References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Bullpen Parlay Acquisition Company. References to our
"management" or our "management team" refer to our officers and directors,
references to the "Sponsor" refer to BPAC Partners LLC. The following discussion
and analysis of the Company's financial condition and results of operations
should be read in conjunction with the condensed financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company formed under the laws of Cayman Islands on April 1,
2021 for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, and forward purchase securities, our
capital stock, debt or a combination of cash, stock and debt.
Our sponsor is BPAC Partners LLC, a Delaware limited liability company. Our
registration statement for the initial public offering became effective on
December 7, 2021. We consummated the initial public offering of 23,000,000 units
on December 7, 2021. Each unit consisted of one Class A ordinary shares and
one-half of one redeemable warrant ("Public Warrant"), including the issuance of
3,000,000 Units as a result of the underwriter's exercise of their
over-allotment option in full. Each Unit consists of one Class A ordinary share
of the Company, par value $0.0001 per share (the "Class A Ordinary Shares"), and
one-half of one redeemable warrant of the Company (each whole warrant, a
"Warrant"), with each Warrant entitling the holder thereof to purchase one Class
A Ordinary Share for $11.50 per share, subject to adjustment. The Units were
sold at a price of $10.00 per Unit, generating gross proceeds to the Company of
$230,000,000 and incurred $12,650,000 in underwriting fees (inclusive of
$8,050,000 in deferred underwriting fees).
Simultaneously with the closing of the initial public offering on December 7,
2021, we completed the closing of the private placement of an aggregate
11,700,000 private placement warrants at a price of $1.00 per private placement
warrant to the sponsor, generating proceeds of $11,700,000.
Upon the closing of the initial public offering, the over-allotment and the
private placements, $234,600,000 ($10.20 per unit) of the net proceeds of the
sale of the units in the initial public offering, the over- allotment and the
private placements were placed in the trust account with Continental Stock
Transfer & Trust Company acting as trustee and invested in United States
government treasury bills with a maturity of 185 days or less or in money market
funds investing solely in U.S. Treasuries and meeting certain conditions under
Rule 2a-7 under the Investment Company Act, as determined by us, until the
earlier of: (i) the completion of a business combination and (ii) the
distribution of the trust account as described below.
Our management and our board of directors have broad discretion with respect to
the specific application of the net proceeds of the initial public offering, the
over-allotment and the sale of private placement warrants, although
substantially all of the net proceeds are intended to be applied generally
toward consummating a business combination.
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If we have not completed our initial business combination within 18 months from
the closing of the initial public offering, or June 7, 2023 (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 the public shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the trust account and not previously
released to us to pay our income taxes, if any (less up to $100,000 of interest
to pay dissolution expenses) divided by the number of the then-outstanding
public shares, which redemption will completely extinguish public shareholders'
rights as shareholders (including the right to receive further liquidation
distributions, if any); and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining shareholders and the
board of directors, liquidate and dissolve, subject in the case of clauses (ii)
and (iii), to our obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable law.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through March 31, 2022 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below, the Company's search for a target business with which to
complete a Business Combination and activities in connection with the proposed
Transactions. We do not expect to generate any operating revenues until after
the completion of our initial Business Combination. We generate non-operating
income in the form of interest income on marketable securities. We are incurring
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses in
connection with completing a Business Combination.
For the three months ended March 31, 2022, we had a net income of $7,139,272,
which consists of formation and operating costs of $348,105, gain on fair value
of derivative warrant liabilities of $7,656,029 and share based arrangement with
directors expenses of $170,283.
Contractual Obligations
Registration Rights
The holders of founder shares, private placement warrants, Class A ordinary
shares underlying the private placement warrants and warrants that may be issued
upon conversion of Working Capital Loans (and any shares of Class A ordinary
shares issuable upon the exercise of the private placement warrants and warrants
that may be issued upon conversion of Working Capital Loans) are entitled to
registration rights 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. These holders will be entitled to
certain demand and "piggyback" registration rights. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the final prospectus relating
to the initial public offering to purchase up to 3,000,000 additional units to
cover over-allotments, if any, at the initial public offering price less the
underwriting discounts and commissions. On December 7, 2021, the underwriters
fully exercised their over-allotment option.
As of March 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than a promissory note due to the
Sponsor.
The underwriters are entitled to a deferred fee of $0.35 per Unit sold in the
Initial Public Offering, or $8,050,000 in the aggregate. The deferred fee will
become payable to the underwriters from the amounts held in the Trust Account
solely in the event that we complete a Business Combination, subject to the
terms of the underwriting agreement.
