United States securities and exchange commission logo
August 21, 2022
Barry Anderson
Chief Executive Officer
Data Knights Acquisition Corp.
Unit G6, Frome Business Park
Manor Road
Frome
United Kingdom, BA11 4FN
Re: Data Knights
Acquisition Corp.
Registration
Statement on Form S-4
Filed July 22, 2022
File No. 333-266274
Dear Mr. Anderson:
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 July 22, 2022
Exhibit 23.3, page 1
1. Please obtain an
updated consent from BF Borgers CPA PC that refers to the correct audit
report date.
Summary Term Sheet, page 2
2. Clarify whether the
merger is contingent upon the PIPE Financing and clearly disclose to
investors the
ramifications of failing to obtain such additional equity capital, including
the
risk that this will
leave the post-merger entity under-capitalized. In this regard, we note
the closing condition
related to the need for cash and cash equivalents of at least
Barry Anderson
FirstName LastNameBarry Anderson
Data Knights Acquisition Corp.
Comapany
August 21, NameData
2022 Knights Acquisition Corp.
August
Page 2 21, 2022 Page 2
FirstName LastName
$30,000,000. Also, in your discussions of how you valued OneMedNet,
clearly state
whether or not such valuation included execution of the PIPE Financing
and, if so, how
the Board considered such valuation in light of the uncertainty of
obtaining the PIPE
Financing.
3. Identify the parties or the nature of the parties that are subject to
the Lock-Up Agreements
with you and quantify the number of outstanding shares subject to such
agreements.
Questions and Answers about the Proposals, page 10
4. In addition to your question that addresses how the Sponsor intends to
vote, revise to
indicate how certain officers, directors and equityholders of
OneMedNet are parties to the
Voting Agreement with Data Knights whereby such parties, among other
things, have
agreed to vote all of their interests in Data Knights to approve the
Merger Agreement, as
you indicate in your Letter to Stockholders. Alternatively, if you
intended to state that
such officers, directors and equityholders of OneMedNet intend to vote
all of their
interests in OneMedNet, as the Voting Agreement seems to indicate,
please revise to state
as much.
What equity stake will current stockholders of Data Knights hold after the
Closing?, page 11
5. We note that your table excludes the dilutive impact of certain
additional issuances of
common stock, including shares issuable upon the exercise of certain
options and
warrants. Please amend your table to show the impact of these
additional issuances on the
ownership following the business combination. Please also amend your
table to include
interim scenarios between the no redemption and maximum redemption
scenarios.
How much consideration will OneMedNet Stockholders receive in connection with
the Business
Combination?, page 12
6. Revise to provide an illustrative example of the amount of
consideration payable based
upon the formula you disclose using a recent practicable date
associated with the various
inputs to the formula. Revise to clarify, if true, that this amount
will fluctuate and, if you
know in which direction the inputs are likely to fluctuate, revise to
state as much and
project the likely results of such fluctuations.
How will Data Knights' Sponsor, Directors and officers vote?, page 15
7. Revise to quantify the amount of the vote needed by the Public Shares
in order for the
Business Combination to be approved, as your disclosure currently
suggests that no such
holders need to approve the transaction.
May Data Knights, the Sponsor or Data Knights' directors, officers, advisors,
or their affiliates
purchase shares...?, page 15
8. Confirm your intent to comply, and revise your disclosure accordingly,
with the
conditions set forth in the Compliance and Disclosure Interpretation
located at Question
Barry Anderson
FirstName LastNameBarry Anderson
Data Knights Acquisition Corp.
Comapany
August 21, NameData
2022 Knights Acquisition Corp.
August
Page 3 21, 2022 Page 3
FirstName LastName
166.01 of the Tender Offers and Schedules interpretations, located at
our web-site.
What interests do Data Knights' current officers and directors have in the
Business Combination?
