SportsTek Acquisition Corp. - Quarter Report: 2021 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2021
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File No. 001-39378
SportsTek Acquisition Corp.
(Exact name of registrant as specified in its charter)
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Delaware
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85-4265519
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2200 S. Utica Place, Suite 450
Tulsa, Oklahoma 74114
(Address of Principal Executive Offices, including zip code)
(918) 957-1086
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange
on which registered
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Units, each consisting of one Class A ordinary share, par value $0.0001 per share, and one-half of one redeemable warrant
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SPTKU
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The Nasdaq Stock Market LLC
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Class A common stock included as part of the units
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SPTK
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The Nasdaq Stock Market LLC
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Redeemable warrants, included as part of the units, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share
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SPTKW
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The Nasdaq Stock Market LLC
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☒
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. □
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☒ No ☐
As of May 14, 2021, there were 17,250,000 Shares of Class A common stock (which are the shares of Class A common stock underlying the units sold in the registrant’s initial public offering) and
4,312,500 shares of Class B common stock of the registrant issued and outstanding.
SPORTSTEK ACQUISITION CORP.
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Page
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Part I. Financial Information
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1
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1
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4
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16
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19
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20
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Part II. Other Information
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20
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20
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20
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21
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21
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21
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22
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23
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March 31,
2021
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December 31, 2020
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(unaudited)
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Assets:
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||||||||
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Current Assets:
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||||||||
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Cash
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$
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1,758,506
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$
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153,938
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||||
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Prepaid Expenses
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673,222
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—
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||||||
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Total current assets
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2,431,728
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153,938
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||||||
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Deferred offering costs
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—
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408,725
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||||||
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Cash and Investments held in Trust Account
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172,503,450
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—
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||||||
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Total Assets
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$
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174,935,178
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$
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562,663
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Liabilities and Stockholders’ Equity
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||||||||
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Current liabilities:
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||||||||
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Accrued offering costs and expenses
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$
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789,000
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$
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362,230
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||||
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Due to related party
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2,957
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—
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||||||
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Promissory note – related party
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—
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176,000
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Total current liabilities
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791,957
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538,230
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Deferred underwriting fee
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6,037,500
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—
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||||||
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Warrant liability
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18,328,868
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—
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||||||
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Total liabilities
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25,158,325
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538,230
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||||||
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Commitments
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||||||||
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Common Stock subject to possible redemption, 14,477,685 and no shares at redemption value at March 31, 2021 and December 31, 2020, respectively
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144,776,850
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—
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||||||
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Stockholders’ Equity:
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||||||||
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding at March 31, 2021 and December 31, 2020
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—
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—
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||||||
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Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 2,772,315 and 0 shares issued and outstanding (excluding 14,477,685 and no shares subject to possible redemption) at
March 31, 2021 and December 31, 2020, respectively
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277
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—
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||||||
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Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 4,312,500 shares issued and outstanding at March 31, 2021 and December 31, 2020
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431
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431(1)
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||||||
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Additional paid-in capital
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7,898,093
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24,569
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||||||
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Accumulated deficit
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(2,898,798
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)
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(567
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)
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Total stockholders’ equity
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5,000,003
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24,433
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Total Liabilities and Stockholders’ Equity
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$
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174,935,178
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$
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562,663
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||||
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(1)
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Included up to 562,500 founder shares which were subject to forfeiture by the sponsor if the over-allotment option was not exercised in full or in part by the underwriters (See Note 5).
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The accompanying notes are an integral part of these unaudited condensed financial statements.
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For the Three Months Ended March 31, 2021
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Formation and operating costs
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$
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46,593
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Loss from Operations
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(46,593
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)
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Other income (expense):
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Interest earned on cash and marketable securities held in Trust Account
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3,450
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|||
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Offering costs allocated to warrants
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(606,375
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)
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Change in fair value of warrant liability
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(2,248,713
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)
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Total other income (expense), net
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(2,851,638
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)
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Net loss
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$
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(2,898,231
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)
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Weighted average shares outstanding of Class A common stock
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17,250,000
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|||
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Basic and diluted net income per share, Class A common stock
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$
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—
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||
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Weighted average shares outstanding of Class B common stock
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4,006,250
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|||
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Basic and diluted net loss per share, Class B common stock
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$
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(0.72
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)
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The accompanying notes are an integral part of these unaudited condensed financial statements.