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Pursuant to a registration rights agreement entered into on December 9, 2021,
the holders of the Founder Shares, Private Placement Warrants and any 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) will
be entitled to registration rights. The holders of the majority 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 completion of a Business Combination. However, the registration
rights agreement provides that we will not permit any registration statement
filed under the Securities Act to become effective until termination of the
applicable lockup period. The registration rights agreement does not contain
liquidating damages or other cash settlement provisions resulting from delays in
registering our securities. We will bear the expenses incurred in connection
with the filing of any such registration statements.
Administrative Services Agreement
On December 7, 2021, the Company entered into an Administrative Services
agreement pursuant to which it will pay $2,083 per month to an affiliate of the
sponsor for office space, secretarial and administrative services and the
sponsor, executive officers and directors, or any of their respective affiliates
will be reimbursed for any out-of-pocket expenses related to identifying,
investigating, negotiating and completing a Business Combination. In the future,
the Company may decide to compensate the executive officers and other employees.
Any such payments prior to the initial Business Combination will be made from
funds held outside the Trust Account. Upon completion of the initial Business
Combination or the Company's liquidation, the Company will cease paying these
monthly fees.
For the three months ended March 31, 2022, the Company incurred $6,249 in
administrative fees under this arrangement.
Critical Accounting Policies and Estimates
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 ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) is
classified as a liability instrument and measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that
features 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 is classified as shareholders' equity. Our Class A ordinary
shares features certain redemption rights that are considered to be outside of
our control and subject to the occurrence of uncertain future events.
Accordingly, Class A ordinary shares subject to possible redemption is presented
as temporary equity, outside of the shareholders' equity section of the balance
sheet.
Net Income Per Ordinary Shares
Net income per ordinary shares is computed by dividing net income by the
weighted-average number of ordinary shares outstanding during the periods. We
have not considered the effect of the warrants sold in our initial public
offering and Private Placement to purchase shares of Class A ordinary shares in
the calculation of diluted earnings per ordinary shares, since their inclusion
would be anti-dilutive under the treasury stock method. As a result, diluted net
income per ordinary share is the same as basic net income per ordinary share for
the periods presented.
The Company has two classes of shares, which are referred to as Class A ordinary
shares and Class B ordinary shares (the "Founder Shares"). Earnings are shared
pro rata between the two classes of shares. A business combination is the most
likely outcome as of March 31, 2022. Accretion associated with the redeemable
shares of Class A ordinary shares is excluded from earnings per share as the
redemption value approximates fair value.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
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We issued 11,500,000 warrants to purchase Class A ordinary shares to investors
in our Initial Public Offering and issued 11,700,000 Private Placement Warrants.
All of our outstanding Warrants are recognized as derivative liabilities in
accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as
liabilities at fair value and adjust the instruments to fair value at each
reporting period. The 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. The fair value of Warrants issued in connection with
the Initial Public Offering and Private Placement were initially measured at
fair value using a Monte Carlo simulation model.
The Class A ordinary shares and warrants comprising the units began separate
trading on the 52nd day following the date of the IPO. Holders have the option
to continue to hold units or separate their units into the component securities.
Holders will need to have their brokers contact our transfer agent in order to
separate the units into Class A ordinary shares and warrants. No fractional
warrants will be issued upon separation of the units and only whole warrants
will trade. Accordingly, unless you purchase a multiple of two units, the number
of warrants issuable to you upon separation of the units will be rounded down to
the nearest whole number of warrants.
Additionally, the units will automatically separate into their component parts
and will not be traded after completion of our initial business combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities that 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.
Recent Accounting Pronouncements
The Company's management does not believe that any recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the accompanying financial statement.
In August 2020, the FASB issued Accounting Standards Update 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, to reduce the
complexity of accounting for convertible debt and other equity-linked
instruments. For certain convertible debt instruments with a cash conversion
feature, the changes are a trade-off between simplifications in the accounting
model (no separation of an "equity" component to impute a market interest rate,
and simpler analysis of embedded equity features) and a potentially adverse
impact to diluted EPS by requiring the use of the if-converted method. The new
standard will also impact other financial instruments commonly issued by both
public and private companies. For example, the separation model for beneficial
conversion features is eliminated simplifying the analysis for issuers of
convertible debt and convertible preference shares. Also, certain specific
requirements to achieve equity classification and/ or qualify for the derivative
scope exception for contracts indexed to an entity's own equity are removed,
enabling more freestanding instruments and embedded features to avoid
mark-to-market accounting. The new standard is effective for companies that are
SEC filers (except for Smaller Reporting Companies) for fiscal years beginning
after December 15, 2021 and interim periods within that year, and two years
later for other companies. Companies can early adopt the standard at the start
of a fiscal year beginning after December 15, 2020. The standard can either be
adopted on a modified retrospective or a full retrospective basis. The Company
has adopted and the effects, if any, are immaterial to the Company's financial
statement.
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