, page 15
9. In each place where you discuss the interests of your sponsor,
officers and directors,
please quantify the aggregate dollar amount of the value of the
interest and describe the
nature of what the sponsor and its affiliates have at risk that
depends on completion of a
business combination. Include loans extended, fees due, and
out-of-pocket expenses for
which the sponsor and its affiliates are awaiting reimbursement.
10. Where you disclose the various security ownership interests of the
sponsor, directors and
officers, revise to include the approximate dollar value of the
interest based on the
transaction value and recent trading prices as compared to the price
paid.
Summary of the Proxy Statement/Prospectus, page 23
11. If the disclosure of risk factors that you provide on page 31 is
intended to satisfy the
requirements of Item 105(b) of Regulation S-K, revise to ensure that
your summary of risk
factors is no more than two pages and describes the principal factors
that make an
investment in the registrant or offering speculative or risky.
Unaudited Pro Forma Condensed Combined Financial Information
Unaudited Pro Forma Condensed Combined Statement of Operations, page 50
12. Please tell us why there is not an adjustment for the conversion of
preferred stock and
conversion of Class B Common Stock.
"We have two significant customers....", page 55
13. Revise your disclosure to state the basis for your statement that
Change Healthcare is
expected to continue to represent a significant portion of your
forecasted revenue for
2022, such as whether or not you have a contract that obligates such
outcome. Explain
any uncertainty as to future revenues from Siemens Medical Solutions
USA, as
applicable.
Risk Factors, page 55
14. Please highlight the material risks to public warrant holders,
including those arising from
differences between private and public warrants. Clarify whether
recent common stock
trading prices exceed the threshold that would allow the company to
redeem public
warrants. Clearly explain the steps, if any, the company will take to
notify all
shareholders, including beneficial owners, regarding when the warrants
become eligible
for redemption.
15. Please provide clear disclosure in your risk factors that discusses
your exclusive forum
provisions, consistent with your exclusive forum discussion on pages
184 and 191. Revise
Barry Anderson
FirstName LastNameBarry Anderson
Data Knights Acquisition Corp.
Comapany
August 21, NameData
2022 Knights Acquisition Corp.
August
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FirstName LastName
to state that such provisions can discourage claims or limit investors
ability to bring a
claim in a judicial forum that they find favorable.
"It is difficult and costly to protect our proprietary rights..." , page 56
16. Revise your disclosure to put this risk in sufficient context by
describing any material
challenges you have experienced or are experiencing as it relates to
obtaining,
maintaining, enforcing and defending against third-party challenges,
your patents and
maintaining your trade secret protection. Also, disclose when your
patents are expected to
expire.
"If OneMedNet fails to comply with federal and state healthcare laws...", page
62
17. You refer readers to the many federal and state healthcare laws, such
as those described in
the "Business - Government Regulation" section, however, we are unable
to locate this
discussion. Revise to include a discussion of existing or probable
governmental
regulations on the business, consistent with Item 101(h)(4)(ix) of
Regulation S-K.
"Data Knights' public stockholders may experience dilution...", page 79
18. Please revise to disclose the extent of dilution that shareholders who
elect not to redeem
their shares may experience in connection with the business
combination. Provide
disclosure of the impact of each significant source of dilution at
each of the redemption
levels detailed in your sensitivity analysis, including any needed
assumptions.
"Warrants will become exercisable for Data Knights Common Stock...", page 80
19. Quantify the value of warrants, based on recent trading prices, that
may be retained by
redeeming stockholders assuming maximum redemptions and identify any
material
resulting risks.
Special Meeting of Data Knights Stockholders
Quorum and Required Vote for Proposals, page 85
20. Please disclose the threshold requirements to pass the Adjournment
Proposal, as well as
the quorum required to hold an adjourned special meeting. Ensure that
you have
consistently described the voting threshold requirements for all
proposals throughout your
prospectus, as the disclosure appears to differ in your Letter to
Stockholders, where you
state that each of the proposals other than the Election of Directors
Proposal requires the
affirmative vote of a majority of the issued and outstanding shares,
which differs from the
disclosure here.
