Table of Contents
S-4/AtrueAmendment No. 10 to FORM S-40001830029 0001830029 2022-01-01 2022-12-31 0001830029 2023-01-01 2023-06-30 0001830029 2022-12-31 0001830029 2021-12-31 0001830029 2021-01-01 2021-12-31 0001830029 2022-01-01 2022-06-30 0001830029 2023-04-01 2023-06-30 0001830029 2022-04-01 2022-06-30 0001830029 2023-06-30 0001830029 2021-12-22 2021-12-23 0001830029 2023-01-01 2023-03-31 0001830029 2021-12-23 0001830029 2021-01-14 2021-01-14 0001830029 2021-01-19 2021-01-19 0001830029 2021-01-14 0001830029 2021-01-19 0001830029 2022-12-23 2022-12-23 0001830029 2022-12-23 0001830029 2022-01-01 2022-03-31 0001830029 2022-08-16 2022-08-16 0001830029 2021-08-17 0001830029 2021-08-18 0001830029 2021-04-17 2021-04-17 0001830029 2020-12-31 0001830029 2023-03-31 0001830029 2022-03-31 0001830029 2022-06-30 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember adex:NewPromissoryNoteMember 2022-12-31 0001830029 us-gaap:RelatedPartyMember adex:AditEdTechSponsorLimitedLiabilityCompanyMember 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us-gaap:RetainedEarningsMember 2022-06-30 iso4217:USD utr:Year utr:Month xbrli:shares utr:Day xbrli:pure iso4217:USD xbrli:shares adex:Extension adex:Subsidiary
As filed with the Securities and Exchange Commission on September
12
, 2023.
Registration No. 333-261880
 
 
 
UNITED
STATES
SECURITIES AND EXCHANGE COM
MI
SSI
ON
Washington, D.C. 20549
 
 
Amendment No. 10
t
o
FORM
S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
ADIT EDTECH ACQUISITION CORP.
(Exact name of Registrant as specified in its charter)
 
 
 
Delaware
 
6770
 
85-3477678
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification No.)
1345 Avenue of the Americas, 33
rd
Floor
New York, New York 10105
(646)
291-6930
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
 
 
David L. Shrier
1345 Avenue of the Americas, 33
rd
Floor
New York, New York 10105
(646)
291-6930
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
Copies to:
 
Kerry S. Burke
Michael Riella
Covington & Burling LLP
One City Center
850 10
th
Street, N.W.
Washington, D.C. 20001-4956
(202)
662-6000
 
Jack Bodner
Brian K. Rosenzweig
Covington & Burling LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
(212)
841-1000
 
Patrick B. Costello
Steven Khadavi
Joseph Walsh
Troutman Pepper Hamilton Sanders LLP
875 Third Avenue
New York, New York 10022
(212)
704-6000
 
 
Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this registration statement is declared effective and all other conditions to the transactions contemplated by the merger agreement described in the enclosed proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with
General
Instruction G, check the following box.  ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
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.
 
Large accelerated filer      Accelerated filer  
Non-accelerated filer
     Smaller reporting company  
         Emerging growth company  
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 7(a)(2)(B) of the Securities Act.  
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act
Rule 13e-4(i)
(Cross-Border Issuer Tender Offer)  ☐
Exchange Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender Offer)  ☐
 
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.
 
 
 


Table of Contents

PRELIMINARY PROXY STATEMENT/PROSPECTUS—SUBJECT TO COMPLETION, DATED

SEPTEMBER 12, 2023

PROXY STATEMENT FOR SPECIAL MEETING IN LIEU OF THE 2021, 2022 AND 2023 ANNUAL MEETINGS OF STOCKHOLDERS OF ADIT EDTECH ACQUISITION CORP.

Dear Stockholders of Adit EdTech Acquisition Corp.:

You are cordially invited to attend the special meeting in lieu of the 2021, 2022 and 2023 annual meetings (the “special meeting”) of stockholders of Adit EdTech Acquisition Corp., a Delaware corporation (“ADEX,” “we,” “our” or “us”), which will be held at                , Eastern Time, on                , or such other date, time and place to which such meeting may be adjourned or postponed, for the purpose of considering and voting upon the proposals. The special meeting will be held entirely online. Stockholders may participate in the special meeting by visiting the following website:                .

The board of directors of ADEX has unanimously approved the agreement and plan of merger, dated as of November 29, 2021 (the “initial merger agreement”), by and among ADEX, ADEX Merger Sub, LLC, a Delaware limited liability company and a wholly owned direct subsidiary of ADEX (“Merger Sub”) and Griid Holdco LLC, a Delaware limited liability company (“GRIID”), as amended by the first amendment to the merger agreement, dated December 23, 2021 (the “first amendment”) and the second amendment to the merger agreement, dated October 17, 2022 (the “second amendment”) and the third amendment to the merger agreement, dated February 8, 2023 (the “third amendment”, and the initial merger agreement as amended by the first amendment, the second amendment and the third amendment, the “merger agreement”), pursuant to which, among other things: (a) ADEX will amend and restate its certificate of incorporation (as so amended and restated, the “proposed charter”) and bylaws (as so amended and restated, the “proposed bylaws”); (b) Merger Sub will merge with and into GRIID (the “merger”), and the separate limited liability company existence of Merger Sub will cease and GRIID, as the surviving company of the merger (“post-merger GRIID”) will continue its existence under the Limited Liability Company Act of the State of Delaware (the “DLLCA”) as a wholly owned subsidiary of ADEX; (c) the limited liability company agreement of post-merger GRIID will be amended and restated to, among other things, admit ADEX as the sole member thereof (as so amended and restated, the “A&R LLCA”); (d) at the effective time of the merger (the “effective time”), pursuant to the merger agreement, the limited liability company membership interests of Merger Sub will be converted into an equivalent limited liability company membership interest in post-merger GRIID; (e) at the effective time, pursuant to the merger agreement, each limited liability company membership unit of GRIID issued and outstanding immediately prior to the effective time will be converted into the right to receive such unit’s share, as determined in accordance with the merger agreement, of 58,500,000 shares of ADEX’s common stock, par value $0.0001 per share (the “updated merger consideration”). Post-merger ADEX is referred to herein as “New GRIID.” You are being asked to vote on the merger and related matters as described below.

Upon completion of the merger, we currently expect to issue (i)                shares of ADEX’s common stock, par value $0.0001 per share (the “common stock”) for each Class A limited liability company membership unit of GRIID issued and outstanding immediately prior to the effective time, (ii)                shares of common stock for each Class B limited liability company membership unit of GRIID issued and outstanding immediately prior to the effective time and (iii)                shares of common stock for each Class C limited liability company membership unit of GRIID issued and outstanding immediately prior to the effective time, based upon certain assumptions stated in the accompanying proxy statement/prospectus and the additional assumptions that (1)                Class A,              Class B and                Class C limited liability company membership units of post-merger GRIID are issued and outstanding immediately prior to the effective time (which amounts include the incentive units issued and outstanding immediately prior to the effective time, but not the Class B units to be issued to Blockchain Capital Solutions (US) Inc. (“Blockchain”) upon the automatic adjustment and exercise of its warrant, in accordance with the terms thereof and the terms of the merger agreement, as described elsewhere in this proxy statement/prospectus) and (2) each outstanding limited liability company membership unit is entitled to the same proportionate share of the updated merger consideration as the other units in its class. The market value of the updated merger consideration will fluctuate between the date of the accompanying proxy statement/prospectus and the completion of the merger based on the price of our common stock. As described in further detail below, shares of our common stock are listed on the NYSE American LLC (the “NYSE American”) under the symbol “ADEX.”


Table of Contents

The following table sets forth the market value of our common stock and the implied value of the updated merger consideration per outstanding Class A, Class B and Class C limited liability company membership unit of GRIID outstanding based on such value as of November 29, 2021, the date preceding the public announcement of the merger, and as of                ,        , the last practicable trading day prior to printing the accompanying proxy statement/prospectus, determined by multiplying the closing price of our common stock on such dates by the number of shares to be issued as merger consideration. There is no market value for GRIID limited liability company membership units, as there is no public market for such interests.

 

     Market
Value of
ADEX
Common
Stock
     Implied Value of
Merger
Consideration (Per
Class A Membership
Unit)
     Implied Value of
Merger
Consideration (Per
Class B Membership
Unit)
     Implied Value of
Merger
Consideration (Per
Class C Membership
Unit)
 

November 29, 2021

   $ 9.85      $                $                $            

                    ,

   $        $        $        $    

Our units, common stock originally sold as part of the units, and warrants, including those originally sold as part of the units, have been listed on the NYSE American under the symbols “ADEX.U,” “ADEX” and “ADEX.WS,” respectively, since February 16, 2023 and were previously listed on the New York Stock Exchange, where they had been separately trading since March 3, 2021. Upon the closing of the merger (the “closing”), we intend to apply to continue the listing of our common stock and warrants on the NYSE American under the symbols “GRDI” and “GRDI.WS,” respectively. We have also applied, and been conditionally approved (subject to closing of the merger), to list our common stock on the Neo Exchange Inc. (the “NEO”). We are seeking a cross-listing on the NYSE American and the NEO to potentially enhance our access to additional liquidity. Our units will not be listed following the closing.

At the special meeting, you will be asked to consider and vote on a proposal (the “merger proposal”) to approve and adopt the merger agreement, the full form of which, including amendments, is attached to this proxy statement/prospectus as Annexes A-1, A-2, A-3, and A-4, and approve the transactions contemplated thereby.

In addition, you will be asked to consider and vote on proposals to:

 

   

approve and adopt, assuming the other condition precedent proposals (as defined below) are approved and adopted, the proposed charter, a copy of which is attached to this proxy statement/prospectus as Annex D, which, if approved, would take effect upon the closing (the “charter amendment proposal”);

 

   

to approve and adopt, on a non-binding advisory basis, certain differences between ADEX’s current certificate of incorporation (as amended and restated through the date of the accompanying proxy statement/prospectus, the “current charter”) and the proposed charter, which are being presented in accordance with the requirements of the U.S. Securities and Exchange Commission (the “SEC”) as six separate sub-proposals (which we refer to, collectively, as the “advisory charter proposals”) to:

 

   

upon completion of the merger, increase the authorized capital stock of ADEX from 101,000,000 shares, consisting of 100,000,000 shares of common stock and 1,000,000 shares of preferred stock, to 501,000,000 shares, consisting of 500,000,000 shares of common stock and 1,000,000 shares of preferred stock;

 

   

provide that the board of directors of ADEX be divided into three classes with only one class of directors being elected each year and each class serving three-year terms;

 

   

provide that directors may be removed only for cause by the affirmative vote of the holders of at least 66 2/3% of the outstanding common stock entitled to vote thereon;

 

   

provide that any action required or permitted to be taken by the stockholders may be effected only at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing and that stockholders may not call a special meeting;

 


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change the stockholder vote required to amend Section 5.5 or Articles VI, VII, IX, or XII of the proposed charter from the affirmative vote of the holders of at least a majority of the outstanding common stock entitled to vote thereon to the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled to vote thereon, voting together as a single class; and

 

   

provide for certain additional changes, including, among other things, (a) changing New GRIID’s corporate name from “Adit EdTech Acquisition Corp.” to “GRIID Infrastructure Inc.” and (b) removing certain provisions related to ADEX’s status as a blank check company that will no longer apply upon consummation of the merger, all of which ADEX’s board of directors believes are necessary to adequately address the needs of New GRIID;

 

   

assuming the condition precedent proposals are approved and adopted, approve and adopt the GRIID Infrastructure Inc. 2023 Omnibus Incentive Compensation Plan (the “incentive plan”), substantially in the form attached to this proxy statement/prospectus as Annex E (the “incentive plan proposal”);

 

   

approve, assuming the other condition precedent proposals are approved and adopted, for purposes of complying with the applicable provisions of the NYSE American listing standard §713(a), the issuance of more than 20% of ADEX’s outstanding common stock in connection with the merger, for purposes of complying with the applicable provisions of the NYSE American listing standard §713(b), the change of control of ADEX (the “NYSE American proposal” and, collectively with the merger proposal, and the charter amendment proposal, the “condition precedent proposals”);

 

   

assuming the condition precedent proposals are approved and adopted, elect seven directors to serve terms as Class I, Class II, and Class III directors on our board of directors until the 2024, 2025, and 2026 annual meetings of stockholders, respectively, or until such directors’ successors have been duly elected and qualified, or until such directors’ earlier death, resignation, retirement or removal (the “director election proposal”); and

 

   

approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of any of the proposals (the “adjournment proposal”).

Each of these proposals is more fully described in this proxy statement/prospectus, which you are encouraged to read carefully. We refer to these proposals collectively as the “proposals” or the “transaction proposals.”

The Board has fixed                 ,         as the record date for the special meeting (the “record date”). Only holders of record of shares of our common stock at the close of business on the record date will be entitled to notice of and to vote and have their votes counted at the special meeting and any adjournments or postponements of the special meeting. A complete list of our stockholders of record entitled to vote at the special meeting will be available before the special meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting. We are providing this proxy statement/prospectus and accompanying proxy card to our stockholders in connection with the solicitation of proxies to be voted at the special meeting and at any adjournments or postponements of the special meeting. Whether or not you plan to attend the special meeting in person (online), we urge you to read the accompanying proxy statement/prospectus carefully. Please pay particular attention to the section entitled “Risk Factors” beginning on page 48 of this proxy statement/prospectus.

After careful consideration, our board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and determined that each of the merger proposal, the charter amendment proposal, the advisory charter proposals, the NYSE American proposal, the director election proposal, the incentive plan proposal and the adjournment proposal is in the best interests of ADEX and its stockholders, and unanimously recommends that you vote or give instruction to vote “FOR” each of those proposals, but expresses no opinion as to whether or not holders of IPO Shares should redeem their IPO Shares.


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The existence of financial and personal interests of ADEX’s directors may result in a conflict of interest on the part of one or more of the directors between what they may believe is in the best interests of ADEX and its stockholders and what they may believe is best for themselves in determining to recommend that stockholders vote for the proposals. See the sections entitled “Proposal No. 1—The Merger Proposal—Interests of Certain Persons in the Merger” and “Beneficial Ownership of Securities” in the accompanying proxy statement/prospectus for a further discussion.

On May 26, 2022, Wells Fargo Securities, LLC (“Wells Fargo”) resigned from its roles as lead placement agent, financial advisor and capital markets advisor to ADEX in connection with the merger. Wells Fargo has informed ADEX that it delivered notice of its resignation to the SEC pursuant to Section 11(b)(1) of the Securities Act of 1933, as amended (the “Securities Act”), and has disclaimed any responsibility for any portion of this proxy statement/prospectus. Stockholders should not place any reliance on the participation of Wells Fargo prior to such resignation in the transactions contemplated by this proxy statement/prospectus.

Pursuant to the current charter, a holder of common stock (such shares of common stock, the “IPO Shares”) included as part of the units issued in ADEX’s initial public offering (the “IPO”) may request that ADEX redeem all or a portion of such stockholder’s IPO Shares for cash if the merger is consummated. A stockholder will be entitled to receive cash for any IPO Shares to be redeemed only if it (i) (a) holds IPO Shares or (b) holds IPO Shares as part of units and elects to separate such units into the underlying IPO Shares and warrants issued as part of such units prior to exercising such stockholder’s redemption rights with respect to the IPO Shares; and (ii) prior to                , Eastern Time, on            ,         (two business days prior to the vote at the special meeting), (a) submits a written request to Continental Stock Transfer & Trust Company, ADEX’s transfer agent (the “transfer agent”), that ADEX redeem its IPO Shares for cash and (b) delivers its IPO Shares to the transfer agent, physically or electronically through The Depository Trust Company (“DTC”).

Holders of ADEX’s units must elect to separate the underlying IPO Shares and warrants prior to exercising redemption rights with respect to the IPO Shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying IPO Shares and warrants, or if a holder holds units registered in its, his or her own name, the holder must contact the transfer agent directly and instruct it to do so and tender its, his or her IPO Shares to the transfer agent, through DTC.

Stockholders may elect to redeem all or a portion of their IPO Shares even if they vote for the merger proposal. If the merger is not consummated, the IPO Shares will not be redeemed for cash. If a stockholder properly exercises its right to redeem its IPO Shares and timely delivers its IPO Shares to the transfer agent, we will redeem each such IPO Share for a per share price, payable in cash, equal to the quotient obtained by dividing (a) the aggregate amount on deposit in the trust account as of two business days prior to the consummation of the merger, including interest (net of taxes payable), by (b) the number of then-outstanding IPO Shares. For illustrative purposes only, as of                ,        , the record date, this would have equaled approximately $             per share. If a stockholder properly exercises its redemption rights, then it will be exchanging its redeemed IPO Shares for cash and will no longer own such IPO Shares. Any request to redeem IPO Shares, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, but only with our consent, until the closing. Furthermore, if a stockholder delivers any certificate representing IPO Shares in connection with an election of its, his or her redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it, he or she may request that ADEX instruct the transfer agent to return the IPO Shares (physically or electronically). The holder can make such request by contacting the transfer agent, at the address or email address listed in the accompanying proxy statement/prospectus. We will be required to honor such request only if made prior to the deadline for exercising redemption requests. See “Proposal No. 1—The Merger Proposal—Redemption Rights” in this proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your IPO Shares for cash.

Notwithstanding the foregoing, a holder of IPO Shares, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined for purposes of Section 13 of the Exchange Act (as defined below)), will be restricted from redeeming its IPO Shares with


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respect to more than an aggregate of 15% of our outstanding common stock, without our prior consent. Accordingly, if a stockholder, alone or acting in concert or as a group, seeks to redeem more than 15% of our outstanding common stock, then any such IPO Shares in excess of that 15% limit would not be redeemed for cash, without our prior consent.

Under the merger agreement, the approval of each of the condition precedent proposals is a condition to the consummation of the merger. The adoption of each condition precedent proposal is conditioned on the approval of all of the condition precedent proposals. The director election proposal and the incentive plan proposal are conditioned on the approval of all of the condition precedent proposals, and the adjournment proposal is not conditioned on the approval of any other proposal. If our stockholders do not approve each of the condition precedent proposals, the merger may not be consummated.

Approval of the charter amendment proposal requires the affirmative vote of a majority of the then-outstanding shares of common stock entitled to vote at the special meeting. Approval of each of the merger proposal, the NYSE American proposal, the incentive plan proposal and the adjournment proposal requires the affirmative vote of a majority of the then-outstanding shares of common stock present, in person (online) or by proxy, and entitled to vote at the special meeting. Approval, on an advisory basis, of the advisory charter proposals, requires the affirmative vote of a majority of the then-outstanding shares of common stock present, in person (online) or by proxy, and entitled to vote at the meeting. The election of the director nominees pursuant to the director election proposal requires the affirmative vote of the holders of a plurality of the votes cast at the meeting.

Immediately upon consummation of the merger, we expect that New GRIID will be a “controlled company” within the meaning of the NYSE American listing standards, and as a result, New GRIID will qualify for, and intends to rely on, exemptions from certain NYSE American listing standards. For more information see “Risk Factors—Risks Related to ADEX and the Merger—Because New GRIID will be a “controlled company” within the meaning of the NYSE American listing standards, New GRIID stockholders may not have certain corporate governance protections that are available to stockholders of companies that are not controlled companies.”

The special meeting is currently scheduled to be held entirely online as indicated above. Stockholders of record may vote their shares electronically at the special meeting by following the instructions at                . Stockholders are also urged to vote their proxies by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope, or by voting online at prior to             , Eastern Time, on             ,         . To ensure your representation at the special meeting, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible or vote by internet. To vote online and to participate in the special meeting, an ADEX stockholder of record will need the 12-digit control number included on your proxy card or instructions that accompanied your proxy materials. If an ADEX stockholder holds its, his or her shares in “street name,” which means its, his or her shares are held of record by a broker, bank or other nominee, such stockholder should contact its, his or her broker, bank or nominee to ensure that votes related to the shares it, he or she beneficially owns are properly counted. In this regard, such stockholder must provide the record holder of its, his or her shares with instructions. If you are a stockholder of record holding shares of common stock, you may also cast your vote in person (online) during the special meeting. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the special meeting and vote in person (online), obtain a proxy from your broker or bank. The special meeting webcast will begin promptly at                , Eastern Time. ADEX stockholders are encouraged to access the special meeting at least 15 minutes prior to the start time. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call the technical support number that will be posted on the virtual meeting login page. Abstentions, while considered present for the purposes of establishing a quorum, will not count as votes cast and will have the same effect as a vote “AGAINST” each of the proposals, other than the director election proposal, presented at the special meeting. Abstentions will have no effect on the outcome of the director election proposal. Broker non-votes will not be considered present for purposes of establishing a quorum, will have the same effect as a vote “AGAINST” the charter amendment proposal, and will have no effect on the outcome of the merger proposal, the NYSE American proposal, the advisory charter proposals, the incentive plan proposal, the director election proposal, or the adjournment proposal. A stockholder’s failure to


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vote by proxy or to vote in person (online) at the special meeting will not be counted towards the number of shares of common stock required to validly establish a quorum, and if a valid quorum is otherwise established, will have the effect as a vote “AGAINST” the charter amendment proposal and no effect on the outcome of the merger proposal, the NYSE American proposal, the advisory charter proposals, the incentive plan proposal, the director election proposal, and the adjournment proposal.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting in person (online) or not, please sign, date and return the enclosed proxy card in the envelope provided or vote online as soon as possible.

If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that your shares are represented and voted at the special meeting.

If you have any questions or need assistance voting your shares, please contact Okapi Partners LLC (“Okapi”), the Company’s proxy solicitor, by calling (877) 259-6290, or banks and brokers can call collect at (212) 297-0720, or by emailing info@okapipartners.com.

TO EXERCISE REDEMPTION RIGHTS, A STOCKHOLDER MUST (1) SUBMIT A WRITTEN REQUEST TO THE TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT THE SPECIAL MEETING, THAT ITS IPO SHARES BE REDEEMED FOR CASH, AND (2) DELIVER ITS IPO SHARES TO THE TRANSFER AGENT, PHYSICALLY OR ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DEPOSIT AND WITHDRAWAL AT CUSTODIAN (“DWAC”) SYSTEM, IN EACH CASE IN ACCORDANCE WITH THE PROCEDURES AND DEADLINES DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. IF THE MERGER IS NOT CONSUMMATED, THEN THE IPO SHARES WILL NOT BE REDEEMED FOR CASH. IF A STOCKHOLDER HOLDS ITS IPO SHARES IN STREET NAME, SUCH STOCKHOLDER WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT ITS BANK OR BROKER TO WITHDRAW THE IPO SHARES FROM ITS ACCOUNT IN ORDER TO EXERCISE ITS REDEMPTION RIGHTS. SEE “PROPOSAL NO. 1—THE MERGER PROPOSAL—REDEMPTION RIGHTS” IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS FOR MORE SPECIFIC INSTRUCTIONS.

Neither the SEC nor any state securities commission has approved or disapproved of the transactions described in this proxy statement/prospectus, passed upon the merits or fairness of either of the merger agreement or the transactions contemplated thereby, or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated                 ,          and is first being mailed to ADEX stockholders on or about                 ,         .

On behalf of our board of directors, I would like to thank you for your support of Adit EdTech Acquisition Corp. and look forward to a successful completion of the merger.

 

By Order of the Board of Directors,

     

David L. Shrier

Director, President and Chief Executive Officer


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NOTICE OF SPECIAL MEETING IN LIEU OF THE 2021, 2022 AND 2023 ANNUAL MEETINGS OF

STOCKHOLDERS OF ADIT EDTECH ACQUISITION CORP.

To Be Held On                ,                

To the Stockholders of Adit EdTech Acquisition Corp:

NOTICE IS HEREBY GIVEN that a special meeting in lieu of the 2021, 2022 and 2023 annual meetings (the “special meeting”) of stockholders of Adit EdTech Acquisition Corp., a Delaware corporation (“ADEX,” “we,” “our” or “us”), will be held on                , at                , Eastern Time, at the following website:                . The special meeting is being called for the following purposes:

 

   

The Merger Proposal—To consider and vote upon a proposal to approve the transactions contemplated by the merger agreement, dated as of November 29, 2021 (the “initial merger agreement”), by and among ADEX, ADEX Merger Sub, LLC, a Delaware limited liability company and a wholly owned direct subsidiary of ADEX (“Merger Sub”), Griid Holdco LLC, a Delaware limited liability company (“GRIID”), as amended by the first amendment to the merger agreement, dated December 23, 2021 (the “first amendment”), the second amendment to the merger agreement, dated October 17, 2022 (the “second amendment”) and the third amendment to the merger agreement, dated February 8, 2023 (the “third amendment”), and the initial merger agreement as amended by the first amendment, the second amendment and the third amendment, (the “merger agreement”), pursuant to which, among other things, (a) ADEX will amend and restate its certificate of incorporation (as so amended and restated, the “proposed charter”) and bylaws; (b) Merger Sub will merge with and into GRIID (the “merger”), and the separate limited liability company existence of Merger Sub will cease and GRIID, as the surviving company of the merger (“post-merger GRIID”) will continue its existence under the Limited Liability Company Act of the State of Delaware as a wholly owned subsidiary of ADEX; (c) the limited liability company agreement of post-merger GRIID will be amended and restated to, among other things, admit ADEX as the sole member thereof; (d) at the effective time of the merger (the “effective time”), pursuant to the merger agreement, the limited liability company interests of Merger Sub will be converted into an equivalent limited liability company membership interest in post-merger GRIID; (e) at the effective time, pursuant to the merger agreement, each limited liability company membership unit of GRIID issued and outstanding immediately prior to the effective time will be converted into the right to receive such unit’s share, as determined in accordance with the merger agreement, of 58,500,000 shares of ADEX’s common stock (our or the “common stock”), par value $0.0001 per share (the “merger proposal”). Post-merger ADEX is referred to herein as “New GRIID.” A copy of the merger agreement is attached to the accompanying proxy statement/prospectus as Annex A-1 and copies of the first and second amendments thereto are attached to the accompanying proxy statement/prospectus as Annexes A-2 and A-3, respectively.

 

   

The Charter Amendment Proposal—To consider and vote upon a proposal to approve, assuming the other condition precedent proposals (as defined below) are approved and adopted, the proposed charter, a copy of which is attached to the accompanying proxy statement/prospectus as Annex D, which, if approved, would take effect upon the closing (the “charter amendment proposal”)

 

   

The Advisory Charter Proposals—To consider and vote upon a proposal to approve, on a non-binding advisory basis, certain differences between ADEX’s current certificate of incorporation (as amended and restated through the date of the accompanying proxy statement/prospectus, the “current charter”) and the proposed charter, which are being presented in accordance with the requirements of the U.S. Securities and Exchange Commission (the “SEC”) as six separate sub-proposals (which we refer to, collectively, as the “advisory charter proposals”):

 

   

upon completion of the merger, increase the authorized capital stock of ADEX from 101,000,000 shares, consisting of 100,000,000 shares of common stock and 1,000,000 shares of preferred stock, to 501,000,000 shares, consisting of 500,000,000 shares of common stock and 1,000,000 shares of preferred stock;

 

   

provide that the board of directors of ADEX be divided into three classes with only one class of directors being elected each year and each class serving three-year terms;


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provide that directors may be removed only for cause by the affirmative vote of the holders of at least 66 2/3% of the outstanding common stock entitled to vote thereon;

 

   

provide that any action required or permitted to be taken by the stockholders may be effected only at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing and that stockholders may not call a special meeting;

 

   

change the stockholder vote required to amend Section 5.5 or Articles VI, VII, IX, or XII of the proposed charter from the affirmative vote of the holders of at least a majority of the outstanding common stock entitled to vote thereon to the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled to vote thereon, voting together as a single class; and

 

   

provide for certain additional changes, including, among other things, (a) changing New GRIID’s corporate name from “Adit EdTech Acquisition Corp.” to “GRIID Infrastructure Inc.” and (b) removing certain provisions related to ADEX’s status as a blank check company that will no longer apply upon consummation of the merger, all of which ADEX’s board of directors believes are necessary to adequately address the needs of New GRIID;

 

   

The Incentive Plan Proposal—To consider and vote upon a proposal to approve and adopt, assuming the condition precedent proposals are approved and adopted, the GRIID Infrastructure Inc. 2023 Omnibus Incentive Compensation Plan (the “incentive plan”), substantially in the form attached to the accompanying proxy statement/prospectus as Annex E (the “incentive plan proposal”);

 

   

The NYSE American Proposal—To consider and vote upon a proposal to approve, assuming the other condition precedent proposals are approved and adopted, for purposes of complying with applicable provisions of the NYSE American listing standard §713(a), the issuance of more than 20% of ADEX’s outstanding common stock, par value $0.0001 per share (the “common stock”) in connection with the merger and, for purposes of complying with the applicable provisions of the NYSE American listing standard §713(b), the change of control of ADEX (the “NYSE American proposal” and, collectively with the merger proposal, and the charter amendment proposal, the “condition precedent proposals”);

 

   

The Director Election Proposal—To consider and vote upon a proposal to elect, assuming the condition precedent proposals are approved and adopted, seven directors to serve terms as Class I, Class II, and Class III directors on our board of directors until the 2024, 2025, and 2026 annual meetings of stockholders, respectively, or until such directors’ successors have been duly elected and qualified, or until such directors’ earlier death, resignation, retirement or removal (the “director election proposal”); and

 

   

The Adjournment Proposal—To consider and vote upon a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of any of the proposals.

Each of these proposals is more fully described in the accompanying proxy statement/prospectus, which you are encouraged to review carefully.

ADEX’s board of directors has fixed             ,         as the record date for the special meeting (the “record date”). Only holders of record of shares of the common stock at the close of business on the record date are entitled to notice of and to vote and have their votes counted at the special meeting and any adjournments or postponements of the special meeting. A complete list of our stockholders of record entitled to vote at the special meeting will be available before the special meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting. The special meeting will be held entirely online. Stockholders may participate in the special meeting by visiting the following website:                .

We are providing the accompanying proxy statement/prospectus and accompanying proxy card to our stockholders in connection with the solicitation of proxies to be voted at the special meeting and at any


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adjournment or postponement of the special meeting. Whether or not you plan to attend the special meeting in person (online), you are urged to read the accompanying proxy statement/prospectus (and any documents incorporated into the accompanying proxy statement/prospectus by reference) carefully. Please pay particular attention to the section entitled “Risk Factors.”

After careful consideration, ADEX’s board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and determined that each of the merger proposal, the charter amendment proposal, the advisory charter proposals, the NYSE American proposal, the director election proposal, the incentive plan proposal, the adjournment proposal is in the best interests of ADEX and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” each of the proposals, but expresses no opinion as to whether or not holders of IPO Shares should redeem their IPO Shares.

The existence of financial and personal interests of ADEX’s directors may result in a conflict of interest on the part of one or more of the directors between what they may believe is in the best interests of ADEX and its stockholders and what they may believe is best for themselves in determining to recommend that stockholders vote for the transaction proposals. See the section entitled “Proposal No. 1—The Merger Proposal—Interests of Certain Persons in the Merger” and “Beneficial Ownership of Securities” in the proxy statement/prospectus for a further discussion of these interests.

On May 26, 2022, Wells Fargo Securities, LLC (“Wells Fargo”) resigned from its roles as financial advisor, capital markets advisor and lead placement agent to ADEX in connection with the merger. Wells Fargo has informed ADEX that it delivered notice of its resignation to the SEC pursuant to Section 11(b)(1) of the Securities Act of 1933, as amended, and has disclaimed any responsibility for any portion of this proxy statement/prospectus. Stockholders should not place any reliance on the participation of Wells Fargo prior to such resignation in the transactions contemplated by this proxy statement/prospectus.

Pursuant to the current charter, a holder of shares of common stock (such shares of common stock, the “IPO Shares”) included as part of units issued in ADEX’s initial public offering may request that ADEX redeem all or a portion of such stockholder’s IPO Shares for cash if the merger is consummated. A stockholder will be entitled to receive cash for any IPO Shares to be redeemed only if it (i) (a) holds IPO Shares or (b) holds IPO Shares as part of units and elects to separate such units into the underlying IPO Shares and warrants issued as part of such units prior to exercising their redemption rights with respect to the IPO Shares; and (ii) prior to                , Eastern Time, on                ,         (two business days prior to the vote at the special meeting), (a) submits a written request to Continental Stock Transfer & Trust Company, ADEX’s transfer agent (the “transfer agent”), that ADEX redeem its IPO Shares for cash and (b) delivers its IPO Shares to the transfer agent, physically or electronically through The Depository Trust Company (“DTC”).

Holders of ADEX’s units must elect to separate the underlying IPO Shares and warrants prior to exercising redemption rights with respect to the IPO Shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying IPO Shares and warrants, or if a holder holds units registered in its, his or her own name, the holder must contact the transfer agent directly and instruct it to do so and tender its, his or her IPO Shares to the transfer agent, through DTC.

Stockholders may elect to redeem all or a portion of their IPO Shares even if they vote for the merger proposal. If the merger is not consummated, the IPO Shares will not be redeemed for cash. If a stockholder properly exercises its right to redeem its IPO Shares and timely delivers its IPO Shares to the transfer agent, we will redeem each such IPO Share for a per share price, payable in cash, equal to the quotient obtained by dividing (a) the aggregate amount on deposit in the trust account as of two business days prior to the consummation of the merger, including interest (net of taxes payable), by (b) the number of then-issued and outstanding IPO Shares. For illustrative purposes only, as of                ,             the record date, this would have equaled approximately $        per share. If a stockholder properly exercises its, his or her redemption rights, then it, he or she will be exchanging its, his or her redeemed IPO Shares for cash and will no longer own such IPO Shares. Any request to redeem IPO Shares, once made, may be withdrawn at any time until the deadline for exercising redemption


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requests and thereafter, but only with our consent, until the closing. Furthermore, if a holder delivers any certificate representing IPO Shares in connection with an election of its, his or her redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it, he or she may request that ADEX instruct the transfer agent to return the shares (physically or electronically). The holder can make such request by contacting the transfer agent, at the address or email address listed in the accompanying proxy statement/prospectus. We will be required to honor such request only if made prior to the deadline for exercising redemption requests. See “Proposal No. 1—The Merger Proposal—Redemption Rights” in the accompanying proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your IPO Shares for cash.

Notwithstanding the foregoing, a holder of shares, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined for purposes of Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of our outstanding common stock, without our prior consent. Accordingly, if a stockholder, alone or acting in concert or as a group, seeks to redeem more than 15% of our outstanding common stock, then any such shares in excess of that 15% limit would not be redeemed for cash, without our prior consent.

We will pay the redemption price to stockholders who properly exercise their redemption rights promptly following the closing. The closing is subject to the satisfaction of a number of conditions. As a result, there may be a significant delay between the deadline for exercising redemption requests prior to the special meeting and payment of the redemption price.

The closing is conditioned on, among other things, the approval of the condition precedent proposals, the director election proposal, and the incentive plan proposal at the special meeting.

We urge you to read the proxy statement/prospectus (including the annexes thereto) accompanying this notice carefully for a more complete description of the merger and related transactions and each of the proposals. If you have any questions or need assistance voting your shares, please contact our proxy solicitor, Okapi Partners LLC, by telephone at (877) 259-6290 (banks and brokers call collect at (212) 297-0720) or via email at info@okapipartners.com.

Thank you for your participation. We look forward to your continued support.

 

By Order of the Board of Directors,
    

David L. Shrier

Director, President and Chief Executive Officer


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     1  

QUESTIONS AND ANSWERS ABOUT THE TRANSACTION PROPOSALS FOR ADEX STOCKHOLDERS

     5  

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

     26  

RISK FACTORS

     48  

SPECIAL MEETING OF ADEX STOCKHOLDERS

     117  

PROPOSAL NO. 1—THE MERGER PROPOSAL

     123  

PROPOSAL NO. 2—THE CHARTER AMENDMENT PROPOSAL

     168  

PROPOSAL NO. 3—THE ADVISORY CHARTER PROPOSALS

     170  

PROPOSAL NO. 4—THE NYSE AMERICAN PROPOSAL

     173  

PROPOSAL NO. 5—THE INCENTIVE PLAN PROPOSAL

     174  

PROPOSAL NO. 6—DIRECTOR ELECTION PROPOSAL

     184  

PROPOSAL NO. 7—THE ADJOURNMENT PROPOSAL

     186  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     187  

INFORMATION ABOUT ADEX

     200  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ADEX

     210  

INFORMATION ABOUT GRIID

     218  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GRIID

     234  

MARKET, INDUSTRY, OTHER DATA AND CERTAIN KEY METRICS

     262  

MANAGEMENT AFTER THE MERGER

     263  

EXECUTIVE COMPENSATION

     272  

BENEFICIAL OWNERSHIP OF SECURITIES

     279  

CERTAIN ADEX RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     282  

CERTAIN GRIID RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     285  

MARKET PRICE AND DIVIDEND INFORMATION

     287  

DESCRIPTION OF SECURITIES

     288  

APPRAISAL RIGHTS

     319  

STOCKHOLDER NOMINATIONS AND PROPOSALS

     320  

HOUSEHOLDING INFORMATION

     320  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     322  

INDEX TO FINANCIAL STATEMENTS

     F-1  

 

ANNEX A-1    MERGER AGREEMENT
ANNEX A-2    FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
ANNEX A-3    SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER
ANNEX A-4    THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER
ANNEX B     VOTING AGREEMENT
ANNEX C    FORM OF INVESTOR RIGHTS AGREEMENT
ANNEX D    FORM OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
ANNEX E    GRIID INFRASTRUCTURE INC. 2023 OMNIBUS INCENTIVE COMPENSATION PLAN
ANNEX F    OPINION OF LINCOLN INTERNATIONAL LLC

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus, including, without limitation, statements under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ADEX” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of GRIID,” includes forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. The information included in this proxy statement/prospectus in relation to GRIID has been provided by GRIID and its management team, and forward-looking statements include statements relating to GRIID’s management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement/prospectus may include, for example, statements about:

 

   

our ability to complete the merger, or, if we do not consummate the merger, any other business combination;

 

   

the benefits of the merger;

 

   

the amount of redemptions of IPO Shares by holders of such IPO Shares;

 

   

the future financial performance of the combined company following the merger;

 

   

our success in retaining or recruiting, our officers, key employees, directors or industry advisors following the merger;

 

   

our public securities’ potential liquidity and trading;

 

   

the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;

 

   

the trust account not being subject to claims of third parties;

 

   

our ability to maintain our listing on the NYSE American;

 

   

our ability not to be deemed a “penny stock”; and

 

   

our financial performance following the merger

The forward-looking statements contained in this proxy statement/prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to:

 

   

the inability to complete the merger due to the failure to obtain the approval of ADEX’s stockholders, regulatory approvals, or satisfy the other conditions to closing in the merger agreement;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

 

   

our success in retaining or recruiting, our officers, key employees, directors or industry advisors following the merger;

 

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our directors, industry advisors and management team members allocating their time to other businesses and potentially having conflicts of interest with our business or in approving the merger;

 

   

the outcome of any legal proceedings that may be instituted against us, GRIID, their affiliates or their respective directors and officers following announcement of the merger;

 

   

our public securities’ potential liquidity and trading;

 

   

the lack of a market for our securities;

 

   

changes adversely affecting the business in which GRIID is engaged;

 

   

the trust account not being subject to claims of third parties;

 

   

fluctuations in GRIID’s revenue and operating results;

 

   

the uncertainty of the projected financial information with respect to GRIID;

 

   

the fact that the terms of its credit agreement restrict GRIID’s current and future operations, particularly its ability to take certain actions;

 

   

the fact that GRIID’s business is highly dependent on a small number of bitcoin mining equipment suppliers;

 

   

GRIID’s reliance on third parties, including utility providers, for the reliable and sufficient supply of electrical power to its infrastructure;

 

   

GRIID’s ability to obtain and maintain access to its targets of carbon-free power supply;

 

   

the ability of GRIID to execute its business model, including market acceptance of bitcoin;

 

   

the risks relating to GRIID’s status as an early-stage company with a history of operating losses;

 

   

our financial performance following the merger;

 

   

our ability to comply with the continued listing standards of the NYSE American; and

 

   

other factors detailed under the section entitled “Risk Factors” herein.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We and GRIID undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements in deciding how to grant your proxy or instruct how your vote should be cast on the proposals set forth in this proxy statement/prospectus.

