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United States securities and exchange commission logo
November 18, 2022
Khurram P. Sheikh
Chief Executive Officer
KINS Technology Group, Inc.
Four Palo Alto Square, Suite 200
3000 El Camino Real
Palo Alto, CA 94306
Re: KINS Technology
Group, Inc.
Registration
Statement on Form S-4
Filed October 19,
2022
File No. 333-267938
Dear Khurram P. Sheikh:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4 filed October 19, 2022
General
1. Please update the
accompanying financial statements and the related pro forma
presentation through
the period ended September 30, 2022.
2. We note that the
parties negotiated the enterprise value of CXApp at $69 million, subject
to adjustments.
Highlight that Inpixon purchased Design Reactor, Inc. and its CXApp
software for a mix of
cash and stock valued at $45 million in 2020. Additionally, to
provide appropriate
context for investors, disclose Inpixon's current market capitilization.
3. In the summary section
and in a Q&A, provide a complete description of the lock-up
agreements, including
to whom each agreement applies, the respective durations, and the
Khurram P. Sheikh
KINS Technology Group, Inc.
November 18, 2022
Page 2
circumstances under which the lock-ups may be released. Clarify any
differences between
the lock-up agreements for Class A and Class C shares. We note, for
example, that your
Anchor Investor, BlackRock, is not a party to the Stockholder Support
Agreement. Please
clarify whether BlackRock is subject to any surviving lock-up
agreement post-business
combination and whether it is obligated to vote in favor of all of the
proposals.
4. We note that Inpixon will receive the Distribution Tax Opinion
regarding the intended tax
treatment of the Distribution and certain related transactions, and
that the Tax Matters
Agreement will require KINS and CXApp to comply with the
representations made in the
materials submitted to legal counsel in connection with the
Distribution Tax Opinion.
Please confirm your intention to file the Distribution Tax Opinion as
an exhibit to this
registration statement. Additionally, please tell us whether counsel
will provide a
separate tax opinion to support the discussion of tax consequences to
U.S. investors as set
forth on page 229.
5. Given that the vast majority of Class A stockholders have already
redeemed their shares,
please disclose, if true, that as a result of such redemptions and the
existence of the
Support Agreements, Class B stockholders have a sufficient percentage
of votes to
approve the business combination.
6. We note that you filed a preliminary proxy statement in efforts to
solicit stockholder
approval to extend the life of the SPAC through June 15, 2023. Please
update your Form
S-4 to address this extension vote, the potential possible removal of
the $5,000,001 net
asset requirement, the Sponsor Loan to fund a bonus payment to
non-redeeming
stockholders, and the likelihood that further redemptions will
concentrate more voting
power with the Sponsor.
7. With a view toward disclosure, please tell us whether your sponsor is,
is controlled by, or
has substantial ties with a non-U.S. person. If so, also include risk
factor disclosure that
addresses how this fact could impact your ability to complete your
initial business
combination. For instance, discuss the risk to investors that you may
not be able to
complete an initial business combination with a U.S. target company
should the
transaction be subject to review by a U.S. government entity, such as
the Committee on
Foreign Investment in the United States (CFIUS), or ultimately
prohibited. Disclose that
as a result, the pool of potential targets with which you could complete
an initial business
combination may be limited. Further, disclose that the time necessary
for government
review of the transaction or a decision to prohibit the transaction
could prevent you from
completing an initial business combination and require you to liquidate.
Disclose the
FirstName LastNameKhurram P. Sheikh
consequences of liquidation to investors, such as the losses of the
investment opportunity
Comapany NameKINS
in a target Technology
company, any priceGroup, Inc. in the combined company,
and the warrants,
appreciation
which
November 18,would expire2 worthless.
2022 Page
FirstName LastName
Khurram P. Sheikh
FirstName LastNameKhurram
KINS Technology Group, Inc. P. Sheikh
Comapany 18,
November NameKINS
2022 Technology Group, Inc.
November
Page 3 18, 2022 Page 3
FirstName LastName
Summary, page 30
8. Revise to clarify the difference between CXApp and Design Reactor. For
example, when
distinguishing between CXApp and Design Reactor in the questions and
answers section,
explain that Design Reactor was formerly doing business under the name
CXApp, but in
this registration statement, CXApp refers to the newly formed Delaware
holding
company.
