Kairos Acquisition 10Q 2022 Q3 Quarterly report

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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

KAIROS ACQUISITION CORP.

(Exact name of registrant as specified in its charter)

Cayman Islands

001-39841

N/A

(State or other jurisdiction

of incorporation or organization)

(Commission File Number)

(IRS Employer Identification No.)

c/o Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas New York, NY

(Address Of Principal Executive Offices)

10105

(Zip Code)

(917) 783-4057

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 and one-half of one redeemable warrant	KAIRU	The Nasdaq Stock Market LLC
Class A ordinary shares, par value $0.0001 per share	KAIR	The Nasdaq Stock Market LLC
Redeemable warrants included as part of the units, each whole warrant exercisable for one share of Class A ordinary share at an exercise price of $11.50 per share	KAIRW	The Nasdaq Stock Market LLC

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, 27,600,000 Class A ordinary shares, par value $0.0001 per share, and 6,900,000 Class B ordinary shares, par value $0.0001 per share, were issued and outstanding.

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KAIROS ACQUISITION CORP.

Form 10-Q

For the Quarter Ended September 30, 2022

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		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	3

	Unaudited Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	4

	Unaudited Condensed Statements of Changes in Shareholders’ Deficit for the Three and Nine Months Ended September 30, 2022 and 2021	5

	Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	6

	Notes to Unaudited Condensed Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

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	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

SIGNATURES		31

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CERTAIN DEFINED TERMS

In this Quarterly Report on Form 10-Q (the “Quarterly Report”), unless otherwise stated or unless the context otherwise requires:

●

“Amended and Restated Memorandum and Articles of Association” means our amended and restated memorandum and articles of association;

●

“board of directors” or “board” means the board of directors of the Company;

●

“Business Combination” means a merger, capital share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses;

●

“Companies Act” means the Companies Act (2020 Revision) of the Cayman Islands as the same may be amended from time to time;

●

“Company,” “we,” “us,” “our” or “our company” means (i) prior to the closing of the initial business combination, Kairos Acquisition Corp., a Cayman Islands exempted company, and (ii) upon closing of the initial business combination, the post-combination company;

●

“Continental” means Continental Stock Transfer & Trust Company, trustee of our trust account.

●

“Exchange Act” means the Securities Exchange Act of 1934, as amended;

●

“Founder Shares” means our Class B ordinary shares initially purchased by our sponsor in a private placement prior to our initial public offering, a portion of which were transferred to HS Chronos in a private placement prior to our initial public offering, and, unless the context otherwise requires, our Class A ordinary shares issued upon the conversion thereof as provided herein;

●

“HS Chronos” means HS Chronos LLC, one of our initial shareholders and an affiliate of Vikas Singhal, our director, and Michael Millette, our board observer;

●

“Initial Public Offering” means the initial public offering that was consummated by the Company on January 8, 2021;

●

“Initial Shareholders” means, collectively, our sponsor and HS Chronos, in their capacity as the holders of our founder shares that were purchased prior to our initial public offering;

●

“Investment Company Act” means the Investment Company Act of 1940, as amended;

●

“JOBS Act” means the Jumpstart Our Business Startups Act of 2012;

●

“letter agreement” means the letter agreement entered into on January 5, 2021, by and among the Company, its officers, directors, Kairos Alpha Acquisition LLC and HS Chronos LLC;

●

“management” or “management team” means our officers and directors;

●

“Nasdaq” means The Nasdaq Capital Market;

●

“ordinary shares” means our Class A ordinary shares and our Class B ordinary shares;

●

“post-combination company” means the Company upon the consummation of the initial business combination;

●

“Private Placement” means the private placement of an aggregate of 8,020,000 warrants purchased by our sponsor and HS Chronos which occurred simultaneously with the completion of our initial public offering at an average purchase price of $1.00 per warrant for a total purchase price of $8.02 million;

●

“Private Placement Warrants” means the warrants issued to our sponsor and HS Chronos in a private placement that closed simultaneously with the closing of our initial public offering and sold to our sponsor in connection with the consummation of the sale of additional units pursuant to the underwriters' over-allotment option on January 12, 2021;

●

“prospectus” means our final prospectus for our initial public offering filed with the SEC on January 8, 2021;

●

“Public Shareholders” means the holders of our public shares;

●

“Public Shares” means our Class A ordinary shares offered as part of the units in our initial public offering (whether they were subscribed for in our initial public offering or thereafter in the open market);

●

“Public Warrants” means the redeemable warrants sold as part of the units in our initial public offering (whether they were subscribed for in our initial public offering or in the open market);

●

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002;

●

“SEC” means the U.S. Securities and Exchange Commission;

●

“Securities Act” means the Securities Act of 1933, as amended;

●

“Sponsor” means Kairos Alpha Acquisition LLC, a Delaware limited liability company;

●

“trust account” means the trust account established in connection with the Initial Public Offering where an amount of $276,000,000 ($10.00 per unit) from the net proceeds of the sale of the units in the initial public offering was placed; and

●

“Units” means the units sold in our initial public offering (whether they are subscribed for in our initial public offering or in the open market), which consist of one public share and one-half of one public warrant.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:

●

our ability to complete our initial business combination;

●

our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;

●

our officers and directors allocating their time to other businesses and having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;

●

our ability to consummate an initial business combination due to the uncertainty resulting from our officers and directors having conflicts of interest;

●

our ability to obtain additional financing to complete our initial business combination;

●

the ability of our officers and directors to generate a number of potential acquisition opportunities;

●

our pool of prospective target businesses;

●

our public securities’ liquidity and trading;

●

the lack of a market for our securities;

●

the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or

●

our financial performance.

The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited, to those factors described under the sections of this report entitled “Summary of Risk Factors” and “Item 1A. Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

KAIROS ACQUISITION CORP.

CONDENSED BALANCE SHEETS


	September 30, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets
Cash	$	97,542	$	132,241
Prepaid expenses		143,207		481,445
Total current assets		240,749		613,686
Investments held in Trust Account		277,679,954		276,017,343
Total Assets	$	277,920,703	$	276,631,029

Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit
Current liabilities
Accounts payable	$	1,550	$	154,715
Accrued expenses		93,917		70,957
Working Capital Loan - related party, at fair value		429,664		179,352
Total current liabilities		525,131		405,024
Deferred underwriting commissions		9,660,000		9,660,000
Derivative warrant liabilities		654,600		10,691,800
Total Liabilities		10,839,731		20,756,824

Commitments and Contingencies

Class A ordinary shares subject to possible redemption, $0.0001 par value; 27,600,000 at $10.06 and $10.00 per share redemption value at September 30, 2022 and December 31, 2021, respectively		277,579,954		276,000,000

