References in this report (the "Annual Report") to "we," "us" or the "Company"
refer to Bullpen Parlay Acquisition Company. References to our "management" or
our "management team" refer to our officers and directors, references to the
"Sponsor" refer to BPAC Partners LLC. The following discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with the financial statements and the notes thereto contained
elsewhere in this Annual Report. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements that involve
risks and uncertainties.
Overview
We are a blank check company formed under the laws of Cayman Islands on April 1,
2021 for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, and forward purchase securities, our
capital stock, debt or a combination of cash, stock and debt.
Our sponsor is BPAC Partners LLC, a Delaware limited liability company. Our
registration statement for the initial public offering became effective on
December 7, 2021. We consummated the initial public offering of 23,000,000 units
on December 7, 2021. Each unit consisted of one Class A ordinary shares and
one-half of one redeemable warrant ("Public Warrant"), including the issuance of
3,000,000 Units as a result of the underwriter's exercise of their
over-allotment option in full. Each Unit consists of one Class A ordinary share
of the Company, par value $0.0001 per share (the "Class A Ordinary Shares"), and
one-half of one redeemable warrant of the Company (each whole warrant, a
"Warrant"), with each Warrant entitling the holder thereof to purchase one Class
A Ordinary Share for $11.50 per share, subject to adjustment. The Units were
sold at a price of $10.00 per Unit, generating gross proceeds to the Company of
$230,000,000 and incurred $12,650,000 in underwriting fees (inclusive of
$8,050,000 in deferred underwriting fees).
Simultaneously with the closing of the initial public offering on December 7,
2021, we completed the closing of the private placement of an aggregate
11,700,000 private placement warrants at a price of $1.00 per private placement
warrant to the sponsor, generating proceeds of $11,700,000.
Upon the closing of the initial public offering, the over-allotment and the
private placements, $234,600,000 ($10.20 per unit) of the net proceeds of the
sale of the units in the initial public offering, the over-allotment and the
private placements were placed in the trust account with U.S. Bank National
Association acting as trustee and invested in United States government treasury
bills with a maturity of 185 days or less or in money market funds investing
solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under
the Investment Company Act, as determined by us, until the earlier of: (i) the
completion of a business combination and (ii) the distribution of the trust
account as described below.
Our management and our board of directors have broad discretion with respect to
the specific application of the net proceeds of the initial public offering, the
over-allotment and the sale of private placement warrants, although
substantially all of the net proceeds are intended to be applied generally
toward consummating a business combination.
If we have not completed our initial business combination within 18 months from
the closing of the initial public offering, or June 7, 2023 (the "Combination
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 our income taxes, if any (less up to $100,000 of interest
to pay dissolution expenses) divided by the number of the then-outstanding
public shares, which redemption will completely extinguish public shareholders'
rights as shareholders (including the right to receive further liquidation
distributions, if any); and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining shareholders and the
board of directors, liquidate and dissolve, subject in the case of clauses (ii)
and (iii), to our obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable law.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through December 31, 2022 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below, the Company's search for a target business with which to
complete a Business Combination and activities in connection with the proposed
Transactions. We do not expect to generate any operating revenues until after
the completion of our initial Business Combination. We generate non-operating
income in the form of interest income on marketable securities. We are incurring
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses in
connection with completing a Business Combination.
For the year ended December 31, 2022, we had a net income of $15,306,093, which
consists of formation and operating costs of $1,390,712, gain on change in fair
value of derivative warrant liabilities of $15,080,000, income tax expense of
$223,754 and share-based compensation expenses of $690,592.
For the period from April 1, 2021 (inception) through year ended December 31,
2021, we had a net loss of $846,224, which consists of formation and operating
costs of $382,412, transaction costs allocated to derivative warrant liabilities
of $473,807, change in fair value of derivative warrant liabilities of $464,000
and share-based compensation expenses of $454,005.
Contractual Obligations
Registration Rights
The holders of founder shares, private placement warrants, Class A ordinary
shares underlying the private placement warrants and warrants that may be issued
upon conversion of Working Capital Loans (and any shares of Class A ordinary
shares issuable upon the exercise of the private placement warrants and warrants
that may be issued upon conversion of Working Capital Loans) are entitled to
registration rights pursuant to a registration rights agreement. The holders of
these securities are entitled to make up to three demands, excluding short form
demands, that we register such securities. These holders will be entitled to
certain demand and "piggyback" registration rights. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the final prospectus relating
to the initial public offering to purchase up to 3,000,000 additional units to
cover over-allotments, if any, at the initial public offering price less the
underwriting discounts and commissions. On December 7, 2021, the underwriters
fully exercised their over-allotment option.
Liquidity and Capital Resources
As of December 31, 2022, the Company had a working capital deficit of $560,174.
Of the net proceeds from the Initial Public Offering and associated Private
Placement, $234,600,000 of cash was placed in the Trust Account. Cash of
$2,504,134 was held outside of the Trust Account and was available for the
Company's working capital purposes. As of December 31, 2022, the Company had a
cash balance of $579,169 held outside of the Trust Account.
