References in this quarterly report on Form 10-Q (the "Report") to "we," "us" or
the "Company" refer to Sports Ventures Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors,
references to the "Sponsor" refer to AKICV LLC. The following discussion and
analysis of our financial condition and results of operations should be read in
conjunction with the financial statements and the notes thereto contained
elsewhere in this Report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Special Note Regarding Forward-Looking Statements
This Report includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") that are not historical facts, and
involve risks and uncertainties that could cause actual results to differ
materially from those expected and projected. All statements, other than
statements of historical fact included in this Report including, without
limitation, statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the Company's financial
position, business strategy and the plans and objectives of management for
future operations, are forward-looking statements. Words such as "expect,"
"believe," "anticipate," "intend," "estimate," "seek" and variations and similar
words and expressions are intended to identify such forward-looking statements.
Such forward-looking statements relate to future events or future performance,
but reflect management's current beliefs, based on information currently
available. A number of factors could cause actual events, performance or results
to differ materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's our final prospectus dated January 5, 2021, our Quarterly Report filed
on Form 10-Q with the SEC on June 10, 2021 and the Amendment No. 1 to our
Quarterly Report on Form 10-Q/A, filed with the SEC on February 3, 2022,
respectively. For additional risks relating to Prime Focus World and the Prime
Focus Business Combination, see the proxy statement to be filed by the Company
in connection with shareholder approval of the Prime Focus Business Combination.
The Company's securities filings can be accessed on the EDGAR section of the
SEC's website at www.sec.gov. Except as expressly required by applicable
securities law, the Company disclaims any intention or obligation to update or
revise any forward-looking statements whether as a result of new information,
future events or otherwise.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding the
Prime Focus Business Combination (as defined below), Company's financial
position, business strategy and the plans and objectives of management for
future operations, are forward-looking statements. When used in this Report,
words such as "anticipate," "believe," "estimate," "expect," "intend" and
similar expressions, as they relate to us or the Company's management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward- looking statements as a result of
certain factors detailed in our filings with the SEC. All subsequent written or
oral forward-looking statements attributable to us or persons acting on the
Company's behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Recent Developments
On January 25, 2022, we entered into a business combination agreement with Prime
Focus World N.V., a public limited liability company incorporated in the
Netherlands ("Prime Focus World"), PF Overseas Limited, a limited liability
company incorporated in Mauritius ("PF Overseas"), Prime Focus 3D Cooperatief
U.A., a Dutch cooperative association ("Prime Focus 3D") and our sponsor (the
"Prime Focus Business Combination Agreement"). The Prime Focus Business
Combination Agreement provides that, upon the terms and subject to the
conditions thereof, the following transactions will occur as part of the
business combination contemplated by the Prime Focus Business Combination
Agreement (the "Prime Focus Business Combination"): (i) the Company and the
stockholders of Prime Focus World will consummate the transfer of all of the
ordinary and preferred shares of Prime Focus World to the Company in exchange
for Class A ordinary shares (the "Prime Focus Company Exchange"), pursuant to
which the Company will acquire from the Prime Focus World stockholders, and the
Prime Focus World stockholders will transfer, convey and deliver to the Company,
all of the ordinary and preferred shares of Prime Focus World issued and
outstanding as of immediately prior to the Prime Focus Company Exchange, and
each Prime Focus World stockholder shall receive, in consideration for such
transfer, conveyance and delivery of each Prime Focus World share, a number of
Class A ordinary shares equal to such Prime Focus World stockholder's portion of
the consideration to which such Prime Focus World stockholder is entitled in
accordance with the Business Combination Agreement and (ii) effective as of the
time of the Prime Focus Company Exchange, any outstanding options to purchase
Prime Focus World shares shall be exchanged for options to purchase Class A
ordinary shares of the Company, as further described in the Prime Focus Business
Combination Agreement.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
The only activities through March 31, 2022 were organizational activities and
following the initial public offering activities necessary to identifying a
target company for and consummating an initial business combination, including
the Prime Focus Business Combination. We do not expect to generate any operating
revenues until after the completion of our initial business combination. We
generated and will continue to generate non-operating income in the form of
interest income on marketable securities held in the trust account (the "Trust
Account") and will recognize unrealized gains or losses from changes in the fair
values of our warrant liability. We incurred and will continue to incur expenses
as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses.
14
For the three months ended March 31, 2022, we had a net loss of $6,858,389 which
consisted of general and administrative expense of $2,226,734 and unrealized
loss of $4,653,524 from the change in the fair value of our derivative warrant
liabilities, partially offset by interest earned on our investments of $21,869.
For the three months ended March 31, 2021, we had net income of $3,912,412 which
consisted of an unrealized gain of $4,732,278 from the change in the fair value
of our derivative warrant liabilities and interest earned on our investments of
$10,410, partially offset by general and administrative expense of $172,274 and
transaction costs associated with the derivative warrant liabilities of
$658,002.
