Business context and reporting period
This is Data Knights Acquisition Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2023—not an operating-company 10-Q filed by OneMedNet Corp. Data Knights was a shell SPAC seeking to combine with OneMedNet Corporation, Inc.; the proposed merger had not closed as of quarter-end. The filing describes an agreement providing for target stockholders to receive securities valued at $200 million, subject to adjustments and closing conditions.
Financial results and position
| Metric | Q2 2023 / June 30, 2023 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None; the SPAC had not begun operations | None |
| Net income (loss) | $(5,158) for Q2; $(91,140) for six months | $949,937 for Q2 2022; $3,145,445 for six months 2022 |
| Operating and franchise-tax costs | $285,454 for Q2; $639,237 for six months | $794,495 for Q2 2022; $1,404,680 for six months 2022 |
| Trust-account income | $343,002 for Q2; $670,401 for six months | $149,350 for Q2 2022; $192,403 for six months 2022 |
| Cash outside trust | $3,438 | $30,870 at December 31, 2022 |
| Trust investments | $29,978,639 | $29,029,416 at December 31, 2022 |
| Current liabilities / working-capital deficit | $2,090,798 / $2,087,360 deficit | $1,976,137 / $1,945,267 deficit at December 31, 2022 |
Net cash used in operations was $646,580 in the first six months of 2023, versus $445,671 in 2022. Financing cash flow was $897,972, including extension-loan proceeds. At June 30, liabilities included $3,283,358 in extension loans, $367,832 in working-capital loans, and a $4,025,000 deferred underwriting fee payable upon a successful business combination. Warrant liabilities were $362,558. The filing reports no long-term debt or off-balance-sheet financing arrangements.
Material changes versus prior periods
- Net results shifted from income to a small quarterly loss and a six-month loss. The prior-year profits included substantial noncash gains from changes in warrant fair value ($1.60 million in Q2 and $4.36 million in the first half of 2022); no such gain was recorded in 2023. Trust income rose, while operating costs declined.
- Public shares subject to possible redemption fell substantially after prior redemptions; 2,731,544 redeemable shares remained at June 30, 2023. The trust balance increased, primarily reflecting extension deposits and investment earnings.
- Extension loans increased by approximately $738,000 from year-end, while working-capital loans increased by approximately $161,000.
Outlook, risks, contingencies, and unusual items
- Management stated that substantial doubt existed about the company’s ability to continue as a going concern, citing only $3,438 in cash outside the trust, a working-capital deficit, ongoing transaction costs, and the risk of failing to complete a business combination by the deadline. The filing’s deadline disclosures are not fully consistent: it cites August 11 and August 23, 2023 in different passages.
- After quarter-end, the company reported that stockholders approved an additional extension framework, allowing monthly extensions through May 11, 2024 subject to required deposits. Holders of 1,018,846 Class A shares exercised redemption rights at that meeting. These are subsequent events, not June 30 balances.
- The filing identifies OneMedNet as the proposed target but gives no operating guidance or outlook for the combined business. Completion remained subject to stockholder approvals, at least $5,000,001 in tangible net assets at closing, and other customary conditions. Redemptions, financing needs, dilution, and the possibility that the transaction fails are key risks.
- Potential redemptions may be subject to the federal stock-repurchase excise tax, depending on transaction details and applicable guidance. Public warrants could expire worthless if no business combination is completed.
- Management concluded disclosure controls and internal control over financial reporting were ineffective, citing weaknesses in complex-financial-instrument accounting and insufficient review controls. Remediation efforts were underway.
- No legal proceedings were reported, and the filing stated there were no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Confirm the correct issuer: this filing is for Data Knights Acquisition Corp., with OneMedNet Corporation, Inc. identified as the merger target.
- Check subsequent filings for the merger’s status, any further extensions, redemptions, financing, and the remaining trust balance; the filing’s deadline references conflict.
- Review the final merger consideration and transaction adjustments, including net debt, working capital, expenses, and dilution from shares, loans, and warrants.
- Assess whether the SPAC can fund obligations and transaction costs given minimal outside cash, outstanding sponsor loans, and the going-concern warning.
- Track remediation of the reported internal-control material weaknesses and any corrections or restatements disclosed in later filings.