BULLPEN PARLAY ACQUISITION CO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended June 30, 2022
For the transition period from to
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (415 ) 649-6923
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which
registered
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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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
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.
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☐ Large accelerated filer
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☐ Accelerated filer
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☒
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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 ☒ No ☐
As of August 5, 2022, there were 23,000,000 Class A
ordinary shares, par value $0.0001 per share, and 5,750,000 Class B ordinary shares, par value $0.0001 per share, issued and outstanding,
respectively.
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
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3 |
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Item 1. Condensed Financial Statements
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7
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BULLPEN PARLAY ACQUISITION COMPANY
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JUNE 30,
2022
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DECEMBER 31,
2021
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(Unaudited)
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ASSETS
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Cash
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$
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$
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Prepaid expenses
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Total current assets
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Marketable securities held in Trust Account
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Total Assets
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$
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$
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LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION, AND SHAREHOLDERS’ DEFICIT
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Current liabilities:
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Accounts payable
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$
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$
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Due to related party
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Accrued expenses
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Total current liabilities
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Deferred underwriting fees payable
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Derivative warrant liabilities
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Total liabilities
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Commitments and Contingencies (Note 5)
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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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(
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)
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(
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)
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Total shareholders’ deficit
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(
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)
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(
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)
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Total Liabilities, Ordinary Shares Subject to Possible Redemption, and Shareholders’ Deficit
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$
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$
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The accompanying notes are an integral part of these condensed financial statements.
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For The Three Months Ended
June 30, 2022
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For The Three Months Ended June 30, 2021
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For The Six Months Ended June 30, 2022
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Formation and operating costs
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$
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$
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$
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Loss from operations
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(
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)
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(
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)
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(
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)
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Change in fair value of derivative warrant liabilities
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Gain on marketable securities (net), dividends and interest, held in Trust Account
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Compensation expense
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(
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)
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(
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(
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Net income (loss)
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$
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$
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(
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)
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$
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Weighted average shares outstanding of Class A ordinary shares subject to possible redemption, basic and diluted
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Basic and diluted net income (loss) per share, Class A subject to possible redemption
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$ |
$
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$ | ||||||||
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Weighted average shares outstanding of Class B non-redeemable ordinary shares, basic and diluted
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Basic and diluted net income (loss) per share, Class B non-redeemable ordinary shares
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$ | $ | ( |
) | $ | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
BULLPEN PARLAY ACQUISITION COMPANY
CONDENSED STATEMENT OF CHANGES IN ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’
DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
(Unaudited)
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Ordinary Shares Subject to Possible Redemption
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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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Class A
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Class B
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Shares
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Amount
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Shares
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Amount
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Balance as of January 1, 2022
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$
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$
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$
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(
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)
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$
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(
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Share based compensation to Directors
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-
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-
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Net income
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-
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-
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Balance as of March 31, 2022 (unaudited)
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$
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$
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$
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$
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(
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)
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$
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(
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Share based compensation to Directors
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-
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-
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Net income
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-
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-
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Balance as of June 30, 2022 (unaudited)
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$
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$
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$
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$
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(
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)
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$
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(
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)
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BULLPEN PARLAY ACQUISITION COMPANY
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE PERIOD FROM APRIL 1, 2021 (INCEPTION) THROUGH JUNE 30, 2021
(Unaudited)
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Ordinary Shares Subject to Possible Redemption
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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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Class A
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Class B
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Shares
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Amount
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Shares
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Amount
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Balance as of January 1, 2021
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$
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$
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$
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$
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Balance as of March 31, 2021 (unaudited)
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$
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$
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$
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$
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$
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Issuance of ordinary shares to Sponsor
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Share based compensation to Directors
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-
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Net loss
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-
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-
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(
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(
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Balance as of June 30, 2021 (unaudited)
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$
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$
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$
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$
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(
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$
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(
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The accompanying notes are an integral part of these unaudited condensed financial statements.