Shareholders’ Deficit:
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at September 30, 2022 and December 31, 2021		—		—
Class A ordinary shares, $0.0001 par value; 200,000,000 shares authorized; no non-redeemable shares issued or outstanding at September 30, 2022 and December 31, 2021		—		—
Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized; 6,900,000 shares issued and outstanding at September 30, 2022 and December 31, 2021		690		690
Additional paid-in capital		—		—
Accumulated deficit		(10,499,672)		(20,126,485)
Total shareholders’ deficit		(10,498,982)		(20,125,795)
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit	$	277,920,703	$	276,631,029

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

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KAIROS ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS


	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2022		2021		2022		2021
General and administrative expenses	$	199,885	$	805,416	$	785,145	$	1,676,601
Administrative expenses - related party		60,000		60,000		180,000		180,000
Loss from operations		(259,885)		(865,416)		(965,145)		(1,856,601)
Other income (expenses):
Change in fair value of derivative warrant liabilities		—		4,364,000		10,037,200		8,946,200
Change in fair value of Working Capital Loan - related party		517,997		—		525,060		—
Financing costs - derivative warrant liabilities		—		—		—		(776,880)
Interest income from investments held in Trust Account		1,248,064		4,241		1,662,611		12,110
Interest expense from Working Capital Loan - related party		(22,926)		—		(52,959)		—
Total other income		1,743,135		4,368,241		12,171,912		8,181,430
Net income	$	1,483,250	$	3,502,825	$	11,206,767	$	6,324,829


Weighted average Class A ordinary shares - basic and diluted		27,600,000		27,600,000		27,600,000		26,839,560
Basic and diluted net income per share, Class A	$	0.04	$	0.10	$	0.32	$	0.19

Weighted average Class B ordinary shares - basic		6,900,000		6,900,000		6,900,000		6,863,736
Weighted average Class B ordinary shares - diluted		6,900,000		6,900,000		6,900,000		6,900,000
Basic and diluted net income per share, Class B	$	0.04	$	0.10	$	0.32	$	0.19

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

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KAIROS ACQUISITION CORP.

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	—	$	—	6,900,000	$	690	$	—	$	(20,126,485)	$	(20,125,795)
Net income	—		—	—		—		—		6,616,085		6,616,085
Balance — March 31, 2022 (Unaudited)	—		—	6,900,000		690		—		(13,510,400)		(13,509,710)
Increase in redemption value of Class A ordinary shares subject to possible redemption	—		—	—		—		—		(332,000)		(332,000)
Net income	—		—	—		—		—		3,107,432		3,107,432
Balance - June 30, 2022 (Unaudited)	—		—	6,900,000		690		—		(10,734,968)		(10,734,278)
Increase in redemption value of Class A ordinary shares subject to possible redemption	—		—	—		—		—		(1,247,954)		(1,247,954)
Net income	—		—	—		—		—		1,483,250		1,483,250
Balance — September 30, 2022 (Unaudited)	—	$	—	6,900,000	$	690	$	—	$	(10,499,672)	$	(10,498,982)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021


	Ordinary Shares						Additional				Total
	Class A			Class B			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Deficit
Balance — December 31, 2020	—	$	—	6,900,000	$	690	$	24,310	$	(36,002)	$	(11,002)
Accretion of Class A ordinary shares subject to possible redemption	—		—	—		—		(24,310)		(28,265,865)		(28,290,175)
Net income	—		—	—		—		—		9,022,118		9,022,118
Balance — March 31, 2021 (Unaudited)	—		—	6,900,000		690		—		(19,279,749)		(19,279,059)
Accretion of Class A ordinary shares subject to possible redemption	—		—	—		—		—		(70,000)		(70,000)
Net loss	—		—	—		—		—		(6,200,114)		(6,200,114)
Balance - June 30, 2021 (Unaudited)	—	$	—	6,900,000	$	690	$	—	$	(25,549,863)	$	(25,549,173)
Net income	—		—	—		—		—		3,502,825		3,502,825
Balance — September 30, 2021 (Unaudited)	—	$	—	6,900,000	$	690	$	—	$	(22,047,038)	$	(22,046,348)

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

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KAIROS ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS


	For The Nine Months Ended September 30,
	2022		2021
Cash Flows from Operating Activities:
Net income	$	11,206,767	$	6,324,829
Adjustments to reconcile net income to net cash used in operating activities:
Financing costs - derivative warrant liabilities		—		776,880
Change in fair value of derivative warrant liabilities		(10,037,200)		(8,946,200)
Change in fair value of promissory note - related party		(525,060)		—
Interest income from investments held in Trust Account		(1,662,611)		(12,110)
Changes in operating assets and liabilities:
Accounts payable		(153,165)		229,233
Accrued expenses		92,960		(8,276)
Prepaid expenses		338,238		(602,993)
Net cash used in operating activities		(740,071)		(2,238,637)

Cash Flows from Investing Activities:
Principal deposited in Trust Account		—		(276,000,000)
Cash used in investing activities		—		(276,000,000)

Cash Flows from Financing Activities:
Repayment of note payable to related parties		—		(280,000)
Proceeds from working capital loan		775,372		—
Proceeds from note payable to related party		—		—
Proceeds received from initial public offering, gross		—		276,000,000
Proceeds received from private placement		—		8,020,000
Offering costs paid		(70,000)		(5,426,316)
Net cash provided by financing activities		705,372		278,313,684

Net change in cash		(34,699)		75,047

Cash - beginning of the period		132,241		111,696
Cash - end of the period	$	97,542	$	186,743

Supplemental disclosure of noncash investing and financing activities:
Offering costs in accrued expenses	$	—		70,000
Deferred underwriting commissions in connection with the initial public offering	$	—	$	9,660,000

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

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KAIROS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 1 — Description of Organization and Business Operations

Organization and General

Kairos Acquisition Corp. (the “Company”) was incorporated as a Cayman Islands exempted company on August 26, 2020. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.

At September 30, 2022, the Company had not yet commenced operations. All activity for the period from August 26, 2020 (inception) through September 30, 2022 relates to the Company’s formation and its preparation for the initial public offering, which is described below, and since the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenue until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of income earned on investments on investments in the trust account.

The Company’s sponsor is Kairos Alpha Acquisition LLC, a Delaware limited liability company. The registration statement for the Company’s Initial Public Offering was declared effective on January 5, 2021. On January 8, 2021, the Company consummated its Initial Public Offering of 24,000,000 Units), at $10.00 per Unit, generating gross proceeds of $240.0 million, and incurring offering costs of approximately $13.3 million, inclusive of $8.4 million in deferred underwriting commissions. The underwriters exercised the over-allotment option in full and on January 12, 2021, purchased an additional 3,600,000 units (the “Over-Allotment Units”), generating additional gross proceeds of $36.0 million (the “Over-Allotment”), and incurring additional offering costs of approximately $2.0 million, inclusive of approximately $1.3 million of deferred underwriting commissions (Note 5).

