ADIT EDTECH ACQUISITION CORP.

(ADEX)
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05/16ADIT EDTECH ACQUISITION CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)
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03/21ADIT EDTECH ACQUISITION : REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - Form 8-K/A
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ADIT EDTECH ACQUISITION CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

05/16/2022 | 05:18pm EDT

References to the "Company," "Adit EdTech Acquisition Corp.," "our," "us" or "we" refer to Adit EdTech Acquisition Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.

Overview

We are a blank check company incorporated in Delaware and formed for the purpose of effecting an initial Business Combination with one or more target businesses. We intend to effectuate our initial Business Combination using cash from the proceeds of the IPO and the private placement of the Private Placement Warrants, our stock, debt or a combination of cash, stock and debt.

The issuance of additional shares of our common stock in a Business Combination:

    •   may subordinate the rights of holders of our common stock if preferred
        stock is issued with rights senior to those afforded our common stock;

    •   may subordinate the rights of holders of our common stock if preferred
        stock is issued with rights senior to those afforded our common stock;




    •   could cause a change in control if a substantial number of shares of our
        common stock is issued, which may affect, among other things, our ability
        to use our net operating loss carry forwards, if any, and could result in
        the resignation or removal of our present management team;

    •   may have the effect of delaying or preventing a change of control of us
        by diluting the stock ownership or voting rights of a person seeking to
        obtain control of us; and




    •   may adversely affect prevailing market prices for our common stock and/or
        warrants.


Similarly, if we issue debt securities, it could result in:

    •   default and foreclosure on our assets if our operating revenues after an
        initial Business Combination are insufficient to repay our debt
        obligations;

    •   acceleration of our obligations to repay the indebtedness even if we make
        all principal and interest payments when due if we breach certain
        covenants that require the maintenance of certain financial ratios or
        reserves without a waiver or renegotiation of that covenant;

    •   our immediate payment of all principal and accrued interest, if any, if
        the debt security is payable on demand;

    •   our inability to obtain necessary additional financing if the debt
        security contains covenants;

    •   restricting our ability to obtain such financing while the debt security
        is outstanding;

    •   our inability to pay dividends on our common stock;



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    •   using a substantial portion of our cash flow to pay principal and
        interest on our debt, which will reduce the funds available for dividends
        on our common stock if declared, our ability to pay expenses, make
        capital expenditures and acquisitions, and fund other general corporate
        purposes;

    •   limitations on our flexibility in planning for and reacting to changes in
        our business and in the industry in which we operate;

    •   increased vulnerability to adverse changes in general economic, industry
        and competitive conditions and adverse changes in government regulation;

    •   limitations on our ability to borrow additional amounts for expenses,
        capital expenditures, acquisitions, debt service requirements, and
        execution of our strategy; and

    •   other purposes and other disadvantages compared to our competitors who
        have less debt.

On January 14, 2021, we completed our IPO of 24,000,000 Units. Each Unit consists of one share of Common Stock, and one-half of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of Common Stock at an exercise price of $11.50 per share, subject to adjustment, pursuant to the Company's registration statements on Form S-1 (File Nos. 333-251641 and 333-252021). The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $240,000,000.

On January 14, 2021, simultaneously with the consummation of the IPO, we completed a private placement of an aggregate of 6,550,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $6,550,000.

On January 15, 2021, the underwriters exercised their over-allotment option in full, and on January 19, 2021, the underwriters purchased an additional 3,600,000 Units at an offering price of $10.00 per Unit, generating gross proceeds of $36,000,000. Simultaneously with the closing of the sale of additional Units, the Company sold an additional 720,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $720,000. As of January 19, 2021, an aggregate amount of $276,000,000 of the net proceeds from the IPO (including the additional 3,600,000 Units and additional 720,000 Private Placement Warrants) were deposited in the Company's trust account established in connection with the IPO.

We paid a total of approximately $5.5 million in underwriting discounts and commissions and approximately $0.6 million for other costs and expenses related to the IPO.

Results of Operations

Our entire activity since inception up to March 31, 2022 relates to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, a search for a Business Combination candidate. We will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest.

For the three months ended March 31, 2022, we had net income of approximately $1.2 million, which consisted of approximately $0.6 million in formation and operating costs, offset by approximately $0.1 million in interest earned on marketable securities held in the Trust Account and change in fair value of warrant liability of approximately $1.7 million.

For the three months ended March 31, 2021, we had net loss of approximately $50,000, which consisted of approximately $90,000 in formation and operating costs, offset by approximately $40,000 in interest earned on marketable securities held in the Trust Account.

Liquidity and Capital Resources

As of March 31, 2022, we had approximately $0.2 million in our operating bank account, and a working capital deficit of approximately $3.0 million, excluding the franchise tax payable that can be paid through the interest income earned on Trust Account.

Prior to the completion of the Initial Public Offering, our liquidity needs had been satisfied through a capital contribution from the Sponsor of $25,000 in exchange for Founder Shares, to cover certain offering costs, and a loan under an unsecured promissory note from the Sponsor of $150,000. Subsequent to the consummation of the Initial Public Offering and Private Placement, our


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liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement Warrants not held in the Trust Account.

In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans.

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

Going Concern Consideration

The Company anticipates that the approximately $0.2 million in its operating bank account as of March 31, 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 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 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Financing Arrangements

As of March 31, 2022, we did not have any off-balance sheet arrangements. We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial assets.

On November 29, 2021, we entered into the Merger Agreement. The Merger Agreement 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 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 Merger Agreement and the transactions contemplated thereby were unanimously approved by the board of directors of ADEX and the board of managers of GRIID.

Contractual Obligations

At March 31, 2022, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than what is disclosed in the condensed balance sheet.

JOBS Act

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an "emerging growth company" and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company", we choose to rely


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on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the IPO or until we are no longer an "emerging growth company," whichever is earlier.

Critical Accounting Policies

Management's discussion and analysis of our results of operations and liquidity and capital resources are based on our unaudited condensed consolidated financial information. We describe our significant accounting policies in Note 2 - Significant Accounting Policies, of the Notes to Financial Statements included in this Quarterly Report on Form 10-Q. Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. Certain of our accounting policies require that management apply significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and, therefore, actual results could differ from our estimates.

We have identified the following as our critical accounting policies:

Common Stock Subject to Possible Redemption

All of the 27,600,000 shares of common stock sold as part of the Units 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 and in connection with 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 March 31, 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 for the three months ended March 31, 2022 and 2021.

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 March 31, 2022, the Company has evaluated both the Public Warrants and Private Placement Warrants under ASC 480 and ASC 815-40. Such guidance provides that because the Private Placement Warrants do not meet the criteria for equity treatment thereunder, each Private Placement Warrant must be recorded as a liability. Accordingly, the Company classified each warrant as a liability at its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company's statements of operations. The Private Placement Warrants had met the requirement for equity accounting treatment when initially


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issued. On December 23, 2021, the Private Placement Warrants were modified such that the Private Placement Warrants no longer meet the criteria for equity treatment. As such, the Private Placement Warrants were treated as derivative liability instruments from the date of the modification.

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