false Q3 0001830029 --12-31 P20D P30D P30D P90D P20D P30D P3D P10D 200000 27600000 27600000 27600000 690000 0.02 0.01 0.13 0.02 P5Y5M4D P5Y3M3D P5Y4M24D 6900000 6900000 0.02 0.13 0001830029 2022-01-01 2022-09-30 xbrli:shares 0001830029 2022-11-10 0001830029 us-gaap:CapitalUnitsMember 2022-01-01 2022-09-30 0001830029 us-gaap:CommonStockMember 2022-01-01 2022-09-30 0001830029 us-gaap:WarrantMember 2022-01-01 2022-09-30 iso4217:USD 0001830029 2022-09-30 0001830029 2021-12-31 iso4217:USD xbrli:shares 0001830029 2022-07-01 2022-09-30 0001830029 2021-07-01 2021-09-30 0001830029 2021-01-01 2021-09-30 0001830029 us-gaap:CommonStockMember 2021-12-31 0001830029 us-gaap:RetainedEarningsMember 2021-12-31 0001830029 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001830029 2022-01-01 2022-03-31 0001830029 us-gaap:CommonStockMember 2022-03-31 0001830029 us-gaap:RetainedEarningsMember 2022-03-31 0001830029 2022-03-31 0001830029 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001830029 2022-04-01 2022-06-30 0001830029 us-gaap:CommonStockMember 2022-06-30 0001830029 us-gaap:RetainedEarningsMember 2022-06-30 0001830029 2022-06-30 0001830029 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0001830029 us-gaap:CommonStockMember 2022-09-30 0001830029 us-gaap:RetainedEarningsMember 2022-09-30 0001830029 us-gaap:CommonStockMember 2020-12-31 0001830029 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001830029 us-gaap:RetainedEarningsMember 2020-12-31 0001830029 2020-12-31 0001830029 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001830029 2021-01-01 2021-03-31 0001830029 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001830029 us-gaap:CommonStockMember 2021-03-31 0001830029 us-gaap:RetainedEarningsMember 2021-03-31 0001830029 2021-03-31 0001830029 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001830029 2021-04-01 2021-06-30 0001830029 us-gaap:CommonStockMember 2021-06-30 0001830029 us-gaap:RetainedEarningsMember 2021-06-30 0001830029 2021-06-30 0001830029 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0001830029 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0001830029 us-gaap:CommonStockMember 2021-09-30 0001830029 us-gaap:RetainedEarningsMember 2021-09-30 0001830029 2021-09-30 adex:Subsidiary 0001830029 adex:ADEXMergerSubLLCMember 2022-09-30 0001830029 adex:ADEXMergerSubLLCMember 2022-01-01 2022-09-30 0001830029 us-gaap:IPOMember 2021-01-14 2021-01-14 0001830029 us-gaap:IPOMember 2021-01-14 0001830029 2021-01-14 2021-01-14 0001830029 2021-01-14 0001830029 2021-01-19 2021-01-19 0001830029 srt:MaximumMember 2021-01-19 2021-01-19 0001830029 us-gaap:OverAllotmentOptionMember 2021-01-19 2021-01-19 0001830029 2021-01-19 0001830029 adex:InitialPublicOfferingOverAllotmentAndPrivatePlacementMember 2021-01-19 xbrli:pure 0001830029 us-gaap:IPOMember 2022-09-30 0001830029 srt:MaximumMember 2022-01-01 2022-09-30 0001830029 adex:FounderSharesMember adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2020-10-15 2020-10-31 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember adex:PromissoryNoteMember 2020-12-31 0001830029 us-gaap:IPOMember 2022-01-01 2022-09-30 0001830029 2022-08-16 2022-08-16 0001830029 adex:PublicWarrantsMember 2021-01-14 2021-01-14 0001830029 adex:PublicWarrantsMember 2021-01-14 0001830029 adex:PublicWarrantsMember 2022-01-01 2022-09-30 0001830029 us-gaap:OverAllotmentOptionMember 2021-01-19 0001830029 2021-01-01 2021-12-31 0001830029 adex:FounderSharesMember srt:DirectorMember 2020-10-27 2020-10-27 0001830029 adex:FounderSharesMember adex:IndustryAdvisorsMember 2020-10-27 2020-10-27 0001830029 adex:FounderSharesMember 2021-01-11 2021-01-11 0001830029 adex:FounderSharesMember adex:AdvisorMember srt:MaximumMember 2021-01-11 2021-01-11 0001830029 adex:FounderSharesMember 2021-01-19 2021-01-19 0001830029 2021-04-17 0001830029 2021-04-17 2021-04-17 0001830029 adex:PromissoryNoteMember adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2020-10-23 0001830029 adex:PromissoryNoteMember adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2022-01-01 2022-09-30 0001830029 adex:PromissoryNoteMember adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2020-10-23 2020-10-23 0001830029 adex:PromissoryNoteMember adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2021-07-28 2021-07-28 0001830029 adex:PromissoryNoteMember adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2022-09-30 0001830029 adex:PromissoryNoteMember adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2021-12-31 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember adex:NewPromissoryNoteMember 2021-08-06 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember adex:NewPromissoryNoteMember 2021-08-06 2021-08-06 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember adex:NewPromissoryNoteMember 2022-09-30 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember adex:NewPromissoryNoteMember 2021-12-31 0001830029 srt:MaximumMember 2022-09-30 0001830029 adex:NewPromissoryNoteMember 2022-09-30 0001830029 adex:NewPromissoryNoteMember 2021-12-31 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember srt:MaximumMember 2021-01-11 2021-01-11 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2022-07-01 2022-09-30 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2022-01-01 2022-09-30 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2021-07-01 2021-09-30 0001830029 adex:AditEdTechSponsorLimitedLiabilityCompanyMember 2021-01-01 2021-09-30 0001830029 us-gaap:FairValueMeasurementsRecurringMember adex:WarrantLiabilityPrivatePlacementWarrantsMember 2022-09-30 0001830029 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member adex:WarrantLiabilityPrivatePlacementWarrantsMember 2022-09-30 0001830029 us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001830029 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2022-09-30 0001830029 us-gaap:FairValueMeasurementsRecurringMember adex:WarrantLiabilityPrivatePlacementWarrantsMember 2021-12-31 0001830029 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member adex:WarrantLiabilityPrivatePlacementWarrantsMember 2021-12-31 0001830029 us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001830029 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001830029 us-gaap:MoneyMarketFundsMember 2022-09-30 0001830029 us-gaap:USTreasurySecuritiesMember 2022-09-30 0001830029 us-gaap:MoneyMarketFundsMember 2021-12-31 0001830029 us-gaap:USTreasurySecuritiesMember 2021-12-31 0001830029 srt:MinimumMember 2022-01-01 2022-09-30 0001830029 2021-12-22 2021-12-23 0001830029 2021-12-23 0001830029 us-gaap:FairValueInputsLevel3Member 2021-12-31 0001830029 us-gaap:FairValueInputsLevel3Member 2022-01-01 2022-03-31 0001830029 us-gaap:FairValueInputsLevel3Member 2022-03-31 0001830029 us-gaap:FairValueInputsLevel3Member 2022-04-01 2022-06-30 0001830029 us-gaap:FairValueInputsLevel3Member 2022-06-30 0001830029 us-gaap:FairValueInputsLevel3Member 2022-07-01 2022-09-30 0001830029 adex:UnderwritingAgreementMember us-gaap:IPOMember 2021-01-19 2021-01-19 0001830029 adex:GriidHoldcoLLCMember 2021-11-29 2021-11-29 0001830029 adex:GriidHoldcoLLCMember adex:SecondAmendmentMember 2021-11-29 2021-11-29 0001830029 adex:SecondAmendmentMember 2021-11-29 2021-11-29 0001830029 adex:CybersecurityDueDiligenceServicesMember adex:EvolveSecurityLLCMember 2021-08-17 2021-08-17 0001830029 adex:AccountingDueDiligenceServicesMember adex:EdelsteinAndCompanyLLPMember 2021-08-17 2021-08-17 0001830029 2021-08-17 0001830029 2021-08-18 0001830029 adex:WellsFargoSecuritiesLLCMember 2021-09-13 0001830029 adex:WellsFargoSecuritiesLLCMember 2021-09-13 2021-09-13 0001830029 adex:WellsFargoSecuritiesLLCMember 2021-09-14 2021-09-14 0001830029 adex:WellsFargoSecuritiesLLCMember 2021-09-14 0001830029 adex:GEMYieldBahamasLimitedMember adex:SharePurchaseAgreementMember 2022-09-09 0001830029 adex:GEMYieldBahamasLimitedMember adex:SharePurchaseAgreementMember 2022-09-09 2022-09-09 0001830029 adex:GriidHoldcoLLCMember adex:SharePurchaseAgreementMember 2022-09-09 2022-09-09

