NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 - Description of Organization, Business
Operations and Going Concern
Kismet Acquisition Three 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 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
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 the 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 28,750,000
units (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares”),
including 3,750,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating
gross proceeds of $287.5 million, and incurring offering costs of approximately $16.2 million, of which approximately $10.1 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 5,166,667 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 approximately $7.8 million, and incurring offering costs of approximately $7,000 (see
Note 4).
Upon the closing of the Initial Public Offering
and the Private Placement, $287.5 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 THREE 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 its 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 THREE 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 approximately
$74,000 in its operating bank account and working capital deficit of approximately $1.1 million.
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 $126,000 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.
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 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 Sponsor,
officers and directors , 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 mandatory liquidation
and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. 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 financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
KISMET ACQUISITION THREE 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.
KISMET ACQUISITION THREE
CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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.
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.
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.
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.
KISMET ACQUISITION THREE
CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 derivative assets and liabilities.
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 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 stock purchase 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
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 THREE
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, 28,750,000 Class A ordinary shares subject to possible redemption are presented as temporary
equity, respectively, outside of the shareholders’ 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.
KISMET ACQUISITION THREE CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 ordinary shares outstanding for the
respective period. This presentation assumes a business combination as the most likely outcome.
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 Private Placement
to purchase 14,750,000 Class A ordinary shares because their exercise is contingent upon future events and their 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 following table presents a reconciliation
of the numerator and denominator used to compute basic and diluted net income (loss) per ordinary share:
| |
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) | |
$ | 3,527,824 | | |
$ | 943,310 | | |
$ | (297,198 | ) | |
$ | (174,952 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted average ordinary shares outstanding, basic and diluted | |
| 28,750,000 | | |
| 7,687,500 | | |
| 12,138,889 | | |
| 7,145,833 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net income (loss) per ordinary share | |
$ | 0.12 | | |
$ | 0.12 | | |
$ | (0.02 | ) | |
$ | (0.02 | ) |
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.
KISMET ACQUISITION THREE CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 3 - Initial Public Offering
On February 22, 2021, the Company consummated
its Initial Public Offering of 28,750,000 Units, including 3,750,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds
of $287.5 million, and incurring offering costs of approximately $16.2 million, of which approximately $10.1 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).
Note 4 - Private Placement
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the Private Placement of 5,166,667 Private Placement Warrants, at a price of $1.50 per Private
Placement Warrant with the Sponsor, generating gross proceeds of approximately $7.8 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 derivate
instruments on its condensed balance sheets. The initial value of the Forward Purchase Units was insignificant, and the Company
recognized a decrease in the change in the fair value of the derivative assets of approximately $110,000 for the three months ended
March 31, 2022.
Founder Shares
On September 21, 2020, the Company issued 7,687,500
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. The Sponsor
agreed to forfeit up to an aggregate of 937,500 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 937,500 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
share quals 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 THREE 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 $126,000 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 18, 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 40,000 options to purchase its 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.
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) are 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.
KISMET ACQUISITION THREE CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL 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.
Underwriting Agreement
The Company granted the underwriters a 45-day
option from February 17, 2021 to purchase up to 3,750,000 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 approximately $5.8 million in the aggregate, paid upon the closing of the Initial Public Offering. In
addition, $0.35 per Unit, or approximately $10.1 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, the
Company had 9,583,333 Public Warrants and 5,166,667 Private Placement Warrants 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 THREE 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.
KISMET ACQUISITION THREE CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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. |
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 28,750,000 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 | |
$ | 287,500,000 | |
Less: | |
| | |
Fair value of Public Warrants at issuance | |
| (8,625,000 | ) |
Offering costs allocated to Class A ordinary shares | |
| (15,760,516 | ) |
Plus: | |
| | |
Accretion on Class A ordinary shares to redemption value | |
| 24,385,516 | |
Class A ordinary shares subject to possible redemption | |
$ | 287,500,000 | |
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 28,750,000 Class A
ordinary shares outstanding, and all of which were subject to possible redemption and classified as temporary equity (see Note 8).
KISMET ACQUISITION THREE CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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. On September 23, 2020, the Company issued
7,687,500 Class B ordinary shares. Of the 7,687,500 shares outstanding, up to 937,500 Class B ordinary shares were subject to forfeiture,
to the Company by the Initial Shareholder for no consideration to the extent that the underwriters’ over-allotment option was not
exercised in full or in part, so that the Initial Shareholder would collectively own 20% of the Company’s issued and outstanding
ordinary shares after the Initial Public Offering plus the potential Forward Purchase Shares. On February 22, 2021, the underwriters
fully exercised their over-allotment option; thus, these 937,500 Class B ordinary shares were no longer subject to forfeiture.
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 | |
$ | 287,573,879 | | |
$ | - | | |
$ | - | |
Derivative assets - forward purchase agreement | |
$ | - | | |
$ | - | | |
$ | 99,174 | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative liabilities - public warrants | |
$ | 1,725,000 | | |
$ | - | | |
$ | - | |
Derivative liabilities - private placement warrants | |
$ | - | | |
$ | 930,000 | | |
$ | - | |
| |
Fair
Value Measured as of December
31, 2021 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets | |
| | |
| | |
| |
Investments held in Trust Account - U.S. Treasury Securities | |
$ | 287,548,167 | | |
$ | - | | |
$ | - | |
Derivative assets - forward purchase agreement | |
$ | - | | |
$ | - | | |
$ | 208,970 | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative liabilities - public warrants | |
$ | 4,791,666 | | |
$ | - | | |
$ | - | |
Derivative liabilities - private placement warrants | |
$ | - | | |
$ | 2,583,334 | | |
$ | - | |
Transfers to/from Levels 1, 2, and 3 are recognized
at the beginning of the reporting period. The estimated fair value of the Public Warrants was transferred from a Level 3 fair value measurement
to a Level 1 fair value measurement when the Public Warrants were separately listed and traded in April 2021. 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 Public Warrants was initially
measured using Monte-Carlo simulation and has subsequently been measured based on the traded 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 $4.7 million and $96,000, respectively,
presented as change in fair value of derivative warrant liabilities on the accompanying condensed statements of operations.
KISMET ACQUISITION THREE CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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. The initial value
of the Forward Purchase Units was insignificant, and the Company recognized a decrease in the change in the fair value of the Forward
Purchase Units of approximately $110,000 for the three months ended March 31, 2022.
The change in the fair value of the Level 3 derivative
assets for the three months ended March 31, 2022, is summarized as follows:
| |
| |
Derivative assets as of January 1, 2022 | |
$ | 208,970 | |
Change in fair value of derivative
assets | |
| (109,796 | ) |
Derivative assets as of March 31, 2022 | |
$ | 99,174 | |
The change in the fair value of the Level 3 derivative liabilities for the three months ended March 31, 2021 is summarized as follows:
Derivative liabilities at January 1, 2021 | |
$ | - | |
Issuance of Public and Private Placement Warrants | |
| 13,326,666 | |
Change in fair value of derivative liabilities | |
| (95,833 | ) |
Derivative liabilities at March 31, 2021 | |
$ | 13,230,833 | |
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 | | |
$ | 9.69 | |
Warrant price | |
$ | 0.18 | | |
$ | 0.50 | |
Term (in years) | |
| 0.75 | | |
| 1.00 | |
Risk-free interest rate | |
| 1.34 | % | |
| 0.39 | % |
Note 11 - Subsequent Events
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,
the Company did not identify any subsequent event that would have required adjustment or disclosure in the condensed financial statements.