The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Software Acquisition Group
Inc. II (the “Company”) is a blank check company incorporated in Delaware on June 16, 2020. The Company was formed for the
purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company
and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2021, the
Company had not yet commenced any operations. All activity for the period June 16, 2020 (inception) through March 31, 2021 relates to
the Company’s formation, the initial public offering (the “Initial Public Offering”) and, subsequent to the Initial
Public Offering, identifying a target company for a Business Combination, Otonomo Technologies Ltd., a company organized under the laws
of the State of Israel (“Otonomo”) (see Note 10).
The registration statement
for the Company’s Initial Public Offering was declared effective on September 14, 2020. On September 17, 2020, the Company consummated
the Initial Public Offering of 15,000,000 units (the “Units” and, with respect to the shares of Class A common stock
included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $150,000,000, which is
described in Note 3.
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the sale of 4,750,000 warrants (each, a “Private Placement Warrant”
and, collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement
to Software Acquisition Holdings II LLC (the “Sponsor”), generating gross proceeds of $4,750,000, which is described
in Note 4.
Following the closing of
the Initial Public Offering on September 17, 2020, an amount of $150,000,000 ($10.00 per Unit) from the net proceeds of the sale of the
Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”)
and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as
amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that
holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company,
until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the
Company’s stockholders, as described below.
On September 24, 2020, the
underwriters exercise their over-allotment option in full. As such, the Company consummated the sale of an additional 2,250,000 Units,
at $10.00 per Unit, and the sale of an additional 450,000 Private Placement Warrants, at $1.00 per Private Placement Warrant, generating
total gross proceeds of $22,950,000. A total of $22,500,000 of the net proceeds was deposited into the Trust Account, bringing the aggregate
proceeds held in the Trust Account to $172,500,000.
Transaction costs amounted
to $9,902,566, consisting of $3,450,000 of underwriting fees, $6,037,500 of deferred underwriting fees and $415,066 of other offering
costs.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. NASDAQ rules provide that the Business Combination must be with one or more target businesses that together have a fair market
value equal to at least 80% of the balance in the Trust Account (less any deferred underwriting commissions and taxes payable on interest
earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will only
complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities
of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide
its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of
their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek
stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares,
regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the
Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination
and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks stockholder
approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended
and Restated Certificate of Incorporation provides that, a public stockholder, together with any affiliate of such stockholder or any
other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to
15% or more of the Public Shares without the Company’s prior written consent.
SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The public stockholders will
be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any
pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The per-share amount to be distributed to stockholders who redeem their shares will not be reduced by the deferred underwriting commissions
the Company will pay to the underwriter (as discussed in Note 6). There will be no redemption rights upon the completion of a Business
Combination with respect to the Company’s warrants.
If a stockholder vote is
not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant
to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and
Exchange Commission (the “SEC”), and file tender offer documents containing substantially the same information as would be
included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor
has agreed (a) to vote its Founder Shares (as defined in Note 5), and any Public Shares purchased during or after the Initial Public Offering
in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation
with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the
Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment;
(c) not to redeem any shares (including the Founder Shares) and Private Placement Warrants (including underlying securities) into the
right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares
in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith)
or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating to stockholders’ rights of pre-Business
Combination activity and (d) that the Founder Shares and Private Placement Warrants (including underlying securities) shall not participate
in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to
liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering
if the Company fails to complete its Business Combination.
If the Company is unable
to complete a Business Combination by March 17, 2022 (the “Combination Period”), the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem the
Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest
earned on the funds held in the Trust Account and not previously released to us to pay taxes (less up to $100,000 of interest to pay dissolution
expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s
board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case
to its obligations under Delaware law to provide for claims of creditors and the requirements of applicable law. The underwriter has agreed
to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business
Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that
will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value
of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
The Sponsor has agreed that
it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement
or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share
and (ii) the actual amount per Public Share held in the Trust Account as of the day of liquidation of the Trust Account, if less than
$10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to
any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account
(whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriter of
Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently
verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Sponsor’s only assets
are securities of the Company. Therefore, the Company cannot assure its stockholders that the Sponsor would be able to satisfy those obligations.