SPORTSTEK ACQUISITION CORP.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2021
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2021
(UNAUDITED)
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Class A
Common stock
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Class B
Common stock
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Additional
Paid-in
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Accumulated
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Total
Stockholder’s
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||||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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Capital
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Deficit
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Equity
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||||||||||||||||||||||
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Balance as of January 1, 2021
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—
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$
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—
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4,312,500
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$
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431(1)
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$
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24,569
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$
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(567
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)
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$
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24,433
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|||||||||||||||
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Sale of 17,250,000 Shares of Class A common stock, net of underwriting discount offering expenses and initial warrant liability
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17,250,000
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1,725
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—
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—
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152,648,926
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—
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152,650,651
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|||||||||||||||||||||
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Net income (loss)
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—
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—
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—
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—
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—
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(2,898,231
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)
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(2,898,231
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)
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Class A Common stock subject to possible redemption
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(14,477,685
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)
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(1,448
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)
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—
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—
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(144,775,402
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)
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—
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(144,776,850
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)
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|||||||||||||||||
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Balance as of March 31, 2021 (unaudited)
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2,772,315
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$
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277
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4,312,500
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$
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431
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$
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7,898,093
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$
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(2,898,798
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)
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$
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5,000,003
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|||||||||||||||
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(1)
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Included up to 562,500 founder shares which were subject to forfeiture by the sponsor if the over-allotment option was not exercised in full or in part by the underwriters (See Note 5).
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The accompanying notes are an integral part of these unaudited condensed financial statements.
(UNAUDITED)
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For the Three Months Ended March 31, 2021
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||||
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Cash flows from operating activities:
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||||
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Net loss
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$
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(2,898,231
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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||||
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Interest earned on marketable securities held in Trust Account
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(3,450
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)
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Offering costs allocated to warrants
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606,375
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|||
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Change in fair value of warrant liability
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2,248,713 | |||
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Changes in operating assets and liabilities:
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Prepaid assets
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(673,222
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)
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Due to related party
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2,957
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|||
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Accrued offering costs and expenses
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689,000
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Net cash used in operating activities
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(27,858
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)
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Cash Flows from Investing Activities:
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Investment of cash in Trust Account
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(172,500,000
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)
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Net cash used in investing activities
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(172,500,000
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)
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Cash Flows from Financing Activities:
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||||
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Proceeds from sale of Units, net of underwriting discount
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169,050,000
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|||
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Proceeds from issuance of Private Placement Warrants
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5,950,000
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|||
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Repayment of promissory note – related party
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(176,000
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)
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Payment of offering costs
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(691,574
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)
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||
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Net cash provided by financing activities
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174,132,426
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|||
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Net change in cash
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1,604,568
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|||
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Cash, beginning of period
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153,938
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|||
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Cash, end of the period
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$
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1,758,506
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||
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Supplemental disclosure of cash flow information:
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||||
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Initial value of Class A common stock subject to possible redemption, as corrected
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$
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143,583,030
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||
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Change in Class A common stock subject to possible redemption
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$
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(806,180
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)
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Deferred underwriters’ discount payable charged to additional paid-in capital
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$
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6,037,500
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The accompanying notes are an integral part of these unaudited condensed financial statements.
Note 1 — Organization and Business Operations
SportsTek Acquisition Corp. (the “Company”) is a blank check company incorporated as a Delaware corporation on December 7, 2020. The Company was
formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
As of March 31, 2021, the Company had not commenced any operations. All activity through March 31, 2021 relates to the Company’s formation and the Initial Public Offering (“IPO”) which is described below, and identifying and evaluating prospective acquisition targets for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The
Company generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The registration statement for the Company’s IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on February 16, 2021 (the “Effective Date”). On February 19, 2021, the Company
consummated the IPO of 17,250,000 units ((the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which included the
full exercise by the underwriters of the over-allotment option to purchase an additional 2,250,000 Units, at $10.00 per Unit, generating gross proceeds of $172,500,000, which is discussed in Note 4. Each Unit consists of one share of
common stock, and one-half of one redeemable warrant to purchase one share of Class A common stock at a price of $11.50 per whole share.
Simultaneously with the closing of the IPO, the Company consummated the sale of 5,950,000 Private Placement Warrants (the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant, in a private
placement to JTJT Partners LLC (the “Sponsor”) and certain of the Company’s directors and advisors, generating
gross proceeds of $5,950,000, which is discussed in Note 5.
Transaction costs of the IPO amounted to $10,325,569 consisting of $3,450,000 of underwriting fee, $6,037,500 of deferred underwriting fee, and $838,069 of other offering costs.
Following the closing of the IPO on February 19, 2021, $172,500,000 ($10.00 per Unit) from the net offering proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a
trust account (the “Trust Account”) and invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S.
