NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
1 - Description of Organization, Business Operations and Going Concern
Kismet
Acquisition Two Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on September
15, 2020. The Company was incorporated for the purpose of acquiring, engaging in a share exchange,
share reconstruction and amalgamation, contractual control arrangement with, purchasing all or substantially all of the assets of, or
engaging in any other similar initial business combination with one or more businesses or entities that the Company has not yet identified
(“Business Combination”).
As
of March 31, 2022, the Company had not yet commenced operations. All activity for the period from September 15, 2020 (inception) through
March 31, 2022, relates to the Company’s formation and the initial public offering (the “Initial Public Offering”),
which is described below, and since the Initial Public Offering, the search for a potential target. The Company will not generate any
operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating
income in the form of interest income on investments held in Trust Account (as defined below) from the proceeds derived from the Initial
Public Offering and the sale of the Private Placement Warrants (as defined below).
The
Company’s sponsor is Kismet Sponsor Limited, a British Virgin Islands company (“Sponsor”). The registration statement
for the Company’s Initial Public Offering was declared effective on February 17, 2021. On February 22, 2021, the Company consummated
its Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in
the Units sold, the “Public Shares”), including 3,000,000 additional Units to cover over-allotments (the “Over-Allotment
Units”), at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $13.1 million,
of which approximately $8.1 million was for deferred underwriting commissions (see Note 6).
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 4,400,000
warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price
of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $6.6 million, and incurring offering costs of approximately
$7,000 (see Note 4).
Upon
the closing of the Initial Public Offering and the Private Placement, $230.0 million ($10.00 per Unit) of the net proceeds of the Initial
Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”) with
Continental Stock Transfer & Trust Company acting as trustee and invested in U.S. government treasury obligations with a maturity
of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 (the
“Investment Company Act”), which invest only in direct U.S. government treasury obligations, as determined by the Company,
until the earlier of (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering
and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. The Company’s initial Business Combination must be with one or more operating businesses or
assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting
commissions and taxes payable, if any, on the income accrued on the Trust Account) at the time the Company signs a definitive agreement
in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction
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.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
Company will provide its holders of the Public Shares (the “Public Shareholders”) 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 shareholder meeting called
to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated
to be $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 Public Shareholders who redeem their Public Shares will not be
reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). These Public Shares
were recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance
with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic
480, “Distinguishing Liabilities from Equity” (“ASC 480”). In such case, the Company will proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority
of the shares are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide
to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to the amended and restated memorandum and
articles of association which were adopted by the Company upon the consummation of the Initial Public Offering (the “Amended and
Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities
and Exchange Commission (the “SEC”), and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, a shareholder approval of the transactions is required by law, or the Company decides to obtain shareholder approval for
business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules
and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business
Combination, the holder of the Founder Shares (as defined in Note 5) prior to the Initial Public Offering (the “Initial Shareholder”)
agreed to vote its Founder Shares and any Public Shares purchased during or after the Initial Public Offering in favor of a Business
Combination. In addition, the Initial Shareholder agreed to waive its redemption rights with respect to their Founder Shares and Public
Shares in connection with the completion of a Business Combination.
Notwithstanding
the foregoing, the Company’s Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together
with any affiliate of such shareholder or any other person with whom such shareholder 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 redeeming its shares with respect to more than an aggregate of 20% or more of the Class A ordinary shares sold in the Initial Public
Offering, without the prior consent of the Company.
The
Company’s Sponsor, executive officers, directors and director nominees agreed not to propose an amendment to the Company’s
Amended and Restated Memorandum and Articles of Association that would affect the substance or timing of the Company’s obligation
to provide for the redemption of its Public Shares in connection with a Business Combination or to redeem 100% of its Public Shares if
the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem
their Class A ordinary shares in conjunction with any such amendment.
If
the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February
22, 2023 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii)
as promptly as reasonably possible but not more than ten business days thereafter, redeem all Public Shares then outstanding at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including any amounts representing interest
earned on the Trust Account, less any interest released to the Company for the payment of taxes, if any (and less up to $100,000 in interest
reserved for expenses in connection with the Company’s dissolution), divided by the number of then outstanding Public Shares, which
redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation
distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii) to the Company’s
obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
In
connection with the redemption of 100% of the Company’s outstanding Public Shares for a portion of the funds held in the Trust
Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned
on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes payable (less up to
$100,000 of interest to pay dissolution expenses).
