Business context and reporting period
The supplied filing is Data Knights Acquisition Corp.’s Form 10-K for the fiscal year ended December 31, 2021—not a filing for OneMedNet Corp. Data Knights is a blank-check company formed to pursue a business combination, with a stated focus on data centers and technology. It had not selected a target or begun substantive discussions with one by year-end. The financial statements cover February 8, 2021 (inception) through December 31, 2021; there is no prior comparable operating period.
Key financial metrics
- Revenue and operations: No operating revenue; the company had not commenced operations.
- Net income: $5.14 million, including a $6.33 million gain from changes in the fair value of warrant liabilities. Operating and franchise tax costs totaled $585,405; interest on trust investments was $1,876.
- Cash flow: $378,487 used in operating activities. Cash at year-end was $453,151 outside the trust account.
- Assets and liquidity: Total assets were $117.86 million, including $117.32 million in the trust account. Reported working capital was $246,232. Management said available cash and working capital were insufficient to fund planned activities for a reasonable period.
- Liabilities and debt: Total liabilities were $9.17 million, including $4.85 million of warrant liabilities, $4.03 million of deferred underwriting fees payable upon a completed business combination, and $289,980 of current liabilities. The company reported no long-term debt or outstanding related-party loans.
- Equity and redemption: All 11.5 million public shares were classified as temporary equity, at a stated redemption value of $10.20 per share. Stockholders’ deficit was $8.61 million.
Changes versus prior comparable period
No prior-year comparable operating results are available because the company was incorporated in February 2021. The company restated previously issued 2021 financial statements to reclassify public shares as temporary equity under SEC guidance. It identified a material weakness in accounting for complex financial instruments; disclosure controls were deemed ineffective as of December 31, 2021 due to the restatement.
Outlook, risks and unusual items
- Business-combination deadline: The company had until May 11, 2022 to complete a transaction, with up to two three-month extensions, potentially through November 11, 2022, subject to required sponsor deposits into the trust. If it failed to complete a combination by the applicable deadline, it would liquidate and redeem public shares; warrants could expire worthless.
- Going concern: Management and the auditor reported substantial doubt about the company’s ability to continue as a going concern, citing limited working capital and the short time to complete a business combination. Sponsor or affiliate loans were possible but not committed.
- Funding and redemption risks: A transaction could require additional financing, and public-share redemptions could reduce funds available. Trust assets may also be exposed to creditor or bankruptcy claims; the sponsor’s indemnity capacity was not verified.
- Control weakness and restatement: The temporary-equity accounting error required restatement. Management said it was devoting resources to remediation; no auditor attestation of internal controls was included.
- Other items: The income result was driven chiefly by a noncash warrant-liability fair-value gain, rather than operating performance. COVID-19 could adversely affect the company or its target search, but the impact was not determinable. No litigation was reported.
Important facts for investors to verify
- Confirm the issuer identity: the filing is for Data Knights Acquisition Corp., despite the request metadata naming OneMedNet Corp.
- Check subsequent filings for whether a business combination closed, an extension was funded, or the company entered liquidation after the disclosed deadline.
- Review the restated financial statements and subsequent disclosures on remediation of the material weakness and effectiveness of disclosure controls.
- Verify the current trust balance, redemption value, share count, warrant terms and any financing or sponsor loans.
- Assess creditor-claim exposure and the sponsor’s ability to meet its trust-account indemnity obligations.