None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation,
claims by vendors and prospective target businesses. The Company will seek to reduce the possibility that the Sponsor will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other
entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any
kind in or to monies held in the Trust Account.
Risks and Uncertainties
Management continues
to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited
condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation
S-X promulgated under the Securities Act. Certain information or footnote disclosures normally included in financial statements prepared
in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.
Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results
of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments,
consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and
cash flows for the periods presented.
The accompanying unaudited condensed
financial statements should be read in conjunction with the Company’s Annual Report on Form 10-KA as filed with the SEC on May 25,
2021. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the
period ending December 31, 2021 or for any future periods.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use of Estimates
The preparation of condensed
financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
Cash and Cash Equivalents
The Company considers all
short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have
any cash equivalents as of March 31, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At March 31, 2021 and December
31, 2020, substantially all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S.
Treasury Securities.
SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Class A Common Stock Subject to Possible Redemption
The Company accounts for
its shares of Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is
classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered
to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject
to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the
Company’s condensed balance sheets.
Warrant Liability
The Company accounts
for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms
and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).
The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period
end date while the warrants are outstanding.
For issued or
modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification,
the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.
Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations (see Note
8).
Income Taxes
The Company complies with
the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach
to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted
tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained
upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as
income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021 and
December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or
material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
On March 27, 2020, President
Trump signed the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The CARES Act includes several significant
business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL)
and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss rules,
accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest limitation
under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act
tax provisions. The enactment of the CARES Act did not have a material impact on the Company’s income tax accounts.
Net Loss per Common Share
Net income (loss) per share
is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. The Company
has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 13,825,000
shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events
and the inclusion of such warrants would be anti-dilutive.
The Company’s statement
of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar
to the two-class method of income (loss) per share. Net income per common share, basic and diluted, for Common stock subject to possible
redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net
of applicable franchise and income taxes, by the weighted average number of Common stock subject to possible redemption outstanding since
original issuance.
Net loss per
share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or loss on marketable
securities attributable to Common stock subject to possible redemption, by the weighted average number of non-redeemable common stock
outstanding for the period.
SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Non-redeemable common stock
includes Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features. Non-redeemable
common stock participates in the income or loss on marketable securities based on non-redeemable common stock shares’ proportionate
interest.
The following table reflects the calculation of
basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
|
For the Three Months Ended
March 31,
2021
|
|
Common stock subject to possible redemption
|
|
|
|
Numerator: Earnings allocable to Common stock subject to possible redemption
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
$
|
2,105
|
|
Less: Income taxes and franchise fees
|
|
|
(2,105
|
)
|
Net loss allocable to shares subject to possible redemption
|
|
$
|
—
|
|
Denominator: Weighted Average Common stock subject to possible redemption
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
14,360,058
|
|
Basic and diluted net loss per share
|
|
$
|
0.00
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
Numerator: Net Loss minus Net Earnings
|
|
|
|
|
Net loss
|
|
$
|
(3,554,465
|
)
|
Net loss allocable to Common stock subject to possible redemption
|
|
|
—
|
|
Non-Redeemable Net Loss
|
|
$
|
(3,554,465
|
)
|
Denominator: Weighted Average Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
7,202,442
|
|
Basic and diluted net loss per share
|
|
$
|
(0.49
|
)
|
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times,
may exceed the Federal Depository Insurance Corporation coverage of $250,000. The Company has not experienced losses on this account and
management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as
the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants
at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
●
|
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments
in active markets;
|
|
●
|
Level
2, defined as inputs other than quoted prices in active markets that are either directly
or indirectly observable such as quoted prices for similar instruments in active markets
or quoted prices for identical or similar instruments in markets that are not active;
and
|
|
●
|
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring
an entity to develop its own assumptions, such as valuations derived from valuation techniques
in which one or more significant inputs or significant value drivers are unobservable.
|
SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
In some circumstances, the
inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair
value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the
fair value measurement.
The following table presents
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2021 and
December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
|
172,505,595
|
|
|
$
|
172,503,002
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability – Public Warrants
|
|
1
|
|
|
13,455,000
|
|
|
|
11,643,750
|
|
Warrant Liability – Private Placement
|
|
3
|
|
|
8,476,000
|
|
|
|
7,176,000
|
|
At March 31, 2021, there
were 8,625,000 Public Warrants outstanding and 5,200,000 Private Warrants outstanding.
