UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
Commission File No.
| (Exact name of registrant as specified in its charter) |
| N/A | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one Class A Ordinary Share and one-third of one Redeemable Warrant | AKICU | The NASDAQ Stock Market LLC | ||
| Warrants, each whole Warrant exercisable for one Class A Ordinary Share for $11.50 per share | AKICW | The NASDAQ Stock Market LLC |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of May 16,
2022, there were
SPORTS VENTURES ACQUISITION CORP.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
i
Item 1. Financial Statements.
SPORTS VENTURES ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| March 31, 2022 | December 31,
2021 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Commitments and Contingencies, and Shareholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and offering costs | $ | $ | ||||||
| Due to related parties | ||||||||
| Total current liabilities | ||||||||
| Derivative warrant liabilities | ||||||||
| Deferred underwriting discount | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A ordinary shares subject to possible redemption, $ | ||||||||
| Shareholders’ Deficit | ||||||||
| Preference shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Commitments and Contingencies, and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
SPORTS VENTURES ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | |||||||
| Operating costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest earned on cash and investments held in Trust Account | ||||||||
| Offering costs allocated to warrant liabilities | ( | ) | ||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Total other income (expense), net | ( | ) | ||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Basic and diluted weighted average shares outstanding of Class A ordinary shares | ||||||||
| Basic and diluted net income (loss) per share, Class A ordinary shares | $ | ( | ) | $ | ||||
| Basic and diluted weighted average shares outstanding of Class B ordinary shares | ||||||||
| Basic and diluted net income (loss) per share, Class B ordinary shares | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
SPORTS VENTURES ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022
| Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance — January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance — March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2021
| Class A | Class B | Additional | Total | |||||||||||||||||||||||||
| Ordinary Shares | Ordinary Shares | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Sale of | — | |||||||||||||||||||||||||||
| Accretion of Class A ordinary shares subject to redemption | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
SPORTS VENTURES ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended March 31, | For the Three Months Ended March 31, | |||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest earned on cash and investments held in Trust Account | ( | ) | ( | ) | ||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Offering costs allocated to warrant liabilities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash invested in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of Units, net of underwriting commissions | ||||||||
| Proceeds from issuance of Private Placement Units | ||||||||
| Borrowings from related party | ||||||||
| Payment of borrowings from related party | ( | ) | ||||||
| Proceeds from note payable-related party | ||||||||
| Payment of note payable-related party | ( | ) | ||||||
| Payment of underwriter discount | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ||||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Deferred underwriting commissions payable charged to additional paid-in capital | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
SPORTS VENTURES ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
Note 1 — Organization and Business Operations
Organization and General
Sports Ventures Acquisition Corp. (the “Company”) was incorporated as a Cayman Islands exempted company on September 24, 2020. The Company was incorporated 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”).
The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2022, the Company had not commenced any operations. All activity for the period from September 24, 2020 (inception) through March 31, 2022 relates to the Company’s formation and the initial public offering (“IPO”), which is described below and since the IPO, searching for a target to complete its Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on investments in the Company’s Trust Account and recognizes changes in the fair value of the derivative warrant liabilities as other income (expense).
On January 25, 2022, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with Prime Focus World N.V., a public limited liability company incorporated in the Netherlands (“Prime Focus World”), PF Overseas Limited, a limited liability company incorporated in Mauritius, Prime Focus 3D Cooperatief U.A., a Dutch cooperative association and the Sponsor (see Note 7).
The Company’s sponsor is AKICV LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement
for the Company’s IPO was declared effective January 5, 2021 (the “Effective Date”). On January 8, 2021, the Company
consummated its IPO of
Simultaneously with the closing
of the IPO, pursuant to the Unit Subscription Agreement, the Company completed the private sale of
On January 25, 2022, the
Company, Prime Focus World and the Sponsor entered into the Backstop Agreement (the “Backstop Agreement”), pursuant to which,
among other things, the Sponsor has committed to utilize the Sponsor’s reasonable commercial efforts to consummate the Common Equity
Financing (as defined in the Business Combination Agreement) and committed to purchase the Company’s Class A Ordinary Shares in
the Backstop Subscription at the Closing Stock Price solely for purposes of consummating the transactions contemplated hereby in an aggregate
amount up to $
On January 25, 2022, concurrently
with the execution of the Business Combination Agreement, the Company entered into subscription agreements (the “Subscription Agreements”)
on substantially two forms with certain institutional and private investors (collectively, the “PIPE Investors”). The PIPE
Investors have collectively subscribed at a purchase price of $
Trust Account
Following the closing of
the IPO on January 8, 2021, $
5
Initial Business Combination
The Company will provide
its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business
Combination either (i) in connection with a shareholder meeting called to approve the initial Business Combination or (ii) by
means of a tender offer, if the Prime Focus Business Combination is not consummated. The decision as to whether the Company will seek
shareholder approval of a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion.
The shareholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially
approximately $
The Company’s Business
Combination must be with one or more target businesses that together have a fair market value equal to at least
The Company will have until
January 8, 2023 to consummate a Business Combination (the “Combination Period”). However, if the Company is unable to complete
a Business Combination within the Combination Period, the Company will redeem
The Company’s Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed (i) to waive their redemption rights with respect to their founder shares and public shares in connection with the completion of the initial Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company fails to complete its initial Business Combination by January 8, 2023 (although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete the initial Business Combination within the prescribed time frame).
The Sponsor has agreed
that it will be liable to the Company if and to the extent any claims by a third-party (other than the Company’s independent auditors)
for services rendered or products sold to us, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the trust account to below (i) $
Liquidity, Capital Resources and Going Concern
As of March 31, 2022, the
Company had cash outside the Trust Account of $
Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and may use Working Capital Loans (as defined in Note 5) from the Sponsor, the Company’s officers and directors, or their respective affiliates (which is described in 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.
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating the Business Combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the Business Combination. Moreover, the Company will need to raise additional capital through loans from its Sponsor, officers, directors, or third parties. None of the Sponsor, officers or directors are under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it 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 its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
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,” management has determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until January 8, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 8, 2023.
6
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 1, 2022, which contains the audited financial statements and notes thereto. The interim results for the three months ended March 31, 2022 is not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder 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. The Company has 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, the Company, 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 the Company’s 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.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the derivative warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Investments Held in Trust Account
The Company’s portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income from investments held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information
Offering Costs Associated with IPO
The Company complies with
the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A—“Expenses of Offering”.
Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the
IPO. Offering costs amounted to $
7
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for
its 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 liability instruments and are
measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares 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 the
Company’s control) is classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’
equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021,
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period.
At March 31, 2022 and December 31, 2021, the Class A ordinary shares reflected in the condensed balance sheet is reconciled in the following table:
| Gross proceeds from IPO | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Class A ordinary share issuance costs | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Contingently redeemable Class A ordinary shares | $ |
Income Taxes
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
Net Income (Loss) Per Ordinary Share
The Company has two classes
of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between
the two classes of shares. The
| For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, (excluding the warrant liability) which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheets primarily due to their short-term nature.
8
Derivative Warrant Liabilities
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. The Company’s derivative instruments are recorded at fair value as of the IPO (January 8, 2021) and re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument. As the warrants meet the definition of a derivative, the warrants are measured at fair value at issuance 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. In accordance with ASC 825-10 “Financial Instruments”, the Company has concluded that a portion of the transaction costs which directly related to the IPO and the Private Placement, which were previously charged to shareholders’ equity, should be allocated to the Warrants based on their relative fair value against total proceeds, and recognized as transaction costs in the statements of operations.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company’s results of operations and ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond the Company’s control. The Company’s business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. The Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and the Company’s ability to complete an initial business combination.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the IPO, the
Company sold
All of the
If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately as they occur. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable ordinary shares resulted in charges against additional paid-in capital and accumulated deficit.
