CXApp (CXAI) - 2021 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Interim Financial Statements KINS Technology Group Inc.'s unaudited condensed financial statements for Q2 2021, including balance sheets, operations, equity, cash flows, and accounting notes Condensed Balance Sheets This section details the company's assets, liabilities, and stockholders' equity as of June 30, 2021, and December 31, 2020 Fair Value of Liabilities (Warrant Liability) | ASSETS / LIABILITIES AND STOCKHOLDERS' EQUITY | June 30, 2021 (Unaudited, USD) | December 31, 2020 (USD) | | :-------------------------------------------- | :------------------------ | :---------------- | | ASSETS | | | | Cash | $678,168 | $1,019,026 | | Prepaid expenses | $332,516 | $456,634 | | Total Current Assets | $1,010,684 | $1,475,660 | | Investments held in Trust Account | $278,821,919 | $278,767,785 | | TOTAL ASSETS | $279,832,603 | $280,243,445 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accrued expenses | $471,567 | $194,699 | | Accrued offering costs | — | $17,579 | | Total Current Liabilities | $471,567 | $212,278 | | Warrant liability | $20,227,200 | $21,912,800 | | Deferred underwriting fee payable | $9,660,000 | $9,660,000 | | Total Liabilities | $30,358,767 | $31,785,078 | | Class A common stock subject to possible redemption | $244,473,833 | $243,458,359 | | Total Stockholders' Equity | $5,000,003 | $5,000,008 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $279,832,603 | $280,243,445 | Unaudited Condensed Statements of Operations This section presents the company's unaudited condensed statements of operations, detailing revenues, expenses, and net income or loss for the periods presented Fair Value of Liabilities (Warrant Liability) | Item | Three Months Ended June 30, 2021 (USD) | Six Months Ended June 30, 2021 (USD) | | :-------------------------------------------- | :------------------------------- | :----------------------------- | | Operating and formation costs | $327,104 | $724,309 | | Loss from operations | $(327,104) | $(724,309) |\n| Interest earned on investments in Trust Account | $8,022 | $54,134 | | Interest income - bank | $20 | $44 | | Change in fair value of warrant liability | $(4,575,200) | $1,685,600 | | Total other income (expense), net | $(4,567,158) | $1,739,778 | | Net income (loss) | $(4,894,262) | $1,015,469 | | Basic and diluted net income per share, Class A redeemable common stock | $— | $— | | Basic and diluted net income (loss) per share, Class B non-redeemable common stock | $(0.71) | $0.15 | Unaudited Condensed Statements of Changes in Stockholders' Equity This section outlines changes in stockholders' equity, including common stock, additional paid-in capital, and retained earnings, for the periods presented Fair Value of Liabilities (Warrant Liability) | Item | Class A Common Stock Shares | Class A Stock Amount (USD) | Class B Common Stock Shares | Class B Stock Amount (USD) | Additional Paid-in Capital (USD) | Retained Earnings (Accumulated Deficit) (USD) | Total Stockholders' Equity (USD) | | :-------------------------------------------- | :-------------------------- | :------------------- | :-------------------------- | :------------------- | :------------------------- | :-------------------------------------- | :------------------------- | | Balance — January 1, 2021 | 3,495,212 | $350 | 6,900,000 | $690 | $9,083,468 | $(4,084,500) | $5,000,008 | | Change in value of Class A common stock subject to redemption | (585,122) | (59) | — | — | (5,909,673) | — | (5,909,732) | | Net income | — | — | — | — | — | 5,909,731 | 5,909,731 | | Balance — March 31, 2021 | 2,910,090 | $291 | 6,900,000 | $690 | $3,173,795 | $1,825,231 | $5,000,007 | | Change in value of Class A common stock subject to redemption | 484,580 | 48 | — | — | 4,894,210 | — | 4,894,258 | | Net loss | — | — | — | — | — | (4,894,262) | (4,894,262) | | Balance – June 30, 2021 | 3,394,670 | $339 | 6,900,000 | $690 | $8,068,005 | $(3,069,031) | $5,000,003 | Unaudited Condensed Statement of Cash Flows This section provides the company's unaudited condensed statement of cash flows, categorizing cash activities into operating, investing, and financing sections Fair Value of Liabilities (Warrant Liability) | Cash Flow Item | Six Months Ended June 30, 2021 (USD) | | :-------------------------------------------- | :----------------------------- | | Net income | $1,015,469 | | Interest earned on marketable securities held in Trust Account | $(54,134) | | Change in fair value of warrant liability | $(1,685,600) | | Prepaid expenses | $124,118 | | Accrued expenses | $276,868 | | Net cash used in operating activities | $(323,279) | | Payment of offering costs | $(17,579) | | Net cash used in financing activities | $(17,579) | | Net Change in Cash | $(340,858) | | Cash – Beginning of period | $1,019,026 | | Cash – End of period | $678,168 | | Non-Cash investing and financing activities: Change in value of Class A common stock subject to possible redemption | $1,015,474 | Notes to Unaudited Condensed Financial Statements NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Describes KINS Technology Group Inc.'s formation as a SPAC, its IPO, and its primary objective of effecting a business combination - KINS Technology Group Inc. was incorporated on July 20, 2020, as a blank check company (SPAC) to effect a business combination. As of June 30, 2021, the Company had not commenced any operations, with activities focused on formation, its Initial Public Offering (IPO), and identifying a target company[24][25] - The Company consummated its IPO on December 17, 2020, selling 27,600,000 units at $10.00 per unit, generating $276,000,000 in gross proceeds. Simultaneously, it sold 10,280,000 Private Placement Warrants for $10,280,000[26][27] - Following the IPO, $278,760,000 was placed in a Trust Account, to be invested in U.S. government securities or money market funds, until a business combination is completed or funds are distributed[29] - Management has determined that the Company's liquidity condition and mandatory liquidation date raise substantial doubt about its ability to continue as a going concern[43] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Outlines the significant accounting policies used in preparing the financial statements, including GAAP compliance and specific instrument treatments - The financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations, with certain disclosures condensed or omitted[45] - The Company is an 'emerging growth company' under the JOBS Act and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[47][48] - Class A common stock subject to possible redemption is classified as temporary equity and measured at fair value due to redemption rights outside the Company's control[53] - Warrants are accounted for as liability-classified instruments and measured at fair value at issuance and each balance sheet date, with changes recognized in the statements of operations[55][56] - Net income (loss) per common share is computed using the two-class method, allocating interest income from the Trust Account to Class A redeemable common stock and net loss (adjusted) to Class B non-redeemable common stock[61] - The Company adopted ASU 2020-06 as of January 1, 2021, which simplifies accounting for certain financial instruments, but it did not have a material impact on its financial position, results of operations, or cash flows[66] NOTE 3. PUBLIC OFFERING Details the Initial Public Offering, including units sold, proceeds generated, and the composition of each unit - The Company sold 27,600,000 Units in its Initial Public Offering at $10.00 per Unit, including the full exercise of the over-allotment option. Each Unit consists of one share of Class A common stock and one-half of one redeemable Public Warrant[69] NOTE 4. PRIVATE PLACEMENT Describes the private placement of warrants to the Sponsor and Direct Anchor Investors, including proceeds and allocation to the Trust Account - The Sponsor and Direct Anchor Investors purchased 10,280,000 Private Placement Warrants at $1.00 each, generating $10,280,000. Proceeds were added to the Trust Account[70] NOTE 5. RELATED PARTIES Details transactions and relationships with related parties, including the Sponsor and administrative service agreements - The Sponsor initially received 5,750,000 Founder Shares for $25,000. After forfeitures and purchases by Direct Anchor Investors, and a 1:1.2 stock split, 6,900,000 Founder Shares were outstanding as of June 30, 2021[71] - The Company pays the Sponsor up to $20,000 per month for administrative services, incurring $60,000 and $120,000 for the three and six months ended June 30, 2021, respectively[73] - The Sponsor or affiliates may provide Working Capital Loans to finance transaction costs for a Business Combination, repayable without interest upon completion or convertible into warrants. No amounts were outstanding as of June 30, 2021[75] NOTE 6. COMMITMENTS AND CONTINGENCIES Outlines the company's commitments and contingencies, including potential