Business context and reporting period
Entity mismatch: The request identifies Cxapp Inc., but the supplied Form 10-K is for KINS Technology Group Inc., a Delaware SPAC. This summary covers KINS, not Cxapp. The fiscal year ended December 31, 2021; the filing was signed March 30, 2022.
KINS had no operating business or operating revenue. Its purpose was to identify and complete a business combination, with a stated focus on transformative technology businesses. It had not selected a target or held substantive discussions with a prospective target by year-end and remained a shell company.
Financial performance and position
- Revenue and operating result: No operating revenue. 2021 operating and formation costs were $1.50 million, producing a $1.50 million operating loss.
- Net income: $9.21 million in 2021, versus a $4.08 million net loss from inception through December 31, 2020. The 2021 result was principally driven by a $10.64 million non-cash gain from the change in fair value of warrant liabilities; it should not be read as operating profitability.
- Cash flow: Cash used in operating activities was $595,321 in 2021. Year-end cash outside the trust was $406,126, down from $1.02 million at December 31, 2020.
- Trust and liquidity: Cash and investments in the trust account were reported at $278.84 million at December 31, 2021. The balance sheet separately presents $278.76 million for 27.6 million redeemable Class A shares, or $10.10 per share.
- Working capital and obligations: Working capital deficit was approximately $234,460. The company reported no long-term debt and no working capital loans outstanding. It had $767,253 of accrued current expenses and a $9.66 million deferred underwriting fee payable upon a completed business combination.
- Margins and dividends: Operating margins are not meaningful without revenue. No cash dividends had been paid, and none were planned before a business combination.
Material changes versus the prior period
The comparison period is July 20, 2020 (inception) through December 31, 2020, not a full prior fiscal year. The company moved from a $4.08 million net loss to $9.21 million net income, largely because warrant fair-value changes shifted from a $3.37 million expense in 2020 to a $10.64 million gain in 2021. Trust investments earned $68,295 in 2021, versus $7,785 in the 2020 inception period. Operating cash use increased from $514,705 to $595,321.
Outlook, risks and unusual items
- Combination deadline and going concern: KINS had until June 17, 2022 to complete a business combination, subject to a possible stockholder-approved extension. Management and the auditor said substantial doubt existed about the company’s ability to continue as a going concern through that deadline, citing limited outside-trust cash, funding needs and mandatory liquidation if no deal closed. Additional funding from the Sponsor or affiliates was possible but not committed.
- Liquidation exposure: If no business combination was completed within the permitted period, public shares were to be redeemed from the trust, while warrants would expire worthless. Creditor claims or other factors could reduce redemption proceeds below $10.10 per public share.
- Accounting and controls: Management concluded internal control over financial reporting and disclosure controls were ineffective at year-end due to a material weakness involving complex financial instruments and accounting for redeemable shares. KINS restated 2020 financial statements twice—in 2021 for warrant accounting and for Class A share accounting—and said the previously issued statements should not be relied upon. The filing states these non-cash adjustments did not change previously reported cash, total assets, revenue or cash flows.
- Warrant valuation: Warrants were classified as liabilities and remeasured at fair value each reporting period, creating potentially material non-cash earnings volatility. The $10.64 million gain reduced the reported warrant liability to $11.28 million at year-end, from $21.91 million.
- Other risks and costs: Risks included SPAC competition, redemption levels and financing availability, conflicts of interest and limited management time, COVID-19 disruption, and the possibility of third-party claims against trust funds. The company paid its Sponsor $20,000 monthly for office and administrative services; 2021 expense was $240,000. No material legal proceedings were reported.
- No financial guidance: The filing provides no revenue, earnings or cash-flow guidance. Management stated its intent to complete a business combination but gave no assurance it would do so.
Most important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for KINS Technology Group Inc., not Cxapp Inc.
- Check subsequent filings and transaction records to establish whether KINS completed a business combination, extended its deadline or liquidated after June 17, 2022.
- Review the audited financial statements and restatement disclosures, especially the material weakness, warrant liability accounting and status of remediation.
- Reconcile the reported $278.84 million trust balance with the $278.76 million carrying value of redeemable shares and confirm the applicable redemption amount and any claims against trust assets.
- Assess cash available outside the trust, any later financing or related-party loans, and the $9.66 million deferred underwriting fee payable if a business combination closed.