The
Initial Shareholder agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business
Combination within the Combination Period. However, if the Initial Shareholder should acquire Public Shares in or after the Initial Public
Offering, it will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails
to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting
commission (see Note 6) 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 Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual
assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust
Account. In order to protect the amounts held in the Trust Account, the Sponsor 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 other 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 date of the 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 the 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 underwriters of the Initial Public Offering against certain
liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that
an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability
for such third-party claims. 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 vendors, service providers (except the Company’s independent registered public
accounting firm), 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.
Liquidity
and Going Concern
As
of March 31, 2022, the Company had $305 in its operating bank account and working capital deficit of $789.
The
Company’s liquidity needs to date have been satisfied through a contribution of $25,000 from the Sponsor to cover certain expenses
in exchange for the issuance of the Founder Shares, a loan of approximately $111,000 from the Sponsor pursuant to the Note (as defined
in Note 5), and a portion of the proceeds from the consummation of the Private Placement not held in the Trust Account. The Company repaid
the Note in full on February 24, 2021. In addition, in order to finance transaction costs in connection with a Business Combination,
the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide
the Company Working Capital Loans (as defined in Note 5). As of March 31, 2022 and December 31, 2021, there were no amounts outstanding
under any Working Capital Loan.
The
Company may need to raise additional capital through loans or additional investments from its Sponsor, its officers or directors or
their affiliates. The Company’s officers, directors and Sponsor, or their affiliates, may, but are not obligated to, loan the
Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the
Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is
unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but
not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, reducing overhead expenses,
and extending the terms and due dates of certain accrued expenses and other liabilities. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if at all. In connection with the Company’s
assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements
– Going Concern,” management has determined that the liquidity condition, mandatory liquidation and subsequent
dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to complete
a business combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after February 22, 2023. The condensed financial statements do not include
any adjustment that might be necessary if the Company is unable to continue as a going concern.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of
the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited
condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement
of the balances and results for the periods presented. Operating results for the three months ended March 31, 2022 are not necessarily
indicative of the results that may be expected through December 31, 2022 or any future period.
The
accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto
included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2022.
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 shareholder 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 an emerging growth 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 an 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 unaudited condensed financial statements
with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the
extended transition period difficult or impossible because of the potential differences in accounting standards used.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Use
of Estimates
The
preparation of unaudited condensed financial statements in conformity with GAAP requires 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 unaudited
condensed 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 unaudited condensed financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates
included in these financial statements is the determination of the fair value of the derivative assets and liabilities. Accordingly,
the actual results could differ 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 had no cash equivalents as of March 31, 2022 and December 31, 2021.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Coverage limit of $250,000, and investments held in Trust Account. The Company
has not experienced losses on these accounts, and management believes the Company is not exposed to significant risks on such accounts.
Investments
Held in the Trust Account
The
Company’s portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set
forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that
invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s
investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities.
When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at
fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of
each reporting period. Gains and losses resulting from the change in fair value of these securities are included in unrealized gain from
investments held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments
held in the Trust Account are determined using available market information.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC Topic 820,
“Fair Value Measurements, equals or approximates the carrying amounts represented in the condensed balance sheets, except for
the derivative assets and liabilities (see Note 10).
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 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 consist of:
|
● |
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.
Derivative
Assets and Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued warrants, to determine if such instruments are derivatives or contain features that
qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
The
Company accounts for its warrants issued in connection with its Initial Public Offering, the Private Placement Warrants and units
that may be issued in connection with the forward purchase agreement (the “Forward Purchase Units”) as derivative
assets/liabilities in accordance with ASC 815. Accordingly, the Company recognizes the instruments as assets/liabilities at fair
value and adjusts the instruments to fair value at the end of each reporting period. The assets/liabilities are subject to
re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s
condensed statements of operations. The fair value of warrants issued in connection with the Initial Public Offering was initially
measured using a Monte-Carlo simulation and has subsequently been measured on the market price of such warrants at each measurement
date when separately listed and traded. The fair value of the Private Placement Warrants was
initially measured using a Black-Scholes Option Pricing Model and subsequently using the public market value of the warrants
issued in connection with its Initial Public Offering. The fair value of the Forward Purchase
Units has been measured using John C. Hull’s Options, Futures, and Other Derivatives model at each measurement
date.