BULLPEN PARLAY ACQUISITION COMPANY
(Unaudited)
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For The Six
Months Ended
June 30, 2022
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For The Period From
April 1, 2021
(Inception) Through
June 30, 2021
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Cash Flows from Operating Activities
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Net income (loss)
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$
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$
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(
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Adjustments to reconcile net income (loss) to net cash used in operating activities:
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Compensation expense
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Gain on marketable securities (net), dividends and interest, held in Trust Account
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(
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Formation and operating expenses funded by note payable through Sponsor
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Change in fair value of derivative warrant liabilities
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(
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Formation and operating expenses paid in exchange for Founder Shares
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Changes in operating assets and liabilities:
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Prepaid and other assets
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Accounts payable
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(
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)
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Accrued expenses
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Net cash used in operating activities
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(
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)
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Cash Flows from Financing Activities
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Repayment of note payable and advances from related party
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(
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Offering costs paid
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(
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Net cash used in financing activities
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(
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)
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Net (decrease) increase in cash
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(
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)
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Cash - beginning of period
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Cash - end of period
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$
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$
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Supplemental disclosure of noncash investing and financing activities:
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Offering costs included in accounts payable
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$
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$
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Offering costs included in accrued expenses
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$
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(
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)
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$
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Offering costs paid through promissory note - related party
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$
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(
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)
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$
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The accompanying notes are an integral part of these unaudited condensed financial statements.
BULLPEN PARLAY ACQUISITION COMPANY
Note 1 — Description of Organization, Business Operations and Going Concern Considerations
Bullpen Parlay Acquisition Company (the “Company”) is a blank check company incorporated in Cayman Islands on April 1, 2021. The Company was formed for the purpose of
effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the
Company is subject to all of the risks associated with emerging growth companies.
As of June 30, 2022, the Company had not yet commenced any operations. All activity for the six months ended June 30, 2022 relates to the Company’s formation and the
preparation of the initial public offering (the “Initial Public Offering”) described below, and since the Initial Public Offering, the search for a prospective Initial 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 on investments from the proceeds derived from the Initial Public Offering. The Company has selected
December 31 as its fiscal year end.
The Company’s sponsor is BPAC Partners LLC, a Delaware limited liability corporation (the “Sponsor”). The registration statement for the Company’s Initial Public
Offering was declared effective on December 1, 2021. On December 7, 2021, the Company consummated its Initial Public Offering of 23,000,000
units (the “Units” and, with respect to the shares of Class A ordinary shares included in the Units offered, the “Public Shares”), including 3,000,000
additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 230,000,000 , and incurring $1,088,296 in
offering costs, $4,600,000 in upfront underwriting fees and $8,050,000 in deferred underwriting commissions (Note 5).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 11,700,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant to the Sponsor, generating proceeds of $11,700,000 (Note 4).
Upon the closing of the Initial Public Offering and the Private Placement, $234,600,000
($10.20 per Unit) of the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants were deposited into a trust
account (the “Trust Account”) in the United States at U.S. Bank National Association maintained by U.S. Bank, acting as trustee, to be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act, with a maturity of 185 days or less, or in any money market funds meeting certain conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S, government treasury
obligations until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and sale
of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80 % of the balance in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the signing a
definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50 % or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment
Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its holders of the outstanding Public Shares (the “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 shareholders meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with an Initial Business Combination,
the Company may seek shareholder approval of a Business Combination at a meeting called for such purpose at which public shareholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company
will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either immediately prior to or
upon such consummation of a Business Combination and, if the Company seeks shareholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the
Company’s Amended and Restated Certificate of Incorporation provides that, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under
Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 15 %
or more of the Public Shares without the Company’s prior written consent.
The Public Shareholders will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.20 per share, plus 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 Public Shareholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the representative of the underwriters (as discussed in Note 5).
There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. These shares of Class A ordinary shares were recorded at a redemption value and classified as temporary equity upon the
completion of the Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company
will, pursuant to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (the “SEC”), and file tender offer documents containing substantially the same
information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor agreed (a) to vote its Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial
Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s amended and restated certificate of incorporation with respect to the Company’s pre-Business Combination activities prior to the consummation of a
Business Combination unless the Company provides dissenting Public Shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) and Private
Placement Warrants (including underlying securities) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business
Combination if the Company does not seek shareholder approval in connection therewith) or a vote to amend the provisions of the amended and restated certificate of incorporation relating to shareholders’ rights of pre-Business Combination activity
and (d) that the Founder Shares and Private Placement Warrants (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be
entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
If the Company is unable to complete a Business Combination within 18 months from the closing of the Initial Public Offering, or June 7, 2023 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but no 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 earned on the funds held in the Trust Account and not previously released to the Company to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights
as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and
the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirement of applicable law. The
representative of the underwriters agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such
amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for
distribution will be less than the Initial Public Offering price per Unit ($10.00 ).