impacts of COVID-19, registration rights, and deferred underwriting fees - The Company continues to evaluate the impact of the COVID-19 pandemic, noting potential negative effects on its financial position and search for a target company, though the specific impact is not readily determinable[76] - Holders of Founder Shares, Private Placement Warrants, and securities from Working Capital Loans are entitled to registration rights[77] - Underwriters are entitled to a deferred fee of $9,660,000, payable from the Trust Account only upon completion of a Business Combination[78] NOTE 7. STOCKHOLDERS' EQUITY Details the authorized and outstanding shares of preferred, Class A, and Class B common stock, and their respective voting rights - The Company is authorized to issue 2,000,000 shares of preferred stock, none of which were issued or outstanding as of June 30, 2021 and December 31, 2020[79] - As of June 30, 2021, there were 3,394,670 shares of Class A common stock issued and outstanding (excluding redeemable shares) and 6,900,000 shares of Class B common stock issued and outstanding[80][81] - Only Class B common stock holders vote on director elections prior to a Business Combination. Class B shares convert to Class A shares on a one-for-one basis upon a Business Combination, subject to adjustment[83][84] NOTE 8. WARRANT LIABILITY Describes the outstanding Public and Private Placement Warrants, their exercisability, redemption terms, and classification as liabilities - As of June 30, 2021 and December 31, 2020, there were 13,800,000 Public Warrants and 10,280,000 Private Placement Warrants outstanding[85][95] - Public Warrants become exercisable 30 days after a Business Combination or 12 months from IPO closing, expiring five years after a Business Combination or earlier upon redemption/liquidation[85] - The Company may redeem Public Warrants at $0.01 per warrant if Class A common stock equals or exceeds $18.00 per share for 20 trading days within a 30-day period, or at $0.10 per warrant if Class A common stock equals or exceeds $10.00 per share under specific conditions[88][90][91][92] - Private Placement Warrants are identical to Public Warrants but are non-transferable/assignable/salable until 30 days post-Business Combination and are exercisable on a cashless basis and non-redeemable while held by initial purchasers[95] NOTE 9. FAIR VALUE MEASUREMENTS Explains the fair value hierarchy used for assets and liabilities, particularly for investments in the Trust Account and warrant liabilities - The Company uses a fair value hierarchy (Level 1, 2, 3) to classify assets and liabilities based on observable and unobservable inputs[96][97] - As of June 30, 2021, assets in the Trust Account included $898 in cash and $278,821,021 in money market funds. As of December 31, 2020, it included $897 in cash and $278,766,888 in U.S. Treasury Securities[99] Fair Value of Liabilities (Warrant Liability) | Description | Level | June 30, 2021 (USD) | Level | December 31, 2020 (USD) | | :----------------------------------- | :---- | :------------ | :---- | :---------------- | | Warrant Liability – Public Warrants | 1 | $11,592,000 | 3 | $12,558,000 | | Warrant Liability – Private Warrants | 2 | $8,635,200 | 3 | $9,354,800 | - Public Warrants were valued using a binomial lattice model initially (Level 3) and then at publicly listed trading price (Level 1) after detachment. Private Placement Warrants were initially valued using a binomial lattice model (Level 3) and subsequently classified as Level 2 due to observable market quotes for similar assets[103][104] Changes in Fair Value of Level 3 Warrant Liabilities | Item | Private Placement (USD) | Public (USD) | Total Warrant Liabilities (USD) | | :------------------------------------- | :---------------- | :------------ | :------------------------ | | Fair value as of December 31, 2020 | $9,354,800 | $12,558,000 | $21,912,800 | | Change in fair value | $(2,672,800) | $(3,588,000) | $(1,685,600) | | Transfer to Level 1 | — | $(8,970,000) | $(8,970,000) | | Transfer to Level 2 | $(6,682,000) | — | $(6,682,000) | | Fair value as of June 30, 2021 | — | — | — | NOTE 10. SUBSEQUENT EVENTS Confirms the review of subsequent events up to the financial statement issuance date, with no material adjustments or disclosures identified - The Company reviewed subsequent events up to the financial statement issuance date and identified no events requiring adjustment or disclosure[108] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion of KINS