 

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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus references important business and financial information about ADEX and GRIID from documents that are not included in or delivered with this proxy statement/prospectus but are contained in the annexes to this proxy statement/prospectus and exhibits to the registration statement on Form S-4 of which this proxy statement/prospectus forms a part. See the section entitled “Where You Can Find Additional Information.”

ADEX is subject to the information and periodic reporting requirements of Section 13(a) and Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and files annual, quarterly and current reports with the SEC. Upon the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus forms a part and following completion of the transaction, New GRIID will continue to be subject to these requirements. You will be able to obtain ADEX’s SEC filings, including the registration statement and this proxy statement/prospectus, free of charge at the SEC’s website at http://www.sec.gov. These documents are also available at ADEX’s website at http://www.aditedtech.com under the heading “SEC Filings.” The references to these websites are inactive textual references only, and the information provided on the SEC’s and ADEX’s website is not a part of this proxy statement/prospectus and therefore is not incorporated by reference into this proxy statement/prospectus.

GRIID does not have a class of securities registered under Section 12 of the Exchange Act or listed on a public exchange, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act and, accordingly, does not file documents or reports with the SEC.

You can obtain documents referenced in this proxy statement/prospectus at no cost by requesting them in writing or by telephone from ADEX:

John D’Agostino

Adit EdTech Acquisition Corp.

1345 Avenue of the Americas, 33rd Floor

New York, NY 10105

Telephone: (646) 291-6930

Email: dagostino@aditedtech.com

You may also obtain these documents by requesting them in writing or by telephone from our proxy solicitation agent at the following address and telephone number:

Okapi Partners LLC

1212 Avenue of the Americas, 24th Floor

New York, NY 10036

Telephone: (877) 259-6290

(banks and brokers call collect at (212) 297-0720)

Email: info@okapipartners.com

These documents are available without charge upon written or oral request. If you would like to request any documents, please do so no later than five business days prior to the date of the special meeting in order to receive them before the special meeting.

No one has been authorized to provide you with any information that is different from that contained in this proxy statement/prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This proxy statement/prospectus may be used only for the purpose for which it has been prepared. This proxy statement/prospectus is dated                ,                 , and you should assume that the information in this proxy statement/prospectus is accurate only as of such date or such other date as is specified. Neither the mailing of this proxy statement/prospectus to the GRIID members nor the issuance by ADEX of common stock in connection with the merger will create any implication to the contrary.

 

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This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in this proxy statement/prospectus regarding ADEX has been provided by ADEX, and information contained in this proxy statement/prospectus regarding GRIID has been provided by GRIID.

Except where otherwise specified, the interests of stockholders of New GRIID set forth in this proxy statement/prospectus are based on the capitalization of ADEX and GRIID as of June 30, 2023 and (w) assume that (i) none of ADEX’s existing stockholders purchase or sell shares of common stock in the open market and (ii) there are no other issuances of equity interests of ADEX, (x) do not take into account the 7,270,000 private placement warrants issued in a private placement that occurred at the consummation of the IPO (the “private placement warrants”) or the 13,800,000 public warrants issued as part of the units in our initial public offering (“IPO warrants”) that will be outstanding upon the closing and may be exercised thereafter, (y) do not take into account warrants issued to GEM Yield Bahamas Limited (“GYBL”) prior to, at or after the closing, which may be exercised after closing, or exercises thereof, nor the issuance of Class B units of GRIID to Blockchain upon the automatic adjustment and exercise of the warrant issued to Blockchain, in accordance with the terms thereof and (z) do not take into account the issuance of warrants to Adit EdTech Sponsor, LLC (the “sponsor”) upon conversion of outstanding borrowings under an amended and restated convertible promissory note issued by the sponsor to ADEX (the “promissory note”) prior to the IPO.

 

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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION PROPOSALS FOR ADEX STOCKHOLDERS

The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the special meeting, including proposals relating to the merger. The following questions and answers do not include all of the information that is important to ADEX stockholders. We urge ADEX stockholders to read carefully the remainder of this proxy statement/prospectus, including the annexes included herein.

Q:    Why am I receiving this proxy statement/prospectus?

A:    This proxy statement/prospectus and the enclosed proxy card are being sent to you in connection with the solicitation of proxies by ADEX’s board of directors for use at the special meeting to be held virtually at              on             , at             , Eastern Time. Stockholders may also attend the special meeting in listen-only mode by dialing             (toll-free within the U.S. and Canada) and (outside of the U.S. and Canada), Conference ID:             , but will not be able to vote shares or ask questions during the special meeting. This proxy statement/prospectus summarizes some of the information that you need to make an informed decision on the proposals to be considered at the special meeting.

ADEX stockholders are being asked to consider and vote upon, among other things, a proposal to approve the transactions contemplated by the merger agreement. The merger agreement provides, subject to the terms and conditions contained therein, that ADEX’s wholly owned direct subsidiary, Merger Sub, will merge with and into GRIID, and the separate limited liability company existence of Merger Sub will cease and post-merger GRIID, the surviving company of the merger, will continue its existence as a wholly owned subsidiary of ADEX. Stockholder approval of the merger agreement and the transactions contemplated thereby is required by the merger agreement and the existing organizational documents, as well as to comply with state and federal law and NYSE American listing standards §713(a) and §713(b).

A copy of the merger agreement is attached to this proxy statement/prospectus as Annex A-1, and copies of the first amendment, second amendment and third amendment to the merger agreement are attached to this proxy statement/prospectus as Annexes A-2, A-3 and A-4, respectively. This proxy statement/prospectus and its annexes contain important information about the merger and the other matters to be acted upon at the special meeting. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.

In connection with the merger, ADEX’s existing organizational documents will be replaced by the proposed organizational documents. The provisions of the proposed organizational documents will differ materially from those of the existing organizational documents. Please see “Questions and Answers About the Transaction Proposals For ADEX Stockholders—What amendments will be made to the existing organizational documents of ADEX?” below.

This document is a proxy statement because ADEX’s board of directors is soliciting proxies using this proxy statement/prospectus from its stockholders. It is a prospectus because ADEX, in connection with the merger, is offering shares of its common stock as merger consideration. See the section entitled “Proposal No. 1—The Merger Proposal.

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON (ONLINE), YOU ARE ENCOURAGED TO COMPLETE AND RETURN YOUR PROXY CARD OR VOTE ONLINE AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS PROXY STATEMENT/PROSPECTUS AND ITS ANNEXES.

Q:    Why is ADEX proposing the merger?

A:    ADEX was incorporated to effect a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

 

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On December 23, 2022, ADEX obtained stockholder approval to allow ADEX to extend the time by which it must complete its initial business combination up to six times at the election of the board of directors for an additional one month each time, for a maximum of six one-month extensions. In connection with the approval of this first extension, the holders of 25,132,578 IPO Shares exercised their right to redeem such shares for a pro rata portion of the funds then on deposit in the trust account of approximately $253.6 million (approximately $10.09 per share). After giving effect to such redemptions, there were 2,467,422 IPO Shares outstanding and there was approximately $25.0 million left in the trust account.

On July 11, 2023, ADEX obtained stockholder approval to allow ADEX to extend the time by which it must complete its initial business combination up to an additional two times at the election of the board of directors for an additional three months each time, for a maximum of two three-month extensions. In connection with the approval of this second extension, the holders of 467,396 IPO Shares exercised their right to redeem such shares for a pro rata portion of the funds then on deposit in the trust account of approximately $26.2 million (approximately $10.58 per share). After giving effect to such redemptions, there were 2,000,026 IPO Shares outstanding and there was approximately $21.3 million left in the trust account.

GRIID is a Delaware limited liability company. GRIID is an emerging American infrastructure company in the bitcoin mining sector that employs a vertically integrated self-mining strategy to develop and operate U.S.-based mining facilities that generate bitcoin. GRIID’s current business plan does not include the expansion of its mining operations to include digital assets other than bitcoin, or any other activities with, or the holding of, any cryptocurrencies other than bitcoin, and GRIID does not anticipate any changes to its business plan for the foreseeable future. Please see the section entitled “Information about GRIID” for more information about GRIID’s business.

For more information, see the section entitled “Proposal No. 1—The Merger Proposal—ADEX’s Board of Directors’ Reasons for Approval of the Merger.”

Q:    What is being voted on at the special meeting?

A:    At the special meeting, you will be asked to consider and vote on a proposal to approve and adopt the merger agreement, the full form of which, including amendments, is attached to this proxy statement/prospectus as Annexes A-1, A-2, and A-3, and approve the transactions contemplated thereby.

In addition, you will be asked to consider and vote on proposals to:

 

   

approve and adopt, assuming the other condition precedent proposals are approved and adopted, the proposed charter, a copy of which is attached to this proxy statement/prospectus as Annex D, which, if approved, would take effect upon the closing;

 

   

approve and adopt, on a non-binding advisory basis, certain differences between the current charter and the proposed charter, which are being presented in accordance with the requirements of the SEC as six separate sub-proposals to:

 

   

upon completion of the merger, increase the authorized capital stock of ADEX from 101,000,000 shares, consisting of 100,000,000 shares of common stock and 1,000,000 shares of preferred stock, to 501,000,000 shares, consisting of 500,000,000 shares of common stock and 1,000,000 shares of preferred stock;

 

   

provide that the board of directors of ADEX be divided into three classes with only one class of directors being elected each year and each class serving three-year terms;

 

   

provide that directors may be removed only for cause by the affirmative vote of the holders of at least 66 2/3% of the outstanding common stock entitled to vote thereon;

 

   

provide that any action required or permitted to be taken by the stockholders may be effected only at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing and that stockholders may not call a special meeting;

 

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change the stockholder vote required to amend Section 5.5 or Articles VI, VII, IX, or XII of the proposed charter from the affirmative vote of the holders of at least a majority of the outstanding common stock entitled to vote thereon to the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled to vote thereon, voting together as a single class; and

 

   

provide for certain additional changes, including, among other things, (a) changing New GRIID’s corporate name from “Adit EdTech Acquisition Corp.” to “GRIID Infrastructure Inc.” and (b) removing certain provisions related to ADEX’s status as a blank check company that will no longer apply upon consummation of the merger, all of which ADEX’s board of directors believes are necessary to adequately address the needs of New GRIID;

 

   

assuming the condition precedent proposals are approved and adopted, approve and adopt the incentive plan, substantially in the form attached to this proxy statement/prospectus as Annex E;

 

   

approve, assuming the other condition precedent proposals are approved and adopted, for purposes of complying with the applicable provisions of the NYSE American listing standard §713(a), the issuance of more than 20% of ADEX’s outstanding common stock in connection with the merger and, for purposes of complying with the applicable provisions of the NYSE American listing standard §713(b), the change of control of ADEX;

 

   

assuming the condition precedent proposals are approved and adopted, elect seven directors to serve terms as Class I, Class II, and Class III directors on our board of directors until the 2024, 2025 and 2026 annual meetings of stockholders, respectively, or until such directors’ successors have been duly elected and qualified, or until such directors’ earlier death, resignation, retirement or removal; and

 

   

approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of any of the proposals.

After careful consideration, ADEX’s board of directors has determined that each of the proposals are in the best interests of ADEX and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” each of those proposals, but expresses no opinion as to whether holders of IPO Shares should redeem their IPO Shares.

The existence of financial and personal interests of ADEX’s directors may result in a conflict of interest on the part of one or more of the directors between what they may believe is in the best interests of ADEX and its stockholders and what they may believe is best for themselves in determining to recommend that stockholders vote for the transaction proposals. See the section entitled “Proposal No. 1—The Merger Proposal—Interests of Certain Persons in the Merger” and “Beneficial Ownership of Securities” for a further discussion of these interests.

THE VOTE OF STOCKHOLDERS IS IMPORTANT. STOCKHOLDERS ARE URGED TO COMPLETE AND RETURN THEIR PROXY CARDS OR VOTE ONLINE AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS PROXY STATEMENT/PROSPECTUS AND ANNEXES.

Q:    Why is ADEX providing stockholders with the opportunity to vote on the merger?

A:    Under our existing organizational documents, we must provide all holders of IPO Shares with the opportunity to have such IPO Shares redeemed upon the consummation of an initial business combination approved by ADEX’s board of directors. For business and other reasons, we have elected to provide our stockholders with the opportunity to have their IPO Shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, we are seeking to obtain the approval of our stockholders of the merger proposal in order to allow our stockholders to effectuate redemptions of their IPO Shares in connection with the closing.

 

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The approval of our stockholders of the merger agreement and the approval of the other condition precedent proposals, the director election proposal, and the incentive plan proposal are also conditions to closing in the merger agreement.

Q:     What will happen in the merger?

A:     Pursuant to the merger agreement, and subject to the terms and conditions contained therein, at the closing of the merger, Merger Sub will merge with and into GRIID, with GRIID surviving the merger. After giving effect to the merger, GRIID will become a wholly owned subsidiary of New GRIID. Please see the section entitled “Proposal No. 1—The Merger Proposal” for more information.

If the merger proposal is approved, we intend to use a portion of the funds then on deposit in the trust account to pay (a) our aggregate costs, fees and expenses in connection with the consummation of the merger, (b) the deferred underwriting commission of approximately $6.8 million from our IPO and (c) the holders of our IPO Shares who exercise redemption rights with respect to such IPO Shares. The remaining balance in the trust account is expected to be used for working capital and general corporate purposes of New GRIID. Please see the section entitled “Proposal No. 1—The Merger Proposal” for more information.

Q:    Will the management of ADEX and GRIID change following the merger?

A:    The business and affairs of New GRIID will be managed under the direction of its board of directors. Following the closing, New GRIID’s board will include seven directors, four of whom are expected to be nominated by GRIID and three of whom are expected to be nominated by ADEX. At least four of the seven directors are expected to be independent such that a majority of the board of directors is independent. Subject to the terms of the proposed organizational documents, the number of directors will be fixed by New GRIID’s board of directors. Please see the section entitled “Management After the Merger” for more information.

Q:    What is the form of consideration that the GRIID equity holders will receive in return for the acquisition of GRIID by ADEX?

A:    Upon the closing, the limited liability company membership interests of Merger Sub will be converted into an equivalent limited liability company membership interest in post-merger GRIID and each outstanding limited liability company membership unit of GRIID will be converted into the right to receive such unit’s share, as determined in accordance with the merger agreement, of 58,500,000 shares of ADEX’s common stock.

Q:    What are the U.S. federal income tax consequences of the merger to U.S. members of GRIID?

A:    The tax consequences of the merger to U.S. members of GRIID will not be known until the closing of the merger because the treatment of the merger for U.S. federal income tax purposes will depend on the percentage of ADEX common stock owned by GRIID members after their exchange of their limited liability company membership units of GRIID for ADEX common stock. As a result of the redemption of 25,132,578 IPO Shares in connection with the first extension meeting (as defined below) and the redemption of 467,396 IPO Shares in connection with the second extension meeting (as defined below), the GRIID members that exchange their limited liability company membership units of GRIID for ADEX common stock will own, immediately after the merger, 80% or more of the stock of ADEX, under Section 351(a) of the Internal Revenue Code of 1986, as amended (the “Code”), the merger should be treated for U.S. federal income tax purposes as a tax-free exchange, so long as certain additional conditions are also satisfied by GRIID and ADEX. We refer to the tax-free treatment under Section 351(a) of the Code as the “intended tax treatment”.

If the merger qualifies as a tax-free transaction pursuant to Section 351(a) of the Code, subject to the limitations and qualifications described in “Certain U.S. Federal Income Tax Considerations,” a GRIID member who exchanges units of GRIID for ADEX common stock in the merger will not recognize taxable gain on the exchange except to the extent that the amount of liabilities of GRIID allocated to such GRIID member exceeds

 

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the adjusted tax basis in such member’s GRIID units, as discussed in more detail in “Certain U.S. Federal Income Tax Considerations” below.

If the GRIID members that exchange their limited liability company membership units of GRIID for ADEX common stock were to own, immediately after the merger, less than 80% of the common stock of ADEX, then the exchange should be treated for U.S. federal income tax purposes as a taxable exchange in which the exchanging GRIID members recognize gain or loss. If that were the case, a GRIID member generally would recognize gain or loss in an amount equal to the difference between (1) the fair market value of the shares of ADEX common stock received in the merger by the member plus such member’s share of the liabilities of GRIID and (2) the member’s adjusted tax basis in the GRIID units exchanged. See “Certain U.S. Federal Income Tax Considerations,” for more information.

The completion of the merger is not conditioned on the merger qualifying for the intended tax treatment, or upon the receipt of an opinion from counsel to that effect, or the receipt of a ruling from the Internal Revenue Service (“IRS”) regarding the U.S. federal income tax consequences of the merger.

The tax consequences of the merger to any particular ADEX stockholder or GRIID member will depend on that stockholder’s or member’s particular facts and circumstances. Accordingly, you are urged to consult your tax advisor to determine your tax consequences from the merger.

Q:    How were the transaction structure and consideration for the merger determined?

A:    The merger was the result of an extensive search for a potential transaction utilizing the global network and investing and operating experience of ADEX’s management team and board of directors. The terms of the merger were the result of extensive negotiations between ADEX and GRIID. Please see the section entitled “Proposal No. 1—The Merger Proposal—Background of the Merger” for more information. At the closing, GRIID members will own approximately 89.4% of the interest in New GRIID in the maximum redemption scenario.

Q:    What are the potential impacts on the merger resulting from the resignation of Wells Fargo?

A:    On May 26, 2022, Wells Fargo resigned from its roles as financial advisor, capital markets advisor and lead placement agent to ADEX in connection with the merger and waived all rights to any fees and compensation in connection with such roles. All fees and compensation payable to Wells Fargo as financial advisor and capital markets advisor were contingent upon the closing of the merger and Wells Fargo did not receive any fees in connection with its role as lead placement agent as a private placement transaction was not consummated. See “Summary—Wells Fargo’s Resignation as Lead Placement Agent, Capital Markets Advisor and Financial Advisor.”

Wells Fargo has informed ADEX that it delivered notice of its resignation to the SEC pursuant to Section 11(b)(1) of the Securities Act, and has disclaimed any responsibility for any portion of this proxy statement/prospectus. Stockholders should not place any reliance on the participation of Wells Fargo prior to such resignation in the transactions contemplated by this proxy statement/prospectus.

Q:    What conditions must be satisfied to complete the merger?

A:    There are a number of closing conditions in the merger agreement, including the approval by our stockholders of the transaction proposals (other than the Adjournment Proposal) as well as certain regulatory approvals. For a summary of the conditions that must be satisfied or waived prior to completion of the merger, see the section entitled “Proposal No. 1—The Merger Proposal—The Merger Agreement—Conditions to Closing of the Merger.”

 

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Q:    What equity stake will current ADEX stockholders, GRIID equity holders and the sponsor, officers and directors hold in New GRIID following the consummation of the merger?

A:    It is anticipated that, upon completion of the merger and related transactions, the ownership of New GRIID by the sponsor and independent directors and industry advisors who received shares of common stock issued prior to our initial public offering (collectively, the “initial stockholders”), holders of IPO Shares, and holders of limited liability company membership interests of GRIID immediately prior to the closing (such holders, including holders of interests granted after the date of the merger agreement and prior to the closing, the “pre-merger GRIID equity holders”) will be as follows:

 

   

The holders of IPO Shares would own 2,000,026 shares of common stock, representing 3.0% of New GRIID’s total outstanding shares of common stock;

 

   

The initial stockholders would own 6,900,000 shares of common stock, representing 10.2% of New GRIID’s total outstanding shares of common stock, of which 6,832,500 shares of common stock, representing 10.1% of New GRIID’s total outstanding shares of common stock, would be held by the sponsor; and

 

   

The pre-merger GRIID equity holders, following the automatic adjustment and exercise of the Blockchain warrant and the assumed exercise of the Bridge Financing warrants (as defined below) immediately prior to the closing) would own 58,500,000 shares of common stock, representing 86.8% of New GRIID’s total outstanding shares of common stock. The pre-merger GRIID equity holders referenced above include (i) Blockchain as the holder of warrants issued to Blockchain by GRIID pursuant to that certain Warrant for Class B Units, dated as of October 9, 2022 (the “Blockchain warrant”), which shall be automatically adjusted and exercised immediately prior to the closing pursuant to the terms of such Blockchain warrant, and (ii) certain bridge financing lenders (the “Bridge Financing Warrantholders”) who have made loans to GRIID and in connection with such loans have been issued warrants for Class B Units in GRIID (the “Bridge Financing warrants”), which shall be automatically adjusted and exercised immediately prior to the closing pursuant to the terms of such Bridge Financing warrants.

The ownership percentages set forth above do not take into account any warrants that will be outstanding as of the closing and may be exercised thereafter, other than the Blockchain and Bridge Financing warrants, and assume no further redemptions of IPO Shares. If the actual facts are different than these assumptions, the percentage ownership retained by ADEX’s existing stockholders in New GRIID following the merger will be different. For example, if we assume that all 13,800,000 IPO warrants and 7,270,000 private placement warrants were exercisable and exercised following completion of the merger and related transactions and no further redemptions of IPO Shares, then the ownership of ADEX by holders of our IPO Shares, the initial stockholders, and the pre-merger GRIID equity holders will be as follows:

 

   

The holders of our IPO Shares would own 15,800,026 shares of common stock, representing 17.9% of New GRIID’s total outstanding shares of common stock;

 

   

The initial stockholders would own 14,170,000 shares of common stock, representing 16.0% of New GRIID’s total outstanding shares of common stock, of which 14,102,500 shares of common stock, representing 15.9% of New GRIID’s total outstanding shares of common stock, would be held by the sponsor; and

 

   

The pre-merger GRIID equity holders (including Blockchain and the Bridge Financing Warrantholders, following the automatic adjustment and exercise of the Blockchain and Bridge Financing warrants immediately prior to the closing) would own 58,500,000 shares of common stock, representing 66.1% of New GRIID’s total outstanding shares of common stock.

The preceding descriptions of the ownership of ADEX’s securities are stated as of the date of filing of this proxy statement/prospectus. The preceding descriptions do not take into account any transactions that may be entered into after the date hereof, including any stockholder redemptions, issuances of warrants to GEM or to the sponsor

 

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upon conversion of borrowings under the promissory note into warrants, other than the automatic adjustment and exercise of the Blockchain warrant and the Bridge Financing warrants immediately prior to the closing. See “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

Q:    What is the impact on relative stock ownership if a substantial number of holders of IPO Shares vote in favor of the merger proposal but exercise their redemption rights?

A:    Holders of IPO Shares are not required to vote “AGAINST” the merger in order to exercise redemption rights with respect to any of their IPO Shares. Accordingly, the merger may be consummated even though the funds available from the trust account and the number of IPO Shares are reduced as a result of redemptions by holders of IPO Shares.

If a holder of IPO Shares exercises its, his or her redemption rights with respect to any of its, his or her IPO Shares, such exercise will not result in the loss of any warrants that such stockholder may hold. We cannot predict the ultimate value of the warrants following the consummation of the merger, but assuming that 100% of the 2,000,026 shares of common stock held by holders of IPO Shares were redeemed, the 13,800,000 retained outstanding IPO warrants would have an aggregate value of $        , based on the price per IPO warrant of $         on             ,             , the most recent practicable date prior to the date of this proxy statement/prospectus. In addition, on             ,             , the most recent practicable date prior to the date of this proxy statement/prospectus, the closing sale price per share of common stock was $        .

In each of the no further redemption, half-redemption and maximum redemption scenarios described below, the residual equity value owned by non-redeeming stockholders, taking into account the respective redemption amounts, is assumed to remain the deemed value of $10.00 per share. As a result of such redemption amounts and the assumed $10.00 per share value, the implied total equity value of New GRIID following the merger, assuming no exercise of outstanding warrants, would be (a) $         in the no further redemption scenario, (b) $         in the half redemption scenario and (c) $         in the maximum redemption scenario. Additionally, the sensitivity table below sets forth (x) the potential additional dilutive impact of warrant exercises in each redemption scenario and (y) the effective underwriting fee incurred in connection with the IPO in each redemption scenario (all of which underwriting fees are contingent upon the closing of the merger). Also, the sensitivity table below sets forth the ownership of each group listed below assuming all IPO warrants and private placement warrants are exercisable and exercised following the completion of the merger and the underlying shares of common stock remain held by the holders of such warrants.

Finally, the table below reflects the issuance of shares of New GRIID common stock to Blockchain and the Bridge Financing Warrantholders upon the automatic adjustment and exercise of the Blockchain warrant and the Bridge Financing warrants immediately prior to the closing. The Blockchain warrant will be automatically 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 New GRIID immediately following the closing, which amounts to Class B units exchangeable in the merger for 6,740,003 shares of ADEX’s common stock in the no further redemption scenario, 6,640,001 shares of ADEX’s common stock in the half redemption scenario and 6,540,000 shares of ADEX’s common stock in the maximum redemption scenario.

 

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Holders of GRIID Class B units are entitled to a fixed portion of the updated merger consideration; therefore, the issuance of such Class B units to Blockchain and the Bridge Financing Warrantholders will reduce the number of shares of New GRIID common stock otherwise issuable to the other holders of GRIID Class B units in the merger. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of GRIID” for further discussion of the Blockchain and Bridge Financing warrants.

 

    No Further
Redemption
Scenario
    % of
Total
    Half
Redemption
Scenario
    % of
Total
    Maximum
Redemption
Scenario
    % of
Total
 

Holders(1)

           

Holders of IPO Shares

    2,000,026       3.0%       1,000,013       1.5%       0       0.0%  

Initial stockholders

    6,900,000       10.2%       6,900,000       10.4%       6,900,000       10.6%  

Pre-merger GRIID holders

    58,500,000       86.8%       58,500,000       88.1%       58,500,000       89.4%  

Pre-merger GRIID Class A unitholders

    7,464,670       11.1%       7,483,035       11.3%       7,501,399       11.5%  

Pre-merger GRIID Class B unitholders(2)

    41,256,663       61.2%       41,211,913       62.1%       41,167,164       62.9%  

Pre-merger GRIID Class C unitholders

    9,778,667       14.5%       9,805,052       14.7%       9,831,437       15.0%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shares outstanding excluding warrants

    67,400,026       100.0%       66,400,013       100.0%       65,400,000       100.0%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity value post-redemptions ($ in millions)

    $674         $664        
$654
 
 

Per share value

    $10.00         $10.00         $10.00    

Warrant dilution(3)(4)

           

IPO warrants

    13,800,000       20.5%       13,800,000       20.8%       13,800,000       21.1%  

Private placement warrants

    7,270,000       10.8%       7,270,000       10.9%       7,270,000       11.1%  

Holdings upon exercise of warrants(3)(4)

           

Holders of IPO Shares

    15,800,026       17.9%       14,800,013       16.9%       13,800,000       16.0%  

Initial stockholders

    14,170,000       16.0%       14,170,000       16.2%       14,170,000       16.4%  

Pre-merger GRIID holders

    58,500,000       66.1%       58,500,000       66.9%       58,500,000       67.7%  

Pre-merger GRIID Class A unitholders

    7,077,744       8.0%       7,096,108       8.1%       7,114,472       8.2%  

Pre-merger GRIID Class B unitholders

    42,199,517       47.7%       42,154,768       48.2%       42,110,018       48.7%  

Pre-merger GRIID Class C unitholders

    9,222,739       10.4%       9,249,124       10.6%       9,275,509       10.7%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shares outstanding upon exercise of warrants

    88,470,026       100.0%       87,470,013       100.0%       86,470,000       100.0%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     No Redemption
Scenario
     % of
Trust
Account
    Half
Redemption
Scenario
     % of
Trust
Account
    Maximum
Redemption
Scenario
     % of
Trust
Account
 

Effective underwriting fee

   $ 6,762,000                   $ 6,762,000                   $ 6,762,000                

 

(1)

Does not include shares to be issued to GYBL under the share purchase agreement (the “GEM Share Purchase Agreement”) entered into among ADEX, Griid Infrastructure LLC, GEM Global Yield LLC SCS (“GEM”) and GYBL. New GRIID is obligated to pay GYBL a commitment fee of $4 million, payable in cash or shares, at New GRIID’s election.

(2)

Includes the shares of ADEX common stock that will be issued to Blockchain following the automatic adjustment and exercise of the Blockchain warrant into a number of GRIID Class B units to be equal to 10% of the issued and outstanding capital stock of New GRIID immediately following the closing, which amounts to Class B units exchangeable in the merger for 6,740,003 shares of ADEX’s common stock in the no further redemption scenario, 6,640,001 shares of ADEX’s common stock in the half redemption scenario and 6,540,000 shares of ADEX’s common stock in the maximum redemption scenario. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of GRIID” for further information regarding the Blockchain warrant.

(3)

Does not separately present the exercise of the outstanding Blockchain and Bridge Financing warrants, because such exercise is automatic immediately prior to closing and reflected separately in this table. See

 

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  “Management’s Discussion and Analysis of Financial Condition and Results of Operations of GRIID” for further discussion of the Blockchain warrant and Bridge Financing warrants.
(4)

Does not include the warrant New GRIID would be obligated to issue to GYBL upon the closing, exercisable for the number of New GRIID shares equal to 2% of the outstanding equity interests in New GRIID immediately following the closing.

If you are a holder of IPO Shares and you exercise your redemption rights, it will not result in the loss of any warrants that you may hold. Accordingly, even if the maximum number of IPO Shares was redeemed, there would still be 13,800,000 and 7,270,000 IPO warrants and private placement warrants, respectively, outstanding. Further, if the shares of New GRIID common stock are trading above the exercise price of $11.50 per warrant, the warrants would be considered to be “in the money” and would therefore be more likely to be exercised by the holders thereof. This in turn increases the risk to non-redeeming stockholders that the warrants will be exercised, which would result in immediate dilution to the non-redeeming stockholders. As of             ,             , the closing price of the IPO warrants was $        .

Q:    Did the board of directors of ADEX obtain a fairness opinion in determining whether or not to proceed with the merger?

A:    The board of directors of ADEX did not obtain an opinion from a financial advisor as to the fairness to ADEX, from a financial point of view, of the 58,500,000 shares of ADEX common stock to be issued by ADEX in the merger as merger consideration, as contemplated by the merger agreement, as amended. In connection with its initial determination to approve the initial merger agreement, the board of directors of ADEX obtained an opinion from Lincoln International LLC (“Lincoln”), delivered on November 29, 2021 (the “fairness opinion”), as to the fairness to ADEX, from a financial point of view, of the 308,100,000 shares of ADEX common stock to be issued by ADEX in the merger as contemplated by the initial merger agreement at the time of such opinion (such amount of consideration, the “initial merger consideration”). The fairness opinion did not reflect changes in circumstances that had occurred or that may have occurred between the signing of the initial merger agreement and the completion of the merger, including the reduction of the merger consideration from 308,100,000 shares of ADEX common stock to 58,500,000 shares of ADEX common stock pursuant to the second amendment, changes in macroeconomic conditions, recent volatility in the market value of bitcoin or the redemptions of 25,132,578 and 467,396 IPO Shares in connection with the approvals on December 23, 2022 and July 11, 2023, respectively, of extensions to the date by which ADEX must consummate its initial business combination. Lincoln’s fairness opinion was furnished to the ADEX board of directors in its capacity as such, and, as stated in such opinion, not to any other person, including any particular shareholder, group or class of securities, creditor, or other constituencies of ADEX, and was furnished solely to be utilized by the ADEX board of directors (such stated limitations of the opinion, the “Lincoln Disclaimer”). The issue of whether the Lincoln Disclaimer would be enforced in favor of Lincoln and against any securities holders or other persons would need to be resolved by a court of competent jurisdiction. However, resolution of the issue would have no effect on the rights and responsibilities of the ADEX board of directors and would have no effect on the rights and responsibilities of either Lincoln or the ADEX board of directors under federal securities laws. See “Proposal No. 1—The Merger Proposal—Opinion of Financial Advisor to the ADEX Board Related to the Initial Merger Consideration” and the full text of such opinion, attached hereto as Annex F, which is being provided solely to provide historical context for the board of directors of ADEX’s deliberations in connection with their initial assessment of the merger and the initial merger agreement, but not the board of directors’ decision to enter into the second amendment or to proceed with the merger following the reduction of the initial merger consideration.

The fairness opinion described throughout this proxy statement/prospectus was dated November 29, 2021 and was delivered in connection with ADEX’s board of directors’ evaluation of the initial merger agreement and the initial merger consideration to be paid pursuant to that agreement. On October 17, 2022, the parties to the initial merger agreement entered into the second amendment, which, among other things, reduced the merger consideration. No new or updated fairness opinion was obtained in connection with ADEX’s board of directors’ determination that the merger and the second amendment, including the

 

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reduction in the merger consideration, was fair to ADEX. We continue to describe the fairness opinion delivered on November 29, 2021 throughout this proxy statement/prospectus solely to provide historical context for ADEX’s board of directors’ deliberations in connection with its initial assessment of the merger and the initial merger agreement. In light of the updated merger consideration set forth in the second amendment, changes in macroeconomic conditions and recent volatility in the market value of bitcoin, you should not rely on the following discussion of the fairness opinion, any discussion of the fairness opinion elsewhere in this proxy statement/prospectus or the text of the fairness opinion set forth in Annex F, in evaluating whether or not to vote your shares of common stock in favor of the merger proposal or any other proposal set forth in this proxy statement/prospectus or in evaluating whether or not to redeem your IPO Shares.

Q:    Why is ADEX proposing the NYSE American proposal?

A:    ADEX is proposing the NYSE American proposal in order to comply with (i) NYSE American listing standard §713(a), which requires, among other things, stockholder approval of certain transactions that result in the issuance of 20% or more of a company’s shares of common stock outstanding before the issuance of stock or securities or the issuance of stock or securities to any director, officer or principal shareholders of the issuer and (ii) NYSE American listing standard §713(b), which requires stockholder approval of certain transactions that result in the change of control of the issuer. In connection with the merger, ADEX is seeking stockholder approval for the issuance of: 58,500,000 shares of common stock to the GRIID equity holders. Because the number of securities that ADEX will issue to the GRIID equity holders in connection with the merger is greater than 20% of ADEX’s outstanding voting power and outstanding common stock in connection with the merger, and because the merger will result in a change in control of ADEX, ADEX is required to obtain stockholder approval of such issuance pursuant to the NYSE American listing standards. Stockholder approval of the NYSE American proposal is also a condition to closing in the merger agreement. See the section entitled “Proposal No. 4—The NYSE American Proposal” for additional information.

Q:    What amendments will be made to the existing organizational documents of ADEX?

A:    The consummation of the merger is conditioned upon, among other things certain amendments to the current charter and current bylaws. Accordingly, in connection with the merger, ADEX’s stockholders are also being asked to consider and vote upon the charter amendment proposal and the advisory charter proposal. For additional information on the differences between the current charter and the proposed charter, see the sections entitled “Proposal No. 2—The Charter Amendment Proposal” and “Proposal No. 3—The Advisory Charter Proposals.”

Q:    What happens if I sell my shares of common stock before the special meeting?

A:    The record date is earlier than the date that the merger is expected to be completed. If you transfer your shares after the record date, but before the special meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the special meeting. However, you will not be able to seek redemption of any IPO Shares transferred because you will no longer be able to deliver them for cancellation upon consummation of the merger in accordance with the provisions described herein. If you transfer your shares prior to the record date, you will have no right to vote those shares at the special meeting or have any IPO Shares redeemed for a pro rata portion of the proceeds held in the trust account.

Q:    What vote is required to approve the proposals presented at the special meeting?

A:    Approval of the charter amendment proposal requires the affirmative vote of a majority of the then-outstanding shares of common stock entitled to vote at the meeting. Assuming all of the                 issued and outstanding shares of common stock as of the record date are voted at the special meeting, the charter amendment proposal will be approved if                 outstanding shares of common stock are voted in favor of

 

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such proposals. Based on the number of shares of common stock outstanding on the record date,                 shares of common stock, in the aggregate, will be required to achieve a quorum. If stockholders holding the minimum number of shares of common stock to constitute a quorum are present at the special meeting, then the charter amendment proposal will be approved if                 outstanding shares of common stock are voted in favor of such proposals. The sponsor and our directors and officers have agreed to vote any shares of common stock owned by them in favor of each of the proposals to be presented at the special meeting. As of the record date, such stockholders own approximately             % of the Company’s issued and outstanding common stock, in the aggregate. As a result, the charter amendment proposal may be approved without the affirmative vote of any of the outstanding IPO Shares.