9. Prominently disclose that the contemplated spin-off and subsequent
merger are structured
as a reverse Morris Trust transaction and that this structure is
intended to result in a tax-
efficient disposition of the current CXApp business for Inpixon and
Inpixon
shareholders. Describe what a reverse Morris Trust transaction is and
briefly discuss why
the parties chose this structure. Your description should include a
discussion of the
requirements of the Reverse Morris Trust transaction under Sections
355 and 368(a)(1)(D)
of the Internal Revenue Code.
10. Address the risks to current KINS stockholders and to security holders
of the combined
company should the parties fail to meet the requirements to preserve
the intended tax
treatment. Disclose any indemnification provisions that will benefit
Inpixon and Inpixon
shareholders if the distribution and related transactions do not
qualify as a reorganization
under Sections 355 and 368(a)(1)(D) of the Code. Further, describe the
limitations to the
combined company's operations and restrictions on future transactions
that are necessary
to preserve the intended tax treatment and discuss how these
restrictions may impact the
combined company's business.
11. We note the parties' intention that holders of CXApp Common Stock will
own more than
50% of the common stock of New CXApp immediately following the Merger.
Please
clarify how you will ensure that historic parent shareholders will own
more than 50% of
the vote and value of the post-business combination company.
12. With respect to the previous acquisition of Design Reactor, Inc. by
Inpixon, please clarify
how the spin-off and subsequent merger will impact the remaining
shares subject to any
Earn-Out Provision.
Risk Factors, page 53
13. Please add a risk factor to highlight that shares of post-business
combination SPACs
commonly decline in value. Your risk factor should address that the
Sponsor and the
Anchor Investor purchased shares at prices below the initial public
offering price and may
be incentivized to sell their shares. Similarly, the address that the
CXApp stockholders
prior to the merger may acquire shares below market carrying cost and
may be
incentivized to sell their shares. Any resulting sales may lower the
trading price of the
Class A common stock. Further, if the price declines below the $11.50
per share exercise
price, it is unlikely warrants will be exercised and New CXApp will be
unable to raise
further proceeds from the warrants.
Khurram P. Sheikh
KINS Technology Group, Inc.
November 18, 2022
Page 4
14. Please add a risk factor that addresses the substantial amount of
public Class A
stockholders that have already redeemed their shares prior to the
stockholder vote to
extend the termination date of the SPAC. Given that many of the
remaining stockholders
will be subject to lock-up agreements and may not be able to sell
their shares on the
Nasdaq, the public float and trading volume may be very small. As a
result, the trading
price of the Class A common stock may be volatile.
The Sponsor, its investors and its and their affiliates (which include members
of the KINS Board
and management) ..., page 66
15. The last sentence in this risk factor indicates that if KINS "is able
to complete the Merger,
the KINS Private Placement Warrants...will become worthless." If true,
revise to reflect
that the Private Placement Warrants will become worthless if the
merger is not completed.
Unaudited Pro forma Condensed Combined Financial Information
Description of the Merger Agreement, page 90
16. Refer to the assumptions regarding the minimum and maximum redemption
scenarios on
page 91 and the table on the pro forma ownership of KINS common stock
following the
business combination on page 92. Please disaggregate in the table on
page 92 the
holdings of the Sponsor, BlackRock and related parties (including but
not limited to
Inpixon) so that the Sponsor's holdings of KINS Class A common stock
are transparent
and align with the descriptions of exchanges of its Class B common
stock and certain
forfeitures by Direct Anchor Investors as described in the foregoing
assumptions and
explanatory footnotes.