Technology Group Inc.'s financial condition and results, focusing on its SPAC status, operational performance, liquidity, and accounting policies Overview Provides an overview of KINS Technology Group Inc. as a blank check company focused on completing a business combination - KINS Technology Group Inc. is a blank check company formed on July 20, 2020, with the purpose of effecting a business combination. The Company intends to use cash from its IPO, private placement warrants, capital stock, debt, or a combination thereof for this purpose[112] - The Company expects to incur significant costs in pursuing its acquisition plans and cannot assure the successful completion of a business combination[113] Results of Operations Summarizes the company's operational results, highlighting the absence of operating revenues and the primary drivers of net income or loss - The Company has not engaged in any operations or generated any revenues to date, other than activities related to its formation, IPO, and the search for a business combination. Operating revenues are not expected until after a business combination is completed[114] Net Income (Loss) Summary | Period | Net Income (Loss) (USD) | | :------------------------------------ | :---------------- |\n| Three months ended June 30, 2021 | $(4,894,262) |\n| Six months ended June 30, 2021 | $1,015,469 | - The net loss for the three months ended June 30, 2021, was primarily due to operating costs of $327,104 and a negative change in the fair value of warrant liabilities of $4,575,200[115] - The net income for the six months ended June 30, 2021, was driven by a positive change in the fair value of warrant liabilities of $1,685,600 and interest income, offset by operating costs of $724,309[116] Liquidity and Capital Resources Discusses the company's liquidity and capital resources, including funds in the Trust Account and cash held outside for operational expenses - Following the IPO and private placement, $278,760,000 was placed in the Trust Account. Transaction costs amounted to $15,688,848, including cash underwriting fees and deferred underwriting fees[118][119] Cash Flow from Operating Activities (Six Months Ended June 30, 2021) | Item | Amount (USD) | | :-------------------------------------------- | :------------ |\n| Cash used in operating activities | $(323,279) |\n| Net income | $1,015,469 |\n| Change in fair value of warrant liabilities | $1,685,600 |\n| Interest income on marketable securities | $(54,134) |\n| Changes in operating assets and liabilities | $400,986 | - As of June 30, 2021, the Company had $278,821,919 in the Trust Account and $678,168 of cash held outside the Trust Account. Funds in the Trust Account are primarily for the Business Combination, while outside funds are for identifying and evaluating target businesses[121][122] - The Company does not believe it needs additional funds for current operations but may require financing for a Business Combination or if redemptions are significant. Failure to secure funds could lead to cessation of operations and liquidation of the Trust Account[124] Off-Balance Sheet Arrangements States that the company has no off-balance sheet arrangements as of the reporting date - As of June 30, 2021, the Company had no off-balance sheet arrangements, such as relationships with unconsolidated entities, special purpose entities, debt guarantees, or non-financial asset purchases[126] Contractual obligations Details the company's contractual obligations, primarily administrative service fees and deferred underwriting fees - The Company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities, other than a monthly fee of $20,000 payable to an affiliate of the Sponsor for administrative services[127] - A deferred underwriting fee of $9,660,000 is payable to underwriters from the Trust Account only upon completion of a Business Combination[128] Critical Accounting Policies Highlights the critical accounting policies, including the treatment of warrant liability and Class A common stock subject to redemption - Key accounting policies include the treatment of Warrant Liability (classified as liabilities at fair value, re-measured each period) and Class A Common Stock Subject to Possible Redemption (classified as temporary equity at fair value)[130][131] - Net Income (Loss) Per Common Share is calculated using the two-class method, distinguishing between Class A redeemable common stock and Class B non-redeemable common stock[133] Recent Accounting Standards Indicates that recently