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 001-39872

 

 

ADIT EDTECH ACQUISITION CORP.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

85-3477678

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1345 Avenue of the Americas, 33rd Floor

New York, New York 10105

 

(Address of principal executive offices, including zip code)

(646) 291-6930

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act

 

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

Units, each consisting of one share of common stock and one-half of one redeemable warrant

 

ADEX.U

 

New York Stock Exchange

Common Stock, par value $0.0001 per share

 

ADEX

 

New York Stock Exchange

Redeemable warrants, exercisable for shares of common stock at an exercise price of $11.50 per share

 

ADEX.WS

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes        No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 10, 2022, there were 34,500,000 outstanding shares of the registrant’s common stock, $0.0001 par value per share.

 

 

 

 


 

 

ADIT EDTECH ACQUISITION CORP.

Quarterly Report on Form 10-Q

Table of Contents 

 

PART I. FINANCIAL INFORMATION

1

 

 

 

Item 1.

Financial Statements

1

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

1

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)

2

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2022 and 2021 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)

4

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

5

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

 

 

 

Item 4.

Controls and Procedures

27

 

 

PART II. OTHER INFORMATION

28

 

 

 

Item 1.

Legal Proceedings

28

 

 

 

Item 1A.

Risk Factors

28

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

 

 

 

Item 3.

Defaults Upon Senior Securities

30

 

 

 

Item 4.

Mine Safety Disclosures

30

 

 

 

Item 5.

Other Information

30

 

 

 

Item 6.

Exhibits

31

 

 

SIGNATURES

32

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

ADIT EDTECH ACQUISITION CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash

 

$

30,848

 

 

$

462,274

 

Prepaid expenses

 

 

123,177

 

 

 

265,282

 

Total current assets

 

 

154,025

 

 

 

727,556

 

Prepaid expenses, non-current

 

 

 

 

 

14,384

 

Cash and securities held in Trust Account

 

 

277,658,548

 

 

 

276,115,444

 

Total Assets

 

$

277,812,573

 

 

$

276,857,384

 

Liabilities, Common Stock Subject to Possible Redemption and

   Stockholders’ Deficit

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accrued offering costs and expenses

 

$

3,685,554

 

 

$

3,153,755

 

Due to related party

 

 

108,986

 

 

 

18,986

 

Income taxes payable

 

 

316,701

 

 

 

 

Working capital loan - related party

 

 

250,000

 

 

 

150,000

 

Total current liabilities

 

 

4,361,241

 

 

 

3,322,741

 

Warrant liability

 

 

335,745

 

 

 

5,044,441

 

Deferred underwriting discount

 

 

9,660,000

 

 

 

9,660,000

 

Total liabilities

 

 

14,356,986

 

 

 

18,027,182

 

Commitments

 

 

 

 

 

 

 

 

Common stock subject to possible redemption, 27,600,000 shares

   at redemption values of $10.04 and $10.00 at September 30, 2022

   and December 31, 2021, respectively

 

 

277,191,397

 

 

 

276,000,000

 

Stockholders’ Deficit:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 1,000,000 shares authorized;

   none issued and outstanding at September 30, 2022 and

   December 31, 2021, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value; 100,000,000 shares authorized;

      6,900,000 shares issued and outstanding (excluding 27,600,000

   shares at redemption value) at September 30, 2022 and

   December 31, 2021, respectively

 

 

690

 

 

 

690

 

Additional paid-in capital

 

 

 

 

 

 

Accumulated deficit

 

 

(13,736,500

)

 

 

(17,170,488

)

Total Stockholders’ Deficit

 

 

