Onemednet Corp quarterly report, Q1 FY2023

Business context and reporting period

Registrant clarification: This filing is Data Knights Acquisition Corp. (a SPAC), not OneMedNet Corp. It reports the three months ended March 31, 2023 and does not provide OneMedNet’s operating results. Data Knights had no operating business or revenue and was pursuing a business combination with OneMedNet Corporation, Inc.

The proposed merger consideration was described as $200 million, subject to adjustments for working capital, closing net indebtedness, transaction expenses, and post-closing adjustments. Completion remained subject to customary conditions, including stockholder approvals and at least $5,000,001 of tangible net assets at closing.

Financial results and liquidity

At March 31, 2023, cash outside the trust was $10,108, versus $30,870 at year-end 2022. Trust investments were $29.73 million, compared with $29.03 million. Working capital deficit was $2.33 million, up from $1.95 million. Total liabilities were $9.88 million, including $239,081 of working capital loans, $2.91 million of extension loans, and a $4.03 million deferred underwriter fee payable only if a business combination closes. The filing reports no long-term debt or off-balance-sheet financing arrangements.

There are no meaningful operating margins to assess because the SPAC had no operating revenue. The Q1 2022 profit was primarily driven by a non-cash warrant revaluation gain; warrants were unchanged in fair value in Q1 2023.

Material changes versus the prior period

• Results shifted from Q1 2022 net income of $2.20 million to a Q1 2023 net loss of $85,983, largely reflecting the absence of the prior-year $2.76 million warrant-liability gain.
• Trust investments increased by approximately $696,000 from December 31, 2022, while outside cash fell by approximately $21,000.
• Extension loans increased by approximately $369,000 and working capital loans by $32,000 during the quarter.
• Redeemable Class A shares were remeasured upward by $583,570, reducing stockholders’ deficit.

Outlook, risks, contingencies, and unusual items

• Management stated that substantial doubt exists about the company’s ability to continue as a going concern, citing minimal outside cash, a working capital deficit, ongoing transaction costs, and the risk of missing the business-combination deadline. Sponsor or insider loans were possible but not committed.
• The filing describes an extension framework through August 11, 2023. Subsequent-event disclosures say the sixth and seventh one-month extensions were exercised, extending the deadline to May 11 and then June 11, 2023. Other passages refer to August 23, creating inconsistent deadline disclosures.
• In November 2022, holders redeemed 8,768,456 shares for approximately $91.4 million; the trust balance after those redemptions was approximately $28.5 million. Sponsor deposits funded monthly extensions.
• Management reported ineffective disclosure controls and internal control over financial reporting, citing material weaknesses in accounting for complex financial instruments and insufficient review controls. Remediation efforts were underway.
• Potential risks include failure to complete the merger, further redemptions, dilution or debt used to fund a transaction, the 1% federal excise tax on certain post-2022 stock repurchases, and sponsor indemnity obligations that may not be supported by sufficient sponsor assets.
• Subsequent to quarter-end, the company withdrew trust interest to pay taxes and franchise tax and made extension deposits. The filing says no legal proceedings were pending.

Important facts for investors to verify

• Confirm the correct issuer and obtain OneMedNet’s own filings for its business and financial performance; this 10-Q reports Data Knights’ SPAC financials.
• Verify the merger’s current status, final consideration and adjustments, required approvals, financing, and applicable closing deadline; the filing’s deadline references are inconsistent.
• Reconcile the disclosed public-share redemption counts and the number of Class A shares subject to redemption, which differ across portions of the filing.
• Assess whether available cash, sponsor funding, and trust funds can support transaction costs and closing conditions, and review the going-concern warning.
• Review the material weaknesses, remediation progress, and any later corrections or restatements in subsequent filings.