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 7,300,000 warrants at a price of $1.00 per Private Placement Warrant, generating total gross proceeds of $7.3 million. In connection with the consummation of the sale of additional Units pursuant to the underwriters’ Over-Allotment on January 12, 2021, the Company sold an additional 720,000 Units to the Sponsor at $1.00 per Private Placement Warrant generating additional gross proceeds of approximately $0.7 million received by the Company on January 8, 2021 (Note 4).

Upon the closing of the Initial Public Offering, the Over-Allotment and the Private Placement, $276.0 million ($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, located in the United States with Continental Stock Transfer & Trust Company (“Continental”) acting as trustee, and was invested only in U.S. government securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”) with a maturity of 185 days or less or in money market funds investing solely in United States Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act, 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 one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the trust account (excluding the amount of deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of the signing 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 sufficient for it not to be required to register as an investment company under the Investment Company Act.

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KAIROS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Company will provide the holders of its 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 shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the trust account (initially at $10.00 per Public Share). The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares have been 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” (“ASC 480”). In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 and the approval of an ordinary resolution. If a shareholder vote is not required by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to the Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transactions is required by law, or the Company decides to obtain shareholder approval for business or legal 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 Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business Combination, the Initial Shareholders (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. Subsequent to the consummation of the Initial Public Offering, the Company adopted an insider trading policy which requires insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material non-public information and (ii) to clear all trades with the Company’s legal counsel prior to execution. In addition, the Initial Shareholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.

Notwithstanding the foregoing, the Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder 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 shares with respect to more than an aggregate of 15% or more of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.

The Sponsor’s and HS Chronos’ officers and directors have agreed not to propose an amendment to Amended and Restated Memorandum and Articles of Association (A) that would modify the substance or timing of the Company’s obligation to allow redemption in connection with its initial business combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within 24 months from the closing of the Initial Public Offering, or January 8, 2023, (the “Combination Period”) or (B) with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment.

If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up; (ii) 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 (which interest shall be 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 Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law.

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KAIROS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Initial Shareholders and the Company’s officers and directors have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Shareholders or members of the Company’s management team 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 have agreed to waive their rights to its deferred 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 of the residual assets remaining available for distribution (including trust account assets) will be only $10.00 per share initially held in the trust account. In order to protect the amounts held in the trust account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor (other than the Company’s independent registered 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, reduce the amount of funds in the trust account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the trust account or 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”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. 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 (except for the Company’s independent registered accounting firm), prospective target businesses or 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 Going Concern

As of September 30, 2022, the Company had approximately $98,000 in its operating bank account and a working capital deficit of approximately $284,000.

Prior to the completion of the Initial Public Offering, the Over-Allotment and the Private Placement, the Company’s liquidity needs had been satisfied through the payment of $25,000 from the Sponsor to cover for certain expenses on behalf of the Company in exchange for the issuance of the Founder Shares, and a loan of $280,000 pursuant to the Note issued to the Sponsor (Note 4). The Company repaid the Note in full on January 8, 2021. Subsequent to the closing of the Initial Public Offering, the Over-Allotment and Private Placement, the proceeds from the consummation of the Private Placement not held in the trust account has been used to satisfy the Company’s liquidity. In addition, in order to finance transaction costs in connection with a Business Combination, the Initial Shareholders, Sponsor, officers or directors may, but are not obligated to, provide the Company working capital loans.

On November 16, 2021, one of the Company’s Initial Shareholders agreed to grant the Company the Working Capital Line of Credit (as defined below) of up to $1.5 million in the form of an unsecured promissory note (see Note 4). As of September 30, 2022 and December 31, 2021, there was approximately $963,000 and $188,000, respectively, of principal outstanding borrowings under the Working Capital Line of Credit, presented at fair value of approximately $1.0 million and $179,000, respectively. As of September 30, 2022, approximately $537,000 was remaining available to be drawn. As of September 30, 2022 and December 31, 2021, there were no other amounts outstanding under Working Capital Loans (defined in Note 4).

Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Working Capital Loan and from its Initial Shareholders or an affiliate of its Initial Shareholders, or certain of the Company’s officers and directors to meet its needs through the consummation of a Business Combination. However, in connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) Topic 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 8, 2023.

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Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required in the annual audited financial statements. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022 or any future period.

The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2022.

Emerging Growth Company

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 take 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

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 an 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 unaudited condensed 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 these unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that expenses for the period and affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements. 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 unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Two of the more significant estimates are the estimates of the fair value of derivative warrant liabilities and the Working Capital Loan - related party. Accordingly, the actual results could differ significantly from those estimates.

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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 as of September 30, 2022 and December 31, 2021.

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 Deposit Insurance Corporation coverage limit of $250,000. As of September 30, 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.

Investments Held in the Trust Account

The Company’s portfolio of investments is comprised 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 and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the trust account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the trust account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in the interest income from investments held in the trust account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the trust account are determined using available market information.

Fair Value of Financial Instruments

The carrying value of the Company’s assets and liabilities recognized in the condensed balance sheets, which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” equals or approximates the fair values for such assets and liabilities either because of the short-term nature of the instruments or because the instrument is recognized at fair value.

Fair Value Measurements

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. 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 consist of:

●

Level 1, defined as observable inputs such as quoted prices (unadjusted) 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.

Working Capital Loan - Related Party

The Company has elected the fair value option to account for its Working Capital Line of Credit as defined and more fully described in

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Note 4. As a result of applying the fair value option, the Company records each draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value, which are recorded as change in fair value of Working Capital Loan - related party on the condensed statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumption about the assumptions a market participant would use in pricing the asset or liability.

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 its warrants to purchase ordinary shares, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). 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 public warrants issued in connection with the Initial Public Offering and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts 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 statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering was initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of Public Warrants issued in connection with the Initial Public Offering has been measured based on the listed market price of such warrants. The fair value of the Private Placement Warrants was estimated initially using a modified version of the Black-Scholes option pricing model. As of September 30, 2022, the fair value of the Private Placement Warrants was estimated by reference to the observable public trading price of the Public Warrants. The determination of the fair value of the warrant liabilities may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Offering Costs

Offering costs consisted of legal, accounting, underwriting fees and other costs that were incurred through, and directly related to, the Initial Public Offering. Offering costs associated with the issuance of derivative warrant liabilities are expensed as incurred and presented as non-operating expenses in the statements of operations. Offering costs associated with the Public Shares were charged against the carrying value of the Public Shares subject to redemption upon the completion of the Initial Public Offering and the Over-Allotment. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Class A Ordinary Shares Subject to Possible Redemption

The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature 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) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature 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 September 30, 2022 and December 31, 2021, 27,600,000 Class A ordinary shares subject to possible redemption are presented as temporary equity, respectively, outside of the shareholders’ deficit section of the Company’s condensed balance sheets.

Under ASC 480-10S99, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering (including the consummation of the Over-Allotment), the Company recognized the accretion from initial book value to redemption

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amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit. Subsequently, the Company recognized changes in the redemption value as an increase in redemption value of Class A ordinary shares subject to possible redemption as reflected on the accompanying unaudited condensed statements of changes in shareholders’ deficit.