The Warrants were accounted
for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheet. The warrant liabilities
are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of
warrant liabilities in the statement of operations.
The Private Warrants were
valued using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black
Scholes model’s primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility
of the common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’
companies without an identified target. The expected volatility as of subsequent valuation dates will be implied from the Company’s
own public warrant pricing. The Public Warrants were valued based upon the closing quoted price as of March 31, 2021.
The following table presents
the changes in the fair value of warrant liabilities:
|
|
Private
Placement
|
|
|
Public
|
|
|
Warrant
Liabilities
|
|
Fair value as of December 31, 2020
|
|
$
|
7,176,000
|
|
|
$
|
11,643,750
|
|
|
$
|
18,819,750
|
|
Change in valuation inputs or other assumptions
|
|
|
1,300,000
|
|
|
|
1,811,250
|
|
|
|
3,111,250
|
|
Fair value as of March 31, 2021
|
|
$
|
8,476,000
|
|
|
$
|
13,455,000
|
|
|
|
21,931,000
|
|
Derivative Financial Instruments
The Company evaluates its
financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance
with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities,
the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with
changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are
classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument
could be required within 12 months of the balance sheet date.
Recent Accounting Standards
Management does
not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on the Company’s condensed financial statements.
SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE 3. PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company sold 15,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common
stock and one-half of one redeemable warrant (“Public Warrant”). On September 24, 2020, in connection with the underwriters’
exercise of the over-allotment option in full, the Company sold an additional 2,250,000 Units at a price of $10.00 per Unit. Each whole
Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to
adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing
of the Initial Public Offering, the Sponsor purchased an aggregate of 4,750,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant, or $4,750,000 in the aggregate. On September 24, 2020, in connection with the underwriters’ exercise of the over-allotment
option in full, the Company sold an additional 450,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant or
$450,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share.
The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the
Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the
Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and
the Private Placement Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On June 16, 2020, the Company
issued an aggregate of 4,312,500 shares of Class B common stock (the “Founder Shares”) to the Sponsor for an aggregate purchase
price of $25,000. The Founder Shares include an aggregate of up to 562,500 shares subject to forfeiture by the Sponsor to the extent that
the underwriter’s over-allotment is not exercised in full or in part, so that the Sponsor will collectively own, on an as-converted
basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor does not purchase
any Public Shares in the Initial Public Offering). As a result of the underwriters’ election to fully exercise their over-allotment
option on September 24, 2020, there are 562,500 Founder Shares no longer subject to forfeiture.
The Sponsor has agreed not
to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination
or (B) the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the
Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding
the foregoing, if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period
commencing at least 150 days after the Business Combination, the Founder Shares will be released from the lock-up.
Promissory Note — Related Party
On June 16, 2020, the Sponsor
agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory
note (the “Note”). The Note is non-interest bearing and is payable on the earlier of March 31, 2021 or the completion of the
Initial Public Offering. As of September 17, 2020, there was $161,337 outstanding under the Promissory Note, which was subsequently repaid
on September 22, 2020.
Administrative Support Agreement
The Company entered into
an agreement, commencing on September 14, 2020 through the earlier of the Company’s consummation of a Business Combination and its
liquidation, to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. For
the three months ended March 31, 2021, the Company incurred $30,000 in fees for these services, of which such amount is included in accounts
payable and accrued expenses in the accompanying condensed balance sheets.
Related Party Loans
In order to finance
transaction costs in connection with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”).
Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination,
without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation of a Business Combination
into warrants at a price of $1.00 per warrant. The warrants will be identical to the Private Placement Warrants. In the event that a
Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital
Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration
rights agreement entered into on September 14, 2020, the holders of the Founder Shares, Private Placement Warrants and any warrants that
may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private
Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares)
will be entitled to registration rights, requiring the Company to register such securities for resale (in the case of the Founder Shares,
only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands,
excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination and rights
to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the
expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled
to a deferred fee of $6,037,500. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely
in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Business Combination Agreement
On January 31, 2021,
the Company entered into a business combination agreement (the “Business Combination Agreement”) with Otonomo and Butterbur
Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Otonomo (“Merger Sub”).