Approval of each of the merger proposal, the NYSE American proposal, the incentive plan proposal and the adjournment proposal requires the affirmative vote of a majority of the then-outstanding shares of common stock present, in person (online) or by proxy, and entitled to vote at the meeting. Approval, on an advisory basis, of the advisory charter proposals, requires the affirmative vote of a majority of the then-outstanding shares of common stock present, in person (online) or by proxy, and entitled to vote at the meeting. Assuming all of the             issued and outstanding shares of common stock as of the record date are voted at the special meeting, each of such proposals will be approved if             outstanding shares of common stock are voted in favor of such proposals. If stockholders holding the minimum number of shares of common stock to constitute a quorum are present at the special meeting, then each of such proposals will be approved if             outstanding shares of common stock are voted in favor of such proposals. The sponsor and our directors and officers have agreed to vote any shares of common stock owned by them in favor of each of the proposals to be presented at the special meeting. As of the record date, the sponsor and the Company’s officers and directors own approximately         % of the Company’s issued and outstanding common stock, in the aggregate. As a result, the affirmative vote of approximately         % of the outstanding IPO Shares would be sufficient for approval of each of the merger proposal, the NYSE American proposal, the incentive plan proposal, the adjournment proposal and the advisory charter proposals.

The election of the director nominees pursuant to the director election proposal requires the affirmative vote of the holders of a plurality of the then-outstanding shares of common stock present, in person (online) or by proxy, and entitled to vote at the meeting.

Q:    May the sponsor, our directors, officers, advisors or their affiliates purchase shares or warrants prior to or in connection with the merger?

A:    Prior to or in connection with the merger, the sponsor, our directors, officers, or advisors or their respective affiliates may purchase shares or warrants. None of the sponsor, directors, officers or advisors or their respective affiliates are permitted to make any such purchases when they are in possession of any material non-public information not disclosed to the seller, or if prohibited during a restricted period under Regulation M under the Exchange Act. Such purchases of shares may be conducted through privately negotiated transactions with holders of IPO Shares who would have otherwise elected to have such IPO Shares redeemed in connection with the merger. In the event that the sponsor, directors, officers or advisors or their affiliates purchase shares in privately negotiated transactions from holders of IPO Shares who have already elected to exercise their redemption rights, such selling stockholders may be required to revoke their prior elections to redeem their IPO Shares. Any such privately negotiated purchases of shares may be effected at purchase prices that are below or in excess of the per-share pro rata portion of the trust account.

Q:    How many votes do I have at the special meeting?

A:    ADEX’s stockholders are entitled to one vote at the special meeting for each share of common stock held of record as of the close of business on                ,         the record date. As of the close of business on the record date, there were                shares of common stock outstanding.

 

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Q:    What constitutes a quorum at the special meeting?

A:    The presence, in person (online) or by proxy, of stockholders holding a majority of the shares issued and outstanding and entitled to vote at the special meeting constitutes a quorum at the special meeting. As of the record date,              shares of common stock, in the aggregate, would be required to achieve a quorum.

Q:    How will ADEX’s sponsor, directors and officers vote?

A:    In connection with the IPO, we entered into letter agreements (each, a “letter agreement,” and together, the “letter agreements”) with the sponsor and each of our directors and officers, pursuant to which, among other things, each agreed to vote any shares of common stock owned by them in favor of the merger. As of the record date, the sponsor and the Company’s officers and directors that have agreed to vote the shares of common stock owned by them in favor of the merger own 6,862,500 shares of common stock, or approximately         % of our issued and outstanding shares of common stock. As a result, the merger proposal may be approved without the affirmative vote of any of the outstanding IPO Shares. See the section entitled “Proposal No. 1—The Merger Proposal—Related Agreements—Sponsor Letter Agreement.”

Q:    What happens if the merger is not consummated or is terminated?

A:    If we are not able to complete the merger with GRIID or another initial business combination by the applicable extension date (as defined below), the latest of which ends on January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter, we will cease all operations except for the purpose of winding up, redeeming the IPO Shares and liquidating the trust account, in which case holders of IPO Shares may only receive approximately $             per share and our warrants will expire worthless.

On December 23, 2022, ADEX held a special meeting of its stockholders (the “first extension meeting”), at which its stockholders approved a proposal to extend the date by which it must complete an initial business combination up to six times at the election of the board of directors for an additional one month each time, for a maximum of six one-month extensions. ADEX provided holders of IPO Shares with the ability to redeem such IPO Shares in connection with the first extension meeting. Stockholders holding 25,132,578 IPO Shares exercised their right to redeem such shares for a pro rata portion of the funds then on deposit in the trust account of approximately $253.6 million (approximately $10.09 per share), leaving approximately $25.0 million in the trust account.

On July 11, 2023, ADEX held a special meeting of its stockholders (the “second extension meeting”), at which its stockholders approved a proposal to extend the date by which it must complete an initial business combination up to two additional times at the election of the board of directors for an additional three months each time, for a maximum of two three-month extensions, commencing on July 14, 2023. ADEX provided holders of IPO Shares with the ability to redeem such IPO Shares in connection with the second extension meeting. Stockholders holding 467,396 IPO Shares exercised their right to redeem such shares for a pro rata portion of the funds then on deposit in the trust account of approximately $26.2 million (approximately $10.58 per share), leaving approximately $21.3 million in the trust account.

Q:    Is ADEX subject to the Investment Company Act of 1940?

A: We completed our IPO in January 2021. Since we are a blank check company, the efforts of our board of directors and management since the completion of our IPO have been focused on searching for a target business with which to consummate an initial business combination and, since November 29, 2021, on the consummation of the merger.

On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”), which include proposals relating to the circumstances in which special purpose acquisition companies (“SPACs”) such as us could be subject to the

 

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Investment Company Act of 1940, as amended (the “1940 Act”), and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor from one prong of the definition of “investment company” under Section 3(a)(1)(A) of the 1940 Act for a SPAC satisfying certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. To comply with the duration limitation of the proposed safe harbor, a SPAC would have a limited time period to announce and complete a de-SPAC transaction. Specifically, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for an initial business combination no later than 18 months after the effective date of the SPAC’s registration statement for its IPO (an “IPO Registration Statement”). The SPAC also would need to complete its initial business combination no later than 24 months after the effective date of the IPO Registration Statement.

There is currently uncertainty concerning the applicability of the 1940 Act to a SPAC, including a SPAC like us, that may not complete its initial business combination within 24 months from the effective date of its IPO Registration Statement. It is possible that a claim could be made that we have been operating as an unregistered investment company. If we were deemed to be an investment company for purposes of the 1940 Act, we might be forced to abandon our efforts to complete an initial business combination and instead be required to liquidate. If we are required to liquidate, our investors would not be able to realize the benefits of owning stock in a successor operating business, such as any appreciation in the value of our common stock and warrants following such a transaction, our warrants would expire worthless and shares of our common stock would have no value apart from their pro rata entitlement to the funds then-remaining in the trust account.

Following our IPO, the funds in the trust account were held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the 1940 Act. To mitigate the risk of us being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the 1940 Act), in January 2023 we instructed Continental Stock Transfer & Trust Company, the trustee with respect to the trust account (“Continental”), to liquidate the U.S. government treasury obligations or money market funds held in the trust account and thereafter to hold all funds in the trust account in cash until the earlier of consummation of our initial business combination or liquidation, and Continental did so liquidate such

treasury obligations and funds and now holds all funds in the trust account in cash. As a result, following such liquidation, we have and will likely continue to receive minimal interest, if any, on the funds held in the trust account, which has and will continue to reduce the dollar amount our public stockholders would receive upon any redemption or liquidation.

Q:    What happens if the merger is subject to CFIUS review?

A:    Certain investments that involve the acquisition of, or investment in, a U.S. business by a non-U.S. investor may be subject to review and approval by Committee on Foreign Investment in the United States (“CFIUS”). Whether CFIUS has jurisdiction to review a transaction depends on, among other factors, whether the transaction involves a “foreign person,” as defined by Section 721 of the Defense Production Act of 1950 and its implementing regulations (“Section 721”), and the rights and interest that such foreign person acquires in the U.S. business. For example, CFIUS has jurisdiction to review a transaction that results in “control” by a foreign person of a U.S. business by a foreign person, as well as certain transactions in which a foreign person acquires an equity interest along with certain non-passive rights in certain U.S. businesses.

We do not believe that either we or the sponsor is a foreign person within the meaning of Section 721. We are a Delaware corporation and the sponsor is a Delaware limited liability company; neither we nor the sponsor is controlled by any foreign person or has substantial ties to a non-U.S. person. However, if CFIUS were to determine we or the sponsor to be a foreign person, then CFIUS could have jurisdiction to review transactions undertaken by us that otherwise meet the criteria to be subject to CFIUS jurisdiction. If CFIUS were to identify unresolvable national security concerns related to such transaction, we may be unable to consummate the merger, or any other initial business combination.

 

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In addition, if the merger, or any other initial business combination, is subject to CFIUS jurisdiction we may be required or determine it advisable to submit a notice to CFIUS regarding the transaction, or to proceed with the transaction without notifying CFIUS and risk CFIUS intervention, before or after closing. We do not believe we or the sponsor is a foreign person; however, if CFIUS took a different view, it could review the merger, or any other initial business combination, undertaken by us that otherwise meets the requirements for CFIUS to have jurisdiction, suspend the transaction, impose conditions to address national security concerns with respect to the transaction, recommend that the President of the United States prohibit the transaction (which, if the transaction has closed, could take the form of an order to divest all or a portion of a U.S. business), or impose civil penalties if CFIUS determines that a mandatory notification requirement applied and was not satisfied. Additionally, the laws and regulations of other U.S. government entities may impose review or approval procedures on account of any potential foreign ownership by the sponsor.

The process of any review by CFIUS could be lengthy. Because we have only a limited time to complete an initial business combination, failure to obtain any required approvals by the applicable extension date (the latest of which ends on January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter) may require us to liquidate. If we were forced to liquidate, holders of IPO Shares will only be entitled to a pro rata portion of the trust account (including interest but net of taxes payable), and the public warrants will expire worthless. This will also cause you to lose any potential investment opportunity in a potential business combination and the chance of realizing future gains on your investment through any price appreciation in the combined company.

Q:    What interests do the sponsor, our current officers and directors have in the merger?

A:    In considering the recommendation of our board of directors to vote in favor of the merger, stockholders should be aware that, aside from their interests as stockholders, the sponsor and certain of our directors and officers and industry advisors have interests in the merger that are different from, or in addition to, those of other stockholders generally. We estimate that the aggregate dollar amount in New GRIID that affiliates of the sponsor have at risk that depends on completion of the merger is $            . Our directors were aware of and considered these interests, among other matters, in evaluating the merger and in recommending to stockholders that they approve the merger. Stockholders should take these interests into account in deciding whether to approve the merger. These interests include, among other things:

 

   

the fact that certain of our directors and officers are principals of the sponsor;

 

   

the fact that each of our directors and officers presently has, and in the future may have, additional fiduciary or contractual obligations to other entities, pursuant to which such director or officer may be required to present a business combination opportunity;

 

   

the fact that the sponsor holds 7,270,000 private placement warrants to purchase 7,270,000 shares of our common stock purchased at a price of $1.00 per warrant in a private placement that closed simultaneously with the consummation of our IPO that would expire worthless if a business combination is not consummated by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter);

 

   

the fact that upon the consummation of the merger, the dollar value of the sponsor’s aggregate interest in the post-merger company will be approximately $        , based upon the closing price of our common stock of $         per share and the closing price of $         per IPO warrant (which we use for these purposes as a proxy for the value of the private placement warrants), in each case on the NYSE American on             ,         , the record date. The Sponsor’s aggregate ownership interest in the Company is comprised of 7,270,000 private placement warrants purchased at a price of $1.00 per warrant and 6,832,500 shares of our common stock purchased for an aggregate price of approximately $25,000, and 502,683 warrants issuable to the sponsor upon the closing of the merger or any other initial business combination upon conversion of the $502,683 the sponsor has loaned to ADEX under a promissory note issued by the sponsor to ADEX;

 

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the fact that the sponsor and certain of its affiliates can earn a positive rate of return on their investment, even if other ADEX stockholders experience a negative rate of return on their investment after the consummation of the merger;

 

   

the fact that the signatories to the letter agreements have each agreed to waive their rights to liquidating distributions from the trust account with respect to their shares if ADEX fails to complete an initial business combination, including the merger, by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter);

 

   

the fact that if the trust account is liquidated, including in the event we are unable to complete an initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter), the sponsor has agreed that it will indemnify ADEX for any debts and obligations to third parties that are owed money by ADEX for services rendered, contracted for, or for products sold to ADEX but only to the extent necessary to ensure that the debt or obligation does not reduce the funds in the trust account to an amount less than $10.00 per share, except that this indemnity will not apply (i) to a third party that has executed an agreement waiving any right to the monies held in the trust account and (ii) claims under ADEX’s obligation to indemnify its IPO underwriters against certain liabilities, including liabilities under the Securities Act;

 

   

the fact that one or more directors of ADEX will be a director of New GRIID;

 

   

the continued indemnification of ADEX’s current directors and officers and the continuation of ADEX’s directors’ and officers’ liability insurance after the merger;

 

   

the fact that the sponsor, officers, directors and their respective affiliates will lose their entire investment in ADEX (which is estimated to be approximately , based on the closing price of the common stock on the record date) as more fully described above, and will not be reimbursed for any of their out-of-pocket expenses (which are currently $             ) from any amounts held in the trust account if an initial business combination is not consummated by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter); and

 

   

the fact that upon the consummation of the merger, an entity affiliated with ADEX’s Chief Financial Officer, John D’Agostino, would be entitled to a $400,000 cash payment from GRIID and accelerated vesting of GRIID units it holds.

Additionally, our current charter provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors or waiver of corporate opportunity materially affected our search for a business combination. We are not aware of any such corporate opportunities not being offered to us and do not believe the renouncement of our interest in any such corporate opportunities impacted our search for an acquisition target.

Q:    Do I have redemption rights?

A:    Pursuant to our current charter, we are providing holders of IPO Shares with the opportunity to have such IPO Shares redeemed at the closing at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the merger, including interest (net of taxes payable), divided by the number of then outstanding IPO Shares, subject to the limitations described in this proxy statement/prospectus. The per-share amount we will distribute to investors who properly redeem their IPO Shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters.

 

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For illustrative purposes, based on the fair value of marketable securities held in the trust account as of        ,        , the record date, of $        , the estimated per share redemption price would have been approximately $        . Holders of IPO Shares may elect to redeem IPO Shares even if they vote for the merger proposal and the other transaction proposals. Our current charter provides that a holder of IPO Shares, acting together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a partnership, limited partnership, syndicate, or other group for purposes of acquiring, holding, or disposing of any shares of ADEX, will be restricted from exercising this redemption right with respect to more than 15% of our outstanding common stock in the aggregate without the prior consent of ADEX. There will be no redemption rights with respect to our warrants. The sponsor and our directors and officers have agreed to waive their redemption rights for no additional consideration with respect to their shares, including any shares they may have acquired after our IPO, in connection with the completion of the merger. Permitted transferees of the sponsor and our directors and officers will be subject to the same obligations.

Additionally, IPO Shares properly tendered for redemption will only be redeemed if the merger is consummated; otherwise holders of such IPO Shares will only be entitled to a pro rata portion of the trust account (including interest but net of taxes payable) in connection with the liquidation of the trust account or if we subsequently complete a different initial business combination on or prior to the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter), and such IPO Shares are tendered for redemption in connection with such different initial business combination.

We will pay the redemption price to any holders of IPO Shares who properly exercise their redemption rights promptly following the closing. The closing is subject to the satisfaction of a number of conditions. As a result, there may be a significant delay between the deadline for exercising redemption requests prior to the special meeting and payment of the redemption price. Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the vote is taken with respect to the merger.

Q:    Will how I vote affect my ability to exercise redemption rights?

A:    No. You may exercise your redemption rights regardless of if you vote your shares of common stock for or against or abstain from voting on the merger proposal or any other transaction proposal described in this proxy statement/prospectus. As a result, the merger can be approved by stockholders who will redeem their IPO Shares and no longer remain stockholders.

Q:    How do I exercise my redemption rights?

A:    In order to exercise your redemption rights, you must (i) if you hold your IPO Shares through units, elect to separate your units into the underlying IPO Shares and IPO warrants prior to exercising your redemption rights with respect to the shares, and (ii) in any case, prior to                , Eastern time, on                ,             (two business days before the special meeting), tender your IPO Shares electronically and submit a request in writing that we redeem your IPO Shares for cash to Continental Stock Transfer & Trust Company, our transfer agent, at the following address:

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

Your written request should include a certification that you are not acting in concert or as a partnership, syndicate, or other “group” (as defined in Section 13 of the Exchange Act) with any other stockholder with

 

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respect to such IPO Shares. Our existing organizational documents provide that a holder of IPO Shares, acting together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a partnership, limited partnership, syndicate, or other group for purposes of acquiring, holding, or disposing of any shares of ADEX, will be restricted from exercising this redemption right with respect to more than 15% of our outstanding common stock in the aggregate without the prior consent of ADEX. There will be no redemption rights with respect to our warrants.

Stockholders who hold their IPO Shares in street name will have to coordinate with their bank, broker or other nominee to have the IPO Shares delivered electronically in order to exercise their redemption rights. Holders of outstanding units of ADEX must separate the underlying IPO Shares and IPO warrants prior to exercising redemption rights with respect to the IPO Shares. If a broker, dealer, commercial bank, trust company or other nominee holds your units, you must instruct such nominee to separate your units. Your nominee must send written instructions to Continental Stock Transfer & Trust Company. Such written instructions must include the number of units to be split and the nominee holding such units. Your nominee must also initiate electronically, using the Depository Trust & Clearing Corporation DWAC system, a withdrawal of the relevant units and a deposit of an equivalent number of IPO Shares and IPO warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the IPO Shares from the units. While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your IPO Shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights. Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, but only with our consent, until the vote is taken with respect to the merger. If you delivered your IPO Shares for redemption to the transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that the transfer agent return such IPO Shares. You may make such request by contacting our transfer agent at the phone number or address listed above.

Q:    What are the U.S. federal income tax consequences of exercising my redemption rights?

A:    The U.S. federal income tax consequences of exercising your redemption rights depend on your particular facts and circumstances. Please see the section entitled “Certain U.S. Federal Income Tax Considerations.” We urge you to consult your tax advisors regarding the tax consequences of exercising your redemption rights.

Q:    If I am a warrant holder, can I exercise redemption rights with respect to my warrants?

A:    No. Prior to the consummation of the merger, the holders of our warrants have no redemption rights with respect to our warrants.

Q:    Following consummation of the merger, under what circumstances may New GRIID call warrants for redemption?

A:    Following consummation of the merger, New GRIID may call the IPO warrants for redemption, in whole and not in part, at a price of $0.01 per IPO warrant, if certain conditions are met, including if the last reported sale price of the shares of New GRIID common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading day period commencing after the IPO warrants become exercisable and ending on the third business day prior to the notice of redemption to IPO warrant holders.

As a result, New GRIID may redeem the IPO warrants as set forth above even if the holders are otherwise unable to exercise their IPO warrants. Redemption of the outstanding IPO warrants could force warrant holders to (i) exercise their IPO warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, (ii) sell their IPO warrants at the then-current market price when they might otherwise wish to hold their warrants or (iii) accept the nominal redemption price which, at the time the outstanding IPO warrants are called for redemption, is likely to be substantially less than the market value of the IPO warrants.

 

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The private placement warrants (including the shares of common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or salable until 30 days after the completion of an initial business combination, including the merger, subject to certain exceptions and they will not be redeemable by ADEX so long as they are held by the sponsor or its permitted transferees. The sponsor and its permitted transferees each have the option to exercise the private placement warrants on a cashless basis and will have certain registration rights related to such private placement warrants. Additionally, a private placement warrant will not be redeemable by ADEX for so long as it is held by its initial holder or permitted transferee thereof. Otherwise, the private placement warrants have terms and provisions that are identical to those of the IPO warrants.

Because the private placement warrants may be redeemed only under limited circumstances, they may remain outstanding after all IPO warrants have been redeemed or exercised. All private placement warrants that are exercised will cause additional dilution for other stockholders, including any holders of New GRIID common stock issued pursuant to prior exercises of IPO warrants. If the holders of the private placement warrants elect to exercise their warrants on a cashless basis we will not receive cash proceeds from the exercise of such warrants. See “Description of Securities—Private Placement Warrants”.

As of the record date, the last reported sale price of the ADEX common stock was $             and the highest sale price through such date was $            . In order to redeem the IPO warrants, New GRIID must provide 30 days’ prior written notice of redemption to each IPO warrant holder and have a current registration statement in effect with respect to the shares of New GRIID common stock underlying such IPO warrants. The private placement warrants are not redeemable by New GRIID following the merger for so long as they are held by the initial holders thereof and certain transferees.

If the foregoing conditions are satisfied and New GRIID properly issues a notice of redemption, each IPO warrantholder can exercise his, her or its warrant prior to the scheduled redemption date. However, New GRIID will not be required to notify any holder if the conditions have been met if New GRIID is not calling the IPO warrants for redemption. On and after the redemption date, a record holder of an IPO warrant will have no further rights except to receive the redemption price for such holder’s IPO warrant upon surrender of such IPO warrant. In such cases, a holder of IPO warrants may lose substantially all of such holder’s investment in his, her or its IPO warrants.

Q:    Are there any appraisal or similar rights for dissenting stockholders?

A:    No. There are no appraisal rights in connection with any of the proposals to be voted on at the special meeting. The Company’s warrants do not have voting rights in connection with the proposals.

Q:    What happens to the funds deposited in the trust account after consummation of the merger?

A:    Upon the completion of the IPO, a total of $276.0 million was placed in the trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. On December 23, 2022, in connection with the first extension meeting, stockholders holding 25,132,578 IPO Shares exercised their right to redeem such shares for a pro rata portion of the funds then on deposit in the trust account of approximately $253.6 million (approximately $10.09 per share), leaving approximately $25.0 million in the trust account. On July 11, 2023, in connection with the second extension meeting, stockholders holding 467,396 IPO Shares exercised their right to redeem such shares for a pro rata portion of the funds the on deposit in the trust account of approximately $26.2 million (approximately $10.58 per share), leaving approximately $21.3 million in the trust account. As of                ,         the record date, there was approximately $         held in the trust account. These funds will not be released until the earlier of the completion of our initial business combination and the redemption of our shares if we are unable to complete an initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter), although we may withdraw the interest earned on the funds held in the trust account, together with working capital, to pay taxes.

 

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Q:    When is the merger expected to be consummated?

A:    It is currently anticipated that the merger will be consummated as soon as practicable following the special meeting, which is set for                ,         provided that all the requisite stockholder approvals are obtained and other conditions to the consummation of the merger have been satisfied or waived. The closing is subject to certain regulatory approvals, including expiration or termination of the waiting period under the Hart Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated thereunder (the “HSR Act”) (the waiting period under the HSR Act expired on January 12, 2022), and as a result, may be subject to substantial delay. For a description of these and the other conditions for the completion of the merger, see “Proposal No. 1—The Merger Proposal—The Merger Agreement—Conditions to the Closing of the Merger.”

Q:    What do I need to do now?

A:    You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the section entitled “Risk Factors” and the annexes, and to consider how the merger will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.

Q:    How do I vote?

A:    If you were a holder of record of common stock on                ,         , the record date, you may vote in person (online) at the special meeting or by submitting a proxy for the special meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage-paid envelope provided, or by voting online at                . If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the special meeting of stockholders and vote in person (online), obtain a valid proxy from your broker, bank or nominee.

The special meeting is currently scheduled to be held entirely online as indicated above. Stockholders of record may vote their shares electronically at the special meeting by following the instructions at                . Stockholders are also urged to vote their proxies by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope, or to direct their brokers or other agents on how to vote the shares in their accounts, as applicable.

Q:    What will happen if I abstain from voting or fail to vote at the special meeting?

A:    Abstentions will be counted in connection with the determination of whether a valid quorum is established but will not count as votes cast and will have the same effect as a vote “AGAINST” each of the proposals, other than the director election proposal. Abstentions will have no effect on the outcome of the director election proposal. Failure to vote by proxy or attend in person (online) at the special meeting will not be counted towards the number of shares of common stock required to validly establish a quorum, and if a valid quorum is otherwise established, will have the same effect as a vote “AGAINST” the charter amendment proposal, and will have no effect on the outcome of the other proposals.

Q:    What will happen if I sign and submit my proxy card without indicating how I wish to vote?

A:    If you return your proxy card signed and without an indication of how you wish to vote, your shares will be voted in favor of each of the proposals.

 

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Q:    If I am not going to attend the special meeting in person (online), should I submit my proxy card instead?

A:    Yes. Whether or not you plan to attend the special meeting, please read this proxy statement/prospectus carefully, and vote your shares in advance of the special meeting by following the instructions at                 , or by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed, postage-paid envelope.

Q:    What is a broker non-vote?

A:    Generally, a broker non-vote occurs when a bank, broker, custodian or other record holder that holds shares in “street name” is precluded from exercising voting discretion on a particular proposal because (i) the beneficial owner has not instructed the bank, broker, custodian or other record holder how to vote, and (ii) the bank, broker, custodian, or other record holder lacks discretionary voting power to vote such shares. Absent specific voting instructions from the beneficial owners of such shares, a bank, broker, custodian or other record holder does not have discretionary voting power with respect to the approval of “non-routine” matters, such as the merger proposal.

Q:    If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

A:     No. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” If this is the case, this proxy statement/prospectus may have been forwarded to you by your brokerage firm, bank or other nominee, or its agent. As the beneficial holder, you have the right to direct your broker, bank or other nominee as to how to vote your shares. If you do not provide voting instructions to your broker on a particular proposal on which your broker does not have discretionary authority to vote, your shares will not be voted on that proposal. This is called a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the special meeting. Broker non-votes will have the same effect as a vote “AGAINST” the charter amendment proposal, and will have no effect on the outcome of the other proposals. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

Q:    May I change my vote after I have submitted my executed proxy card?

A:    Yes. Stockholders may change their vote or revoke their proxy by sending a later-dated, signed proxy card to Adit EdTech Acquisition Corp., 1345 Avenue of the Americas, 33rd Floor, New York, NY 10105; Attention: Secretary, so that it is received by ADEX’s Secretary prior to the vote at the special meeting (which is scheduled to take place at                 , Eastern Time, on        ,        ); by transmitting a subsequent vote over the Internet prior to        , Eastern Time, on                ,        ; or by attending the special meeting and voting in person (online). A stockholder’s last vote, whether prior to or at the special meeting, is the vote that will be counted. However, if your shares are held in “street name” by your broker, bank or another nominee, you must contact your broker, bank or other nominee to change your vote.

Q:    What should I do if I receive more than one set of voting materials?

A:    Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your shares of common stock or vote online with respect to all of your shares of common stock.

 

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Q:    Who will solicit and pay the cost of soliciting proxies?

A:    ADEX will pay the cost of soliciting proxies for the special meeting. ADEX has engaged Okapi to assist in the solicitation of proxies for the special meeting. ADEX has agreed to pay Okapi a fee of $             . ADEX will reimburse Okapi for reasonable out-of-pocket losses, damages and expenses. ADEX will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to beneficial owners of shares and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Q:    Who can help answer my questions?

A:    If you have questions about the merger or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card you should contact:

Okapi Partners LLC

1212 Avenue of the Americas, 17th Floor

New York, NY 10036

Tel: (877) 259-6290

Banks and brokers call collect: (212) 297-0720

E-mail: info@okapipartners.com

You also may obtain additional information about ADEX from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find Additional Information.” If you are a holder of IPO Shares and you intend to seek redemption of your IPO Shares, you will need to tender such IPO Shares electronically and submit a request in writing to Continental Stock Transfer & Trust Company, the Company’s transfer agent, that the Company redeem such IPO Shares for cash at the address below prior to                , Eastern Time, on            ,             (two business days prior to the vote at the special meeting). If you have questions regarding the certification of your position or delivery of your shares, please contact:

Mark Zimkind

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, New York 10004

E-mail: mzimkind@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the merger and the proposals to be considered at the special meeting, you should read this entire proxy statement/prospectus carefully, including the annexes included herein.

Parties to the Merger

Adit EdTech Acquisition Corp.

ADEX is a blank check company incorporated in Delaware for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

Our units, common stock originally sold as part of the units and warrants originally sold as part of the units have been listed on the NYSE American under the symbols “ADEX.U,” “ADEX” and “ADEX.WS,” since February 16, 2023 and prior to that were listed on the New York Stock Exchange since they began separately trading on March 3, 2021. Upon the closing of the merger (the “closing”), we intend to apply to continue the listing of our common stock and warrants on the NYSE American under the symbols “GRDI” and “GRDI.WS,” respectively. We have also applied, and been conditionally approved (subject to closing of the merger), to list our common stock on the NEO. We are seeking a cross-listing on the NYSE American and the NEO to potentially enhance our access to additional liquidity. Our units will not be listed following the closing.

The mailing address of ADEX’s principal executive offices is 1345 Avenue of the Americas, 33rd Floor, New York, NY, 10105. ADEX’s telephone number is (646) 291-6930.

ADEX Merger Sub, LLC

ADEX Merger Sub, LLC (“Merger Sub”) is a Delaware limited liability company and wholly owned direct subsidiary of ADEX formed on November 24, 2021. In the merger, Merger Sub will merge with and into GRIID, and 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 ADEX.

The mailing address of Merger Sub’s principal executive offices is 1345 Avenue of the Americas, 33rd Floor, New York, NY, 10105. Merger Sub’s telephone number is (646) 291-6930.

Griid Holdco LLC

Griid Holdco LLC is an emerging American infrastructure company in the bitcoin mining sector. GRIID employs a vertically integrated self-mining strategy to develop and operate U.S.-based mining facilities that generate bitcoin. GRIID’s current business plan does not include the expansion of its mining operations to include digital assets other than bitcoin, or any other activities with, or the holding of, any other cryptocurrencies other than bitcoin, and GRIID does not anticipate any changes to its business plan for the foreseeable future. As of the date of this proxy statement/prospectus, GRIID has 68MW of available electrical capacity in its New York facility and its three Tennessee facilities (48MW of which are at dedicated self-mining sites and 20MW of which are subject to the Mining Services Agreement), and GRIID believes that it is well-positioned to grow its capacity to 436MW by the end of 2024. GRIID’s mining operations currently utilize application specific integrated

 

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circuits (“ASICs”) manufactured by two leading companies, Bitmain and MicroBT. GRIID has also purchased ASICs manufactured by Intel Corporation (“Intel”), which it anticipates integrating into its operations. GRIID has begun the process of developing a carbon-free focused power pipeline including 1300MW of power capacity, subject to memoranda of understanding and letters of intent, land acquisition and infrastructure procurement. GRIID’s existing facilities utilize approximately 67% carbon-free power, and GRIID expects that its facilities will utilize approximately 90% carbon-free power by the end of 2024. These carbon-free levels are based solely on generation type and not from offsets or carbon credits and can therefore be materially improved.

The mailing address of GRIID’s principal executive offices is 2577 Duck Creek Road, Cincinnati, OH 45212. GRIID’s telephone number is (513) 268-6185.

The Merger

On November 29, 2021, we entered into the initial merger agreement with GRIID and Merger Sub pursuant to which, subject to the terms and conditions contained therein, Merger Sub will merge with and into GRIID with GRIID being the surviving entity and a subsidiary of New GRIID. On December 23, 2021, we, GRIID and Merger Sub entered into the first amendment; on October 17, 2022, we, GRIID and Merger Sub entered into the second amendment; and on February 8, 2023, we, GRIID and Merger Sub entered into the third amendment.

The updated merger consideration to be issued to the GRIID equity holders at the closing of the merger pursuant to the merger agreement will have a value of $585,000,000 (based upon the assumed price of $10.00 per share of ADEX common stock) and will be paid in shares of ADEX common stock.

For more information about the merger agreement and the merger, see the section entitled “Proposal No. 1—The Merger Proposal—The Merger.”

Conditions to the Closing

Conditions to Obligations of the ADEX Parties and GRIID to Consummate the Merger

The obligations of ADEX and Merger Sub (the “ADEX parties”) and GRIID to consummate, or cause to be consummated, the merger are subject to the satisfaction of the following conditions, any one or more of which may be waived (if permitted by applicable law) in writing by all of such parties:

 

   

all applicable waiting periods (and any extensions thereof) under the HSR Act must have expired or been terminated;

 

   

there must not be in force any applicable law or governmental order enjoining, prohibiting, making illegal or preventing the consummation of the merger;

 

   

the approval of the transaction proposals (other than the adjournment proposal) by ADEX’s stockholders as described in this proxy statement/prospectus must have been obtained;

 

   

the approval of the merger agreement and related agreements and transactions and actions contemplated thereby shall have been approved by the members of GRIID;

 

   

the shares of common stock contemplated to be listed pursuant to the merger agreement must have been listed on the New York Stock Exchange (“NYSE”) (or such other stock exchange on which such shares are listed as of such time) and be eligible for continued listing on the NYSE (or such other stock exchange on which such shares are listed as of such time) immediately following the closing (as if it were a new initial listing by an issuer that had never been listed prior to closing);

 

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ADEX must have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (or any successor rule)) (“NTA”) remaining after ADEX’s stockholders have exercised their right to redeem their shares in connection with the closing; and

 

   

the registration statement on Form S-4 must have become effective and no stop order may have been issued by the SEC with respect to the registration statement on Form S-4 and no proceeding seeking such a stop order may have been threatened or initiated by the SEC.

If necessary, the parties intend to amend the merger agreement prior to closing to remove the condition that ADEX have at least $5,000,001 of NTA remaining after ADEX’s stockholders have exercised their right to redeem their shares in connection with the closing.

Conditions to Obligations of the ADEX Parties to Consummate the Merger

The obligations of the ADEX parties to consummate, or cause to be consummated, the transactions contemplated by the merger agreement are subject to the satisfaction of the following additional conditions, any one or more of which may be waived (if permitted by applicable law) in writing by the ADEX parties:

 

   

the representations and warranties of GRIID set forth in the merger agreement related to the corporate organization of GRIID and its subsidiaries, due authorization to enter into the merger agreement and related documentation, consents, brokers’ fees and title to GRIID’s and its subsidiaries’ respective assets, must be true and correct (without giving effect to any materiality, “company material adverse effect,” “company impairment effect” or similar qualification therein) in all material respects as of the closing date, as if made on and as of the closing date, except to the extent any such representation and warranty is made as of an earlier date, in which case such representation and warranty must be true and correct in all material respects as of such earlier date;

 

   

the representations and warranties of GRIID set forth in the merger agreement related to the capitalization of GRIID and its subsidiaries, must be true and correct in all respects (except for de minimis inaccuracies) as of the closing date, as if made on and as of the closing date, except to the extent any such representation and warranty is made as of an earlier date, in which case such representation and warranty must be true and correct in all respects (except for de minimis inaccuracies) as of such earlier date;

 

   

the other representations and warranties of GRIID set forth in the merger agreement must be true and correct (without giving effect to any materiality, “material adverse effect,” “company impairment effect” or similar qualifications therein) in all respects as of the closing date, as if made on and as of the closing date (except to the extent any such representation and warranty is made as of an earlier date, in which case such representation and warranty must be true and correct in all respects as of such earlier date), except where the failure of such representations and warranties to be true and correct, taken as a whole, does not cause a company material adverse effect or any effect that would, individually or in the aggregate, reasonably be expected to prevent or materially impair the ability of GRIID to consummate the transactions contemplated by the merger agreement (such effect, a “company impairment effect”);

 

   

each of the covenants of GRIID to be performed or complied with at or prior to the closing must have been performed or complied with by GRIID in all material respects;

 

   

from the date of the initial merger agreement there must have not occurred a company impairment effect that is continuing as of the closing date or any company material adverse effect;

 

   

GRIID must have delivered, or cause to be delivered, to ADEX: (i) the investor rights agreement executed by the GRIID equity holders, (ii) a certificate signed by an authorized officer of GRIID,

 

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dated as of the closing date, certifying that the conditions described in the preceding bullets above have been satisfied, (iii) certification conforming to the requirements of Treasury Regulations section 1.1445-11T(d)(2)(i), and (iv) certificates of good standing with respect to GRIID and each of its subsidiaries; and

 

   

GRIID must have delivered to ADEX the audited consolidated financial statements of GRIID and its subsidiaries as of and for the year ended December 31, 2021, prepared in accordance with GAAP and Regulation S-X and audited by GRIID’s independent auditor.

Conditions to Obligations of GRIID to Consummate the Merger

The obligation of GRIID to consummate the transactions contemplated by the merger agreement is subject to the satisfaction of the following additional conditions, any one or more of which may be waived (if permitted by applicable law) in writing by GRIID:

 

   

each of the representations and warranties of the ADEX parties set forth in the merger agreement related to the corporate organization of the ADEX parties, due authorization to enter into the merger agreement and related documentation, consents and brokers’ fees, must be true and correct (without giving effect to any materiality, “ADEX material adverse effect,” “ADEX impairment effect” or similar qualifications therein) in all material respects as of the closing date, as if made on and as of the closing date, except to the extent any such representation and warranty is made as of an earlier date, in which case such representation and warranty must be true and correct in all material respects as of such earlier date;

 

   

the representations and warranties of the ADEX parties set forth in the merger agreement related to the capitalization of the ADEX parties, must have been true and correct in all respects (except for de minimis inaccuracies) as of the closing date, as if made as of the closing date, except to the extent any such representation and warranty is made as of an earlier date, in which case such representation and warranty must be true and correct in all respects (except for de minimis inaccuracies) as of such earlier date;

 

   

the other representations and warranties of the ADEX parties, must be true and correct (without giving effect to any materiality, “ADEX material adverse effect,” “ADEX impairment effect” or similar qualifications therein) in all respects as of the closing date, as if made on and as of the closing date (except to the extent any such representation and warranty is made as of an earlier date, in which case such representation and warranty must be true and correct in all respects as of such earlier date), except where the failure of such representations and warranties to be true and correct, taken as a whole, does not cause an ADEX material adverse effect or any effect that would, individually or in the aggregate, reasonably be expected to prevent or materially impair the ability of the ADEX parties to consummate the transactions contemplated by the merger agreement (such effect, an “ADEX impairment effect”);

 

   

each of the covenants of ADEX or Merger Sub to be performed or complied with at or prior to closing must have been performed or complied with by the ADEX parties, as applicable, in all material respects;

 

   

from the date of the initial merger agreement there must have not occurred an ADEX impairment effect that is continuing as of the closing date or any ADEX material adverse effect; and

 

   

ADEX must have delivered, or cause to be delivered, to GRIID (i) the investor rights agreement and the amended operating agreement, in each case executed by ADEX or its stockholders, as applicable and (ii) a certificate signed by an officer of ADEX, dated the closing date, certifying that the conditions described in the preceding five bullets above have been fulfilled.