The Sponsor agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to
the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the
lesser of (i) $10.20 per public share and (ii) the actual amount per public share held in the Trust Account as of the day of liquidation of
the Trust Account, if less than $10.20 per share due to reductions in the value of the trust assets, less taxes payable, provided that such
liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under
the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Sponsor to
reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations. None of the Company’s officers or directors will indemnify the Company for claims
by third parties including, without limitation, claims by vendors and prospective target businesses.
Risks 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. Management continues to evaluate the impact of the COVID-19 outbreak on the
industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily
determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The credit and financial markets have experienced extreme volatility and disruptions due to the current conflict between Ukraine and Russia. The conflict is expected to
have further global economic consequences, including but not limited to the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates and
uncertainty about economic and political stability. In addition, the United States and other countries have imposed sanctions on Russia which increases the risk that Russia, as a retaliatory action, may launch cyberattacks against the United States,
its government, infrastructure and businesses. Any of the foregoing consequences, including those we cannot yet predict, may cause our business, financial condition, results of operations and the price of our ordinary shares to be adversely affected.
Basis of Presentation
The accompanying condensed financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and
regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of
management, the accompanying 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. Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2021 as filed with
the SEC on March 31, 2022.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth 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 an 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 that is neither an emerging growth company nor an emerging
growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Going Concern Considerations and Liquidity
On a
routine basis, the Company assesses going concern considerations in accordance with FASB ASC 205-40 “Presentation of Financial Statements— Going Concern”. As of June 30, 2022, the Company had a cash balance of $849,776 , and a working capital surplus of $364,315 ,
and the Company has access to working capital loans from the Sponsor, which is described in Note 4, to cover the working capital deficit. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its
financing and acquisition plans. If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence, and negotiating a Business Combination are less than the actual amount necessary to do so, the Company
may have insufficient funds available to operate its business prior to an initial business combination. The liquidation deadline for the Company is also within the next twelve months if an initial Business Combination is not consummated. The
Company cannot assure that its plans to consummate an initial Business Combination will be successful.
As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with 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 liquidity conditions raise substantial doubt about the Company’s ability to continue as a going concern
through approximately one year from the date of filing. These unaudited condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
Note 2 — Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires 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. 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 $849,776 of cash and no cash equivalents as
of June 30, 2022. The company had $2,504,134 of cash and no cash equivalents as of December 31, 2021.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may
exceed the federal depository insurance coverage of $250,000, and investments held in Trust Account. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Marketable Securities Held in Trust Account
At June 30, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. Gains and losses resulting from the
change in fair value of these investments are included in Interest on marketable securities held in the Trust Account in the accompanying statement of operations.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants
at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements). These tiers include:
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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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
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•
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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.
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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.
Fair Value of Financial Instruments
As of June 30, 2022 and December 31, 2021, the carrying values of cash, accounts payable, and accrued expenses, which qualify as financial instruments under the FASB ASC
820, “Fair Value Measurements and Disclosures,” approximate the carrying amounts represented in the balance sheet.
The fair value of warrants issued in connection with the Initial Public Offering were initially measured at fair value using a Monte Carlo simulation model for the
Public Warrants and Private Placement Warrants. The fair value of the Public Warrants are now measured based on the listed market price of the Public Warrants since they began trading on January 24, 2022. The
fair value of the Private Placement Warrants has subsequently been measured by reference to the trading price of the Public Warrants, which is considered to be a Level 2 fair value measurement.
Offering Costs
Offering costs consist of legal, accounting, underwriting and other costs incurred through the condensed balance sheet date that are directly related to the Initial
Public Offering. Upon the completion of the Initial Public Offering, the offering costs were allocated using the relative fair values of the company ordinary shares and its Warrants. The costs allocated to Warrants were recognized in other expenses
and those related to the Company’s ordinary shares were charged to temporary equity.
