KINS Technology Group Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2022; filed November 8, 2022. Although the request identifies Cxapp Inc., this filing is for KINS Technology Group Inc., a special purpose acquisition company (SPAC). It reports KINS’s financial position and proposed combination with Inpixon’s enterprise apps business, CXApp—not CXApp’s standalone operating results.
Business context and proposed transaction
KINS had not commenced operating activities or generated operating revenue. Its activities were formation, public-company costs, and searching for a business combination. On September 25, 2022, KINS entered into agreements for a transaction involving the separation of Inpixon’s enterprise apps business into CXApp, a distribution of CXApp shares to Inpixon security holders, and a merger of CXApp with KINS’s subsidiary. Inpixon was to contribute $10 million to CXApp. The transaction remained subject to customary closing conditions, stockholder approvals, Nasdaq listing, and other requirements, including at least $9.5 million of specified available cash or financing.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Operating revenue | None | None |
| Operating and formation costs | 2022: $1.10 million; 2021: $346,362 | 2022: $1.72 million; 2021: $1.07 million |
| Net income | 2022: $872,308; 2021: $4.24 million | 2022: $18.81 million; 2021: $5.25 million |
| Basic and diluted earnings per share, Class A and B | 2022: $0.11; 2021: $0.12 | 2022: $0.81; 2021: $0.15 |
| Cash used in operating activities | Not separately reported | 2022: $615,250; 2021: $514,969 |
Net income was driven largely by non-operating and non-cash items, rather than business operations. For the first nine months of 2022, these included a $10.55 million gain from changes in warrant fair value and a $9.66 million gain from elimination of the deferred underwriting fee. Without operating revenue, operating margins are not meaningful.
At September 30, 2022, cash outside the trust was $219,337; trust assets were $9.57 million; total assets were $9.89 million; current liabilities were $2.21 million; and the company reported a $1.68 million working-capital deficit. Derivative liabilities were $722,400. There was no long-term debt reported. The balance sheet lists a related-party working-capital note of $347,961, while the related-party note disclosure states $347,367 outstanding; the filing text does not provide a clear reconciled value. Stockholders’ deficit was $2.52 million.
Operating cash use was offset by $269.61 million of investing cash inflows, primarily trust withdrawals for redemptions, and financing cash outflows of $269.18 million, primarily redemptions. Cash declined by $186,789 during the nine-month period, to $219,337.
Material changes and management commentary
- In June 2022, stockholders approved extending KINS’s business-combination deadline from June 17 to December 16, 2022. In connection with the extension, approximately $269.53 million was withdrawn from the trust to redeem shares. Redeemable Class A shares fell from 27.6 million at year-end 2021 to 938,090 at September 30, 2022.
- The deferred underwriting fee payable of $9.66 million was eliminated during the nine months, producing an equal gain in earnings.
- Operating costs increased year over year, while quarterly net income fell from $4.24 million to $872,308, chiefly reflecting lower warrant fair-value gains.
- Management stated that the short deadline, limited liquidity, and uncertainty about completing a transaction raise substantial doubt about KINS’s ability to continue as a going concern. If no transaction is completed by December 16, 2022, KINS would be required to liquidate and redeem public shares. Management intended to complete a transaction by the deadline but gave no assurance it could do so; sponsor or other financing was possible but not committed.
- The proposed merger agreement could be terminated if closing had not occurred by March 16, 2023, among other specified circumstances. The filing disclosed a potential $2 million termination fee in certain cases.
Risks, contingencies, and unusual items
- The proposed business combination was conditional and not completed as of the filing. Transaction execution, redemptions, financing, approvals, and listing conditions could affect whether it closes.
- Warrant liabilities are remeasured at fair value each reporting period; resulting non-cash gains or losses can materially fluctuate reported earnings.
- The filing identifies risks from SPAC competition for targets, inflation and interest-rate changes, geopolitical disruption related to Russia’s invasion of Ukraine, and potential effects of the Inflation Reduction Act’s 1% excise tax on certain post-2022 stock repurchases.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. The filing reported no legal proceedings.
Key facts for investors to verify
- Whether the CXApp separation, distribution, and merger closed, and the final consideration, capitalization, and financing terms.
- Whether KINS met its December 16, 2022 business-combination deadline or obtained an extension, and the resulting redemption or liquidation outcome.
- The discrepancy between the $347,961 related-party note on the balance sheet and the $347,367 amount in the note disclosure.
- The available cash after redemptions and transaction expenses relative to the $9.5 million transaction condition and the $5,000,001 net-tangible-asset requirement.
- The effect of warrant fair-value changes and any applicable excise tax on post-combination cash and reported results.