Treasuries, as determined by the Company, until the earlier of: (i) the completion of a Business Combination; (ii) the redemption of any Public Shares in connection with a stockholder vote to approve an amendment to the Company’s Certificate of
Incorporation (a) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of the Public Shares if the Company has not consummated a Business Combination within
24 months from the closing of the IPO or (b) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (iii) the redemption of any Public Shares if the Company has not consummated a
Business Combination within 24 months from the closing of the IPO, subject to applicable law.
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) 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 stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a
Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders 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 Public Share). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will have only 24 months from February 19, 2021, the closing of the IPO, to complete an initial Business Combination (the “Combination Period”). However, if the Company
doesn’t complete a Business Combination within the Combination Period, the Company will redeem 100% of the outstanding Public Shares for a pro rata portion of the funds held in the Trust Account, 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 the Company to pay its franchise and income taxes, divided by the number of then outstanding Public Shares, subject to applicable
law and as further described in registration statement, and then seek to dissolve and liquidate.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party (other than our independent
public registered accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account
to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the amount
of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriter
of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, 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 all
vendors, service providers (except for the Company’s independent registered accounting firm), prospective target businesses and 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. However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient
funds to satisfy its indemnity obligations and the Company believes that the Company’s Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that it 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 financial statements. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Note 2 — 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. The interim results for the three months ended March 31, 2021 are not necessarily indicative of
the results to be expected for the year ending December 31, 2021 or for any future interim periods.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K filed by the Company with
the SEC on March 30, 2021.
Correction of Previously Issued Financial Statement
The Company corrected certain line items related to the previously audited balance sheet as of February 19, 2021 in the Form 8-K filed with the SEC on
February 25, 2021 related to misstatements identified in improperly applying accounting guidance on certain warrants, recognizing them as components of equity instead of a derivative liability under the guidance of Accounting Standard
Codification (“ASC”) 815-40, “Derivatives and Hedging – Contracts on an Entity’s Own Equity” (“ASC 815-40”). The following balance sheet items as of February 19, 2021 were impacted: an increase of $17.6 million in warrant liabilities, a decrease
of $17.6 million in the amount of Class A common stock subject to redemption, an increase of $2.1 million in additional paid-in capital and an increase in $2.1 million in accumulated deficit.
Emerging Growth Company Status
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 auditor 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
stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had
a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a 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 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 financial statements with another public company which is neither an emerging growth company nor an emerging growth company which 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 financial statements in conformity with US 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 financial statements and the reported amounts of expenses during the reporting period.
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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, 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 did not have any cash equivalents as of March 31, 2021 and
December 31, 2020.
Marketable Securities Held in Trust Account
At March 31, 2021, the assets held in the Trust Account were held in U.S. Treasury Bills with a maturity of 185 days or less and in money market funds which invest in U.S. Treasury securities.
During the three months ended March 31, 2021, the Company did not withdraw any of the interest income from the Trust Account to pay its tax obligations.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The
impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market
price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration
of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in
the “interest income” line item in the statements of operations. Interest income is recognized when earned.
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 depository insurance coverage
of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Warrant Liabilities
The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 2, Note 4, Note 5 and Note 9) in accordance with ASC 815-40, “Derivatives and Hedging —
Contracts in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of
a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the Condensed Balance Sheet and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820,
“Fair Value Measurement”, with changes in fair value recognized in the Condensed Statement of Operations in the period of change.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1. 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 warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged
to stockholders’ equity upon the completion of the Initial Public Offering.
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common
stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features 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 common stock is classified as stockholders’
equity. The Company’s Class A common stock 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, at March 31, 2021 and December 31,
2020, 14,477,685 and 0 shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets, respectively.
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial
statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than
not that all or a portion of deferred tax assets will not be realized. The deferred tax assets were deemed to be de minimis as of March 31, 2021 and December 31, 2020.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement
recognition and measurement of a tax position 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. ASC 740 also
provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
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, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company has identified the United States as its only
“major” tax jurisdiction. The Company is subject to income tax examinations by major taxing authorities since inception. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax
jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The provision for income taxes was deemed
to be de minimis for the three months ended March 31, 2021.