issued accounting standards are not expected to materially affect the financial statements - Management does not believe that any recently issued, but not yet effective, accounting standards would materially affect the condensed financial statements if currently adopted[134] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that quantitative and qualitative disclosures about market risk are not required for smaller reporting companies - Quantitative and Qualitative Disclosures About Market Risk are not required for smaller reporting companies[135] Item 4. Controls and Procedures Evaluation of disclosure controls and procedures, identifying a material weakness in warrant classification and outlining remediation efforts Evaluation of Disclosure Controls and Procedures Assesses the effectiveness of disclosure controls and procedures, noting a material weakness in warrant classification - As of June 30, 2021, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting concerning the classification of warrants as equity instead of derivative liabilities[137] Changes in Internal Control over Financial Reporting Describes changes in internal control over financial reporting, including remediation efforts for the identified material weakness - No material changes in internal control over financial reporting occurred during the quarter, other than remediation steps implemented to address the material weakness, including enhanced supervisory review of accounting procedures and improved review processes for complex securities. As of June 30, 2021, this had not been fully remediated[138] Limitations on the Effectiveness of Controls Acknowledges the inherent limitations of internal control systems in preventing all errors or fraud - Management acknowledges that control systems provide only reasonable, not absolute, assurance against errors and fraud due to inherent limitations and resource constraints[139] Part II. Other Information Item 1. Legal Proceedings States that the Company is not currently involved in any legal proceedings - The Company has no legal proceedings[142] Item 1A. Risk Factors Refers to risk factors from the Annual Report on Form 10-K/A, noting no material changes - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K/A[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the IPO and private placement of warrants, including gross proceeds and allocation of funds to the Trust Account - The Company consummated its IPO on December 17, 2020, selling 27,600,000 Units at $10.00 per Unit, generating $276.0 million in gross proceeds[144] - Simultaneously, 10,280,000 Private Placement Warrants were sold at $1.00 each to the Sponsor, generating approximately $10.3 million, pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act[145] - An aggregate of $278,760,000 from the IPO and private placement was placed in the Trust Account. The Company paid $5,520,000 in underwriting discounts and commissions and $508,848 for other offering costs, with an additional $9,660,000 in deferred underwriting discounts[147] Item 3. Defaults Upon Senior Securities Confirms that there are no defaults upon senior securities - There are no defaults upon senior securities[149] Item 4. Mine Safety Disclosures States that there are no mine safety disclosures - There are no mine safety disclosures[149] Item 5. Other Information Indicates that there is no other information to disclose - There is no other information to disclose[149] Item 6. Exhibits Lists the exhibits filed or incorporated by reference in the Quarterly Report on Form 10-Q Exhibits Filed | No. | Description of Exhibit |\n| :-------- | :-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |\n| (1) 3.1 | Amended and Restated Certificate of Incorporation of the Registrant |\n| 31.1* | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |\n| 32.1** | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |\n| 101.INS* | XBRL Instance Document |\n| 101.SCH* | XBRL Taxonomy Extension Schema Document |\n| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |\n| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |\n| 101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document |\n| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | Part III. Signatures SIGNATURES Contains the required signatures for the Form 10-Q report by the Chief Executive Officer and Chief Financial Officer - The report was signed by Khurram Sheikh, Chief Executive Officer and Chief Financial Officer of KINS Technology Group Inc., on August 16, 2021[156][157]