9
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing
of the IPO, the Sponsor purchased an aggregate of
Each Private Placement Unit was identical to the Units sold in the IPO, except for the Class A shares in these units which are non-redeemable and the Private Placement Warrants (see Note 9). If the Company does not complete its initial Business Combination by January 8, 2023, the proceeds from the sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of its public shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
In October 2020, the Company
issued
The Sponsor has agreed not to transfer, assign or sell any of their founder shares until the earliest of (a) one year after the completion of an initial Business Combination and (b) subsequent to the initial Business Combination, (x) if the closing price of the Company’s Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of its public shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Administrative Service Fee
The Company has agreed, commencing
on January 6, 2021, to pay the Sponsor or its affiliate a monthly fee of an aggregate of $
Promissory Note — Related Party
On October 5, 2020, the Company
issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $
Due to Related Parties
At March 31, 2022 and December
31, 2021, the Company owed $
Related Party Loans
In order to finance transactions
costs in connection with a Business Combination, post the Company’s IPO, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company
completes a Business Combination, the Company would repay the working capital loans. In the event that a Business Combination does not
close, the Company may use a portion of proceeds held outside the Trust Account to repay the working capital loans but no proceeds held
in the Trust Account would be used to repay the working capital loans. Up to $
NOTE 6 — RECURRING FAIR VALUE MEASUREMENTS
Investments Held in Trust Account
As of March 31, 2022 and
December 31, 2021, the investments in the Company’s Trust Account consisted of $
Fair values of the Company’s investments in the Trust Account are classified as Level 1 utilizing quoted prices (unadjusted) in active markets for identical assets.
10
Derivative Warrant Liabilities
At March 31, 2022 and December
31, 2021, the Company’s warrant liability was valued at $
Recurring Fair Value Measurements
Since all of the Company’s permitted investments consist of U.S. Money Market funds, fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.
The Company’s Public Warrants liability is based on unadjusted quoted prices in an active market for identical assets or liabilities that the Company has the ability to access. The Company’s Private Placement Warrants are economically equivalent to the Company’s Public Warrants. For the period ending March 31, 2021 the Public Warrants were reclassified from a Level 3 to a Level 1 classification.
The following table presents fair value information as of March 31, 2022 and December 31, 2021 of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| March 31, | December 31, | |||||||||||
| Description | Level | 2022 | 2021 | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust – U.S. Money Market | 1 | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Public Warrants | 2 | $ | $ | |||||||||
| Private Placement Warrants | 2 | $ | $ | |||||||||
The following table provides a reconciliation of changes in fair value of the beginning and ending balances for our Warrants classified as Level 3:
| Fair value at December 31, 2020 | $ | |||
| Initial value at January 8, 2021 | ||||
| Public Warrants reclassified to level 1 (1) | ( | ) | ||
| Change in fair value | ( | ) | ||
| Fair Value at March 31, 2021 | $ |
| (1) |
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the (i) founder shares, which were issued in a private placement prior to the closing of the IPO, (ii) Private Placement Warrants which were issued in a private placement simultaneously with the closing of the IPO and the Class A ordinary shares underlying such Private Placement Warrants and (iii) Private Placement Warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters
a 45-day option from the date of the prospectus to purchase up to an additional
On January 8, 2021, the Company
paid a fixed underwriting discount of $
11
Business Combination Agreement
On January 25, 2022, the Company entered into a Business Combination Agreement with Prime Focus World N.V., a public limited liability company incorporated in the Netherlands, PF Overseas Limited, a limited liability company incorporated in Mauritius, Prime Focus 3D Cooperatief U.A., a Dutch cooperative association and the Sponsor.
Backstop Agreement
On January 25, 2022, the
Company, Prime Focus World and Sponsor entered into the Backstop Agreement, pursuant to which, among other things, the Sponsor has committed
to utilize the Sponsor’s reasonable commercial efforts to consummate the Common Equity Financing (as defined in the Business Combination
Agreement) and committed to purchase all of the Company’s Class A Ordinary Shares in the Backstop Subscription at the Closing Stock
Price solely for purposes of consummating the transactions contemplated hereby in an aggregate amount up to $
Subscription Agreement
On January 25, 2022, concurrently with the execution
of the Business Combination Agreement, the Company entered into subscription agreements on substantially two forms with PIPE Investors.
The PIPE Investors have collectively subscribed at a purchase price of $
NOTE 8 — SHAREHOLDERS’ DEFICIT
Preference Shares
— The Company is authorized to issue
Class A Ordinary Shares—The
Company is authorized to issue
Class B Ordinary Shares—The
Company is authorized to issue
Class A ordinary shareholders and Class B ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders and vote together as a single class, except as required by law; provided, that holders of the Class B ordinary shares will have the right to appoint all of the Company’s directors prior to the initial Business Combination and holders of the Class A ordinary shares will not be entitled to vote on the appointment of directors during such time.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination on a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like.