Net Income (Loss) Per Common Share
Net income (loss) per share is computed by dividing net loss by the weighted-average number of common stock outstanding during the period. The Company’s unaudited condensed statement of
operations includes a presentation of loss per share for common stock subject to redemption in a manner similar to the two-class method of income (loss) per share. Net loss per share, basic and diluted for Class A common stock is calculated by
dividing the interest income earned on the investments held in the Trust Account of $3,450, less $450 of allowance for tax obligations, resulting in $3,000 of income for Class A common stock for the three months ended March 31, 2021, by the
weighted average number of Class A common stock outstanding for the periods. Net loss per share, basic and diluted for Class B common stock is calculated by dividing the net loss of $2,898,231, less income attributable to Class A common stock of
$3,000, resulting in a net loss of $2,901,231 for the three months ended March 31, 2021, by the weighted average number of Class B common stock outstanding for the periods. The Company has not considered the effect of the warrants sold in the
Initial Public Offering and the Private Placement to purchase an aggregate of 14,575,000 of the Company’s Class A common stock in the calculation of diluted income per share, since they are not yet
exercisable.
Reconciliation of Net Income (Loss) per Common Share
The Company’s condensed statement of operations includes a presentation of loss per share for common stock subject to redemption in a manner similar to the two-class method of income (loss) per
share. Accordingly, basic and diluted loss per common share of Class A common stock and Class B common stock is calculated as follows:
|
Three Months Ended
March 31, 2021 |
||||
|
Net Income per share for Class A common stock:
|
||||
|
Interest income earned on securities held in the Trust Account
|
$
|
3,450
|
||
|
Less: Interest income available to the Company for taxes
|
(450
|
)
|
||
|
Adjusted net income
|
$
|
3,000
|
||
|
Weighted average shares outstanding of Class A common stock
|
17,250,000
|
|||
|
Basic and diluted net income per share, Class A common stock
|
$
|
0.00
|
|
|
|
Net Loss per share for Class B common stock:
|
||||
|
Net loss
|
$
|
(2,898,231
|
)
|
|
|
Less: Income attributable to Class A common stock
|
(3,000
|
)
|
||
|
Adjusted net loss
|
$
|
(2,901,231
|
)
|
|
|
Weighted average shares outstanding of Class B common stock
|
4,006,250
|
|||
|
Basic and diluted net loss per share, Class B common stock
|
$
|
(0.72
|
)
|
|
Fair Value of Financial Instruments
The Company follows the guidance in ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are re-measured and reported at
fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid
in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to
classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1 —
|
Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on
quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
|
|
Level 2 —
|
Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or
liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
|
|
Level 3 —
|
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
See Note 9 for additional information on assets and liabilities measured at fair value.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3 — Initial Public Offering
Public Units
On February 19, 2021, the Company sold 17,250,000 Units, at a purchase price of $10.00 per Unit, which included the full exercise by the underwriters of the over-allotment option to
purchase an additional 2,250,000 Units. Each Unit consists of one share of Class A common stock, and one-half of one redeemable warrant to purchase one share of Class A common stock (the “Public Warrants”).
Public Warrants
Each whole warrant entitles the registered holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment. Pursuant to the
warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A common stock. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants
will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the IPO. The Public Warrants will expire five years after the completion of a Business Combination or earlier
upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a
registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is
available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated
to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from
registration is available.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, the Company will use its commercially reasonable
efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a
current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities
exchange such that it satisfies 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” in
accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or
qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● |
in whole and not in part;
|
| ● |
at a price of $0.01 per warrant;
|
| ● |
upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and
|
| ● |
if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within a 30-trading day period ending on the third trading day prior the date on which the Company sends the notice of redemption to the warrant holders.
|
If and when the warrants become redeemable by the Company, the Company may exercise the redemption right even if it is unable to register or qualify the underlying securities or sale under all
applicable state securities laws.
Redemption of Warrants When the Price per Share of Class A Common Stock 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 provided that the holder will be able to exercise their warrants on cashless basis prior to redemption and receive that number of shares based on the redemption date and the
fair market value of the Class A common stock;
|
| ● |
upon a minimum of 30 days’ prior written notice of redemption;
|
| ● |
if, and only if, the last reported sale price of the Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and
|
| ● |
if the last reported sale price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of
redemption to the warrant holders is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Warrants must also be concurrently called for redemption on the
same terms as the outstanding Public Warrants, as described above.
|
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a
“cashless basis,” as described in the warrant agreement.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business
Combination at an issue price or effective issue price of less than $9.20 per 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 its affiliates, without taking into account any founder shares held by the sponsor or such affiliates, 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 a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading
price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a 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 $18.00 per share redemption trigger price described above will be adjusted (to the nearest
cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger described above will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly
Issued Price.
