References to the "Company," "our," "us" or "we" refer to SportsTek Acquisition
Corp. The following discussion and analysis of our 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.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K 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-K. 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.
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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.
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 year ended December 31, 2021, we had a net income of approximately $4.9
million, which included a gain from the change in fair value of warrant
liabilities of $7.3 million and a loss from operations of $1.8 million. From
inception (December 7, 2020) to December 31, 2020, we had a net loss of $567.
Our business activities from inception (December 7, 2020) through December 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.
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Liquidity and Capital Resources
As of December 31, 2021, the Company had approximately $0.3 million in its
operating bank account and working capital deficiency of approximately $0.2
million. At December 31, 2020, the Company had approximately $0.2 million in
its operating bank account and a working capital deficiency of $0.2 million.
The Company's liquidity needs up to December 31,2021 were satisfied through a
capital contribution from the Sponsor of $25,000 for the Founder Shares, the
loan under an unsecured promissory note from the Sponsor of $176,000 and funds
that were not deposited in the Trust Account from the Private Placement
Warrants. The promissory note from the Sponsor was paid in full as of February
22, 2021.
The Company has 24 months from the closing of the IPO (up to February 19, 2023)
to complete an initial Business Combination. 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. Further, the Company has a working capital
deficiency at December 31, 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 March 21, 2022, we had borrowed $163,300 under such promissory
note.
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 December 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 financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these 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 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.
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Derivative 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 Sheets 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
Statements 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
derivative warrant liabilities are expensed as incurred, presented as
non-operating expenses in the statements 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 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 sheet.
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 (Loss) Per Common Stock
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 (loss) per share, since they are not yet exercisable. As a result,
diluted net income (loss) per common stock is the same as basic net income
(loss) per common stock for the period.
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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 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06
would have 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 financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2021, 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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