(13,735,810

)

 

 

(17,169,798

)

Total Liabilities, Common Stock Subject to Possible Redemption

   and Stockholders’ Deficit

 

$

277,812,573

 

 

$

276,857,384

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

1


 

ADIT EDTECH ACQUISITION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three
Months Ended

September 30,

 

 

Nine
Months Ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Formation and operating costs

 

$

364,061

 

 

$

450,588

 

 

$

1,509,714

 

 

$

675,928

 

Loss from operations

 

 

(364,061

)

 

 

(450,588

)

 

 

(1,509,714

)

 

 

(675,928

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrants

 

 

37,956

 

 

 

 

 

 

4,708,696

 

 

 

 

Trust interest income

 

 

1,296,308

 

 

 

27,656

 

 

 

1,743,104

 

 

 

83,453

 

Total other income, net

 

 

1,334,264

 

 

 

27,656

 

 

 

6,451,800

 

 

 

83,453

 

Income (Loss) before provision for income taxes

 

 

970,203

 

 

 

(422,932

)

 

 

4,942,086

 

 

 

(592,475

)

Provision for income taxes

 

 

(294,065

)

 

 

 

 

 

(316,701

)

 

 

 

Net income (loss)

 

$

676,138

 

 

$

(422,932

)

 

$

4,625,385

 

 

$

(592,475

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares

outstanding, redeemable common stock

 

 

27,600,000

 

 

 

27,600,000

 

 

 

27,600,000

 

 

 

6,900,000

 

Basic and diluted net income (loss) per share

 

$

0.02

 

 

$

(0.01

)

 

 

0.13

 

 

 

(0.02

)

Basic and diluted weighted average shares

outstanding, common stock

 

 

6,900,000

 

 

 

 

 

 

6,900,000

 

 

 

 

Basic and diluted net income (loss) per share

 

$

0.02

 

 

$

 

 

 

0.13

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

 

2


 

ADIT EDTECH ACQUISITION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(UNAUDITED)

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Deficit

 

 

Deficit

 

Balance as of January 1, 2022

 

 

6,900,000

 

 

$

690

 

 

$

 

 

$

(17,170,488

)

 

$

(17,169,798

)

Net income

 

 

 

 

 

 

 

 

 

 

 

1,217,736

 

 

 

1,217,736

 

Balance as of March 31, 2022

 

 

6,900,000

 

 

 

690

 

 

 

 

 

 

(15,952,752

)

 

 

(15,952,062

)

Net income

 

 

 

 

 

 

 

 

 

 

 

2,731,511

 

 

 

2,731,511

 

Remeasurement of carrying value to

redemption value

 

 

 

 

 

 

 

 

 

 

 

(239,154

)

 

 

(239,154

)

Balance as of June 30, 2022

 

 

6,900,000

 

 

 

690

 

 

 

 

 

 

(13,460,395

)

 

 

(13,459,705

)

Net income

 

 

 

 

 

 

 

 

 

 

 

676,138

 

 

 

676,138

 

Remeasurement of carrying value to

redemption value

 

 

 

 

 

 

 

 

 

 

 

(952,243

)

 

 

(952,243

)

Balance as of September 30, 2022

 

 

6,900,000

 

 

$

690

 

 

$

 

 

$

(13,736,500

)

 

$

(13,735,810

)

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Deficit

 

 

Equity (Deficit)

 

Balance as of January 1, 2021

 

 

6,900,000

 

 

$

690

 

 

$

24,310

 

 

$

(526

)

 

$

24,474

 

Proceeds allocated to Private Placement Warrants

 

 

 

 

 

 

 

 

7,270,000

 

 

 

 

 

 

7,270,000

 

Subsequent remeasurement under ASC 480-10-S99

 

 

 

 

 

 

 

 

(7,294,310

)

 

 

(8,521,776

)

 

 

(15,816,086

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(49,954

)

 

 

(49,954

)

Balance as of March 31, 2021

 

 

6,900,000

 

 

 

690

 

 

 

 

 

 

(8,572,256

)

 

 

(8,571,566

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(119,589

)

 

 

(119,589

)

Balance as of June 30, 2021

 

 

6,900,000

 

 

 

690

 

 

 

 

 

 

(8,691,845

)

 

 

(8,691,155

)

Offering costs charged to additional paid-in capital

 

 

 

 

 

 

 

 

(14,950

)

 

 

 

 

 

(14,950

)

Reduce negative additional paid-in capital to zero

 

 

 

 

 

 

 

 

14,950

 

 

 

(14,950

)

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(422,932

 

 

(422,932

)

Balance as of September 30, 2021

 

 

6,900,000

 

 

$

690

 

 

$

 

 

$

(9,129,727

)

 

$

(9,129,037

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

3


 

ADIT EDTECH ACQUISITION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

For the Nine Months Ended

September 30, 

 

 

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

4,625,385

 

 

$

(592,475

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Change in fair value of warrants

 

 

(4,708,696

)

 

 

 

Interest earned on cash and marketable securities held in Trust Account

 

 

(1,743,104

)

 

 

(83,453

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

156,489

 

 

 

(354,087

)

Income taxes payable

 

 

316,701

 

 

 

 

Accrued offering costs and expenses

 

 

531,799

 

 

 

401,055

 

Due to related party

 

 

90,000

 

 

 

30,214

 

Net cash used in operating activities

 

 

(731,426

)

 

 

(598,746

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Investment held in Trust Account

 

 

 

 

 

(276,000,000

)

Cash withdrawn from Trust Account to pay franchise tax and income taxes

 

 

200,000

 

 

 

 

Net cash provided by (used in) investing activities

 

 

200,000

 

 

 

(276,000,000

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from Initial Public Offering, net of underwriters’ fees

 

 

 

 

 

270,480,000

 

Proceeds from issuance of promissory note to related party

 

 

100,000

 

 

 

 

Proceeds from private placement

 

 

 

 

 

7,270,000

 

Payments of offering costs

 

 

 

 

 

(651,036

)

Net cash provided by financing activities

 

 

100,000

 

 

 

277,098,964

 

Net change in cash

 

 

(431,426

)

 

 

500,218

 

Cash, beginning of the period

 

 

462,274

 

 

 

35,614

 

Cash, end of the period

 

$

30,848

 

 

$

535,832

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Deferred underwriting commissions charged to additional paid-in capital

 

$

 

 

$

9,660,000

 

Initial value of common stock subject to possible redemption

 

$

 

 

$

276,000,000

 

Remeasurement of carrying value to redemption value

 

$

1,191,397

 

 

$

 

Deferred offering costs paid by Sponsor loan

 

$

 

 

$

18,773

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4


 

ADIT EDTECH ACQUISITION CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 1 — Organization and Business Operations

Organization and General

Adit EdTech Acquisition Corp. (the “Company”) was incorporated in Delaware on October 15, 2020. The Company is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”). Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus its search for a business that would benefit from its founders’ and management team’s experience and ability to identify, acquire and manage a business in the education, training and education technology industries.