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were
directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the
Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with
derivative warrant liabilities are expensed as incurred, presented as non-operating expenses in the condensed statements of
operations. Offering costs associated with the Class A ordinary shares were charged against the carrying value of the Class A
ordinary shares upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as
non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation
of current liabilities.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class
A Ordinary Shares Subject to Possible Redemption
The
Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary
shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified
as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class
A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the
occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021, 23,000,000 Class A ordinary shares subject
to possible redemption are presented as temporary equity, outside of the shareholders’ equity (deficit) section of the Company’s
condensed balance sheets.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A ordinary shares
subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the
reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering,
the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in
capital (to the extent available) and accumulated deficit.
Share-Based
Compensation
The
Company complies with the accounting and disclosure requirement of FASB ASC Topic 718, “Compensation – Stock
Compensation.” Share-based compensation to employees and non-employees is recognized over the requisite service period based
on the estimated grant-date fair value of the awards. Share-based awards with graded-vesting schedules are recognized on a
straight-line basis over the requisite service period for each separately vesting portion of the award. The Company recognizes the
expense for share-based compensation awards subject to performance-based milestone vesting over the remaining service period when
management determines that achievement of the milestone is probable. Management evaluates when the achievement of a
performance-based milestone is probable based on the expected satisfaction of the performance conditions at each reporting date.
Share-based compensation will be recognized in general and administrative expense in the condensed statements of operations. The
Company issued option awards that contain both a performance condition and service condition. The option awards vest upon the
consummation of the initial business combination and will expire in five years after the date on which they first become
exercisable. The Company has determined that the consummation of an initial business combination is a performance condition subject
to significant uncertainty. As such, the achievement of the performance is not deemed to be probable of achievement until the
consummation of the event, and therefore no compensation has been recognized for the period from inception to March 31,
2022.
Income
Taxes
FASB
ASC Topic 740, “Income Taxes,” 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’s management determined
that the Cayman Islands is the Company’s only major tax jurisdiction. 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, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position.
There
is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman federal income tax regulations,
income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s unaudited condensed financial
statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change
over the next twelve months.
Net
Income (Loss) per Ordinary Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has
two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted
average number of ordinary shares outstanding for the respective period. This presentation assumes a business combination as the most likely outcome.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
calculation of diluted net income (loss) per ordinary share does not consider the effect of the warrants issued in connection with the
Initial Public Offering and the Private Placement Warrants to purchase 12,066,667 Class A ordinary shares because their exercise is contingent
upon future events and because inclusion would be anti-dilutive under the treasury stock method.
Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates
fair value.
The
table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share
for each class of ordinary shares:
| |
For the Three Months Ended | | |
For the Three Months Ended | |
| |
March 31, 2022 | | |
March 31, 2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income (loss) | |
$ | 3,208,772 | | |
$ | 871,949 | | |
$ | (493,018 | ) | |
$ | (295,303 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted average ordinary shares outstanding, basic and diluted | |
| 23,000,000 | | |
| 6,250,000 | | |
| 9,711,111 | | |
| 5,816,667 | |
Basic and diluted net income (loss) per ordinary share | |
$ | 0.14 | | |
$ | 0.14 | | |
$ | (0.05 | ) | |
$ | (0.05 | ) |
Recent
Accounting Pronouncements
The
Company’s management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently
adopted, would have a material effect on the accompanying condensed financial statements.
Note
3 – Initial Public Offering
On
February 22, 2021, the Company consummated its Initial Public Offering of 23,000,000 Units, including 3,000,000 Over-Allotment Units,
at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $13.1 million, of which
approximately $8.1 million was for deferred underwriting commissions.
Each
Unit consists of one Class A ordinary share and one-third of one redeemable warrant (“Public Warrant”). Each whole Public
Warrant will entitle the holder to purchase one Class A ordinary share at an exercise price of $11.50 per share, subject to adjustment
(see Note 7).
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
4 – Private Placement
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of 4,400,000 Private Placement Warrants,
at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $6.6 million, and incurring offering
costs of approximately $7,000.
Each
whole Private Placement Warrant is exercisable for one whole Class A ordinary share at a price of $11.50 per share. A portion of the
proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the 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 Private Placement Warrants
will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as
they are held by the Sponsor or its permitted transferees.
