References to "we," "us" or the "Company" refer to Kadem Sustainable Impact Corporation. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Kadem Management, LLC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report. 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 Delaware on December 29, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our business combination using cash derived from the proceeds of the Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt.


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We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.

Results of Operations

We have neither engaged in any operations nor generated any operating revenues to date. Our only activities for the twelve months ended December 31, 2021 were organizational activities and those necessary to prepare for the Public Offering, described below, the identification and evaluation of prospective acquisition targets for a business combination and ongoing administrative and compliance matters. We do not expect to generate any operating revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Public Offering. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a business combination.

For the twelve months ended December 31, 2021, we had net income of $3,820,335, which consisted of formation and operating costs, net of interest income and change in the fair value of the Public Warrants Liability and Private Placement Warrant Liability. For the period from December 29, 2020 (inception) to December 31, 2020, we had no income or expenses incurred.

Liquidity and Capital Resources

On March 19, 2021, the Company consummated the Public Offering of 17,500,000 Units, with respect to the shares of the Company's Class A common stock, par value $0.0001 per share, at $10.00 per Unit, generating gross proceeds of $175,000,000. Each Unit consists of one Public Share, and one-half of one warrant which entitles the holder to purchase one share of Class A Common Stock at a price of $11.50 per share.

Simultaneously with the closing of the Public Offering, the Company consummated the sale of 4,875,000 warrants at a price of $1.00 per Private Placement Warrant in a Private Placement to the Sponsor, generating gross proceeds of $4,875,000.

Following the closing of the Public Offering, $175,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Public Offering and certain of the proceeds of the Private Placement was placed in a Trust Account. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.

As of December 31, 2021, the Company had $62,821 of cash in its operating bank account and working capital of approximately $218,275.

Prior to the completion of the Public Offering, the Company's liquidity needs were satisfied through a capital contribution of $25,000 from the Sponsor in exchange for the issuance of the Founder Shares. Subsequent to the consummation of the Public Offering, the Company's liquidity needs have been satisfied through the proceeds from the consummation of Private Placement Warrants for $4,875,000 (see Note 4 to the financial statements), not held in the Trust Account. In addition, in order to finance transaction costs in connection with a business combination, on November 17, 2021, the Company entered into the Working Capital Loan with the Sponsor (as described in Note 4 to the financial statements). The Working Capital Loan will either be repaid upon consummation of a business combination, without interest, or, at the lender's discretion, up to $1.5 million of such Working Capital Loan may be convertible into warrants of the post-business combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. If the Company does not complete a business combination, the Working Capital Loan will not be repaid, and all amounts owed under the Working Capital Loan will be forgiven.


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The Company has incurred and expects to incur additional significant costs in
pursuit of its financing and acquisition plans. Also, the Company is subject to
mandatory liquidation and subsequent dissolution if no business combination is
consummated within twenty-four months from the IPO filing date. In connection
with the Company's assessment of going concern considerations in accordance with
FASB ASC
205-40,
"Basis of Presentation - Going Concern," management has determined that the
limited amounts of cash and working capital and risk of mandatory liquidation
raise substantial doubt about the Company's ability to continue as a going
concern within one year after the date that the accompanying financial
statements are issued. No adjustments have been made to the carrying amounts of
assets or liabilities should the Company be required to liquidate after
March 19, 2023. The financial statements do not include any adjustment that
might be necessary if the Company is unable to continue as a going concern.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the period reported. Actual results could materially differ from those estimates. The Company has identified the following as its critical accounting policies.

Shares of Class A Common Stock Subject to Possible Redemption

The Company accounts for its shares of Class A Common Stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." The Company's shares of Class A Common Stock 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, shares of Class A Common Stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders' (deficit) equity section of the Company's balance sheet.

Public Warrants and Private Placement Warrants

Simultaneously with the closing of the Public Offering, the Sponsor purchased an aggregate of 4,875,000 Private Placement Warrants at a price of $1.00 per whole Warrant ($4,875,000 in the aggregate) in the Private Placement. Each whole Private Placement Warrant is exercisable for one whole share of the Company's Class A common stock at a price of $11.50 per share.


Pursuant to the Public Offering, the Company sold 17,500,000 Units at a price of
$10.00 per Unit for a total of $175,000,000. Each Unit consists of one Public
Share, and
one-half
of one warrant ("Public Warrants"). Each whole Warrant entitles the holder to
purchase one share of Class A Common Stock at a price of $11.50 per share.

The Private Placement Warrants and the shares of common stock issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or salable until after the completion of a business combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder's option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrant.



