References to the "Company," "Adit EdTech Acquisition Corp.," "our," "us" or
"we" refer to Adit EdTech Acquisition Corp. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the unaudited condensed consolidated financial
statements and the notes thereto contained elsewhere in this Quarterly Report on
Form 10-Q. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and
uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a blank check company incorporated in Delaware and formed for the purpose
of effecting an initial business combination with one or more target businesses.
We intend to effectuate our initial business combination using cash from the
proceeds of our initial public offering (the "IPO") and the private placement of
the warrants consummated simultaneous with the IPO (the "Private Placement
Warrants"), our stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our common stock in a business combination:
• may subordinate the rights of holders of our common stock if preferred
stock is issued with rights senior to those afforded our common stock;
• may subordinate the rights of holders of our common stock if preferred
stock is issued with rights senior to those afforded our common stock;
• could cause a change in control if a substantial number of shares of our
common stock is issued, which may affect, among other things, our ability
to use our net operating loss carry forwards, if any, and could result in
the resignation or removal of our present management team;
• may have the effect of delaying or preventing a change of control of us
by diluting the stock ownership or voting rights of a person seeking to
obtain control of us; and
• may adversely affect prevailing market prices for our common stock and/or
warrants.
Similarly, if we issue debt securities, it could result in:
• default and foreclosure on our assets if our operating revenues after an
initial business combination are insufficient to repay our debt
obligations;
• acceleration of our obligations to repay the indebtedness even if we make
all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any, if
the debt security is payable on demand;
• our inability to obtain necessary additional financing if the debt
security contains covenants;
• restricting our ability to obtain such financing while the debt security
is outstanding;
22
--------------------------------------------------------------------------------
• our inability to pay dividends on our common stock;
• using a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available for dividends
on our common stock if declared, our ability to pay expenses, make
capital expenditures and acquisitions, and fund other general corporate
purposes;
• limitations on our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry
and competitive conditions and adverse changes in government regulation;
• limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements and
execution of our strategy; and
• other purposes and other disadvantages compared to our competitors who
have less debt.
On January 14, 2021, we completed our IPO of 24,000,000 units (the "Units").
Each Unit consists of one share of our common stock and one-half of one
redeemable warrant. Each whole warrant entitles the holder thereof to purchase
one share of common stock at an exercise price of $11.50 per share, subject to
adjustment. The Units were sold at an offering price of $10.00 per Unit,
generating gross proceeds of $240,000,000.
On January 14, 2021, simultaneously with the consummation of the IPO, we
completed a private placement of an aggregate of 6,550,000 Private Placement
Warrants at a price of $1.00 per Private Placement Warrant, generating gross
proceeds of $6,550,000.
On January 15, 2021, the IPO underwriters exercised their over-allotment option
in full, and, on January 19, 2021, the IPO underwriters purchased an additional
3,600,000 Units at an offering price of $10.00 per Unit, generating gross
proceeds of $36,000,000. Simultaneously with the closing of the sale of
additional Units, we sold an additional 720,000 Private Placement Warrants at a
price of $1.00 per Private Placement Warrant, generating gross proceeds of
$720,000. As of January 19, 2021, an aggregate amount of $276,000,000 of the net
proceeds from the IPO (including the additional 3,600,000 Units and additional
720,000 Private Placement Warrants) were deposited in our trust account
established in connection with the IPO (the "Trust Account").
We paid a total of approximately $5.5 million in underwriting discounts and
commissions and approximately $0.6 million for other costs and expenses related
to the IPO.
We will have until January 14, 2023 to complete an initial business combination.
However, we intend to solicit votes at a special meeting of our stockholders
(the "Extension Meeting"), at which we plan to seek the approval of our
stockholders of a proposal to extend the date by which we must complete an
initial business combination up to six times at the election of our board of
directors for an additional one month each time for a maximum of six one-month
extensions (such proposal the "Extension Proposal" and such extended date, as
applicable, the "Extension Date"). We intend to provide holders of shares
purchased in the IPO with the ability to redeem such shares in connection with
the Extension Meeting. If we are unable to complete an initial business
combination by January 14, 2023 or by the applicable Extension Date if the
Extension Proposal is approved (the period from the consummation of the
Company's IPO to such date, 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 shares
purchased in the IPO, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the Trust Account including interest (which
interest shall be net of taxes payable, and less up to $100,000 of interest to
pay dissolution expenses), divided by the number of then outstanding shares
purchased in the IPO, which redemption will completely extinguish rights of
holders of such shares as stockholders (including the right to receive further
liquidating distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and our board of directors, dissolve and
liquidate, subject in the case of clauses (ii) and (iii) to our obligations
under Delaware law to provide for claims of creditors and the requirements of
other applicable law. There will be no redemption rights or liquidating
distributions with respect to our warrants, which will expire worthless if we
fail to complete an initial business combination within the Combination Period.
23
--------------------------------------------------------------------------------
Results of Operations
Our entire activity since inception up to September 30, 2022 relates to our
formation, the IPO and, since the closing of the IPO, a search for a business
combination candidate. We will not be generating any operating revenues until
the closing and completion of our initial business combination, at the earliest.
For the three months ended September 30, 2022, we had net income of
approximately $676,138 million, which consisted of change in fair value of
warrant liability of approximately $38,000 and interest earned on marketable
securities held in the Trust Account of approximately $1.3 million, offset by
approximately $0.4 million in formation and operating costs and provision for
income taxes of approximately $294,065 million.
For the nine months ended September 30, 2022, we had net income of approximately
$625,385, million, which consisted of change in fair value of warrant liability
of approximately $4.7 million and interest earned on marketable securities held
in the Trust Account of approximately $1.7 million, offset by approximately $1.5
million in formation and operating costs and provision for income taxes of
approximately $316,701. million.
For the three months ended September 30, 2021, we had net loss of approximately
$0.4 million, which consisted of approximately $0.5 million in formation and
operating costs, offset by approximately $28,000 in interest earned on
marketable securities held in the Trust Account.
For the nine months ended September 30, 2021, we had net loss of approximately
$0.6 million which consisted of approximately $0.7 million in formation and
operating costs, offset by approximately $0.1 million in interest earned on
marketable securities held in the Trust Account.
Liquidity and Capital Resources
As of September 30, 2022, we had approximately $31,000 in our operating bank
account, and a working capital deficit of approximately $3.7 million, excluding
the franchise tax payable that can be paid through the interest income earned on
Trust Account.
Prior to the completion of the IPO, our liquidity needs had been satisfied
through a capital contribution from the Sponsor of $25,000 in exchange for
shares of our common stock, to cover certain offering costs, and a loan under an
unsecured promissory note from the Adit EdTech Sponsor, LLC (the "Sponsor") of
$150,000. Subsequent to the consummation of the IPO and the concurrent private
placement, our liquidity needs have been satisfied through the proceeds from the
consummation of the Private Placement Warrants not held in the Trust Account.
In addition, in order to finance transaction costs in connection with a business
combination, our Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, provide us working capital
loans.
On August 6, 2021, we issued an unsecured promissory note to the Sponsor in
connection with a working capital loan made by the Sponsor to us pursuant to
which we may borrow up to $300,000 in the aggregate. The note is non-interest
bearing and payable on the earlier to occur of (i) January 14, 2023 or (ii) the
effective date of a business combination. Any amounts outstanding under the note
are convertible into warrants, at a price of $1.00 per warrant at the option of
the Sponsor, the terms of which shall be identical to the Private Placement
Warrants. As of September 30, 2022, we had borrowed $250,000 under the note.
On October 9, 2022, we entered into a settlement and release agreement with
Griid Holdco LLC ("GRIID") and its affiliates and Blockchain Access UK Limited
("Blockchain") and certain of its affiliates (the "Blockchain Settlement and
Release Agreement"), pursuant to which Blockchain waived any potential defaults
under the Third Amended and Restated Credit Agreement between GRIID and
Blockchain, dated November 19, 2021 (the "Prior Credit Agreement") and the
parties agreed to release each other from any claims related to the Prior Credit
Agreement. Also on October 9, 2022, GRIID and its affiliates entered into the
Fourth Amended and Restated Loan Agreement (the "Credit Agreement") with
Blockchain and its affiliates. The Credit Agreement amended and restated the
Prior Credit Agreement in its entirety, providing for a restructured senior
secured term loan in the amount of $57,433,360.50, which represents GRIID's
outstanding obligations under the Prior Credit Agreement after giving effect to
the Credit Agreement. GRIID also issued to Blockchain a warrant in connection
with the credit agreement, which will be automatically adjusted and exercised
for an exercise price of $0.01 into a number of GRIID Class B units to be equal
to 10% of the issued and outstanding capital stock of the continuing company
following the Merger (as defined below) ("New GRIID") immediately following the
Closing.
24
--------------------------------------------------------------------------------
Going Concern Consideration
We anticipate that the approximately $31,000 in the operating bank account as of
September 30, 2022 will not be sufficient to allow us to operate for at least
the next 12 months, assuming that a business combination is not consummated
during that time. We have incurred and expect to continue to incur significant
costs in pursuit of its financing and acquisition plans. These conditions raise
substantial doubt about our ability to continue as a going concern one year from
the issuance date of the financial statements. Management plans to address this
uncertainty through loans from the Sponsor, officers, directors, or third
parties. None of the Sponsor, officers or directors are under any obligation to
advance funds to or to invest in us. There is no assurance that the plans to
raise capital or to consummate a business combination will be successful. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Further, management has determined that if we are unable to complete a Business
Combination within the Combination Period, then we will (a) cease all operations
except for the purpose of winding up, (b) as promptly as reasonably possible but
not more than ten business days thereafter, redeem all of the Public Shares and
(c) as promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and in accordance with applicable law,
dissolve and liquidate. The date for mandatory liquidation and subsequent
dissolution as well as our working capital deficit raise substantial doubt about
our ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after the Combination Period.
Off-Balance Sheet Financing Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements. We
have no obligations, assets or liabilities which would be considered off-balance
sheet arrangements. 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
entered into any non-financial assets.
On September 9, 2022, we and Griid Infrastructure LLC ("Griid Infrastructure")
entered into a share purchase agreement (the "Share Purchase Agreement") with
GEM Global Yield LLC SCS (the "Purchaser") and GEM Yield Bahamas Limited
relating to a share subscription facility. Pursuant to the Share Purchase
Agreement, following the Merger (as defined below), subject to certain
conditions and limitations set forth in the Share Purchase Agreement, New GRIID
shall have the right, but not the obligation, from time to time at its option,
to issue and sell to the Purchaser up to $200.0 million of its shares of common
stock.
On November 29, 2021, we entered into an agreement and plan of merger (the
"Initial Merger Agreement") by and among us, ADEX Merger Sub, LLC, a Delaware
limited liability company and a wholly owned direct subsidiary of the Company
("Merger Sub"), and GRIID. On December 23, 2021, the parties to the Initial
Merger Agreement amended the Initial Merger Agreement.
On October 17, 2022, the Company, Merger Sub and GRIID entered into a second
amendment (the "Second Amendment") to the Initial Merger Agreement (as so
amended, the "Merger Agreement"). The Merger Agreement, as amended, provides,
among other things, that on the terms and subject to the conditions set forth
therein, Merger Sub will merge with and into GRIID (the "Merger"), the separate
limited liability company existence of Merger Sub will cease, and GRIID, as the
surviving company of the Merger, will continue its existence under the Limited
Liability Company Act of the State of Delaware as a wholly owned subsidiary of
the Company.
The Merger Agreement and the transactions contemplated thereby were unanimously
approved by the board of directors of ADEX and the board of managers of GRIID.
Contractual Obligations
At September 30, 2022, we did not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities, other than
what is disclosed in the condensed balance sheet.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and, as a result, we
25
--------------------------------------------------------------------------------
may not comply with new or revised accounting standards on the relevant dates on
which adoption of such standards is required for non-emerging growth companies.
As a result, our financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public company
effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions, we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis), and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of the IPO or until we are no longer an "emerging
growth company," whichever is earlier.
Critical Accounting Policies
Management's discussion and analysis of our results of operations and liquidity
and capital resources are based on our unaudited condensed consolidated
financial information. We describe our significant accounting policies in Note 2
- Significant Accounting Policies of the Notes to Financial Statements included
in this Quarterly Report on Form 10-Q. Our unaudited condensed consolidated
financial statements have been prepared in accordance with U.S. GAAP. Certain of
our accounting policies require that management apply significant judgments in
defining the appropriate assumptions integral to financial estimates. On an
ongoing basis, management reviews the accounting policies, assumptions,
estimates and judgments to ensure that our financial statements are presented
fairly and in accordance with U.S. GAAP. Judgments are based on historical
experience, terms of existing contracts, industry trends and information
available from outside sources, as appropriate. However, by their nature,
judgments are subject to an inherent degree of uncertainty, and, therefore,
actual results could differ from our estimates.
We have identified the following as our critical accounting policies:
Common Stock Subject to Possible Redemption
All of the 27,600,000 shares of common stock sold as part of the Units (the
"Public Shares") contain a redemption feature, which allows for the redemption
of such Public Shares in connection with our liquidation, if there is a
stockholder vote or tender offer in connection with a business combination or in
connection with certain amendments to our amended and restated articles of
incorporation. In accordance with ASC 480-10-S99, redemption provisions not
solely within the control of the Company require shares of common stock subject
to redemption to be classified outside of permanent equity. Therefore, all
27,600,000 shares of common stock were classified outside of permanent equity as
of September 30, 2022 and December 31, 2021.
We recognize changes in redemption value immediately as they occur upon the IPO
and will adjust the carrying value of redeemable shares of common stock to equal
the redemption value at the end of each reporting period. Increases or decreases
in the carrying amount of redeemable shares of common stock are recorded as
charges against additional paid-in capital and accumulated deficit.
Net Income (Loss) Per Share of Common Stock
We have two categories of shares, which are referred to as redeemable shares of
common stock and non-redeemable shares of common stock. Earnings and losses are
shared pro rata between the two categories of shares for the three and nine
months ended September 30, 2022 and 2021.
Derivative Financial Instruments
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 815-40, "Derivatives and Hedging - Contracts in Entity's Own Stock ("ASC
815-40")." 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.
26
--------------------------------------------------------------------------------
At September 30, 2022, we have evaluated both the warrants included in the Units
(the "Public Warrants") and Private Placement Warrants under ASC 480 and ASC
815-40. Such guidance provides that, because the Private Placement Warrants do
not meet the criteria for equity treatment thereunder, each Private Placement
Warrant must be recorded as a liability. Accordingly, we classified 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 our
statements of operations. The Private Placement Warrants had met the requirement
for equity accounting treatment when initially issued. On December 23, 2021, the
Private Placement Warrants were modified such that the Private Placement
Warrants no longer meet the criteria for equity treatment. As such, the Private
Placement Warrants were treated as derivative liability instruments from the
date of the modification.
© Edgar Online, source Glimpses
ADIT EDTE 