Class A Ordinary Shares Subject to Possible Redemption
All of the Class A ordinary shares sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such Public
Shares in connection with the Company’s liquidation if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of
incorporation. In accordance with ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all shares of Class A ordinary
shares have been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
Net Income (Loss) Per Ordinary Shares
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per ordinary shares is computed by
dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placements to purchase Class A
ordinary shares in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per share is the same as basic loss per share for the period
presented.
The Company has two classes of ordinary shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata
between the two classes of ordinary shares. Net income per share, basic and diluted for Class A ordinary shares is calculated by dividing the pro rata allocation of net loss to shares of Class A ordinary shares for the six months ended June 30, 2022
by the weighted average number of Class A ordinary shares outstanding for the period. Net income per share basic and diluted for Class B ordinary shares is calculated by dividing the pro rata allocation of net loss to Class B
ordinary shares for the six months ended June 30, 2022 by the weighted average number of Class B ordinary shares outstanding for the period.
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For The
Three Months
Ended June 30, 2022
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For The
Three
Months
Ended June 30, 2021
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For The Six Months
Ended June 30, 2022
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Redeemable Class A Ordinary Shares
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Numerator: Net income (loss) allocable to Redeemable Class A Ordinary Shares
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Net income (loss) allocable to Redeemable Class A Ordinary Shares
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$
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Denominator: Weighted Average Share Outstanding, Redeemable Class A Ordinary Shares
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Basic and diluted weighted average shares outstanding, Redeemable Class A
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Basic and diluted net income (loss) per share, Class A subject to possible redemption
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$
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Non-Redeemable Class B Ordinary Shares
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Numerator: Net income (loss) allocable to non-redeemable Class B Ordinary Shares
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Net income (loss) allocable to non-redeemable Class B Ordinary Shares
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$
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$ | ( |
) |
$
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Denominator: Weighted Average Non-Redeemable Class B Ordinary Shares
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Basic and diluted net income (loss) per share, Class B non-redeemable ordinary shares
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$ | $ | ( |
) | $ | |||||||
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge its exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s
financial instruments, including issued warrants to purchase its Class A ordinary shares, 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.
The Company issued 11,500,000 warrants to purchase Class
A ordinary shares to investors in the Company’s Initial Public Offering and simultaneously issued 11,700,000 Private Placement Warrants.
All of the Company’s 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.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the
expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and
measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no no
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 period presented.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update No. 2020-06 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 adopted the new standard upon incorporation and the impact to the Company’s balance sheet, statement of
operations and cash flows was not material.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material
effect on the Company’s financial statement.
Note 3 — Initial Public Offering
Pursuant to the Initial Public Offering, the Company sold 23,000,000 Units at
a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A ordinary shares and of one Public Warrant. Each whole Public Warrant
entitles the holder to purchase one share of Class A ordinary shares at an exercise price of $11.50 per share.
Note 4 — Related Party Transactions
Class B Founder Shares
On April 8, 2021, the Sponsor paid $25,000 , to cover certain offering costs in
consideration for 5,750,000 Class B ordinary shares, par value $0.0001 (the “Founder Shares”). Up to 750,000 Founder Shares are
subject to forfeiture by the Sponsor depending on the extent to which the underwriter’s over-allotment option is exercised. At the close of the Initial Public Offering, the underwriters exercised their overallotment option in full and these founder
shares are no longer subjected to forfeitures as of December 7, 2021.
On April 27, 2021, the Sponsor transferred 69,000 Founder Shares to Bertrand
Navarrete, former Chief Operating Officer as part of Mr. Navarrete’s employment agreement at the original issue price, pursuant to a securities assignment agreement. The Company has recognized this transfer as a compensation expense in accordance
with SEC Staff Accounting Bulletin 5T and ASC Topic 718 Compensation – Stock Compensation. The fair value of the Founder Shares issued in this arrangement was determined using the implied stock price as of the date of Initial Public Offering of the
Company’s Class A ordinary shares and the probability of the success of the Business Combination.
On July 15, 2021, Bertrand Navarrete resigned as Chief Operating Officer of the Sponsor and agreed to serve as an advisor of the Company. On July 26, 2021 the Sponsor modified certain terms
of the Securities Assignment Agreement with Mr. Navarrete to match other advisors’ agreements. The Company expensed $117,414 in costs
associated with the transfer of the Founder Shares during the six-months ended June 30, 2022.
