References to the "Company, "our," "us" or "we" refer to Sports Entertainment
Acquisition Corp. 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
report. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and uncertainties.
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In this Amendment No. 3 ("Amendment No. 3") to the Annual Report on Form 10-K of
Sports Entertainment Acquisition Corp. (the "Company") for the period ended
December 31, 2020, we are restating (i) our audited balance sheet as of October
6, 2020, as previously revised in the 2020 Form 10-K/A No. 2, (ii) audited
financial statements as previously revised in the 2020 Form 10-K/A No. 2.
We have re-evaluated our application of ASC 480-10-S99-3A to our accounting and
classification of the Public Shares, issued as part of the units sold in the IPO
on October 6, 2020. Historically, a portion of the Public Shares was classified
as permanent equity to maintain stockholders' equity greater than $5 million on
the basis that we will not redeem our Public Shares in an amount that would
cause our net tangible assets to be less than $5,000,001, as described in the
Charter. Pursuant to such re-evaluation, our management has determined that the
Public Shares include certain provisions that require classification of all of
the Public Shares as temporary equity regardless of the net tangible assets
redemption limitation contained in the Articles. In addition, in connection with
the change in presentation for the Public Shares, management determined it
should restate earnings per share calculation to allocate income and losses
shared pro rata between the two classes of shares. This presentation
contemplates a Business Combination as the most likely outcome, in which case,
both classes of shares share pro rata in the income and losses of our Company.
Therefore, on November 23, 2021, our management and the Audit Committee
concluded that our previously issued (i) audited balance sheet as of October 6,
2020, as previously revised in the 2020 Form 10-K/A No. 2, (ii) audited
financial statements as previously revised in the 2020 Form 10-K/A No. 2, (iii)
unaudited interim financial statements included in our Quarterly Report on Form
10-Q for the quarterly period ended March 31, 2021, filed with the SEC on June
25, 2021 and (iv) unaudited interim financial statements included in our
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021,
filed with the SEC on August 16, 2021, should be restated to report all Public
Shares as temporary equity and calculate earnings per share by allocating income
and losses pro-rata for each class of common stock and should no longer be
relied upon. As such, the Company is restating the 2020 periods herein and
intends to restate its 2021 interim financial statements for the Affected
Periods in its amended quarterly report on Form 10-Q for the period ended
September 30, 2021.
The restatement does not have an impact on our cash position and cash held in
the Trust Account.
Our management has concluded that in light of the classification error described
above, a material weakness exists in our internal control over financial
reporting and that our disclosure controls and procedures were not effective.
In connection with the restatement, our management reassessed the effectiveness
of our disclosure controls and procedures for the periods affected by the
restatement. As a result of that reassessment, we determined that our disclosure
controls and procedures for such periods were not effective with respect to our
internal controls around the proper accounting and classification of complex
financial instruments. For more information, see Item 9A included in this Annual
Report on Form 10-K.
We have not amended our previously filed Quarterly Report on Form 10-Q for the
period affected by the restatement or our previously filed balance sheet, dated
October 6, 2020, on Form 8-K. The financial information that has been previously
filed or otherwise reported for these periods is superseded by the information
in this Amendment No. 3, and the financial statements and related financial
information contained in such previously filed reports should no longer be
relied upon.
The restatement is more fully described in Note 2 of the notes to the financial
statements included herein.
Overview
We are a blank check company formed under the laws of the State of Delaware on
July 30, 2020 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 (the "Business Combination"). 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 (as
defined below), our capital stock, debt or a combination of cash, stock and
debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Recent Developments
On April 23, 2021, we entered into a Business Combination Agreement (as it may
be amended, supplemented or otherwise modified from time to time, the "Business
Combination Agreement"), by and among the Company, the Sponsor, SGHC Limited, a
non-cellular company limited by shares incorporated under the laws of Guernsey,
Super Group (SGHC) Limited, a non-cellular company limited by shares
incorporated under the laws of the Island of Guernsey ("NewCo"), Super Group
(SGHC) Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of
NewCo.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from July 30, 2020 (inception) through December 31, 2020
were organizational activities, execution of the Initial Public Offering,
described below, and identifying a target for a Business Combination. We do not
expect to generate any operating revenues until after the completion of our
Business Combination at the earliest. We generate non-operating income in the
form of interest income on marketable securities held since the Initial Public
Offering. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
As a result of the restatement described in Note 2 of the notes to the financial
statements included herein, we classify the Warrants issued in connection with
our Initial Public Offering as liabilities at their fair value and adjust the
warrant instrument to fair value at each reporting period. This liability is
subject to re-measurement at each balance sheet date until exercised, and any
change in fair value is recognized in our statement of operations.