NOTE 9 — WARRANTS
At March 31, 2022 and December
31, 2021, there were
Each whole warrant entitles
the holder to purchase one share of the Company’s Class A ordinary shares at a price of $
12
The warrants will become
exercisable on the later of January 8, 2022 or 30 days after the completion of its initial Business Combination, and will expire
The Company will not be obligated to deliver any shares of Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A ordinary shares underlying the warrants is then effective and a prospectus is current. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A ordinary shares upon exercise of a warrant unless Class A ordinary shares issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A ordinary shares underlying such unit.
Once the warrants become exercisable, the Company may call the warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and |
The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
If the Company calls the warrants for redemption as described above, the Company will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” If the Company takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A ordinary shares equal to the quotient obtained by dividing (x) the product of the number of shares of Class A ordinary shares underlying the warrants, multiplied by the excess of the “fair market value” over the exercise price of the warrants by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the financial statements were issued. Based upon this review the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this quarterly report on Form 10-Q (the “Report”) to “we,” “us” or the “Company” refer to Sports Ventures Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to AKICV LLC. 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 Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s our final prospectus dated January 5, 2021, our Quarterly Report filed on Form 10-Q with the SEC on June 10, 2021 and the Amendment No. 1 to our Quarterly Report on Form 10-Q/A, filed with the SEC on February 3, 2022, respectively. For additional risks relating to Prime Focus World and the Prime Focus Business Combination, see the proxy statement to be filed by the Company in connection with shareholder approval of the Prime Focus Business Combination. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Prime Focus Business Combination (as defined below), Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
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 Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Recent Developments
On January 25, 2022, we entered into a business combination agreement with Prime Focus World N.V., a public limited liability company incorporated in the Netherlands (“Prime Focus World”), PF Overseas Limited, a limited liability company incorporated in Mauritius (“PF Overseas”), Prime Focus 3D Cooperatief U.A., a Dutch cooperative association (“Prime Focus 3D”) and our sponsor (the “Prime Focus Business Combination Agreement”). The Prime Focus Business Combination Agreement provides that, upon the terms and subject to the conditions thereof, the following transactions will occur as part of the business combination contemplated by the Prime Focus Business Combination Agreement (the “Prime Focus Business Combination”): (i) the Company and the stockholders of Prime Focus World will consummate the transfer of all of the ordinary and preferred shares of Prime Focus World to the Company in exchange for Class A ordinary shares (the “Prime Focus Company Exchange”), pursuant to which the Company will acquire from the Prime Focus World stockholders, and the Prime Focus World stockholders will transfer, convey and deliver to the Company, all of the ordinary and preferred shares of Prime Focus World issued and outstanding as of immediately prior to the Prime Focus Company Exchange, and each Prime Focus World stockholder shall receive, in consideration for such transfer, conveyance and delivery of each Prime Focus World share, a number of Class A ordinary shares equal to such Prime Focus World stockholder’s portion of the consideration to which such Prime Focus World stockholder is entitled in accordance with the Business Combination Agreement and (ii) effective as of the time of the Prime Focus Company Exchange, any outstanding options to purchase Prime Focus World shares shall be exchanged for options to purchase Class A ordinary shares of the Company, as further described in the Prime Focus Business Combination Agreement.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. The only activities through March 31, 2022 were organizational activities and following the initial public offering activities necessary to identifying a target company for and consummating an initial business combination, including the Prime Focus Business Combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generated and will continue to generate non-operating income in the form of interest income on marketable securities held in the trust account (the “Trust Account”) and will recognize unrealized gains or losses from changes in the fair values of our warrant liability. We incurred and will continue to 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.
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For the three months ended March 31, 2022, we had a net loss of $6,858,389 which consisted of general and administrative expense of $2,226,734 and unrealized loss of $4,653,524 from the change in the fair value of our derivative warrant liabilities, partially offset by interest earned on our investments of $21,869.
