Business context and reporting period
This is KINS Technology Group Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022—not a filing by Cxapp Inc., despite the request metadata. KINS was a SPAC seeking a business combination and had no operating revenue or business operations. The financial statements are presented in U.S. dollars.
Financial results and position
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | None | None |
| Operating and formation costs | $301,733 | $624,985 |
| Net income | $10,071,447 | $17,939,616 |
| Net income per share, basic and diluted | $0.47 | $0.64 |
| Cash used in operating activities | — |
For the six months, operating cash outflow was $297,479. Cash outside the trust account was $189,147 at June 30; cash and investments reported in the trust account were $9,528,176. Current liabilities were $1,020,692, and working capital deficit was $801,795. Total liabilities were $3,669,492, including $2,648,800 of warrant derivative liabilities; the company reported no long-term debt. Stockholders’ deficit was $3,397,128. Margins are not meaningful because the company had no revenue.
Reported income was primarily non-operating: the quarter included a $9.66 million gain from waiver of the deferred underwriting fee and a $458,480 gain from the change in fair value of derivative liabilities. Six-month results included those items at $9.66 million and $8,626,569, respectively. These non-cash or one-time valuation/waiver items explain why reported profit did not translate into operating cash generation.
Material changes versus prior comparable periods
Net income improved from a $4,894,262 loss in second-quarter 2021 to $10,071,447 income in second-quarter 2022; six-month income rose from $1,015,469 to $17,939,616. The comparison reflects large fair-value changes and the 2022 underwriting-fee waiver, rather than operating growth. Operating and formation costs declined to $301,733 for the quarter from $327,104, and to $624,985 for six months from $724,309.
In June 2022, shareholders approved extending the business-combination deadline from June 17 to December 16, 2022. Redemptions removed $269,528,286 from the trust and reduced redeemable Class A shares from 27.6 million at December 31, 2021 to 938,090 at June 30, 2022. The deferred underwriting fee payable was eliminated following the underwriters’ waiver.
Outlook, risks and unusual matters
- The company disclosed substantial doubt about its ability to continue as a going concern: it had limited cash outside the trust, may lack liquidity for working-capital needs, and faced mandatory liquidation if no business combination was completed by December 16, 2022. Sponsor or affiliate loans were possible but not committed.
- A non-binding letter of intent signed April 22, 2022 with an earlier target was terminated. A new non-binding letter of intent was signed July 7, after quarter-end; due diligence, a definitive agreement, conditions and shareholder approval remained outstanding. No transaction was assured.
- If no combination is completed by the deadline, public shares are to be redeemed from the trust under the charter terms; warrants would expire worthless. The filing notes that distributions could be below $10.10 per share.
- The filing describes a material weakness in accounting for the initial valuation of redeemable Class A shares. Its risk-factor discussion says controls were not effective as of June 30, while the controls section says remediation was completed during the quarter and management concluded disclosure controls were effective. This inconsistency merits review.
- COVID-19 and the Russia-Ukraine conflict and related sanctions were identified as possible risks, with specific effects not determinable. The company reported no legal proceedings and no off-balance-sheet arrangements.
- No financial guidance was provided. Management expected continuing costs while pursuing a transaction; additional financing could be needed.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is for KINS Technology Group Inc., not Cxapp Inc.
- Review the June redemption, remaining public shares and trust balance, and the December 16, 2022 combination deadline.
- Assess the status and subsequent outcome of the July 7 target letter of intent; it was non-binding and signed after quarter-end.
- Reconcile the internal-control disclosures: the filing states both that the material weakness was remediated and that controls were not effective as of June 30.
- Check the trust-account figures: the balance sheet reports $9,528,176 and the fair-value table reports money-market funds of $9,527,778, but a narrative note contains an apparent inconsistent figure of $9,527,835,182. The filing text does not provide a clear reconciliation.
- Distinguish recurring cash needs from the reported profit, which depended heavily on the underwriting-fee waiver and warrant fair-value gains.