The statements in the discussion and analysis regarding industry outlook, our
expectations regarding the performance of our business and the forward-looking
statements are subject to numerous risks and uncertainties, including, but not
limited to, the risks and uncertainties described in "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements." Our actual results may
differ materially from those contained in or implied by any forward-looking
statements. You should read the following discussion together with the sections
entitled "Risk Factors"," "Business" and the audited consolidated financial
statements, including the related notes, appearing elsewhere in this Annual
Report. All references to years, unless otherwise noted, refer to our fiscal
years, which end on December 31.
Overview
We are a blank check company incorporated in the British Virgin Islands on June
3, 2020. We were formed 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. Although we are not limited to a particular industry or geographic
region for purposes of consummating a business combination, we have initially
focused on companies in the telecommunications infrastructure, internet and
technology and consumer goods and services sectors operating in Russia. We are
an emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
At December 31, 2020, we had not yet commenced operations. All activity for the
period from June 3, 2020 (inception) through December 31, 2020 relates to our
formation, our initial public offering, which is described below, and since the
initial public offering, the search for a potential target. We will not generate
any operating revenues until after the completion of our initial business
combination, at the earliest. We generate non-operating income in the form of
interest income from the proceeds derived from the Initial Public Offering. We
have selected December 31 as our fiscal year end.
Our sponsor is Kismet Sponsor Limited, a business company incorporated in the
British Virgin Islands with limited liability. The registration statement for
our initial public offering was declared effective on August 5, 2020. On August
10, 2020, we consummated our Initial Public Offering of 25,000,000 Units, at
$10.00 per Unit, generating gross proceeds of $250.0 million, and incurring
offering costs of approximately $14.3 million, inclusive of approximately $8.8
million in deferred underwriting commissions.
Simultaneously with the closing of the initial public offering, we consummated a
private placement (the "private placement") of 6,750,000 warrants (the "private
placement warrants"), at a price of $1.00 per private placement warrant, to our
sponsor, generating gross proceeds of approximately $6.8 million.
Upon the closing of the initial public offering and the private placement in
August 2020, $250.0 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 initially held in cash and subsequently invested in U.S.
"government securities" within the meaning of Section 2(a)(16) of the Investment
Company Act having a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations,
until the earlier of: (i) the completion of a business combination and (ii) the
distribution of the trust account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of our 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.
If we are unable to complete a business combination within 24 months from the
closing of the initial public offering, or August 10, 2022 (as may be extended
by approval of our shareholders), we 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 the public shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the
trust account including interest earned on the funds held in the trust account
and not previously released to us to pay our taxes, if any (less up to $100,000
of interest to pay dissolution expenses), divided by the number of then
outstanding public shares, which redemption will completely extinguish public
shareholders' rights as shareholders (including the right to receive further
liquidation distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of the remaining shareholders and our board of directors, commence a
voluntary liquidation and thereby a formal dissolution of us, subject in each
case to our obligations under British Virgin Islands law to provide for claims
of creditors and the requirements of other applicable law.
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Proposed Business Combination
On January 31, 2021, we entered into a Business Combination Agreement with
Pubco, our sponsor, solely in its capacity as our Representative, Nexters
Global, a private limited liability company domiciled in Cyprus, Fantina
Holdings Limited, a private limited liability company domiciled in Cyprus,
solely in its capacity as Nexters Global Shareholders Representative, and the
shareholders of Nexters Global. Pursuant to the Business Combination Agreement,
among other things, we agreed to combine with Nexters Global in a business
combination whereby we will merge with and into Pubco and Pubco will purchase
all shares of Nexters Global, making Nexters Global a direct wholly-owned
subsidiary of Pubco. Pubco is a newly formed entity that was formed for the sole
purpose of entering into and consummating the transactions set forth in the
Business Combination Agreement. Nexters Global is one of the largest and most
seasoned European gaming unicorns with deep expertise in mobile game development
and marketing. It is a developer and publisher of Hero Wars mid-core RPG
franchise, currently available on mobile (iOS, Android) and PC (via web and
Facebook) and is looking to launch three new titles in 2021.
The proposed business combination is subject to certain conditions, including:
(i) our shareholders having approved, among other things, the transactions
contemplated by the Business Combination Agreement; (ii) the absence of any law
or governmental order that would prohibit the proposed transactions; (iii) the
termination or expiration of all required waiting periods under the
Hart-Scott-Rodino Act; (iv) our company having at least $5,000,001 of net
tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the
Exchange Act) remaining after the closing; (v) our company and Pubco having at
least $100 million of cash either in or outside of the trust account, after
taking into accounts payments by us for the redemption and any proceeds received
by Pubco under the A&R Forward Purchase Agreement; (vi) the Registration
Statement having been declared effective by the SEC and remaining effective; and
(vii) the Pubco ordinary shares and Pubco warrants having been approved for
listing on Nasdaq, subject only to official notice thereof. The proposed
business combination is more fully described in Note 1 to the financial
statements included in Item 8 of this Annual Report.
Liquidity and Capital Resources
As of December 31, 2020, we had approximately $762,000 in cash in our operating
bank account and working capital of approximately $435,000.
