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.
The registration statement for our IPO was declared effective on February 16,
2021. On February 19, 2021, we consummated the IPO of 17,250,000 units
(including 2,250,000 units issued to the Underwriters pursuant to the exercise
in full of the over-allotment option granted to the Underwriters) ("Units" and,
with respect to the Class A common stock included in the Units being offered,
the "Public Shares"), at $10.00 per Unit, generating gross proceeds of $172.5
million, and incurring offering costs of approximately $10.3 million, inclusive
of approximately $6.0 million in deferred underwriting commissions.
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.
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If we have not completed a Business Combination within 24 months from the
closing of the IPO, 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.
Results of Operations
For the three months ended June 30, 2022, we had net income of $1,993,184, which
included a gain from the change in fair value of warrant liabilities of
$2,186,250, interest earned on investments held in trust of $36,514, and a loss
from operations of $229,580. For the six months ended June 30, 2022, we had net
income of $7,709,229, which included a gain from the change in fair value of
warrant liabilities of $8,214,348, interest earned on investments held in trust
of $79,668, and a loss from operations of $584,787.
For the three months ended June 30, 2021, we had net income of $5,339,621, which
included a gain from the change in fair value of warrant liabilities of
$6,353,699 offset by a loss from operations of $1,022,177. For the six months
ended June 30, 2021, we had a net income of approximately $2,441,390, which
included a gain from the change in fair value of warrant liabilities of
$4,104,986, offset by a loss from operations of $1,068,770, and offering cost
expense allocated to warrants of $606,375.
Our business activities from inception to June 30, 2022 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.
Liquidity and Capital Resources
As of June 30, 2022, the Company had $9,936 in its operating bank account, and a
working capital deficit of $744,219.
The Company's liquidity needs up to February 19, 2021 were 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 $176,000. The
promissory note from the Sponsor was paid in full as of February 22, 2021.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, our sponsors or an affiliate of our
sponsors or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required ("Working Capital Loans"). Such Working Capital
Loans would be evidenced by promissory notes. If we complete a business
combination, we may repay the notes out of the proceeds of the Trust Account
released to us. In the event that a business combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay the
notes, but no proceeds from our Trust Account would be used for such repayment.
On March 16, 2022, we issued a promissory note in the principal amount of up to
$1,000,000 to the sponsor. The note is non-interest bearing and payable upon the
consummation of a business combination or may be convertible into warrants of
the post-business combination entity at the option of the sponsor at a price of
$1.00 per warrant. The warrants would be identical to the private placement
warrants. As of June 30, 2022, we had borrowed $163,300 under such Working
Capital Loans.
If the Company does not consummate an initial business combination by February
19, 2023, there will be a mandatory liquidation and subsequent dissolution of
the Company. Management has determined that this mandatory liquidation, should
an initial business combination not occur, and potential subsequent dissolution
raises substantial doubt about the Company's ability to continue as a going
concern.
Contractual Obligations
As of June 30, 2022, 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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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
We evaluated the Public Warrants and Private Placement Warrants (collectively,
"Warrants") 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 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 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 and are presented as non-operating
expenses in the statement of operations. Offering costs associated with the
Class A common stock were charged to temporary equity upon the completion of the
Initial Public Offering.
Common Stock Subject to Possible Redemption
All of the 17,250,000 Class A Common Stock sold as part of the Units in the
Public Offering contain a redemption feature which allows for the redemption of
such public shares in connection with the Company's liquidation, if there is a
stockholder vote or tender offer in connection with the Business Combination and
in connection with certain amendments to the Company's second amended and
restated certificate of incorporation. In accordance with SEC and its staff's
guidance on redeemable equity instruments, which has been codified in ASC
480-10-S99, redemption provisions not solely within the control of the Company
require common stock subject to redemption to be classified outside of permanent
equity. Ordinary liquidation events, which involve the redemption and
liquidation of all of the entity's equity instruments, are excluded from the
provisions of ASC 480. Accordingly, at June 30, 2022 and December 31, 2021, all
shares of Class A common stock subject to possible redemption is presented as
temporary equity, outside of the stockholders' deficit section of the Company's
balance sheets, respectively.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable common stock are affected by charges against
additional paid in capital and accumulated deficit.
Net Income Per Common Share
The Company has two classes of shares, Class A Common Stock and Class B Common
Stock. Earnings and losses are shared pro rata between the two classes of
shares. 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. As a result, diluted net
income per common share is the same as basic net income per common share for the
periods.
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Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 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) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 was effective January 1, 2022 and is applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company does not believe that ASU 2020-06 has a material impact on its
financial position, results of operations or cash flows.
Our management does not believe that any other 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 June 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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