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For the period from July 30, 2020 (inception) through December 31, 2020, we had
a net loss of $16,296,019, which consists of operating costs of $203,809,
changes in fair value of warrant liability of $15,007,134 and transaction costs
allocated to the warrant liabilities of $1,152,775, offset by interest earned on
marketable securities held in the Trust Account of $67,699.
Liquidity and Capital Resources
On October 6, 2020, we consummated the Initial Public Offering of 40,000,000
Units at a price of $10.00 per Unit, generating gross proceeds of $400,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 10,000,000 Private Placement Warrants at a price of $1.00 per
Private Placement Warrant in a private placement to our Sponsor and an affiliate
of PJT Partners LP, generating gross proceeds of $10,000,000.
On October 15, 2020, the Company issued an additional 5,000,000 Units issued for
total gross proceeds of $50,000,000 in connection with the underwriters' partial
exercise of their over-allotment option. Simultaneously with the partial closing
of the over-allotment option, we also consummated the sale of an additional
1,000,000 Private Placement Warrants at $1.00 per Private Placement Warrant,
generating total proceeds of $1,000,000. A total of $450,000,000 was placed in
the Trust Account. We incurred $25,318,504 in transaction costs, including
$9,000,000 of underwriting fees, $15,750,000 of deferred underwriting fees and
$568,504 of other offering costs.
For the period from July 30, 2020 (inception) through December 31, 2020, cash
used in operating activities was $385,100. Net loss of $16,296,019 was affected
by changes in fair value of warrant liability of $15,007,134, transaction costs
allocated to the warrant liabilities of $1,152,775, interest earned on
marketable securities held in the Trust Account of $67,699 and changes in
operating assets and liabilities, which used $181,291 of cash from operating
activities.
As of December 31, 2020, we had cash and marketable securities held in the Trust
Account of $450,067,699. We intend to use substantially all of the funds held in
the Trust Account, including any amounts representing interest earned on the
Trust Account, to complete our Business Combination. We may withdraw interest to
pay franchise and income taxes. During the period ended December 31, 2020, we
did not withdraw any interest earned on the Trust Account. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies.
As of December 31, 2020, we had cash of $1,087,876 outside of the Trust Account.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
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In order to fund working capital deficiencies or 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,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts 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 such
loaned amounts, but no proceeds from our Trust Account would be used for such
repayment. Up to $2,000,000 of such loans may be convertible into warrants, at a
price of $1.00 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants. There is no such loan outstanding
as of December 31, 2020.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate 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, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our Business Combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until October 6, 2022 to
consummate the proposed Business Combination. If a business combination is not
consummated by this date, there will be a mandatory liquidation and subsequent
dissolution of the Company. Management has determined that the mandatory
liquidation, should a business combination not occur, and potential subsequent
dissolution, raises substantial doubt about the Company's ability to continue as
a going concern. No adjustments have been made to the carrying amounts of assets
or liabilities should the Company be required to liquidate after October 6,
2022. The Company intends to complete the proposed Business Combination before
the mandatory liquidation date. However, there can be no assurance that the
Company will be able to consummate any business combination by October 6, 2022.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2020. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay the Sponsor
a monthly fee of $10,000 for office space, secretarial and administrative
support services provided to the Company. We began incurring these fees on
October 1, 2020 and will continue to incur these fees monthly until the earlier
of the completion of a Business Combination and the Company's liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$15,750,000 in the aggregate. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
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Warrant Liability
We account for the Warrants in accordance with the guidance contained in ASC
815-40 under which the Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the Warrants as
liabilities at their fair value and adjust the Warrants to fair value at each
reporting period. This liability is 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 Private Placement Warrants and the Public Warrants
for periods where no observable traded price was available are valued using a
Monte Carlo simulation. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the
fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Shares of common stock subject to
mandatory redemption are classified as liability instruments and are measured at
fair value. Conditionally Class A redeemable common stock (including common
stock that feature redemption rights that is 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 Class A common
stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
all of the shares of Class A common stock subject to possible redemption are
presented as temporary equity, outside of the stockholders' equity section of
our balance sheet.
Net Loss per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding for the
period. Income and losses are shared pro rata between the two classes of common
stock. The Company applies the two-class method in calculating earnings per
share. Accretion associated with the redeemable shares of Class A common stock
is excluded from earnings per share as the redemption value approximates fair
value..
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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