Liquidity and Capital Resources
On January 8, 2021, we consummated an initial public offering of 23,000,000
units at $10.00 per public unit, at $10.00 per public unit, generating gross
proceeds of $230,000,000. Simultaneously with the closing of our initial public
offering, we consummated the sale of 660,000 placement units, at a price of
$10.00 per placement unit. Each placement unit consists of one Class A ordinary
share, and one-third redeemable warrant, each whole warrant entitling the holder
to purchase one Class A ordinary share at a price of $11.50 per share,
generating gross proceeds of $6,600,000.
Following the closing of our initial public offering on January 8, 2021,
$230,000,000 ($10.00 per Unit) from the net offering proceeds of the sale of the
Units in our initial public offering and the sale of the placement units was
placed in the Trust Account and invested in U.S. government securities.
As of March 31, 2022, we had investments held in the Trust Account of
$230,048,446 consisting of money market funds. Income on the balance in the
Trust Account may be used to pay taxes. Through March 31, 2022, we did not
withdraw any interest earned on the Trust Account to pay our taxes.
As of March 31, 2022, we had cash outside the Trust Account of $140,948
available for working capital needs. All remaining cash held in the Trust
Account is generally unavailable for use, prior to an initial business
combination, and is restricted for use either in an initial business
combination, pay tax obligations or to redeem ordinary shares.
Until consummation of an initial business combination, we will be using the
funds not held in the Trust Account, and any additional working capital loans
from the initial shareholders, our officers and directors, or their respective
affiliates, for identifying and evaluating prospective acquisition candidates,
performing business due diligence on prospective target businesses, traveling to
and from the offices, plants or similar locations of prospective target
businesses, reviewing corporate documents and material agreements of prospective
target businesses, selecting the target business to acquire and structuring,
negotiating and consummating the initial business combination.
For the three months ended March 31, 2022, cash used in operating activities was
$329,527. Net loss of $6,858,389 was impacted by an unrealized non-cash loss on
the change in the fair value of our warrant liability of $4,653,524, net
increases in operating assets and liabilities of $1,897,207 and interest earned
on our Trust Account of $21,869.
For the three months ended March 31, 2021, cash used in operating activities was
$859,017. Net income of $3,912,412 was impacted by an unrealized non-cash gain
on the change in the fair value of our warrant liability of $4,732,278, net
decrease in operating assets and liabilities of $686,743 and interest earned on
our Trust Account of $10,410, partially offset by transaction costs allocated to
the warrant liability of $658,002.
With funds raised from our initial public offering, we invested $230,000,000 as
our investing activities.
We raised $231,571,844 from financing activities, primarily related to the
initial public offering. Amounts included $229,566,057 proceeds from the sale of
our public units, net of offering costs from our initial public offering and
$6,600,000 proceeds from the issuance of placement units, partially offset be
$4,600,000 in payments for underwriting discounts.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
taxes payable) to complete our initial business combination. We may withdraw
interest from the Trust Account to pay franchise and income taxes. To the extent
that our equity or debt is used, in whole or in part, as consideration to
complete our initial business combination, the remaining proceeds held in the
Trust Account will be used as working capital to finance the operations of the
target business or businesses, make other acquisitions and pursue our growth
strategies.
We have engaged underwriters as advisors in connection with our initial business
combination to assist us in holding meetings with our shareholders to discuss
the potential business combination and the target business' attributes,
introduce us to potential investors that are interested in purchasing our
securities in connection with the potential business combination, assist us in
obtaining shareholder approval for the initial business combination and assist
us with our press releases and public filings in connection with the initial
business combination. We will pay the marketing fee for such services upon the
consummation of our initial business combination in an amount equal to, in the
aggregate, 3.5% of the gross proceeds of our initial public offering, including
any proceeds from the full or partial exercise of the over-allotment option.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our initial business
combination. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an initial business
combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our initial
business combination. Moreover, we may need to obtain additional financing
either to complete our initial business combination or because we become
obligated to redeem a significant number of our public shares upon completion of
our initial business combination, in which case we may issue additional
securities or incur debt in connection with such initial business combination.
If we are unable to complete our initial business combination because we do not
have sufficient funds available to us, we will be forced to cease operations and
liquidate the Trust Account.
Going Concern
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," management has determined that the mandatory liquidation and
subsequent dissolution raises substantial doubt about our ability to continue as
a going concern. We have until January 8, 2023 to consummate an initial business
combination. It is uncertain that we will be able to consummate the Prime Focus
Business Combination, or if the Prime Focus Business Combination is not
consummated, an initial business combination by this time. If an initial
business combination is not consummated by this date, there will be a mandatory
liquidation and subsequent dissolution. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after January 8, 2023.
