UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File Number:
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Securities registered pursuant to Section 12(b) of the Act:
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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 15 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 15 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 |
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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 August 11, 2022, there were
ICONIC SPORTS ACQUISITION CORP.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ICONIC SPORTS ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| June 30, 2022 |
| December 31, 2021 | |||
ASSETS |
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Current assets | ||||||
Cash | $ | | $ | | ||
Prepaid expenses – current | | | ||||
Total Current Assets |
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Non-current assets | ||||||
Marketable securities held in Trust Account |
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Prepaid expenses – non-current | — | | ||||
Total Non-current Assets | | | ||||
Total Assets | $ | | $ | | ||
LIABILITIES, SHAREHOLDERS’ DEFICIT AND CLASS A REDEEMABLE SHARES |
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Current liabilities | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses | | | ||||
Accrued offering costs | | | ||||
Total Current Liabilities | | | ||||
Non-Current liabilities | ||||||
Warrant Liability | | | ||||
Deferred underwriters fee payable |
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Total Non-current Liabilities |
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Total Liabilities | $ | | $ | | ||
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Commitments and Contingencies (Note 8) |
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Class A ordinary shares subject to possible redemption; $ | | | ||||
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Shareholders’ Deficit |
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Preference shares, $ |
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Class A ordinary shares, $ |
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Class B ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Shareholders’ Deficit |
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TOTAL LIABILITIES, SHAREHOLDERS’ DEFICIT AND CLASS A REDEEMABLE SHARES | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
ICONIC SPORTS ACQUISITION CORP.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
For the Period | |||||||||
From | |||||||||
April 15, 2021 | |||||||||
Three Months Ended | Six Months Ended | (Inception) Through | |||||||
| June 30, 2022 |
| June 30, 2022 |
| June 30, 2021 | ||||
Formation and operating costs | $ | | $ | | $ | | |||
Loss from operations | ( | ( | ( | ||||||
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Other income (expense): | |||||||||
Change in fair value of warrant liability | | | — | ||||||
Unrealized gain on marketable securities held in Trust Account | | | — | ||||||
Other expense, net | | | — | ||||||
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Net income (loss) | $ | | $ | | $ | ( | |||
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Basic and diluted weighted average shares outstanding, Class A ordinary shares | | | — | ||||||
Basic and diluted net income per share, Class A ordinary shares | | | $ | — | |||||
Basic and diluted weighted average shares outstanding, 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
ICONIC SPORTS ACQUISITION CORP.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
Class A | ||||||||||||||||||||
Ordinary Shares Subject to | Class B | Additional | Total | |||||||||||||||||
Possible Redemption | Ordinary Shares | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||
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| Shares |
| Amount |
| Capital |
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| Deficit | ||||||
Balance — December 31, 2021 (audited) |
| | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
Net income |
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Balance — March 31, 2022 (unaudited) | | | | | | ( | ( | |||||||||||||
Net income |
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Balance — June 30, 2022 (unaudited) |
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FOR THE PERIOD FROM APRIL 15, 2021 (INCEPTION) THROUGH JUNE 30, 2022
Class A | ||||||||||||||||||||
Ordinary Shares Subject to | Class B | Additional | Total | |||||||||||||||||
Possible Redemption | Ordinary Shares | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||
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Balance — April 15, 2021 (inception) | | $ | |
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Issuance of Class B ordinary shares to Sponsor | — | — |
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Net loss |
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Balance — June 30, 2021 (unaudited) | — | $ | — | | $ | | $ | | $ | ( | $ | | ||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
ICONIC SPORTS ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the Period | ||||||
From | ||||||
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Six Months Ended | (Inception) Through | |||||
| June 30, 2022 |
| June 30, 2021 | |||
Cash Flows from Operating Activities: | ||||||
Net income | $ | | $ | ( | ||
Adjustments to reconcile net income to net cash used in operating activities: |
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Unrealized gain on marketable securities held in Trust Account | ( | — | ||||
Change in fair value of warrant liability | ( | — | ||||
Formation costs paid by Sponsor |
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Changes in operating assets and liabilities: | ||||||
Prepaid expenses | | — | ||||
Accounts payable | ( | — | ||||
Accrued expenses |
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Accrued offering costs | ( | — | ||||
Net cash used in operating activities |
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Net Change in Cash |
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Cash — Beginning |
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Cash — Ending | $ | | $ | — | ||
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Deferred offering costs included in accrued offering costs | $ | — | $ | | ||
Deferred offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares | $ | — | $ | | ||
Issuance of Promissory Note by the Sponsor to pay offering and formation costs | $ | — | $ | | ||
Offering costs paid by the Sponsor | $ | — | $ | ( | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
ICONIC SPORTS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
Note 1. Organization and Plans of Business Operations
Organization and General
Iconic Sports Acquisition Corp. (the “Company”) was incorporated as a Cayman Islands exempted company on April 15, 2021. The Company is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