 

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Other Agreements

The following agreements were entered into or will be entered into in connection with the merger, the merger agreement and the other transactions contemplated thereby:

Investor Rights Agreement

In connection with closing of the merger, New GRIID, the initial stockholders and certain GRIID members will enter into an investor rights agreement (the “investor rights agreement”) to provide for certain registration rights related to the shares of ADEX common stock and private placement warrants of ADEX. New GRIID will agree to, among other things, file within 30 days of closing of the merger a resale shelf registration statement covering the resale of all securities registrable under the investor rights agreement.

See the section entitled “Proposal No. 1—The Merger Proposal—The Merger Agreement—Related Agreements.”

Voting Agreement

In connection with the execution of the initial merger agreement, ADEX entered into a voting agreement with Griid Holdings LLC, a member of GRIID (the “voting agreement”), covering approximately 64.0% of GRIID’s membership units. The voting agreement requires, among other things, that Griid Holdings LLC vote all of its membership units of GRIID in favor of, or execute written consents to approve, upon effectiveness of the S-4 registration statement, the merger and the other transactions contemplated by the merger agreement and against alternative transactions. The voting agreement also restricts Griid Holdings LLC from transferring its GRIID units prior to the expiration date (as such term is defined in the voting agreement) unless the transferee joins the voting agreement. The voting agreement also contains customary representations and warranties made by Griid Holdings LLC. Under GRIID’s existing operating agreement, GRIID’s members are obligated to vote in favor of a merger approved by GRIID’s board of managers.

See the section entitled “Proposal No. 1—The Merger Proposal—The Merger Agreement—Related Agreements.”

Sponsor IPO Letter Agreements

In connection with the IPO, we entered into the letter agreements with the sponsor and each of our directors and officers, pursuant to which, among other things, the sponsor and our directors and officers each agreed to vote any shares of common stock owned by them in favor of the merger. As of the record date, such stockholders that have agreed to vote their shares of common stock owned by them in favor of the merger own approximately         % of our issued and outstanding shares of common stock, in the aggregate. As a result the merger proposal may be approved without the affirmative vote of any of the outstanding IPO Shares.

See the section entitled “Proposal No. 1—The Merger Proposal—The Merger Agreement—Related Agreements.”

Amended Operating Agreement

Concurrently with the closing, GRIID’s current operating agreement will be amended and restated in its entirety to become the amended operating agreement (as so amended, the “amended operating agreement”), whereby ADEX will be admitted as the sole member of post-merger GRIID.

 

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See the section entitled “Proposal No. 1—The Merger Proposal—The Merger Agreement—Related Agreements.”

Interests of Certain Persons in the Merger

When considering our board of directors’ recommendation that our stockholders vote in favor of the approval of the merger, our stockholders should be aware that the sponsor and certain of our directors and officers and industry advisors have interests in the merger that are different from, or in addition to, the interests of other stockholders generally. We estimate that the aggregate dollar amount in New GRIID that affiliates of the sponsor have at risk that depends on completion of the merger is $        . Our directors were aware of and considered these interests, among other matters, in evaluating the merger, and in recommending to stockholders that they approve the merger. Our stockholders should take these interests into account in deciding whether to approve the merger. These interests include:

 

   

the fact that certain of our directors and officers are principals of the sponsor;

 

   

the fact that each of our directors and officers presently has, and in the future may have, additional fiduciary or contractual obligations to other entities, pursuant to which such director or officer may be required to present a business combination opportunity;

 

   

the fact that the sponsor holds 7,270,000 private placement warrants to purchase 7,270,000 shares of our common stock purchased at a price of $1.00 per warrant in a private placement that closed simultaneously with the consummation of the IPO that would expire worthless if a business combination is not consummated by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two-three-month extensions allowed under the current charter);

 

   

the fact that the signatories to the letter agreements have each agreed to waive their rights to liquidating distributions from the trust account with respect to their shares if ADEX fails to complete an initial business combination, including the merger, by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter);

 

   

the fact that upon the consummation of the merger, the dollar value of the sponsor’s aggregate interest in the post-merger company will be approximately $         , based upon the closing price of our common stock of $         per share and the closing price of $         per IPO warrant (which we use for these purposes as a proxy for the value of the private placement warrants), in each case on the NYSE American on         ,                 , the record date. The Sponsor’s aggregate ownership interest in the Company is comprised of 7,270,000 private placement warrants purchased at a price of $1.00 per warrant and 6,832,500 shares of our common stock purchased for an aggregate price of approximately $25,000, and 502,683 warrants issuable to the sponsor upon the closing of the merger or any other initial business combination upon conversion of the $502,683 the sponsor has loaned to ADEX under a promissory note issued by the sponsor to ADEX;

 

   

the fact that the sponsor and certain of its affiliates can earn a positive rate of return on their investment, even if other ADEX stockholders experience a negative rate of return on their investment after the consummation of the merger;

 

   

the fact that if the trust account is liquidated, including in the event ADEX is unable to complete an initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter), the sponsor has agreed that it will be liable to ADEX if and to the extent any claims by a third party (other than ADEX’s independent auditors) for services rendered or

 

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products sold to ADEX, or a prospective target business with which ADEX has discussed entering into a transaction agreement, reduce the amounts in the trust account to below (i) $10.00 per share or (ii) such lesser amount per share held in the trust account as of the date of the liquidation of the trust account, due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act;

 

   

the fact that one or more directors of ADEX will be a director of New GRIID;

 

   

the continued indemnification of ADEX’s current directors and officers and the continuation of ADEX’s directors’ and officers’ liability insurance after the merger;

 

   

the fact that the sponsor, officers, directors and their respective affiliates will lose their entire investment in ADEX (which is estimated to be approximately             , based on the closing price of the common stock on the record date) as more fully described above, and will not be reimbursed for any of their out-of-pocket expenses (which are currently $             ) from any amounts held in the trust account if an initial business combination is not consummated by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter); and

 

   

the fact that upon the consummation of the merger, an entity affiliated with ADEX’s Chief Financial Officer, John D’Agostino, would be entitled to a $400,000 cash payment from GRIID and acceleration of vesting of GRIID units it holds.

Additionally, our current charter provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors or waiver of corporate opportunity materially affected our search for a business combination. We are not aware of any such corporate opportunities not being offered to us and do not believe the renouncement of our interest in any such corporate opportunities impacted our search for an acquisition target.

Reasons for Approval of the Merger

ADEX’s board of directors considered a wide variety of factors in connection with its evaluation of the merger. In light of the complexity of those factors, ADEX’s board of directors, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. Individual members of ADEX’s board of directors may have given different weight to different factors. ADEX’s reasons for the board of directors’ approval of the merger, and all other information presented in this section, is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking Statements.”

Before reaching its decision, ADEX’s board of directors reviewed the results of due diligence conducted by ADEX’s management, together with its advisors, which included, among other things:

 

   

extensive meetings with GRIID’s management team regarding operations and forecasts;

 

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research on the cryptocurrency industry, including historical growth trends and market share information as well as end-market size and growth projections;

 

   

consultation with ADEX’s management and legal and financial advisors;

 

   

review of current and forecasted industry and market conditions;

 

   

GRIID’s audited and unaudited financial statements; and

 

   

consideration of legal, cybersecurity, and operational due diligence reports prepared by external advisors.

In the prospectus for ADEX’s IPO, we identified general, non-exclusive criteria and guidelines that we believed would be important in evaluating prospective target businesses. ADEX indicated its intention to acquire companies that it believes possess the following characteristics:

 

   

are fundamentally sound and that we believe are underperforming their potential;

 

   

are in a position to utilize our management team’s global network of contacts, which can provide access to differentiated deal flow and significant deal-sourcing capabilities following a business combination;

 

   

are at an inflection point, such as requiring additional management expertise or new operational techniques to drive improved financial performance;

 

   

exhibit unrecognized value or other characteristics, desirable returns on capital and a need for capital to achieve the company’s growth strategy, that we believe have been misevaluated by the marketplace based on our analysis and due diligence review;

 

   

will offer an attractive risk-adjusted return for our stockholders; the potential upside from growth in the target business and an improved capital structure will be weighed against any identified downside risks; and

 

   

have been materially impacted by possible market dislocations or that have new market opportunities and would benefit from capital markets access.

In considering the merger, ADEX’s board of directors concluded that GRIID met all of the above criteria.

In particular, the board of directors considered the following positive factors in evaluating the merger under the terms of the merger agreement and in connection with entering into the second amendment, although not weighted or in any order of significance:

 

   

Continued Compelling Financial Metrics and Valuation. The recommendation of ADEX management, which was based upon an updated proposed pro forma enterprise value of approximately $725.0 million and an implied enterprise value to projected 2023 EBITDA multiple of 12.68x and an enterprise value to projected 2023 total revenue multiple of 5.99x (based on the 2022 management projections (as defined below)) after giving effect to the second amendment, which ADEX management believes reflected the significant volatility in the cryptocurrency markets following GRIID and ADEX’s entry into the initial merger agreement.

 

   

GRIID’s Resolution of its Dispute with Blockchain Access. GRIID entered into a settlement and release agreement with Blockchain Access UK Limited (“Blockchain Access”) on October 9, 2022, pursuant to which Blockchain Access waived any potential defaults under the prior credit agreement. The resolution of this dispute and entry into the credit agreement provide GRIID with greater certainty regarding its debt financing.

 

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New GRIID’s Post-Merger Access to Capital. GRIID entered into the GEM Share Purchase Agreement, which would provide New GRIID with access of up to $200.0 million in equity capital following the closing, but would also result in dilution to New GRIID stockholders.

 

   

Revised Merger Agreement Terms. Our board of directors reviewed the revised financial and other terms and conditions included in the second amendment, including the increased flexibility for ADEX, and determined that they continued to be reasonable and the product of arm’s-length negotiations among the parties.

 

   

Management’s View That Updated Merger Consideration Remains Fair. Our directors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and their experience and backgrounds, together with the experience and expertise of ADEX’s advisors, enabled them to make the necessary analyses and determination that the updated merger consideration is fair to ADEX.

 

   

Proven Existing Management Team. GRIID has an experienced management team with a proven track record of operational excellence. We are confident in the management team’s deep industry knowledge and strategic vision and believe that the ADEX and GRIID teams will form a collaborative and effective long-term partnership that is positioned to create and enhance stockholder value going forward.

 

   

Stockholder Approval. Our board of directors considered the fact that in connection with the merger our stockholders have the option to (i) remain stockholders of ADEX, (ii) sell their shares on the open market or (iii) redeem their shares for the per share amount held in the trust account.

 

   

Independent Director Role. Our board of directors is comprised of a majority of independent directors who are not affiliated with the sponsor and its affiliates. In connection with the merger, our independent directors took an active role in evaluating the proposed terms of the merger, including the merger agreement and the related agreements. Our independent directors evaluated and unanimously approved, as members of our board of directors, the merger agreement and the related agreements and the transactions contemplated thereby.

 

   

Other Alternatives. Our board of directors’ belief is that the merger represents the best potential business combination for ADEX based upon the process utilized to evaluate and assess other potential acquisition targets, and our board of directors’ and management’s belief that such processes had not presented a better alternative.

In May 2023, our board of directors also considered the 2023 management projections (as defined below) as supporting the board’s continued positive view of the revised merger agreement terms included in the second amendment.

In the course of its deliberations in connection with the initial merger agreement and subsequent amendments, our board of directors also considered a variety of uncertainties, risks and other potentially negative factors relevant to the transaction, including, among others, the following:

 

   

The risk relating to the uncertainty of the projected financial information with respect to GRIID.

 

   

The risk that the terms of GRIID’s credit agreement with Blockchain Access restrict GRIID’s current and future operations, particularly its ability to take certain actions.

 

   

The risk that GRIID’s business is highly dependent on a small number of bitcoin mining equipment suppliers.

 

   

The risks relating to GRIID’s reliance on third parties, including utility providers, for the reliable and sufficient supply of electrical power to its infrastructure.

 

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The risks relating to GRIID’s ability to obtain and maintain access to its targets of carbon-free power supply.

 

   

The risks relating to GRIID’s ability to execute its business model, including market acceptance of bitcoin.

 

   

The risks relating to GRIID’s status as an early-stage company with a history of operating losses.

 

   

The risk that because GRIID’s miners are designed specifically to mine bitcoin, GRIID’s future success will depend in large part upon the value of bitcoin.

 

   

The risk that the market price of bitcoin may be extremely volatile, including due to potential under-regulation.

 

   

The risks posed by the fact that there is no PIPE as part of the merger, since public investors often rely on PIPE investors for third-party validation of the valuation of a transaction.

 

   

The risks associated with the cryptocurrency industry in general, including the development, effects and enforcement of laws and regulations with respect to the cryptocurrency industry.

 

   

The risks associated with macroeconomic uncertainty and the effects it could have on GRIID’s revenues.

 

   

The risk that ADEX does not retain sufficient tangible assets to meet the requirements of the merger agreement.

 

   

The risk that GRIID might not able to protect its trade secrets or maintain its trademarks, patents and other intellectual property consistent with historical practice.

 

   

The risk that key employees of GRIID might not remain with GRIID following the closing.

 

   

The possibility of litigation challenging the merger.

 

   

The challenge of attracting and retaining senior management personnel.

 

   

The significant fees and expenses associated with completing the merger and related transactions and the substantial time and effort of management required to complete the merger.

 

   

The fact that no financial advisor has delivered or is expected to deliver an opinion regarding the fairness of the merger that takes into account the 2022 management projections, changes in macroeconomic conditions, recent volatility in the market value of bitcoin, the second amendment or the updated merger consideration contemplated thereby.

 

   

The other risks described in the section entitled “Risk Factors.”

After considering the foregoing potentially negative and potentially positive reasons, our board of directors concluded, in its business judgment, that the potentially positive reasons for consummating the merger outweighed the potentially negative reasons for not consummating the merger. In connection with its deliberations, our board of directors did not consider the fairness of the updated merger consideration to any person other than ADEX.

For a more complete description of ADEX’s reasons for approving the merger and the recommendation of ADEX’s board of directors, see the section entitled “Proposal No. 1—The Merger Proposal—ADEX’s Board of Directors’ Reasons for Approval of the Merger.”

Wells Fargo’s Resignation as Lead Placement Agent, Capital Markets Advisor and Financial Advisor

On September 13, 2021, ADEX hired Wells Fargo to serve as financial advisor to ADEX in connection with the merger and on September 14, 2021, ADEX hired Wells Fargo to serve as capital markets advisor to ADEX in

 

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connection with the merger and as lead placement agent in connection with a PIPE transaction. As compensation for its roles as financial advisor and capital markets advisor, Wells Fargo was to receive an aggregate fee of $3.5 million, which was contingent on the closing of the merger. Wells Fargo did not receive any fees in connection with its role as lead placement agent as the PIPE transaction was not consummated. Although the services provided by Wells Fargo as financial advisor, capital markets advisor and lead placement agent were substantially complete, Wells Fargo resigned from those roles on May 26, 2022. In connection with its resignation, Wells Fargo waived all rights to fees and compensation in connection with such roles and disclaimed any responsibility for the contents of this proxy statement/prospectus. In addition, Wells Fargo has informed ADEX that it delivered notice of resignation to the SEC pursuant to Section 11(b)(1) under the Securities Act.

Wells Fargo’s resignation and waiver of fees for services already rendered is unusual. Wells Fargo has not provided any reason to ADEX for its resignation or the waiver of fees. However, at no time prior to or after its resignation through the date of the filing of this proxy statement/prospectus has Wells Fargo indicated to ADEX or GRIID that it has any specific concerns with the merger, nor has it advised ADEX or GRIID that it is in disagreement with the contents of this proxy statement/prospectus or the registration statement of which it forms a part. There is not currently any dispute or disagreement among any of ADEX, GRIID, or Wells Fargo with respect to the scope of Wells Fargo’s engagement, Wells Fargo’s ability to complete its engagement, or the resignation described above.

Although Wells Fargo has waived the right to receive any compensation for the services described above, ADEX and Wells Fargo each continue to have customary obligations with respect to the use of the other party’s confidential information. ADEX also agreed to indemnify Wells Fargo, Wells Fargo’s affiliates and their respective officers, directors, controlling persons, employees, affiliates, agents, counsel and other advisors from and against any and all judgments, losses, claims, damages, costs, fees, expenses or liabilities, joint or several, to which such party may become subject, related to or arising out of Wells Fargo’s engagement or performance of its services, untrue statements of material fact and omissions to state material facts contained in ADEX’s SEC filings, and actual or threatened claims; provided, that such claims do not result solely from Wells Fargo’s gross negligence or willful misconduct. Other than with respect to such potential indemnification obligations, neither ADEX nor GRIID is a party to any agreement that would require the payment of any fees to, or require the reimbursement of any expenses of, Wells Fargo with respect to the merger or any private placement in connection therewith.

Wells Fargo did not prepare or provide any of the disclosures in this prospectus/proxy statement or any analysis underlying such disclosure or any other materials that have been provided to ADEX’s stockholders. Additionally, Wells Fargo was not responsible for the preparation of any materials reviewed by the ADEX board of directors other than providing a general market and process overview. Wells Fargo did identify potential PIPE investors and prepare the PIPE presentation that was provided to potential PIPE investors and the ADEX board of directors. Wells Fargo has not informed ADEX, or to the knowledge of ADEX, any potential PIPE investors, that it has withdrawn its association with the materials described in the immediately preceding sentence.

ADEX did not rely on Wells Fargo, in its roles as capital markets advisor, financial advisor or lead placement agent, in the preparation and analysis of the materials, including the 2021 management projections (as defined below), provided to the ADEX board for use as a component of its overall evaluation of GRIID. The ADEX board did not receive or rely upon any financial or valuation analyses conducted or prepared by Wells Fargo in making its determination that the merger agreement and the merger were advisable, fair to, and in the best interests of, ADEX and its stockholders. Please see “Proposal No. 1—The Merger Proposal—The Merger—Background of the Merger” for further details.

Any services provided by Wells Fargo pursuant to its engagement letters with ADEX were substantially complete at the time of Wells Fargo’s resignation. ADEX and GRIID do not intend to engage additional capital

 

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markets advisors, financial advisors or placement agents. Neither Wells Fargo nor any affiliate of Wells Fargo is a lender to, or has any other material relationship with, ADEX or GRIID and no credit or financing agreements entered into by ADEX or GRIID is impacted by the resignation of Wells Fargo.

At the request of the Division of Corporation Finance of the SEC, ADEX requested that Wells Fargo provide a letter stating whether it agrees with the statements made in this proxy statement/prospectus relating to its resignation. As of the date of this proxy statement/prospectus, ADEX has not received any such letter from Wells Fargo. Wells Fargo’s failure to deliver such letter should not be interpreted to mean that Wells Fargo agrees with this disclosure. As Wells Fargo has disclaimed any responsibility for the disclosure in this proxy statement/prospectus, stockholders should not put any reliance on the fact that Wells Fargo was previously involved with any aspect of the transactions described in this prospectus/proxy statement.

Opinion of Financial Advisor to the ADEX Board Related to the Initial Merger Consideration

On November 29, 2021, Lincoln rendered its oral opinion, which was subsequently confirmed in writing on the same date, to the board of directors of ADEX as to the fairness, from a financial point of view, to ADEX of the initial merger consideration to be issued by ADEX in the merger. The board of directors of ADEX did not obtain an opinion from a financial advisor as to the fairness to ADEX, from a financial point of view, of the 58,500,000 shares of ADEX common stock to be issued by ADEX in the merger as merger consideration, as contemplated by the second amendment to the merger agreement.

On October 17, 2022, the parties to the initial merger agreement entered into the second amendment, which, among other things, reduced the merger consideration. No new or updated fairness opinion was obtained in connection with ADEX’s board of directors’ determination that the merger and the second amendment, including the reduction in the merger consideration, was advisable and in the best interests of ADEX and its stockholders. We continue to describe the fairness opinion delivered on November 29, 2021 throughout this proxy statement/prospectus solely to provide historical context for ADEX’s board of directors’ deliberations in connection with its initial assessment of the merger and the initial merger agreement. In light of the updated merger consideration set forth in the second amendment, changes in macroeconomic conditions and recent volatility in the market value of bitcoin, you should not rely on the following discussion of the fairness opinion, any discussion of the fairness opinion elsewhere in this proxy statement/prospectus or the text of the fairness opinion set forth in Annex F, in evaluating whether or not to vote your shares of common stock in favor of the merger proposal or any other proposal set forth in this proxy statement/prospectus or in evaluating whether or not to redeem your IPO Shares.

Lincoln’s November 29, 2021 opinion was directed to the board of directors of ADEX (in its capacity as such) and only addressed the fairness to ADEX, from a financial point of view, of the initial merger consideration to be issued by ADEX in the merger, based upon and subject to the qualifications, procedures, limitations and assumptions set forth in the opinion. The opinion did not address any other terms, aspects or implications of the merger, or any agreements, arrangements or understandings entered into in connection with the merger. Lincoln’s opinion did not address the second amendment, the updated merger consideration contemplated thereby, or the terms of the merger as amended by the second amendment, and does not reflect any other changes in circumstances that had occurred or that may have occurred between the signing of the initial merger agreement and the completion of the merger, including the reduction of the merger consideration pursuant to the second amendment, changes in macroeconomic conditions, or recent volatility in the market value of bitcoin. The summary of Lincoln’s opinion included elsewhere in this proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex F to this proxy statement/prospectus and which describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other

 

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matters considered by Lincoln in connection with the preparation of its opinion. Neither Lincoln’s opinion nor the summary of its opinion and the related analyses set forth elsewhere in this proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the board of directors of ADEX, ADEX or any security holder as to how to act or vote on any matter relating to the merger or otherwise.

For a summary of the opinion, please see the section entitled “Proposal No. 1—The Merger Proposal—Opinion of Financial Advisor to the ADEX Board Related to the Initial Merger Consideration.”

Redemption Rights

Pursuant to the current charter, we are providing holders of IPO Shares with the opportunity to have such IPO Shares redeemed at the closing of the merger at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the merger, including interest (net of taxes payable), divided by the number of then-outstanding IPO Shares, subject to the limitations described in this proxy statement/prospectus. The per-share amount we will distribute to investors who properly redeem their IPO Shares will not be reduced by the deferred underwriting commissions we expect to pay to the IPO underwriters. For illustrative purposes only, based on the fair value of marketable securities held in the trust account as of        ,         , the record date, of $                , the estimated per share redemption price would have been approximately $                . Holders of IPO Shares may elect to redeem such IPO Shares even if they vote for the merger proposal and the other transaction proposals. The current charter provides that a holder of IPO Shares, acting together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a partnership, limited partnership, syndicate, or other group for purposes of acquiring, holding, or disposing of any shares of ADEX, will be restricted from exercising this redemption right with respect to more than 15% of our outstanding common stock in the aggregate without the prior consent of ADEX. There will be no redemption rights with respect to our warrants. The sponsor and our directors and officers have agreed to waive their redemption rights for no additional consideration with respect to their shares, including any IPO Shares they may have acquired after our IPO, in connection with the completion of the merger. Permitted transferees of the sponsor and our directors and officers will be subject to the same obligations.

Additionally, IPO Shares properly tendered for redemption will only be redeemed if the merger is consummated; otherwise, holders of such IPO Shares will only be entitled to a pro rata portion of the trust account (including interest but net of taxes payable) in connection with the liquidation of the trust account or if we subsequently complete a different initial business combination on or prior to the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter), and such IPO Shares are tendered for redemption in connection with such different initial business combination.

We will pay the redemption price to any holders of IPO Shares who properly exercise their redemption rights promptly following the closing, subject to the minimum net tangible asset condition discussed above. The closing is subject to the satisfaction of a number of conditions. As a result, there may be a significant delay between the deadline for exercising redemption requests prior to the special meeting and payment of the redemption price. Any request to redeem IPO Shares, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the closing.

If you exercise your redemption rights with respect to any IPO Shares, such IPO Shares will cease to be outstanding immediately prior to the merger and will only represent the right to receive a pro rata share of the aggregate amount on deposit in the trust account. You will no longer own those IPO Shares and will have no

 

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right to participate in, or have any interest in, the future growth of New GRIID following the merger, if any, with respect to such IPO Shares. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.

See the section entitled “Proposal No. 1—The Merger Proposal—Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

Impact of the Merger on ADEX’s Capitalization

Assuming there are no further redemptions of our shares and that no additional shares are issued prior to completion of the merger, it is anticipated that, upon completion of the merger and related transactions, the ownership of New GRIID by holders of IPO Shares, the initial stockholders and the pre-merger GRIID equity holders will be as follows:

 

   

The holders of IPO Shares would own 2,000,026 shares of common stock, representing 3.0% of New GRIID’s total outstanding shares of common stock;

 

   

The initial stockholders would own 6,900,000 shares of common stock, representing 10.2% of New GRIID’s total outstanding shares of common stock, of which 6,832,500 shares of common stock, representing 10.1% of New GRIID’s total outstanding shares of common stock, would be held by the sponsor; and

 

   

The pre-merger GRIID equity holders (including Blockchain and the Bridge Financing Warrantholders, following the automatic adjustment and exercise of the Blockchain warrant and Bridge Financing warrants) would own 58,500,000 shares of common stock, representing 86.8% of New GRIID’s total outstanding shares of common stock.

The ownership percentages set forth above do not take into account any warrants that will be outstanding as of the closing and may be exercised thereafter, other than the Blockchain warrant and Bridge Financing warrants. If the actual facts are different than these assumptions, the percentage ownership retained by ADEX’s existing stockholders in New GRIID following the merger will be different. For example, if we assume that all 13,800,000 IPO warrants and 7,270,000 private placement warrants were exercisable and exercised following completion of the merger and related transactions, then the ownership of ADEX by holders of IPO Shares, the initial stockholders and the pre-merger GRIID equity holders will be as follows:

 

   

The holders of IPO Shares would own 15,800,026 shares of common stock, representing 17.9% of New GRIID’s total outstanding shares of common stock;

 

   

The initial stockholders would own 14,170,000 shares of common stock, representing 16.0% of New GRIID’s total outstanding shares of common stock, of which 14,102,500 shares of common stock, representing 15.9% of New GRIID’s total outstanding shares of common stock, would be held by the sponsor; and

 

   

The pre-merger GRIID equity holders (including Blockchain and the Bridge Financing Warrantholders, following the automatic adjustment and exercise of the Blockchain warrant and Bridge Financing warrants) would own 58,500,000 shares of common stock, representing 66.1% of New GRIID’s total outstanding shares of common stock.

The preceding description of the ownership of ADEX’s securities is accurate as of the date of filing of this proxy statement/prospectus. The preceding description does not take into account any transactions that may be entered into after the date hereof, including any issuances of warrants to GEM or to the sponsor upon conversion of borrowings under the promissory note into warrants, other than the automatic adjustment and exercise of the Blockchain warrant and Bridge Financing warrants immediately prior to the closing. See “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

 

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Board of Directors of New GRIID Following the Merger

Upon the closing, assuming the election of each of the director nominees and re-nominees, the board of directors of New GRIID will consist of the following seven directors: James D. Kelly III, Neal Simmons, Sundar Subramaniam, Tom Zaccagnino, Cristina Dolan, David L. Shrier, and Sharmila Kassam. See “Proposal No. 6—The Director Election Proposal.”

Information about the current ADEX directors and executive officers can be found in the section entitled “Information About ADEX.”

Accounting Treatment

The merger will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, ADEX is treated as the “acquired” company and GRIID is treated as the acquiror for financial statement reporting purposes. GRIID has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

following the merger, New GRIID will be governed by a board of directors consisting of four members that are initially appointed by GRIID and three initially that are appointed by ADEX;

 

   

the existing GRIID equity holders are expected to represent a majority of the voting power of New GRIID;

 

   

GRIID’s operations prior to the merger will constitute the only ongoing operations of New GRIID;

 

   

GRIID’s senior management will represent a majority of the senior management of New GRIID; and

 

   

GRIID is significantly larger than ADEX in terms of revenue, total assets (excluding cash) and employees.

Accordingly, for accounting purposes, the financial statements of the combined company will represent a continuation of the consolidated financial statements of GRIID with the acquisition being treated as the equivalent of GRIID issuing shares for the net assets of ADEX, accompanied by a recapitalization. The net assets of ADEX will be stated at historical cost, with no goodwill or other intangible assets recorded.

Appraisal Rights

There are no appraisal rights in connection with any of the proposals to be voted on at the Special Meeting. The Company’s warrants do not have voting rights in connection with the proposals.

Proposals to be Put to the Stockholders of ADEX Special Meeting

At the special meeting, you will be asked to consider and vote on a proposal to approve and adopt the merger agreement, the full form of which, including amendments, is attached to this proxy statement/prospectus as Annexes A-1, A-2, and A-3, and approve the transactions contemplated thereby.

 

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In addition, you will be asked to consider and vote on proposals to:

 

   

approve and adopt, assuming the other condition precedent proposals (as defined below) are approved and adopted, the proposed charter, a copy of which is attached to this proxy statement/prospectus as Annex D, which, if approved, would take effect upon the closing;

 

   

to approve and adopt, on a non-binding advisory basis, certain differences between the current charter and the proposed charter, which are being presented in accordance with the requirements of the SEC as six separate sub-proposals to:

 

  o

upon completion of the merger, increase the authorized capital stock of ADEX from 101,000,000 shares, consisting of 100,000,000 shares of common stock and 1,000,000 shares of preferred stock, to 501,000,000 shares, consisting of 500,000,000 shares of common stock and 1,000,000 shares of preferred stock;

 

  o

provide that the board of directors of ADEX be divided into three classes with only one class of directors being elected each year and each class serving three-year terms;

 

  o

provide that directors may be removed only for cause by the affirmative vote of the holders of at least 66 2/3% of the outstanding common stock entitled to vote thereon;

 

  o

provide that any action required or permitted to be taken by the stockholders may be effected only at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing and that stockholders may not call a special meeting;

 

  o

change the stockholder vote required to amend Section 5.5 or Articles VI, VII, IX, or XII of the proposed charter from the affirmative vote of the holders of at least a majority of the outstanding common stock entitled to vote thereon to the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled to vote thereon, voting together as a single class; and

 

  o

provide for certain additional changes, including, among other things, (a) changing New GRIID’s corporate name from “Adit EdTech Acquisition Corp.” to “GRIID Infrastructure Inc.” and (b) removing certain provisions related to ADEX’s status as a blank check company that will no longer apply upon consummation of the merger, all of which ADEX’s board of directors believes are necessary to adequately address the needs of New GRIID;

 

   

assuming the condition precedent proposals are approved and adopted, approve and adopt the incentive plan, substantially in the form attached to this proxy statement/prospectus as Annex E;

 

   

approve, assuming the other condition precedent proposals are approved and adopted, for purposes of complying with the applicable provisions of the NYSE American listing standard §713(a), the issuance of more than 20% of ADEX’s outstanding common stock in connection with the merger and, for purposes of complying with the applicable provisions of the NYSE American listing standard §713(b), the change of control of ADEX;

 

   

assuming the condition precedent proposals are approved and adopted, elect seven directors to serve terms as Class I, Class II, and Class III directors on our board of directors until the 2024, 2025 and 2026 annual meetings of stockholders, respectively, or until such directors’ successors have been duly elected and qualified, or until such directors’ earlier death, resignation, retirement or removal; and

 

   

approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of any of the proposals.

 

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Date, Time and Place of Special Meeting

The special meeting will be held at                at                , Eastern Time, on                ,                 , or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals. The special meeting will be held entirely online. Stockholders may participate in the special meeting by visiting the following website:                 . Stockholders may also attend the special meeting in listen-only mode by dialing                  (toll-free within the U.S. and Canada) and                 (outside of the U.S. and Canada), Conference ID:                 , but will not be able to vote shares or ask questions during the meeting.

Voting Power; Record Date

You will be entitled to vote or direct votes to be cast at the special meeting if you owned shares of common stock at the close of business on                 ,                 , which is the record date for the special meeting. You are entitled to one vote for each share of common stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were                shares of common stock outstanding.

Proxy Solicitation

ADEX has hired Okapi to assist in the proxy solicitation process. ADEX has agreed to pay Okapi a fee of $        . ADEX will reimburse Okapi for reasonable out-of-pocket losses, damages and expenses. ADEX will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to beneficial owners of shares and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Quorum and Required Vote for Proposals for the Special Meeting

The presence, in person (online) or by proxy, of stockholders holding a majority of the shares issued and outstanding and entitled to vote at the special meeting constitutes a quorum at the special meeting.

Approval of the charter amendment proposal requires the affirmative vote of a majority of the then-outstanding shares of common stock entitled to vote at the meeting. Approval of each of the merger proposal, the NYSE American proposal, the incentive plan proposal and the adjournment proposal requires the affirmative vote of a majority of the then-outstanding shares of common stock present, in person (online) or by proxy, and entitled to vote at the meeting. Approval, on an advisory basis, of the advisory charter proposals, requires the affirmative vote of a majority of the then-outstanding shares of common stock present, in person (online) or by proxy, and entitled to vote at the meeting. The election of the director nominees pursuant to the director election proposal requires the affirmative vote of the holders of a plurality of the then-outstanding shares of common stock present, in person (online) or by proxy, and entitled to vote at the meeting.

Under the merger agreement, the approval of each of the condition precedent proposals, the director election proposal, and the incentive plan proposal is a condition to the consummation of the merger. The adoption of each condition precedent proposal is conditioned on the approval of all of the condition precedent proposals. The director election proposal and the incentive plan proposal are conditioned on the approval of all of the condition

 

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precedent proposals, and the adjournment proposal is not conditioned on the approval of any other proposal. If ADEX’s stockholders do not approve any of the condition precedent proposals, the merger may not be consummated.

Abstentions, while considered present for the purposes of establishing a quorum, will not count as votes cast and will have the same effect as a vote against each of the proposals, other than the director election proposal, presented at the special meeting. Abstentions will have no effect on the outcome of the director election proposal. Broker non-votes will not be considered present for purposes of establishing a quorum, will have the same effect as a vote against the charter amendment proposal, and will have no effect on the outcome of the merger proposal, the NYSE American proposal, the advisory charter proposals, the incentive plan proposal, the director election proposal, or the adjournment proposal. A stockholder’s failure to vote by proxy or to vote in person (online) at the special meeting will not be counted towards the number of shares of common stock required to validly establish a quorum, and if a valid quorum is otherwise established, will have the effect as a vote against the charter amendment proposal and no effect on the outcome of the merger proposal, the NYSE American proposal, the advisory charter proposals, the incentive plan proposal, the director election proposal, and the adjournment proposal.

Recommendation to ADEX Stockholders

After careful consideration, ADEX’s board of directors recommends that ADEX’s stockholders vote “FOR” each proposal being submitted to a vote of ADEX’s stockholders at the special meeting, but expresses no opinion as to whether or not holders of IPO Shares should redeem their IPO Shares.

For more information regarding ADEX’s reasons for the approval of the merger and the recommendation of ADEX’s board of directors, see the section entitled “Proposal No. 1—The Merger Proposal—ADEX’s Board of Directors’ Reasons for Approval of the Merger.”

When you consider the recommendation of the board of directors to vote in favor of approval of these proposals, you should keep in mind that the sponsor and certain of our directors and officers and industry advisors have interests in the merger that are different from or in addition to (and which may conflict with) your interests as a stockholder. Please see the section entitled “Proposal No. 1—The Merger Proposal—Interests of Certain Persons in the Merger” and “Beneficial Ownership of Securities.”

Summary of Risk Factors

In evaluating the transaction proposals, you should carefully read this proxy statement/prospectus, including the annexes included herein, and especially consider the factors discussed in the section entitled “Risk Factors.” The following is a summary of principal risks to which (i) our business, operations and financial performance and (ii) the merger are subject. Each of these risks is more fully described in the individual risk factors contained in the section entitled “Risk Factors.”

Risks Related to GRIID’s Business and Industry

 

   

GRIID has a limited operating history, with operating losses as the business has grown. If GRIID is unable to sustain greater revenues than its operating costs, GRIID will incur operating losses, which could negatively impact its business, financial condition and results of operations.

 

   

Any electricity outage, limitation of electricity supply or increase in electricity costs could materially impact GRIID’s operations and financial performance.

 

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GRIID may face risks of internet disruptions, which could have an adverse effect on both the price of bitcoin and its ability to operate its business.

 

   

GRIID has identified a material weakness in its internal control over financial reporting. This material weakness could adversely affect its ability to report its results of operations and financial condition accurately and in a timely manner.

 

   

The terms of its credit agreement restrict GRIID’s current and future operations, particularly its ability to take certain actions.

 

   

GRIID’s business is highly dependent on a small number of bitcoin mining equipment suppliers. Failure of GRIID’s suppliers to perform under the relevant supply contracts for equipment that has already been procured may delay its expansion plans. Failure of suppliers to make new machines available on an ongoing basis could delay GRIID’s expansion plans.

 

   

GRIID’s evolving business model increases the complexity of its business, which makes it difficult to evaluate its future business prospects and could have a material adverse effect on its business, financial condition and results of operations.

 

   

GRIID may not be able to compete effectively against its current and future competitors, which could have a material adverse effect on its business, financial condition and results of operations.

 

   

GRIID’s success will depend significantly on the price of bitcoin, which is subject to risk and has historically been subject to wide swings and significant volatility.

 

   

If demand for transactions in bitcoin declines and is replaced by new demand for other cryptocurrencies, GRIID’s business, financial condition and results of operations could be adversely affected.

 

   

It may take significant time and expenditure for GRIID to grow its bitcoin mining operations through continued development at its existing and planned sites, and its efforts may not be successful.

 

   

COVID-19 or any pandemic, epidemic or outbreak of an infectious disease in any country in which GRIID operates, and any governmental or industry measures taken in response to COVID-19 or any other such infectious disease, may adversely impact its operations.

 

   

GRIID’s management team has limited experience managing a public company.

 

   

GRIID may be vulnerable to climate change, severe weather conditions and natural and man-made disasters, including earthquakes, fires, floods, hurricanes, tornadoes, severe storms (including impacts from rain, snow, lightning and wind), as well as power outages and other industrial incidents, which could severely disrupt the normal operation of its business and adversely affect its results of operations.

 

   

Bitcoin held by GRIID is not subject to Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation protections.

 

   

GRIID may be affected by price fluctuations in the wholesale and retail power markets.

 

   

GRIID may be exposed to cybersecurity threats and hacks, which could have a material adverse effect on its business, financial condition and results of operations.

Risks Related to Bitcoin

 

   

Bitcoin is a form of technology which may become redundant or obsolete in the future.

 

   

There is a lack of liquid markets in bitcoin, and these markets are subject to possible manipulation.

 

   

If a malicious actor or botnet obtains control of more than 50% of the processing power on the bitcoin blockchain, such actor or botnet could manipulate the bitcoin blockchain, which would adversely affect an investment in GRIID or its ability to operate.

