References to the "Company," "our," "us" or "we" refer to SportsMap Tech
Acquisition Corp. The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with the
unaudited interim 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 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. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a blank check company incorporated as a Delaware corporation on May 14,
2021 and 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. We intend to consummate an initial
business combination using cash from the proceeds of our Public Offering (the
"Public Offering") that closed on October 21, 2021 (the "Closing Date") and the
Private Placement, and from additional issuances of, if any, our equity and our
debt, or a combination of cash, equity and debt.
Our sponsor is SportsMap, LLC, a Delaware limited liability company (the
"Sponsor"). The registration statement for our initial public offering was
declared effective on October 18, 2021.
Liquidity and Capital Resources
On October 21, 2021, we consummated our initial public offering (the "IPO") of
11,500,000 Units, including the full exercise of the underwriters'
over-allotment option to purchase 1,500,000 units, at a purchase price of $10.00
per Unit generating a profit of $115,000,000.
Simultaneously with the consummation of the IPO, we consummated the private
placement 675,000 units (the "Private Placement Units") at a price of $10.00 per
Private Placement Unit to the Sponsor and the representative of the underwriters
and/or certain of their designees or affiliates, generating gross proceeds to us
of $6,750,000.
Following the closing of the IPO on October 21, 2021, $117,300,000 ($10.20 per
Unit) from the net proceeds of the sale of Units in the IPO and a portion of the
proceeds of the sale of the Private Placement Units was deposited into a trust
account ("Trust Account") located in the United States with Continental Stock
Transfer & Trust Company acting as trustee, and will be invested only in U.S.
government treasury bills, notes or bonds with a maturity of 185 days or less or
in money market funds meeting certain conditions under Rule 2a-7 under the
Investment Company Act and which invest solely in U.S. Treasuries. Except as set
forth below, the proceeds held in the Trust Account will not be released until
the earlier of: (1) the completion of the initial Business Combination within
the required time period; (2) our redemption of 100% of the outstanding public
shares if we have not completed an initial Business Combination in the required
time period; and (3) the redemption of any public shares properly tendered 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 redemption of public shares as described in the IPO or redeem 100% of the
public shares if we do not complete the initial Business Combination within the
required time period or (B) with respect to any other provision relating to
stockholders' rights or pre-Business Combination activity.
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As of September 30, 2022, we had $347,671 in our operating bank account, and
working capital of $527,665, excluding taxes. Our liquidity needs through
September 30, 2022 were satisfied through a payment from the Sponsor of $25,000
for the Founder Shares to cover certain offering costs and the loan under an
unsecured promissory note from the Sponsor of up to $400,000. The outstanding
balance under the promissory note of $323,190 was paid in full on October 22,
2021 and the unsecured promissory note is no longer available to the Company. As
of September 30, 2022, no amounts were outstanding under the unsecured
promissory note.
After consummation of the IPO on October 21, 2021, we had $24,991 in its
operating bank account, and working capital of $1,463,454, which included
$2,150,000 of private placement proceeds receivable from the Sponsor which was
received into our operating bank account on October 22, 2021. 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
September 30, 2022, there were no amounts outstanding under any Working Capital
Loans.
Going Concern
We anticipate that the $347,671 held outside the trust account as of September
30, 2022 might not be sufficient to allow us to operate for at least 12 months
from the issuance of the financial statements, assuming that a business
combination is not consummated during that time. Until consummation of its
business combination, we will be using the funds not held in the Trust Account,
and any additional Working Capital Loans (as defined in Note 5) from the initial
shareholders, certain of our officers and directors (see Note 5), for
identifying and evaluating prospective acquisition candidates, performing
business due diligence on prospective target businesses, traveling to and from
the offices, plants or similar locations of prospective target businesses,
reviewing corporate documents and material agreements of prospective target
businesses, selecting the target business to acquire and structuring,
negotiating and consummating the business combination.
We can raise additional capital through Working Capital Loans from the initial
shareholders, certain of our officers, and directors (see Note 5), or through
loans from third parties. None of the sponsor, officers or directors are under
any obligation to advance funds to, or to invest in, us. If we are unable to
raise additional capital, we may be required to take additional measures to
conserve liquidity, which could include, but not necessarily be limited to,
curtailing operations, suspending the pursuit of our business plan, and reducing
overhead expenses. We cannot provide any assurance that new financing will be
available to us on commercially acceptable terms, if at all. These conditions
raise substantial doubt about our ability to continue as a going concern for a
reasonable period of time, which is considered to be one year from the issuance
date of the financial statements.