The Company has one wholly owned subsidiary, ADEX Merger Sub, LLC, a Delaware limited liability company incorporated on November 24, 2021. There has been no activity since inception.

The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

The Company has selected December 31 as its fiscal year end. 

As of September 30, 2022, the Company had not commenced any operations. All activity for the period from October 15, 2020 (inception) through September 30, 2022 relates to the Company’s formation and the initial public offering (“IPO”), which is described below, and since the closing of the IPO, the search for a prospective initial Business Combination (see Note 7). The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO and change in the fair value of its Private Placement Warrants derivative liability.

The Company’s sponsor is Adit EdTech Sponsor, LLC, a Delaware limited liability company (the “Sponsor”).

Financing

The registration statements for the Company’s IPO were declared effective on January 11, 2021. On January 14, 2021, the Company consummated the IPO of 24,000,000 units (the “Units” and, with respect to the shares of common stock included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $240,000,000.

Simultaneously with the closing of the IPO, the Company consummated the sale of 6,550,000 Private Placement Warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating total gross proceeds of $6,550,000.

The Company granted the underwriters in the IPO a 45-day option to purchase up to 3,600,000 additional Units to cover over-allotments, if any. On January 19, 2021, the underwriters exercised the over-allotment option in full to purchase 3,600,000 Units (the “Over-allotment Units”), generating aggregate gross proceeds of $36,000,000, and incurred $720,000 in deferred underwriting fees. Simultaneously with the closing of the sale of the Over-allotment Units, the Company consummated the sale of an additional 720,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $720,000.

Transaction costs amounted to $13,836,086 consisting of $4,800,000 of underwriting discount, $8,400,000 of deferred underwriting discounts and commissions, and $636,086 of other offering costs.

 

Trust Account

Following the closing of the IPO on January 14, 2021 and the underwriters’ full exercise of their over-allotment option on January 19, 2021, $276,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO, the sale of Over-allotment Units and the sale of the Private Placement Warrants were placed in a Trust Account, which are held as cash or invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of

5


180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account.

Initial Business Combination

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption are recorded at redemption value and classified as temporary equity upon the completion of the IPO in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.”

The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the then outstanding shares of common stock present and entitled to vote at the meeting to approve the Business Combination are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC containing substantially the same information as would be included in a proxy statement prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares it purchased during or after the IPO in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or do not vote at all.

Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, 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 under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.

The Sponsor and the Company’s officers, directors and industry advisors have agreed (a) to waive redemption rights with respect to the Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination and certain amendments to the Amended and Restated Certificate of Incorporation or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.

The Company will have until January 14, 2023 to complete a Business Combination. However, the Company intends to solicit proxies at a special meeting of its stockholders (the “Extension Meeting”), at which the Company plans to seek the approval of its stockholders of 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 for an additional one month each time for a maximum of six one-month extensions (such proposal, the “Extension Proposal,” and such extended date, as applicable, the “Extension Date”). The Company intends to provide holders of Public Shares with the ability to redeem such Public Shares in connection with the Extension Meeting. If the Company is unable to complete a Business Combination by January 14, 2023 or by the applicable Extension Date if the Extension Proposal is approved (the period from the consummation of the Company’s IPO to such date, the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in

6


the Trust Account including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The holders of the Founder Shares have agreed to waive liquidation rights with respect to such shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquired Public Shares in, or acquires Public Shares after, the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The IPO underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the IPO price per Unit ($10.00).

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of trust assets, in each case net of the interest which may be withdrawn to pay the Company’s tax obligation and up to $100,000 for liquidation expenses, 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 (even if such waiver is deemed to be unenforceable) and except as to any claims under the Company’s indemnity of the underwriters of IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

 

 Liquidity and Capital Resources

 

As of September 30, 2022, the Company had approximately $31,000 in its operating bank account and a working capital deficit of approximately $3.7 million, excluding approximately $0.2 million in franchise tax payable and approximately $0.3 million in income taxes payable that can be paid through the interest income earned on Trust Account.

 

Prior to the completion of the IPO, the Company’s liquidity needs had been satisfied through a payment from the Sponsor of $25,000 (see Note 5) for the Founder Shares to cover certain offering costs and a loan under an unsecured promissory note from the Sponsor of $150,000 (see Note 5). Subsequent to the consummation of the IPO and sale of Private Placement Warrants, the Company’s liquidity needs have been satisfied through the proceeds from the consummation of the sale of Private Placement Warrants not held in the Trust Account.

In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or the Company’s officers and directors or their affiliates may, but are not obligated to, provide the Company Working Capital Loans (as defined below) (see Note 5).

 

Going Concern Consideration

The Company anticipates that the approximately $31,000 in its operating bank account as of September 30, 2022 will not be sufficient to allow the Company to operate for at least the next 12 months, assuming that a Business Combination is not consummated during that time. The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the issuance date of the condensed financial statements. Management plans to address this uncertainty through loans from its Sponsor, officers, directors or third parties. None of the Sponsor, officers or directors are under any obligation to advance funds to, or to invest in, the Company. There is no assurance that the Company’s plans to raise capital or to consummate a Business Combination will be successful. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

7


Further, management has determined that if the Company is unable to complete a Business Combination within the Combination Period, then the Company will (a) cease all operations except for the purpose of winding up, (b) as promptly as reasonably possible but not more than ten business days thereafter, redeem all of the Public Shares and (c) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and in accordance with applicable law, dissolve and liquidate. The date for mandatory liquidation and subsequent dissolution as well as the Company’s working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after the Combination Period.