Sponsor and Initial Financing
As of June 30, 2022, the Company had not commenced any operations. All activity through June 30, 2022 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below, and identifying a target for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statements for the Initial Public Offering were declared effective on October 21, 2021. On October 26, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
Transaction costs related to the consummation of the Initial Public Offering on October 26, 2021, amounted to $
The Trust Account
Following the closing of the Initial Public Offering on October 26, 2021, an amount of $
5
Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds from the Initial Public Offering, although substantially all of the net proceeds from the Initial Public Offering are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein, “Target Business” means one or more target businesses that together have an aggregate fair market value equal to at least
The Company will provide its public shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination, either (i) in connection with a shareholder meeting called to approve such Business Combination or (ii) by means of a tender offer. The public shareholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account, calculated as of two business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations. The per-share amount to be distributed to the public shareholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. As a result, shares are recorded at their redemption amount and classified as temporary equity, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity” (“ASC 480”).
The decision as to whether the Company will seek shareholder approval of a Business Combination or will allow shareholders to sell their shares in a tender offer will be made by the Company, in its sole discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek shareholder approval unless a vote is required by law or stock exchange listing requirements. If the Company seeks shareholder approval, it will complete its Business Combination only if a majority of the ordinary shares voted are voted in favor of a Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $
The Company has until April 26, 2023 to complete its initial Business Combination. If the Company does not complete a Business Combination by such date (or such longer period as provided in an amendment to the Company’s amended and restated memorandum and articles of association (an “Extension Period”)), it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible but not more than 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 (less up to $
6
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 the Company, 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 (1) $
Going Concern
As of June 30, 2022, the Company had $
The Company’s liquidity needs up to June 30, 2022 had been satisfied through a payment from the Sponsor of $
The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. Although no formal agreement exists, the Sponsor is committed to extend Working Capital Loans as needed (as defined in Note 5 below). The Company cannot assure that its plans to consummate an initial Business Combination will be successful. In addition, management is currently evaluating the impact of the COVID-19 pandemic and its effect on the Company’s financial position, results of its operations and/or search for a target company.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern through April 26, 2023, which is within one year from the date this financial statement is issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 Securities and Exchange Commission (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 31, 2022 (the “Annual Report”), which contains the audited financial statements and notes thereto. The financial information as of December 31, 2021 is derived from the audited financial statements presented in the Company’s Annual Report. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.
7
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by 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 either not an emerging growth company or 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 the 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 warrant liabilities. Such estimates may be subject to change as more current information becomes available. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Marketable Securities Held in Trust Account
Following the closing of the Initial Public Offering on October 26, 2021, an amount of $
8
Offering Costs
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 Initial Public Offering. Offering costs are charged to shareholders’ equity or the statement of operations based on the relative value of the Public Warrants and the Private Placement Warrants to the proceeds received from the Units sold upon the completion of the Initial Public Offering. Accordingly, on October 26, 2021, offering costs totaling $
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 480. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that is 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, ordinary shares is classified as shareholders’ equity. The Company’s Class A ordinary shares features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2022 and December 31, 2021, Class A ordinary shares subject to possible redemption is presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statements 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
The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the periods presented.
Net Income per Ordinary Share
Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding during the period. Ordinary shares subject to possible redemption at June 30, 2022, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net income per ordinary share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. 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
9
The Company’s statement of operations includes a presentation of net income per ordinary share subject to possible redemption and allocates the net income into the two classes of ordinary shares in calculating net earnings per ordinary share, basic and diluted. For redeemable Class A ordinary shares, net income per ordinary share is calculated by dividing the net income by the weighted average number of Class A ordinary shares subject to possible redemption outstanding since original issuance. For non-redeemable Class B ordinary shares, net income per share is calculated by dividing the net income by the weighted average number of non-redeemable Class B ordinary shares outstanding for the period. Nonredeemable Class B ordinary shares include the founder shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account. As of June 30, 2022, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the periods presented.