We have until April 20, 2023 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by that
date, which is less than 12 months from the issuance date of these financial
statements. If a Business Combination is not consummated by the required date,
there will be a mandatory liquidation and subsequent dissolution. In connection
with our assessment of going concern considerations in accordance with the
authoritative guidance in Financial Accounting Standards Board ("FASB")
Accounting Standards Update ("ASU") 2014-15, "Disclosure of Uncertainties About
an Entity's Ability to Continue as a Going Concern," we have determined that
mandatory liquidation, and subsequent dissolution, should we be unable to
complete a business combination, raises substantial doubt about our ability to
continue as a going concern for the next 12 months from the issuance of these
financial statements. No adjustments have been made to the carrying amounts of
assets and liabilities should we be required to liquidate after April 20, 2023.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and
Russia-Ukraine war and has concluded that while it is reasonably possible that
the virus and war could have a negative effect on our financial position,
results of our operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these unaudited condensed
financial statements. The unaudited condensed financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
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Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its shareholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair
market value of the shares repurchased at the time of the repurchase. However,
for purposes of calculating the excise tax, repurchasing corporations are
permitted to net the fair market value of certain new stock issuances against
the fair market value of stock repurchases during the same taxable year. In
addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the "Treasury") has been given authority to provide regulations and
other guidance to carry out and prevent the abuse or avoidance of the excise
tax.
Any redemption or other repurchase that occurs after December 31, 2022, in
connection with a Business Combination, extension vote or otherwise, may be
subject to the excise tax. Whether and to what extent we would be subject to the
excise tax in connection with a Business Combination, extension vote or
otherwise would depend on a number of factors, including (i) the fair market
value of the redemptions and repurchases in connection with the Business
Combination, extension or otherwise, (ii) the structure of a Business
Combination, (iii) the nature and amount of any "PIPE" or other equity issuances
in connection with a Business Combination (or otherwise issued not in connection
with a Business Combination but issued within the same taxable year of a
Business Combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by us
and not by the redeeming holder, the mechanics of any required payment of the
excise tax have not been determined. The foregoing could cause a reduction in
the cash available on hand to complete a Business Combination and in our ability
to complete a Business Combination.
Results of Operations
As of September 30, 2022, we had not commenced any operations. All activity for
the period from May 14, 2021 (inception) through September 30, 2022 relates to
our formation and the Initial Public Offering. We have neither engaged in any
operations nor generated any revenues to date. We will not generate any
operating revenues until after the completion of our initial Business
Combination, at the earliest. We will generate non-operating income in the form
of interest income on cash and cash equivalents from the proceeds derived from
the Initial Public Offering. We expect to incur increased expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had a net income of $184,106,
which consisted of interest earned on cash and securities held in Trust Account
of $541,215, offset by operating costs of $253,954 and provision for income
taxes of $103,155.
For the nine months ended September 30, 2022, we had a net loss of $133,014,
which consisted of $795,516 in operating costs and provision for income taxes of
$115,308, offset by interest earned on cash and securities held in Trust Account
of $777,810.
For the three months ended September 30, 2021, we had a net loss of $30 which
consists of formation and operating costs.
For the period from May 14, 2021 (inception) through September 30, 2021, we had
a net loss of $443 which consists of formation and operating costs.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
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Administrative Services Agreement
We entered into an administrative services agreement on October 18, 2021,
pursuant to which we will pay the Sponsor a total of $10,000 per month for
office space, utilities, secretarial support and other administrative and
consulting services. Upon completion of our initial Business Combination or our
liquidation, we will cease paying these monthly fees. At September 30, 2022 and
December 31, 2021, we had accrued $21,356 and $24,516, respectively, of
administrative service fees, net of payments made. For the three and nine months
ended September 30, 2022, the Company incurred $30,000 and $90,000 of
administrative service fees expense, respectively. For the period of three
months and for from May 14, 2021 (inception) through September 30, 2021, the
Company did not incur any fees for these services.