17. Please disclose why the Sponsor is receiving less shares of KINS Class
A common stock
in exchange for its Class B common stock under the minimum redemption
scenario. Also,
since the holders of Class B shares may exchange their shares into a
number of Class A
shares based on the redemption level, depending on whether they are
the Sponsor or
Direct Anchor Investors, provide us your analysis as to whether the
Class B shares:
should be classified as a liability under ASC 480-10-25-14. In
this regard, it appears
the Class B shares contain an unconditional obligation to issue a
variable number of
shares depending on variations in something other than the fair
value of KINS
Technology's equity shares.
may contain an embedded feature that needs to be bifurcated and
accounted for as a
derivative. Refer to ASC 815-15-25-1 and ASC 815-40-15.
18. Refer to footnote (4) on page 92. Please provide additional context
regarding the
circumstances related to the Direct Anchor Investors' forfeiture to
Sponsor of
525,000
FirstName shares of KINSP.
LastNameKhurram Class B Common Stock prior to closing.
Sheikh
Comapany
19. ReferNameKINS
to footnoteTechnology
(5) on page Group, Inc. provide historical background
information
92. Please
regarding
November Inpixon's
18, 2022 Page 4initial and existing interests in KINS.
FirstName LastName
Khurram P. Sheikh
FirstName LastNameKhurram
KINS Technology Group, Inc. P. Sheikh
Comapany 18,
November NameKINS
2022 Technology Group, Inc.
November
Page 5 18, 2022 Page 5
FirstName LastName
20. Refer to footnote (6) on page 92. With a view towards expanded
disclosure, please
explain the significance and intended consequence of the provision in
the Sponsor's
Agreement that the "total amount of shares of New CXApp Common Stock
issued to
CXApp Stockholders (as of immediately after consummation of the
Distribution) at the
Closing will exceed the total amount of shares of New CXApp Common
Stock issued to
all other parties at the Closing by one share."
Background to the Business Combination, page 127
21. Please provide more details of the circumstance and negotiations
surrounding the $10
million cash contribution and why this term was first offered and
later accepted. Further,
please clarify whether there were discussions as to whether the final
cash and cash
equivalents balance at the time of the merger would solely be the $10
million cash
contribution or if any of the approximately $5 million of cash as June
30, 2022 would also
stay with the CXApp post-business combination.
Certain Projected Financial Information of the Enterprise Apps Business, page
141
22. On page 142, as part of your disclosure of the projections provided to
and relied upon by
KINS and the Board for purposes of its financial analyses, you
reference both "actual" and
projected December 31, 2022 revenues, adjusted EBITDA and gross
margins. Please
clarify whether the actual financial information is referring to
information as of
December 31, 2021.
23. Please identify the specific dollar values of the projected 2022 and
2023 revenues and
adjusted EBITDA. Additionally, revise to disclose all material
assumptions that were
used to formulate the projections, as distinguished from "the key
elements" of the
projections.
24. With respect to your reference to a 181% revenue growth rate to $6.3
million, which
appears to refer to the growth rate from fiscal year 2020 to 2021 for
revenues, please
clarify whether this growth rate relates to the organic growth rate of
the underlying
products of Design Reactor, Inc. Your MD&A refers to this growth rate
related to the
acquisition of the CXApp in the second quarter of 2020.
25. Please provide more details, including specific forecasted unlevered
cash flows by year
that was provided by CXApp management, as to how GVS calculated the
discounted cash
flows. Similarly, clarify the EV/Revenue ratio used for the
calculation of CXApp s was
based on 22E and 23E figures, not 20E and 21E for the Selected
Companies Analysis.
Further, we note the comparable companies are significantly larger
than Design
Reactor/CXApp. Provide supplemental disclosure addressing any risk
that the use of this
sample of comparable companies may result in an inflated or overstated
valuation.
Khurram P. Sheikh
FirstName LastNameKhurram
KINS Technology Group, Inc. P. Sheikh
Comapany 18,
November NameKINS
2022 Technology Group, Inc.
November
Page 6 18, 2022 Page 6
FirstName LastName
Opinion of KNAV P.A., page 144
26. We note that the description of the KNAV fairness opinion generally
provides a list of
what information the financial advisor considered, but does not
provide detail of the
methodology used to make this determination. Please revise this
section to clarify the
specific financial information and projections that were provided to
KNAV and to provide
detailed support for the ultimate conclusions reached, including the
methods used.