The
Sponsor agreed, subject to limited exceptions, not to transfer, assign or sell any of its Private Placement Warrants until 30 days after
the completion of the initial Business Combination.
Note
5 – Related Party Transactions
Forward
Purchase Agreement
In
connection with the consummation of the Initial Public Offering, the Company entered into a forward purchase agreement (the
“Forward Purchase Agreement”) with the Sponsor, which provides for the purchase of $20.0 million of Forward Purchase
Units, which at the option of the Sponsor can be increased to $50.0 million, with each unit consisting of one Class A ordinary share
(the “Forward Purchase Shares”) and one-third of one warrant to purchase one Class A ordinary share at $11.50 per share
(the “Forward Purchase Warrants”), for a purchase price of $10.00 per Forward Purchase Unit, in a private placement to
occur concurrently with the closing of the initial Business Combination. The purchase under the Forward Purchase Agreement is
required to be made regardless of whether any Class A ordinary shares are redeemed by the Public Shareholders. The forward purchase
securities will be issued only in connection with the closing of the initial Business Combination. The proceeds from the sale of
forward purchase securities may be used as part of the consideration to the sellers in the initial Business Combination, expenses in
connection with the initial Business Combination or for working capital in the post-transaction company. The Company classified the
Forward Purchase Units as derivative instruments on its condensed balance sheets. The initial value of the Forward Purchase Units
was insignificant, and the Company recognized an increase in the change in the fair value of the derivative assets of approximately
$30,000 for the three months ended March 31, 2022.
Founder
Shares
On
September 21, 2020, the Company issued 4,812,500 Class B ordinary shares, par value $0.001 per share (the “Founder Shares”)
to the Sponsor. On September 23, 2020, the Sponsor paid an aggregate of $25,000 for certain expenses on behalf of the Company in exchange
for issuance of the Founder Shares. On January 25, 2021, the Company effected a stock dividend of 1,437,500 shares with respect to Class
B ordinary shares, resulting in an aggregate of 6,250,000 shares outstanding. The Sponsor agreed to forfeit up to an aggregate of 750,000
Founder Shares, on a pro rata basis, to the extent that the option to purchase additional Units was not exercised in full by the underwriters,
so that the Founder Shares would represent 20% of the Company’s issued and outstanding shares after the Initial Public Offering
plus the 2,000,000 Forward Purchase Shares underlying the Forward Purchase Units (which at the option of the Sponsor can be increased
to up to 5,000,000 Forward Purchase Shares). On February 22, 2021, the underwriter fully exercised its over-allotment option; thus, these
750,000 Founder Shares were no longer subject to forfeiture.
The
Sponsor agreed not to transfer, assign or sell any of its Founder Shares until the earlier to occur of (i) one year after the date of
the consummation of the initial Business Combination, or earlier if, subsequent to the initial Business Combination, (x) the last reported
sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations
and recapitalizations) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business
Combination or (y) the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results
in all of the shareholders having the right to exchange their ordinary shares for cash, securities or other property.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Related
Party Loans
On
September 23, 2020, the Sponsor agreed to loan the Company up to $250,000 to cover costs related to the Initial Public Offering pursuant
to a promissory note, which was later amended on January 22, 2021 (the “Note”). The Note was non-interest bearing, unsecured
and due upon the closing of the Initial Public Offering. As of February 22, 2021, the Company borrowed approximately $111,000 under the
Note. The Company repaid the Note in full on February 24, 2021. Subsequent to the repayment, the facility was no longer available to
the Company.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s
founding team or any of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. 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.
The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lenders’
discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity
at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms
of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of March
31, 2022 and December 31, 2021, the Company had no borrowings under the Working Capital Loans.
Administrative
Services Agreement
Commencing
on February 17, 2021, through the earlier of consummation of the initial Business Combination and the liquidation, the Company agreed
to pay an affiliate of the Sponsor $10,000 per month for office space, utilities, secretarial support and administrative services. Fees
for such services were waived for the three months ended March 31, 2022 and 2021.