 

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K filed by the Company with the SEC on March 18, 2022. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, ADEX Merger Sub, LLC. There has been no intercompany activity since inception.  

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, 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. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial

8


statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2022 and December 31, 2021.

Cash and Securities Held in Trust Account

Cash and securities held in Trust Account consist of United States treasury securities. The Company classifies its United States Treasury securities as held-to-maturity in accordance with ASC Topic 320, “InvestmentsDebt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.

A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.

Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “Trust interest income” line item in the statements of operations. Trust interest income is recognized when earned.

Fair Value Measurements

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

 

 

Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;

 

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets. The fair values of cash and promissory note to related party are estimated to approximate the carrying values as of September 30, 2022 and December 31, 2021 due to the short maturities of such instruments.

The fair value of the Private Placement Warrants is based on a Monte Carlo valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the Private Placement Warrants is classified as Level 3. See Note 6 for additional information on assets and liabilities measured at fair value.

 

9


 

 Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At September 30, 2022 and December 31, 2021, the Company has not experienced losses on this account, and management believes that the Company is not exposed to significant risks on such account.

Common Stock Subject to Possible Redemption

All of the 27,600,000 shares of common stock sold as part of the Units (see Note 3) contain a redemption feature, which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with a Business Combination or certain amendments to the Company’s amended and restated articles of incorporation. In accordance with ASC 480-10-S99, redemption provisions, not solely within the control of the Company, require shares of common stock subject to redemption to be classified outside of permanent equity. Therefore, all 27,600,000 shares of common stock were classified outside of permanent equity as of September 30, 2022 and December 31, 2021.

The Company recognizes changes in redemption value immediately as they occur upon the IPO and will adjust the carrying value of redeemable shares of common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares of common stock are recorded as charges against additional paid-in capital and accumulated deficit. 

Net Income (Loss) Per Share of Common Stock

The Company has two categories of shares, which are referred to as redeemable shares of common stock and non-redeemable shares of common stock. Earnings and losses are shared pro rata between the two categories of shares. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each category for the three and nine months ended September 30, 2022 and 2021:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

Redeemable common
stock

 

 

Non-
redeemable common stock

 

 

Redeemable common
stock

 

 

Non-
redeemable common stock

 

 

Redeemable common
stock

 

 

Non-
redeemable common stock

 

 

Redeemable common
stock

 

 

Non-
redeemable common stock

 

Basic and diluted net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of net income (loss)

 

$

540,910

 

 

$

135,228

 

 

$

(422,932

 

 

 

 

$

3,700,308

 

 

$

925,077

 

 

$

(592,475

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding including common stock subject to redemption

 

 

27,600,000

 

 

 

6,900,000

 

 

 

27,600,000

 

 

 

 

 

 

27,600,000

 

 

 

6,900,000

 

 

 

6,900,000

 

 

 

 

Basic and diluted net income (loss) per share

 

$

0.02

 

 

$

0.02

 

 

$

(0.01

)

 

 

 

 

$

0.13

 

 

$

0.13

 

 

$

(0.02

)

 

 

 

 

10


 

Offering Costs associated with the Initial Public Offering

The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A— “Expenses of Offering.” Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. The Company incurred offering costs amounting to approximately $15.8 million as a result of the IPO, consisting of approximately $5.5 million of underwriting discount, approximately $9.7 million of deferred underwriting discounts and commissions, and approximately $0.7 million of other offering costs.

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Stock (“ASC 815-40”).” The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

 

At September 30, 2022 and December 31, 2021, the Company has evaluated both the Public Warrants (as defined below) and Private Placement Warrants under ASC 480 and ASC 815-40. Such guidance provides that because the Private Placement Warrants do not meet the criteria for equity treatment thereunder, each Private Placement Warrant must be recorded as a liability. Accordingly, the Company classified each Private Placement Warrant as a liability at its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s condensed statements of operations. The Private Placement Warrants had met the requirement for equity accounting treatment when initially issued. On the date of the IPO, the Company’s Private Placement Warrants met the criteria for equity classification. On December 23, 2021, the Private Placement Warrants were modified such that the Private Placement Warrants no longer meet the criteria for equity treatment. As such, the Private Placement Warrants were treated as derivative liability instruments from the date of the modification.

 

Income Taxes

 

The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, “Income Taxes”, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry-forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. The Company’s effective tax rate was 30.31% and 0.00% for the three months ended September 30, 2022 and 2021, respectively, and 6.41% and 0.00% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liability, nondeductible acquisition expenses, and the valuation allowance on the deferred tax assets.

 

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.

 

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

 

The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

11


Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic on the Company’s condensed consolidated financial statements and has concluded that, while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of operations and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed consolidated financial statements. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Inflation Reduction Act of 2022

The Inflation Reduction Act of 2022, signed into law on August 16, 2022, introduced a new excise tax on repurchases of stock after December 31, 2022 by domestic corporations whose stock is traded on an established securities market. The new excise tax is imposed on the repurchasing corporation, not the stockholders whose stock is repurchased. The tax is imposed at a rate of 1% of the fair market value of the stock repurchased during the corporation’s taxable year, reduced by the fair market value of stock issued during the taxable year. Because the Company is a Delaware corporation and its common stock is traded on the New York Stock Exchange, post-2022 repurchases of the Company’s stock will be subject to this 1% excise tax. The U.S. Department of the Treasury has been given authority to provide guidance to carry out and prevent the abuse or avoidance of this excise tax, but to date has not issued any such guidance. It is uncertain whether future guidance will exclude redemptions of the Company’s shares after December 31, 2022 from the application of the excise tax, including any redemptions after December 31, 2022 in connection with an initial Business Combination or any redemptions the Company may make if an initial Business Combination is not consummated. There is no guidance regarding whether and how stock issued in connection with an initial Business Combination after December 31, 2022 would reduce the fair market value of stock repurchased after December 31, 2022 that is subject to the excise tax. In addition, no guidance has been issued on the timing and manner of collection of this new excise tax in light of the annual netting of repurchases with issuances. It is also not clear whether and in what circumstances the IRS may collect funds from the Trust Account in the event the Company has insufficient funds to pay this excise tax.