For the three months ended March 31, 2021, we had net income of $3,912,412 which consisted of an unrealized gain of $4,732,278 from the change in the fair value of our derivative warrant liabilities and interest earned on our investments of $10,410, partially offset by general and administrative expense of $172,274 and transaction costs associated with the derivative warrant liabilities of $658,002.
Liquidity and Capital Resources
On January 8, 2021, we consummated an initial public offering of 23,000,000 units at $10.00 per public unit, at $10.00 per public unit, generating gross proceeds of $230,000,000. Simultaneously with the closing of our initial public offering, we consummated the sale of 660,000 placement units, at a price of $10.00 per placement unit. Each placement unit consists of one Class A ordinary share, and one-third redeemable warrant, each whole warrant entitling the holder to purchase one Class A ordinary share at a price of $11.50 per share, generating gross proceeds of $6,600,000.
Following the closing of our initial public offering on January 8, 2021, $230,000,000 ($10.00 per Unit) from the net offering proceeds of the sale of the Units in our initial public offering and the sale of the placement units was placed in the Trust Account and invested in U.S. government securities.
As of March 31, 2022, we had investments held in the Trust Account of $230,048,446 consisting of money market funds. Income on the balance in the Trust Account may be used to pay taxes. Through March 31, 2022, we did not withdraw any interest earned on the Trust Account to pay our taxes.
As of March 31, 2022, we had cash outside the Trust Account of $140,948 available for working capital needs. All remaining cash held in the Trust Account is generally unavailable for use, prior to an initial business combination, and is restricted for use either in an initial business combination, pay tax obligations or to redeem ordinary shares.
Until consummation of an initial business combination, we will be using the funds not held in the Trust Account, and any additional working capital loans from the initial shareholders, our officers and directors, or their respective affiliates, 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 initial business combination.
For the three months ended March 31, 2022, cash used in operating activities was $329,527. Net loss of $6,858,389 was impacted by an unrealized non-cash loss on the change in the fair value of our warrant liability of $4,653,524, net increases in operating assets and liabilities of $1,897,207 and interest earned on our Trust Account of $21,869.
For the three months ended March 31, 2021, cash used in operating activities was $859,017. Net income of $3,912,412 was impacted by an unrealized non-cash gain on the change in the fair value of our warrant liability of $4,732,278, net decrease in operating assets and liabilities of $686,743 and interest earned on our Trust Account of $10,410, partially offset by transaction costs allocated to the warrant liability of $658,002.
With funds raised from our initial public offering, we invested $230,000,000 as our investing activities.
We raised $231,571,844 from financing activities, primarily related to the initial public offering. Amounts included $229,566,057 proceeds from the sale of our public units, net of offering costs from our initial public offering and $6,600,000 proceeds from the issuance of placement units, partially offset be $4,600,000 in payments for underwriting discounts.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable) to complete our initial business combination. We may withdraw interest from the Trust Account to pay franchise and income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial 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.
We have engaged underwriters as advisors in connection with our initial business combination to assist us in holding meetings with our shareholders to discuss the potential business combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with the potential business combination, assist us in obtaining shareholder approval for the initial business combination and assist us with our press releases and public filings in connection with the initial business combination. We will pay the marketing fee for such services upon the consummation of our initial business combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of our initial public offering, including any proceeds from the full or partial exercise of the over-allotment option.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial business combination. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial 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 initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account.
Going Concern
In connection with our 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,” management has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about our ability to continue as a going concern. We have until January 8, 2023 to consummate an initial business combination. It is uncertain that we will be able to consummate the Prime Focus Business Combination, or if the Prime Focus Business Combination is not consummated, an initial business combination by this time. If an initial business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after January 8, 2023.
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Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2022. 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.
The holders of the (i) founder shares, which were issued in a private placement prior to the closing of our initial public offering, (ii) placement warrants which were issued in a private placement simultaneously with the closing of our initial public offering and the placement shares underlying such placement warrants, and (iii) placement warrants that may be issued upon conversion of working capital loans will have registration rights to require us to register a sale of any of its securities held by them 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. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of the initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
On January 8, 2021, we paid a fixed underwriting discount of $0.20 per Unit, $4,600,000 in the aggregate, in connection with our initial public offering. Additionally, the underwriters will be entitled to a deferred underwriting discount of 3.5%, or $8,050,000, of the gross proceeds of our initial public offering upon the completion of the Prime Focus Business Combination or another initial business combination.