Income Taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes”. ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 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.

There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman federal income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s unaudited condensed financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Net Income per Ordinary Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares, which assumes a business combination as the most likely outcome. Net income per ordinary share is calculated by dividing the net income by the weighted average shares of ordinary shares outstanding for the respective period.

The calculation of diluted net income does not consider the effect of the warrants underlying the Units, the Over-Allotment Units and the Private Placement Warrants to purchase an aggregate of 21,820,000 shares of Class A ordinary shares in the calculation of diluted income per share, because their exercise is contingent upon future events. For the nine months ended September 30, 2021, the Company has considered the effect of Class B ordinary shares that were excluded from the weighted average number of basic shares outstanding as they were contingent on the exercise of over-allotment option by the underwriters. Since the contingency was satisfied, the Company has included these shares in the weighted average number as of the beginning of the period to determine the dilutive impact of these shares. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.

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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The following table reflects a reconciliation of the numerator and denominator used to compute basic and diluted net income per share for each class of ordinary shares:


	For The Three Months Ended September 30,								For The Nine Months Ended September 30,
	2022				2021				2022				2021
	Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B
Basic and diluted net income per ordinary share:
Numerator:
Allocation of net income - basic		1,186,600		296,650		2,802,260		700,565		8,965,414		2,241,353		5,036,766		1,288,063
Allocation of net income - diluted		1,186,600		296,650		2,802,260		700,565		8,965,414		2,241,353		5,031,353		1,293,476

Denominator:
Basic weighted average common shares outstanding		27,600,000		6,900,000		27,600,000		6,900,000		27,600,000		6,900,000		26,839,560		6,863,736
Diluted weighted average common shares outstanding		27,600,000		6,900,000		27,600,000		6,900,000		27,600,000		6,900,000		26,839,560		6,900,000

Basic net income per ordinary share	$	0.04	$	0.04	$	0.10	$	0.10	$	0.32	$	0.32	$	0.19	$	0.19
Diluted net income per ordinary share	$	0.04	$	0.04	$	0.10	$	0.10	$	0.32	$	0.32	$	0.19	$	0.19

Recent Accounting Standards

In June 2022, the FASB issued ASU Topic 2022-03, “ASC Topic 820 ‘Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions’ (“ASC 820”)” (“ASU 2022-03”). The ASU 2022-03 amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The ASU 2022-03 applies to both holders and issuers of equity and equity-linked securities measured at fair value. The amendments in this ASU 2022-03 are effective for the Company in fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is considering the impact of this pronouncement on the financial statements.

The Company’s 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 unaudited condensed financial statements.

Note 3 — Initial Public Offering

On January 8, 2021, the Company consummated its Initial Public Offering of 24,000,000 Units at $10.00 per Unit, generating gross proceeds of $240.0 million, and incurring offering costs of approximately $13.3 million, inclusive of approximately $8.4 million in deferred underwriting commissions. The underwriters were granted a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 3,600,000 additional Units to cover over-allotments, if any, at $10.00 per Unit. On January 12, 2021, the underwriters exercised the over-allotment option in full and, purchased 3,600,000 Over-Allotment Units, generating additional gross proceeds of $36.0 million, and incurring additional offering costs of approximately $2.0 million, inclusive of approximately $1.3 million of deferred underwriting commissions.

Each Unit consists of one Class A ordinary share, and one-half of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 7).

Note 4 — Related Party Transactions

Founder Shares

On August 31, 2020, the Sponsor paid $25,000, or approximately $0.004 per share, to cover certain expenses on behalf of the Company in exchange for the issuance of 5,750,000 Class B ordinary shares, par value $0.0001. On September 10, 2020, HS Chronos purchased

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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

3,287,412 Founder Shares from the Sponsor for $14,293, or $0.004 per share. On January 5, 2021, the Company declared a share dividend satisfied by way of issuance of 0.2 of a share for each ordinary share issued and outstanding, resulting in the Sponsor holding an aggregate of 2,955,106 Founder Shares (up to 285,212 shares of which were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option was exercised) and HS Chronos holding an aggregate of 3,944,894 Founder Shares (up to 614,788 shares of which were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option was exercised). All shares and associated amounts have been adjusted to reflect this share dividend. The forfeiture would be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares will represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On January 12, 2021, the underwriters fully exercised the over-allotment option; thus, these Founder Shares were no longer subject to forfeiture.

The Founder Shares will automatically convert into shares of Class A ordinary shares at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions, as described in Note 8.

The Initial Shareholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (i) one year after the completion of the initial Business Combination or (ii) the date following the completion of the initial Business Combination on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the shareholders having the right to exchange their ordinary shares for cash, securities or other property. Notwithstanding the foregoing, if the closing price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, 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, the Founder Shares will be released from the lockup.

Private Placement Warrants

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 7,300,000 Private Placement Warrants to the Sponsor and HS Chronos at an average purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $7,300,000. In connection with the consummation of the sale of additional Units pursuant to the underwriters’ over-allotment option on January 12, 2021, the Company sold the additional 720,000 Units to the Sponsor at $1.00 per Private Placement Warrant generating additional gross proceeds of approximately $0.7 million received by the Company on January 8, 2021.

The Private Placement Warrants are identical to the Public Warrants sold as part of the Units in the Initial Public Offering, except that the Sponsor and HS Chronos have agreed not to transfer, assign or sell any of the Private Placement Warrants (except to certain permitted transferees) until 30 days after the completion of the Company’s initial Business Combination. The Private Placement Warrants are also not redeemable by the Company so long as they are held by the Sponsor and HS Chronos or their respective permitted transferees.

Certain proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering to be 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 and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.

Related Party Loans

On August 28, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover for expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and was payable upon the earlier of June 30, 2021 or the completion of the Initial Public Offering. The Company borrowed $280,000 under the Note through December 31, 2020 and repaid the Note in full on January 8, 2021. This facility is no longer available to be drawn.

In order to finance the Company’s working capital needs and transaction costs in connection with an initial Business Combination, on November 16, 2021, one of the Company’s Initial Shareholders agreed to loan the Company up to $1,500,000 (“Working Capital Loans”) pursuant to a line of credit (“Working Capital Line of Credit”). The Company intends to use its borrowings for paying accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and

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consummating the Business Combination. Working Capital Loans accrue interest at eleven percent (11%) per annum and are due on the earlier of January 8, 2023 or the completion of an initial Business Combination. The lender may decline requests for Working Capital Loans that fund items not contemplated by or in excess of the Company’s operating budget. If the Company completes an initial Business Combination, the Company must repay the outstanding balance of the principal and interest owing under the Working Capital Line of Credit either, at the lender’s election, (i) in cash out of the proceeds of the trust account released to the Company or (ii) by converting up to $1,500,000 of the outstanding balance of the principal, in whole or in part, into the Company’s warrants at a price of $1.00 per warrant and paying the outstanding balance of the interest in cash. In the event that an initial 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 and interest arising therefrom. The Working Capital Line of Credit and funds available to the Company outside of the trust account may not be sufficient to allow the Company to operate until January 8, 2023 (24 months following the closing of its Initial Public Offering), assuming that its initial Business Combination is not completed during that time.

