Filing identity and period
The supplied filing is ISOS Acquisition Corporation’s Form 10-Q for the quarter ended September 30, 2021, filed November 15, 2021—not a Lucky Strike Entertainment Corp. filing or a 2021 Q1 report. It describes a blank-check company (SPAC), not an operating bowling business. Accordingly, the financial results below are ISOS’s and should not be attributed to Lucky Strike.
Business context
ISOS had not commenced operations and reported no operating revenue. Its activities related to formation, its March 2021 IPO, and pursuing a business combination. On July 1, 2021, ISOS agreed to combine with Bowlero Corp.; Bowlero was to merge into ISOS, with the surviving company expected to be renamed Bowlero and trade as BOWL. Bowlero shareholders were to receive a mix of cash, common shares, and preferred shares. The filing does not report operating results for Bowlero.
Financial results and liquidity
| Metric | Three months ended September 30, 2021 | Nine months ended September 30, 2021 |
|---|---|---|
| Operating expenses | $785,494 | $1,260,847 |
| Net loss | $8,257,112 | $6,370,860 |
| Net loss per share | $0.26 Class A; $0.25 Class B | $0.25 Class A and Class B |
| Trust interest income | $3,848 | $7,389 |
The quarterly loss primarily reflected noncash fair-value losses of $5.27 million on warrants and $2.21 million on the forward purchase agreement (FPA). For the nine-month period, those losses were $0.81 million and $3.67 million, respectively, plus $638,847 of warrant issuance costs. Revenue and operating margins are not applicable because ISOS had no operations.
At September 30, cash outside the trust was $1.22 million and reported working capital was approximately $1.2 million. The trust held $254.85 million in marketable securities. Total liabilities were $32.60 million, including $19.23 million of warrant liabilities, $4.23 million of FPA liability, and $8.92 million of deferred underwriting fees. The filing reports no outstanding borrowings under working-capital loans; the $125,267 sponsor promissory note had been repaid in March 2021. Operating cash use for the nine months was $1.18 million. No revenue, cash-flow, margin, or debt figures for Lucky Strike are provided.
Changes, unusual items, and risks
- Restatement: ISOS restated previously issued financial statements, classifying all 25,483,700 redeemable public Class A shares as temporary equity rather than partly as permanent equity, and revising earnings-per-share allocations. The company said the restatement did not change total assets, liabilities, or operating results; it was a presentation and EPS change.
- Control weakness: Management concluded disclosure controls were ineffective at quarter-end because of a material weakness in accounting for complex financial instruments, including warrant classification and redeemable shares. It described remediation steps but gave no assurance they would be effective.
- Liquidity outlook: Management believed available working capital and borrowing capacity would meet needs through the earlier of the business combination or one year from the filing. Sponsor or insider working-capital loans were optional, not committed.
- Transaction and completion risks: The Bowlero transaction remained subject to completion; the filing provides no assurance it would close. Public shareholders had redemption rights, and if ISOS failed to complete a business combination within 24 months of the IPO closing, it generally would redeem public shares and liquidate, subject to applicable requirements.
- COVID-19: Management said possible effects on financial position, results, cash flows, and the Bowlero transaction could not be determined; no related adjustments were recorded.
- Valuation uncertainty: Private warrants and the FPA were Level 3 fair-value liabilities based on models and significant unobservable inputs, so estimates could change materially. No legal proceedings were reported.
Most important facts to verify
- Confirm the intended issuer and period: this is an ISOS Acquisition Corporation Q3 2021 filing, not a Lucky Strike filing or Q1 report.
- Review the Bowlero transaction terms, approval status, closing conditions, redemption terms, and final consideration in the relevant transaction filings.
- Assess the financial-statement restatement, material weakness, and any subsequent remediation or auditor disclosures.
- Check the latest cash available outside the trust, transaction funding needs, and whether any sponsor or other financing was actually committed.
- Review subsequent filings for changes in warrant and FPA valuations, transaction liabilities, and the company’s ultimate business-combination outcome.