E.MERGE TECHNOLOGY ACQUISITION CORP.

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E.MERGE TECHNOLOGY ACQUISITION CORP. - 10-K/A - Management's Discussion and Analysis of Financial Condition and Results of Operations.

01/18/2022 | 04:19pm EDT
References to the "Company," "us," "our" or "we" refer to E.Merge Technology
Acquisition Corp.. The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our
audited financial statements and related notes included herein.
In this Amendment No. 2, we are restating (i) the Post IPO Balance Sheet, as
previously restated in the First Amended Filing, (ii) the unaudited financial
statements included in our Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2020, as previously restated in the First Amended
Filing, and (iii) the financial statements included in our Original Filing as
previously restated in the First Amended Filing.
We have
re-evaluated
our application of ASC
480-10-S99-3A
to our accounting and classification of the Public Shares, issued as part of the
units sold in the initial public offering on August 4, 2020. Historically, a
portion of the Public Shares was classified as permanent equity to maintain
stockholders' equity greater than $5 million on the basis that we will not
redeem our Public Shares in an amount that would cause our net tangible assets
to be less than $5,000,001, as described in the Charter. Pursuant to such
re-evaluation,
our management has determined that the Public Shares include certain provisions
that require classification of all of the Public Shares as temporary equity
regardless of the net tangible assets redemption limitation contained in the
Charter. In addition, in connection with the change in presentation for the
Public Shares, management determined it should restate earnings per share
calculation to allocate income and losses shared pro rata between the two
classes of common stock. This presentation contemplates an initial business
combination as the most likely outcome, in which case, both classes of common
stock share pro rata in the income and losses of our Company.
On December 22, 2021, the Audit Committee concluded, after discussion with the
Company's management and consultation with Withum, our independent registered
accounting firm, that our previously issued (i) Post IPO Balance sheet, as
previously restated in the First Amended Filing, (ii) the unaudited financial
statements for the quarterly period ended September 30, 2020, as previously
restated in the First Amended Filing, (iii) the financial statements as of and
for the year ended December 31, 2020 as previously restated in the First Amended
Filing, (iv) unaudited financial statements included in our Quarterly Report on
Form
10-Q
for the quarterly period ended March 31, 2021, filed with the SEC on July 14,
2021 and (v) unaudited financial statements included in our Quarterly Report on
Form
10-Q
for the quarterly period ended June 30, 2021, filed with the SEC on August 13,
2021, should be restated to report all Public Shares as temporary equity and the
Company also determined it should restate its earnings per share calculation to
allocate income and losses shared pro rata between the two classes of common
stock should no longer be relied upon. As such, the Company is restating the
financial statements for the Affected Periods in 2020 herein and intends to
restate the financial statements for the Affected Periods in 2021 in the Q3 Form
10-Q/A.
The restatement does not have an impact on our cash position.
Our management has concluded that in light of the classification error described
above, a material weakness exists in our internal control over financial
reporting and that our disclosure controls and procedures were not effective.
In connection with the restatement, our management reassessed the effectiveness
of our disclosure controls and procedures for the periods affected by the
restatement. As a result of that reassessment, we determined that our disclosure
controls and procedures for such periods were not effective with respect to our
internal controls around the proper accounting and classification of complex
financial instruments. For more information, see Item 9A included in this
Amendment No. 2.
The restatement is more fully described in Note 2 of the notes to the financial
statements included herein.
Overview
We are a blank check company incorporated on May 22, 2020 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar Business
Combination with one or more businesses. While our efforts to identify a target
business may span many industries and regions worldwide, we focus our search for
prospects within the software and internet technology industries. We intend to
effectuate our initial Business Combination using cash from the proceeds of our
Initial Public Offering and the private placement of the Private Units, the
proceeds of the sale of our shares in connection with our initial Business
Combination, shares issued to the owners of the target, debt issued to bank or
other lenders or the owners of the target, or a combination of the foregoing.
We expect to continue to incur significant costs in the pursuit of our initial
Business Combination. We cannot assure you that our plans to complete our
initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through December 31, 2020 were organizational
activities, those necessary to prepare for our Initial Public Offering,
described below, and, after our Initial Public Offering, identifying a target
company for an initial Business Combination. We do not expect to generate any
operating revenues until after the completion of our initial Business
Combination. We generate
non-operating
income in the form of interest income on marketable securities held in the Trust
Accounts. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the period from May 22, 2020 (inception) through December 31, 2020, we had a
net loss of $8,519,343, which consists of operating costs of $587,861, a change
in fair value of warrant liability of $6,744,000, transaction costs allocable to
warrants of $1,299,560, and a provision for income taxes of $7,231, offset by
interest income on investments held in the Trust Accounts of $119,309.
As a result of the restatement described in Note 2 of the notes to the financial
statements included herein, we classify the Warrants issued in connection with
our Initial Public Offering and private placement as liabilities at their fair
value and adjust the warrant instrument to fair value at each reporting period.
This liability is subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations.