The Company expects to incur significant costs in pursuit of an initial Business Combination. However, the Company’s affiliates are not obligated to make further loans to the Company in the future, and the Company may not be able to raise additional financing from unaffiliated parties necessary to fund its expenses. As of September 30, 2022 and December 31, 2021, there was $963,000 and $188,000, respectively, of outstanding principal borrowings under the Working Capital Loan Line of Credit, presented at fair value of approximately $430,000 and $179,000, respectively, with approximately $537,000 and $1.3 million, respectively, remaining available to be drawn. As of September 30, 2022 and December 31, 2021, there were no other amounts outstanding under Working Capital Loans.

Administrative Support Agreement

Commencing on the effective date of the Company’s Initial Public Offering, the Company agreed to pay its Sponsor a total of up to $20,000 per month, for up to 24 months, for office space, utilities, secretarial and administrative support, of which Mr. de St. Paer, the Company’s Chief Financial Officer, will be paid $10,000 per month. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 30, 2022 and 2021, the Company incurred approximately $60,000 and $180,000, respectively, in each period, for expenses in connection with the Administrative Support Agreement, included as administrative expenses – related party on the accompanying condensed statements of operations. As of September 30, 2022 and December 31, 2021, there were $40,000 payable for such expenses included in accrued expenses on the accompanying condensed balance sheets.

Note 5 — Commitments and Contingencies

Registration and Shareholder Rights

The holders of Founder Shares, Private Placement Warrants, and securities that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights pursuant to a registration and shareholder rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, these holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. 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 final prospectus relating to the Initial Public Offering to purchase up to 3,600,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On January 12, 2021, the underwriters exercised the over-allotment option in full.

The underwriters were entitled to an underwriting discount of $0.20 per Unit, excluding 1,980,000 Units purchased by HS Chronos, or approximately $5.1 million in the aggregate, paid upon the closing of the Initial Public Offering and the Over-Allotment. In addition, $0.35 per unit, or approximately $9.7 million in the aggregate was payable to the underwriters for deferred underwriting commissions.

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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.

Contingent Fee Arrangement

The Company has entered into fee arrangements with an advisor in connection with the Company’s search for a prospective initial Business Combination. A portion of the fees in connection with the services rendered as of September 30, 2022 and December 31, 2021, amounting to approximately $1.8 million and $1.6 million, respectively, only become due and payable upon the closing of an initial Business Combination, and therefore not included as liabilities on the accompanying balance sheets.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that, while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these unaudited condensed financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed financial statements.

Note 6 – Class A Ordinary Shares Subject to Possible Redemption

The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue 200,000,000 ordinary shares with a par value of $0.0001 per share. Holder of the Company’s Class A ordinary shares are entitled to one vote for each share. As of September 30, 2022 and December 31, 2021, there were 27,600,000 Class A ordinary shares outstanding, all of which were subject to possible redemption and are classified outside of permanent equity in the condensed balance sheets.

Class A ordinary shares subject to possible redemption reflected on the condensed balance sheets is reconciled on the following table:


Gross proceeds	$	276,000,000
Less:
Proceeds allocated to public warrants		(13,800,000)
Class A ordinary share issuance costs		(14,560,175)
Plus:
Accretion of carrying value to redemption value		28,360,175
Class A ordinary share subject to possible redemption, December 31, 2021		276,000,000
Increase in redemption value of Class A ordinary shares subject to possible redemption		1,579,954
Class A ordinary share subject to possible redemption, September 30, 2022	$	277,579,954

Note 7 - Derivative Warrant Liabilities

As of September 30, 2022 and December 31, 2021, the Company had 13,800,000 Public Warrants and 8,020,000 Private Placement Warrants outstanding.

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KAIROS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Public Warrants will become exercisable at $11.50 per share on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Proposed Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their 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 commercially reasonable efforts to file with the SEC and have an effective registration statement covering the Class A ordinary shares issuable upon exercise of the warrants and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the Class A ordinary shares 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 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 Class A ordinary shares 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 elects, 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 warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

The exercise price and number of ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. In addition, if (x) the Company issues additional Class A ordinary shares 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 Class A ordinary share (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 Initial Shareholders or their affiliates, without taking into account any Founder Shares held by the Initial Shareholders 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, plus interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume-weighted average trading price of the Class A ordinary shares during the 10-trading day period starting on the trading day prior to the day on which the Company consummates the initial Business Combination (such price, the “Market Value”) is below $9.20 per share, then 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, the $18.00 per share redemption trigger price described below will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described below will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Proposed Public Offering, except that the Private Placement Warrants and the ordinary shares issuable upon exercise of the Private Placement Warrants, so long as they are held by the Initial Shareholders or their permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.

Redemption of Warrants When the Price per Class A Ordinary Share Equals or Exceeds $18.00

Once the warrants become exercisable, the Company may call the Public Warrants for redemption (except with respect to the Private Placement Warrants):

●

in whole and not in part;

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KAIROS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

●

at a price of $0.01 per warrant;

●

upon a minimum of 30 days’ prior written notice of redemption; and

●

if, and only if, the last reported sale price (“the closing price”) of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) 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.

If the Company calls the warrants for redemption as described above, the Company will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” In no event will the Company be required to net cash settle any Warrant. 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 — Shareholders’ Deficit

Preference Shares — The Company is authorized to issue 1,000,000 preference shares with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors. As of September 30, 2022 and December 31, 2021, there were no preference shares issued or outstanding.

Class A Ordinary Shares — The Company is authorized to issue 200,000,000 Class A ordinary shares with a par value of $0.0001 per share. As of September 30, 2022 and December 31, 2021, there were 27,600,000 Class A ordinary shares issued and outstanding, all subject to possible redemption and therefore classified as temporary equity (See Note 6).

Class B Ordinary Shares — The Company is authorized to issue 20,000,000 Class B ordinary shares with a par value of $0.0001 per share. Holders are entitled to one vote for each Class B ordinary share. On August 31, 2020, the Company issued 5,750,000 Class B ordinary shares to the Sponsor. On January 5, 2021, the Company declared a share dividend satisfied by way of issuance of 0.2 of a share for each ordinary share issued and outstanding, resulting in there being 6,900,000 Class B ordinary shares issued and outstanding. All shares and associated amounts have been retroactively restated to reflect this share dividend. Of the 6,900,000 Class B ordinary shares outstanding, up to 900,000 shares were subject to forfeiture to the Company for no consideration to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the Initial Shareholders will collectively own 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. On January 12, 2021, the underwriters fully exercised the over-allotment option; thus, these Founder Shares were no longer subject to forfeiture. Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s shareholders, except as required by law or stock exchange rule; provided that only holders of the Class B ordinary shares have the right to vote on the election of the Company’s directors prior to the initial Business Combination. As of September 30, 2022 and December 31, 2021, there were 6,900,000 Class B ordinary shares issued and outstanding.

