NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 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 June 30, 2021, the Company had not yet commenced any operations. All activity for the period June 16, 2020 (inception) through June
30, 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.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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.
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.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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
JUNE
30, 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-K/A
as filed with the SEC on May 25, 2021. The interim results for the three and six months ended June 30, 2021 are not necessarily indicative
of the results to be expected for the year 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.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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 June 30, 2021 and December 31, 2020.
Marketable
Securities Held in Trust Account
At
June 30, 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.
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
Liabilities
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).
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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 June
30, 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.
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 statements of operations include 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.
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.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
The
following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
For the Period From
June 24,
2020
(inception) through
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
|
2020
|
|
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
|
|
$
|
2,622
|
|
|
$
|
5,215
|
|
|
$
|
—
|
|
Less: Income taxes and franchise fees available to be withdrawn from the Trust Account
|
|
|
(2,622
|
)
|
|
|
(5,215
|
)
|
|
|
—
|
|
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
|
|
|
13,873,441
|
|
|
|
14,181,124
|
|
|
|
—
|
|
Basic and diluted net loss per share
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Net Loss minus Net Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,305,091
|
)
|
|
$
|
(4,859,556
|
)
|
|
$
|
(761
|
)
|
Net loss allocable to Common stock subject to possible redemption
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Non-Redeemable Net Loss
|
|
$
|
(1,305,091
|
)
|
|
$
|
(4,859,556
|
)
|
|
$
|
(761
|
)
|
Denominator: Weighted Average Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
7,689,059
|
|
|
|
7,381,376
|
|
|
|
3,750,000
|
|
Basic and diluted net loss per share
|
|
$
|
(0.17
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
—
|
|
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.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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.
|
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 June 30, 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
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities held in Trust Account
|
|
1
|
|
|
$
|
172,508,217
|
|
|
$
|
172,503,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
Liability – Public Warrants
|
|
1
|
|
|
|
14,058,750
|
|
|
|
11,643,750
|
|
Warrant
Liability – Private Placement
|
|
3
|
|
|
|
8,788,000
|
|
|
|
7,176,000
|
|
At
June 30, 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 statements of operations.
Transfers
to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period. During the three and six months ended June 30, 2021
there were no transfers to/from Levels 1,2, and 3.
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 June 30, 2021.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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
|
|
|
1,612,000
|
|
|
|
2,415,000
|
|
|
|
4,027,000
|
|
Fair
value as of June 30, 2021
|
|
$
|
8,788,000
|
|
|
$
|
14,058,750
|
|
|
|
22,846,750
|
|
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
In
August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early
adoption permitted.
Management
does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s condensed financial statements.
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.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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. Borrowings under the Promissory Note are no longer available.
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 and six months ended June 30, 2021, the Company incurred $30,000 and $60,000 in fees for these services, of which
$60,000 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
JUNE
30, 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. As of June 30, 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. As of June 30, 2021 and December 31, 2020,
there were 3,376,559 and 3,245,843 shares of Class A common stock issued and outstanding, excluding 13,873,441 and 14,360,058 shares
of Class A common stock subject to possible redemption, respectively.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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. As of June 30, 2021 and December 31, 2020,
there were 4,312,500 Class B common stock issued and outstanding.
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. WARRANT LIABILITIES
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.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
Once
the Public Warrants become exercisable, the Company may redeem the Public Warrants for redemption:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per Public Warrant;
|
|
●
|
upon
not less than 30 days’ prior written notice of redemption to each warrant holder and
|
|
●
|
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.
|
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.
SOFTWARE
ACQUISITION GROUP INC. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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.
On
July 10, 2021, SWAG, Otonomo and Merger Sub entered into an amendment (the “Amendment”) to the Business Combination Agreement
to extend the “Termination Date” under the Business Combination Agreement from July 31, 2021 to September 30, 2021.