On June 17, 2021, the Sponsor transferred a total of 189,750 Founders Shares
to the following who were expected to be advisors: iGaming capital LLC, Brett Calapp, Les Ottolenghi, Binion SPAC Investors, LLC, Manu Gambhir, Derrick Brooks, Jacob Kleiner and Tom Griffiths. The Company has recognized this transfer as a
compensation expense in accordance with SEC Staff Accounting Bulletin 5T and ASC Topic 718 Compensation – Stock Compensation. The fair value of the Founder Shares issued in this arrangement was determined using the implied stock price as of the date
of Initial Public Offering of the Company’s Class A ordinary shares and the probability of the success of the Business Combination. The Company expensed $225,043
in costs associated with the transfer of the Founder Shares during the six months ended June 30, 2022.
On July 13, 2021, the Sponsor transferred 20,000 Founder Shares to Maurice
Werdegar through a transfer of shares, pursuant to and on the terms set out in certain securities assignment agreements. The Company has recognized this transfer as a compensation expense in accordance with SEC Staff Accounting Bulletin 5T and ASC
Topic 718 Compensation – Stock Compensation. The fair value of the Founder Shares issued in this arrangement was determined using the implied stock price as of the date of Initial Public Offering of the Company’s Class A ordinary shares and the
probability of the success of the Business Combination.
On November 3, 2021, an aggregate of 77,500 Founders Shares were transferred
back to the Sponsor from Maurice Werdegar and Binion SPAC Investors, LLC.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 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 .
Each warrant is exercisable to purchase one share of the
Company’s Class A ordinary shares at a price of $11.50 per share. Certain proceeds from the sale of the Private Placement Warrants were
added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund
the redemption of the Public Shares (subject to the requirement of applicable law) and the Private Placement Warrants will expire worthless.
Promissory Note
The Sponsor agreed to loan the Company an aggregate of up to $300,000
to be used for a portion of the expenses of the Initial Public Offering. The loan was non-interest bearing, unsecured and due at the earlier of December 31, 2021 or the closing of the Initial Public Offering. The loan was repaid out of the offering
proceeds that were allocated to the payment of offering expenses. As of June 30, 2022, the Company does no t have a balance under the
promissory note.
Due to Related Party
As of June 30, 2022, the Company has a balance of $0 in
due to related party. As of December 31, 2021, the Company has a balance of $173,947 in due to related party. This balance was made up of
the administrative fees noted in administrative services agreement footnote.
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 six months ended June 30, 2022, the Company incurred $12,498 in
administrative fees under this arrangement.
Working Capital Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or
certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“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 consummation of
a Business Combination or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of
the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.
As of June 30, 2022 and December 31, 2021, the Company had no
Note 5 — Commitments & Contingencies
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans), will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to the
consummation of the Initial Public Offering. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement will provide that we will not be required to effect or permit any
registration or cause any registration statement to become effective until termination of the applicable lock-up period. 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 to
purchase up to 3,000,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts
and commissions. The underwriters exercised the option in full on December 7, 2021.
The underwriters were entitled to a cash underwriting discount of 2.0 %
of the gross proceeds of the Initial Public Offering, or $4,600,000 in the aggregate, which was paid upon closing of the Initial Public
Offering. In addition, the representative of the underwriters will be entitled to a deferred fee of 3.5 % of the gross proceeds of the
Initial Public Offering, or $8,050,000 . The deferred fee will become payable to the representative of the underwriters from the amounts
held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 6 — Derivative Warrant Liabilities
The Company accounted for the 23,200,000 Warrants issued
in connection with the Initial Public Offering (the 11,500,000 of Public Warrants and the 11,700,000 of Private Placement Warrants) in accordance with the guidance contained in ASC 815-40 Derivatives and Hedging — Contracts in
Entity’s Own Equity. Such guidance provides that, because the Warrants do not meet the criteria for equity treatment thereunder, each Warrant must be recorded as a liability. Accordingly, the Company classifies each warrant as a liability at
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.
Additionally, certain adjustments to the settlement amount of the Private Placement Warrants are based on a variable that is not an input to the fair value of a
“fixed-for-fixed” option as defined under ASC 815-40, and thus the Private Placement Warrants are not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting.