Security Ownership of Certain Beneficial Owners and Management, page 187
27. Please disclose the natural person(s) that hold investment and/or
voting power over the
voting securities beneficially owned by the 5% stockholders.
28. For your post-business combination beneficial ownership table, we note
that you indicate
that it includes ordinary shares that are exercisable within 60 days
of October 14, 2022
and underlying your public or private warrants. Please revise these
figures to the most
recent date practicable and clarify whether the KINS Capital LLC and
BlackRock
warrants are included in these totals.
Product Roadmap and Enhancements, page 195
29. The features listed in this section appear to be prospective in
nature. Please clarify the
timing of when you believe they will be available, or if they will be
available within the
next 12 months. Further, clarify whether you have sufficient funds to
develop these
features or clarify the amount of funding that is necessary to
development them.
Market Size, page 197
30. Please disclose the sources of your industry statistics on page 197.
We note you refer to
research analysts, but do not identify any of them here or on
page 6. Further, it is not
clear if you are referring to an industry research entity or research
analysts for the
securities industry. If it is the latter, please clarify the source of
where the research
analyst obtained their industry statistics if it is not based on their
own research.
Research and Development Expenses, page 198
31. We note that your Research and Development costs exceed your Revenues.
Please
provide more disclosure of how you conduct your Research and
Development
activities and clarify the extent to which they or were shared with
those of Inpixon and its
IIOT business. Discuss whether the R&D expenses are expected to grow
at a slower rate
than your revenues and address any dependence on further financing.
Khurram P. Sheikh
FirstName LastNameKhurram
KINS Technology Group, Inc. P. Sheikh
Comapany 18,
November NameKINS
2022 Technology Group, Inc.
November
Page 7 18, 2022 Page 7
FirstName LastName
Intellectual Property, page 199
32. We note that Inpixon acquired the CXApp operations through the
acquisition of Design
Reactor and other entities since 2019, and Inpixon is retaining its
Industrial Internet of
Things ( IIOT ) business. You reference that your mapping and
geolocation services
incorporates Internet of Things technology. Please clarify the extent
that you will share or
license intellectual property that would be retained by Inpixon and be
subject to your
Separation and Distribution Agreement.
Certain Relationships and Related Party Transactions, CXApp, page 204
33. Please describe the services that may be performed under the
Transition Services
Agreement by either CXApp or Inpixon.
Management's Discussion and Analysis of our Financial Condition and Results of
Operations for
Design Reactor, Inc. and Subsidiaries,
Key Factors Affecting Design Reactor's Results of Operations, page 204
34. Provide a more detailed description of your customer base, such as the
number of
customers from year to year and any concentration in geographic
location, size, or
industry. Additionally please clarify whether your management uses any
key metrics to
evaluate customer growth or penetration.
Validity of Common Stock, page 251
35. Please clarify whether the legal opinion will also opine on the
validity of the Class C
common stock that will be issued as part of this registration
statement.
KINS Technology Group Inc.
Notes to Condensed Financial Statements - June 30, 2022 (Unaudited)
Note 1. Description of Organization and Business Operations, page F-25
36. Please update your disclosure to include the terms of the redemptions,
including but not
limited to the number of shares redeemed and redemption price per
share, that were
conducted in connection with the Charter Amendment to extend the date
by which the
Company has to consummate a business combination from June 17, 2022 to
December 16,
2022. We refer to the redemptions of Class A shares depicted on table
on page F-30.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Khurram P. Sheikh
KINS Technology Group, Inc.
November 18, 2022
Page 8
You may contact Kathryn Jacobson, Senior Staff Accountant, at (202)
551-3365 or
Robert Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have
questions regarding
comments on the financial statements and related matters. Please contact Edwin
Kim, Staff
Attorney, at (202) 551-3297 or Joshua Shainess, Legal Branch Chief, at (202)
551-3350 with any
other questions.
Sincerely,
FirstName LastNameKhurram P. Sheikh
Division of
Corporation Finance
Comapany NameKINS Technology Group, Inc.
Office of Technology
November 18, 2022 Page 8
cc: Michael Mies, Esq.
FirstName LastName