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 September 30, 2022

☐	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 November 14, 2022, 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

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements	1
	Condensed Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	1
	Unaudited Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	2
	Unaudited Condensed Statements of Changes in Shareholders’ Deficit for the Three and Nine Months Ended September 30, 2022 and 2021	3
	Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	4
	Notes to Unaudited Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
	Signature	30

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Financial Statements

KERNEL GROUP HOLDINGS, INC.

CONDENSED BALANCE SHEETS

	September 30, 2022			December 31, 2021
	(Unaudited)
Assets:
Current assets:
Cash	$	112,580		$	474,945
Prepaid expenses		159,039			444,503
Total current assets		271,619			919,448
Investments held in Trust Account		306,603,530			304,765,064
Total Assets	$	306,875,149		$	305,684,512

Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit:
Current liabilities:
Accounts payable	$	801,822		$	797,789
Accrued expenses		1,909,539			1,791,858
Accrued expenses - related party		153,852			50,000
Total current liabilities		2,865,213			2,639,647
Deferred underwriting commissions		10,666,250			10,666,250
Warrant liabilities		719,625			12,473,500
Total liabilities		14,251,088			25,779,397

Commitments and Contingencies

Class A ordinary shares subject to possible redemption, $0.0001 par value; 30,475,000 shares issued and outstanding at approximately $10.06 and $10.00 per share redemption value as of September 30, 2022 and December 31, 2021, respectively		306,503,530			304,750,000

Shareholders’ Deficit:
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding as of September 30, 2022 and December 31, 2021		-			-
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; no non-redeemable shares issued or outstanding as of September 30, 2022 and December 31, 2021		-			-
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 7,618,750 shares issued and outstanding as of September 30, 2022 and December 31, 2021		762			762
Accumulated deficit		(13,880,231	)		(24,845,647	)
Total shareholders’ deficit		(13,879,469	)		(24,844,885	)
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit	$	306,875,149		$	305,684,512

The accompanying notes are an integral part of these unaudited condensed financial statements.

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KERNEL GROUP HOLDINGS, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Operating expenses
General and administrative expenses	$	249,489		$	240,508		$	783,395		$	1,703,529
Administrative fees - related party		30,000			30,000			90,000			80,000
Loss from operations		(279,489	)		(270,508	)		(873,395	)		(1,783,529	)
Other income (expenses):
Change in fair value of warrant liabilities		1,199,375			11,034,250			11,753,875			23,682,750
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		1,378,065			4,682			1,838,466			11,959
Net income	$	2,297,951		$	10,768,424		$	12,718,946		$	15,489,642

Weighted average shares outstanding of Class A ordinary shares, basic and diluted		30,475,000			30,475,000			30,475,000			26,567,949
Basic and diluted net income per Class A ordinary share	$	0.06		$	0.28		$	0.33		$	0.45
Weighted average shares outstanding of Class B ordinary shares, basic		7,618,750			7,618,750			7,618,750			7,491,346
Weighted average shares outstanding of Class B ordinary shares, diluted		7,618,750			7,618,750			7,618,750			7,618,750
Basic and diluted net income per Class B ordinary share	$	0.06		$	0.28		$	0.33		$	0.45

The accompanying notes are an integral part of these unaudited condensed financial statements.

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KERNEL GROUP HOLDINGS, INC.

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

For the Three and Nine Months Ended September 30, 2022

	Ordinary Shares								Additional					Total
	Class A				Class B				Paid-in		Accumulated			Shareholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance - December 31, 2021		-	$	-		7,618,750	$	762	$	-	$	(24,845,647	)	$	(24,844,885	)
Net income		-		-		-		-		-		6,124,381			6,124,381
Balance - March 31, 2022 (unaudited)		-		-		7,618,750		762		-		(18,721,266	)		(18,720,504	)
Increase in redemption value of Class A ordinary shares subject to possible redemption		-		-		-		-		-		(375,465	)		(375,465	)
Net income		-		-		-		-		-		4,296,614			4,296,614
Balance - June 30, 2022 (unaudited)		-		-		7,618,750		762		-		(14,800,117	)		(14,799,355	)
Increase in redemption value of Class A ordinary shares subject to possible redemption		-		-		-		-		-		(1,378,065	)		(1,378,065	)
Net income		-		-		-		-		-		2,297,951			2,297,951
Balance - September 30, 2022 (unaudited)		-	$	-		7,618,750	$	762	$	-	$	(13,880,231	)	$	(13,879,469	)

For the Three and Nine Months Ended September 30, 2021

	Ordinary Shares								Additional						Total
	Class A				Class B				Paid-in			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Equity (Deficit)
Balance - December 31, 2020		-	$	-		7,618,750	$	762	$	24,238		$	(23,107	)	$	1,893
Accretion on Class A ordinary shares subject to possible redemption amount		-		-		-		-		(24,238	)		(40,070,796	)		(40,095,034	)
Net loss		-		-		-		-		-			(6,694,512	)		(6,694,512	)
Balance - March 31, 2021 (unaudited)		-		-		7,618,750		762		-			(46,788,415	)		(46,787,653	)
Net income		-		-		-		-		-			11,415,730			11,415,730
Balance - June 30, 2021 (unaudited)		-		-		7,618,750		762		-			(35,372,685	)		(35,371,923	)
Net income		-		-		-		-		-			10,768,424			10,768,424
Balance - September 30, 2021 (unaudited)		-	$	-		7,618,750	$	762	$	-		$	(24,604,261	)	$	(24,603,499	)

The accompanying notes are an integral part of these unaudited condensed financial statements.

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KERNEL GROUP HOLDINGS, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended
	September 30, 2022			September 30, 2021
Cash Flows from Operating Activities:
Net income	$	12,718,946		$	15,489,642
Adjustments to reconcile net income to net cash used in operating activities:
Change in fair value of warrant liabilities		(11,753,875	)		(23,682,750	)
Loss on issuance of Private Placement Warrants		-			5,162,500
Income from investments held in Trust Account		(1,838,466	)		(11,959	)
Offering costs associated with issuance of warrants		-			1,259,038
Changes in operating assets and liabilities:
Prepaid expenses		285,464			(554,106	)
Accounts payable		4,033			838,243
Accrued expenses		187,681			1,237
Accrued expenses - related party		103,852			16,143
Net cash used in operating activities		(292,365	)		(1,482,012	)

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		-			37,000
Repayment of note payable to related party		-			(77,000	)
Proceeds received from initial public offering, gross		-			304,750,000
Proceeds received from private placement		-			8,750,000
Offering costs paid		(70,000	)		(6,659,948	)
Net cash provided by (used in) financing activities		(70,000	)		306,800,052

Net change in cash		(362,365	)		568,040

Cash - beginning of the period		474,945			-
Cash - end of the period	$	112,580		$	568,040

Supplemental disclosure of noncash activities:
Offering costs included in accrued expenses	$	-		$	70,000
Deferred underwriting commissions	$	-		$	10,666,250

The accompanying notes are an integral part of these unaudited condensed financial statements.

Table of Contents

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