The following table reflects the calculation of basic and diluted net income per ordinary share (in dollars, except per share amounts):
For the Period from April | |||||||||
15, 2021 (Inception) | |||||||||
| Three Months Ended |
| Six Months Ended | Through | |||||
| June 30, 2022 |
| June 30, 2022 |
| June 30, 2021 | ||||
Class A ordinary shares subject to possible redemption |
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Numerator: Income attributable to Class A ordinary shares subject to possible redemption |
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Net income |
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Net income attributable to Class A ordinary shares subject to possible redemption |
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Denominator: Weighted average Class A ordinary shares subject to possible redemption |
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Basic and diluted weighted average shares outstanding, Class A ordinary shares subject to possible redemption |
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Basic and diluted net income per share, Class A ordinary shares subject to possible redemption |
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Non-Redeemable Class B ordinary shares |
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Numerator: Net income (loss) |
| $ | | $ | | $ | ( | ||
Net income (loss) |
| $ | | $ | | $ | ( | ||
Non-redeemable net income (loss) |
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Denominator: Weighted average non-redeemable Class B ordinary shares |
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Basic and diluted weighted average shares outstanding, non-redeemable Class B ordinary shares |
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Basic and diluted net income (loss) per share, non-redeemable Class B ordinary shares |
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Related Parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $
10
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
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. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Warrant Liabilities
The Company accounted for the
Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company will classify each warrant as a liability at its fair value and the warrants will be allocated a portion of the proceeds from the issuance of the Units equal to its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
11
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. 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.
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.
Note 3. Initial Public Offering
On October 26, 2021, pursuant to the Initial Public Offering, the Company sold
An aggregate of $
Note 4. Private Placement
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
Each whole Private Placement Warrant is exercisable for one whole Class A ordinary share at a price of $
Note 5. Related Party Transactions
Founder Shares
In April 2021, the Sponsor purchased
The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (A)
12
Promissory Note-Related Party
In April 2021, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor, certain of the Company’s officers, directors or any of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. 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. The Working Capital Loans would either be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $
Administrative Services Agreement
The Company has entered into an agreement with the Sponsor, pursuant to which the Company has agreed to pay Iconic Sports Management LLC a total of $
Note 6. Shareholders’ Equity
Preference shares — The Company is authorized to issue up to
Class A ordinary shares — The Company is authorized to issue up to
Class B ordinary shares — The Company is authorized to issue up to
Ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders and holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders except as required by law; provided that only holders of Class B ordinary shares will have the right to vote on the appointment of directors prior to or in connection with the completion of the initial Business Combination.
13
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding Class B ordinary shares to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis,
Note 7. Warrants
The Company accounts for the
Public Warrants may only be exercised for a whole number of Class A ordinary shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. Accordingly, unless holders purchase at least two Units, they will not be able to receive or trade a whole warrant. The Public Warrants will become exercisable
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No Public Warrant will be exercisable, and the Company will not be obligated to issue any Class A ordinary shares upon exercise of a Public Warrant unless the Class A ordinary shares issuable upon such Public 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 Public Warrants.
The Company has agreed that as soon as practicable, but in no event later than business days after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a post-effective amendment to the registration statement filed in connection with its initial public offering or a new registration statement covering registration under the Securities Act, of the Class A ordinary shares issuable upon exercise of the Public Warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within business days after the closing of a Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those Class A ordinary shares until the Public Warrants expire or are redeemed, as specified in the warrant agreement; provided that if the Class A ordinary shares is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but it will use its commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary share issuable upon exercise of the Public Warrants is not effective by the th day after the closing of a Business Combination, Public Warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise Public Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
14
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the last reported sale price of the Class A ordinary share equals or exceeds $ |
| ● | If the closing price of the Class A Ordinary Shares for any trading days within a |
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of |
| ● | if, and only if, the last reported sale price of the Class A ordinary share equals or exceeds $ |
15
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or saleable until
Note 8. Commitments and Contingencies