 

Because any redemption that occurs as a result of the Extension Proposal, if approved, will occur before December 31, 2022, the Company will not be subject to the excise tax as a result of any redemptions in connection with the Extension Proposal, if approved.

 

The Company expects that if the new excise tax is imposed with respect to redemptions made after December 31, 2022, the Company will use interest earned on the Trust Account, as permitted by the Company’s charter, to satisfy any excise tax liability. If this were the case, the amount available in the Trust Account for distribution to stockholders in connection with a liquidation would be reduced if the Extension Proposal were approved. The cash on hand to fund operations after a Business Combination may also be reduced. This may adversely affect the Company’s ability to complete a Business Combination.

 

Recent Accounting Standards

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.

Note 3 — Initial Public Offering

Pursuant to the IPO on January 14, 2021, the Company sold 24,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of common stock and one-half of one warrant to purchase one share of common stock (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment.

12


On January 14, 2021, an aggregate of $10.00 per Unit sold in the IPO was held in the Trust Account and will be held as cash or invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act.

On January 19, 2021, the underwriters exercised the over-allotment option in full to purchase 3,600,000 Units.

Following the closing of the IPO on January 14, 2021 and the underwriters’ full exercise of the over-allotment option on January 19, 2021, $276,000,000 was held in the Trust Account.

As of September 30, 2022 and December 31, 2021, common stock subject to possible redemption reflected on the condensed consolidated balance sheets is reconciled in the following table:

 

Gross proceeds from public issuance

 

$

276,000,000

 

Less:

 

 

 

 

Proceeds allocated to public warrants

 

 

(16,771,351)

 

Common stock issuance costs

 

 

(14,849,933

)

Plus:

 

 

 

 

Remeasurement of carrying value to redemption value

 

 

31,621,284

 

Common stock subject to possible redemption, December 31, 2021

 

 

276,000,000

 

Plus:

 

 

 

 

Remeasurement of carrying value to redemption value

 

 

1,191,397

 

Common stock subject to possible redemption, September 30, 2022

 

$

277,191,397

 

 

Note 4 — Private Placement

Simultaneously with the closing of the IPO on January 14, 2021, the Sponsor purchased an aggregate of 6,550,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $6,550,000, in a private placement (the “Private Placement”).

On January 19, 2021, the underwriters exercised the over-allotment option in full to purchase 3,600,000 Units. Simultaneously with the closing of the exercise of the overallotment option, the Company completed the private sale of an aggregate of 720,000 Private Placement Warrants to the Sponsor at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds of $720,000.

Each Private Placement Warrant will entitle the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment. The proceeds from the Private Placement Warrants were added to the proceeds from the IPO held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.

On December 23, 2021, the Company amended the warrant agreement entered into on January 11, 2021 with Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent, to modify certain provisions to conform with applicable disclosure contained in the Company’s final prospectus filed with the SEC on January 13, 2021. Pursuant to the amended Private Placement Warrant agreement, a Private Placement Warrant will not be redeemable by the Company for so long as it is held by its initial purchaser or a permitted transferee of such purchaser. After giving effect to the amended Private Placement Warrant agreement, the Private Placement Warrants qualify for liability classification. The difference in the aggregate fair value of the Private Placement Warrants immediately before and after the modification was recognized as an equity issuance cost and charged to additional paid-in capital.

 

Note 5 — Related Party Transactions

Founder Shares

In October 2020, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration of 5,750,000 shares of the Company’s common stock (the “Founder Shares”). On October 27, 2020, the Sponsor transferred 10,000 Founder Shares to each of the Company’s independent directors and 7,500 Founder Shares to each of the Company’s industry advisors at their

13


original purchase price (the Sponsor, independent directors and industry advisors being defined herein collectively as the “initial stockholders”). On January 11, 2021, the Company effected a stock dividend of 1,150,000 shares with respect to the common stock, resulting in the initial stockholders holding an aggregate of 6,900,000 Founder Shares (up to 900,000 of which are subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option is exercised). As such, the initial stockholders collectively own 20% of the Company’s issued and outstanding shares of common stock after the IPO. On January 19, 2021, the underwriter exercised its over-allotment option in full; hence, the 900,000 Founder Shares are no longer subject to forfeiture.

The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Transactions with Company Officers

On April 17, 2021, Griid Holdco LLC, a Delaware limited liability company (“GRIID”), entered into an engagement letter and an incentive unit award agreement (together, the “consulting agreements”) with Deucalion Partners, LLC, an entity affiliated with John D’Agostino, the Company’s Chief Financial Officer. Pursuant to the consulting agreements, GRIID agreed to pay to such entity $400,000 and grant such entity units representing a 0.5% profits interest in GRIID. The cash payment will be due and payable upon the closing of the Merger. The units vested as to one-fourth on April 16, 2022, and have vested and will continue to vest 1/36th on the 17th day of each month thereafter, subject to such entity’s continued service through such vesting dates, provided, however, that any unvested units shall fully vest upon the consummation of a merger with a special purpose acquisition company, qualified initial public offering, or other change of control transaction.

Due to Related Parties

As of September 30, 2022 and December 31, 2021, one related party paid or is obligated to pay an aggregate of approximately $110,000 and $20,000, respectively, on behalf of the Company to pay for deferred administrative service fees and operating costs.

Promissory Note — Related Party

On October 23, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $150,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) June 30, 2021, (ii) the consummation of the IPO, (iii) the abandonment of the IPO and (iv) an Event of Default (as defined in the Promissory Note). As of December 31, 2020, the Company had borrowed $150,000 under the Promissory Note. On July 28, 2021, the Company repaid $150,000 to the Sponsor under the Promissory Note. There was no outstanding balance under the Promissory Note as of September 30, 2022 and December 31, 2021.

On August 6, 2021, the Company issued a new unsecured promissory note to the Sponsor in connection with a Working Capital Loan (as defined below) made by the Sponsor to the Company pursuant to which the Company may borrow up to $300,000 in the aggregate (the “New Promissory Note”). The note is non-interest bearing and payable on the earlier of (i) January 14, 2023 or (ii) the effective date of a Business Combination. Any amounts outstanding under the note are convertible into warrants, at a price of $1.00 per warrant at the option of the Sponsor, the terms of which shall be identical to the Private Placement Warrants. As of September 30, 2022 and December 31, 2021, the Company borrowed $ 250,000 and $150,000 under the note, respectively.