The accounting treatment of these derivative financial instruments required that the Company record a derivative liability upon issuance of the warrants at the closing
of the Initial Public Offering. Accordingly, the Company classified each warrant as a liability at its fair value. The Public Warrants allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined with the
assistance of a professional independent valuation firm. The warrant 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 of the warrants 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
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public
Warrants will trade. The Public Warrants will become exercisable 30 days after the completion of a Business Combination provided that the
Company has an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants and a current prospectus relating to them is available and such shares are registered, qualified or
exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or holders are permitted to exercise their warrants on a cashless basis under certain circumstances as a result of (i) the Company’s failure to
have an effective registration statement by the 60 th
business day after the closing of the Initial Business Combination or (ii) a notice of redemption described under “Redemption of warrants when the price per share of Class A ordinary shares equals or exceeds $10.00 ”). The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of its Initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the Class A
ordinary shares issuable upon exercise of the warrants and will use its commercially reasonable efforts to cause the same to become effective within 60
business days after the closing of the Company’s Initial Business Combination and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed. If the shares issuable upon exercise of the
warrants are not registered under the Securities Act in accordance with the above requirements, the Company will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a
cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the
exercising holder, or an exemption from registration is available. Notwithstanding the above, if the Company’s Class A ordinary shares are at the time of any exercise of a 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, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its commercially reasonable efforts to register or
qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The warrants have an exercise price of $11.50 per share,
subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or
liquidation. 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 the Initial Business Combination at an issue price or effective issue
price of less than $9.20 per share of Class A ordinary shares (with such issue price or effective issue price to be determined in good
faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued
Price”), (y) the aggregate gross proceeds from such issuances represent more than 60 % of the total equity proceeds, and interest thereon,
available for the funding of the Initial Business Combination on the date of the consummation of the Initial Business Combination (net of redemptions) and (z) the volume weighted average trading price of Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the Initial Business Combination (such price, the
“Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115 % of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices described under “Redemption of warrants for Class A
ordinary shares” and “Redemption of warrants for cash” will be adjusted (to the nearest cent) to be equal to 100 % and 180 % of the higher of the Market Value and the Newly Issued Price, respectively.
The Private Placement Warrants are identical to the Public Warrants, except that, so long as they are held by the Sponsor or its permitted transferees, (i) they will not
be redeemable by the Company, (ii) they (including the Class A ordinary shares issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the completion of the Initial Business Combination, (iii) they may be exercised by the holders on a cashless basis and (iv) are subject to
registration rights.
If a tender offer, exchange or redemption offer shall have been made to and accepted by the holders of the Class A ordinary shares and upon completion of such offer, the
offeror owns beneficially more than 50 % of the outstanding Class A ordinary shares the holder of the warrant shall be entitled to receive
the highest amount of cash, securities or other property to which such holder would actually have been entitled as a shareholder if such warrant had been exercised, accepted such offer and all of the Class A ordinary shares held by such holder had
been purchased pursuant to the offer. If less than 65 % of the consideration receivable by the holders of the Class A ordinary shares in
the applicable event is payable in the form of common equity in the successor entity that is listed on a national securities exchange or is quoted in an established over-the-counter market, and if the holder of the warrant properly exercises the
warrant within thirty days following the public disclosure of the consummation of the applicable event by the Company, the warrant price shall be reduced by an amount equal to the difference (but in no event less than zero) of (i) the warrant price
in effect prior to such reduction minus (ii) (A) the Per Share Consideration (as defined in the warrant agreement) minus (B) the value of the warrant based on the Black-Scholes Warrant Value for a Capped American Call on Bloomberg Financial Markets.
Redemption of warrants when the price per share of Class A ordinary shares equals or exceeds $18.00 : Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement
Warrants):
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in whole and not in part;
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at a price of $
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•
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upon a minimum of
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•
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if, and only if, the last reported sale price (the “closing price”) of Class A ordinary shares equals or exceeds $
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The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the Class A ordinary shares
issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30 -day
redemption period. Any such exercise would not be on a cashless basis and would require the exercising warrant holder to pay the exercise price for each warrant being exercised.
