References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to E.Merge Technology Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors,
references to the "Sponsor" refer to E.Merge Technology Sponsor LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the unaudited condensed
financial statements and the notes thereto contained elsewhere in this Quarterly
Report. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" that are not
historical facts, and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factor's section of the Company's Annual Report on Form 10-K/A filed with the U.
S. Securities and Exchange Commission (the "SEC"). The Company's securities
filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
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 March 31, 2021 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 Account. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2021, we had a net income of $11,291,244,
which consists of a change in the fair value of the warrant liabilities
$11,436,000 and interest income on marketable securities held in the Trust
Account of $51,843, offset by general and administrative expenses of $196,212
and a provision for income taxes of $387.
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Liquidity and Capital Resources
On August 4, 2020, we consummated our Initial Public Offering of 52,200,000
units (the "Units" and, with respect to the shares of Class A common stock
included in the units sold, the "Public Shares") 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 units (each, a "Placement Unit" and collectively, the "Placement
Units") to E.Merge Technology Sponsor LLC, a Delaware limited liability company
(the "Sponsor"), at a price of $10.00 per Placement Unit, generating gross
proceeds of $12,000,000.
On September 4, 2020, in connection with the underwriters' election to partially
exercise of their option to purchase additional Units, we consummated the sale
of an additional 7,800,000 Units, generating total gross proceeds of
$78,000,000.
Following our Initial Public Offering, the partial exercise of the
over-allotment option and the sale of the Placement Units, a total of
$600,000,000 was placed in the Trust Account. We incurred $33,039,544 in
transaction costs, including $9,840,000 of underwriting fees, $22,560,000 of
deferred underwriting fees and $639,544 of other offering costs.
For the three months ended March 31, 2021, cash used in operating activities was
$230,734. Net income of $11,291,244 was offset by a change in fair value of
warrant liabilities $11,436,000, interest earned on marketable securities held
in the Trust Account of $51,843 and changes in operating assets and liabilities,
which used $34,135 of cash from operating activities.
As of March 31, 2021, we had investments of $600,171,152 held in the Trust
Account. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust Account
(less taxes paid and deferred underwriting commissions) to complete our initial
Business Combination. We may withdraw interest to pay taxes. Through March 31,
2021, we did not withdraw any interest earned on the Trust Account. To the
extent that our capital stock or debt is used, in whole or in part, as
consideration to complete our initial Business Combination, the remaining
proceeds held in the Trust Account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and
pursue our growth strategies.
As of March 31, 2021, we had cash of $719,118 outside of the Trust Account. We
intend to use the funds held outside the Trust Account 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 Account to repay such loaned amounts but no proceeds from
our Trust Account 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 Account. 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 March 31, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee up to $15,000 for office space, utilities
and secretarial and administrative support services. We began incurring these
fees on July 30, 2020 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $22,560,000 in the aggregate.
The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and
income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical
accounting policies:
Warrant Liability
We account for our warrants in accordance with the guidance contained in
Accounting Standards Codification ("ASC") 815-40 under which the warrants that
do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify our warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. The fair value of our placement warrants was determined using a
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." Class A common stock subject to mandatory redemption is classified as a
liability instrument and is measured at fair value. Conditionally redeemable
common stock (including common stock that features redemption rights that are
either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) is classified as
temporary equity. At all other times, common stock is classified as
stockholders' equity. Our common stock features certain redemption rights that
are considered to be outside of our control and subject to occurrence of
uncertain future events. Accordingly, the Class A common stock subject to
possible redemption is presented as temporary equity, outside of the
stockholders' equity section of our unaudited condensed balance sheets.
Net Loss per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and diluted, for Class A redeemable common stock is
calculated by dividing the interest income earned on the Trust Account, net of
applicable taxes, by the weighted average number of shares of Class A redeemable
common stock outstanding for the period. Net income (loss) per common share,
basic and diluted, for Class A and Class B non-redeemable common stock is
calculated by dividing net income (loss) less income attributable to Class A
redeemable common stock, by the weighted average number of shares of Class A and
Class B non-redeemable common stock outstanding for the periods presented.
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Recent Accounting Standards
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. We adopted ASU 2020-06 effective as of January 1,
2021. The adoption of ASU 2020-06 did not have an impact on our financial
statements.
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 unaudited condensed financial statements.
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