Director
Compensation
Commencing
on February 18, 2021, through the earlier of consummation of the initial Business Combination and the Company’s liquidation, the
Company agreed to pay its directors $40,000 each and granted each of the independent directors an option to purchase 40,000 Class A ordinary
shares at an exercise price of $10.00 per share, which will vest upon the consummation of the initial Business Combination and will expire
five years after the date on which it first became exercisable. In addition, the Sponsor, executive officers and directors, or any of
their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s
behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s
audit committee will review on a quarterly basis all payments that were made to the Sponsor, officers or directors, or the Company’s
or their affiliates. During the three months ended March 31, 2022 and 2021, the Company recorded approximately $15,000 and $7,000 of
director compensation, respectively. As of March 31, 2022 and December 31, 2021, the Company has payables recognized of approximately $22,000 and $17,000, respectively, for
director compensation, which is classified as accounts payable - related party in the accompanying condensed balance sheets.
Note
6 - Commitments and Contingencies
Registration
Rights
The
holders of the Founder Shares and Private Placement Warrants (and any Class A ordinary shares issuable upon the exercise of the Private
Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant
to a registration rights agreement dated February 17, 2021. The holders 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 completion of the initial Business Combination. The
Company will bear the expenses incurred in connection with the filing of any such registration statements.
Pursuant
to the Forward Purchase Agreement, the Company agreed to use its commercially reasonable efforts (i) to file within 30 days after the
closing of the initial Business Combination a registration statement with the SEC for a secondary offering of the Forward Purchase Shares
and the Forward Purchase Warrants (and underlying Class A ordinary shares), (ii) to cause such registration statement to be declared
effective promptly thereafter but in no event later than sixty (60) days after the initial filing, and (iii) to maintain the effectiveness
of such registration statement until the earliest of (A) the date on the Sponsor or its assignees cease to hold the securities covered
thereby and (B) the date all of the securities covered thereby can be sold publicly without restriction or limitation under Rule 144
under the Securities Act. In addition, the Forward Purchase Agreement provides for “piggy-back” registration rights to the
holders of forward purchase securities to include their securities in other registration statements filed by the Company.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from February 17, 2021, to purchase up to 3,000,000 additional Units at the Initial
Public Offering price less the underwriting discounts and commissions. On February 22, 2021, the underwriter fully exercised its over-allotment
option.
The
underwriters were entitled to an underwriting discount of $0.20 per Unit, or $4.6 million in the aggregate, paid upon the closing of
the Initial Public Offering. In addition, $0.35 per Unit, or approximately $8.1 million in the aggregate will be payable to the underwriters
for deferred underwriting commissions. The deferred fee will become payable to the underwriters 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.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic on the industry 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 unaudited condensed financial statements. The unaudited
condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In
February 2022, a military conflict started between Russia and Ukraine. The ongoing military conflict between Russia and Ukraine has provoked
strong reactions from the United States, the United Kingdom, the European Union and various other countries around the world, including the imposition
of broad financial and economic sanctions against Russia. Further, the precise effects of the ongoing military conflict and these sanctions
on the global economies remain uncertain as of the date of these condensed financial statements. The specific impact on the Company’s
financial condition, results of operations, and cash flows is also not determinable as of the date of these condensed financial statements.
Note
7 - Warrants
As
of March 31, 2022 and December 31, 2021, 7,666,667 Public Warrants and 4,400,000 Private Placement Warrants were outstanding.
Public
Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units
and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion
of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has
an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the Public
Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration
under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their warrants
on a cashless basis under certain circumstances). The Company agreed that as soon as practicable, but in no event later than 15 business
days after the closing of the initial Business Combination, the Company will use commercially reasonable efforts to file with the SEC
and have an effective registration statement covering the Class A ordinary shares issuable upon exercise of the warrants and to maintain
a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant
agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by
the 60th day after the closing of the initial 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. Notwithstanding
the above, if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such
that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at
its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” and, in the event
the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the
Company does not so elect, it will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws
to the extent an exemption is not available.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked
securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective
issue price of less than $9.20 per Class A ordinary share (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 an affiliate of the Sponsor, without
taking into account any Founder Shares held by the Sponsor or an affiliate of the Sponsor, 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 initial Business Combination on the date of the completion of the initial Business
Combination (net of redemptions), and (z) the volume-weighted average trading price of the Class A ordinary shares during the 20 trading
day period starting on the trading day prior to the day on which the Company completes 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 $10.00 and $18.00 per share redemption trigger
prices described under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00” and “Redemption
of warrants when the price per Class A ordinary share equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal
to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
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 and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable,
assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally,
the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchaser or such purchaser’s permitted
transferees. If the Private Placement Warrants are held by someone other than the Initial Shareholder or its 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.