Registration Rights
Our initial stockholders and their permitted transferees can demand that we
register the founder shares, the Private Placement Units and the underlying
private shares and private warrants, and the units issuable upon conversion of
Working Capital Loans and the underlying common stock and warrants, pursuant to
an agreement to be signed prior to or on the date of the IPO. The holders of
such securities are entitled to demand that we register these securities at any
time after we consummate an initial Business Combination. Notwithstanding
anything to the contrary, any holder that is affiliated with an underwriter
participating in the IPO may only make a demand on one occasion and only during
the five-year period beginning on the commencement date of sales in the IPO. In
addition, the holders have certain "piggy-back" registration rights on
registration statements filed after our consummation of a Business Combination;
provided that any holder that is affiliated with an underwriter participating in
the IPO may participate in a "piggy-back" registration only during the
seven-year period beginning on the commencement date of sales in the IPO.
Underwriting Agreement
On October 21, 2021, we paid a cash underwriting discount of 2.0% per Unit, or
$2,300,000.
Business Combination Marketing Agreement
We have engaged the representative as an advisor in connection with the Business
Combination to assist it in holding meetings with its stockholders to discuss
the potential Business Combination and the target business' attributes,
introduce us to potential investors that are interested in purchasing its
securities in connection with the initial Business Combination, assist us in
obtaining stockholder approval for the Business Combination and assist us with
its press releases and public filings in connection with the Business
Combination. We will pay the representative a cash fee for such services upon
the consummation of the initial Business Combination in an amount equal to 3.5%
of the gross proceeds of the IPO, or $4,025,000 (exclusive of any applicable
finders' fees which might become payable).
Critical Accounting Policies
Offering Costs
We comply with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin ("SAB") Topic 5A - "Expenses of Offering". Offering costs consist of
underwriting, legal, accounting and other expenses incurred through the balance
sheet date that are directly related to the IPO. Offering costs are allocated to
the separable financial instruments to be issued in the IPO based on a relative
fair value basis, compared to total proceeds received. Offering costs directly
attributable to the issuance of an equity contract to be classified in equity
are recorded as a reduction of equity. Offering costs for equity contracts that
are classified as assets and liabilities are expensed immediately. Upon closing
of the IPO on October 21, 2021, offering costs associated with the common stock
and the warrants were charged to stockholders' equity. Transaction costs
amounted to $2,822,937, consisting of $2,686,076 which was charged to temporary
equity and $136,861 which was charged to additional paid-in capital.
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Common Stock Subject to Possible Redemption
We will account for our common stock subject to possible redemption in
accordance with the guidance in FASB ASC Topic 480 "Distinguishing Liabilities
from Equity." Common stock subject to mandatory redemption (if any) is
classified as a liability instrument and measured at fair value. Conditionally
redeemable common stock (including shares of common stock that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our Common stock will feature certain
redemption rights that are considered to be outside of our control and will be
subject to the occurrence of uncertain future events. Accordingly, common stock
subject to possible redemption will be presented at redemption value as
temporary equity, outside of the stockholders' equity section of our condensed
balance sheets.
Net Income (Loss) Per Common Stock
We comply with the accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net income (loss) per common stock is computed by dividing
net loss by the weighted average number of shares of common stock outstanding
during the period. At September 30, 2022, we did not have any dilutive
securities and other contracts that could, potentially, be exercised or
converted into common stock and then share in our earnings. As a result, diluted
loss per common stock is the same as basic income (loss) per common stock for
the period presented.
Warrants
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities
from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to our own common
stock and whether the warrant holders could potentially require "net cash
settlement" in a circumstance outside of our control, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all of the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. We account for our outstanding
warrants as equity-classified instruments.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40) ("ASU 2020-06"), which simplifies the accounting for
convertible instruments. The guidance removes certain accounting models that
separate the embedded conversion features from the host contract for convertible
instruments. ASU 2020-06 allows for a modified or full retrospective method of
transition. For smaller reporting companies, this update is effective for fiscal
years beginning after December 15, 2023, and interim periods within those fiscal
years. Early adoption is permitted. We are currently evaluating the impact this
change will have on our financial statements.
Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2022 and December 31, 2021, we did not have any off-balance
sheet arrangements.
Inflation
We do not believe that inflation had a material impact on our business, revenues
or operating results during the period presented.
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Emerging Growth Company Status
We are an "emerging growth company," as defined in Section 2(a) of the
Securities Act of 1933, as amended, (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 our 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. We have 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, us, 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
our 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.
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