Related Party Loans

In order to finance transaction costs in connection with a Business Combination, the initial stockholders, the Sponsor or an affiliate of the Sponsor or the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $2,000,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 30, 2022 and December 31, 2021, a Working Capital Loan was outstanding in the amount of $250,000 and $150,000 respectively, under the New Promissory Note, as detailed under the heading “Promissory Note – Related Party.”

14


Administrative Service Fee

The Company entered into an agreement whereby, commencing on January 11, 2021, the Company has agreed to pay the Sponsor or an affiliate of the Sponsor an amount up to a total of $10,000 per month for office space, utilities, secretarial support and administrative services. For the three and nine months ended September 30, 2022, under such agreement, the Company incurred $30,000 and $90,000, respectively, in total, which is included due to related party on the accompanying balance sheet as of September 30, 2022. For the three and nine months ended September 30, 2021, under such agreement, the Company incurred and paid $30,000 and $90,000, respectively. Upon completion of the initial Business Combination or liquidation, the Company will cease paying these monthly fees.

Note 6 — Fair Value Measurements

 

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

 

 

 

September 30,

 

 

Quoted

Prices In

Active

Markets

 

 

Significant

Other

Observable

Inputs

 

 

Significant

Other

Unobservable

Inputs

 

 

 

2022

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability – Private Placement Warrants

 

$

335,745

 

 

$

 

 

$

 

 

$

335,745

 

 

 

$

335,745

 

 

$

 

 

$

 

 

$

335,745

 

 

 

 

December 31,

 

 

Quoted

Prices In

Active

Markets

 

 

Significant

Other

Observable

Inputs

 

 

Significant

Other

Unobservable

Inputs

 

 

 

2021

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability – Private Placement Warrants

 

$

5,044,441

 

 

$

 

 

$

 

 

$

5,044,441

 

 

 

$

5,044,441

 

 

$

 

 

$

 

 

$

5,044,441

 

 

Cash and securities held in Trust Account

As of September 30, 2022, investment in the Company’s Trust Account consisted of approximately $1,000 in U.S. Money Market funds and approximately $277.7 million, in U.S. treasury securities. As of December 31, 2021, investment in the Company’s Trust Account consisted of approximately $1,000 in U.S. Money Market funds and approximately $276.1 million, in U.S. treasury securities. The Company classifies its U.S. treasury securities as held-to-maturity in accordance with ASC 320, “Investments — Debt and Equity Securities.” Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts. The Company considers all investments with original maturities of more than three months but less than one year to be short-term investments. The carrying value approximates the fair value due to its short-term maturity.

The carrying value, excluding gross unrealized holding loss and fair value of held to maturity securities on September 30, 2022 and December 31, 2021 are as follows:

 

 

 

Carrying

Value/Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

as of

September 30,

2022

 

U.S. Money Market

 

$

1,145

 

 

$

 

 

$

 

 

$

1,145

 

U.S. Treasury Securities

 

 

277,657,403

 

 

 

 

 

 

11

 

 

 

277,657,392

 

 

 

$

277,658,548

 

 

$

 

 

$

11

 

 

$

277,658,537

 

15


 

 

 

 

Carrying

Value/Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value as of

December 31,

2021

 

U.S. Money Market

 

$

979

 

 

$

 

 

$

 

 

$

979

 

U.S. Treasury Securities

 

 

276,114,465

 

 

 

4,535

 

 

 

 

 

 

276,119,000

 

 

 

$

276,115,444

 

 

$

4,535

 

 

$

 

 

$

276,119,979

 

 

Warrant liability - Private Placement Warrants

The estimated fair value of the Private Placement Warrants was determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model are assumptions related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend yield and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the Private Placement Warrants. The expected life of the Private Placement Warrants is simulated based on management assumptions regarding the timing and likelihood of completing a Business Combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.

The key inputs into the Monte Carlo simulation model for the Private Placement Warrants were as follows at December 23, 2021:

 

Input

 

December 23,

2021

 

Expected term (years)

 

 

5.43

 

Expected volatility

 

 

13.20

%

Risk-free interest rate

 

 

1.21

%

Stock price

 

$

9.88

 

Dividend yield

 

 

0.00

%

Exercise price

 

$

11.50

 

 

The key inputs into the Monte Carlo simulation model for the Private Placement Warrants were as follows at September 30, 2022 and December 31, 2021:

 

Input

 

September 30,

2022

 

 

December 31,

2021

 

Expected term (years)

 

 

5.26

 

 

 

5.40

 

Expected volatility

 

 

2.8

%

 

 

11.70

%

Risk-free interest rate

 

 

4.05

%

 

 

1.20

%

Stock price

 

$

9.89

 

 

$

9.90

 

Dividend yield

 

 

0.00

%

 

 

0.00

%

Exercise price

 

$

11.50

 

 

$

11.50

 

 

The following table sets forth a summary of the changes in the Level 3 fair value classification:

 

 

 

Warrant

Liability

 

Fair value as of December 31, 2021

 

$

5,044,441

 

Change in fair value

 

 

(1,747,419

)

Fair value as of March 31, 2022

 

 

3,297,022

 

Change in fair value

 

 

(2,923,321

)

Fair value as of June 30, 2022

 

 

373,701

 

Change in fair value

 

 

(37,956

)

 

 

$

 

 

16


 

 

 

Note 7 — Commitments and Contingencies

Registration Rights

The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement signed on January 11, 2021, requiring the Company to register such securities for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement 

The underwriters were paid a cash underwriting discount of 2.0% of the gross proceeds of the IPO, or $5,520,000 in the aggregate. In addition, the underwriters are entitled to a deferred fee of 3.5% of the gross proceeds of the IPO, or $9,660,000.

Agreement

On November 29, 2021, the Company entered into an agreement and plan of merger (the “Initial Merger Agreement”) by and among the Company, ADEX Merger Sub, LLC, a Delaware limited liability company and a wholly owned direct subsidiary of the Company (“Merger Sub”), and GRIID. On December 23, 2021, the parties to the Initial Merger Agreement amended the Initial Merger Agreement.