 

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To the extent that the profit margins of digital asset mining operations are not high, mining participants are more likely to sell their earned bitcoin, which could constrain bitcoin prices.

 

   

Digital asset trading platforms for bitcoin may be subject to varying levels of regulation, which exposes GRIID’s bitcoin holdings to risks.

 

   

Bitcoin transactions are irrevocable and, if stolen or incorrectly transferred, bitcoin may be irretrievable. As a result, any incorrectly executed bitcoin transactions could have a material adverse effect on GRIID’s business, financial condition and results of operations.

Risks Related to Third Parties

 

   

Banks and financial institutions may not provide bank accounts, or may cut off certain banking or other financial services, to bitcoin investors or businesses that engage in bitcoin-related activities or that accept bitcoin as payment.

 

   

The IRS and certain states have taken the position that digital assets are property for income tax purposes.

Risks Related to Regulations and Regulatory Frameworks

 

   

Regulatory changes or actions may restrict the use of bitcoin in a manner that adversely affects GRIID’s business, prospects or operations.

 

   

GRIID’s business and financial condition may be materially adversely affected by increased regulation of energy sources.

 

   

If GRIID were deemed an “investment company” under the 1940 Act, applicable restrictions could make it impractical for GRIID to continue its business as contemplated and could have a material adverse effect on its business.

 

   

Any change in the interpretive positions of the SEC or its staff with respect to cryptocurrencies or digital asset mining firms could have a material adverse effect on GRIID.

 

   

Increasing scrutiny and changing expectations from investors, lenders, customers, government regulators and other market participants with respect to GRIID’s Environmental, Social and Governance policies may impose additional costs on GRIID or expose GRIID to additional risks.

Risks Related to GRIID’s Intellectual Property

 

   

If GRIID is unable to protect the confidentiality of its trade secrets or other intellectual property rights, its business and competitive position could be harmed.

Risks Related to ADEX and the Merger

 

   

The sponsor and certain of our directors, our officers and our industry advisors have interests in the merger that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the merger proposal and approval of the other proposals described in this proxy statement/prospectus.

 

   

After completion of the merger, we will be controlled by GRIID, whose interests may conflict with our interests and the interests of other stockholders.

 

   

No opinion from any financial advisor was obtained in connection with the second amendment. ADEX does not have a financial advisor, as ADEX did not engage any additional financial advisors after the

 

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resignation of Wells Fargo and did not engage Lincoln to provide an updated fairness opinion in connection with the second amendment. The opinion of Lincoln obtained in connection with the initial merger agreement did not reflect changes in circumstances that had occurred or that may had occurred between the signing of the initial merger agreement and the completion of the merger, including the reduction of the merger consideration pursuant to the second amendment, changes in macroeconomic conditions, or recent volatility in the market value of bitcoin.

 

   

There can be no assurance that we will be able to comply with the continued listing standards of the NYSE American or that our common stock will be finally approved for listing on the NEO.

 

   

We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement. As such, substantial doubt exists as to our ability to continue as a going concern if we do not consummate an initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter). If we are unable to effect an initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter), we will be forced to liquidate and our warrants will expire worthless.

 

   

If we were deemed to be an “investment company” under the 1940 Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which would make it difficult for us to complete the merger.

 

   

The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the merger agreement may result in a conflict of interest when determining whether such changes to the terms of the merger agreement or waivers of conditions are appropriate and in the best interests of our stockholders.

 

   

Subsequent to our completion of the merger, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

Risks Related to Redemption

 

   

We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a business combination even though a substantial majority of our stockholders elected to have their IPO Shares redeemed in connection with the first and second extension meetings.

 

   

If you or a “group” of stockholders are deemed to hold in excess of 15% of our outstanding common stock, you will lose the ability to redeem all such shares in excess of 15% of our outstanding common stock.

 

   

There is no guarantee that a stockholder’s decision whether to redeem its IPO Shares for a pro rata portion of the trust account will put the stockholder in a better future economic position.

 

   

Redemptions of IPO Shares may subject us to excise tax obligations.

Litigation Relating to the Merger

There can be no assurances that complaints or demands will not be filed or made with respect to the merger. Please see the section entitled “Proposal No. 1—The Merger Proposal—Litigation Relating to the Merger.”

 

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Emerging Growth Company

ADEX 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, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to non-emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), 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 stockholder 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. ADEX intends to take advantage of the benefits of this extended transition period. This may make comparison of ADEX’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

ADEX will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of its initial public offering or (b) in which it has total annual gross revenue of at least $1.235 billion (as adjusted for inflation pursuant to SEC rules from time to time), and (2) the date on which (x) it is deemed to be a large accelerated filer, which means the market value of its common stock that are held by non-affiliates exceeds $700 million as of the prior June 30, or (y) the date on which it has issued more than $1.0 billion in nonconvertible debt during the prior three-year period.

Controlled Company

Immediately upon consummation of the merger, it is expected that New GRIID will be a “controlled company” within the meaning of the NYSE American listing standards, and as a result, New GRIID will qualify for, and intends to rely on, exemptions from certain NYSE American listing standards. For more information see “Risk Factors—Risks Related to ADEX and the Merger—Because New GRIID will be a “controlled company” within the meaning of the NYSE American listing standard §713(b), New GRIID stockholders may not have certain corporate governance protections that are available to stockholders of companies that are not controlled companies.”

 

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RISK FACTORS

The risks described below should be carefully considered before making an investment decision. This proxy statement/prospectus also contains forward-looking statements that involve risks and uncertainties. See the sections entitled “Cautionary Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ADEX,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of GRIID” in this proxy statement/prospectus. The value of your investment following the completion of the merger will be subject to significant risks affecting, among other things, New GRIID’s business, consolidated financial condition or results of operations. The trading price of our, or, following the merger, New GRIID’s, securities could decline due to any of these risks, and investors in our securities may lose all or part of their investment.

Risks Related to GRIID’s Business and Industry

We have a limited operating history, with operating losses as the business has grown. If we are unable to achieve and sustain greater revenues than our operating costs, we will incur operating losses, which could negatively impact our business, financial condition and results of operations.

We began operating the company in May 2018. Accordingly, we have a limited operating history, which makes an evaluation of our future prospects difficult. As of June 30, 2023, we had an approximate balance of cash of $0.6 million, and an accumulated deficit of approximately $112.7 million. Our operating results will likely fluctuate moving forward as we focus on increasing our capacity, and as the market price of bitcoin fluctuates. We may be subject to many risks common to new and growing businesses, including cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. Additionally, we will continue to be exposed to numerous risks and volatility associated with the bitcoin mining and power generation sectors, including fluctuating bitcoin to U.S. dollar prices, the costs of bitcoin miners, the number of market participants mining bitcoin, the availability of other power generation facilities to expand operations and regulatory changes. There is no assurance that we will be successful in achieving a return on your investment or meeting other metrics of success.

Our future business plan requires substantial expenses in the establishment and operation of our business and there can be no assurance that subsequent operational objectives will be achieved. Our success will ultimately depend on our ability to generate cash from our business. If we do not achieve our operational objectives, and to the extent that we do not generate cash flow and income, our financial performance and long-term viability may be materially and adversely affected. An investment in New GRIID’s common stock must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development.

Our operating results may fluctuate due to the highly volatile nature of cryptocurrencies in general and, specifically, bitcoin.

All of our sources of revenue will be dependent on cryptocurrencies and, specifically, bitcoin and the broader blockchain and bitcoin mining ecosystem. Due to the highly volatile nature of the cryptocurrency markets and the prices of cryptocurrency assets, our operating results may fluctuate significantly from quarter to quarter in accordance with market sentiments and movements in the broader cryptocurrency ecosystem. Our operating results may fluctuate as a result of a variety of factors, many of which are unpredictable and in certain instances are outside of our control, including:

 

   

macroeconomic conditions;

 

   

changes in the legislative or regulatory environment, or actions by governments or regulators, including fines, orders, or consent decrees;

 

   

adverse legal proceedings or regulatory enforcement actions, judgments, settlements, or other legal proceeding and enforcement-related costs;

 

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increases in operating expenses that we expect to incur to grow and expand our operations and to remain competitive;

 

   

system errors, failures, outages and computer viruses, which could disrupt our ability to continue mining;

 

   

power outages and certain other events beyond our control, including natural disasters and telecommunication failures;

 

   

breaches of security or privacy;

 

   

our ability to attract and retain talent; and

 

   

our ability to compete with our existing and new competitors.

As a result of these factors, it may be difficult for us to forecast growth trends accurately and our business and future prospects are difficult to evaluate, particularly in the short term. In view of the rapidly evolving nature of our business and the bitcoin mining ecosystem, period-to-period comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance. Quarterly and annual expenses reflected in our financial statements may be significantly different from historical or projected rates, and our operating results in one or more future quarters may fall below the expectations of securities analysts and investors.

The market price of bitcoin has recently been volatile. The market price of bitcoin is impacted by a variety of factors, and is determined primarily using data from various exchanges, over-the-counter markets and derivative platforms. As further described herein, the crypto assets industry has been negatively impacted by recent bankruptcy filings of FTX Trading Ltd., et al. (“FTX”), and its affiliated hedge fund Alameda Research LLC, in addition to other bankruptcy filings of crypto companies throughout 2022 and 2023 to-date. Furthermore, such prices may be subject to factors such as those that impact commodities, more so than business activities, which could be subjected to additional influence from fraudulent or illegitimate actors, real or perceived scarcity, and political, economic, regulatory or other conditions. Pricing may be the result of speculation regarding future appreciation in the value of bitcoin, or New GRIID’s share price, inflating and making their market prices more volatile or creating “bubble” type risks for both bitcoin and shares of New GRIID’s securities. Further, volatility in crypto asset pricing could lead to other impacts such as increased risks of legal proceedings or governmental scrutiny of us and our affiliates, either in the United States or in other jurisdictions.

The terms of the credit agreement with Blockchain Access restrict GRIID’s current and future operations, particularly its ability to take certain actions.

The Fourth Amended and Restated Credit Agreement with Blockchain Access (the “credit agreement”) contains a number of restrictive covenants that impose significant operating and financial restrictions on GRIID and may limit GRIID’s ability to engage in acts that may be in GRIID’s long-term best interest, including restrictions on GRIID’s ability to:

 

   

make certain loans and investments;

 

   

pay certain dividends or make other distributions or repurchase or redeem capital stock;

 

   

sell assets;

 

   

incur or permit certain liens;

 

   

incur or permit certain additional indebtedness and guarantee obligations;

 

   

make any investment or acquisitions other than as specifically permitted;

 

   

enter into certain transactions with affiliates; and

 

   

alter the businesses GRIID conducts.

 

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In addition, the restrictive covenants in the credit agreement require GRIID to maintain specified financial ratios and satisfy other financial condition tests. GRIID’s ability to meet those financial ratios and tests can be affected by events beyond its control, and GRIID may be unable to meet them.

A breach of the covenants under the credit agreement could allow the lenders to accelerate the debt or exercise other remedies. In addition, if GRIID were unable to repay the amounts due and payable under the credit agreement, the lenders could proceed against the collateral securing the debt.

GRIID has identified material weaknesses in its internal control over financial reporting. These material weaknesses could adversely affect its ability to report its results of operations and financial condition accurately and in a timely manner.

GRIID’s management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. GRIID’s management is likewise required, on a quarterly basis, to evaluate the effectiveness of its internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a significant deficiency, or a combination of significant deficiencies, in internal control over financial reporting, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

In connection with the evaluation of internal controls and procedures for the period ended December 31, 2022, GRIID identified a material weakness in its internal control over financial reporting related to the improper accounting of warrants issued in connection with certain debt and equity transactions. As a result of this material weakness, GRIID management concluded that its internal control over financial reporting was not effective as of December 31, 2022.

In connection with the evaluation of the internal controls and procedures for the period ended December 31, 2022, GRIID identified a material weakness in its internal controls over financial reporting related to the reclassification of realized gains and losses from the sale of cryptocurrencies from nonoperating income to operating in its statement of operations and the reclassification of cash proceeds related to the sale of cryptocurrencies from cash flows from investing activities to cash flows from operating activities in its statement of cash flows. As a result of this material weakness, GRIID management concluded that its internal control over financial reporting was not effective as of December 31, 2022.

Any failure to maintain such internal control could adversely impact New GRIID’s ability to report its financial position and results from operations on a timely and accurate basis. If New GRIID’s financial statements are not accurate, investors may not have or may not believe they have a complete understanding of New GRIID’s operations. Likewise, if New GRIID’s financial statements are not filed on a timely basis, New GRIID could be subject to sanctions or investigations by the NYSE American, the NEO or any other stock exchange on which New GRIID’s common stock will be listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on New GRIID’s business. Failure to timely file may also cause New GRIID to be ineligible to utilize short form registration statements on Form S-3, which may impair New GRIID’s ability to raise capital in a timely fashion to execute its business strategies. Ineffective internal controls could also cause investors to lose confidence in New GRIID’s reported financial information, which could have a negative effect on the trading price of its stock.

GRIID can give no assurance that the measures it has taken and plans to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if GRIID is successful in strengthening its controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of its financial statements.

 

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Any electricity outage, limitation of electricity supply or increase in electricity costs could materially impact our operations and financial performance.

Our mining operations have historically required significant amounts of electrical power. The costs of electric power account for a significant portion of our cost of revenue. We require a significant electric power supply to conduct our mining activity, operating critical mining facilities and equipment infrastructure. We rely on third parties, including utility providers, for the reliable and sufficient supply of electrical power to our infrastructure. We cannot guarantee that these third parties will be able to consistently provide sufficient levels of electrical power or will have the necessary infrastructure to deliver any additional power that we may require, or that we will be able to procure power from or recontract with them on commercially acceptable terms. Restrictions on the supply of, or our failure to procure, sufficient electricity could adversely affect our business, financial condition and results of operations.

Our access to electricity, or to sufficient electricity, may be affected by climate change, acts of God, utility equipment failure or scheduled and unscheduled maintenance that result in electricity outages to the utility’s or the broader electrical network’s facilities. These electricity outages may occur with limited or no warning and be of an unpredictable duration. Further, our counterparties may be unable to deliver the required amount of power for a variety of technical or economic reasons. As bitcoin mining is power intensive and backup power generation may be expensive to procure, any backup electricity supplies may not be sufficient to power any or all of our bitcoin mining equipment in an affected location for the duration of the outage. The effects of any such events, including any significant nonperformance by counterparties, could have a material adverse effect on our business, financial condition, and operating results.

The price that we pay for electricity is dependent on numerous factors including sources of generation, commodity prices, regulatory environment, electricity market structure, instantaneous supply/demand balances, counterparty and procurement method. These factors may be subject to change over time and result in increasing power costs, which could have a material adverse effect on our operating results and financial condition.

Additionally, our mining operations could be materially adversely affected by prolonged power outages. Although our miners may be powered by backup generators on a temporary basis, it would not be feasible or cost-effective to run miners on back-up power generators for extended periods of time. We would likely need to reduce or cease our operations in the event of an extended power outage or as a result of the unavailability or increased cost of electrical power, which would materially and adversely affect our business and results of operations.

We may face risks of internet disruptions, which could have an adverse effect on both the price of bitcoin and our ability to operate our business.

The bitcoin network, and our business of mining bitcoin, are dependent upon the internet. A disruption in internet connectivity could disrupt the bitcoin network’s operations, which could have an adverse effect on the price of bitcoin and our ability to mine bitcoin. A broadly accepted and widely adopted decentralized network is necessary for the bitcoin network to function as intended. Features of the bitcoin network, such as decentralization, open-source protocol and reliance on peer-to-peer connectivity, are essential to preserve the stability of the bitcoin network and decrease the risk of fraud or cyber-attacks. A disruption of the internet or the bitcoin network could affect the ability to transfer bitcoin, and consequently the value of bitcoin, as well as our ability to mine bitcoin. A significant disruption of internet connectivity could prevent the bitcoin network’s functionality and operations until the internet disruption is resolved. Additionally, our mining sites’ activities are dependent upon internet access. Any disruption to internet connectivity at any of our mining sites could have a negative impact on business performance.

 

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Our business is highly dependent on a small number of bitcoin mining equipment suppliers. Failure of our suppliers to perform under the relevant supply contracts for equipment that has already been procured may delay our expansion plans. Failure of suppliers to make new machines available on an ongoing basis could delay our expansion plans.

Our business is highly dependent upon bitcoin mining equipment suppliers such as Bitmain, MicroBT, Intel and others providing an adequate supply of new generation bitcoin mining machines at economical prices to us. The growth of our business is dependent upon the availability of new generation mining machines offered for sale at a price conducive to profitable bitcoin mining, as well as the trading price of bitcoin. The market price and availability of new mining machines fluctuates with the price of bitcoin and can be volatile. Higher bitcoin prices increase the demand for mining equipment and increase the cost. In addition, as more companies seek to enter the mining industry, the demand for machines may outpace supply and create mining machine equipment shortages. There are no assurances that bitcoin mining equipment suppliers, such as Bitmain, MicroBT, Intel and others, will be able to keep pace with any surge in demand for mining equipment or continue to supply bitcoin mining equipment. Further, mining machine purchase contracts are not favorable to purchasers and we may have little or no recourse in the event a mining machine manufacturer defaults on its mining machine delivery commitments. If we are not able to obtain a sufficient number of bitcoin mining machines at favorable prices, our growth expectations, business, financial condition and results of operations will be negatively impacted.

Supply chain and logistics issues for us or our suppliers may delay our expansion plans or increase the cost of constructing our infrastructure.

The equipment used in our business is generally manufactured by third parties using a large amount of commodity inputs. Our third-party manufacturers, suppliers, sub-contractors and customers have been disrupted by worker absenteeism, quarantines, restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures or other travel or health-related restrictions, as a result of the COVID-19 pandemic. Supply chain disruptions may also occur from time to time due to a range of factors beyond our control, including, but not limited to, climate change, increased costs of labor, freight costs and raw material prices along with a shortage of qualified workers or unforeseen global events such as the armed conflict between Russia and Ukraine. See also “—We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.” Such issues may cause delays in the delivery of, or increases in the cost of, the equipment used in our operations, which could materially impact our business, financial condition and results of operations and may delay our expansion plans.

Cancellation or withdrawal of required operating and other permits and licenses could materially impact our operations and financial performance.

In each jurisdiction in which we operate, it is typical that we must obtain certain permits, approvals and/or licenses in order to construct and operate our facilities. If such permits, approvals and/or licenses are not granted, or if they are suspended, terminated or revoked, it may result in delays in construction of our facilities or require us to halt all or part of our operations. Such circumstances could have a material adverse effect on our business, financial condition and operating results.

Our evolving business model increases the complexity of our business, which makes it difficult to evaluate our future business prospects and could have a material adverse effect on our business, financial condition and results of operation.

Our business model has significantly evolved since our formation in 2018 and we expect it to continue to do so in the future. As cryptocurrency assets and blockchain technologies become more widely available, we expect

 

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the services and products associated with them to evolve. As a result, our business model may require us to evolve as well. We may need to modify aspects of our business model relating to our strategy from time to time and we cannot offer any assurance that these or any other modifications will be successful. Further, any new services that we offer that are not favorably received by the market could damage our reputation or our brand. There can be no assurance that we will ever generate sufficient revenues or achieve profitably in the future or that we will have adequate working capital to meet our obligations as they become due. In the event that we do not effectively evaluate future business prospects, successfully implement new strategies or adapt to our evolving industry, it will have a material adverse effect on our business, financial condition and results of operations.

Our future success depends on our ability to expand our organization to match the growth of our activities, and any failure to manage our growth effectively could place strains on our managerial, operational and financial resources and could adversely affect our business, financial condition and results of operation.

As our operations grow, the demands upon us will grow, and our success will depend upon our ability to meet those demands. We require certain financial, managerial and other resources, which could create challenges to our ability to successfully manage operations and impact our ability to assure compliance with its policies, practices and procedures. These demands include, among others, increased executive, accounting, management, legal services, staff support and general office services. We may need to hire additional qualified personnel to meet these demands, the cost and quality of which depends in part upon market factors outside of our control. Further, we will need to effectively manage the training and growth of our staff to maintain an efficient and effective workforce, and our failure to do so could adversely affect our business, financial condition and results of operations. Currently, we have limited personnel in our organization to meet our organizational and administrative demands. If we fail to manage our growth effectively or to develop and expand our managerial, operational and financial resources and systems, we may not be able to execute on our business plan, respond to competitive pressures or take advantage of market opportunities and our business, financial condition and results of operations would be adversely affected.

We may not be able to compete effectively against our current and future competitors, which could have a material adverse effect on our business, financial condition and results of operations.

The bitcoin mining ecosystem is highly innovative, rapidly evolving and characterized by intense competition, experimentation and frequent introductions of new products and services, and is subject to uncertain and evolving industry and regulatory requirements. We expect competition to increase in the future as existing competitors expand their operations, new competitors enter the industry, and new products are introduced or existing products enhanced. We compete against a number of companies operating globally that focus on mining digital assets.

Our existing and potential competitors may have various competitive advantages over us, such as:

 

   

greater name recognition, longer operating histories and larger market shares;

 

   

more established marketing, banking and compliance relationships;

 

   

greater mining capabilities;

 

   

more timely introduction of new technologies;

 

   

preferred relationships with suppliers of mining machines and other equipment;

 

   

access to more competitively priced power;

 

   

greater financial resources to make acquisitions;

 

   

lower labor, compliance, risk mitigation and research and development cost;

 

   

established core business models outside of the mining or trading of digital assets, allowing them to operate on lesser margins or at a loss;

 

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operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and

 

   

substantially greater financial, technical and other resources.

If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, financial condition and results of operations could be adversely affected.

There are several new and existing competitors in our industry that are purchasing mining equipment at scale, which may cause delays or difficulty in us obtaining new miners, which could materially and adversely affect our business and results of operations.

Many of the competitors in our industry have also been purchasing mining equipment at scale, which has caused a world-wide shortage of mining equipment and extended the corresponding delivery schedules for new miner purchases. There are no assurances that manufacturers, including the manufacturers we currently utilize, will be able to keep pace with the surge in demand for mining equipment. It is uncertain how manufacturers will respond to this increased global demand and whether they can deliver on the schedules promised to all of their customers.

In the event manufacturers are not able to keep pace with demand, we may not be able to purchase miners in sufficient quantities or on the delivery schedules that meet our business needs. Additionally, should manufacturers default on their purchase agreements with us, we would have to pursue recourse, which would be costly and time consuming to resolve, and there is no guarantee we would succeed in recovering any of our deposits paid for such miner purchases, which could materially and adversely affect our business, financial condition and results of operations.

Our future success will depend significantly on the price of bitcoin, which is subject to risk and has historically been subject to wide swings and significant volatility.

We generate substantially all of our revenue from the generation and sale of bitcoin. The price of bitcoin is highly speculative and is not based on the performance of an underlying business. Furthermore, the price of bitcoin could be subjected to additional influence from fraudulent or illegitimate actors, real or perceived scarcity, and political, economic, regulatory, tax or other conditions. Changes in the legislative or regulatory environment, or actions by governments or regulators that impact the cryptocurrency industry generally, could also affect the price of bitcoin. These factors may inhibit consumer trust in and market acceptance of bitcoin as a means of exchange, which could have a material adverse effect on our business, prospects, or operations and potentially the value of any bitcoin we mine. The speculative nature of the price of bitcoin and past dramatic volatility in pricing, particularly in recent months, may create risks for the volatile trading price of bitcoin.

There is no assurance that bitcoin will maintain its value or that there will be meaningful levels of trading activities to support markets in bitcoin. A decline in the market value of bitcoin or in the demand for trading bitcoin could lead to a corresponding decline in the value of our bitcoin assets and the number of transactions on the bitcoin blockchain network.

If demand for transactions in bitcoin declines or is replaced by demand for other cryptocurrencies, our business, financial condition and results of operations could be adversely affected.

Our business is highly dependent on strong bitcoin demand relative to other cryptocurrencies in the market. As such, in addition to the factors impacting the broader cryptoeconomy, our business may be adversely affected, and growth in our revenues may slow or decline, if market demand for bitcoin deteriorates and is supplanted by other cryptocurrencies such as Ethereum and Solana. In addition, negative perceptions surrounding bitcoin

 

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relative to other cryptocurrencies may cause bitcoin to fall out of favor. If other cryptocurrencies, such as Ethereum and Solana, surpass bitcoin in market demand over a sustained period of time, such a trend could harm our business. Also, competition from public and central bank backed digital currencies could undercut the need for other cryptocurrencies such as bitcoin. Additionally, stablecoins (commodity-backed or fiat-backed) could undercut demand for other cryptocurrencies, including bitcoin. All of these factors could cause the value of bitcoin to decline, and if the value of bitcoin were to continue to be low or decline further, particularly if such decline were significant or over an extended period of time, our operating results would be adversely affected, and there could be a material adverse effect on our ability to continue as a going concern or to pursue our bitcoin strategy at all, which could have a material adverse effect on our business, prospects or operations, and harm investors in New GRIID’s securities.

Although we do not hold any bitcoin for third parties, our business, financial condition and results of operations may still be adversely affected by recent events beyond our control.

While we do not hold any bitcoin for third parties, our business, financial condition and results of operations could be adversely affected by recent events beyond our control, including the fallout from the Chapter 11 Bankruptcy filings of cryptocurrency exchanges FTX (including its affiliated hedge fund, Alameda Research LLC), crypto hedge fund Three Arrows Capital (“Three Arrows”) and crypto lenders Celsius Network LLC, et al. (“Celsius”), Voyager Digital Ltd., et al. (“Voyager”), BlockFi Inc., et al. (“BlockFi”) and Genesis Global Holdco, LLC, et al. (“Genesis”). Most recently, in January 2023, Genesis filed for Chapter 11 bankruptcy. Genesis is owned by Digital Currency Group Inc. (“DCG”), who also owns Foundry Digital LLC, one of our custodians. At this time, we believe that there are no material risks to our business arising from our indirect exposure to Genesis. Although (i) we have no direct exposure to any cryptocurrency entities that have recently filed for Chapter 11 bankruptcy; (ii) we have no assets that may not be recovered due to these bankruptcies; and (iii) we have no exposure to any other counterparties, customers, custodians or other crypto asset market third parties known to us to have (x) experienced material excessive redemptions, withdrawals or suspended redemptions or withdrawal of crypto assets, (y) the crypto assets of their customers unaccounted for, or (z) experienced material compliance failures, our business, financial condition and results of operations may not be immune to unfavorable investor sentiment resulting from these recent developments in the broader cryptocurrency industry.

The digital asset exchanges on which cryptocurrencies, including bitcoin, trade are relatively new and largely unregulated, and thus may be exposed to fraud and failure. Such failures may result in a reduction in the price of bitcoin and other cryptocurrencies and can adversely affect an investment in us and New GRIID.

Digital asset exchanges on which cryptocurrencies, including bitcoin, trade are relatively new and, in most cases, largely unregulated. Many digital exchanges do not provide the public with significant information regarding their ownership structure, management teams, corporate practices or regulatory compliance. As a result, the marketplace may lose confidence in, or may experience problems relating to, cryptocurrency exchanges, including prominent exchanges handling a significant portion of the volume of digital asset trading.

In response to the recent bankruptcy filings of FTX and its affiliated hedge fund Alameda Research LLC, in addition to other bankruptcy filings of crypto companies throughout 2022 and 2023 to-date, the digital asset markets, including the market for bitcoin specifically, have experienced extreme price volatility, and several other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital assets markets and in bitcoin. These events have also negatively impacted the liquidity of the digital assets markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital assets markets continues to be negatively impacted by these events, digital asset prices, including the price of bitcoin, may continue to experience significant volatility and confidence in the digital asset markets may be further undermined. Because the value of bitcoin is derived from the continued willingness of market participants to exchange government-issued currency that is designated as legal tender in its country of issuance for bitcoin, permanent and total loss of the value of bitcoin may result should the

 

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marketplace for bitcoin be jeopardized or disappear entirely. These potential consequences of a digital asset exchange’s failure could adversely affect an investment in us and New GRIID.

We are continuing to monitor and evaluate our risk management procedures, but we believe our current risk management procedures are reasonably designed and effective. The perceived lack of stability in digital asset exchanges and a potential decline in the value of bitcoin could adversely affect an investment in New GRIID. Furthermore, any decrease in the price of bitcoin would cause a risk of increased losses or impairments to the extent that the price of bitcoin falls below our Carrying value.

It may take significant time and expenditure for us to grow our bitcoin mining operations and our efforts may not be successful.

The continued development of our existing and planned facilities is subject to various factors beyond our control. There may be difficulties in integrating new equipment into existing infrastructure, constraints on our ability to connect to or procure the expected electricity supply capacity at our facilities, defects in design or construction, diversion of management resources, insufficient funding, or other resource constraints. Actual costs for development may exceed our planned budget. There may be difficulty acquiring land either through lease, purchase, or some other means, zoning intended locations for our commercial activities, or permitting the land to develop the facilities. All these challenges could delay or halt expansion and therefore negatively impact business performance.

We intend to expand by acquiring and developing additional sites, taking into account a number of important characteristics such as availability of renewable energy, electrical infrastructure and related costs, geographic location and the local regulatory environment. We may have difficulty finding sites that satisfy our requirements at a commercially viable price, or that satisfy our timing requirements associated with our expansion plans. Furthermore, there may be significant competition for suitable cryptocurrency mining sites, and government regulators, including local permitting officials, may potentially restrict our ability to set up cryptocurrency mining operations in certain locations.

Transfer of sites that we have contractually secured may ultimately fail to complete due to factors beyond our control (e.g. due to default or non-performance by counterparties). In addition, estimated power availability at sites secured could be materially less than initially expected or not available at all, and processes to secure permits, approvals and/or licenses to construct and operate our facilities could be delayed in regulatory processes or may not be successful.

Development and construction delays, cost overruns, changes in market circumstances, an inability to find suitable data center locations as part of our expansion, and other factors may adversely affect our operations, financial position and financial performance.

COVID-19 or any pandemic, epidemic or outbreak of an infectious disease in any country in which we operate, and any governmental or industry measures taken in response to COVID-19 or any other such infectious disease, may adversely impact our operations.

The COVID-19 pandemic has had unpredictable and unprecedented impacts in the United States and nearly every other country in the world. In response to the pandemic, governmental authorities around the world, including the United States and elsewhere, introduced various measures to limit the spread of the pandemic, including travel restrictions, border closures, business closures, quarantines, self- and forced isolations, shelter-in-place orders and social distancing. COVID-19 reduced the number of new generation machines available for purchase by prospective customers, reduced demand for our services and delayed and continues to frustrate and delay global supply chains that has impacted and will continue to impact the pace at which new mining machines are added to our facilities. The continued impact or a resurgence of COVID-19, including the emergence of additional variant strains of COVID-19, could have a material impact on our business financial condition and results of operations and any such impact will be determined by the severity and duration of the continuing pandemic.

 

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The nature and extent of the effect of COVID-19 on our financial performance, particularly in the longer term, is unknown. The continued uncertainty, as well as a likelihood of an economic downturn of unknown duration or severity in certain jurisdictions key to our business, means that we may be unable to accurately forecast our operating costs or financial performance.

As the COVID-19 pandemic continues to develop, governments (at national, provincial and local levels), corporations and other authorities may continue to implement restrictions or policies that could adversely affect global capital markets, the global economy, bitcoin and other cryptocurrency prices, and New GRIID’s stock price.

Our management team has limited experience managing a public company.

Members of our management team have not previously served as management of a publicly traded company and therefore do not have experience complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our immediate transition to being a public company. Upon the closing of the merger, we will be subject to significant regulatory oversight and reporting obligations under the federal securities laws, as well as the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and results of operations.

Our success and future growth will, to a significant degree, depend on the skills and services of our management. The loss of any members of our management team or our inability to execute an effective succession plan could adversely affect our business.

Our success and future growth will to a significant degree depend on the skills and services of our management, including our Chief Executive Officer, James D. Kelly III, Chief Technology Officer, Dwaine Alleyne, Chief Operating Officer, Gerard F. King II, Chief Research Officer, Michael W. Hamilton, and Chief Financial Officer, Allan J. Wallander. We will need to continue to grow our management to alleviate pressure on our existing team and to set up and develop our business. If our management, including any new hires that we may make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business could be significantly harmed. Furthermore, if we fail to execute an effective contingency or succession plan with the loss of any member of management, the loss of such management personnel could have a material adverse effect on our business, financial condition, and results of operations.

We do not maintain any key person life insurance policies. The loss of any member of our management team, investment professionals or other key personnel could make it more difficult to execute its business strategy and, therefore, have a material adverse effect on our business, financial condition, and results of operations.

Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business, which in turn could have a material adverse effect on our business, financial condition and results of operation.

We believe our success depends on the efforts and talent of our employees, including facility design, construction management, operations, data processing, engineering, IT, risk management and communications personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.

 

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In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services could diminish, resulting in a material adverse effect on our business, financial condition and results of operations.

The potential acquisition of businesses, services or technologies may not be successful or may adversely affect our existing operations.

As part of our business strategy, we intend to make acquisitions of other companies, products and technologies. We have limited experience in acquisitions. We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms in the future, if at all. Further, the pursuit of potential acquisitions may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, regardless of whether or not they are ultimately completed.

If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated synergies, strategic advantages or earnings from the acquired business due to a number of factors, including:

 

   

incurrence of acquisition-related costs;

 

   

unanticipated costs or liabilities associated with the acquisition;

 

   

the potential loss of key employees of the target business;

 

   

use of resources that are needed in other parts of our business; and

 

   

use of substantial portions of our available cash to complete the acquisition.

We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could affect our financial condition or the value of New GRIID’s common stock. The sale of equity to finance any such acquisitions could result in dilution to our stockholders. If we incur more debt, it would result in increased fixed obligations and could also subject us to covenants or other restrictions that would impede our ability to flexibly operate our business. In addition, if an acquired business fails to meet expectations, our business, financial condition and results of operations may be adversely affected.

We are vulnerable to risks associated with climate change, severe weather conditions and natural and man-made disasters, including earthquakes, fires, floods, hurricanes, tornadoes, severe storms (including impacts from rain, snow, lightning and wind), and warfare, as well as power outages and other industrial incidents, which could severely disrupt the normal operation of our business and adversely affect our results of operations.

Our business may be subject to the risks of climate change, severe weather conditions and natural and man-made disasters, including earthquakes, fires, floods, hurricanes, tornadoes, severe storms (including impacts from rain, snow, lightning and wind), and warfare, as well as power outages and other industrial incidents, any of which could result in system failures, power supply disruptions and other interruptions that could harm our business. The potential physical impacts of climate change on our properties and operations are highly uncertain and would be particular to the geographic circumstances in areas in which we operate. These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures. The impacts of climate change may materially and adversely impact the cost, production and financial performance of our operations. Further, any impacts to our business, financial condition and results of operations as a result of climate change are likely to occur over a sustained period of time and are therefore difficult to quantify with any degree of specificity. For example, extreme weather events may result in adverse

 

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physical effects on portions of our infrastructure, which could disrupt our supply chain and ultimately our business operations. Also, disruption of transportation, power and distribution systems could result in reduced operational efficiency. Additionally, unforeseen global events such as the armed conflict between Russia and Ukraine could adversely affect our business and results of operations. See also “—We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.”

We do not currently, and may not in the future, carry business interruption insurance sufficient to compensate for the losses that may result from interruptions in our operations as a result of inability to operate or failures of equipment and infrastructure at our facilities. A system outage could have a material adverse effect on our business, financial condition and results of operations.

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. In late February 2022, Russian military forces launched significant military action against Ukraine. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions for some of our mining equipment components. Our operations would be particularly vulnerable to potential interruptions in the supply of certain critical materials and metals, such as neon gas and palladium, which are used in semiconductor manufacturing. Any interruption to semiconductor chip supply could significantly impact our ability to receive the mining equipment. Furthermore, any potential increase in geopolitical tensions in Asia could also significantly disrupt existing semiconductor chip manufacturing and increase the prospect of an interruption to the semiconductor chip supply across the world. The world’s largest semiconductor chip manufacturer is located in Taiwan and a large part of equipment and materials for our bitcoin mining, including ASIC chips, is manufactured in, and imported from, Taiwan. A setback to the current state of relative stability in Asia could compromise existing semiconductor chip production and have downstream implications for our company. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business, including any future impairment or other charges.

Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to a broad array of new or expanded sanctions, export controls, and other measures against Russia and others supporting Russia’s economy or military efforts being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system.

Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this proxy statement/prospectus.

 

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Adverse developments affecting financial institutions, companies in the financial services industry or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or nonperformance, could adversely affect our operations and liquidity.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (the “FDIC”), as receiver.

Although a statement by the U.S. Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day following the date of closure and depositors with SVB received such access on March 13, 2023, uncertainty and liquidity concerns in the broader financial services industry remain. Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. The U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments. However, widespread demands for customer withdrawals or other needs of financial institutions for immediate liquidity may exceed the capacity of such program. There is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions in a timely fashion or at all.

Our access to our cash and cash equivalents in amounts adequate to finance our operations could be significantly impaired by the financial institutions with which we have arrangements directly facing liquidity constraints or failures. In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any material decline in available funding or our ability to access our cash and cash equivalents could adversely impact our ability to meet our operating expenses, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws, any of which could have material adverse impacts on our operations and liquidity.

Our cash and cash equivalents could be adversely affected if the financial institutions at which we hold our cash and cash equivalents fail.

We maintain a restricted cash account with Signature Bank, or Signature Bank, where the cash balance exceeds insured limits. The restricted cash provides underlying support to an irrevocable letter of credit that was issued by Signature Bank for a surety bond. We currently maintain and may in the future maintain our cash and cash equivalents in accounts with U.S. banks and financial institutions at levels that exceed insured limits. Market conditions can impact the viability of these institutions. For example, on March 12, 2023, Signature Bank was closed by the New York State Department of Financial Services, which appointed the FDIC as receiver. The FDIC created a successor bridge bank, Signature Bridge Bank, N.A. (“SBB”), and all deposits of Signature Bank were transferred to SBB under a systemic risk exception approved by the Federal Reserve, the U.S. Treasury Department, and the FDIC. While the Federal Reserve, the U.S. Treasury Department, and the FDIC announced in a joint statement on March 12, 2023 that all Signature Bank deposits, including both insured and uninsured amounts, would be available in full to account holders, there is no guarantee that the Federal Reserve Board, the U.S. Treasury Department and the FDIC will provide access to uninsured funds in the future in the event of the closure of any other banks or financial institutions in a timely fashion or at all. Any inability to access or delay in accessing these funds could adversely affect our business, financial position, and liquidity.