15
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term.
The holders of the (i) founder shares, which were issued in a private placement
prior to the closing of our initial public offering, (ii) placement warrants
which were issued in a private placement simultaneously with the closing of our
initial public offering and the placement shares underlying such placement
warrants, and (iii) placement warrants that may be issued upon conversion of
working capital loans will have registration rights to require us to register a
sale of any of its securities held by them pursuant to a registration rights
agreement. The holders of these securities are entitled to make up to three
demands, excluding short form demands, that we register such securities. In
addition, the holders have certain "piggy-back" registration rights with respect
to registration statements filed subsequent to our completion of the initial
business combination. We will bear the expenses incurred in connection with the
filing of any such registration statements.
On January 8, 2021, we paid a fixed underwriting discount of $0.20 per Unit,
$4,600,000 in the aggregate, in connection with our initial public offering.
Additionally, the underwriters will be entitled to a deferred underwriting
discount of 3.5%, or $8,050,000, of the gross proceeds of our initial public
offering upon the completion of the Prime Focus Business Combination or another
initial business combination.
Risk and Uncertainties
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus (the "COVID-19
outbreak"). In March 2020, the WHO classified the COVID-19 outbreak as a
pandemic, based on the rapid increase in exposure globally. The full impact of
the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak
on our financial position will depend on future developments, including the
duration and spread of the outbreak and related advisories and restrictions.
These developments and the impact of the COVID-19 outbreak on the financial
markets and the overall economy are highly uncertain and cannot be predicted. If
the financial markets and/or the overall economy are impacted for an extended
period, our financial position may be materially adversely affected.
Additionally, our ability to complete an initial business combination may be
materially adversely affected due to significant governmental measures being
implemented to contain the COVID-19 outbreak or treat its impact, including
travel restrictions, the shutdown of businesses and quarantines, among others,
which may limit our ability to have meetings with potential investors or affect
the ability of a potential target company's personnel, vendors and service
providers to negotiate and consummate an initial business combination in a
timely manner. Our ability to consummate the Prime Focus Business Combination
may also be dependent on the ability to raise additional equity and debt
financing, which may be impacted by the COVID-19 outbreak and the resulting
market downturn.
Our results of operations and our ability to complete the Prime Focus Business
Combination may also be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending and geopolitical instability, such
as the military conflict in the Ukraine. We cannot at this time fully predict
the likelihood of one or more of the above events, their duration or magnitude
or the extent to which they may negatively impact our business and our ability
to complete the Prime Focus Business Combination.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements and related disclosures in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies.
Derivative Warrant Liabilities
We account for the warrants as either equity-classified or liability-classified
instruments based on an assessment of the specific terms of the warrants and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC
815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the
Warrants are freestanding financial instruments pursuant to ASC 480, meet the
definition of a liability pursuant to ASC 480, and meet all of the requirements
for equity classification under ASC 815, including whether the Warrants are
indexed to our own ordinary shares and whether the holders of the Warrants could
potentially require "net cash settlement" in a circumstance outside of our
control, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of
issuance of the Warrants and as of each subsequent quarterly period end date
while the Warrants are outstanding. For issued or modified warrants that meet
all of the criteria for equity classification, such warrants are required to be
recorded as a component of additional paid-in capital at the time of issuance.
For issued or modified warrants that do not meet all the criteria for equity
classification, liability-classified warrants are required to be recorded at
their initial fair value on the date of issuance, and each balance sheet date
thereafter. Changes in the estimated fair value of such warrants are recognized
as a non-cash gain or loss on the statements of operations.
16
Class A Ordinary Shares subject to Possible Redemption
We account for Class A ordinary shares subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Class A ordinary shares subject to
mandatory redemption (if any) is classified as liability instruments and are
measured at fair value. Conditionally redeemable Class A ordinary shares
(including Class A ordinary shares that feature redemption rights that are
either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) is classified as
temporary equity. At all other times, Class A ordinary shares are classified as
shareholders' equity. Our Class A ordinary shares feature certain redemption
rights that are considered to be outside of our control and subject to the
occurrence of uncertain future events. Accordingly, as of March 31, 2022 and
December 31, 2021, 23,000,000 shares of Class A ordinary shares subject to
possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' equity (deficit) section of our condensed balance
sheets.
Net Income per Ordinary Share
We have two classes of shares, which are referred to as Class A ordinary shares
and Class B ordinary shares. Earnings and losses are shared pro rata between the
two classes of shares. The 7,886,667 potential ordinary shares for outstanding
warrants to purchase our shares were excluded from diluted earnings per share
for the three months ended March 31, 2022 and 2021 because the warrants are
contingently exercisable, and the contingencies have not yet been met. As a
result, diluted net income per ordinary share is the same as basic net income
per ordinary share for the periods presented.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
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