Through December 31, 2020, our liquidity needs have been satisfied through a
payment of $25,000 from our sponsor to cover certain offering costs in exchange
for the issuance of the founder shares, a loan from our sponsor pursuant to a
promissory note of $191,000, and the net proceeds from the consummation of the
private placement not held in the trust account. We fully repaid the note
balance of approximately $191,000 on August 12, 2020. In addition, in order to
finance transaction costs in connection with a business combination, our sponsor
or an affiliate of our sponsor, or certain of our officers and directors may,
but are not obligated to, provide us with working capital loans. As of December
31, 2020, there were no amounts outstanding under the working capital loans.
Based on the foregoing, our management believes that we will have sufficient
working capital and borrowing capacity from our sponsor or an affiliate of our
sponsor, or certain of our officers and directors to meet its needs through the
earlier of the consummation of a business combination or one year from this
filing. Over this time period, we will be using these funds for paying existing
accounts payable, identifying and evaluating prospective initial business
combination candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
merge with or acquire, and structuring, negotiating and consummating the
business combination.
Management is continuing 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 our financial position, results of operations
and/or search for a target company and the close of the business combination,
the specific impact is not readily determinable as of the date of these
financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception up to December 31, 2020 was in preparation
for our formation and the preparation of the initial public offering, and since
our initial public offering, our activity has been limited to the search for a
prospective initial business combination. We will not be generating any
operating revenues until the closing and completion of our initial business
combination, at the earliest.
50
For the period from June 3, 2020 (inception) through December 31, 2020, we had a
net loss of approximately $744,000, which consisted of approximately $808,000 in
general and administrative expenses partly offset by approximately $64,000 of
gain from investments held in trust account.
Related Party Transactions
Founder Shares
On June 8, 2020, we issued 6,250,000 ordinary shares to our sponsor, or the
founder shares. Our sponsor paid for certain offering costs of $25,000 on behalf
of the company in exchange for issuance of the founder shares. In July 2020, we
performed a 1.23 share split resulting in our sponsor holding an aggregate of
7,687,500 founder shares. All shares and associated amounts have been
retroactively restated to reflect the share capitalization. The sponsor had
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 is not
exercised in full by the underwriters so that the founder shares would represent
20% of our issued and outstanding shares after the initial public offering plus
the number of ordinary shares that were to be sold pursuant to the forward
purchase agreement (as defined below). On September 17, 2020, the underwriters
notified us that the over-allotment option was not exercised; as a result, these
founder shares were forfeited and cancelled, effective as of September 19, 2020.
Our sponsor agreed, subject to limited exceptions, not to transfer, assign or
sell any of its founder shares until the earlier to occur of: (x) one year after
the date of the completion of the initial business combination or earlier if,
subsequent to the initial business combination, the last reported sale price of
the 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) we consummate a subsequent liquidation,
merger, stock exchange or other similar transaction which results in all of our
shareholders having the right to exchange their ordinary shares for cash,
securities or other property.
Private Placement Warrants
Simultaneously with the closing of the initial public offering, we consummated a
private placement of 6,750,000 private placement warrants, at a price of $1.00
per private placement warrant, to our sponsor, generating gross proceeds of
approximately $6.8 million.
Each whole private placement warrant is exercisable for one whole ordinary share
at a price of $11.50 per share. A portion of the proceeds from the private
placement warrants was added to the proceeds from the initial public offering
held in the trust account. If we do not complete a business combination within
the combination period, the private placement warrants will expire worthless.
The private placement warrants are non-redeemable and exercisable on a cashless
basis so long as they are held by the sponsor or its permitted transferees.
Related Party Loans
On June 10, 2020, our sponsor agreed to loan us up to $200,000 to be used for
the payment of costs related to the initial public offering pursuant to a
promissory note. The note was non-interest bearing, unsecured and due upon the
date we consummated the initial public offering. We repaid the balance of the
note of approximately $191,000 in full on August 12, 2020.
In addition, in order to finance transaction costs in connection with a business
combination, our sponsor or an affiliate of our sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds pursuant to
the working capital loans. If we complete a business combination, we would repay
the working capital loans out of the proceeds of the trust account released to
us. 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, we 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. 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. The working capital loans would
either be repaid upon consummation of a business combination, without interest,
or, at the lender's 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 $1.00 per warrant. The warrants would be identical to the private
placement warrants. As of December 31, 2020, there were no amounts outstanding
under the working capital loans.
51
Administrative Services Agreement
Commencing on August 5, 2020, we agreed to pay an affiliate of our sponsor a
total of up to $10,000 per month for office space, administrative and support
services. We incurred $20,000 in expenses in connection with this agreement for
the period from June 3, 2020 through December 31, 2020 which are reflected in
the accompanying statement of operations. Upon completion of the initial
business combination or our liquidation, we will cease paying these monthly
fees.