Redemption of warrants when the price per share of Class A ordinary shares equals or exceeds $10.00 : Once the warrants become exercisable, the Company may redeem the outstanding warrants:
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in whole and not in part;
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•
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at a price of $
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•
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if, and only if, the closing price of Class A ordinary shares equals or exceeds $
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•
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if the closing price of the Class A ordinary shares for any
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In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and
the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with
the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 7 — Shareholders’ Deficit
Preference Shares — The Company is authorized to issue 1,000,000
shares of preference shares, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be
determined from time to time by the Company’s board of directors. As of June 30, 2022 and December 31, 2021 there were no
Class A ordinary shares — The Company is authorized to issue 200,000,000
Class A ordinary shares with a par value of $0.0001 per share. As of June 30, 2022 and December 31, 2021, there were no 23,000,000
Class B ordinary shares — The Company is authorized to issue 20,000,000
Class B ordinary shares with a par value of $0.0001 per share. As of June 30, 2022 and December 31, 2021, 5,750,000
Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the
Company’s shareholders, except as required by law or stock exchange rule; provided that only holders of the Class B ordinary shares shall have the right to vote on the election of the Company’s directors prior to the initial Business Combination.
Note 8 — Fair Value Measurements
The following table presents information about the Company’s financial liabilities that are measured at fair value on a recurring basis as of June
30, 2022 by level within the fair value hierarchy:
|
Level 1
|
Level 2 | Level 3 | Total | |||||||||||||
|
Assets
|
||||||||||||||||
|
Marketable securities held in Trust Account
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
|
Liabilities:
|
||||||||||||||||
|
Public Warrants
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Private Placement Warrants
|
|
|
|
|
||||||||||||
|
Total liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The following table presents the fair value hierarchy for liabilities measured at fair value on a recurring basis as of December 31, 2021:
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Assets
|
||||||||||||||||
|
Marketable securities held in Trust Account
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
|
Liabilities:
|
||||||||||||||||
|
Public Warrants
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Private Placement Warrants
|
|
|
|
|
||||||||||||
|
Total liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. For the six months ended June 30, 2022, the public and
private warrants were transferred out of level 3 into level 1 and level 2, respectively.
The change in the fair
value of the derivative warrant liabilities measured with Level 3 inputs for the period from April 1, 2021 (inception) through June 31, 2022 is summarized as follows:
|
Derivative warrant liabilities at April 1, 2021 (inception)
|
$
|
|
||
|
Issuance of Public and Private Warrants - Level 3 measurements
|
|
|||
|
Change in fair value of derivative warrant liabilities with Level 3 inputs
|
(
|
)
|
||
|
Derivative warrant liabilities at December 31, 2021 with Level 3 inputs
|
$
|
|
||
|
Transfer out of level 3
|
(
|
)
|
||
|
Derivative warrant liabilities at June 30, 2022 with Level 3 inputs
|
$
|
|
The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value
using a Monte Carlo simulation model. The fair value of Public Warrants issued in connection with the Initial Public Offering have been measured based on the listed market price of such warrants, a Level 1 measurement, since January 24, 2022. The
fair value of the Private Placement Warrants has subsequently been measured by reference to the trading price of the Public Warrants, which is considered to be a Level 2 fair value measurement. The Company recognized a charge to the statement of
operations resulting from a decrease in the fair value of liabilities of $12,064,000 presented as change in fair value of derivative
warrant liabilities on the accompanying statement of operations.
|
Public
Warrant |
Private
Warrant
|
Total
|
||||||||||
|
Fair value at January 1, 2022
|
$
|
|
$
|
|
$
|
|
||||||
|
Change in fair value
|
|
|
|
|
|
|
||||||
|
Fair value as of June 30, 2022
|
$
|
|
$
|
|
$
|
|
||||||
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement:
|
As of December 31, 2021
|
||||
|
Volatility
|
|
%
|
||
|
Underlying stock price
|
$
|
|
||
|
Expected time until merger (years)
|
|
|||
|
Risk-free rate
|
|
%
|
||
|
Dividend yield
|
|
%
|
||
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date financial statements were issued. The Company did not
identify any subsequent events that would have required adjustment or disclosure in the financial statements.
PART II
| ITEM 2. |
Management’s Discussion and Analysis for Financial Condition and Results of Operations
|
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.