Registration rights
The holders of the Founder Shares, Private Placement Warrants, warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement that was signed on the effective date of the Initial Public Offering, requiring the Company to register such securities for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. 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 Initial Public Offering to purchase up to
The underwriters were paid a cash underwriting discount of $
16
Note 9. Fair Value Measurements
At June 30, 2022 and December 31, 2021, the Company’s warrant liability was valued at $
The following table presents fair value information as of June 30, 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. The Company’s warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The Company’s transferred the fair value of Public Warrants from a Level 3 measurement to a Level 1 measurement during the period from April 15, 2021 (inception) through December 31, 2021:
|
| Private |
| ||||||
Public | Placement | Warrant | |||||||
| Warrants |
| Warrants |
| Liability | ||||
Derivative warrant liabilities at April 15, 2021 (inception) | $ | | $ | | $ | | |||
Initial fair value at issuance of public and private placement warrants | | | | ||||||
Change in fair value |
| ( |
| ( |
| ( | |||
Transfer of public warrants to Level 1 measurement |
| ( |
| — |
| ( | |||
Level 3 derivative warrant liabilities as of December 31, 2021 | $ | — | $ | | $ | | |||
Change in fair value |
| — |
| ( |
| ( | |||
Level 3 derivative warrant liabilities as of March 31, 2022 | $ | — | $ | | $ | | |||
Change in fair value | — | ( | ( | ||||||
Level 3 derivative warrant liabilities as of June 30, 2022 | $ | — | $ | | $ | | |||
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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The following table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value on a recurring basis at June 30, 2022 and December 31, 2021:
June 30, 2022
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Assets |
|
|
|
|
|
| |||
Cash and marketable securities held in trust account | $ | | $ | | $ | | |||
Liabilities |
|
|
|
|
|
| |||
Public Warrants | $ | | $ | | $ | | |||
Private Placement Warrants | $ | | $ | | $ | | |||
December 31, 2021
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Assets |
|
|
|
|
|
| |||
Cash and marketable securities held in trust account | $ | | $ | | $ | | |||
Liabilities |
|
|
|
|
|
| |||
Public Warrants | $ | | $ | | $ | | |||
Private Placement Warrants | $ | | $ | | $ | | |||
Measurement
The Company established the initial fair value for the warrants on October 26, 2021, the date of the completion of the Company’s Initial Public Offering. The Company used a Monte Carlo simulation model to value the warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of
Based on the applied volatility assumption and the expected term to a business combination noted below, the Company determined that the risk-neutral probability of exceeding the $
The following table presents the changes in the fair value of derivative warrant liabilities from April 15, 2021 (inception) through June 30, 2022:
|
|
| Total | ||||||
Private | Derivative | ||||||||
Public | Placement | Warrant | |||||||
| Warrants |
| Warrants |
| Liability | ||||
Derivative warrant liabilities as of April 15, 2021 (inception) | $ | — | $ | — | $ | — | |||
Initial fair value at issuance of public and private placement warrants | | | | ||||||
Change in fair value | ( | ( | ( | ||||||
Derivative warrant liabilities as of December 31, 2021 | $ | | $ | | $ | | |||
Change in fair value |
| ( |
| ( |
| ( | |||
Derivative warrant liabilities as of March 31, 2022 | $ | | $ | | $ | | |||
Change in fair value | ( | ( | ( | ||||||
Derivative warrant liabilities as of June 30, 2022 | $ | | $ | | $ | | |||
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The key inputs into the Black-Scholes model formula were as follows at June 30, 2022 and December 31, 2021:
| Private Placement Warrants |
| |||||
| June 30, 2022 |
| December 31, 2021 |
| |||
Input |
|
|
| ||||
Ordinary share price | $ | | $ | |
| ||
Exercise price | $ | | $ | | |||
Risk-free rate of interest |
| | % |
| | % | |
Volatility |
| | % |
| | % | |
Term |
| |
| | |||
Warrant to buy one share (adjusted for the probability of dissolution) | $ | | $ | | |||
Dividend yield |
| % |
| % | |||
The risk-free interest rate assumption was based on the linearly interpolated Treasury Constant Maturity Rate Curve between and rates, which was commensurate with the contractual term of the Warrants, which expire on the earlier of (i) after the completion of the initial business combination and (ii) upon redemption or liquidation. An increase in the risk-free interest rate, in isolation, would result in an increase in the fair value measurement of the warrant liabilities and vice versa.
Note 10. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the 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 condensed financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “our,” “us” or “we” refer to Iconic Sports Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” 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 Quarterly 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 Annual Report, filed with the SEC on March 31, 2022. 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.
Overview
We are a newly incorporated blank check company formed as a Cayman Islands exempted company whose business purpose is to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. We have not identified any business combination partner and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with respect to any potential business combination with us
Our sponsor is Iconic Sports Management LLC (“Sponsor”). The registration statement for our Initial Public Offering was declared effective on October 21, 2021. On October 26, 2021, we consummated the Initial Public Offering of 34,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Class A ordinary shares” or “public shares”), including the issuance of 4,500,000 Units as a result of the underwriters’ exercise of their over-allotment option, at $10.00 per Unit, generating gross proceeds of approximately $345,000,000, and incurring offering costs of approximately $16,966,617, consisting of $5,900,000 of underwriting discount, $10,325,000 deferred underwriting commissions, and $741,617 of actual offering costs.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 17,025,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant with our Sponsor, generating gross proceeds of approximately $17,025,000.