Forward Purchase Agreement
On August 5, 2020, we entered into a forward purchase agreement with our
sponsor, which provides for the purchase of $20,000,000 of units, with each unit
consisting of one ordinary share (the "forward purchase shares") and one half of
one warrant (the "forward purchase warrants"), for a purchase price of $10.00
per 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 ordinary shares are redeemed by
the public shareholders. The forward purchase shares and forward purchase
warrants will be issued only in connection with the closing of the initial
business combination. The proceeds from the sale of forward purchase shares and
forward purchase warrants 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.
Amended and Restated Forward Purchase Agreement
On January 31, 2021, we, Pubco and our sponsor entered into the A&R Forward
Purchase Agreement. The A&R Forward Purchase Agreement amends the forward
purchase agreement by, among other things, increasing the sponsor's purchase
commitment thereunder from $20 million to $50 million and replacing the
sponsor's commitment to acquire our public units with a commitment to acquire
Pubco ordinary shares and Pubco public warrants in a private placement to occur
after, and subject to, the Merger closing and prior to the Share Acquisition
closing.
Contractual Obligations
Registration Rights Agreement
The holders of the founder shares, private placement warrants and warrants that
may be issued upon conversion of working capital loans (and any 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, requiring us to
register such securities for resale. The holders of the majority of these
securities are entitled to make up to three demands, excluding short form
demands, that we 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 and rights to
require us to register for resale such securities pursuant to Rule 415 under the
Securities Act.
In connection with the proposed transactions, Pubco, our sponsor and three of
Holders will enter into the New Registration Rights Agreement, pursuant to
which, among other things, subject to certain requirements and customary
conditions, including with regard to the number of demand rights that may be
exercised, the Holders may demand at any time or from time to time, that Pubco
file a registration statement with the SEC to register the securities of Pubco
held by such Holders. The New Registration Rights Agreement will also provide
the Holders with "piggy-back" registration rights, subject to certain
requirements and customary conditions.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the prospectus for
the initial public offering to purchase up to 3,750,000 additional units at the
initial public offering price less the underwriting discounts and commissions.
On September 17, 2020, the underwriters notified us that the over-allotment
option was not exercised; as a result, 937,500 founder shares were forfeited and
cancelled, effective as of September 19, 2020.
52
The underwriters were entitled to an underwriting commission of $0.20 per unit,
or $5.0 million in the aggregate, paid upon the closing of the initial public
offering. In addition, the underwriters were entitled to a deferred underwriting
commission of $0.35 per unit, or approximately $8.8 million in the aggregate.
The deferred fee will become payable to the underwriters from the amounts held
in the trust account solely in the event that we complete a business
combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
Investments Held in the Trust Account
Our 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, or a combination
thereof. The investments held in the trust account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these securities is included in net gain from investments held
in trust account in the accompanying statement of operations. The estimated fair
values of investments held in the trust account are determined using available
market information.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption (if any) are classified as
liability instruments and are measured at fair value. Conditionally redeemable
ordinary shares (including 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 our control) are classified as
temporary equity. At all other times, ordinary shares are classified as
shareholders' equity. Our ordinary shares feature certain redemption rights that
are considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, at December 31, 2020, 23,674,906 ordinary
shares subject to possible redemption are presented as temporary equity, outside
of the shareholders' equity section of the accompanying balance sheet.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of ASC Topic 260,
"Earnings Per Share." Net income (loss) per ordinary share is computed by
dividing net loss by the weighted average number of ordinary shares outstanding
during the period, excluding ordinary shares subject to forfeiture by our
sponsor. Weighted average shares were reduced for the effect of an aggregate of
937,500 ordinary shares that are subject to forfeiture if the option to purchase
additional units was not exercised by the underwriters. On September 17, 2020,
the underwriters notified us that the over-allotment was not exercised, and as a
result, 937,500 ordinary shares were forfeited and cancelled, effective as of
September 19, 2020. We have not considered the effect of the warrants sold in
the initial public offering and private placement to purchase an aggregate
of 19,250,000 ordinary shares in the calculation of diluted earnings per share,
since their inclusion would be anti-dilutive under the treasury stock method.
Our statement of operations includes a presentation of income (loss) per share
for ordinary shares subject to redemption in a manner similar to the two-class
method of income (loss) per share. Net income per ordinary share, basic and
diluted for redeemable ordinary shares are calculated by dividing the interest
income earned on investments held in the trust account, net of amounts available
to be withdrawn from the trust account to pay the Company's income taxes, if
any, for the period presented, by the weighted average number of redeemable
ordinary shares outstanding for the period. Net loss per ordinary share, basic
and diluted for non-redeemable ordinary shares is calculated by dividing the net
loss, less income attributable to redeemable ordinary shares, by the weighted
average number of redeemable ordinary shares oustanding for the period.
Share-based Compensation
We comply with the accounting and disclosure requirement of ASC Topic 718,
"Compensation - Stock Compensation." We record share-based compensation to
employees and non-employees 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. We
recognize 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 statement of operations. In August 2020, we 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. We have 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 June 3, 2020 (inception) to December 31,
2020.
53
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
JOBS Act
The Jumpstart Our Business Startups Act of 2012, or JOBS Act, contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our initial public offering or until we are no
longer an "emerging growth company," whichever is earlier.
Recent Accounting Pronouncements
Our management does not believe there are any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our financial statements.
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