In order to finance transaction costs in connection with a Business Combination,
the Company's Sponsor, or an affiliate of the Sponsor or certain of the
Company's officers and directors may, but are not obligated to, provide the
Company Working Capital Loans. As of December 31, 2022, there were no amounts
outstanding under any Working Capital Loans.
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If the Company's estimates of the costs of identifying a target business,
undertaking in-depth due diligence and negotiating a Business Combination are
less than the actual amount necessary to do so, the Company may have
insufficient funds available to operate its business prior to an Initial
Business Combination. Moreover, the Company may need to obtain additional
financing either to complete an Initial Business Combination or because it
becomes obligated to redeem a significant number of its public shares upon
completion of an Initial Business Combination, in which case the Company may
issue additional securities or incur debt in connection with such Initial
Business Combination.
As a result of the above, in connection with the Company's assessment of going
concern considerations in accordance with Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," management has determined that the liquidity conditions raise
substantial doubt about the Company's ability to continue as a going concern
through June 7, 2023, the mandatory liquidation date. These unaudited condensed
financial statements do not include any adjustments relating to the recovery of
the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
Critical Accounting Policies and Estimates
Class A Ordinary Shares Subject to Possible Redemption
We account for Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) is
classified as a liability instrument and measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares 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
our control) is classified as temporary equity. At all other times, Class A
ordinary shares is classified as shareholders' equity. Our Class A ordinary
shares features certain redemption rights that are considered to be outside of
our control and subject to the occurrence of uncertain future events.
Accordingly, Class A ordinary shares subject to possible redemption is presented
as temporary equity, outside of the shareholders' equity section of the balance
sheet.
Net Income (Loss) Per Ordinary Shares
Net income (loss) per ordinary shares is computed by dividing net income (loss)
by the weighted-average number of ordinary shares outstanding during the
periods. For the year ended December 31, 2022, we have not considered the effect
of the warrants sold in our initial public offering and Private Placement to
purchase shares of Class A ordinary shares in the calculation of diluted
earnings per ordinary shares, since their inclusion is contingent on a future
event. For the period from April 1, 2021 (inception) through December 31, 2021,
their inclusion would be anti-dilutive under the treasury stock method. As a
result, diluted earnings per ordinary shares is the same as basic earnings per
ordinary shares for the periods presented.
The Company has two classes of shares, which are referred to as Class A ordinary
shares and Class B ordinary shares (the "Founder Shares"). Earnings are shared
pro rata between the two classes of shares as long as an Initial Business
Combination is consummated. Accretion associated with the redeemable shares of
Class A ordinary shares is excluded from earnings per share as the redemption
value approximates fair value.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
We issued 11,500,000 warrants to purchase Class A ordinary shares to investors
in our Initial Public Offering and issued 11,700,000 Private Placement Warrants.
All of our outstanding Warrants are recognized as derivative liabilities in
accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as
liabilities at fair value and adjust the instruments to fair value at each
reporting period. The liabilities are subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in our
statement of operations. The fair value of Warrants issued in connection with
the Initial Public Offering and Private Placement were initially measured at
fair value using a Monte Carlo simulation model.
The Class A ordinary shares and warrants comprising the units began separate
trading on the 52nd day following the date of the IPO. Holders have the option
to continue to hold units or separate their units into the component securities.
Holders will need to have their brokers contact our transfer agent in order to
separate the units into Class A ordinary shares and warrants. No fractional
warrants will be issued upon separation of the units and only whole warrants
will trade. Accordingly, unless you purchase a multiple of two units, the number
of warrants issuable to you upon separation of the units will be rounded down to
the nearest whole number of warrants.
Additionally, the units will automatically separate into their component parts
and will not be traded after completion of our initial business combination.
Recent Accounting Pronouncements
The Company's management does not believe that any recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the accompanying financial statement.
In August 2020, the FASB issued Accounting Standards Update No. 2020-06,
Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity, to reduce the
complexity of accounting for convertible debt and other equity-linked
instruments. For certain convertible debt instruments with a cash conversion
feature, the changes are a trade-off between simplifications in the accounting
model (no separation of an "equity" component to impute a market interest rate,
and simpler analysis of embedded equity features) and a potentially adverse
impact to diluted EPS by requiring the use of the if-converted method. The new
standard will also impact other financial instruments commonly issued by both
public and private companies. For example, the separation model for beneficial
conversion features is eliminated simplifying the analysis for issuers of
convertible debt and convertible preference shares. Also, certain specific
requirements to achieve equity classification and/ or qualify for the derivative
scope exception for contracts indexed to an entity's own equity are removed,
enabling more freestanding instruments and embedded features to avoid
mark-to-market accounting. The new standard is effective for companies that are
SEC filers (except for Smaller Reporting Companies) for fiscal years beginning
after December 15, 2021 and interim periods within that year, and two years
later for other companies. Companies can early adopt the standard at the start
of a fiscal year beginning after December 15, 2020. The standard can either be
adopted on a modified retrospective or a full retrospective basis. The Company
has adopted and the effects, if any, are immaterial to the Company's financial
statements.
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