If we do not effectively diversify our bank deposits and investment portfolio, the value and liquidity of our investments may fluctuate substantially which could affect our access to capital and results of operations in a

 

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material way. Furthermore, our access to our cash and cash equivalents in amounts adequate to finance our operations could be significantly impaired if the financial institutions with which we have arrangements directly face liquidity constraints or failures. Investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any material decline in available funding or our ability to access our cash and cash equivalents could adversely impact our results of operations and liquidity.

Our existing insurance coverage may not be adequate to cover all of our potential losses, and increased self-insurance and other insurance costs could materially and adversely affect our business and results of operations.

We maintain insurance policies for our business that provide us with some protection in the event our miners are lost or damaged, however, these insurance policies and protections may not be adequate to protect us from liabilities that we may incur in connection with the operation of our business. Certain extraordinary hazards, for example, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks. Moreover, any loss incurred could exceed policy limits, and policy payments made to us may not be made on a timely basis.

Additionally, the premiums we pay to obtain insurance coverage may, and are likely to, increase over time. These increases in insurance premiums can occur unexpectedly and without regard to our efforts to limit them, and, because of these rising costs, we may not be able to obtain similar levels of insurance coverage on reasonable terms, or at all. If this occurs, we may choose or be forced to self-insure our assets, which could expose us to significant financial risk. If insurance costs become unacceptably high and we elect to self-insure, and we experience a significant casualty event resulting in the loss of some or all of our miners, we could be forced to expend significant capital resources to acquire new replacement miners. If such casualty loss of our miners is not adequately covered by insurance and we do not have access to sufficient capital resources to acquire replacement miners, we may not be able to compete in our rapidly evolving and highly competitive industry, which could materially and adversely affect our financial condition and results of operations, and our business could suffer.

Furthermore, the bitcoin held by us is not insured by any government-sponsored investor protection program or otherwise. Therefore, any loss of bitcoin held by us, either through an information security failure, a mistaken transaction or otherwise, would not be reimbursed. This could adversely affect our business, financial condition and results of operations.

We may not have adequate sources of recovery if the bitcoin held by us is lost, stolen or destroyed.

If the bitcoin held by us is lost, stolen or destroyed under circumstances rendering a party liable to us, the responsible party may not have the financial resources sufficient to satisfy its claim. For example, as to a particular event of loss, the only source of recovery for us might be limited, to the extent identifiable, other responsible third parties (e.g., a thief or terrorist), any of which may not have the financial resources (including liability insurance coverage) to satisfy a valid claim by us.

Bitcoin held by us is not subject to FDIC or SIPC protections.

We do not hold bitcoin with a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, the bitcoin we hold is not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.

We may be affected by price fluctuations in the wholesale and retail power markets.

Our power arrangements may vary depending on the markets in which we operate, and comprise fixed and variable power prices, including arrangements that may contain certain price adjustment mechanisms in case of

 

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certain events. Furthermore, some portion of our power arrangements may be priced by reference to published index prices and, thus, reflect market movements outside of our control.

A substantial increase in electricity costs or a fall in bitcoin exchange values could render bitcoin mining ineffective or not viable for us. Market prices for power, generation capacity and ancillary services, are unpredictable. An increase in market prices for power, generation capacity, and ancillary services may adversely affect our business, prospects, financial condition, and operating results. Long- and short-term power prices may fluctuate substantially due to a variety of factors outside of our control, including, but not limited to:

 

   

increases and decreases in the quantity and type of generation capacity;

 

   

changes in network charges;

 

   

fuel costs;

 

   

new generation technologies;

 

   

changes in power transmission constraints or inefficiencies;

 

   

climate change and volatile weather conditions, particularly unusually hot or mild summers or unusually cold or warm winters;

 

   

technological shifts resulting in changes in the demand for power or in patterns of power usage, including the potential development of demand-side management tools, expansion and technological advancements in power storage capability and the development of new fuels or new technologies for the production or storage of power;

 

   

federal, state, local and foreign power, market and environmental regulation and legislation;

 

   

changes in capacity prices and capacity markets; and

 

   

power market structure (e.g. energy-only vs. energy and capacity markets).

If we are unable to secure power supply at prices or on terms acceptable to us, it would potentially have a material adverse effect on our business, financial condition and operating results.

We may be exposed to cybersecurity threats and hacks, which could have a material adverse effect on our business, financial condition and results of operations.

The threats to network and data security are increasingly diverse and sophisticated. In addition, cybersecurity researchers anticipate an increase in cyberattack activity in connection with the Russian invasion of Ukraine. Although we have not taken specific actions as a result of the situation in Ukraine, we have made efforts and instituted processes to prevent breaches. Despite such efforts and processes, our computer servers and computer systems may be vulnerable to cybersecurity risks, including denial-of-service attacks, physical or electronic break-ins, employee theft or misuse and similar disruptions from unauthorized tampering with our computer servers and computer systems. The preventive actions we take to reduce the risk of cyber incidents and protect our information technology and networks may be insufficient to repel a major cyber-attack in the future. To the extent that any disruption or security breach results in a loss or damage to our network, in unauthorized disclosure of confidential information or in a loss of our bitcoin, it could cause significant damage to our reputation, lead to claims against us and ultimately have a material adverse effect on our business, financial condition and results of operations. Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

We may only have limited control over our mining operation.

Our mining operation comprises blockchain mining technologies that depend on a network of computers to run certain software programs to solve complex transactions in competition with other mining operations and to

 

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process transactions. Because of this less centralized model and the complexity of our mining operation, we have limited control over the success of our mining operations. While we participate in mining pools to combine our mining operations with other mining participants to increase processing power to solve blocks, there can be no assurance that such pools will adequately address this risk.

We may be subject to material litigation, including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities.

We may from time to time become subject to claims, arbitrations, individual and class action lawsuits, government and regulatory investigations, inquiries, actions or requests, including with respect to employment matters, and other proceedings alleging violations of laws, rules and regulations, both foreign and domestic. The scope, determination and impact of such litigation, government and regulatory investigations, enforcement actions, disputes and proceedings to which we are subject cannot be predicted with certainty, and may result in:

 

   

substantial payments to satisfy judgments, fines or penalties;

 

   

substantial outside counsel legal fees and costs;

 

   

additional compliance and licensure requirements;

 

   

loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for our business;

 

   

loss of productivity and high demands on employee time;

 

   

criminal sanctions or consent decrees;

 

   

barring of certain employees from participating in our business in whole or in part;

 

   

orders that restrict or suspend our business or prevent us from offering certain products or services;

 

   

changes to our business model and practices;

 

   

delays and/or interruptions to planned transactions, product launches or improvements; and

 

   

damage to our brand and reputation.

Any such matters can have an adverse impact, which may be material, on our business, operating results or financial condition because of legal costs, diversion of management resources, reputational damage and other factors.

The transition of digital asset validation from proof-of-work mining algorithms to proof-of-stake validation may significantly impact the value of our capital expenditures and investments in machines and real property to support proof-of-work mining, which could make us less competitive and ultimately adversely affect our business and the value of our New GRIID’s common stock.

Proof-of-stake is an alternative method of validating distributed ledger transactions. Proof-of-stake methodology does not rely on resource intensive calculations to validate transactions and create new blocks in a blockchain, but rather the validator of the next block is determined, sometimes randomly, based on a methodology in the blockchain software. Rewards, and sometimes penalties, are issued based on the amount of digital assets a user has “staked” in order to become a validator.

Our business strategy currently focuses entirely on mining bitcoin (as opposed to other digital assets). Additionally, all of our hardware is limited to mining using a “proof-of-work” protocol based on the SHA-256 hashing algorithm. Should bitcoin shift from a proof-of-work validation method to a proof-of-stake method, the transaction verification process (i.e. “mining” or “validating”) would require less power and may render any company that maintains advantages in the current climate with respect to proof-of-work mining (for example,

 

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from lower-priced electricity, processing, computing power, or real estate) less competitive or less profitable, including ours. For example, the Ethereum blockchain, another popular blockchain with a widely traded digital asset, has recently completed a transition from proof-of-work to proof-of-stake, in part to achieve more efficiency in relation to the energy consumption of its network and production and verification of its blockchain. If this transition is successful, current Ethereum mining equipment and other investments in Ethereum mining operations could become obsolete or be repurposed for mining other digital assets, which may be less profitable.

If bitcoin shifts to proof-of-stake validation, we may lose the benefit of our capital investments and the competitive advantage we hope to gain from our capital investments, which were intended to improve the efficiency of our bitcoin mining operations only with respect to proof-of-work networks. Further, a shift in market demand from proof-of-work to proof-of-stake protocols could impair our business and operations which are based on hardware that is strictly limited to mining digital assets based on the SHA-256 algorithm. Such events could have a material adverse effect on our ability to continue as a going concern or to pursue our business strategy at all, which could have a material adverse effect on our business, financial condition and results of operating.

Bitcoin is a form of technology which may become redundant or obsolete in the future.

Bitcoin currently holds a “first-to-market” advantage over other digital assets and is currently the market leader, in terms of value and recognition, in the digital assets market. This first-to-market advantage is driven in large part by having the largest user base and, more importantly, the largest combined mining power in use to secure the bitcoin network. Despite the current first-to-market advantage of the bitcoin network over other digital asset networks, the digital asset market continues to grow rapidly as the value of existing digital assets rises, new digital assets enter the market and demand for digital assets increases. Therefore, it is possible that another digital asset could become comparatively more popular than bitcoin in the future. As a result, the emergence of a digital asset that erodes bitcoin’s market share and value could have a material adverse effect on our business, financial condition and results of operations.

The utilization of digital assets technologies is influenced by public acceptance and confidence in its integrity and potential application, and if public acceptance or confidence is lost for any reason, the use of that technology may become less attractive, with users instead utilizing alternative digital assets. If preferences in the digital assets markets shift away from proof-of work networks such as bitcoin, or the market otherwise adopts new digital assets, this could result in a significant reduction in the value of bitcoin, which could have a material adverse effect on our business, financial condition and results of operations, including the value of the bitcoin that it mines or otherwise acquires or holds for its own account.

The price of new miners may be linked to the market price of bitcoin and other cryptocurrencies, and our costs of obtaining new and replacement miners may increase along with the market price of bitcoin and other cryptocurrencies, which may have a material and adverse effect on our financial condition and results of operations.

Our business, financial condition and results of operations are dependent on our ability to sell the bitcoin we mine at a price greater than our costs to produce that bitcoin. We incur significant up-front capital costs each time we acquire new miners, and, if future prices of bitcoin are not sufficiently high, we may not realize the benefit of these capital expenditures. As the price for new miners we buy increases, our cost to mine a single bitcoin also increases, therefore requiring a corresponding increase in the price of bitcoin for us to maintain our results of operations, to the extent we sell the bitcoin shortly after mining it.

The global supply chain for miners is presently constrained due to unprecedented demand coupled with a global semiconductor (including microchip) shortage, with a significant portion of available miners being acquired by companies with substantial resources. Semiconductors are utilized in various devices and products and are a crucial component of miners. Supply chain constraints coupled with increasing demand has led to

 

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increased pricing and limited availability for semiconductors. Prices for both new and older models of miners have been on the rise and these supply constraints are expected to continue for the foreseeable future. China, a major supplier of miners, has seen a production slowdown as a result of COVID-19. Should similar outbreaks or other disruptions to the China-based global supply chain for mining hardware occur, we may not be able to obtain adequate replacement parts for our existing miners or to obtain additional miners on a timely basis, if at all, or we may only be able to acquire miners at premium prices. Such events could have a material adverse effect on our ability to pursue our strategy, which could have a material adverse effect on our business and the value of our securities.

There is a lack of liquid markets in bitcoin, and these markets are subject to possible manipulation.

Cryptocurrencies that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets. Stock exchanges have rules and regulations regarding marketplace conduct, and monitor investors transacting on such platforms for fraud and other improprieties. These conditions may not necessarily be replicated on a digital assets trading platform, depending on the platform’s controls and other policies, and there are no controls regarding transactions that take place outside of organized exchanges. Although some digital assets trading platforms are subject to regulation and monitor for illegal activity, because the bitcoin market itself is unregulated, there are few means to prevent manipulation of prices for the overall market. These factors may decrease liquidity or volume or may otherwise increase volatility of bitcoin, which may have a material adverse effect on our ability to monetize the bitcoin we mine.

If a malicious actor or botnet obtains control of more than 50% of the processing power on the bitcoin blockchain, such actor or botnet could manipulate the bitcoin blockchain, which would adversely affect your investment in us or our ability to operate.

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining a digital asset, it may be able to alter the digital asset network or blockchain on which transactions of the digital asset are recorded by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude, or modify the ordering of transactions, though it could not generate new bitcoin or digital assets or transactions using such control. The malicious actor could “double-spend” its own bitcoin or digital assets (i.e., spend the same bitcoin or digital assets in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such malicious actors or botnets did not yield their control of the processing power on the bitcoin or other network, or the bitcoin or other community did not reject the fraudulent blocks as malicious, reversing any changes made to the blockchain may not be possible.

Although there are no known reports of malicious activity or control of the bitcoin blockchain achieved through controlling over 50% of the processing power on the network, it is believed that certain mining pools may have exceeded the 50% threshold. The approach towards and possible crossing of the 50% threshold indicate a greater risk that a single mining pool could exert authority over the validation of digital asset transactions. To the extent that the digital assets ecosystems do not act to ensure greater decentralization of digital asset mining processing power, the feasibility of a malicious actor obtaining in excess of 50% of the processing power on any digital asset network (e.g., through control of a large mining pool or through hacking such a mining pool) will increase, which may adversely affect our business, financial condition and results of operations.

To the extent that the profit margins of digital asset mining operations are not high, mining participants are more likely to sell their earned bitcoin, which could constrain bitcoin prices.

Over the past few years, digital asset mining operations have evolved from individual users mining with computer processors, graphics processing units and first-generation ASIC servers. Currently, new processing

 

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power is predominantly added by incorporated and unincorporated “professionalized” mining operations. Professionalized mining operations may use proprietary hardware or sophisticated ASIC machines acquired from ASIC manufacturers. They require the investment of significant capital to acquire this hardware, to lease or develop operating space (often in data centers or warehousing facilities), and to pay the costs of electricity and labor to operate the mining farms. As a result, professionalized mining operations are of a greater scale than prior mining operations and have more defined and regular expenses and liabilities. These regular expenses and liabilities require professionalized mining operations to maintain profit margins on the sale of digital assets. To the extent the price of digital assets declines and such profit margin is constrained, professionalized mining participants are incentivized to more immediately sell digital assets earned from mining operations, whereas it is believed that individual mining participants in past years were more likely to hold newly mined digital assets for more extended periods. The immediate selling of newly mined digital assets greatly increases the trading volume of the digital assets, creating downward pressure on the market price of digital asset rewards. The extent to which the value of digital assets mined by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such operation. A professionalized mining operation may be more likely to sell a higher percentage of its newly mined digital assets rapidly if it is operating at a low profit margin and it may partially or completely cease operations if its profit margin is negative. In a low profit margin environment, a higher percentage could be sold more rapidly, thereby potentially depressing digital asset prices. Lower digital asset prices could result in further tightening of profit margins for professionalized mining operations creating a network effect that may further reduce the price of digital assets until mining operations with higher operating costs become unprofitable forcing them to reduce mining power or cease mining operations temporarily. Such circumstances could have a material adverse effect on our business, prospects or operations and potentially the value of bitcoin and any other digital assets we mine or otherwise acquire or hold for our own account.

The “halving” of rewards available on the bitcoin network, or the reduction of rewards on other networks, has had and in the future could have a negative impact on our ability to generate revenue, which could have a material adverse effect on our business, financial condition and results of operations.

Under the current protocols governing the bitcoin network, the reward for validating a new block on that network is cut in half from time to time, which has been referred to in our industry as the “halving.” When the bitcoin network was first launched, the reward for validating a new block was 50 bitcoin. In 2012, the reward for validating a new block was reduced to 25 bitcoin. In July 2016, the reward for validating a new block was reduced to 12.5 bitcoin, and in May 2020, the reward was further reduced to 6.25 bitcoin. The next halving of awards is expected to occur in April 2024 and following such halving, the reward for validating a new block will be reduced to 3.125 bitcoins. In addition, other networks may operate under rules that, or may alter their rules to, limit the distribution of new digital assets. We currently rely on these rewards to generate a significant portion of our total revenue. We have attempted to mitigate the risk to us as a result of halving, including sourcing competitive electricity pricing, sourcing efficient mining hardware across a diverse range of manufacturers, vertically integrating our business model to include container fabrication, proprietary software development in order to lower deployment costs and protecting margins, and self-mining rather than hosting in order to deliver stronger margins that are prepared to tolerate the reduction in bitcoin available due to the halving event. To the extent that other mining companies exit the business, remaining miners are the direct beneficiaries from the lower competition for each 3.125 bitcoin per block. Achieving competitive advantages in the above ways increases the chances for GRIID to be one of these beneficiaries. However, in spite of such mitigation efforts, if the award of digital assets for solving blocks and transaction fees are not sufficiently high, the halving of available rewards on the bitcoin network, or any reduction of rewards on other networks, would have a negative impact on our revenues and may have a material adverse effect on our business, financial condition and results of operations.

In addition, the reduction of rewards may reduce our profit margins, which could result in us selling a substantial portion of our bitcoin, which is subject to high volatility. If we are forced to sell bitcoin at low prices, it could have a material adverse effect on our business, financial condition, prospects and results of operations.

 

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We may not be able to realize the benefits of forks, and forks in the bitcoin network may occur in the future that may affect our operations and financial performance.

The future development and growth of bitcoin is subject to a variety of factors that are difficult to predict and evaluate. As bitcoin is built on an open-source protocol without a centralized governing authority, there is a possibility bitcoin develops in ways which are not foreseeable. An example is modification of the bitcoin protocol by a sufficient number of users (known as a “fork”).

The bitcoin protocol has been subject to “forks” that resulted in the creation of new networks, including Bitcoin Cash, Bitcoin Cash SV, Bitcoin Diamond, Bitcoin Gold and others. Some of these forks have caused fragmentation among trading platforms as to the correct naming convention for the forked digital assets. Due to the lack of a central registry or rulemaking body, no single entity has the ability to dictate the nomenclature of forked digital assets, causing disagreements and a lack of uniformity among platforms on the nomenclature of forked digital assets, which results in further confusion to individuals as to the nature of assets they hold on digital asset trading platforms. In addition, several of these forks were contentious and, as a result, participants in certain digital asset user and developer communities may harbor ill will toward other communities. As a result, certain community members may take actions that adversely impact the use, adoption and price of bitcoin or any of its forked alternatives.

Furthermore, hard forks can lead to new security concerns. For instance, when the Bitcoin Cash and Bitcoin Cash SV network split in November 2018, “replay” attacks, in which transactions from one network were rebroadcast on the other network to achieve “double-spending,” plagued platforms that traded bitcoin, resulting in significant losses to some digital asset trading platforms. Another possible result of a hard fork is an inherent decrease in the level of security due to the splitting of some mining power across networks, making it easier for a malicious actor to exceed 50% of the mining power of that network, thereby making digital asset networks that rely on proof-of-work more susceptible to attack in the wake of a fork.

Historically, speculation over a new “fork” in the bitcoin protocol has resulted in bitcoin price volatility and future forks may occur at any time. A fork can lead to a disruption of networks and our IT systems could be affected by cybersecurity attacks, replay attacks, or security weaknesses, any of which can further lead to temporary or even permanent loss of our assets. Such disruption and loss could cause us to be exposed to liability, even in circumstances where we have no intention of supporting an asset compromised by a fork. Additionally, a fork may result in a scenario where users running the previous protocol will not recognize blocks created by those running the new protocol, and vice versa. This may render our bitcoin mining hardware incompatible with the new bitcoin protocol. Such changes may have a material effect on our operations, financial position and financial performance.

Because our miners are designed specifically to mine bitcoin, our future success will depend in large part upon the value of bitcoin, and any sustained decline in its value could adversely affect our business, financial condition and results of operations.

Our operating results will depend in large part upon the value of bitcoin because it is the only cryptocurrency we currently mine. Specifically, our revenues from our bitcoin mining operations are based upon two factors: (1) the number of bitcoin rewards we successfully mine and (2) the fair market value of bitcoin on the date earned. In addition, our operating results are directly impacted by changes in the value of bitcoin because under the value measurement model, both realized and unrealized changes will be reflected in our statement of operations (i.e., we mark bitcoin to fair value each quarter). This means that our operating results will be subject to swings based upon increases or decreases in the value of bitcoin. The introduction of alternative cryptocurrencies, such as those backed by central banks known as Central Bank Digital Currencies, could significantly reduce the demand for bitcoin. This would reduce both our ability to earn mining rewards and transaction fees, and would also impair our ability to monetize the bitcoin we earn in accordance with our financial projections.

 

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Digital asset trading platforms for bitcoin may be subject to varying levels of regulation, which exposes our digital asset holdings to risks.

Platforms on which digital assets may trade, such as the one we use to monetize our bitcoin, pose special risks, as these platforms are generally new and the rules governing their activities are less settled and their activities may be largely unregulated or under-regulated, and may therefore be more exposed to theft, fraud and failure than established, regulated exchanges for other products. Digital asset platforms may be startup businesses with limited institutional backing, limited operating history, and no publicly available financial information. This can lead to increased price volatility. In addition, a failure of an important digital asset trading platform could result in a loss of confidence in digital assets generally, resulting in our inability to monetize the bitcoin we mine in accordance with our financial projections.

Bitcoin traded on the bitcoin blockchain do not rely on a trusted intermediary or depository institution. The participation in trading platforms requires users to take on credit risk by transferring bitcoin from a personal account to a third party’s account. Accordingly, we are exposed to the digital asset trading platform’s credit risk with respect to each bitcoin transaction we make. Digital asset exchanges may also impose daily, weekly, monthly, or customer-specific transaction or distribution limits or suspend withdrawals entirely, rendering the exchange of digital assets for fiat currency difficult or impossible. Additionally, digital asset prices and valuations on exchanges may be volatile and subject to influence by many factors, including the levels of liquidity on particular platforms and operational interruptions and disruptions. The prices and valuation of digital assets (e.g., bitcoin) remain subject to any volatility experienced by trading platforms, and any such volatility can adversely affect the value of the bitcoin that we mine. It is possible that while engaging in transactions with various digital asset platforms located throughout the world, any such platform may cease operations voluntarily or involuntarily due to theft, fraud, security breach, liquidity issues, or government investigation without any recourse available to us.

Digital asset platforms for bitcoin may be appealing targets for cybercrime, hackers and malware and have been shut down or experienced losses of assets placed on the exchange as a result of cybercrime, and any such event is likely to result in the complete loss of assets placed on such a platform. Any governmental or regulatory action against such a digital asset trading platform may cause assets on such exchange to become frozen for a substantial period of time or forfeited, and could result in material opportunity costs or even in the total loss of such assets. In addition, banks may refuse to process or support wire transfers to or from digital asset trading platforms.

There are a limited number of digital asset trading platforms for bitcoin in operation, and many operate in jurisdictions outside of the United States. Trading on digital asset platforms outside of the United States may involve certain risks not applicable to trading on digital asset exchanges that operate in the United States. Foreign markets may be subject to instability, lack of regulation, temporary closures due to fraud, business failure, local capital requirements or government-mandated regulations. Digital asset platforms located outside the United States may not be subject to regulatory, investigative, or prosecutorial authority through which an action or complaint regarding missing or stolen digital assets may be brought. Additionally, due to lack of globally consistent treatment and regulation of digital assets, certain platforms located outside the United States may not be currently available to, or may in the future become unavailable to, certain persons or entities based on their country of domicile, including the United States.

While we perform diligence on our counterparties and any digital asset trading platforms that we may use, it may be difficult, or even impossible, to sufficiently verify the ultimate ownership and control of a digital asset trading platform and other information for evaluating the risks associated with such counterparty or platform. Any of our digital assets that reside on a trading platform that shuts down may be permanently unrecoverable, misapplied or otherwise lost. Additionally, to the extent that the digital asset platforms representing a substantial portion of the trading volume in a particular digital asset are involved in fraud or experience security failures or other operational issues, such failures may result in loss or less favorable prices of the digital assets, which may adversely affect our business and results of operations, and consequently, an investment in New GRIID’s common stock.

 

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Because there is limited precedent for financial accounting for bitcoin and other digital assets, the determinations that we have made for how to account for digital asset transactions may be subject to change.

Because there is limited precedent for the financial accounting for bitcoin and other digital assets and related revenue recognition and no official guidance has been provided by the Financial Accounting Standards Board or the SEC, it is unclear how we may in the future be required to account for digital asset transactions and assets and related revenue recognition. Changes in regulatory or financial accounting standards could require us to change the accounting methods we currently intend to employ in respect of our anticipated revenues and assets and restate any financial statements produced based on those methods. Such a change or restatement could require increased professional fees and expenses and time commitment by management to address matters related to the change or restatement, increased scrutiny by the SEC and other regulatory bodies, civil or criminal penalties or stockholder litigation, which could adversely affect our business, prospects, financial condition and results of operation.

Bitcoin transactions are irrevocable and, if stolen or incorrectly transferred, bitcoin may be irretrievable. As a result, any incorrectly executed bitcoin transactions could have a material adverse effect on our business, financial condition and results of operations.

Bitcoin transactions are irrevocable, and stolen or incorrectly transferred bitcoin may be irretrievable. As a result, any incorrectly executed or fraudulent bitcoin transactions could adversely affect our investments and assets. Bitcoin transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the bitcoin from the transaction. Once a transaction has been verified and recorded in a block that is added to a blockchain, an incorrect transfer of bitcoin or a theft thereof generally will not be reversible and if an incorrect transfer or theft occurs, we may not have sufficient recourse to recover our losses from any such transfer or theft. It is possible that, through computer or human error, or through theft or criminal action, our bitcoin rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. Further, at this time, we are not aware of any specifically enumerated U.S. or foreign governmental, regulatory, investigative or prosecutorial authority or mechanism through which to bring an action or complaint regarding missing or stolen bitcoin. As a result, if there is human error, theft, or criminal action, we will need to rely on existing private investigative entities to investigate any potential loss of our bitcoin assets. These third-party service providers rely on data analysis and compliance of internet service providers with traditional court orders to reveal information such as the IP addresses of any attackers who may target us. Our inability to recover any losses from such action, error or theft, could have a material adverse effect on our business, financial condition and results of operations.

Political or economic crises may motivate large-scale sales of bitcoin, which could result in a reduction in some or all of bitcoin’s values and adversely affect our business, financial condition and results of operations.

Geopolitical crises may motivate large-scale purchases of bitcoin, which could increase the price of bitcoin rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior dissipates, adversely affecting the value of our inventory following such downward adjustment. Such risks are similar to the risks of purchasing commodities in general in uncertain times, such as the risk of purchasing, holding or selling gold. Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in bitcoin as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.

As an alternative to fiat currencies that are backed by central governments, bitcoins are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of bitcoins either globally or locally. Large-scale sales of bitcoins would result in a reduction in some or all bitcoins’ values and may adversely affect our business, financial condition and results of operations.

 

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Our operations, investment strategies and profitability may be adversely affected by competition from other methods of investing in bitcoins or tracking bitcoin markets.

We compete with other users and/or companies that are mining bitcoin and other potential financial vehicles that seek to provide exposure to bitcoin, including securities backed by, or linked to, bitcoins. Market and financial conditions, and other conditions beyond our control, may make it more attractive to invest in certain financial vehicles, or to invest in bitcoin directly, which could limit the market for New GRIID’s common stock and reduce its liquidity. In addition, the emergence of other financial vehicles and exchange-traded funds that provide exposure to bitcoin prices have been scrutinized by regulators and such scrutiny and the negative impressions or conclusions resulting from such scrutiny could be applied to our business and impact our ability to successfully pursue our strategy or operate at all, or to establish or maintain a public market for New GRIID’s common stock.

The global market for bitcoin is generally characterized by supply constraints that may differ from those present in the markets for commodities or other assets such as gold and silver. The mathematical protocols under which bitcoin is mined permit the creation of a limited, predetermined amount of currency, while others have no limit established on total supply. To the extent that other vehicles investing in bitcoin or tracking bitcoin markets form and come to represent a significant proportion of the demand for digital assets, large redemptions of the securities of those vehicles and the subsequent sale of bitcoin by such vehicles could negatively affect bitcoin prices and therefore affect the value of any bitcoin inventory we hold.

Currently, we believe there is relatively limited use of bitcoin in the retail and commercial marketplace in comparison to relatively sizable use by speculators, thus contributing to price volatility that could adversely affect an investment in New GRIID’s common stock.

We believe bitcoin has not yet gained widespread acceptance as a means of payment for goods and services by any major retail or commercial outlets. We believe a significant portion of the demand for bitcoin is generated by speculators and investors, some of whom may have no knowledge of the inner workings of bitcoin. Certain of these investors may seek to profit from the short-term or long-term holding of bitcoin, and thus, may contribute to bitcoin price volatility. A lack of expansion in the use of bitcoin in retail and commercial markets, or a contraction of such use, may result in increased price volatility of bitcoin or a reduction in the market price of bitcoin or in the demand for bitcoin which would reduce the performance of the business and the value of bitcoin held by us, any of which could have a material adverse effect on our business, financial condition and results of operations.

As more processing power is added to a network, our relative percentage of total processing power on that network is expected to decline absent significant capital investment, which has an adverse impact on our ability to generate revenue from processing transactions on that network and could have a material adverse effect on our business, financial condition and results of operations.

Processing power on networks has been increasing rapidly over time while the rewards and transaction fees available on those networks tends to decline over time. In order to grow or maintain the revenue we generate from processing transactions on such networks, we are required to invest significant capital to acquire new computer servers, expand our power capacity and otherwise increase our effective processing power on such networks. In the event we are unable to invest sufficient capital to grow or maintain the level of our processing power on a network relative to the total processing power of such network, our revenue from the applicable network will decline over time and as a result, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, a decrease in the price of computer servers may result in an increase in transaction processors, which may lead to more competition for fees in a particular network. In the event we are unable to realize adequate fees on a network due to increased competition, our revenue from the applicable network will decline over time and in turn, it could have a material adverse effect on our business, financial condition and results of operations.

 

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Our transactions in bitcoin may expose us to countries, territories, regimes, entities, organizations and individuals that are subject to sanctions and other restrictive laws and regulations.

The Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) and the U.S. Department of State administer and enforce economic sanctions programs based on foreign policy and national security goals against targeted countries, territories, regimes, entities, organizations and individuals. These laws and regulations may be implicated by a number of digital assets activities, including investing or trading. Because of the anonymous nature of blockchain transactions, we may not be able to determine the ultimate identity of the individuals with whom we transact when buying or selling digital assets or receive bitcoin through mining (e.g. transaction fees, or rewards from mining pool), and thus may inadvertently engage in transactions with persons, or entities or territories that are the target of sanctions or other restrictions. Moreover, U.S. federal law prohibits any U.S. person from knowingly or unknowingly possessing any visual depiction of child pornography. We are aware of recent media reports that have suggested that persons have imbedded such depictions on one or more blockchains. To the extent government enforcement authorities enforce these and other laws and regulations that are impacted by blockchain technology, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which could harm our reputation and affect the value of New GRIID’s common stock.

The market price of bitcoin may be extremely volatile, including due to potential under-regulation. Rapid decreases in the price of bitcoin could have a materially adverse effect on our business, financial condition and results of operations.

Bitcoin is represented and trades on a ledger-based platform that may not necessarily benefit from a viable trading market. Stock exchanges have rules and regulations regarding marketplace conduct, and monitor investors transacting on such platforms for fraud and other improprieties. These conditions may not necessarily be replicated on a bitcoin trading platform, depending on the platform’s controls and other policies, and there are no controls regarding transactions that take place outside of organized exchanges. The market price of bitcoin has been and may in the future continue to be extremely volatile. These factors may decrease liquidity or volume or may otherwise increase volatility of bitcoin, which will have a material adverse effect on our ability to monetize the bitcoin we mine and therefore have an adverse effect on our business, financial condition and results of operations.

Regulatory actions in one or more countries could severely affect the right to acquire, own, hold, sell or use bitcoin or to exchange them for fiat currency.

One or more countries, such as India or Russia, may take regulatory actions in the future that could severely restrict the right to acquire, own, hold, sell or use bitcoin or to exchange them for fiat currency. In some nations, including China, it is illegal to accept payment in bitcoin for consumer transactions and banking institutions are barred from accepting deposits of cryptocurrencies. Such restrictions may adversely affect us as the large-scale use of bitcoin as a means of exchange is presently confined to certain regions.

Furthermore, in the future, foreign governments may decide to subsidize or in some other way support certain large-scale bitcoin mining projects, thus adding hashrate to the overall network. Such circumstances could have a material adverse effect on the amount of bitcoin we may be able to mine, the value of bitcoin and any other cryptocurrencies we may potentially acquire or hold in the future and, consequently, our business, financial condition and results of operations.

Bitcoin exchanges, wallets and the bitcoin network may suffer from hacking and fraud risks, which may adversely erode user confidence in bitcoin, which could negatively affect the bitcoin price and our revenues.

Bitcoin transactions are entirely digital and, as with any virtual system, are at risk from hackers, malware and operational glitches. Hackers can target bitcoin exchanges and custody providers, to gain access to thousands

 

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of accounts and digital wallets where bitcoin is stored. Bitcoin transactions and accounts are not insured by any type of government program and all bitcoin transactions are permanent because there is no third party or payment processor. Bitcoin has previously suffered from hacking and cyber-theft which have affected its demand and price. Also, the price and exchange of bitcoin may be subject to fraud risk. While bitcoin uses private key encryption to verify owners and register transactions, fraudsters and scammers may attempt to sell false bitcoin. All of the above may adversely affect the operation of the bitcoin network, which would erode user confidence in bitcoin and could negatively impact our business and ability to monetize the bitcoin that we mine.

Technological advancement in computing may make our operations and ASICs obsolete. The mining hardware market for ASICs does not undergo rapid performance improvements anymore. Earlier in the SHA-256 ASIC development cycle when bitcoin mining hardware had yet to catch up to current foundry node sizes, technological leaps in hash power and efficiency were more common and made all previous units obsolete. Since the release of the Antminer S9, these improvements have been incremental and older generation hardware is commonly run in the market. It is possible that there will be a significant breakthrough in hash power and/or efficiency that would make existing ASIC miners obsolete, severely impact the company’s balance sheet and forward looking performance and, should we not have access to this technology, could render all operations non-viable.

Bitcoin mining activities are energy-intensive, which may restrict the geographic locations of miners, in particular, to locations with renewable sources of power. Government regulators may potentially restrict the ability of electricity suppliers to provide electricity to bitcoin miners, including us, or bitcoin mining activities generally.

Mining bitcoin requires significant amounts of electrical power, and electricity costs are expected to account for a material portion of our operating costs. There has been a substantial increase in the demand for electricity for bitcoin mining, and this has had varying level of impact on local electricity supply. The availability and cost of electricity will impact the geographic locations in which we conduct mining activities.

Additionally, renewable sources of power currently form a large portion of our power mix and we expect them to continue to do so in the future. Renewable power may, depending on the source, be intermittent or variable and not always available. Some electrical grids have little storage capacity, and the balance between electricity supply and demand must be maintained at all times to avoid blackouts or other cascading problems. Intermittent sources of renewable power can provide challenges as their power can fluctuate over multiple time horizons, forcing the grid operator to adjust its day-ahead, hour-ahead, and real-time operating procedures. Any shortage of electricity supply or increase in electricity costs in any location where we operate or plan to operate may negatively impact the viability and the expected economic return for bitcoin mining activities in that location.

Should our operations require more electricity than can be supplied in the areas where our mining facilities are located or should the electrical transmission grid and distribution systems be unable to provide the regular supply of electricity required, we may have to limit or suspend activities or reduce the speed of our proposed expansion, either voluntarily or as a result of either quotas imposed by energy companies or governments, or increased prices for certain users (such as us). If we are unable to procure electricity at a suitable price, we may have to shut down our operations in that particular jurisdiction either temporarily or permanently.

There may be significant competition for suitable bitcoin mining sites, and government regulators, including local permitting officials, may potentially restrict our ability to set up mining sites in certain locations. The significant consumption of electricity may have a negative environmental impact, including contribution to climate change, which may give rise to public opinion against allowing the use of electricity for bitcoin mining activities.

 

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If bitcoin mining becomes more widespread, government scrutiny related to bitcoin mining facilities and their energy consumption may significantly increase. This could lead to new governmental measures restricting or prohibiting the use of electricity for bitcoin mining activities, or bitcoin mining activities generally.

If we are forced to reduce our operations due to the availability or cost of electrical power, or restrictions on bitcoin mining activities, this will have an adverse effect on our business, prospects, financial condition and operating results.

The open-source structure of the bitcoin network protocol means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol.

The bitcoin network operates based on an open-source protocol, not represented by an official organization or authority. Instead it is maintained by a group of core contributors, largely on the Bitcoin Core project on GitHub.com. This group of contributors is currently headed by Wladimir J. van der Laan, the current lead maintainer. As the bitcoin network protocol is not sold and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining and updating the bitcoin network protocol. Although the MIT Media Lab’s Digital Currency Initiative funds the current maintainer Wladimir J. van der Laan, among others, this type of financial incentive is not typical. The lack of guaranteed financial incentive for contributors to maintain or develop the bitcoin network and the lack of guaranteed resources to adequately address emerging issues with the bitcoin network may reduce incentives to address the issues adequately or in a timely manner.

There can be no guarantee that developer support will continue or be sufficient in the future. Additionally, some development and developers are funded by companies whose interests may be at odds with other participants in the network or with investors’ interests. To the extent that material issues arise with the bitcoin network protocol and the core developers and open-source contributors are unable or unwilling to address the issues adequately or in a timely manner, the bitcoin network and consequently our business, prospects, financial condition and operating results could be adversely affected.

Significant contributors to all or a network for any particular digital asset, such as bitcoin, could propose amendments to the respective network’s protocols and software that, if accepted and authorized by such network, could adversely affect our business.

The bitcoin network is maintained by a group of contributors, largely on the Bitcoin Core project on GitHub.com, currently headed by Wladimir J. van der Laan. These individuals can propose refinements or improvements to the bitcoin network’s source code through one or more software upgrades that alter the protocols and software that govern the bitcoin network and the properties of bitcoin, including the irreversibility of transactions and limitations on the mining of new bitcoin. Proposals for upgrades and discussions relating thereto take place on online forums.