Following the closing of the Initial Public Offering, the full exercise of the over-allotment option and the sale of the Private Placement Warrants, an amount of $353,625,000 ($10.25 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”).
20
We have until April 26, 2023 to consummate a Business Combination (the “Combination Period”) (or such longer period as provided in an amendment to the Company’s amended and restated memorandum and articles of association (an “Extension Period”)). However, if we have not completed a Business Combination within the Combination Period, 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 100% of 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 and not previously released to us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish the rights of the public shareholders as shareholders (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 Company’s remaining public shareholders and its Board of Directors, liquidate and dissolve, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
Results of Operations
Our entire activity from inception through June 30, 2022 relates to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, a search for a Business Combination candidate. We will not be generating any operating revenues until the closing and completion of our Business Combination at the earliest.
For the three months ended June 30, 2022, we had net income of $5,452,870, which consisted of $721,159 of formation and operating expenses, offset by a gain of $5,705,300 for the change in fair value of the warrant liability and an unrealized gain of $468,729 on marketable securities held in trust.
For the six months ended June 30, 2022, we had net income of $14,557,657, which consisted of $1,138,743 of formation and operating expenses, offset by a gain of $15,194,050 for the change in fair value of the warrant liability and an unrealized gain of $502,350 on marketable securities held in trust.
Liquidity, Capital Resources and Going Concern
As of June 30, 2022, the Company had $271,890 in operating cash and a working capital deficit of $372,017.
The Company’s liquidity needs up to October 26, 2021 had been satisfied through a payment from the Sponsor of $25,000 for Class B ordinary shares, par value $0.0001 per share (“Class B ordinary shares” and shares thereof, “Founder Shares”) (see Note 5), the Initial Public Offering and the issuance of the Private Placement Warrants. Additionally, the Company drew on an unsecured promissory note to pay certain offering costs.
The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. Although no formal agreement exists, the Sponsor is committed to extend Working Capital Loans as needed. The Company cannot assure that its plans to consummate an initial Business Combination will be successful. In addition, management is currently evaluating the impact of the COVID-19 pandemic and its effect on the Company’s financial position, results of its operations and/or search for a target company.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern through April 26, 2023, which is within one year from the date this financial statement is issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 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.
21
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities as of June 30, 2022, other than as described below.
We have an agreement to pay our Sponsor a monthly fee of $50,000 for office space utilities and administrative services. We began incurring these fees on October 26, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s liquidation.
The underwriters of the Initial Public Offering are entitled to a deferred discount of $0.35 per Unit, or $10,325,000 in the aggregate. The deferred discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Warrant Liabilities
We account for the warrants underlying the Units and the Private Placement Warrants in accordance with the guidance contained in ASC 815 under which the public warrants and the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Under ASC 815-40, the public warrants and the Private Placement Warrants are not indexed to our ordinary shares in the manner contemplated by ASC 815-40 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. Accordingly, we classify the public warrants and the Private Placement Warrants as liabilities at their fair value and adjust the public warrants and the Private Placement Warrants to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. Subsequent to our initial public offering, the Private Placement Warrants value is based on the public trading value. The Company utilized the Monte Carlo simulation model to value the Private Placement Warrants as of June 30, 2022 and December 31, 2021.
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 Accounting Standards Codification (“ASC”) Topic 480. Class A ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that is 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. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2022 and December 31, 2021, Class A ordinary shares subject to possible redemption is presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
Net Income (Loss) per Ordinary Share
Net loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period. Ordinary shares subject to possible redemption at June 30, 2022, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net loss per ordinary share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. 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 17,025,000 Private Placement Warrants in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share for the periods presented.
22
The Company’s statement of operations includes a presentation of net income (loss) per ordinary share subject to possible redemption and allocates the net income (loss) into the two classes of shares in calculating net earnings (loss) per ordinary share, basic and diluted. For redeemable Class A ordinary shares, net earnings (loss) per ordinary share is calculated by dividing the net loss by the weighted average number of Class A ordinary shares subject to possible redemption outstanding since original issuance. For non-redeemable Class B ordinary shares, net earnings (loss) per share is calculated by dividing the net loss by the weighted average number of nonredeemable Class B ordinary shares outstanding for the period. Non-redeemable Class B ordinary shares include the founder shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. We are currently assessing the impact, if any, that ASU 2020-06 would have on our financial position, results of operations or cash flows.