Risk and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on our financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, our financial position may be materially adversely affected. Additionally, our ability to complete an initial business combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit our ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combination in a timely manner. Our ability to consummate the Prime Focus Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.
Our results of operations and our ability to complete the Prime Focus Business Combination may also be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete the Prime Focus Business Combination.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements and related disclosures in conformity with GAAP 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 not identified any critical accounting policies.
Derivative Warrant Liabilities
We account for the warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in Financial Accounting Standards Board (“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 meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to our own ordinary shares and whether the holders of the Warrants 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 of issuance of the Warrants 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, such 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 the criteria for equity classification, liability-classified warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of such warrants are recognized as a non-cash gain or loss on the statements of operations.
16
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 Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares 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, Class A ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021, 23,000,000 shares of Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity (deficit) section of our condensed balance sheets.
Net Income per Ordinary Share
We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. The 7,886,667 potential ordinary shares for outstanding warrants to purchase our shares were excluded from diluted earnings per share for the three months ended March 31, 2022 and 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the periods presented.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Following the consummation of our initial public offering, the net proceeds of our initial public offering, including amounts in the Trust Account, may be invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our principal executive officer and principal financial and accounting officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of March 31, 2022, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of March 31, 2022, our disclosure controls and procedures were not effective as of March 31, 2022, due to the material weakness in our internal control over financial reporting described below in “Changes in Internal Control Over Financial Reporting.” In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex features of the public shares and warrants. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
As of the date of this Report, there have been no material changes, except for what were described below, with respect to those risk factors contained in our final prospectus dated January 5, 2021, our Quarterly Report filed on Form 10-Q with the SEC on June 10, 2021 and the Amendment No. 1 to our Quarterly Report on Form 10-Q/A, filed with the SEC on February 3, 2022, respectively. For additional risks relating to Prime Focus World and the Prime Focus Business Combination, see the proxy statement filed by the Company in connection with shareholder approval of the Prime Focus Business Combination. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Military conflict in Ukraine could make it more difficult for us to consummate the Prime Focus Business Combination.
Military conflict in Ukraine may lead to increased and price volatility for publicly traded securities, including ours, and to other national, regional and international economic disruptions and economic uncertainty, any of which could make it more difficult for us to consummate the Prime Focus Business Combination on acceptable commercial terms or at all.
Recent increases in inflation in the United States and elsewhere could make it more difficult for us to consummate the Prime Focus Business Combination.
Recent increases in inflation in the United States and elsewhere may be leading to increased price volatility for publicly traded securities, including ours, and may lead to other national, regional and international economic disruptions, any of which could make it more difficult for us to consummate the Prime Focus Business Combination.
Changes in laws or regulations or in how such laws or regulations are interpreted or applied, or a failure to comply with any laws, regulations, interpretations or applications, may adversely affect our business, including our ability to negotiate and complete the Prime Focus Business Combination.
We are subject to the laws and regulations, and interpretations and applications of such laws and regulations, of national, regional, state and local governments and applicable non-U.S. jurisdictions. In particular, our consummation of the Prime Focus Business Combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications, and any post-business combination company may be subject to additional laws, regulations, interpretations and applications. Compliance with the foregoing may be difficult, time consuming and costly. Laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete the Prime Focus Business Combination. A failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete the Prime Focus Business Combination.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, disclosures in business combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, as amended, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in a revised form, may increase the costs of and the time needed to negotiate and complete the Prime Focus Business Combination, and may constrain the circumstances under which we could complete the Prime Focus Business Combination.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Use of Proceeds
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SPORTS VENTURES ACQUISITION CORP. | ||
| Date: May 16, 2022 | /s/ Alan Kestenbaum | |
| Name: | Alan Kestenbaum | |
| Title: | Chief Executive Officer, (Principal Executive Officer) | |
| Date: May 16, 2022 | /s/ Robert Tilliss | |
| Name: | Robert Tilliss | |
| Title: |
Chief Financial Officer (Principal Financial and Accounting Officer) | |
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