Voting Your Shares, page 86
21. Revise to refer to the second of two ways holders of your common stock
can vote their
shares.
Barry Anderson
FirstName LastNameBarry Anderson
Data Knights Acquisition Corp.
Comapany
August 21, NameData
2022 Knights Acquisition Corp.
August
Page 5 21, 2022 Page 5
FirstName LastName
The Business Combination Proposal
Background of the Business Combination, page 96
22. Revise to elaborate upon how you "deemed a potential business
combination
target compelling enough" to pursue execution of an initial
non-binding letter of intent.
Expand your disclosure to provide additional detail about the other 2
parties with which
LOIs were executed, including when and how you contacted the parties
or were contacted
by these parties; the details of any negotiations or agreements that
took place; and when
and why you ultimately determined not to pursue a transaction with
each party and how
and when you decided to pursue discussions solely with OneMedNet
Corporation.
23. We note that on March 4, 2022 you offered a transaction valuation of
$200 million, which
appears to be the final amount the parties settled upon in the Merger
Agreement. Please
revise to discuss in greater detail how this valuation was determined
and the specific
negotiations that resulted in this amount. If no other valuation
amount was considered by
the Board, specifically state as much. Also, explain why this
discussion does not
characterize the consideration as a pro forma enterprise value of $317
million, as the press
release issued on April 25, 2022 indicates.
24. We note your disclosure on pages 96-97 that reflect various exchanges
of initial comments
and revised drafts and discussions among the parties. Amend your
disclosure to describe
the material content of these discussions, including the positions of
the parties and the
terms that were negotiated by the parties throughout this period.
25. Please disclose the following:
if your sponsor, management, or its affiliates have a track record
with SPACs, any
details about the outcomes of these prior transactions;
any discussions about continuing employment or involvement for any
persons
affiliated with you before the merger, any formal or informal
commitment to retain
the financial advisors after the merger, and any pre-existing
relationships between
your sponsors and additional investors; and
whether the your sponsor has other SPACs in the process of
searching for a target
company, and if so, whether it considered more than one active
SPAC to be the
potential acquirer and how the final decision was reached.
26. Please disclose any discussions about the need to obtain additional
financing for the
combined company, such as the intended PIPE transaction, and the
negotiation/marketing
processes undertaken to date (e.g., identification of potential PIPE
investors; and how the
terms of the PIPE transaction may be determined). Additionally, as
applicable, please
also disclose whether the parties intend to provide any valuations or
other material
information about the SPAC, the target, or the de-SPAC transaction to
potential PIPE
investors that are not expected to be disclosed publicly.
27. Please disclose the negotiation of any contingent payments to be
received by target
shareholders as well as the negotiation of any arrangements whereby
any shareholder
Barry Anderson
Data Knights Acquisition Corp.
August 21, 2022
Page 6
agreed to waive its redemption rights and whether any compensation was
offered in
exchange for such agreement.
28. Elaborate upon the role of ARC Group Ltd. as your financial advisor
and provide
additional details about the services they provided. In this regard,
you state on page 98
that the experience and sector expertise of your financial advisors
enabled your Board to
"make the necessary analyses and determinations regarding the Business
Combination."
Disclose any fees due to ARC Group Ltd. for such services.
The Board's Reasons for Approval of the Business Combination, page 98
29. Please clarify how the board considered the material interests in the
transaction held by
the sponsor and the company s officers and directors in negotiating
and recommending
the business combination.
30. In your discussion of the Purchase Price factor, elaborate upon the
"current valuations of
other private- and publicly traded comparable Real World-Data
companies," which your
Board appears to have considered in determining OneMedNet's valuation
to be relatively
attractive.
31. Explain why Stockholder Liquidity was a factor that supported the
Board's decision to
recommend the transaction when your stockholders already hold shares
that are listed on
Nasdaq, and are therefore liquid.