Our management does not believe that there are any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our balance sheet.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our co-principal executive officers and principal financial officer, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our co-principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the fiscal quarter ended June 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, and concluded our disclosure controls and procedures were not effective due solely to the material weakness in our internal controls over financial reporting primarily for the Company’s accounting for legal fees incurred through December 31, 2021.
Changes in Internal Control over Financial Reporting
Except as described below, there were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
23
We currently are implementing several actions, as described below, to remediate the material weakness. Management is committed to ensuring that our internal controls over financial reporting are designed and operating effectively. Our co-principal executive officers and principal financial officer have performed additional review procedures including reviewing historical filings and consulting with subject matter experts related to the accounting for complex agreements. The Company’s management has also retained an additional consultant to provide additional review and subject matter expertise. We believe that the relevant control procedures have been remediated, subject to testing in subsequent periods confirming the performance of these controls.
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 improved, 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.
The elements of our remediation plan can offer no assurance that these initiatives will ultimately have the intended effects.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks discussed in our Annual Report. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in the risk factors discussed in our Annual Report, except for the below risk factor.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those 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, investments and results of operations. In addition, 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 our initial business combination, and results of operations.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving SPACs and private operating companies and increasing the potential liability of certain participants in proposed business combination transactions. These rules, if adopted, whether in the form proposed or in revised form, may materially increase the costs and time required to negotiate and complete an initial business combination and could potentially impair our ability to complete an initial business combination.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On October 26, 2021, we consummated our Initial Public Offering of 34,500,000 Units, inclusive of 4,500,000 Units sold to the underwriters upon the underwriters’ election to fully exercise their over-allotment option, at a price of $10.00 per Unit, generating total gross proceeds of $345,000,000. Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC acted as representatives of the underwriters. The securities sold in the offering were registered under the Securities Act on registration statements on Form S-1 (Nos. 333-260096 and 333-260421). The registration statements became effective on October 21, 2021.
24
Simultaneously with the consummation of the Initial Public Offering and the full exercise of the over-allotment option, we consummated the Private Placement of 17,025,000 Private Placement Warrants to our Sponsor at a price of $1.00 per Private Placement Warrant, generating total proceeds of $17,025,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering, including the over-allotment option, and the sale of the Private Placement Warrants, $353,625,000 was placed in the Trust Account.
We incurred $16,966,617 in transaction costs, including $5,900,000 of underwriting fees, $10,325,000 of deferred underwriting fees and $741,617 of other offering costs in connection with the Initial Public Offering and the Private Placement.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
25
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
| Description of Exhibit |
3.1 | Amended and Restated Memorandum and Articles of Association(1) | |
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
4.5 | ||
10.1 | Investment Management Trust Agreement between Continental and the Company(1) | |
10.2 | ||
10.3 | Private Placement Warrants Purchase Agreement by and between the Company and the Sponsor(1) | |
10.4 | Administrative Services Agreement by and between the Company and the Sponsor(1) | |
10.5 | ||
10.6 | ||
10.7 | ||
10.8 | Securities Subscription Agreement between the Company and the Sponsor(3) | |
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
*Filed herewith.
** | Furnished. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on October 27, 2021 and incorporated by reference herein. |
| (2) | Previously filed as an exhibit to our Registration Statement on Form S-1 filed on October 12, 2021 and incorporated by reference herein. |
| (3) | Previously filed as an exhibit to our Registration Statement on Form S-1 filed on October 6, 2021 and incorporated by reference herein. |
| (4) | Previously filed as an exhibit to our Annual Report on Form 10-K filed on March 31, 2022 and incorporated by reference herein. |
26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ICONIC SPORTS ACQUISITION CORP. | ||
|
|
| |
Dated: August 11, 2022 | By: | /s/ Fausto Zanetton | |
|
| Name: | Fausto Zanetton |
|
| Title: | Co-Chief Executive Officer and Chief Financial Officer |
(Principal Financial and Accounting Officer) | |||
Dated: August 11, 2022 | By: | /s/ Gianluca Vialli | |
Name: | Gianluca Vialli | ||
Title: | Co-Chief Executive Officer | ||
(Principal Executive Officer) | |||