The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination on a one-for-one basis (as adjusted). In the case that additional Class A ordinary shares or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, 20% of the total number of Class A ordinary shares outstanding after such conversion (after giving effect to any redemptions of Class A ordinary shares by Public Shareholders), including the total number of Class A ordinary shares issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination and any warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans; provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.

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KAIROS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 9 — Fair Value Measurements

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.

September 30, 2022


	Quoted Prices in Active		Significant Other		Significant Other
	Markets		Observable Inputs		Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)
Assets:
Investments in the Trust Account -Money Market Funds	$	277,679,954	$	—	$	—
Liabilities:
Derivative warrant liabilities - Public	$	414,000	$	—	$	—
Derivative warrant liabilities – Private Placement	$	—	$	240,600	$	—
Working Capital Loan - related party	$	—	$	—	$	429,664

December 31, 2021


	Quoted Prices in Active		Significant Other		Significant Other
	Markets		Observable Inputs		Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)
Assets:
Investments in the Trust Account - Money Market Funds	$	276,017,343	$	—	$	—
Liabilities:
Derivative warrant liabilities - Public	$	6,762,000	$	—	$	—
Derivative warrant liabilities – Private Placement	$	—	$	—	$	3,929,800
Working Capital Loan - related party	$	—	$	—	$	179,352

Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement in February 2021 as the Public Warrants were separately listed and traded in February 2021. The Private Placement Warrants were transferred to a Level 2 measurement, based on the observable market price of the Public Warrants as of September 30, 2022. There were no other transfers to/from Levels 1, 2, and 3 during the nine months ended September 30, 2022.

Level 1 assets include investments in mutual funds invested in government securities and Public Warrants. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.

The fair value of the Public Warrants issued in connection with the Public Offering was initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Public Warrants has been measured based on the listed market price of such warrants, a Level 1 measurement. The fair value of the Private Placement Warrants was initially estimated using a modified Black-Scholes option pricing model. As of September 30, 2022 the Private Placement Warrants are measured by reference to the observable trading price of the Public Warrants. The Company concluded at September 30, 2022 the Private Placement Warrants equal to the Public Warrants given the extremely low volatility observed from the market. For the three and nine months ended September 30, 2022, the Company recognized a $-0- and $10.0 million gain resulting from a decrease in the fair value of the derivative warrant liabilities of approximately, respectively, presented as change in fair value of derivative liabilities on the accompanying condensed statements of operations. For the three and nine months ended September 30, 2021, the Company recognized a gain resulting from a decrease in the fair value of the derivative warrant liabilities of approximately $4.4 million and $8.9 million, respectively, presented as change in fair value of derivative liabilities on the accompanying condensed statements of operations.

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KAIROS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Level 3 Valuations

Derivative Warrant Liabilities

The estimated fair value of the Private Placement Warrants prior to September 30, 2022, and the Public Warrants prior to being separately listed and traded, was determined using Level 3 inputs. Inherent in a Monte Carlo simulation and Black-Scholes model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary share warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s ordinary shares that matches the expected remaining life of the warrants. Significant increases (decreases) in the expected volatility in isolation would result in a significantly higher (lower) fair value measurement. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. 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.

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:


	As of December 31, 2021
Volatility		9.8	%
Stock price	$	9.79
Risk-free rate		1.32	%
Dividend yield		0.0	%

The change in the fair value of the derivative warrant liabilities measured with Level 3 inputs for the nine months ended September 30, 2022 and 2021 is summarized as follows:


Level 3 - Derivative warrant liabilities at December 31, 2021	$	3,929,800
Change in fair value of derivative warrant liabilities		(2,566,400)
Level 3 - Derivative warrant liabilities at March 31, 2022		1,363,400
Change in fair value of derivative warrant liabilities		(1,122,800)
Level 3 - Derivative warrant liabilities at June 30, 2022		240,600
Change in fair value of derivative warrant liabilities		(240,600)
Level 3 - Derivative warrant liabilities at September 30, 2022	$	—


Level 3 - Derivative warrant liabilities at December 31, 2020	$	—
Issuance of Public and Private Placement Warrants		21,820,000
Change in fair value of derivative warrant liabilities		(3,689,200)
Transfer of Public Warrants to Level 1		(13,800,000)
Level 3 - Derivative warrant liabilities at March 31, 2021		4,330,800
Change in fair value of derivative warrant liabilities		2,005,000
Level 3 - Derivative warrant liabilities at June 30, 2021		6,335,800
Change in fair value of derivative warrant liabilities		(1,604,000)
Level 3 - Derivative warrant liabilities at September 30, 2021	$	4,731,800

Working Capital Loan - Related Party

The estimated fair value of the Working Capital Loan – Related Party was estimated utilizing a probability weighted expected return method at September 30, 2022 and a binomial lattice model at December 31, 2021 utilizing Level 3 inputs.

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KAIROS ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The following table provides quantitative information regarding the inputs for the fair value measurement of the Working Capital Loan – Related Party as of their measurement dates:


	As of September 30, 2022			As of December 31, 2021
Warrant Price	$	0.03		$	0.49
Volatility		—			100.0	%
Risk-free rate		3.36	%		0.40	%
Debt yield		33.0	%		30.0	%
Probability of Business Combination		40.0	%		—

The change in the fair value of the Working Capital Loan – Related Party, measured utilizing Level 3 measurements for the period for the three and nine months ended September 30, 2022, is summarized as follows:


Level 3 - Working Capital Loan - Related Party at December 31, 2021	$	179,352
Initial borrowings		467,000
Change in fair value of Working Capital Loan - related party		(43,097)
Level 3 - Working Capital Loan - Related Party at March 31, 2022		603,255
Initial borrowings		171,884
Change in fair value of Working Capital Loan - related party		36,034
Level 3 - Working Capital Loan - Related Party at June 30, 2022	$	811,173
Initial borrowings		136,488
Change in fair value of Working Capital Loan - related party		(517,997)
Level 3 - Working Capital Loan - Related Party at September 30, 2022	$	429,664

Note 10 — Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the date as of these condensed balance sheets through the date the unaudited condensed financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

References in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Kairos Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to Kairos Alpha Acquisition LLC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Quarterly Report including, without limitation, statements under this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward- looking statements. When used in this Quarterly Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Quarterly Report under “Item 1 Financial Statements”. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Overview

We are a blank check company incorporated in the Cayman Islands on August 26, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

Our sponsor is Kairos Alpha Acquisition LLC, a Delaware limited liability company. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.