Redemption
of warrants when the price per Class A ordinary share equals or exceeds $18.00:
Once
the warrants become exercisable, the Company may call the outstanding warrants (excluding the Private Placement Warrants), in whole and
not in part, at a price of $0.01 per warrant:
|
● |
upon
a minimum of 30 days’ prior written notice of redemption; and |
|
● |
if,
and only if, the last reported sale price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) 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 (the “Reference Value”). |
The
Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the Class A
ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary
shares is available throughout the 30-day redemption period.
Redemption
of warrants when the price per Class A ordinary share equals or exceeds $10.00:
Once
the warrants become exercisable, the Company may redeem the outstanding warrants, in whole and not in part, at a price of $0.10 per warrant:
|
● |
upon
a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a
cashless basis prior to redemption and receive that number of Class A ordinary shares to be determined by reference to an agreed
table based on the redemption date and the “fair market value” of Class A ordinary shares; and |
|
● |
if,
and only if, and only if, the Reference Value equals or exceeds $10.00 per Public Share (as adjusted), and |
| ● | if the Reference Value is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
“fair market value” of Class A ordinary shares for the above purpose shall mean the volume-weighted average price of the
Class A ordinary shares for the 10 trading days immediately following the date on which the notice of redemption is sent to the holders
of warrants. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 Class A ordinary
shares per warrant (subject to adjustment).
In
no event will the Company be required to net cash settle any warrant. 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.
Note
8 - Class A Ordinary Shares Subject to Possible Redemption
The
Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is authorized to issue 200,000,000 Class A ordinary shares with a par value
of $0.001 per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. As of March 31,
2022 and December 31, 2021, there were 23,000,000 Class A ordinary shares outstanding, which were all subject to possible redemption
and are classified outside of permanent equity in the condensed balance sheets. There has been no change in the redemption value of Class
A ordinary shares since the date of the Company’s Initial Public Offering.
The
Class A ordinary shares subject to possible redemption reflected on the condensed balance sheets are reconciled on the following
table:
Gross
proceeds received from Initial Public Offering | |
$ | 230,000,000 | |
Less: | |
| | |
Fair
value of Public Warrants at issuance | |
| (6,823,334 | ) |
Offering
costs allocated to Class A ordinary shares | |
| (12,685,596 | ) |
Plus: | |
| | |
Accretion
on Class A ordinary shares to redemption value | |
| 19,508,930 | |
Class
A ordinary shares subject to possible redemption | |
$ | 230,000,000 | |
Note
9 - Shareholders’ Deficit
Class
A Ordinary Shares - The Company is authorized to issue 200,000,000 Class A ordinary shares with a par value of $0.001 per share.
Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. As of March 31, 2022 and December 31,
2021, there were 23,000,000 Class A ordinary shares issued and outstanding, and all of which were subject to possible redemption and
included as temporary equity (see Note 8).
Class
B Ordinary Shares - The Company is authorized to issue 10,000,000 Class B ordinary shares with a par value of $0.001 per
share. As of March 31, 2022 and December 31, 2021, there were 6,250,000 Class B ordinary shares issued and outstanding.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Ordinary
shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Except as described
below, holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters
submitted to a vote of the shareholders except as required by law.
The
Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination or earlier
at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder
Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of the ordinary shares issued and
outstanding upon completion of the Initial Public Offering, plus (ii) the total number of Class A ordinary shares issued or deemed issued
or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued by the Company in connection
with or in relation to the completion of the initial Business Combination (including the Forward Purchase Shares, but not the Forward
Purchase Warrants), excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary
shares issued, deemed issued, or to be issued, to any seller in the initial Business Combination and any private placement warrants issued
to the Sponsor or any of its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans.
In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one-to-one.