32. We note that your Board considered OneMedNet's financial outlook and
received
"internal financial analysis," including "certain financial
projections" provided by
OneMedNet. Revise to disclose OneMedNet's internal financial analysis,
including
certain financial projections and any assumptions underlying those
projections. If
different, please also disclose the financial projection assumptions
and revenue projections
for OneMetNet's second product, OneMedtNet iRWD solution, which you
also indicate
that your management reviewed. If any of these projections differ from
those that your
financial advisor, Marshall & Stevens, received and considered, please
revise to explain
such differences.
33. In your discussion of the "Financial information and Comparable
Company Analysis"
factor, revise to clarify exactly what aspect of OneMedNet's financial
outlook was
considered by the Board, considering you state that the Board did not
rely upon
OneMedNet's financial projections.
34. We note the Investor Presentations dated May 12 and 20, 2022 and the
inclusion of
Valuation Benchmarking and Industry Comps. Clarify whether this
information was
considered by the Board in recommending the transaction and, if so,
include this
FirstName LastNameBarry Anderson
information in your prospectus. In doing so, revise to include
disclosure about how the
Comapany NameData
companies usedKnights Acquisition
were selected Corp. the inputs used to arrived at
the amounts
and provide
Augustdepicted. Explain
21, 2022 Page 6 who prepared these materials.
FirstName LastName
Barry Anderson
FirstName LastNameBarry Anderson
Data Knights Acquisition Corp.
Comapany
August 21, NameData
2022 Knights Acquisition Corp.
August
Page 7 21, 2022 Page 7
FirstName LastName
Opinion of Marshall & Stevens, page 101
35. We note your disclosure on pages 101 through 102 that your fairness
advisor, in arriving
at its fairness opinion, reviewed and relied upon projections for
the five years ending
December 31, 2026 [ ] as prepared and provided to it by OneMedNet
s management.
Please disclose the projections, as well as the key assumptions
underlying the financial
projections and any limitations of the projections. To the extent the
projections are not in
line with historic operating trends, please disclose why the change in
trends is appropriate
or assumptions underlying such projections are reasonable.
36. In a separate section immediately following this section, please
disclose the following:
the fees the fairness advisor will receive upon completion of the
business
combination and any amount that is contingent upon completion of
the transaction;
any additional services the fairness advisor or its affiliates
provided in connection
with the transaction (such as for any PIPE transaction related to
the de-SPAC
transaction), the related fees, and whether those fees are
conditioned on the
completion of the transaction; and
a description of any services the financial advisor has provided
to the target or
affiliates of the parties, (including other SPACs associated with
the same sponsor).
37. Elaborate upon your disclosure to explain why you retained Marshall &
Stevens on May
6, 2022, after you approved and executed the Merger Agreement.
38. Elaborate upon the Discounted Cash Flows Analysis and Guideline Public
Company
Analysis your fairness advisor prepared, consistent with Item
1015(b)(6) of Regulation M-
A, which requires disclosure of the bases and methods used for the
fairness opinion. In
doing so, include the various inputs and assumptions used in the
discounted cash flow
analysis and disclose the values ultimately arrived at. Identify the
Guideline Companies,
explain how they are reasonably comparable and disclose the various
multiples and how
they were determined.
Certain Material U.S. Federal Income Tax Considerations of the Redemption, page
104
39. We note that you provide a discussion of the tax consequences of the
exercise of
redemption rights and the exchange of shares as contemplated in the
Merger Agreement
but neither appears to constitute an opinion. Revise to include an
opinion if the tax
consequences are material or tell us why you believe this is not
necessary. Refer to Item
601(b)(8) of Regulation S-K.
The Charter Amendment Proposal, page 112
40. Please provide a complete explanation of how shareholders will be
affected by the Charter
Amendment Proposal.
Barry Anderson
FirstName LastNameBarry Anderson
Data Knights Acquisition Corp.