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 June 30, 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 June 30, 2022, we had a net income of $4,051,359, which consists of formation and operating costs of $339,900, gain on fair value of derivative warrant liabilities of
$4,407,971, gain on marketable securities of $155,463 and share based arrangement with directors’ expenses of $172,175.
For the six months ended June 30, 2022, we had a net income of $11,188,659, which consists of formation and operating costs of $689,977, gain on fair value of derivative warrant liabilities of
$12,064,000, gain on marketable securities of $157,094 and share based arrangement with directors’ expenses of $342,458.
Liquidity and Capital Resources
On a routine basis, the Company assesses going concern considerations in accordance with FASB ASC 205-40 “Presentation of Financial Statements— Going Concern”. As of June 30, 2022, the Company had a cash balance of
$849,776, and a working capital surplus of $364,315, and the Company has access to working capital loans from the Sponsor, which is described in Note 4, to cover the working capital deficit. Further, the Company has incurred and expects to
continue to incur significant costs in pursuit of its financing and acquisition plans. If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence, and negotiating a Business Combination are less
than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to an initial business combination. The liquidation deadline for the Company is also within the next twelve months if an
initial Business Combination is not consummated. The Company cannot assure that its plans to consummate an initial Business Combination will be successful.
As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with 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 liquidity conditions raise substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date of filing. These
unaudited condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going
concern.
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 June 30, 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.
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 six months ended June 30, 2022, the Company incurred $12,489 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 June 30, 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.
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 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.
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.
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk
|
As of June 30, 2022, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust
Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we
believe there will be no associated material exposure to interest rate risk.
| Item 4. |
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
Disclosure controls 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 Securities Exchange Act of 1934, as amended (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 Chief Executive Officer (who serves as our principal executive officer), to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based upon their evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) were not effective due to a material weakness in the Company’s controls over reconciliations during the financial statement close and disclosure review process.
Management has implemented remediation steps to improve our disclosure controls and procedures and our internal control over
financial reporting process.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls
and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must
reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures
can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
In light of the material weakness described above, we plan to enhance our processes to identify and record potential accruals. Our plans at this time include increased communication with
third-party service providers and additional procedures to identify and review subsequent invoices and disbursements. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives
will ultimately have the intended effects.
| Item 1. |
Legal Proceedings.
|
None.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds.
|
The registration statement for the Company’s Initial Public Offering was declared effective on December 1, 2021. On December 7, 2021, the Company consummated its Initial Public Offering of 23,000,000 units (the
“Units”), including 3,000,000 additional Units to cover over-allotments, at $10.00 per Unit, generating gross proceeds of $230,000,000, and incurring $1,088,296 in offering costs, $4,600,000 in upfront underwriting fees and $8,050,000 in deferred
underwriting commissions.
| Item 3. |
Defaults Upon Senior Securities.
|
None.
| Item 4. |
Mine Safety Disclosures.
|
Not Applicable.
| Item 5. |
Other Information.
|
None.
| Item 6. |
Exhibits
|
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit Index
|
Exhibit
Number
|
Description
|
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive and Principal Financial Officer.
|
||
|
Section 1350 Certification of the Company’s Principal Executive and Principal Financial Officer. The information contained in this Exhibit shall not be deemed filed with the Securities
and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended.
|
||
|
101.INS**
|
XBRL Instance Document
|
|
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.SCH**
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB**
|
XBRL Taxonomy Extension Labels Linkbase Document
|
|
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
104
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
*Filed herewith
**Furnished herewith
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
BULLPEN PARLAY ACQUISITION COMPANY
|
||
|
By:
|
/s/ David VanEgmond
|
|
|
David VanEgmond
|
||
|
Chief Executive Officer and Director
|
||
|
Date:
|
August 5, 2022
|
|
27
TABLE OF CONTENTS
Note 1 Description Of Organization, Business Operations and Going Concern ConsiderationsNote 2 Summary Of Significant Accounting PoliciesNote 3 Initial Public OfferingNote 4 Related Party TransactionsNote 5 Commitments ContingenciesNote 6 Derivative Warrant LiabilitiesNote 7 Shareholders DeficitNote 8 Fair Value MeasurementsNote 9 Subsequent EventsPart IIItem 2. Management S Discussion and Analysis For Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits