References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to E.Merge Technology Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors,
references to the "Sponsor" refer to E.Merge Technology Sponsor LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the unaudited 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.
Cautionary Note Regarding Forward-Looking Statements
All statements, other than statements of historical fact included in this
Quarterly Report including, without limitation, statements this "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding our financial position, business strategy and the plans
and objectives of management for future operations, are forward-looking
statements. When used in this Quarterly Report, words such as "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions, as they
relate to us or our management, identify forward-looking statements. Such
forward-looking statements are based on the beliefs of management, as well as
assumptions made by, and information currently available to, the Company's
management. Actual results could differ materially from those contemplated by
the forward-looking statements as a result of certain factors detailed in our
filing with the SEC. All subsequent written oral forward-looking statements
attributable to us or persons acting on our behalf are qualified in their
entirety by this paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited 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 incorporated on May 22, 2020 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination (the "Business Combination") with one or more businesses. While our
efforts to identify a target business may span many industries and regions
worldwide, we focus our search for prospects within the software and internet
technology industries. We intend to effectuate our initial Business Combination
using cash from the proceeds of our Initial Public Offering and the private
placement of the Private Placement Units (as defined below), the proceeds of the
sale of our shares in connection with our initial Business Combination, shares
issued to the owners of the target, debt issued to bank or other lenders or the
owners of the target, or a combination of the foregoing.
We expect to continue to incur significant costs in the pursuit of our initial
Business Combination. We cannot assure you that our plans to complete our
initial Business Combination will be successful.
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 our Initial Public Offering,
described below, and, after our Initial Public Offering, identifying a target
company for an initial Business Combination. 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
investments held in the trust account (the "Trust Account"). We incur expenses
as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended June 30, 2022, we had a net income of $2,151,094,
which consists of a change in the fair value of the warrant liabilities of
$816,000, change in the fair value of the convertible Promissory Note of
$199,000, change in the fair value of the convertible extension loan of
$458,430, interest expense on mandatorily redeemable class A shares of $573,114
and interest income on investments held in the Trust Account of $830,043, offset
by general and administrative expenses of $562,530 and provision for income
taxes of $162,963.
For the six months ended June 30, 2022, we had a net income of $9,840,435, which
consists of a change in the fair value of the warrant liabilities of $8,772,000,
change in the fair value of the convertible Promissory Note of $199,000, change
in the fair value of the convertible extension loan of $458,430, interest
expense on mandatorily redeemable class A shares of $573,114 and interest income
on investments held in the Trust Account of $881,895, offset by general and
administrative expenses of $881,041 and provision for income taxes of $162,963.
For the three months ended June 30, 2021, we had a net loss of $620,504, which
consists of a change in the fair value of the warrant liabilities of $408,000
and investments general and administrative expenses of $238,089, offset by
interest income on investments held in the Trust Account of $25,585.
For the six months ended June 30, 2021, we had a net income of $10,670,740,
which consists of a change in the fair value of the warrant liabilities of
$11,028,000 and interest income on investments held in the Trust Account of
$77,428, offset by general and administrative expenses of $434,301 and provision
for income taxes of $387.
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Liquidity, Capital Resources and Going Concern
On August 4, 2020, we consummated our Initial Public Offering of 52,200,000
units (the "Public Units") at a price of $10.00 per Public Unit, at $10.00 per
Public Unit, generating gross proceeds of $522,000,000. Simultaneously with the
closing of our Initial Public Offering, we consummated the sale of 1,200,000
private placement units (the "Private Placement Units") to our Sponsor, at a
price of $10.00 per Private Placement Unit, generating gross proceeds of
$12,000,000.
On September 4, 2020, in connection with the underwriters' election to partially
exercise of their option to purchase additional units, we consummated the sale
of an additional 7,800,000 units, generating total gross proceeds of
$78,000,000.
Following our Initial Public Offering, the partial exercise of the
over-allotment option and the sale of the Private Placement Units, a total of
$600,000,000 was placed in the Trust Account. We incurred $33,039,544 in
transaction costs, including $9,840,000 of underwriting fees, $22,560,000 of
deferred underwriting fees and $639,544 of other offering costs.
For the six months ended June 30, 2022, cash used in operating activities was
$822,916. Net income of $9,840,435 was affected by a change in the fair value of
the warrant liabilities of $8,772,000 and interest income on investments held in
the Trust Account of $881,895, change in the fair value of the convertible
promissory note of $199,000, change in the fair value of the convertible
extension loan of $458,430, interest expenses on mandatorily redeemable class A
shares of $573,114 and changes in operating assets and liabilities, which
provided $221,088 of cash from operating activities.
For the six months ended June 30, 2021, cash used in operating activities was
$407,412. Net income of $10,670,740 was affected by a change in fair value of
warrant liabilities of $11,028,000, interest earned on investments held in the
Trust Account of $77,420 and changes in operating assets and liabilities, which
provided $27,268 of cash from operating activities.
As of June 30, 2022, we had investments of $601,933,594 held in the Trust
Account. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust Account
(less taxes paid and deferred underwriting commissions) to complete our initial
Business Combination. We may withdraw interest to pay taxes. Through June 30,
2022, we have withdrawn $48,775 of interest earned on the Trust Account for the
payment of franchise and income taxes. To the extent that our capital stock or
debt is used, in whole or in part, as consideration to complete our initial
Business Combination, the remaining proceeds held in the Trust Account will be
used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2022, the Company had $1,291,030 in its operating bank accounts
($143,801 is available to the Company for working capital purposes, while
$1,147,229 is an extension payment entered to on June 28, 2022 that was
deposited into the trust account on July 1, 2022) and a working capital deficit
of $445,687. 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, provide the
Company Working Capital Loans up to $1,500,000 (see Note 5). As of June 30,
2022, there were $500,000 principal outstanding under a promissory note due to
the Sponsor (See Note 5.)
In order to fund working capital deficiencies or finance transaction costs in
connection with our initial Business Combination, our Sponsor or an affiliate of
our Sponsor or certain of our officers and directors may, but are not obligated
to, loan us funds as may be required. The Company intends to complete an initial
Business Combination by November 4, 2022. However, in the absence of a completed
business combination, we may require additional capital. If we are unable to
raise additional capital, it may be required to take additional measures to
conserve liquidity, which could include, but not necessarily be limited to,
suspending the pursuit of an initial Business Combination. The Company cannot
provide any assurance that new financing will be available to it on commercially
acceptable terms, if at all.
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's ASU 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern," we have
until November 4, 2022, to consummate an initial Business Combination. It is
uncertain that we will be able to consummate an initial Business Combination by
this time. If an initial Business Combination is not consummated by this date,
there will be a mandatory liquidation and subsequent dissolution of our company.
Management has determined that the liquidity condition and mandatory
liquidation, should an initial Business Combination not occur, and potential
subsequent dissolution raises 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 November 4, 2022.
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Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which 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.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee up to $15,000 for office space, utilities
and secretarial and administrative support services. We began incurring these
fees on July 30, 2020 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $22,560,000 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 the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and
income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical
accounting policies:
Warrant Liability
We account for our warrants in accordance with the guidance contained in
Accounting Standards Codification ("ASC") 815-40 under which the warrants that
do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify our warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This
liability is 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 our placement warrants was determined using a
Binomial Lattice Model. The Public Warrants for periods where no observable
traded price was available are valued using a Monte Carlo simulation model. For
periods subsequent to the detachment of the Public Warrants from the Public
Units, the Public Warrant quoted market price was used as the fair value as of
each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A common stock subject to mandatory redemption is classified as a
liability instrument and is measured at fair value. Conditionally redeemable
common stock (including common stock 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, common stock is classified as
stockholders' equity. Our common stock features certain redemption rights that
are considered to be outside of our control and subject to occurrence of
uncertain future events. Accordingly, the Class A common stock subject to
possible redemption is presented as temporary equity, outside of the
stockholders' deficit section of our unaudited condensed balance sheets.
Convertible Promissory Note
The Company accounts for their convertible promissory note under ASC 815,
Derivatives and Hedging ("ASC 815"). Under 815-15-25, the election can be at the
inception of a financial instrument to account for the instrument under the fair
value option under ASC 825. The Company has made such election for their
convertible promissory note. Using the fair value option, the convertible
promissory note is required to be recorded at its initial fair value on the date
of issuance, and each balance sheet date thereafter. Changes in the estimated
fair value of the notes are recognized as a non-cash gain or loss on the
condensed statements of operations.
Net Loss per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." The Company has two classes of shares, which
are referred to as Class A common stock and Class B common stock. Income and
losses are shared pro rata between the two classes of shares.
Net income (loss) per share of common stock is computed by dividing net income
(loss) by the weighted average number of shares of Class A common stock
outstanding for the period. The Company has not considered the effect of
warrants sold in the Initial Public Offering and private placement to purchase
20,400,000 shares of Class A common stock in the calculation of diluted income
(loss) per share, since the exercise price of the warrants is greater than the
average market price for the period and therefore, the inclusion of such
warrants under the treasury stock method would be anti-dilutive. As a result,
diluted net income (loss) per share is the same as basic net income (loss) per
share for the periods presented.
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Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
unaudited condensed financial statements.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial Business
Combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial Business Combination.
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E.MERGE TECHNOLOGY ACQUISITION CORP. 