Note 4 — Private Placement
Simultaneously with the closing of the IPO, the Sponsor and certain of the Company’s directors and advisors purchased an aggregate of 5,950,000 Private Warrants at a price of $1.00 per
Private Warrant, for an aggregate purchase price of $5,950,000, in a private placement. A portion of the proceeds from the private placement was added to the proceeds from the IPO held in the Trust Account.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Placement Warrants and the shares of Class A common
stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private
Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than
the Sponsor 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.
Note 5 — Related Party Transactions
Founder Shares
On December 11, 2020, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration for 3,593,750 shares of Class B common stock (the “Founder Shares”). On February 16,
2021 the Company effected a stock dividend of 718,750 shares with respect to the Class B common stock, resulting in the initial stockholders holding an aggregate of 4,312,500 Founder Shares (See Note 8). The accompanying financial statements have
been retroactively adjusted to reflect the stock dividend in the share capitalization. The Founder Shares include an aggregate of up to 562,500 shares subject to forfeiture if the option to purchase additional units is not exercised by the
underwriter in full. On February 19, 2021, the underwriter fully exercised its over-allotment option, hence, the 562,500 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (i) one year after the completion of a
Business Combination and (ii) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or
other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Due to Related Party
The balance of $2,957 represents the amounts accrued for the administrative support services provided by Sponsor.
Promissory Note — Related Party
On December 18, 2020, Company issued an unsecured promissory note to the Sponsor for an aggregate of up to $300,000 to cover expenses related to the IPO. This loan is non-interest
bearing and payable on the earlier of April 30, 2021 or the completion of the IPO. As of December 31, 2020, the Company had drawn down $176,000 under the promissory note and on February 22, 2021, the Company paid the full balance on the note from
the proceeds of the IPO.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the
Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up
to $2,000,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants. 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. As of March 31, 2021 and December
31, 2020, there were no amounts outstanding under the Working Capital Loans.
Administrative Service Fee
Commencing on the date of the IPO, the Company agrees to reimburse its Sponsor for office space, administrative and support services provided to members of the Company’s management team in an
amount not to exceed $2,000 per month. Upon completion of the Company’s Business Combination or its liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2021, the Company has recorded $2,957 of
administrative service fees.
Note 6 — Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the
exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement dated
February 16, 2021, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make up to three
demands, excluding short form registration 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 completion of a
Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or
permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any
such registration statements.
Underwriting Agreement
The underwriter had a 45-day option from the date of the IPO to purchase up to an aggregate of 2,250,000 additional Units at the public offering price less the underwriting commissions to cover over-allotments, if
any. On February 19, 2021, the underwriter fully exercised its over-allotment option and was paid a cash underwriting discount of $0.20 per
Unit, or $3,450,000 in the aggregate.
The underwriters are entitled to a deferred underwriting fee of 3.5% of the gross proceeds of the IPO held in the Trust Account, or $6,037,500, upon the completion of the Company’s
initial Business Combination subject to the terms of the underwriting agreement.
Note 7 — Stockholders’ Equity
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per
share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or
outstanding.
Class A Common Stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of
$0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At March 31, 2021 and December 31, 2020, there were 17,250,000 and 0 shares issued and outstanding, including 14,477,685 and no shares subject to
possible redemption, respectively.
Class B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of
$0.0001 per share. At March 31, 2021 and December 31, 2020, there were 4,312,500 shares issued and outstanding.
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common
stock will vote together as a single class on all matters submitted to a vote of our stockholders except as otherwise required by law.
The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis,
subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the IPO and related to the closing of a Business Combination, the ratio
at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any
such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the total number of all shares of
common stock outstanding upon the completion of the IPO plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A common stock
redeemed in connection with a Business Combination), excluding any shares or equity-linked securities issued or issuable to any seller in a Business Combination.
Note 8 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2021, and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value:
|
March 31,
|
Quoted
Prices In Active Markets |
Significant
Other Observable Inputs |
Significant
Other Unobservable Inputs |
|||||||||||||
|
2021
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Public Warrants Liability
|
$
|
10,614,650
|
$
|
-
|
$
|
-
|
$
|
10,614,650
|
||||||||
|
Private Placement Warrants Liability
|
7,714,218
|
-
|
-
|
7,714,218
|
||||||||||||
|
$
|
18,328,868
|
$
|
-
|
$
|
-
|
$
|
18,328,868
|
|||||||||
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Condensed Balance Sheet. The warrant liabilities are measured at fair value at inception
and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Condensed Statement of Operations.
The Company established the initial fair value of the Public Warrants and Private Warrants on February 19, 2021, the date of the Company’s Initial Public Offering, and as of March 31, 2021, using a Monte Carlo
simulation model. The Warrants were classified as Level 3 at the initial measurement date and at March 31, 2021 due to the use of unobservable inputs.
The key inputs into the Monte Carlo simulation as of February 19, 2021 and March 31, 2021 were as follows:
|
(Initial Measurement)
|
||||||||
|
February 19, 2021
|
March 31, 2021
|
|||||||
|
Inputs
|
||||||||
|
Risk-free interest rate
|
0.78
|
%
|
1.17
|
%
|
||||
|
Expected remaining term (years)
|
6.15
|
6.04
|
||||||
|
Expected volatility
|
24.1
|
%
|
24.4
|
%
|
||||
|
Stock price
|
$
|
9.41
|
$
|
9.32
|
||||
The carrying value, excluding gross unrealized holding loss and fair value of held to maturity securities on March 31, 2021 are as follows:
|
Carrying
Value as of March 31, 2021 |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair Value
as of March 31, 2021 |
|||||||||||||
|
U.S. Money Market
|
$
|
925
|
$
|
-
|
$
|
-
|
$
|
925
|
||||||||
|
U.S. Treasury Securities
|
172,502,525
|
2,041
|
-
|
172,504,566
|
||||||||||||
|
$
|
172,503,450
|
$
|
2,041
|
$
|
-
|
$
|
172,505,491
|
|||||||||
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any
subsequent events that would have required adjustment or disclosure in the financial statements.
References to the “Company,” “our,” “us” or “we” refer to SportsTek Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of
operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and
assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or
other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this
Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated in Delaware on December 7, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more businesses (the “Business Combination”). Our sponsor is JTJT Partners LLC, a Delaware limited liability company.
Simultaneously with the closing of the IPO, we consummated the private placement (“Private Placement”) of 5,950,000 warrants at a price of $1.00 per warrant (“Private Placement Warrants” and, together with the
warrants included in the Units, the “Warrants”) to the Sponsor, generating gross proceeds of approximately $5.95 million.
Upon the closing of the IPO and the Private Placement on February 19, 2021, $172.5 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the IPO and the Private Placement were placed in a trust
account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act
of 1940, as amended (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, 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.
If we have not completed a Business Combination within 24 months from the closing of the IPO, or during any extension period, 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 its taxes (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 Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders
and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Recent Developments
On April 12, 2021, the Staff of the SEC released the Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “Statement”). The SEC
Staff Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those issued by the Company at the time of its IPO in February 2021.
The Warrants were classified as equity in the Company’s previously issued audited balance sheet as of February, 2021. In light of the Statement and guidance in Accounting Standards Codification (“ASC”) 815-40,
“Derivatives and Hedging — Contracts in Entity’s Own Equity”, in particular as applicable to certain provisions in the Warrants related to tender or exchange offer provisions as well as provisions that provided for potential changes to the
settlement amounts dependent upon the characteristics of the holder of the warrant, the Company evaluated the terms of the Warrant Agreement entered into in connection with the Company’s IPO and concluded that the Company’s Warrants include
provisions that, based on ASC 815-40, preclude the Warrants from being classified as components of equity. The Warrants are not eligible for an exception from derivative accounting, and therefore should be classified as a liability measured at
fair value, with changes in fair value reported each period in earnings.
Results of Operations
For the three months ended March 31, 2021, we had a net loss of approximately $2.90 million, which included a loss from operations of $0.05 million, offering cost expense allocated to warrants of $.6 million,
and a loss from the change in fair value of warrant liabilities of $2.2 million. Our business activities from inception to March 31, 2021 consisted primarily of our formation and completing our IPO, and since the offering, our activity has
been limited to identifying and evaluating prospective acquisition targets for a Business Combination.
As of March 31, 2021, the Company had approximately $1.8 million in its operating bank account, and working capital of approximately $1.6 million.
The Company’s liquidity needs up to February 19, 2021 had been satisfied through a capital contribution from the Sponsor of $25,000 for the founder shares and the loan under an
unsecured promissory note from the Sponsor of up to $300,000, which was repaid in full as of February 22, 2021. Subsequent to the consummation of the IPO, the Company’s liquidity needs have been satisfied through the net proceeds from
the consummation of the Private Placement not held in the Trust Account. 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 working capital loans. As of March 31, 2021 and December 31, 2020, there were no amounts outstanding under any working capital loan.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity 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 held outside of the Trust Account 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.