Pursuant to the Business
Combination Agreement, Merger Sub will merge with and into the Company, with the Company surviving the merger (the “Business Combination”).
As a result of the Business Combination, and upon consummation of the Business Combination and the other transactions contemplated by
the Business Combination Agreement (the “Transactions”) the Company will become a wholly owned subsidiary of Otonomo, with
the securityholders of the Company becoming securityholders of Otonomo.
The following securities
issuances will be made by Otonomo to the Company securityholders at the Effective Time and in each case assume the Stock Split (as defined
in the Business Combination Agreement) has occurred: (i) each share of Class A common stock of the Company and each share of
Class B common stock of the Company will be exchanged for one Otonomo Ordinary Share and (ii) each outstanding warrant of the
Company will be assumed by Otonomo and will become a warrant of Otonomo (“Otonomo Warrant”) (with the number of Otonomo
Ordinary Shares underlying Otonomo Warrant and the exercise price of such Otonomo Warrants subject to adjustment in accordance with the
terms of the Business Combination Agreement).
The Transactions will be
consummated subject to the deliverables and provisions as further described in the Business Combination Agreement.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock—
The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At March 31, 2021 and December 31, 2020, there
were no preferred shares issued or outstanding.
Class A Common
Stock— The Company is authorized to issue up to 100,000,000 shares of Class A, $0.0001 par value common stock. Holders of
the Company’s common stock are entitled to one vote for each share. At March 31, 2021 and December 31, 2020, there were 2,889,942
and 3,245,843 shares of Class A common stock issued and outstanding, excluding 14,004,157 and 14,360,058 shares of Class A common
stock subject to possible redemption, respectively.
Class B Common
Stock— The Company is authorized to issue up to 10,000,000 shares of Class B, $0.0001 par value common stock. Holders of
the Company’s common stock are entitled to one vote for each share. At March 31, 2021 and December 31, 2020, there were 4,312,500
Class B common stock issued and outstanding.
SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The shares of Class
B common stock will automatically convert into shares of Class A common stock at the time of the Business Combination on a one-for-one
basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like. In the case that additional
shares of Class A common stock, or equity linked securities, are issued or deemed issued in excess of the amounts offered in the Initial
Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert
into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock
agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock
issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as converted basis, 20% of the sum
of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class
A common stock and equity linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or
equity linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent warrants
issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert
their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above,
at any time.
The Company may issue additional
common stock or preferred stock to complete its Business Combination or under an employee incentive plan after completion of its Business
Combination.
NOTE 8. WARRANTS
Warrants —
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) 30 days after the consummation of a Business Combination or (b) 12
months from the closing of the Initial Public Offering. The Public Warrants will expire five years from the consummation of a Business
Combination or earlier upon redemption or liquidation.
The Company will not be obligated
to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant
exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise
of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations
with respect to registration. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated
to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered
or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
The Company has agreed that
as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its best
efforts to file with the SEC a registration statement registering the issuance, under the Securities Act, of the Class A common stock
issuable upon exercise of the Public Warrants. The Company will use its best efforts to file with the SEC a registration statement covering
the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and
to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified
in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants
is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time
as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration
statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Once the Public Warrants
become exercisable, the Company may redeem the Public Warrants for redemption:
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in whole and not in part;
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at a price of $0.01 per Public Warrant;
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upon not less than 30 days’ prior written notice of redemption to each warrant holder and
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if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.
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SOFTWARE ACQUISITION GROUP INC. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
If and when the Public
Warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of common stock
upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is
unable to effect such registration or qualification.
The exercise price and number
of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event
of a share dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will
not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required
to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and
the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their
warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to
such warrants. Accordingly, the warrants may expire worthless. If the Company calls the Public Warrants for redemption, management will
have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described
in the warrant agreement.
In addition, if
(x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection
with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class
A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors
and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor
or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from
such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s
initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume
weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior
to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20
per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market
Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent)
to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants
will and the common shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable
until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement
Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their
permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon
this review, other than as describe below, the Company did not identify any subsequent events that would have required adjustment or disclosure
in the financial statements.