Note
10 - Fair Value Measurements
The
following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis as of March 31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company
utilized to determine such fair value.
| |
Fair Value Measured as of
March 31, 2022 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets | |
| | |
| | |
| |
Investments held in Trust Account - U.S. Treasury Securities | |
$ | 230,059,082 | | |
$ | - | | |
$ | - | |
Derivative assets - forward purchase agreement | |
$ | - | | |
$ | - | | |
$ | 119,174 | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative liabilities - public warrants | |
$ | 1,150,000 | | |
$ | - | | |
$ | - | |
Derivative liabilities - private placement warrants | |
$ | - | | |
$ | 660,000 | | |
$ | - | |
|
|
Fair
Value Measured as of
December 31, 2021 |
|
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
Assets |
|
|
|
|
|
|
|
|
|
Investments
held in Trust Account - U.S. Treasury Securities |
|
$ |
230,038,512 |
|
|
$ |
- |
|
|
$ |
- |
|
Derivative
assets - forward purchase agreement |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
88,970 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities - public warrants |
|
$ |
3,833,334 |
|
|
$ |
- |
|
|
$ |
- |
|
Derivative
liabilities - private placement warrants |
|
$ |
- |
|
|
$ |
2,200,000 |
|
|
$ |
- |
|
Transfers
to/from Levels 1, 2, and 3 are recognized in the beginning of the reporting period. The estimated fair value of the Public Warrants was
transferred from a Level 3 measurement to a Level 1 fair value measurement in April 2021, when the Public Warrants were separately listed
and traded. The estimated fair value of the Private Placement Warrants was transferred from a Level
3 measurement to a Level 2 fair value measurement during the year ended December 31, 2021.
Level
1 assets include investments in mutual funds that invest solely in U.S. government securities. The Company uses inputs such as actual
trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
The
fair value of the Public Warrants was initially measured using a Monte-Carlo simulation and has subsequently been measured based on the
market price of such warrants at each measurement date when separately listed and traded. The fair value of the Private Placement Warrants
was initially measured using a Black-Scholes Option Pricing Model and subsequently using the market value of the Public Warrants. For
the three months ended March 31, 2022 and 2021, the Company recognized a decrease in the fair value of derivative warrant liabilities
of approximately $4.2 million and an increase in the fair value of derivative warrant liabilities of approximately $318,000, respectively,
presented on the accompanying condensed statements of operations.
The
Company utilizes John C. Hull’s Options, Futures, and Other Derivatives model to estimate the fair value of the Forward
Purchase Units at each measurement date. The Company determined that the initial fair value of the Forward Purchase Units was
insignificant and change in fair value of the Forward Purchase Units for the three months ended March 31, 2022 was approximately a
$30,000 increase.
KISMET
ACQUISITION TWO CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
change in the fair value of the Level 3 derivative assets for three months ended March 31, 2022, is summarized as follows:
Derivative assets as of January 1, 2022 | |
$ | 88,970 | |
Change in fair value of derivative assets | |
| 30,204 | |
Derivative assets as of March 31, 2022 | |
$ | 119,174 | |
The change in the fair value of the derivative warrant
liabilities for three months ended March 31, 2021 is summarized as follows:
Warrant liabilities at January 1, 2021 | |
$ | - | |
Issuance of Public and Private Warrants | |
| 10,827,334 | |
Change in fair value of warrant liabilities | |
| 318,000 | |
Warrant liabilities at March 31, 2021 | |
$ | 11,145,334 | |
The
estimated fair value of the Forward Purchase Units is determined using Level 3 inputs. However, inherent uncertainties are involved.
If factors or assumptions change, the estimated fair values could be materially different. Inherent in John C. Hull’s Options,
Futures, and Other Derivatives model are assumptions related to expected, expected life, risk-free interest rate and probability of completing
a business combination. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity
similar to the expected remaining life of the Forward Purchase Units. The expected life of the Forward Purchase Units is assumed to be
equivalent to their remaining contractual term.
The
following table provides quantitative information regarding Level 3 fair value measurements inputs for derivative assets of the Forward
Purchase Units at each measurement date:
| |
As of
March 31,
2022 | | |
As of December 31,
2021 | |
Stock price | |
$ | 9.79 | | |
$ | 9.75 | |
Warrant price | |
$ | 0.15 | | |
$ | 0.50 | |
Term (in years) | |
| 0.75 | | |
| 1.00 | |
Risk-free interest rate | |
| 1.34 | % | |
| 0.39 | % |
Note
11 - Subsequent Events
On
April 13, 2022, the Sponsor agreed to loan the Company an aggregate of $200,000 pursuant to an interest free promissory note.
Management
has evaluated subsequent events to determine if events or transactions occurring through the date the condensed financial statements
were issued. Based upon this review, other than as described herein, the Company did not identify any subsequent event that would have
required adjustment or disclosure in the condensed financial statements.