Contractual Obligations
As of March 31, 2021, we do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The
preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in
our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known
trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions or conditions.
Warrant Liabilities
The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 2, Note 4, Note 5 and Note 9) in accordance with ASC 815-40, “Derivatives and Hedging —
Contracts in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of
a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the Condensed Balance Sheet and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820,
“Fair Value Measurement”, with changes in fair value recognized in the Condensed Statement of Operations in the period of change.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1. 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 warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to
stockholders’ equity upon the completion of the Initial Public Offering.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common
stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features 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 common stock is classified as stockholders’
equity. The Company’s Class A common stock 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, the shares of Class A common stock
subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per share is computed by dividing net loss by the weighted-average number of common stock outstanding during the period. The Company’s unaudited condensed statement of
operations includes a presentation of loss per share for common stock subject to redemption in a manner similar to the two-class method of income (loss) per share. Net loss per share, basic and diluted for Class A common stock is calculated by
dividing the interest income earned on the investments held in the Trust Account, less allowance for tax obligations, by the weighted average number of Class A common stock outstanding for the periods. Net loss per share, basic and diluted for
Class B common stock is calculated by dividing the net income (loss), less income attributable to Class A common stock, by the weighted average number of Class B common stock outstanding for the periods. The Company has not considered the effect
of the warrants sold in the Initial Public Offering and the Private Placement to purchase an aggregate of 14,575,000 of the Company’s Class A common stock in the calculation of diluted income per share, since
they are not yet exercisable.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
As of March 31, 2021, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering,
including amounts in the Trust Account, have been invested in certain U.S. government securities with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these
investments, we believe there will be no associated material exposure to interest rate risk.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including the Co-Chief Executive Officers and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
Evaluation of Disclosure Controls and Procedures
In connection with the Correction of our February 19, 2021 audited balance sheet, our management reassessed the effectiveness of our disclosure controls
and procedures as of March 31, 2021. As a result of that reassessment and in light of the public statement by the SEC staff entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by
Special Purpose Acquisition Companies” on April 12, 2021, our management determined that our disclosure controls and procedures as of March 31, 2021 were not effective solely as a result of its classification of the warrants as
components of equity instead of as derivative liabilities. Due solely to the events that led to the Correction, management has made changes in internal controls related to the accounting for warrants issued in connection with our initial public
offering. In light of the material weakness that we identified, we performed additional analysis as deemed necessary to ensure that our financial statements for the three months ended March 31, 2021, were prepared in accordance with U.S.
generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash
flows for the period presented.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most
recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the correction of our previously filed financial statements
described above had not yet been identified. In light of the correction of the previously filed financial statements, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and
understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication
among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will
ultimately have the intended effects.
There were no material changes from the risks disclosed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December, 31, 2020.
Unregistered Sales of Equity Securities
On February 19, 2021, simultaneously with the consummation of our IPO, we completed the private sale, pursuant to an exemption under Section 4(a)(2) of the Securities Act, of an aggregate of
5,950,000 private placement warrants, each exercisable to purchase one share of Class A common stock for $11.50 per share, subject to adjustment, to our sponsor and certain directors and advisors of the Company, at a price of $1.00 per private
placement warrant, generating gross proceeds of $5,950,000. The private placement warrants are identical to the warrants sold as part of the units in our IPO except that, so long as they are held by our sponsor or its permitted transferees: (1)
they will not be redeemable by us (except in certain redemption scenarios when the price per share of Class A common stock equals or exceeds $10.00 (as adjusted); (2) they (including the Class A common stock issuable upon exercise of these
warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until 30 days after the completion of our initial business combination; (3) they may be exercised by the holders on a cashless basis; and (4)
the holders thereof (including with respect to the shares of common stock issuable upon exercise of these warrants) are entitled to registration rights.
Use of Proceeds
On February 19, 2021, we consummated our IPO offering 17,250,000 units at a price of $10.00 per unit. Each unit consists of one share of Class A common stock and one-half of one redeemable
warrant. Each whole warrant entitles the holder to purchase one public share at a price of $11.50 per share. Simultaneously with the closing of our IPO, we completed the private sale of an aggregate of 5,950,000 private placement warrants, each
exercisable to purchase one share of Class A common stock for $11.50 per share, subject to adjustment, to our sponsor and certain directors and advisors of the Company, at a price of $1.00 per private placement warrant. Only whole warrants are
exercisable.
Stifel, Nicolaus & Company, Incorporated served as underwriter for our IPO. The units sold in the IPO were registered under the Securities Act on a registration statement on Form S-1
(Registration Nos. 333-252604), which was declared effective by the SEC on February 16, 2021.