Comapany
August 21, NameData
2022 Knights Acquisition Corp.
August
Page 8 21, 2022 Page 8
FirstName LastName
Information about OneMedNet Corporation
Company Overview, page 131
41. Define Real World Evidence and explain it's use as compared to, or
using, Real World
Data.
42. Elaborate upon how OneMedNet has access to the 95+ healthcare
facilities you reference
here and explain how that number will grow. Clarify whether the
reference to the
"Partnership Network" in the graphic is the same as the "federated
network of healthcare
facilities" and if not, why not. In this regard, the reference to 200+
customers/partners is
unclear. Clarify the categories of customers in which you have entered
into agreements
and generate revenues and quantify the amount generated in each
category.
Material Agreements, page 148
43. Revise to explain how you selected the agreements you have opted to
describe here and,
as applicable, file them as exhibits, consistent with Item 601(b)(10)
of Regulation S-K.
44. Provide a summary of the material terms of your customary agreements,
such as your
Data Exchange Master Reseller Agreement, Data License Agreement and
your Real
World Data Clinical Trial Agreement.
OneMedNet Management's Discussion and Analysis of Financial Condition and
Results of
Operations, page 153
45. Please provide the disclosures required by paragraphs (b)(1) and
(b)(b2) in Item 303 of
Regulation S-K.
Index to Financial Statements, page F-1
46. Please provide updated financial statements for OneMedNet in
accordance with Rule 3-12
of Regulation S-X. In addition, MD&A should be updated as applicable.
OneMedNet Consolidated Statements of Operations, page F-48
47. Please disclose in the notes to the financial statements the nature of
the items in the
Operations line item expense.
Revenue Recognition, page F-52
48. In the second paragraph, you mention costs related to services. Please
revise to disclose
the types of costs included in this item and the amount included in
Costs of Goods Sold in
the Statements of Operations. If the Costs of Goods Sold line item
contains both
categories, please consider changing the Income Statement line item to
Cost of Revenues
to be more inclusive.
49. Please provide the required disclosures in accordance with ASC
606-10-50, including how
you measure and recognize revenue.
Barry Anderson
Data Knights Acquisition Corp.
August 21, 2022
Page 9
General
50. We note your reference on pages 43 and 47 to Management s Discussion
and Analysis of
Financial Condition and Results of Operations of Data Knights, but
could not locate that
section in your filing. Please advise or revise to include MD&A.
51. Revise your disclosure to show the potential impact of redemptions on
the per share value
of the shares owned by non-redeeming shareholders by including a
sensitivity analysis
showing a range of redemption scenarios, including minimum, maximum
and interim
redemption levels.
52. It appears that underwriting fees remain constant and are not adjusted
based on
redemptions. Revise your disclosure to disclose the effective
underwriting fee on a
percentage basis for shares at each redemption level presented in your
sensitivity analysis
related to dilution.
53. Update your disclosure to indicate that you have opted to extend the
deadline to complete
the merger by three months to November 11, 2022, consistent with your
Form 8-K dated
August 11, 2022, and quantify the amount deposited into the Trust
Account.
54. Please tell us, with a view to disclosure, whether you have received
notice from your
fairness advisor or financial advisor about ceasing involvement in your
transaction and
how that may impact your deal.
FirstName LastNameBarry Anderson
55. We note that Annex D includes language that suggests shareholders may
not rely upon the
Comapany NameData
fairness opinion,Knights Acquisition
in the last paragraphCorp.
on page D-2. Please ask your
fairness advisor to
remove this language.
August 21, 2022 Page 9
FirstName LastName
Barry Anderson
FirstName LastNameBarry Anderson
Data Knights Acquisition Corp.
Comapany
August 21, NameData
2022 Knights Acquisition Corp.
August
Page 1021, 2022 Page 10
FirstName LastName
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.
You may contact Tatanisha Meadows at 202-551-3322 or Lyn Shenk at
202-551-3380 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Ryan Lichtenfels at 202-551-4457 or Mara Ransom at 202-551-3264 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services