 

On October 17, 2022, the Company, Merger Sub and GRIID entered into a second amendment (the “Second Amendment”) to the Initial Merger Agreement (as so amended, the “Merger Agreement”). The Merger Agreement, as amended, provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into GRIID (the “Merger”), the separate limited liability company existence of Merger Sub will cease, and GRIID, as the surviving company of the Merger, will continue its existence under the Limited Liability Company Act of the State of Delaware as a wholly owned subsidiary of the Company.

 

Pursuant to the Merger Agreement, at the closing of the Merger (the “Closing”), the limited liability company membership interests of Merger Sub will be converted into an equivalent limited liability company membership interest in GRIID, and each limited liability company membership unit of GRIID that is issued and outstanding immediately prior to the effective time of the Merger will automatically be converted into and become the right to receive such unit’s proportionate share, as determined in accordance with the Merger Agreement, of 58,500,000 shares of the Company’s common stock.

 

In addition to reducing the merger consideration to 58,500,000 shares of the Company’s common stock, the Second Amendment removes certain negative covenants limiting the Company’s conduct of its business during the period between the signing of the Merger Agreement and the Closing and permits the Company to pursue an alternative Business Combination transaction during the pre-closing period.

 

The Second Amendment eliminates GRIID’s ability to terminate the Merger Agreement if the Merger has not closed by an agreed outside date, extends that outside date to January 14, 2023 (subject to the Company’s right to extend such outside date for successive 90-day extensions at its sole discretion) and permits the Company to terminate the Merger Agreement (i) if the board of managers (or similar body) of GRIID approves any plan of liquidation, winding up or reorganization of GRIID or any of its subsidiaries or the sale, assignment, transfer, lease, license or other disposition of all or any material portion of the assets or equity of GRIID or any of its subsidiaries, (ii) if Blockchain Access UK Limited (“Blockchain”) provides notice under the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) by and between Blockchain and Griid Infrastructure LLC (“Holdco”) informing GRIID or Holdco that the amounts outstanding thereunder (x) have been accelerated or (y) will be accelerated and neither GRIID nor Holdco has an opportunity to cure the breach or breaches causing such acceleration or (iii) in order to enter into a binding written agreement providing for the consummation of an alternative Business Combination transaction.

 

17


 

Finally, the Second Amendment provides that upon (i) the termination of the Merger Agreement by the Company if (A) GRIID’s representations and warranties are untrue or GRIID fails to perform any covenant or agreement such that the respective condition to Closing is not satisfied, (B) there is an order by a government entity permanently enjoining the Merger, (C) GRIID’s members do not approve the Merger, (D) GRIID’s board of managers (or similar body) approves any plan of liquidation, winding up or reorganization for GRIID or any of its subsidiaries or (E) Blockchain provides notice to GRIID or any of GRIID’s subsidiaries of the acceleration of outstanding debt under the Credit Agreement, (ii) the termination of the Merger Agreement by GRIID if there is an order by a government entity permanently enjoining the Merger or (iii) any rejection of the Merger Agreement by GRIID or any of its subsidiaries in bankruptcy, insolvency, reorganizational or similar proceeding, GRIID will pay to the Company a non-refundable termination fee of $50,000,000.

The Merger Agreement and the transactions contemplated thereby were unanimously approved by the board of directors of the Company and the board of managers of GRIID.

 

The parties to the Merger Agreement have agreed to customary representations and warranties for transactions of this type. Additionally, under the Merger Agreement, the obligations of the parties to consummate the Merger are subject to the satisfaction or waiver of certain customary closing conditions.

 

If the Merger Agreement is validly terminated, none of the parties to the Merger Agreement will have any liability or any further obligation under the Merger Agreement other than customary confidentiality obligations, except in the case of Willful Breach or Fraud (each, as defined in the Merger Agreement).

Vendor Agreements

On August 17, 2021, the Company entered into a master services agreement (the “Evolve Agreement”) with Evolve Security, LLC (“Evolve”) for cybersecurity due diligence services related to the Merger. Under the Evolve Agreement, the Company paid Evolve $55,000.

On August 17, 2021, the Company entered into an engagement letter (the “Edelstein Letter”) with Edelstein & Company, LLP (“Edelstein”) for accounting due diligence services related to the Merger. Under the Edelstein Letter, Edelstein estimated its fees payable by the Company to be $16,000.

On August 17, 2021, the Company entered into an engagement letter (the “Lincoln Letter”) with Lincoln International LLC (“Lincoln”) for fairness opinion services related to the Merger. Under the Lincoln Letter, Lincoln will be entitled to receive a contingent fee in the amount of $500,000 plus expenses upon the consummation of the Merger.

On August 18, 2021, the Company entered into a consulting agreement (the “Consulting Agreement”) with Arthur D. Little LLC (“ADL”) for technical and commercial due diligence services related to the Merger. Under the Consulting Agreement, ADL will receive a contingent fee in the amount of $250,000 plus expenses upon the consummation of the Merger.

On September 13, 2021, the Company entered into an engagement letter (the “M&A Engagement Letter”) with Wells Fargo Securities, LLC (“Wells”), pursuant to which Wells would serve as financial advisor in connection with contemplated acquisitions made by the Company. Under the M&A Engagement Letter, Wells would receive $1,000,000 upon the consummation of a Business Combination, which amount would be offset against any amounts to which Wells is entitled under the Capital Markets Engagement Letter (as defined below), and would be entitled to 30% of any break-up fee the Company receives upon the termination of a business combination agreement. On May 26, 2022, Wells resigned from its role as financial advisor and waived all rights to any fees and compensation in connection with such role.

On September 14, 2021, the Company entered into engagement letters relating to a private investment in public equity (“PIPE”) financing (the “PIPE Engagement Letter”) and capital markets advisory services (the “Capital Markets Engagement Letter”), each with Wells. Under the PIPE Engagement Letter, Wells would receive a contingent fee equal to 4% of the gross proceeds of securities sold in the PIPE plus expenses. The Company will be obligated to pay an additional $1,500,000 if the gross proceeds of securities sold in a PIPE is above $100,000,000. Under the Capital Markets Engagement Letter, Wells would receive $3,500,000 upon the consummation of a Business Combination. On May 26, 2022, Wells resigned from its role as capital markets advisor and lead placement agent and waived all rights to any fees and compensation in connection with such roles.