The Company evaluated the Public Warrants and Private Placement Warrants under
ASC
815-40,
Derivatives and Hedging-Contracts in Entity's Own Equity, and concluded that
they do not meet the criteria to be classified in stockholders' (deficit)
equity. Specifically, the exercise of the Public Warrants and Private Placement
Warrants may be settled in cash upon the occurrence of a tender offer or
exchange that involves 50% or more of the Company's outstanding shares of Common
Stock. Because not all of the Company's shareholders

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need to participate in such tender offer or exchange to trigger the potential cash settlement and the Company does not control the occurrence of such an event, the Company concluded that the Public Warrants and Private Placement Warrants do not meet the conditions to be classified in equity. Since the Public Warrants and Private Placement Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the balance sheet at their initial fair value, with subsequent changes in their respective fair values recognized in the statement of operations at each reporting date.

Net Income Per Common Share

Net income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, excluding shares of common stock forfeited. The Company has not considered the effect of the conversion of the Working Capital Loan warrants to Class A common shares, upon merger, in the calculation of diluted income per share, since no amounts were drawn from the Working Capital Loan as of December 31, 2021. The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 13,625,000 shares in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.



The Company has two classes of shares, which are referred to as Class A and
Class B common stock. The Company's statement of operations includes a
presentation of net income per share for each of Class A and B common stock in a
manner similar to the
two-class
method of income per share. Net income per common share, basic and diluted, for
Class A and B common stock is calculated by dividing the net income by the
weighted average number of shares of Class A and B common stock since original
issuance.

Non-redeemable

common stock includes Founder Shares Class B common stock as these shares do not have any redemption features.

Recent Accounting Pronouncement



In August 2020, the FASB issued Accounting Standards Update ("ASU")
No. 2020-06,
Debt-Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity's Own Equity
("ASU
2020-06"),
which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. The new standard will become effective for
the Company beginning January 1, 2024, can be applied using either a modified
retrospective or a fully retrospective method of transition and early adoption
is permitted. Management is currently evaluating the impact of the new standard
on the Company's financial statements.

The Company's management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's financial statements.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities and secretarial, and administrative support services provided to the Company. We began incurring these fees on March 19, 2021 and will continue to incur these fees monthly until the earlier of the completion of a business combination or the Company's liquidation.


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On November 17, 2021, the Company issued an unsecured promissory note in the principal amount of $1,500,000 to the Sponsor (the "Working Capital Loan"). The Working Capital Loan does not bear interest and is repayable in full upon consummation of the initial business combination. If the Company does not complete an initial business combination, the Working Capital Loan shall not be repaid, and all amounts owed under it will be forgiven. Upon the consummation of an initial business combination, the Sponsor shall have the option, but not the obligation, to convert all or a portion of the unpaid principal balance of the Working Capital Loan into warrants ("Working Capital Warrants") equal to the principal amount of the Working Capital Loan so converted divided by $1.00. The terms of the Working Capital Warrants will be identical to the terms of the Private Placement Warrants. The Working Capital Loan is subject to customary events of default, the occurrence of which automatically trigger the unpaid principal balance of the Working Capital Loan and all other sums payable with regard to the Working Capital Loan becoming immediately due and payable. No amounts were drawn down under the Working Capital Loan as of December 31, 2021. $100,000 was drawn in January 2022 and $200,000 was drawn in February 2022, for a total of $300,000 draw down under the Working Capital Loan.



The Company granted the underwriters a
45-day
option from March 16, 2021, to purchase up to 2,625,000 additional Units to
cover any over-allotments at the initial public offering price less the
underwriting discounts and commissions. The underwriters did not exercise any of
the over-allotment units which expired on May 3, 2021. Because the underwriters
did not exercise their over-allotment option, 656,250 shares of Class B common
stock were forfeited at no cost on May 3, 2021, so that total Class B common
stock were reduced from 5,031,250 to 4,375,000 shares (Note 5 to the financial
statements). The forfeited shares returned to the authorized but unissued shares
of the Class B common stock of the Company.

The underwriter is entitled to a deferred underwriting discount of 3.5% of the gross offering proceeds of the Public Offering, or $6,125,000 (the "Deferred Discount"), and BMO Capital Markets Corp. will be entitled to a cash fee (the "Advisory Fee") equal to 0.5% of the gross offering proceeds of the Public Offering, or $875,000, for providing certain capital markets advisory services to the Company. Each of the Deferred Discount and the Advisory Fee will be payable upon the Company's completion of its initial business combination. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial business combination.

The holders of Founder Shares and Working Capital Warrants that may be issued upon conversion of working capital loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement signed on March 16, 2021. These holders will be entitled to certain demand and "piggyback" registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

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