Our registration statement for the initial public offering became effective on January 5, 2021. On January 8, 2021, we consummated our initial public offering of 24,000,000 units, at $10.00 per unit, generating gross proceeds of $240.0 million, and incurring offering costs of approximately $13.3 million, inclusive of approximately $8.4 million in deferred underwriting commissions. Our underwriters exercised the over-allotment option in full and on January 12, 2021, purchased an additional 3,600,000 units (the “Over-Allotment Units”), generating additional gross proceeds of $36.0 million (the “Over-Allotment”), and incurring additional offering costs of approximately $2.0 million, inclusive of approximately $1.3 million of deferred underwriting commissions.

Simultaneously with the closing of our initial public offering, we consummated the Private Placement of 7,300,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, generating gross proceeds of approximately $7.3 million. In connection with the consummation of the sale of additional units pursuant to the underwriters’ over-allotment option on January 12, 2021, we sold an additional 720,000 Private Placement Warrants to our sponsor at $1.00 per Private Placement Warrant generating additional gross proceeds of approximately $0.7 million received by us on January 8, 2021.

Upon the closing of our initial public offering, the Over-Allotment, and the Private Placement, $276.0 million ($10.00 per unit) of the net proceeds of our initial public offering and certain of the proceeds of the Private Placement were placed in the trust account located in the United States, with Continental acting as trustee, and will be invested by the trustee only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act, until the earlier of (i) the completion of a business combination and (ii) the distribution of the trust account as described below.

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Our management has broad discretion with respect to the specific application of the net proceeds of our 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 an initial business combination. There is no assurance that we will be able to complete an initial business combination successfully. We must complete one or more initial business combinations having an aggregate fair market value of at least 80% of the net assets held in the trust account (excluding the amount of deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of the signing of the agreement to enter into the initial business combination. However, we will only complete an initial business combination if the post-combination 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 us not to be required to register as an investment company under the Investment Company Act.

If we are unable to complete a business combination by January 8, 2023, we will (i) cease all operations except for the purpose of winding up, (ii) 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 (which interest shall be 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 shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law.

Results of Operations

Our entire activity from August 26, 2020 (inception) through January 6, 2021, was in preparation for an initial public offering, and since the consummation of our initial public offering on January 6, 2021 through September 30, 2022, our activity has been limited to the search for a prospective initial business combination. We will not generate any operating revenues until the closing and completion of our initial business combination, at the earliest.

For the three months ended September 30, 2022, we had net income of approximately $1.5 million, which consisted of approximately $1.2 million in interest income from investments held in trust account, and approximately $518,000 in change in fair value of Working Capital Loan - related party, partially offset by approximately $260,000 of general and administrative expenses inclusive of administrative expenses with related party of $60,000 and approximately $23,000 of interest expense on the Working Capital Loan - related party.

For the three months ended September 30, 2021, we had net income of approximately $3.5 million, which consisted of $4.4 million in change in fair value of derivative warrant liabilities, and approximately $4,000 in interest income from investments held in trust account, partially offset by approximately $865,000 of general and administrative expenses inclusive of administrative expenses with related party.

For the nine months ended September 30, 2022, we had net income of approximately $11.2 million, which consisted of approximately $10.0 million in change in fair value of derivative warrant liabilities, approximately $1.7 million in interest income from investments held in trust account, and approximately $525,000 in change in fair value of Working Capital Loan - related party, partially offset by approximately $965,000 of general and administrative expenses, inclusive of administrative expenses with related party of $180,000, and approximately $53,000 of interest expense on the Working Capital Loan - related party.

For the nine months ended September 30, 2021, we had net income of approximately $6.3 million, which consisted of $8.9 million in change in fair value of derivative warrant liabilities, and approximately $12,000 in interest income from investments held in trust account, partially offset by approximately $1.9 million of general and administrative expenses inclusive of administrative expenses with related party, and approximately $777,000 of financing costs associated with derivative warrant liabilities.

Liquidity and Going Concern

As of September 30, 2022, we had approximately $98,000 in cash and a working capital deficit of approximately $284,000.

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Our liquidity needs up to the closing our initial public offering had been satisfied through the payment of $25,000 from our sponsor to cover for certain expenses on behalf of us in exchange for the issuance of the Founder Shares, and a loan of approximately $280,000 pursuant to such note issued to our sponsor. We fully repaid such note to our sponsor on January 8, 2021. Subsequent to the closing of our initial public offering and Over-Allotment, the proceeds from the consummation of the private placement not held in the trust account have been used to satisfy our liquidity. In addition, in order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, our sponsor could, but is not obligated to, provide us working capital loans.

On November 16, 2021, we entered into an unsecured promissory note with HS Chronos in the principal amount up to $1,500,000, the “Working Capital Loan Line of Credit.” Interest accrues on the unpaid principal balance of this Working Capital Loan Line of Credit at the rate of eleven percent (11%) per annum and is repayable in full on the earlier of (i) date on which we consummate the initial business combination or (ii) January 8, 2023. If we do not complete an initial business combination, the Working Capital Loan Line of Credit shall not be repaid and all amounts owed under it will be forgiven except to the extent that we have funds available to it outside of its trust account established in connection with its initial public offering. Upon the consummation of an initial business combination, HS Chronos shall have the option, but not the obligation, to convert the principal balance of the Working Capital Loan Line of Credit, in whole or in part, to warrants of our Company equal to: the portion of the principal amount of the Working Capital Loan Line of Credit being converted divided by $1.00, rounded down to the nearest whole number of warrants. As of September 30, 2022 and December 31, 2021, there was approximately $963,000 and $188,000, respectively, of outstanding principal borrowings under the Working Capital Loan Line of Credit, presented at fair value of approximately $430,000 and $179,000, respectively, with approximately $537,000 and $1.3 million, respectively, available to be drawn.

In addition, in order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, our sponsor or an affiliate of our sponsor, other Initial Shareholders, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (the “Working Capital Loans”). If we complete an initial business combination, we would repay the Working Capital Loans out of the proceeds of the trust account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the trust account. In the event that an initial business combination does not close, we 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. As of September 30, 2022 and December 31, 2021, there were no other Working Capital Loans other than the Working Capital Loan Line of Credit described above.

Based on the foregoing, our management believes that we will have sufficient working capital and borrowing capacity from the Working Capital Loan Line of Credit and from our Initial Shareholders or an affiliate of our Initial Shareholders, or certain of our officers and directors to meet our needs through an initial business combination. However, in connection with our assessment of going concern considerations in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) Topic 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” our management has determined that the mandatory liquidation and subsequent dissolution raise substantial doubt about the company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after January 8, 2023. The unaudited condensed financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. The impact of this action and related sanctions on the world economy is not determinable as of the date of this Quarterly Report. Further, the specific impact of this action on our financial condition, results of operations, and cash flows is also not determinable as of the date of this Quarterly Report.