If a developer or group of developers proposes a modification to the bitcoin network that is not accepted by a majority of miners and users, but that is nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible blockchain implementations could result, with one running the pre-modification software program and the other running the modified version (i.e., a second “bitcoin network”). Such a hard fork in the blockchain typically would be addressed by community-led efforts to reunite the forked blockchains, and several prior forks have been resolved successfully. However, a hard fork in the blockchain could materially and adversely affect the perceived value of bitcoin as reflected on one or both incompatible blockchains. Additionally, a hard fork will decrease the number of users and miners available to each fork of the blockchain as the users and miners on each fork blockchain will not be accessible to the other blockchain and, consequently, there will be fewer block rewards and transaction fees may decline in value. Any of the above could have a material adverse effect on our business, prospects, financial condition, and operating results.

 

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Because there has been limited precedent set for financial accounting for bitcoin and other cryptocurrency assets, the determinations that we have made for how to account for cryptocurrency assets transactions may be subject to change.

Because there has been limited precedent set for the financial accounting for bitcoin and other cryptocurrency assets and related revenue recognition and no official guidance has yet been provided by the Financial Accounting Standards Board or the SEC, it is unclear how companies may in the future be required to account for cryptocurrency transactions and assets and related revenue recognition. A change in regulatory or financial accounting standards could result in the necessity to change the accounting methods we currently intend to employ in respect of our anticipated revenues and assets and restate any financial statements produced based on those methods. Such a restatement could adversely affect our business, prospects, financial condition and results of operation.

The development and acceptance of cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies is subject to a variety of factors that are difficult to evaluate.

Digital assets, such as bitcoin, that may be used, among other things, to buy and sell goods and services are a new and rapidly evolving industry of which the digital asset networks are prominent, but not unique, parts. The growth of the digital asset industry, in general, and the digital asset networks, in particular, are subject to a high degree of uncertainty. The factors affecting the further development of the digital asset industry, as well as the digital asset networks, include:

 

   

continued worldwide growth in the adoption and use of bitcoin and other digital assets;

 

   

government and quasi-government regulation of bitcoin and other digital assets and their use, or restrictions on or regulation of access to and operation of the digital asset network or similar digital assets systems;

 

   

the maintenance and development of the open-source software protocol of the bitcoin network and Ether network;

 

   

changes in consumer demographics and public tastes and preferences;

 

   

the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

 

   

general economic conditions and the regulatory environment relating to digital assets; and

 

   

the impact of regulators focusing on digital assets and digital securities and the costs associated with such regulatory oversight.

The outcome of these factors could have negative effects on our ability to pursue our business strategy, which could have a material adverse effect on our business, prospects, financial condition, and operating results as well as potentially negative effect on the value of bitcoin or any other cryptocurrencies we may potentially acquire or hold in the future.

Risks Related to Third Parties

Banks and financial institutions may not provide bank accounts, or may cut off certain banking or other financial services, to bitcoin investors or businesses that engage in bitcoin-related activities or that accept bitcoin as payment.

Although a number of significant U.S. banks and investment institutions have indicated they plan to begin allowing customers to carry and invest in bitcoin, bitcoin’s acceptance and use by banks is relatively uncommon and may never become mainstream. Indeed, a number of companies and individuals engaged in bitcoin have been unable to find banks or financial institutions that are willing to provide them with banking services.

 

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Similarly, a number of companies and individuals or businesses associated with bitcoin may have had and may continue to have their existing banking services discontinued with financial institutions in response to government action. We also may be unable to obtain or maintain these services for our business. The difficulty that many businesses that provide bitcoin have and may continue to have in finding banks and financial institutions willing to provide them services may be decreasing the usefulness of bitcoin as a payment system and harming public perception of cryptocurrencies, and could decrease bitcoin’s usefulness and harm its public perception in the future.

The public perception of bitcoin could be damaged if banks or financial institutions were to close the accounts of businesses engaging in bitcoin. This could occur as a result of compliance risk, cost, government regulation or public pressure. The risk applies to securities firms, clearance and settlement firms, national stock and derivatives on commodities exchanges, the over-the-counter market and the Depository Trust Company. The adoption or implementation of similar policies, rules or regulations by these or similar entities could negatively affect our relationships with financial institutions and impede our ability to convert bitcoin to fiat currencies. Such factors could have a material adverse effect on our business, financial condition or results of operations.

As a result of the depressed price of bitcoin as compared to its historical high, the cryptocurrency industry has experienced increased credit pressures that could result in additional demands for credit support by third parties or decisions by banks, investors or other companies to reduce or eliminate their exposure to bitcoin and the cryptocurrency industry as a whole, including us. These credit pressures could materially and adversely impact our liquidity.

Our business is heavily dependent on the spot price of bitcoin. The prices of cryptocurrencies, including bitcoin, have experienced substantial volatility, meaning that high or low prices may be based on speculation and incomplete information, may be subject to rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting.

Ongoing depressed bitcoin prices, including the recent decrease to the price of bitcoin, have resulted in, and could result further in, increased credit pressures on the cryptocurrency industry generally. These credit pressures include banks, investors and other companies reducing or eliminating their exposure to the cryptocurrency industry. While many of these pressures are directed to the cryptocurrency industry in general, such pressures in the future could adversely impact New GRIID’s liquidity following the merger if New GRIID needs to restructure or refinance is indebtedness or sell equity or debt securities.

We are subject to counterparty risk with respect to our bitcoin custodians, Coinbase Prime, Foundry and Blockchain.com.

We use Coinbase Prime, Foundry and Blockchain.com to act as custodians for our mined bitcoin. Our bitcoin custodied with each of Coinbase Prime, Foundry and Blockchain.com are not “deposits” within the meaning of U.S. federal or state banking law, and thus balances of digital assets held in our custodian accounts are not subject to FDIC or Securities Investor Protection Corporation protections. The nature of digital assets means that any technological difficulties experienced by any of Coinbase Prime, Foundry and Blockchain.com may prevent us from accessing or using our bitcoin custodied with Coinbase Prime, Foundry and Blockchain.com. Only Coinbase Prime, Foundry or Blockchain.com holds the private keys to wallets associated with our balances, and no one at GRIID has access to these wallets’ private keys. A loss of such private keys relating to, or hack or other compromise of, these digital wallets would adversely affect our ability to access or sell our bitcoin. No physical, operational and cryptographic system for the secure storage of private keys is completely secure, and loss or theft due to operational or other failure of Coinbase Prime’s, Foundry’s or Blockchain.com’s operations is always possible. While we believe that our agreements with each of Coinbase Prime, Foundry and Blockchain.com provide our business with reasonable protections for our operations and the safe storage of our bitcoin, we make no assurances that storing our bitcoin with each of Coinbase Prime, Foundry and Blockchain.com is free from risk. To the best of our knowledge, each of Coinbase Prime, Foundry and

 

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Blockchain.com stores our bitcoin in segregated accounts pursuant to agreements we have with each of them. However, if any of Coinbase Prime, Foundry and Blockchain.com were to breach our agreements and comingle our bitcoin with bitcoin of others, our bitcoin could be compromised. Additionally, if any of Coinbase Prime, Foundry and Blockchain.com were to cease operations, declare insolvency or file for bankruptcy, there is a reasonable risk that recovery of our assets would be delayed or unrecoverable despite the fact that our assets are kept in segregated accounts. Recent Chapter 11 bankruptcy filings by FTX, Celsius and other digital asset market participants have raised issues concerning ownership of the digital assets held by such digital asset market participants, the outcome of which is still largely unsettled. Even if it were finally determined that the customer owns the assets on deposit, the custodian may be unable to return the customers assets in kind because of intermingling of assets and other factors. If Coinbase Prime, Foundry or Blockchain.com were to become subject to Chapter 11 bankruptcy, there is a risk that New GRIID’s assets held by them might not be recovered in full or in part.

We may temporarily store our bitcoin on digital asset trading platforms which could subject our bitcoin to the risk of loss or access.

Although we sell our mined bitcoin from time to time, we may temporarily store all or a portion of our bitcoin on various digital asset trading platforms which requires us to rely on the security protocols of these trading platforms to safeguard our bitcoin. No security system is perfect and trading platforms have been subject to hacks resulting in the loss of businesses’ and customers’ digital assets in the past. Such trading platforms may not be well capitalized and may not have adequate insurance necessary to cover any loss or may not compensate for loss where permitted under the laws of the relevant jurisdiction. In addition, malicious actors may be able to intercept our bitcoin when we transact in or otherwise transfer our bitcoin or while we are in the process of selling our bitcoin via such trading platforms. Digital asset trading platforms have been a target for malicious actors in the past, and given the growth in their size and their relatively unregulated nature, we believe these trading platforms may continue to be targets for malicious actors. An actual or perceived security breach or data security incident at the digital asset trading platforms with which we have accounts could harm our ability to operate, result in loss of our assets, damage our reputation and negatively affect the market perception of our effectiveness, all of which could adversely affect the value of New GRIID’s common stock.

The IRS and certain states have taken the position that digital assets are property for income tax purposes.

In early 2014, the IRS issued basic guidance on the U.S. federal income tax treatment of digital assets. The IRS has taken the position that a digital asset is “property” rather than “currency” for tax purposes. Thus, general tax principles applicable to property transactions apply to the acquisition, ownership, use or disposition of digital assets. This overall treatment creates a potential tax liability for, and potential tax reporting requirements applicable to us in any circumstance where we mine or otherwise acquire, own or dispose of a digital asset. In 2019, the IRS issued additional guidance specifically relating to the U.S. federal income tax consequences that could arise from a digital asset hard fork event in which a new unit of digital asset may or may not be received, and released frequently asked questions to address certain digital asset topics such as basis, gain or loss on the sale or exchange of certain kinds of digital assets, and how to determine the fair market value of such digital assets.

There is no guarantee that the IRS will not alter its position with respect to the taxation of digital assets, or that legislation or judicial determinations in the future will not result in a tax treatment of digital assets and transactions in digital assets for U.S. federal and state tax purposes that differs from the treatment described above. You are urged to consult your own tax advisor as to the tax implications of our acquisition, ownership, use and disposition of digital assets. The taxation of digital assets for state, local or foreign tax purposes may not be the same as the taxation of digital assets for U.S. federal income tax purposes.

In addition, under the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”), as of January 1, 2018, “like-kind exchange” treatment is not available for an exchange of digital assets. Accordingly, gain from the sale

 

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or exchange of digital assets cannot be deferred by undertaking an exchange of one type of virtual currency for another.

Certain states, including New York and Tennessee, generally follow IRS guidance with respect to the treatment of digital assets for state income tax purposes, but it is unclear if other states will do so. Transactions involving digital assets for other goods and services also may be subject to sales and use or similar taxes under barter transaction treatment or otherwise. The treatment of digital assets for state income tax and sales tax purposes may have negative consequences, including the imposition of a greater tax burden on investors in digital assets or a higher cost with respect to the acquisition, ownership and disposition of digital assets generally. In either case, this could have a negative effect on prices in the relevant digital asset exchange market and could have a material adverse effect on our business, financial condition and results of operations.

Foreign jurisdictions also may elect to treat digital assets in a manner that results in adverse tax consequences. If a foreign jurisdiction with a significant share of the market of digital asset owners or users imposes onerous tax burdens on such owners or users, or imposes sales, use or value added tax on purchases and sales of digital assets for fiat currency, demand for digital assets may decrease in such jurisdiction. This may negatively impact the price of digital assets. This in turn may have a material adverse effect on our business, financial condition and results of operations.

Changes to, or changes to interpretations of, the U.S. federal, state, local or non-U.S. tax laws could have a material adverse effect on our business, financial condition and results of operations.

All statements contained herein concerning U.S. federal income tax (or other tax) consequences are based on existing law and interpretations thereof. The tax regimes to which we are subject or under which we operate, including income and non-income taxes, are unsettled and may be subject to significant change. While some of these changes may be beneficial, such changes could also negatively affect our after-tax returns. Accordingly, no assurance can be given that the currently anticipated tax treatment will not be affected by legislative, judicial or administrative changes, possibly with retroactive effect. In addition, no assurance can be given that tax authorities or courts will agree with any particular interpretation of the relevant laws.

State, local or non-U.S. jurisdictions could enact or adopt new tax laws or regulations that may affect us, or impose levies on our business operations or results. Tax laws and regulations at the state and local levels frequently change, especially in relation to the interpretation of existing tax laws for new and emerging industries, and we cannot always reasonably predict the impact from, or the ultimate cost of compliance with, current or future taxes, which could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Regulations and Regulatory Frameworks

Regulatory changes or actions may restrict the use of bitcoin in a manner that adversely affects our business, prospects or operations.

Bitcoin has been the source of much regulatory consternation, resulting in differing definitional outcomes without a single unifying statement. Bitcoin is viewed differently by different regulatory and standards setting organizations globally as well as in the United States on the federal and state levels. For example, the Financial Action Task Force (“FATF”) and the IRS consider bitcoin as currency or an asset or property. Further, the IRS applies general tax principles that apply to property transactions to transactions involving virtual currency. The U.S. Commodity Futures Trading Commission (“CFTC”) classifies bitcoin as a commodity. The SEC has also publicly stated that it considers bitcoin to be a commodity, but that some digital assets should be categorized as securities. How a digital asset such as bitcoin is characterized by a regulator impacts the rules that apply to activities related to that digital asset.

As bitcoin has grown in both popularity and market size, governments around the world have reacted differently. Certain governments have deemed bitcoin illegal or have severely curtailed the use of digital assets

 

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by prohibiting the acceptance of payment in bitcoin and other digital assets for consumer transactions and barring banking institutions from accepting deposits of bitcoin. Other nations, however, allow bitcoin to be used and traded without restriction. In some jurisdictions, such as in the U.S., bitcoin is subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. There is a risk that relevant authorities in any jurisdiction may impose more onerous regulation on bitcoin, for example banning its use, regulating its operation, or otherwise changing its regulatory treatment. Such changes may introduce a cost of compliance, or have a material impact on our business model, and therefore our financial performance and shareholder returns. If the use of bitcoin is made illegal in jurisdictions where bitcoin is currently traded in heavy volumes, the available market for bitcoin may contract.

Digital asset trading platforms may also be subject to increased regulation and there is a risk that increased compliance costs are passed through to users, including us, as we exchange bitcoin earned through our mining activities. There is a risk that a lack of stability in the bitcoin exchange market and the closure or temporary shutdown of bitcoin exchanges due to fraud, business failure, hackers or malware, or government-mandated restrictions may reduce confidence in the bitcoin network and result in greater volatility in or suppression of bitcoin’s value and consequently have an adverse impact on our operations and financial performance.

In the U.S., the Federal Reserve Board, U.S. Congress and certain U.S. agencies (e.g. the CFTC, the SEC, the Financial Crimes Enforcement Network of the U.S. Treasury Department (“FinCEN”) and the Federal Bureau of Investigation) have begun to examine the operations of the bitcoin network, bitcoin users and the bitcoin exchange market. Increasing regulation and regulatory scrutiny may result in new costs for us and our management may have to devote increased time and attention to regulatory matters or change aspects of our business. Increased regulation may also result in limitations on the use cases of bitcoin. In addition, regulatory developments may require us to comply with certain regulatory regimes. For example, to the extent that our activities cause us to be deemed a “money service business” under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act (“BSA”), we may be required to comply with FinCEN regulations, including those that would mandate us to implement certain anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

Furthermore, in the future, foreign governments may decide to subsidize or in some other way support certain large-scale bitcoin mining projects, thus adding hashrate to the overall network. Such circumstances could have a material adverse effect on the amount of bitcoin that we may be able to mine as well as the value of bitcoin and, consequently, our business, prospects, financial condition and operating results.

We cannot be certain as to how future regulatory developments will impact the treatment of bitcoin under the law, and ongoing and future regulation and regulatory actions could significantly restrict or eliminate the market for or uses of bitcoin and materially and adversely impact our business. If we fail to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations or be subjected to fines, penalties and other governmental action. Such circumstances could have a material adverse effect on our ability to continue as a going concern or to pursue our business model at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of any digital assets we plan to hold or expect to acquire for our own account.

The bitcoin economy is novel and subject to the public perception that it may be used to facilitate illegal activities or fraud. Such novelty and public perception may result in new and changing laws and regulations, which may impact the value of bitcoin and adversely impact our business.

As bitcoin and other digital assets have grown in both popularity and market size, various U.S. federal, state, and local and foreign governmental organizations and public advocacy groups have been examining the operations of bitcoin networks, users and platforms, with a focus on how bitcoin can be used to launder the proceeds of illegal activities or fund criminal or terrorist enterprises, as well as the safety and soundness of platforms and other service providers that hold bitcoin and other digital assets for users.

 

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Many of these governmental organizations and public advocacy groups have called for heightened regulatory oversight and issued advisories describing the risks posed by bitcoin to users and investors. The bitcoin economy is novel and has little access to policymakers and lobbying organizations in many jurisdictions. Competitors from other, more established industries, including traditional financial services, may have greater access to lobbyists or governmental officials, and regulators that are concerned about the potential for illicit usage of bitcoin and other digital assets may effect statutory and regulatory changes with minimal input from the bitcoin economy. As a result, new laws and regulations may be proposed and adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways, that could harm the bitcoin and digital asset industry, which could adversely impact our business.

We are subject to a highly evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our business, reputation, financial condition and results of operations.

Until recently, little regulatory attention has been directed toward bitcoin by U.S. federal and state governments, foreign governments and self-regulatory agencies. As bitcoin has grown in popularity and in market size, the U.S. regulatory regime — namely the Federal Reserve Board, U.S. Congress and certain U.S. agencies — have begun to examine the operations of the bitcoin network, bitcoin users and the bitcoin exchange market. The complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the cryptocurrency industry requires us to exercise our judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we do not comply with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, reputation, financial condition and results of operations.

Additionally, the recent bankruptcy filings of FTX and its affiliated hedge fund Alameda Research LLC, in addition to other bankruptcy filings of crypto companies throughout 2022 and 2023 to-date will likely attract increased regulatory scrutiny from U.S. regulatory agencies such as the SEC and CFTC. Increasing regulation and regulatory scrutiny may result in new costs for us and our management having to devote increased time and attention to regulatory matters, change aspects of our business or result in limits on the utility of bitcoin. In addition, regulatory developments and/or our business activities may require us to comply with certain regulatory regimes. Increasingly strict legal and regulatory requirements and any regulatory investigations and enforcement may result in changes to our business, as well as increased costs, and supervision and examination for ourselves and our service providers. Moreover, new laws, regulations or interpretations may result in additional litigation, regulatory investigations and enforcement or other actions. Adverse changes to, or our failure to comply with, any laws and regulations, may have an adverse effect on our reputation and brand and our business, financial condition and results of operations.

Additionally, although we are not directly connected to the recent bankruptcy filings of FTX and its affiliated hedge fund Alameda Research LLC, in addition to other bankruptcy filings of crypto companies throughout calendar year 2022 and 2023 to-date, we may still suffer reputational harm due to our association with the cryptocurrency industry in light of the recent disruption in the crypto asset markets. Ongoing and future regulation and regulatory actions could significantly restrict or eliminate the market for or uses of bitcoin and/or may adversely affect our business, reputation, financial condition and results of operations.

We may be at a higher risk of litigation and other legal proceedings due to heightened regulatory scrutiny of the cryptocurrency industry, which could ultimately be resolved against us, requiring material future cash payments or charges, which could impair our business, financial condition and results of operations.

The size, nature and complexity of our business could make it susceptible to various claims, both in litigation and binding arbitration proceedings, legal proceedings and government investigations, due to the

 

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heightened regulatory scrutiny following the recent disruptions in the crypto asset markets. We believe that since cryptocurrency mining, and the digital asset industry generally, is a relatively new business sector, it is more likely subject to government investigation and regulatory determination, particularly following the recent bankruptcy filings of FTX and its affiliated hedge fund Alameda Research LLC, in addition to other bankruptcy filings of crypto companies throughout 2022. Any claims, regulatory proceedings or litigation that could arise in the course of our business could have a material adverse effect on our business or operations, or the industry as a whole.

Failure to comply with anti-corruption and anti-money laundering laws, including the FCPA and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.

We operate an international business and may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We are subject to the FCPA and other applicable anti-corruption and anti-money laundering laws in countries in which we conduct activities. The FCPA prohibits providing, offering, promising, or authorizing, directly or indirectly, anything of value to government officials, political parties, or political candidates for the purpose of obtaining or retaining business or securing any improper business advantage.

In many foreign countries, including countries in which we may conduct business, it may be a local custom that businesses engage in practices that are prohibited by the FCPA and other applicable laws and regulations. We face significant risks if we or any of our directors, officers, employees, contractors, agents or other partners or representatives fail to comply with these laws, and governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties, which could have a material adverse effect on our business, reputation, operating results, prospects and financial condition.

Any violation of the FCPA and other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, any of which could have a materially adverse effect on our reputation, business, operating results, prospects and financial condition. In addition, responding to any enforcement action or internal investigation related to alleged misconduct may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.

Blockchain technology may expose us to specially designated nationals or blocked persons or cause us to violate provisions of law.

We are subject to the rules enforced by OFAC, including regarding sanctions and requirements not to conduct business with persons named on its specially designated nationals list. However, because of the pseudonymous nature of blockchain transactions, we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s specially designated nationals list, which may expose us to regulatory sanctions and adversely affect our business, financial condition and results of operations.

Our business and financial condition may be materially adversely affected by increased regulation of energy sources.

Our bitcoin mining activities are powered primarily by renewable energy sources. While renewable energy generally is less exposed to carbon pricing and underlying commodity price risks of fossil fuels, there is a risk that regulatory constraints placed on energy intense industries may restrict the operation of, or increase the cost of operating, data centers and bitcoin mining activities. Additionally, although we target markets with high levels of renewable energy penetration and our energy is primarily sourced from renewable sources, we currently rely on non-renewable energy sources for approximately 26% of our data center energy needs. Governmental

 

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authorities have and may continue to pursue and implement legislation and regulation that seeks to limit the amount of carbon dioxide produced from electricity generation, which, in the event any of our data centers are powered by non-renewable energy sources, would affect our ability to source electricity from fossil fuel-fired electric generation in a potentially material adverse manner. For example, in November 2022, New York passed a law banning certain bitcoin mining operations that run on carbon-based power sources. For the next two years, unless a company engaged in proof-of-work mining, such as ours, which requires sophisticated gear and large amounts of electricity, uses 100% renewable energy, it will not be allowed to expand or renew permits, and new entrants will not be allowed to come online. Potential increases in costs arising from compliance and environmental monitoring may adversely affect our operations and financial performance.

If we were deemed an “investment company” under the 1940 Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

An issuer will generally be deemed to be an “investment company” for purposes of the 1940 Act if:

 

   

it is an “orthodox” investment company because it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

 

   

it is an inadvertent investment company because, absent an applicable exemption, it owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

We believe that we are not and will not be primarily engaged in the business of investing, reinvesting or trading in securities, and we do not hold ourselves out as being engaged in those activities. We intend to hold ourselves out as a bitcoin mining business. Accordingly, we do not believe that we are an “orthodox” investment company as described in the first bullet point above.

Furthermore, while certain cryptocurrencies may be deemed to be securities, we do not believe that certain other cryptocurrencies, in particular bitcoin, are securities. Our mining activities currently focus on bitcoin, which we believe should not be treated as an investment security for purposes of the 1940 Act. Therefore, we believe that less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis will comprise certain other cryptocurrencies or assets that could be considered investment securities. Accordingly, we do not believe that we are an inadvertent investment company by virtue of the 40% inadvertent investment company test as described in the second bullet point above. However, although the SEC and courts are providing increasing guidance on the treatment of digital assets for purposes of federal securities law, this continues to be an evolving area of law. Previous statements by the SEC that bitcoin should not be considered a security are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court. Therefore, it is possible that the SEC or a court could take a position that bitcoin constitutes an investment security for purposes of the 1940 Act, which might require us to register as an investment company.

If we were to be deemed an inadvertent investment company, we may seek to rely on Rule 3a-2 under the 1940 Act, which allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (b) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We are putting in place policies that we expect will work to keep the investment securities held by us at less than 40% of our total assets, which may include acquiring assets with our cash, liquidating our investment securities or seeking no-action relief or exemptive relief from the SEC if we are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner. As Rule 3a-2 is available to an issuer no more than once every three years, and assuming no other exclusion were available to us, we would have to keep within the 40% limit for at least three years after we cease

 

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being an inadvertent investment company. This may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings. In any event, we do not intend to become an investment company engaged in the business of investing and trading securities.

Finally, we believe we are not an investment company under Section 3(b)(1) of the 1940 Act because we are primarily engaged in a non-investment company business.

The 1940 Act and the rules thereunder contain detailed parameters for the organization and operations of investment companies. Among other things, the 1940 Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, prohibit the issuance of stock options, and impose certain governance requirements. We intend to continue to conduct our operations so that we will not be deemed to be an investment company under the 1940 Act. However, if anything were to happen that would cause us to be deemed to be an investment company under the 1940 Act, requirements imposed by the 1940 Act, including limitations on our capital structure, ability to transact business with affiliates and ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements between and among us and our senior management team. Compliance with the requirements of the 1940 Act applicable to registered investment companies may make it difficult for us to continue our current operations or our operations as a company that is engaged in the business of developing data center infrastructure and in activities related to bitcoin mining, and this would materially and adversely affect our business, financial condition and results of operations.

If we were required to register as an investment company but failed to do so, the consequences could be severe. Among the various remedies it may pursue, the SEC may seek an order of a court to enjoin us from continuing to operate as an unregistered investment company. In addition, all contracts that we have entered into in the course of our business, including securities that we have offered and sold to investors, will be rendered unenforceable except to the extent of any equitable remedies that might apply. An affected investor in such case may pursue the remedy of rescission.

Any change in the interpretive positions of the SEC or its staff with respect to cryptocurrencies or digital asset mining firms could have a material adverse effect on us.

We intend to conduct our operations so that we are not required to register as an investment company under the 1940 Act. Specifically, we do not believe that bitcoin is a security. The SEC staff has not provided guidance with respect to the treatment of digital assets under the 1940 Act. To the extent the SEC staff publishes new guidance with respect to these matters, we may be required to adjust our strategy or assets accordingly. There can be no assurance that we will be able to maintain our exclusion from registration as an investment company under the 1940 Act. In addition, continuously seeking to avoid the need to register under the 1940 Act may limit our ability to engage in cryptocurrency mining operations or otherwise make certain investments, and these limitations could result in our holding assets we may wish to sell or selling assets we may wish to hold, which could materially and adversely affect our business, financial condition and results of operations.

If regulatory changes or interpretations of our activities require us to register under the regulations promulgated by FinCEN under the authority of the BSA, or otherwise under state laws, we may incur significant compliance costs, which could be substantial or cost-prohibitive. If we become subject to these regulations, our costs in complying with them may have a material negative effect on our business and the results of its operations.

Cryptocurrencies are treated as “money” by FinCEN, and businesses engaged in the transfer of money or other payments services are subject to registration and licensure requirements at the U.S. federal level and also under U.S. state laws. While FinCEN has issued guidance that cryptocurrency mining, without engagement in other activities, generally does not require registration and licensure with FinCEN, this could be subject to change as FinCEN and other regulatory agencies continue their scrutiny of the bitcoin network and digital assets

 

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generally. To the extent that our business activities cause us to be deemed a “money services business” under the regulations promulgated by FinCEN under the authority of the BSA, we may be required to comply with FinCEN regulations, including those that would mandate us to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

To the extent that our activities would cause us to be deemed a “money transmitter” (“MT”) or equivalent designation, under state law in any state in which we may operate, we may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include the implementation of anti-money laundering programs, maintenance of certain permissible investments in relation to the customer funds that we hold, recordkeeping and other operational requirements. For example, in August 2015, the New York State Department of Financial Services enacted the first U.S. regulatory framework for licensing participants in “virtual currency business activity.” The regulations, known as the “BitLicense,” are intended to focus on consumer protection and regulate the conduct of businesses that are involved in “virtual currencies” in New York or with New York customers and prohibit any person or entity involved in such activity to conduct activities without a license.

Such additional federal or state regulatory obligations may cause us to incur extraordinary expenses. Furthermore, we may not be capable of complying with certain federal or state regulatory obligations applicable to money services businesses and MTs. If we are deemed to be subject to and determine we are not able to comply with such additional regulatory and registration requirements, we may act to dissolve and liquidate.

The application of the Commodity Exchange Act (“CEA”) and the regulations promulgated thereunder by the CFTC to our business is unclear and is subject to change in a manner that is difficult to predict. To the extent we are deemed to be or subsequently become subject to regulation by the CFTC in connection with our business activities, we may incur additional regulatory obligations and compliance costs, which may be significant.

The CFTC has stated and judicial decisions involving CFTC enforcement actions have confirmed that bitcoin and other digital assets fall within the definition of a “commodity” under the CEA, and the regulations promulgated by the CFTC thereunder (“CFTC Rules”). As a result, the CFTC has general enforcement authority to police against manipulation and fraud in the spot markets for bitcoin and other digital assets. From time to time, manipulation, fraud and other forms of improper trading by other participants involved in the markets for bitcoin and other digital assets have resulted in, and may in the future result in, CFTC investigations, inquiries, enforcement action, and similar actions by other regulators, government agencies and civil litigation. Such investigations, inquiries, enforcement actions and litigation may cause negative publicity for bitcoin and other digital assets, which could adversely impact mining profitability.

In addition to the CFTC’s general enforcement authority to police against manipulation and fraud in spot markets for bitcoin and other digital assets, the CFTC has regulatory and supervisory authority with respect to commodity futures, options, and/or swaps (“Commodity Interests”) and certain transactions in commodities offered to retail purchasers on a leveraged, margined, or financed basis. Although we do not currently engage in such transactions, changes in our activities, the CEA, CFTC Rules, or the interpretations and guidance of the CFTC may subject us to additional regulatory requirements, licenses and approvals which could result in significant increased compliance and operational costs.

Furthermore, trusts, syndicates and other collective investment vehicles operated for the purpose of trading in Commodity Interests may be subject to regulation and oversight by the CFTC and the National Futures Association (“NFA”) as “commodity pools”. If our mining activities or transactions in bitcoin and other digital assets were deemed by the CFTC to involve Commodity Interests and the operation of a commodity pool for our shareholders, we could be subject to regulation as a commodity pool operator and required to register as such. Such additional registrations may result in increased expenses, thereby materially and adversely impacting an investment in New GRIID’s common stock. If we determine it is not practicable to comply with such additional

 

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regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in our business.

While we are not aware of any provision of the CEA or CFTC Rules currently applicable to the mining of bitcoin and other digital assets, this is subject to change. We cannot be certain how future changes in legislation, regulatory developments, or changes in CFTC Rules, interpretations and policy may impact the treatment of digital assets and the mining of digital assets. Any resulting requirements that apply to or relate to our mining activities or our transactions in bitcoin and digital assets may cause us to incur additional extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in New GRIID’s common stock.

As we continue to expand and localize our international activities, our obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions will increase and we may be subject to investigations and enforcement actions by U.S. and non-U.S. regulators and governmental authorities.

Laws regulating financial services, the internet, mobile technologies, digital assets and related technologies in the United States and other jurisdictions often impose different, more specific, or potentially conflicting obligations, as well as broader liability, on us. At the same time, we may also be required to comply with sanctions and export controls and counterterrorism financing laws and regulations in the United States and other jurisdictions around the world.

Regulators worldwide frequently study each other’s approaches to the regulation of digital assets such as bitcoin. Consequently, developments in any jurisdiction may influence other jurisdictions. New developments with respect to one type of cryptocurrency operations in one jurisdiction may be extended to additional operations in other jurisdictions. As a result, the risks created by any new law or regulation in one jurisdiction may be magnified by the potential that they may be replicated in other jurisdictions, affecting our business in another place or involving another aspect of our operations. Conversely, if regulations diverge worldwide, we may face difficulty adjusting our business in order to comply with such divergent regulations. These risks are heightened as we face increased competitive pressure from other similarly situated businesses that engage in regulatory arbitrage to avoid the compliance costs associated with regulatory changes.

The complexity and ongoing development of U.S. federal and state and other international regulatory and enforcement regimes, coupled with the global scope of our operations and the evolving global regulatory environment, could result in a single event prompting a large number of overlapping investigations and legal and regulatory proceedings by multiple government authorities in different jurisdictions. Any of the foregoing could, individually or in the aggregate, harm our reputation and adversely affect our operating results and financial condition. Due to the uncertain application of existing laws and regulations, it may be that, despite our analysis concluding that certain activities are currently unregulated, such activities may indeed be subject to financial regulation, licensing, or authorization obligations that we have not obtained or with which we have not complied. As a result, we are at a heightened risk of enforcement action, litigation, regulatory and legal scrutiny which could lead to sanctions, cease and desist orders, or other penalties and censures that could significantly and adversely affect our continued operations and financial condition.

Bitcoin’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize bitcoin, we may be subject to regulatory scrutiny, investigations, fines and other penalties, which may adversely affect our business, operating results and financial condition. Furthermore, a determination that bitcoin is a “security” may adversely affect the value of bitcoin and our business.

The SEC and its staff have taken the position that certain digital assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given digital asset is a security is a highly complex, fact-driven analysis that may evolve over time, and the outcome is difficult to

 

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predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular digital asset as a security. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff.

Public statements made by some senior officials at the SEC indicate that the SEC does not intend to take the position that bitcoin and Ethereum (as currently offered and sold) are securities under the federal securities laws. However, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other digital asset. As of the date of this proxy statement/prospectus, with the exception of certain centrally issued digital assets that have received “no-action” letters from the SEC staff, bitcoin and Ethereum are the only digital assets which senior officials at the SEC have publicly stated are unlikely to be considered securities. With respect to all other digital assets, there is no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our risk-based assessment regarding the likelihood that a particular digital asset could be deemed a security under applicable laws.

Any enforcement action by the SEC or any international or state securities regulator asserting that bitcoin is a security, or a court decision to that effect, would be expected to have an immediate material adverse impact on the trading value of bitcoin, as well as our business. This is because the business models behind most digital assets are incompatible with regulations applying to transactions in securities. If a digital asset is determined or asserted to be a security, it is likely to become difficult or impossible for the digital asset to be traded, cleared or custodied through the same channels used by non-security digital assets, which in addition to materially and adversely affecting the trading value of the digital asset is likely to significantly impact its liquidity and market participants’ ability to convert the digital asset into U.S. dollars and other currencies.

The regulatory regime governing bitcoin is uncertain, and new regulations or policies may alter our business practices with respect to bitcoin.

The determination as to whether bitcoin is a security is a fact-driven analysis and the outcome may be difficult to predict. While we have determined that GRIID does not offer digital securities, the SEC could take a position that bitcoin mined by GRIID are deemed “securities” under its definition and interpretation. GRIID has policies and procedures in place that are intended to enable it to make a risk-based assessment regarding the likelihood that a bitcoin could be deemed a security under applicable laws. These policies and procedures are not legal determinations as to whether or not bitcoin is a security under federal securities laws nor are they binding on regulators. These policies and procedures include (1) internally evaluating whether a digital asset is included in the lists of instruments making up the definition of “security” in the Securities Act, the Exchange Act and the 1940 Act, (2) communicating with our general counsel, outside counsel, and other advisors, and (3) following recent SEC guidance on whether a digital asset, specifically bitcoin, falls within the definition of a “security” under the U.S. federal securities laws. We believe that our process reflects a comprehensive and thoughtful analysis and is reasonably designed to facilitate consistent application of available legal guidance to bitcoin to facilitate informed risk-based business judgment. However, we recognize that the application of securities laws to the specific facts and circumstances of bitcoin may be complex and subject to change, and that our listing determination does not guarantee any conclusion under the U.S. federal securities laws. The SEC has not made any statement as to whether the bitcoin that GRIID mines are or are not digital securities. There is no certainty that bitcoin is not a security, notwithstanding the conclusions drawn based on our risk-based assessment. We could be subject to legal or regulatory action in the event a regulatory authority or court were to determine that a bitcoin that GRIID mines is a security under applicable laws.

There can be no assurances that we will properly characterize bitcoin as a security or non-security, or that the SEC, other regulatory authorities, or a court, if the question was presented to it, would agree with our assessment. If the SEC, other regulatory authority, or a court were to determine that the bitcoin that we mine is a security, we would not be able to mine such bitcoin until we are able to do so in a compliant manner.

 

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If bitcoin is deemed to be a security under any U.S. federal, state or foreign jurisdiction, or in a proceeding in a court of law or otherwise, it may have adverse consequences for bitcoin, and we could be subject to legal or regulatory action. Moreover, the networks on which bitcoin are utilized may be required to be regulated as securities intermediaries, and subject to applicable rules, which could effectively render the network impracticable for its existing purposes. Further, it could draw negative publicity and a decline in the general acceptance of bitcoin. Also, it may make it difficult for bitcoin to be mined, traded, cleared, and custodied as compared to other digital assets that are not considered to be securities.

As bitcoin and cryptocurrency business activities grow in popularity and market size, and as new cryptocurrency businesses and technologies emerge and proliferate, foreign, federal, state, and local regulators can be expected to revisit and update their laws and policies. Changes in this regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government, may significantly affect or change the manner in which we currently conduct some aspects of our business.

We are subject to governmental regulation and other legal obligations related to data privacy, data protection and information security. If we are unable to comply with these, we may be subject to governmental enforcement actions, litigation, fines and penalties or adverse publicity.

We collect and process data, including personal, financial and confidential information about individuals, including our employees and business partners. The collection, use, processing and storage of such data about individuals are governed by data privacy laws, regulations, guidelines and rules. We do not currently have any formal data privacy policies and procedures in place and have not completed an assessment of whether we are in compliance with all applicable data privacy laws and regulations. Data privacy laws and regulations are complex, continue to evolve, and on occasion may be inconsistent between jurisdictions leading to uncertainty in interpreting such laws and it is possible that these laws, regulations and requirements may be interpreted and applied in a manner that is inconsistent with our existing information processing practices, and many of these laws are significantly litigated and/or subject to regulatory enforcement. The implication of this includes that various federal, state and foreign legislative or regulatory bodies may enact or adopt new or additional laws and regulations concerning data privacy, data retention, data transfer and data protection. Such laws may continue to add to our compliance costs, restrict or dictate how we collect, maintain, combine and disseminate information and could have a material adverse effect on our business, results of operations, financial condition and prospects.

In the United States, according to the Federal Trade Commission (“FTC”), failure to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards. State privacy and security laws vary from state to state and, in some cases, can impose more restrictive requirements than U.S. federal law. For example, California enacted the California Consumer Privacy Act (“CCPA”) on June 28, 2018, which went into effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal data. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability, and many similar laws have been proposed and/or enacted in other states and at the federal level.

