173	)
Offering costs associated with issuance of warrants		1,259,038
Changes in operating assets and liabilities:
Prepaid expenses		(793,420	)
Accrued expenses		3,956
Accrued expenses - related party		20,000
Net cash used in operating activities		(1,221,611	)

Cash Flows from Investing Activities:
Cash deposited in Trust Account		(304,750,000	)
Net cash used in investing activities		(304,750,000	)

Cash Flows from Financing Activities:
Proceeds from note payable to related party		32,000
Repayment of note payable to related party		(77,000	)
Proceeds received from initial public offering		304,750,000
Proceeds received from private placement		8,750,000
Offering costs paid		(6,629,468	)
Net cash provided by financing activities		306,825,532

Net increase in cash		853,921

Cash - beginning of the period		-
Cash - end of the period	$	853,921

Supplemental disclosure of noncash investing and financing activities:
Offering costs included in accounts payable	$	12,385
Accrued offering costs	$	70,000
Offering costs included in note payable	$	5,000
Offering costs included in advance from related party	$	13,095
Reversal of accrued offering costs	$	263,000
Deferred underwriting commissions	$	10,666,250
Initial value of Class A ordinary shares subject to possible redemption	$	290,803,650
Change in value of Class A ordinary shares subject to possible redemption	$	37,841,310
Initial value of derivative warrant liabilities	$	37,835,375

	Fair Value Measured as of March 31, 2021
	Level 1		Level 2		Level 3
Assets
Investments held in Trust Account - money market fund	$	304,754,173	$	-	$	-
Liabilities:
Warrant liabilities - public warrants		23,922,875		-
Warrant liabilities - private warrants		-		-		13,737,500

Warrant liabilities at January 1, 2021	$	-
Issuance of Public and Private Warrants		37,835,375
Public Warrants transfer to Level 1		(23,922,875	)
Change in fair value of warrant liabilities		(175,000	)
Warrant liabilities at March 31, 2021	$	13,737,500

	February 5, 2021			March 31, 2021
Exercise price	$	11.50		$	11.50
Stock Price	$	10.30		$	9.98
Term (in years)		6.59			6.44
Volatility		19.60	%		20.20	%
Risk-free interest rate		0.76	%		1.27	%

Exhibit Number		Description
31.1*		Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Dated: June 8, 2021	KERNEL GROUP HOLDINGS, INC.

	By:	/s/ Mark Gross
	Name:	Mark Gross
	Title:	Chief Executive Officer

SEC Form 10-Q filed by Kernel Group Holdings Inc.