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Other Contractual Obligations

Registration and Shareholder Rights

The holders of Founder Shares, Private Placement Warrants, and securities that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights pursuant to a registration and shareholder rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. These holders will be entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, these holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

We granted the underwriters a 45-day option from the date of the final prospectus to purchase up to 3,600,000 additional units at our initial public offering price less the underwriting discounts and commissions. On January 12, 2020, the underwriters fully exercised the over-allotment option.

The underwriters were entitled to an underwriting discount of $0.20 per unit, excluding 1,980,000 units purchased by HS Chronos, or approximately $5.1 million in the aggregate, paid upon the closing of our initial public offering. In addition, $0.35 per unit, or approximately $9.7 million in the aggregate is 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 we complete a business combination, subject to the terms of the underwriting agreement.

Contingent Fee Arrangement

We have entered into fee arrangements with an advisor in connection with our search for a prospective initial business combination. A portion of the fees in connection with the services rendered as of September 30, 2022 and December 31, 2021, amounting to approximately $1.8 million and $1.6 million, respectively, only become due and payable upon the closing of a business combination, which was not probable and therefore not included as liabilities on the accompanying balance sheets.

Administrative Support Agreement

We agreed to pay our sponsor a total of $20,000 per month, commencing on the effective date of our initial public offering, for office space, utilities, secretarial and administrative support, of which Mr. de St. Paer, our Chief Financial Officer, will be paid $10,000 per month. Upon completion of the initial business combination or our liquidation, we will cease paying these monthly fees. For the three and nine months ended September 30, 2022 and 2021, we incurred approximately $60,000 and $180,000, respectively, in each period, for expenses in connection with the Administrative Support Agreement, included as administrative expenses - related party on the accompanying condensed statements of operations. As of September 30, 2022 and December 31, 2021, there were $40,000 payable for such expenses.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 2 to our unaudited condensed financial statements in Part I, Item 1 of this Quarterly Report. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our unaudited condensed financial statements and require significant, difficult or complex judgments, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2021 Annual Report on Form 10-K filed with the SEC on March 31 2022. There have been no significant changes in the application of our critical accounting policies during the nine months ended September 30, 2022.

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Recent Accounting Pronouncements

See Note 2 to the unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report for a discussion of recent accounting pronouncements.

JOBS Act

On April 5, 2012, the JOBS Act was signed into law. 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 such, our unaudited condensed financial statements may not be comparable to companies that comply with 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 may 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.

Factors That May Adversely Affect Our Results of Operations

Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

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.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this Quarterly Report, our disclosure controls and procedures were effective as of September 30, 2022.

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Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting during the quarter ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.

ITEM 1A. RISK FACTORS.

An investment in our securities involves a high degree of risk. Our potential investors should consider carefully all of the risks described below, together with the other information contained in this Quarterly Report, before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and our investors could lose all or part of their investments. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

For additional risk factors not presently known to us or that we currently deem immaterial or that may also impair our business or results of operations, please see our final prospectus dated January 5, 2021 filed with the SEC and in our quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2021, June 30, 2021, September 30, 2021, March 31, 2022, and June 30, 2022 respectively, filed with the SEC on May 27, 2021, August 13, 2021, November 22, 2021, May 16, 2022, and August 12, 2022 respectively.

To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the securities held in the trust account and instead to hold the funds in the trust account in cash items until the earlier of the consummation of our initial business combination or our liquidation. As a result, following the liquidation of securities in the trust account, we would likely receive minimal interest, if any, on the funds held in the trust account, which would reduce the dollar amount our public shareholders would receive upon any redemption or liquidation of the Company.

The funds in the trust account have, since our Initial Public Offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, instruct Continental, the trustee with respect to the trust account, to liquidate the U.S. government treasury obligations or money market funds held in the trust account and thereafter to hold all funds in the trust account as cash items until the earlier of the consummation of our initial Business Combination or the liquidation of the Company. Following such liquidation, we would likely receive minimal interest, if any, on the funds held in the trust account. However, interest previously earned on the funds held in the trust account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result, any decision to liquidate the securities held in the trust account and thereafter to hold all funds in the trust account in cash items would reduce the dollar amount our public shareholders would receive upon any redemption or liquidation of the Company.

In the event that we may be deemed to be an investment company, we may be required to liquidate the Company.

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We may not be able to complete an initial business combination with certain potential target companies if a proposed transaction with the target company may be subject to review or approval by regulatory authorities pursuant to certain U.S. or foreign laws or regulations.

Certain acquisitions or Business Combinations may be subject to review or approval by regulatory authorities pursuant to certain U.S. or foreign laws or regulations. In the event that such regulatory approval or clearance is not obtained, or the review process is extended beyond the period of time that would permit an initial Business Combination to be consummated with us, we may not be able to consummate a Business Combination with such target.

Among other things, the U.S. Federal Communications Act prohibits foreign individuals, governments, and corporations from owning more than a specified percentage of the capital stock of a broadcast, common carrier, or aeronautical radio station licensee. In addition, U.S. law currently restricts foreign ownership of U.S. airlines. In the United States, certain mergers that may affect competition may require certain filings and review by the Department of Justice and the Federal Trade Commission, and investments or acquisitions that may affect national security are subject to review by the Committee on Foreign Investment in the United States (“CFIUS”). CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States.

Outside the United States, laws or regulations may affect our ability to consummate a Business Combination with potential target companies incorporated or having business operations in jurisdiction where national security considerations, involvement in regulated industries (including telecommunications), or in businesses relating to a country’s culture or heritage may be implicated.

U.S. and foreign regulators generally have the power to deny the ability of the parties to consummate a transaction or to condition approval of a transaction on specified terms and conditions, which may not be acceptable to us or a target. In such event, we may not be able to consummate a transaction with that potential target.

As a result of these various restrictions, the pool of potential targets with which we could complete an initial Business Combination may be limited and we may be adversely affected in terms of competing with other SPACs that do not have similar ownership issues. Moreover, the process of government review could be lengthy. Because we have only a limited time to complete our initial Business Combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public shareholders may only receive $10.00 per share, and our warrants will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None. For a description of the use of proceeds generated in our initial public offering and private placement, see Part II, Item 2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the SEC on May 24, 2021. There has been no material change in the planned use of proceeds from the Company’s initial public offering and private placement as described in the Registration Statement.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

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
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Filed herewith.

**	Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: November 14, 2022	KAIROS ACQUISITION CORP.

	By:	/s/ Peter Bang
	Name:	Peter Bang
	Title:	Chief Executive Officer and Director (Principal Executive Officer)

Date: November 14, 2022		/s/ Jerry de St. Paer
	Name:	Jerry de St. Paer
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

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Readability	Coll. sophomore Bad

Kairos Acquisition (KAIR) 10-Q2022 Q3 Quarterly report

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