Any actual or perceived failure by us or the third parties with whom we work to comply with data privacy laws, regulations, guidelines, rules or industry standards, or any security incident that results in the unauthorized release or transfer of personally identifiable information, may result in governmental enforcement actions and investigations including by U.S. federal and state regulatory authorities, fines and penalties, litigation and/or adverse publicity, including by consumer advocacy groups, and could cause our customers to lose trust in us,

 

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which could harm our reputation and have a material adverse effect on our business, reputation, results of operations, financial condition and prospects.

Due to the unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our bitcoin holdings.

Bitcoin trading venues are relatively new and, in some cases, unregulated. Furthermore, there are many bitcoin trading venues which do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in bitcoin trading venues, including prominent exchanges that handle a significant volume of bitcoin trading.

Negative perception, a lack of stability in the broader bitcoin markets and the closure or temporary shutdown of bitcoin trading venues due to fraud, business failure, hackers or malware or government-mandated regulation may reduce confidence in bitcoin and result in greater volatility in the prices of bitcoin. To the extent investors view New GRIID’s common stock as linked to the value of our bitcoin holdings, these potential consequences of a bitcoin trading venue’s failure could have a material adverse effect on the market value of New GRIID’s common stock.

We are subject to environmental, health and safety laws and regulations, including applicable zoning and building codes, that may expose us to significant liabilities for penalties, damages or costs of remediation or compliance.

Our operations and properties are subject to laws and regulations governing health and safety, the discharge of pollutants into the environment or otherwise relating to health, safety and environmental protection requirements in the countries and localities in which we operate. These laws and regulations may impose numerous obligations that are applicable to us, including acquisition of a permit or other approval before conducting construction or regulated activities; limitation or prohibition of construction and operating activities in environmentally sensitive areas, such as wetlands or areas with endangered plants or species; imposition of specific health and safety standards addressing worker protection; imposition of certain zoning building code standards for the sites at which we operate; and imposition of significant liabilities for pollution, including investigation, remedial and clean-up costs. Failure to comply with these requirements may expose us to fines, penalties and/or interruptions in our operations, among other sanctions, that could have a material adverse effect on our financial position, results of operations and cash flows. Certain environmental laws may impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances have been disposed or otherwise released into the environment, even under circumstances where the hazardous substances were released by prior owners or operators or the activities conducted and from which a release emanated complied with applicable law. Failure to secure renewal of permits or tightening of restrictions within our existing permits, or the failure to meet the zoning and building code standards imposed by regulations applicable to our sites, could have a material adverse effect on our business or cause us to incur material expenses. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by noise or the release of hazardous substances into the environment.

The trend in environmental regulation has been to place more restrictions and limitations on activities that may be perceived to impact the environment, and thus there can be no assurance as to the amount or timing of future expenditures for environmental regulation compliance or remediation. New or revised laws and regulations that result in increased compliance costs or additional operating restrictions, or the incurrence of environmental liabilities, could have a material adverse effect on our financial position, results of operations and cash flows.

 

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The regulatory and legislative developments related to climate change, may materially adversely affect our brand, reputation, business, financial condition and results of operations.

A number of governments or governmental bodies have introduced or are contemplating legislative and regulatory changes in response to the increasing focus on climate change and its potential impact, including from governmental bodies, interest groups and stakeholders. Despite our sustainability objectives in sourcing electricity from renewable energy sources, given the very significant amount of electrical power required to operate bitcoin mining machines, as well as the environmental impact of mining for the rare earth metals used in the production of mining servers, the bitcoin mining industry may become a target for future environmental and energy regulation. Legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, costs to purchase renewable energy credits or allowances and other costs to comply with such regulations. Specifically, imposition of a tax or other regulatory fee in a jurisdiction where we operate or on electricity that we purchase could result in substantially higher energy costs, and due to the significant amount of electrical power required to operate bitcoin mining machines, could in turn put our facilities at a competitive disadvantage. Any future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.

Given the political significance and uncertainty around the impact of climate change and how it should be addressed, we cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation. Any of the foregoing could have a material adverse effect on our business, financial position and results of operations.

Concerns about greenhouse gas emissions and global climate change may result in environmental taxes, charges, assessments or penalties and could have a material adverse effect on our business, financial condition and results of operations.

The effects of human activity on global climate change have attracted considerable public and scientific attention, as well as the attention of the United States and other foreign governments. Efforts are being made to reduce greenhouse gas emissions, particularly those from coal combustion power plants, some of which plants we may rely upon for power. The added cost of any environmental taxes, charges, assessments or penalties levied on such power plants could be passed on to us, increasing the cost to run our facilities. Any enactment of laws or promulgations of regulations regarding greenhouse gas emissions by the United States, or any domestic or foreign jurisdiction in which we conduct business, could have a material adverse effect on our business, financial condition or results of operations.

Increasing scrutiny and changing expectations from investors, lenders, customers, government regulators and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.

Certain institutional investors, investor advocacy groups, investment funds, creditors and other influential financial markets participants have become increasingly focused on companies’ ESG practices in evaluating their investments and business relationships, including the impact of bitcoin mining operations on the environment. Certain organizations also provide ESG ratings, scores and benchmarking studies that assess companies’ ESG practices. Although there are no universally adopted standards for such ratings, scores or benchmarking studies, they are used by some investors to inform their investment and voting decisions. It is possible that our future shareholders or organizations that report on, rate or score ESG practices will not be satisfied with our ESG strategy or performance. Unfavorable press about or ratings or assessments of our ESG strategies or practices, regardless of whether or not we comply with applicable legal requirements, may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to and cost of capital.

 

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Additionally, in February 2021, the Acting Chair of the SEC issued a statement directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings and in March 2021 the SEC announced the creation of a Climate and ESG Task Force in the Division of Enforcement. The increased focus and activism related to ESG may hinder our access to capital, as investors and lenders may reconsider their capital investment allocation as a result of their assessment of our ESG practices. If we do not adapt to or comply with investor, lender or other industry shareholder expectations and standards and potential government regulations, which are evolving but may relate to the suitable deployment of electric power, or which are perceived to have not responded appropriately to the growing concern for ESG issues, our reputation could suffer which would have a material adverse effect on our business, financial condition and results of operations.

Our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect our reputation, operating results and financial condition.

Our ability to comply with applicable complex and evolving laws, regulations and rules is largely dependent on the establishment and maintenance of our compliance, audit and reporting systems, as well as our ability to attract and retain qualified compliance and other risk management personnel. We cannot assure you that our policies and procedures will be effective or that we will be successful in monitoring or evaluating the risks to which we are or may be exposed in all market environments or against all types of risks, including unidentified or unanticipated risks. Our risk management policies and procedures rely on a combination of technical and human controls and supervision that are subject to error and failure. Some of our methods for managing risk are discretionary by nature and are based on internally developed controls and observed historical market behavior, and also involve reliance on standard industry practices. These methods may not adequately prevent losses, particularly as they relate to extreme market movements, which may be significantly greater than historical fluctuations in the market. Our risk management policies and procedures also may not adequately prevent losses due to technical errors if our testing and quality control practices are not effective in preventing failures. In addition, we may elect to adjust our risk management policies and procedures to allow for an increase in risk tolerance, which could expose us to the risk of greater losses.

Risks Related to Intellectual Property

If we are unable to protect the confidentiality of our trade secrets or other intellectual property rights, our business and competitive position could be harmed.

Our ability to conduct our business in a profitable manner relies in part on our proprietary methods and designs, which we primarily protect as trade secrets. We rely upon trade secret and other intellectual property laws, physical and technological security measures and contractual commitments to protect our trade secrets and other intellectual property rights, including entering into non-disclosure agreements with employees, consultants and third parties with access to our trade secrets. However, such measures may not provide adequate protection and the value of our trade secrets could be lost through misappropriation or breach of our confidentiality agreements. For example, an employee with authorized access may misappropriate our trade secrets and provide them to a competitor, and the recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully, because enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time consuming, and the outcome is unpredictable. Thus, if any of our trade secrets were to be disclosed or misappropriated, our competitive position could be harmed. In addition to the risk of misappropriation and unauthorized disclosure, our competitors may develop similar or better methods independently in a manner that could prevent legal recourse by us, which could result in costly product redesign efforts, discontinuance of certain product offerings or other competitive harm. Furthermore, any of our intellectual property rights could be challenged, invalidated, circumvented, infringed, diluted, disclosed or misappropriated and adequate legal recourse may be unavailable. Thus, there can be no assurance that our trade secrets or other intellectual property rights will be sufficient to protect against competitors operating their business in a manner that is substantially similar to us.

 

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We may infringe on third-party intellectual property rights or other proprietary rights, which could have a material adverse effect on our business, financial condition and results of operations.

Our commercial success depends on our ability to operate without infringing third-party intellectual property rights or other proprietary rights. For example, there may be issued patents of which we are not aware that our services or products infringe on. Also, there may be patents we believe we do not infringe on, but that we may ultimately be found to by a court of law or government regulatory agency. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our services or products allegedly infringe on.

Third parties could accuse us of misappropriating their trade secrets. Any claims of patent infringement or trade secret misappropriation, even claims without merit, could be costly and time-consuming to defend and could require us to divert resources away from operations. In addition, if any third party has a meritorious or successful claim that we are infringing their intellectual property, we may be forced to redesign our operations or secure a license from such third parties, which may be costly or impractical. We also may be subject to significant damages or injunctions that may cause a material adverse effect to our business and operations, if we cannot license or develop an alternative for any infringing aspect of its business, and may result in a material loss in revenue, which could adversely affect the trading price of our shares and harm our investors.

Risks Related to ADEX and the Merger

The sponsor, certain members of our Board, our officers and our industry advisors have interests in the merger that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the merger proposal and approval of the other proposals described in this proxy statement/prospectus.

In considering the recommendation of our Board to vote for the proposals presented at the special meeting, including the merger proposal, you should be aware that aside from their interests as stockholders, the sponsor and certain members of our Board and officers have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. We estimate that the aggregate dollar amount in New GRIID that affiliates of the sponsor have at risk that depends on completion of the merger is $             . Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger and transaction agreements and in recommending to our stockholders that they vote in favor of the proposals presented at the special meeting, including the merger proposal. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the special meeting, including the merger proposal. These interests include, among other things:

 

   

the fact that certain of our directors and officers are principals of the sponsor;

 

   

the fact that each of our directors and officers presently has, and in the future may have, additional fiduciary or contractual obligations to other entities, pursuant to which such officer or director may be required to present a business combination opportunity.

 

   

the fact that the sponsor holds 7,270,000 private placement warrants to purchase 7,270,000 shares of our common stock purchased at a price of $1.00 per warrant in a private placement that closed simultaneously with the consummation of the IPO that would expire worthless if a business combination is not consummated by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter);

 

   

the fact that upon the consummation of the merger, the dollar value of the sponsor’s aggregate interest in the post-merger company will be approximately $            , based upon the closing price of our common stock of $            per share and the closing price of $            per IPO warrant (which we use for these purposes as a proxy for the value of the private placement warrants), in each case on the NYSE American on     ,             , the record date. The sponsor’s aggregate ownership interest in the

 

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Company is comprised of 7,270,000 private placement warrants purchased at a price of $1.00 per warrant, 6,832,500 shares of our common stock purchased for an aggregate price of approximately $25,000, and 502,683 warrants issuable to the sponsor upon the closing of the merger or any other initial business combination upon conversion of the $502,683 the sponsor has loaned to ADEX under a promissory note issued by the sponsor to ADEX.

 

   

the fact that the sponsor and certain of its affiliates can earn a positive rate of return on their investment, even if other ADEX stockholders experience a negative rate of return on their investment after the consummation of the merger.

 

   

the fact that the signatories to the letter agreements have each agreed to waive their rights to liquidating distributions from the trust account with respect to their shares if ADEX fails to complete an initial business combination, including the merger, by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter);

 

   

the fact that if the trust account is liquidated, including in the event we are unable to complete an initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter), the sponsor has agreed that it will indemnify ADEX for any debts and obligations to third parties that are owed money by ADEX for services rendered, contracted for, or for products sold to ADEX but only to the extent necessary to ensure that the debt or obligation does not reduce the funds in the trust account to an amount less than $10.00 per share, except that this indemnity will not apply (i) to a third party that has executed an agreement waiving any right to the monies held in the trust account and (ii) claims under ADEX’s obligation to indemnify its IPO underwriters against certain liabilities, including liabilities under the Securities Act;

 

   

the fact that one or more directors of ADEX will be a director of New GRIID;

 

   

the continued indemnification of ADEX’s current directors and officers and the continuation of ADEX’s directors’ and officers’ liability insurance after the merger;

 

   

the fact that the sponsor, officers, directors and their respective affiliates will lose their entire investment in ADEX (which is estimated to be approximately             , based on the closing price of the common stock on the record date as more fully described above, and will not be reimbursed for any of their out-of-pocket expenses (which are currently $        ) from any amounts held in the trust account if an initial business combination is not consummated by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter); and

 

   

the fact that upon the consummation of the merger, an entity affiliated with ADEX’s Chief Financial Officer, John D’Agostino, would be entitled to a $400,000 cash payment from GRIID and acceleration of vesting of GRIID units it holds.

The personal and financial interests of the sponsor and our officers and directors may have influenced their motivation in identifying and selecting GRIID and completing a business combination with GRIID. Additionally, our current charter provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors or waiver of corporate opportunity materially affected our search for a business combination. We are not aware of any such corporate opportunities not being offered to us and do not believe the renouncement of our interest in any such corporate opportunities impacted our search for an acquisition target.

 

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The sponsor and our directors and officers have agreed to vote in favor of the merger, regardless of how holders of IPO Shares vote.

Unlike many other blank check companies in which the sponsor, officers and directors agree to vote their shares in accordance with the majority of the votes cast by their public stockholders in connection with a merger transaction, the sponsor and our directors and officers have agreed to vote any shares of common stock owned by them in favor of the merger. As of the record date, such stockholders own shares equal to approximately     % of our issued and outstanding shares of common stock in the aggregate. Accordingly, it is expected that the shares held by our sponsor, officers and directors will be sufficient to establish a quorum at the special meeting and to approve the merger.

Our initial stockholders, directors, officers, advisors and their affiliates may elect to purchase shares from stockholders, which may influence a vote on the merger and reduce the public “float” of our common stock.

Our initial stockholders, directors, officers, advisors or any of their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of the merger, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such selling stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our initial stockholders, sponsor, directors, officers, advisors or any of their affiliates purchase shares in privately negotiated transactions from stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their IPO Shares. The purpose of such purchases may be to obtain such shares for the purpose of voting such shares in favor of the merger and thereby increase the likelihood of obtaining stockholder approval of the merger. This may result in the completion of the merger when it may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.

In addition, if such purchases are made, the public “float” of our common stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on the NYSE American, the NEO or any other national securities exchange.

After completion of the merger, we may be controlled by former GRIID equity holders, whose interests may conflict with our interests and the interests of other stockholders.

Upon completion of the merger, the pre-merger GRIID equity holders (including Blockchain and the Bridge Financing Warrantholders, following the automatic adjustment and exercise of the Blockchain warrant and Bridge Financing warrants immediately prior to the closing) will hold 86.2% of our issued and outstanding common stock, assuming no ADEX stockholder redemptions. If GRIID members own at least 66 2/3% of the outstanding common stock following the closing, which may occur as a result of redemptions of IPO Shares, they will have the ability to determine all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our Board, any amendment to our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. This could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquiror from attempting to obtain control of New GRIID, which could cause the market price of our common stock to decline or prevent stockholders from realizing a premium over the market price for common stock. The interests of the pre-merger GRIID equity holders may conflict with our interests as a company or the interests of our other stockholders.

Our stockholders will experience substantial dilution as a consequence of, among other transactions, the issuance of common stock in the merger.

It is anticipated that, upon completion of the merger, and assuming that no further IPO Shares are elected to be redeemed: (i) holders of IPO Shares will retain an interest of approximately 3.0% of the capital stock of New GRIID; (ii) our initial stockholders (including the sponsor) will retain an interest of approximately 10.2% of the

 

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capital stock of New GRIID; and (iii) holders of GRIID’s existing limited liability company membership units will retain an interest of approximately 86.8% of the capital stock of New GRIID.

The ownership percentages with respect to New GRIID following the merger (a) assume that (i) none of ADEX’s existing stockholders purchase or sell shares of common stock in the open market and (ii) there are no other issuances of equity interests of ADEX, (b) do not take into account the 7,270,000 private placement warrants or the 13,800,000 IPO warrants that will be outstanding upon the closing and may be exercised thereafter, (c) do not take into account the issuance of warrants to GYBL after the closing, which may be exercised immediately following closing, or exercises thereof, (d) do not take into account the issuance of warrants to the sponsor upon conversion of outstanding borrowings under the promissory note and (e) do not take into account the issuance of any shares upon completion of the merger under the incentive plan, but (f) do reflect the automatic conversion of the GRIID Class B units that will be issued to Blockchain and the Bridge Financing Warrantholders upon the automatic adjustment and exercise of the Blockchain warrant and Bridge Financing warrants into shares of New GRIID common stock upon the closing. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by ADEX’s existing stockholders in New GRIID will be different. For more information, please see the sections entitled “Summary of the Proxy Statement/Prospectus—Impact of the Merger on ADEX’s Capitalization,” “Unaudited Pro Forma Condensed Combined Financial Information” and “Proposal No. 5—The Incentive Plan Proposal.”

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After the merger, the initial stockholders, including the sponsor, will hold approximately 10.2% of our common stock, assuming no further redemptions of IPO Shares or exercises of outstanding warrants. In addition, at the closing of the merger, New GRIID is expected to enter into the investor rights agreement, substantially in the form attached as Annex C to this proxy statement/prospectus. Pursuant to the terms of the investor rights agreement, (i) any outstanding share of common stock or any other equity security (including those issuable upon conversion of outstanding warrants and including shares of common stock issued or issuable upon the exercise of any other equity security) of New GRIID held by a party to the investor rights agreement as of the date of such agreement or thereafter acquired by a party to such agreement upon exercise of any warrants and (ii) any other equity security of New GRIID issued or issuable with respect to any such share of common stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise, will be entitled to registration rights. In addition, the sponsor and each of our directors and officers entered into a letter agreement pursuant to which each such person agreed, with certain limited exceptions, not to transfer any shares of common stock until one year after the closing of the merger. However, if the closing price of the common stock equals or exceeds $12.00 per share (as adjusted for any stock splits, stock dividends, reorganizations, recapitalizations, and similar transactions) for any 20 trading days within any 30 trading day period commencing at least 150 days after the merger, such shares would be released from this restriction. Moreover, such transfer restrictions may be waived by the IPO underwriters that are third-party beneficiaries of the letter agreements.

 

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No opinion from any financial advisor was obtained in connection with the second amendment. ADEX does not have a financial advisor, as ADEX did not engage any additional financial advisors after the resignation of Wells Fargo and did not engage Lincoln to provide an updated fairness opinion in connection with the second amendment. The opinion of Lincoln obtained in connection with the initial merger agreement did not reflect changes in circumstances that had occurred or that may have occurred between the signing of the initial merger agreement and the completion of the merger, including the reduction of the merger consideration pursuant to the second amendment, changes in macroeconomic conditions, or recent volatility in the market value of bitcoin.

The fairness opinion obtained in connection with the initial merger agreement was provided only as of November 29, 2021 and does not address the second amendment, the reduction in merger consideration contemplated thereby, or the terms of the merger agreement as amended by the second amendment. ADEX’s board of directors has not obtained an updated opinion from Lincoln or any other financial advisor as of the date of this proxy statement/prospectus, nor does it expect to receive an updated, revised or reaffirmed opinion prior to the completion of the merger. Because the fairness opinion only addressed the fairness of the initial merger consideration at the time of such opinion, the opinion did not address subsequent changes in circumstances that had occurred, including the reduction of the merger consideration pursuant to the second amendment, changes in macroeconomic conditions, recent volatility in the market value of bitcoin, or the redemption of an aggregate of 25,599,974 IPO Shares in connection with the first and second extension meetings. Changes in the operations and prospects of ADEX or GRIID, general market and economic conditions and other factors that may be beyond the control of ADEX or GRIID, and on which Lincoln’s opinion was based, may significantly alter the value of GRIID or the share price of ADEX’s common stock by the time the merger is completed. The opinion did not speak as of the time the merger will be completed or as of any date other than the date of such opinion. Because Lincoln will not be updating its opinion, the opinion does not address the fairness of the updated merger consideration, from a financial point of view, at the time of the second amendment or at the time the merger is completed. The recommendation of ADEX’s board of directors that ADEX stockholders approve the merger, however, is made as of the date of this proxy statement/prospectus. For a description of the opinion that ADEX’s board of directors received from Lincoln, see “Proposal No. 1—The Merger Proposal—Opinion of Financial Advisor to the ADEX Board Related to the Initial Merger Consideration.”

The fairness opinion described throughout this proxy statement/prospectus was dated November 29, 2021 and was delivered in connection with ADEX’s board of directors’ evaluation of the initial merger agreement and the initial merger consideration to be paid pursuant to that agreement. On October 17, 2022, the parties to the initial merger agreement entered into the second amendment, which, among other things, reduced the merger consideration. No new or updated fairness opinion was obtained in connection with ADEX’s board of directors’ determination that the merger and the second amendment, including the reduction in the merger consideration, was advisable and in the best interests of ADEX and its stockholders. We continue to describe the fairness opinion delivered on November 29, 2021 throughout this proxy statement/prospectus solely to provide historical context for ADEX’s board of directors’ deliberations in connection with its initial assessment of the merger and the initial merger agreement. In light of the updated merger consideration set forth in the second amendment, changes in macroeconomic conditions and recent volatility in the market value of bitcoin, you should not rely on the following discussion of the fairness opinion, any discussion of the fairness opinion elsewhere in this proxy statement/prospectus or the text of the fairness opinion set forth in Annex F, in evaluating whether or not to vote your shares of common stock in favor of the merger proposal or any other proposal set forth in this proxy statement/prospectus or in evaluating whether or not to redeem your IPO Shares.

 

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Wells Fargo acted as capital markets advisor, financial advisor and lead placement agent to ADEX and was to be compensated for completion of its services in its roles as capital markets advisor and financial advisor at the closing of the merger. Before it completed such services, Wells Fargo resigned and waived any compensation it might have earned if it had completed the services for which it was engaged as lead placement agent, capital markets advisor and financial advisor. In connection with this resignation, Wells Fargo has disclaimed any responsibility for this proxy statement/prospectus.

On September 13, 2021, ADEX hired Wells Fargo to serve as financial advisor in connection with the merger, and on September 14, 2021, ADEX hired Wells Fargo to serve as capital markets advisor to ADEX in connection with the merger and as lead placement agent in a PIPE transaction. As compensation for its roles as financial advisor and capital markets advisor, Wells Fargo was to receive an aggregate fee of $3.5 million, which was contingent on the closing of the merger. Wells Fargo did not receive any fees in connection with its role as lead placement agent as a private placement transaction was not consummated. Although the services provided by Wells Fargo were substantially complete, Wells Fargo resigned on May 26, 2022. In connection with its resignation, Wells Fargo waived all rights to fees and compensation in connection with such roles and disclaimed any responsibility for the contents of this proxy statement/prospectus. Wells Fargo did not provide any reason to ADEX for its resignation or the waiver of fees.

Wells Fargo did not prepare or provide any of the disclosures in this prospectus/proxy statement or any analysis underlying such disclosure or any other materials that have been provided to ADEX’s stockholders. Additionally, Wells Fargo was not responsible for the preparation of any materials reviewed by the ADEX board of directors other than providing a general market and process overview. Wells Fargo did identify potential PIPE investors and prepare the PIPE presentation that was provided to potential PIPE investors and the ADEX board of directors. Wells Fargo has not informed ADEX, or to the knowledge of ADEX any potential PIPE investors, that it has withdrawn its association with the materials in the immediately preceding sentence.

Although Wells Fargo’s services were substantially complete, it is possible that Wells Fargo’s resignation will adversely impact market perception of the merger. If market perception is negatively impacted, an increased number of ADEX stockholders may vote against the proposed merger or seek to redeem their shares for cash, which could potentially impact ADEX’s ability to consummate the merger.

At the request of the Division of Corporation Finance of the SEC, ADEX requested that Wells Fargo provide a letter stating whether it agrees with the statements made in this proxy statement/prospectus relating to its resignation. As of the date of this proxy statement/prospectus, ADEX has not received any such letter from Wells Fargo. Wells Fargo’s failure to respond should not be interpreted to mean that Wells Fargo agrees with this disclosure. As Wells Fargo has indicated that it does not want to be associated with the disclosure in this proxy statement/prospectus, stockholders should not put any reliance on the fact that Wells Fargo was previously involved with any aspect of the transactions described in this prospectus/proxy statement.

There can be no assurance that we will be able to comply with the continued listing standards of the NYSE American, the NEO or any other exchange on which our securities may be listed in the future.

Our common stock, units and warrants are currently listed on the NYSE American and we have applied, and been conditionally approved (subject to closing of the merger), to list the common stock on the NEO.

Our eligibility for continued listing on the NYSE American may depend on, among other things, the number of our shares that are redeemed and the resulting market capitalization, public float and number of round lot holders of our shares immediately after the merger, each of which may drop below the required amount due to redemptions. If, in connection with the merger, NYSE American delists our common stock from trading on its exchange for failure to meet the listing standards, or that our common stock will be approved for listing on the NEO, we and our stockholders could face significant material adverse consequences including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity for our securities;

 

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a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” To the extent our common stock, units, or warrants are listed on the NYSE American, they are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on the NYSE American, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement. As such, substantial doubt exists as to our ability to continue as a going concern if we do not consummate an initial business combination by the applicable extension date (the latest of which is January 14, 2024). If we are unable to effect an initial business combination by the applicable extension date, we will be forced to liquidate and our warrants will expire worthless.

We are a blank check company, and as we have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement, substantial doubt exists as to our ability to continue as a going concern if we do not consummate an initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter). On December 23, 2022 and July 11, 2023, respectively, our stockholders approved the first extension proposal (as defined below) and second extension proposal (as defined below). Stockholders holding 25,132,578 and 467,396 IPO Shares, respectively exercised their right to redeem such shares for a pro rata portion of the funds then on deposit in the trust account of approximately $253.6 million and $26.2 million, respectively (approximately $10.09 and $10.58 per share, respectively). In connection with the second extension meeting, our charter was amended to extend the date by which we must consummate our initial business combination up to two times at the election of our board of directors for an additional three months each time (for a maximum of two three-month extensions), or otherwise (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 all of the IPO Shares, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and in accordance with applicable law, dissolve and liquidate. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including trust account assets) will be less than the initial public offering price per unit in the IPO.

In addition, if we fail to complete an initial business combination by the applicable extension date (the latest of which is January 14, 2024), there will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless.

We previously identified a material weakness in our internal control over financial reporting. Material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

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preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As described in our Amendment No. 1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, we identified a material weakness in our internal control over financial reporting related to our application of ASC 480-10-S99 to our accounting of complex financial instruments. As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of March 31, June 30, September 30, or December 31, 2021 or as of March 31, 2022 or June 30, 2022.

In light of the material weakness, we designed and implemented remediation measures to address the material weakness previously identified related to the accounting for complex financial instruments and enhanced our internal control over financial reporting. We enhanced our processes to identify, review and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex financial instruments that apply to our condensed financial statements, including enhanced analyses by third-party professionals with whom we consult regarding complex accounting applications. The foregoing actions, including the passage of time, which we believe remediated the material weakness in internal control over financial reporting, were completed as of September 30, 2022.

Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Failure to timely file will cause us to be ineligible to utilize short form registration statements on Form S-3, which may impair our ability to obtain capital in a timely fashion to execute our business strategies or issue shares to effect an acquisition. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

No material costs have been incurred or are expected to be incurred with respect to our remediation plans. While we have remediated this material weakness as of September 30, 2022, we can give no assurance that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

The restatement of our financial statements has subjected us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings.

As a result of the restatement of our financial statements, we have become subject to additional risks and uncertainties, including, among others, increased professional fees and expenses and time commitment that may be required to address matters related to the restatements, and scrutiny of the SEC and other regulatory bodies which could cause investors to lose confidence in our reported financial information and could subject us to civil or criminal penalties or stockholder litigation. We could face monetary judgments, penalties or other sanctions that could have a material adverse effect on our business, financial condition and results of operations and could cause its stock price to decline.

 

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Our ability to successfully effect the merger and to be successful thereafter will be dependent upon the efforts of our key personnel, including the key personnel of GRIID whom we expect to stay with New GRIID. The loss of key personnel could negatively impact the operations and profitability of New GRIID and its financial condition could suffer as a result.

Our ability to successfully effect the merger is dependent upon the efforts of our key personnel and the key personnel of GRIID. It is possible that we will lose some key personnel, the loss of which could negatively impact the operations and profitability of New GRIID. We anticipate that some or all of the management of GRIID will remain in place.

New GRIID’s success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of GRIID’s officers could have a material adverse effect on New GRIID’s business, financial condition, or operating results. GRIID does not maintain key-person life insurance on any of its officers. The services of such personnel may not continue to be available to New GRIID.

ADEX and GRIID will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on GRIID’s team members and third parties may have an adverse effect on ADEX and GRIID. These uncertainties may impair our or GRIID’s ability to retain and motivate key personnel and could cause third parties that deal with any of us or them to defer entering into contracts or making other decisions or seek to change existing business relationships. If key team members depart because of uncertainty about their future roles and the potential complexities of the merger, our or GRIID’s business could be harmed.

The unaudited pro forma condensed combined financial information included in this document may not be indicative of what our actual financial position or results of operations would have been.

The unaudited pro forma condensed combined financial information for New GRIID following the merger in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the merger been completed on the dates indicated. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for more information.

We may waive one or more of the conditions to the merger.

We may agree to waive, in whole or in part, one or more of the conditions to our obligations to complete the merger, to the extent permitted by our current charter and bylaws and applicable laws. However, if ADEX’s board of directors determines that a failure to satisfy the condition is not material, then ADEX’s board of directors may elect to waive that condition and close the merger. We may not waive the condition that our stockholders approve the merger. Please see the section entitled “Proposal No. 1—The Merger Proposal—The Merger Agreement—Conditions to Closing of the Merger” for additional information.

The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the merger agreement may result in a conflict of interest when determining whether such changes to the terms of the merger agreement or waivers of conditions are appropriate and in the best interests of our stockholders.

In the period leading up to the closing of the merger, other events may occur that, pursuant to the merger agreement, would require ADEX to agree to amend the merger agreement, to consent to certain actions or to waive rights that we are entitled to under those agreements. Such events could arise because of changes in the course of GRIID’s business, a request by GRIID to undertake actions that would otherwise be prohibited by the

 

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terms of the merger agreement or the occurrence of other events that would have a material adverse effect on GRIID’s business and would entitle ADEX to terminate the merger agreement. In any of such circumstances, it would be in the discretion of ADEX, acting through its board of directors, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described elsewhere in this proxy statement/prospectus may result in a conflict of interest on the part of one or more of the directors between what they may believe is best for ADEX and our stockholders and what they may believe is best for themselves or their affiliates in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, we do not believe there will be any changes or waivers that our directors and officers would be likely to make after stockholder approval of the merger has been obtained. While certain changes could be made without further stockholder approval, if there is a change to the terms of the merger that would have a material impact on the stockholders, we will be required to circulate a new or amended proxy statement or supplement thereto and resolicit the vote of our stockholders with respect to the merger proposal.

We and GRIID will incur significant transaction and transition costs in connection with the merger.

We and GRIID have both incurred and expect to continue to incur significant, non-recurring costs in connection with consummating the merger, and New GRIID is expected to incur ongoing costs related to operating as a public company following the consummation of the merger. New GRIID may also incur additional costs to retain key team members. Upon closing, all expenses incurred in connection with the merger agreement and the merger, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be paid by New GRIID following the closing of the merger.

ADEX’s transaction expenses as a result of the merger are currently estimated to be approximately $12.3 million, including $6.8 million in deferred underwriting commissions payable to the underwriters of our IPO. The amount of the deferred underwriting commissions will not be adjusted based on redemptions of IPO Shares. The per-share amount we will distribute to holders of IPO Shares who properly exercise their redemption rights will not be reduced by the deferred underwriting commissions and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commissions.

If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.

Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we have sought and intend to continue to seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any funds held in the trust account for the benefit of our stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the funds held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any

 

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negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemption of our common stock, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. As a result, the per-share redemption amount received by stockholders could be less than the $10.00 per share initially held in the trust account, due to claims of such creditors.

Our directors may decide not to enforce the indemnification obligations of the sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our stockholders.

In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.00 per share or (ii) other than due to the failure to obtain a waiver to seek access to the trust account, such lesser amount per share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to fund our working capital requirements and/or to pay our tax obligations (less up to $100,000 of such net interest to pay dissolution expenses), and the sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against the sponsor to enforce its indemnification obligations.

While we currently expect that our independent directors would take legal action on our behalf against the sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine a favorable outcome is unlikely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in our trust account available for distribution to our stockholders may be reduced below $10.00 per share.

If, after we distribute the proceeds in the trust account to our stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our board may be exposed to claims of punitive damages.

If, after we distribute the proceeds in the trust account to our stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying holders of IPO Shares from the trust account prior to addressing the claims of creditors.

If, before distributing the proceeds in the trust account to our stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the trust account to our stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

 

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Stockholders will not have any rights or interests in funds from the trust account, except under certain limited circumstances. In order for stockholders to liquidate their investment, therefore, you may be forced to sell your shares or warrants, potentially at a loss.

Our stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) our completion of an initial business combination, such as the merger, and then only in connection with those shares of common stock that such stockholder properly elected to redeem, subject to the limitations described herein; (ii) the redemption of any shares properly submitted in connection with a stockholder vote to amend our current charter (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our current charter or to redeem 100% of our shares if we do not complete our initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter) or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (iii) the redemption of our shares if we are unable to complete an initial business combination by the applicable extension date (the latest of which is January 14, 2024 if our board of directors approves both two three-month extensions allowed under the current charter), as further described herein. In no other circumstances will a stockholder have any right or interest of any kind in the trust account. Holders of warrants will not have any right to the proceeds held in the trust account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your shares or warrants, potentially at a loss.

Even if we consummate the merger, there is no guarantee that the IPO warrants will be in the money at the time they become exercisable, and they may expire worthless.

The exercise price for our warrants is $11.50 per share of common stock. There is no guarantee that the IPO warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless.

Following the consummation of the merger, New GRIID’s sole material asset will be its direct equity interest in GRIID and, accordingly, New GRIID will be dependent upon distributions from GRIID to pay taxes and cover its corporate and other overhead expenses and pay dividends, if any, on New GRIID’s common stock.

New GRIID will be a holding company and, subsequent to the completion of the merger, will have no material assets other than its direct equity interest in GRIID. New GRIID will have no independent means of generating revenue. To the extent GRIID has available cash, New GRIID will cause GRIID to make distributions of cash to pay taxes, cover New GRIID’s corporate and other overhead expenses and pay dividends, if any, on New GRIID common stock. To the extent that New GRIID needs funds and GRIID fails to generate sufficient cash flow to distribute funds to New GRIID or is restricted from making such distributions or payments under applicable law or regulation or under the terms of its financing arrangements, or is otherwise unable to provide such funds, New GRIID’s liquidity and financial condition could be materially adversely affected.

Subsequent to our completion of the merger, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

Although we have conducted due diligence on GRIID, we cannot assure you that this diligence will surface all material issues that may be present in GRIID’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of GRIID’s business and outside of our and GRIID’s control will not later arise, such as the situation in Ukraine. As a result of these factors, we may be forced to later write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges

 

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of this nature could contribute to negative market perceptions about the surviving company or its securities. Accordingly, any of our stockholders who choose to remain stockholders following the merger could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.

We cannot assure you that our diligence review has identified all material risks associated with the merger, and you may be less protected as an investor from any material issues with respect to GRIID’s business, including any material omissions or misstatements contained in this proxy statement/prospectus relating to the merger, than an investor in an underwritten initial public offering.

Before entering into the initial merger agreement, we performed a due diligence review of GRIID and its business and operations; however, we cannot assure you that our due diligence review identified all material issues, and certain unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Additionally, the scope of due diligence we have conducted in conjunction with the merger may be different than would typically be conducted in the event GRIID pursued an underwritten initial public offering. In a typical initial public offering, the underwriters of the offering conduct due diligence on the company to be taken public, and following the offering, the underwriters are subject to liability to private investors for any material misstatements or omissions in the registration statement. While potential investors in an initial public offering typically have a private right of action against the underwriters of the offering for any of these material misstatements or omissions, there are no underwriters of the common stock that will be issued pursuant to the registration statement of which this proxy statement/prospectus forms a part and thus no corresponding right of action is available to our stockholders for any material misstatements or omissions in such registration statement and this proxy statement/prospectus. Therefore, as a stockholder, you may be exposed to future losses, impairment charges, write-downs, write-offs or other charges that could have a significant negative effect on New GRIID’s financial condition, results of operations and the price of its securities, which could cause you to lose some or all of your investment without recourse against an underwriter that may have been available had GRIID been taken public through an underwritten public offering.

Our stockholders will not be entitled to protections normally afforded to investors of many other blank check companies.

Since the net proceeds of the IPO and the sale of the warrants are intended to be used to complete the merger, we may be deemed to be a “blank check” company under the U.S. securities laws. However, for so long as we have net tangible assets in excess of $5,000,000, we will be exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Securities Act Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means our units are immediately tradable and we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419. Moreover, offerings subject to Rule 419 would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of our initial business combination.

We have no operating or financial history and our results of operations and those of the surviving company may differ significantly from the unaudited pro forma financial data included in this proxy statement/prospectus.

We are a blank check company and we have no operating history and no revenues. This proxy statement/prospectus includes unaudited pro forma condensed combined financial statements for the surviving company. The unaudited pro forma condensed combined statement of operations of the surviving company combined the historical results of operations of ADEX for the periods ended June 30, 2023 and December 31, 2022, with the historical results of operations of GRIID for the periods ended June 30, 2023 and December 31, 2022, and gives pro forma effect to the merger as if it had been consummated on January 1, 2022. The unaudited pro forma condensed combined balance sheet of the surviving company combines the historical balance sheets of ADEX as of June 30, 2023 and of GRIID as of June 30, 2023 and gives pro forma effect to the merger as if it had been consummated on June 30, 2023.

 

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The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the merger been consummated on the dates indicated above, or the future consolidated results of operations or financial position of the surviving company. Accordingly, the surviving company’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We will be subject to income taxes in the United States and other jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

   

changes in the valuation of our deferred tax assets and liabilities;

 

   

expected timing and amount of the release of any tax valuation allowances;

 

   

tax effects of stock-based compensation;