We received gross proceeds from the IPO and the sale of the private placement warrants of $172,500,000 and $5,950,000, respectively, for an aggregate of $178,450,000. $172,500,000 of the gross
proceeds from the IPO and private placement (which includes the underwriter’s deferred discount of $6,037,500) were deposited in a trust account with Continental Stock Transfer and Trust Company as trustee. As of the closing of our IPO, $5,950,000
was held outside of the trust account, of which $3,450,000 was used to pay underwriting discounts and commissions, $796,711 was used to pay other offering costs, and $49,958 was used to repay a note payable to our sponsor. The balance of $1,653,331
held outside of the trust account is reserved to pay accrued offering and formation costs, business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. The funds in the trust account
will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries.
Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, if any, the funds held in the trust account will not be released from
the trust account until the earliest of: (1) the completion of our initial business combination; (2) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of
incorporation (A) to modify the substance or timing of our obligation to allow redemptions in connection with our initial business combination or to redeem 100% of our Public Shares if we do not complete our initial business combination within 24
months from the closing of our IPO or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (3) the redemption of all of our Public Shares if we have not completed our initial
business combination within 24 months from the closing of our IPO, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our
Public Stockholders.
Except as disclosed herein no payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. There has
been no material change in the planned use of proceeds from our IPO as described in our final prospectus, dated February 16, 2021.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
None.
Not applicable.
None.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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Exhibit
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Description
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Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 filed with the Company’s Form 8-K filed on February 22, 2021)
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Bylaws (incorporated by reference to Exhibit 3.3 filed with the Company’s Registration Statement on Form S-1/A filed on February 9, 2021)
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Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 filed with the Company’s Registration Statement on Form S-1/A filed on February 9, 2021)
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Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 filed with the Company’s Registration Statement on Form S-1/A filed on February 9, 2021)
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Specimen Warrant Certificate (included in Exhibit 4.4)
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Warrant Agreement, dated February 16, 2021, between Continental Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 4.1 filed with the Company’s Form 8-K filed on
February 22, 2021)
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Promissory Note, dated December 18, 2020 issued in favor of JTJT Partners LLC (incorporated by reference to Exhibit 10.1 filed with the Company’s Registration Statement on Form S-1/A filed on February 9,
2021)
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Warrant Purchase Agreement, dated February 16, 2021, between the Company and the Sponsor (incorporated by reference to Exhibit 10.1 filed with the Company’s Form 8-K filed on February 22, 2021)
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Investment Management Trust Account Agreement, dated February 16, 2021, between Continental Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 10.2 filed with the
Company’s Form 8-K filed on February 22, 2021)
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Registration Rights Agreement, dated February 16, 2021, among the Company, the Sponsor and the other Holders (as defined therein) signatory thereto (incorporated by reference to Exhibit 10.3 filed with the
Company’s Form 8-K filed on February 22, 2021)
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Letter Agreement, dated February 16, 2021, among the Company, the Sponsor, certain investors in the Sponsor and each of the directors and officers of the Company (incorporated by reference to Exhibit 10.4
filed with the Company’s Form 8-K filed on February 22, 2021)
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Administrative Services Agreement, dated February 16, 2021, between the Company and the Sponsor (incorporated by reference to Exhibit 10.5 filed with the Company’s Form 8-K filed on February 22, 2021)
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Securities Subscription Agreement, dated December 11, 2020, between the Company and JTJT Partners LLC (incorporated by reference to Exhibit 10.5 filed with the Company’s Registration Statement on Form S-1/A
filed on February 9, 2021)
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Form of Indemnification Agreement between the Company and each of the officers and directors of the Company (incorporated by reference to Exhibit 10.6 filed with the Company’s Form 8-K filed on February 22,
2021)
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Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Executive Officer and Principal Financial Officer Pursuant to U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS*
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XBRL Instance Document
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB*
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XBRL Taxonomy Extension Labels Linkbase Document
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
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*
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Filed herewith.
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Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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SPORTSTEK ACQUISITION CORP.
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Date: May 27, 2021
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By:
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/s/ Jeffrey Lunhow
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Name: Jeffrey Luhnow
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Title: Chair and Co-Chief Executive Officer
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By:
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/s/ C. Tavo Hellmund
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Name: C. Tavo Hellmund
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Title: Co-Chief Executive Officer
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By:
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/s/ Timothy W. Clark
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Name: Timothy W. Clark
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Title: Chief Financial Officer and Chief Operating Officer
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