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Liquidity and Capital Resources
On August 4, 2020, we consummated our Initial Public Offering of 52,200,000
Units at a price of $10.00 per Unit, at $10.00 per Unit, generating gross
proceeds of $522,000,000. Simultaneously with the closing of our Initial Public
Offering, we consummated the sale of 1,200,000 Placement Units to the Sponsor at
a price of $10.00 per Unit, generating gross proceeds of $12,000,000.
On September 4, 2020, in connection with the underwriters' election to partially
exercise of their option to purchase additional Units, we consummated the sale
of an additional 7,800,000 Units, generating total gross proceeds of
$78,000,000.
Following our Initial Public Offering, the partial exercise of the
over-allotment option and the sale of the Placement Units, a total of
$600,000,000 was placed in the Trust Accounts. We incurred $33,039,544 in
transaction costs, including $9,840,000 of underwriting fees, $22,560,000 of
deferred underwriting fees and $639,544 of other offering costs.
For the period from May 22, 2020 (inception) through December 31, 2020, cash
used in operating activities was $595,604. Net loss of $8,519,343 was impacted
by interest earned on marketable securities held in the Trust Accounts of
$119,309, change in fair value of warrant liability of $6,744,000, transaction
costs allocable to warrants of $1,299,560, and changes in operating assets and
liabilities, which used $512 of cash from operating activities.
As of December 31, 2020, we had investments of $600,119,309 held in the Trust
Accounts. We intend to use substantially all of the funds held in the Trust
Accounts, including any amounts representing interest earned on the Trust
Accounts (less taxes paid and deferred underwriting commissions) to complete our
initial Business Combination. We may withdraw interest to pay taxes. During the
period ended December 31, 2020, we did not withdraw any interest earned on the
Trust Accounts. To the extent that our capital stock or debt is used, in whole
or in part, as consideration to complete our initial Business Combination, the
remaining proceeds held in the Trust Accounts will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
As of December 31, 2020, we had cash of $949,852 outside of the Trust Accounts.
We intend to use the funds held outside the Trust Accounts primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete our initial Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with our initial Business Combination, our Sponsor or an affiliate of
our Sponsor or certain of our officers and directors may, but are not obligated
to, loan us funds as may be required. If we complete our initial Business
Combination, we would repay such loaned amounts. In the event that our initial
Business Combination does not close, we may use a portion of the working capital
held outside the Trust Accounts to repay such loaned amounts but no proceeds
from our Trust Accounts would be used for such repayment. Up to $1,500,000 of
such loans may be convertible into units identical to the Placement Units, at a
price of $10.00 per unit at the option of the lender.
We do not currently believe we will need to raise additional funds in order to
meet the expenditures required for operating our business. However, if our
estimate of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating our initial Business Combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our initial Business Combination. Moreover, we may
need to obtain additional financing either to complete our initial Business
Combination or because we become obligated to redeem a significant number of our
Public Shares upon consummation of our initial Business Combination, in which
case we may issue additional securities or incur debt in connection with such
Business Combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our
initial Business Combination. If we are unable to complete our initial Business
Combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the Trust Accounts. In addition,
following our initial Business Combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.

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Off-Balance
Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance
sheet arrangements as of December 31, 2020. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating
off-balance
sheet arrangements. We have not entered into any
off-balance
sheet financing arrangements, established any special purpose entities,
guaranteed any debt or commitments of other entities, or purchased any
non-financial
assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee up to $15,000 for office space, utilities
and secretarial and administrative support services. We began incurring these
fees on July 30, 2020 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $22,560,000 in the aggregate.
The deferred fee will become payable to the underwriters from the amounts held
in the Trust Accounts solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for the Warrants in accordance with the guidance contained in ASC
815-40
under which the Warrants do not meet the criteria for equity treatment and must
be recorded as liabilities. Accordingly, we classify the Warrants as liabilities
at their fair value and adjust the Warrants to fair value at each reporting
period. This liability is subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The fair value of Placement Warrants
was determined using a Black-Scholes option pricing model. The Public Warrants
for periods where no observable traded price was available are valued using a
Monte Carlo simulation model. For periods subsequent to the detachment of the
Public Warrants from the Units, the Public Warrant quoted market price was used
as the fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that is either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' equity section of our balance sheet.
Effective with the closing of our initial public offering, the Company
recognized the accretion from initial book value to redemption amount, which
resulted in charges against additional paid-in capital (to the extent available)
and accumulated deficit.
Net Income (Loss) per Common Share
We comply with accounting and disclosure requirements of the Financial
Accounting Standards Board ("FASB") ASC Topic 260, "Earnings Per Share." We have
two classes of common stock, which are referred to as Class A common stock and
Class B common stock. Income and losses are shared pro rata between the two
classes of common stock. Net income (loss) per share of common stock is
calculated by dividing the net income (loss) by the weighted average number of
common stock outstanding for the respective period.
We did not consider the effect of the warrants issued in connection with the
initial public offering and the private placement in the calculation of diluted
income (loss) per share of common stock because their exercise is contingent
upon future events. As a result, diluted net income (loss) per s is the same as
basic net income (loss) per share of common stock. Accretion associated with the
redeemable Class A common stock is excluded from income (loss) per share of
common stock as the redemption value approximates fair value.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.

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