References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Equity Distribution Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors.
References to the "Sponsor" refer to Equity Distribution Sponsor, LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the 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" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") 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 Factors section of the
Company's Annual report on
Form10-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.
Restatement of Previously Issued Financial Statements
This Management's Discussion and Analysis of Financial Condition has been
amended and restated to give effect to the restatement of our financial
statements as of March 31, 2021 and June 30, 2021. Management concluded it
should restate its financial statements to classify all Public Shares in
temporary equity. In accordance with ASC 480, paragraph 10-S99, redemption
provisions not solely within the control of the Company require common stock
subject to redemption to be classified outside of permanent equity. The Company
previously determined the common stock subject to possible redemption to be
equal to the redemption value of $10.00 per common stock while also taking into
consideration a redemption cannot result in net tangible assets being less than
$5,000,001. Previously, the Company did not consider redeemable shares
classified as temporary equity as part of net tangible assets. Effective with
these financial statements, the Company revised this interpretation to include
temporary equity in net tangible assets. Accordingly, effective with this
filing, the Company presents all redeemable common stock as temporary equity and
recognizes a remeasurement from the initial book value to redemption value at
the time of its Initial Public Offering and in accordance with ASC 480. As a
result, management has noted a reclassification adjustment related to temporary
equity and permanent equity. This resulted in an adjustment to the initial
carrying value of the common stock subject to possible redemption with the
offset recorded to additional paid-in capital (to the extent available),
accumulated deficit and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on
July 7, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a 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 July 7, 2020 (inception) through September 30, 2021
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and the search for a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate
non-operating
income in the form of interest income on marketable securities held after the
Initial Public Offering. 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 September 30, 2021, we had a net income of
$5,622,296, which consists of the change in fair value of warrant liability of
$5,782,933, interest earned on marketable securities held in Trust Account of
$34,042 and an unrealized gain on marketable securities held in Trust Account of
$16,008, offset by operating and formation costs of $195,687, which are
comprised primarily of legal fees, consulting fees, printing fees and franchise
taxes, as well as a provision for income taxes of $15,000.
For the nine months ended September 30, 2021, we had net income of $16,516,053,
which consists of a change in fair value of warrant liability of $18,381,466 and
interest earned on marketable securities held in Trust Account of $104,230,
offset by formation and operational costs of $1,951,774, which are comprised
primarily of legal fees, consulting fees, printing fees and franchise taxes, as
well as a provision for income taxes of $16,402 and an unrealized loss on
marketable securities held in Trust Account of $1,467.
For the period from July 7, 2020 (inception) through September 30, 2020, we had
net income of $546,045, which consists of the change in fair value of warrant
liability of $4,750,267, interest earned on marketable securities held in Trust
Account of $9,267, and benefit from income taxes of $7,670, offset by the
warrant liability in excess of the purchase price of Private Placement Warrants
of $2,535,733 and transaction costs associated with the Initial Public Offering
of $1,477,685, operating and formation costs of $171,221, which are comprised
primarily of legal fees, consulting fees, printing fees and franchise taxes, as
well as an unrealized loss on marketable securities held in Trust Account of
$36,520.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of Class B common stock by the Sponsor and
loans from our Sponsor, as described in Note 6. Related Party Transactions to
our condensed financial statements.
On September 18, 2020, we consummated the Initial Public Offering of 41,400,000
Units at a price of $10.00 per Unit, which includes the full exercise by the
underwriters of the over-allotment option to purchase an additional 5,400,000
Units, generating gross proceeds of $414,000,000. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 6,853,333
Private Placement Warrants at a price of $1.50 per Private Placement Warrant in
a private placement to our Sponsor, generating gross proceeds of $10,280,000.


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For the nine months ended September 30, 2021, cash used in operating activities
was $1,057,773. Net income of $16,516,053 was attributable to the change in fair
value of warrant liability of $18,381,466 and interest earned on marketable
securities held in the Trust Account of $104,230, offset by an unrealized loss
on marketable securities held in Trust Account of $1,467 and changes in
operating assets and liabilities, which provided $910,403 in cash from operating
activities.
For the period from July 7, 2020 (inception) through September 30, 2020, cash
used in operating activities was $316,413. Net income of $546,045 was
attributable to the change in fair value of warrant liability of $4,750,267,
interest earned on marketable securities held in the Trust Account of $9,267,
and deferred tax benefit of $7,670, offset by the warrant liability in excess of
the purchase price of Private Placement Warrants of $2,535,733 and transaction
costs associated with the Initial Public Offering of $1,477,685, an unrealized
loss on marketable securities held in Trust Account of $36,520 and changes in
operating assets and liabilities, which used $145,192 in cash from operating
activities.
As of September 30, 2021, we had cash and marketable securities held in the
Trust Account of $414,083,323. We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on
the Trust Account to complete our Business Combination. We may withdraw interest
to pay franchise and income taxes. During the period ended September 30, 2021,
cash withdrawn from the Trust Account to pay franchise and income taxes totaled
$137,627. To the extent that our capital stock or debt is used, in whole or in
part, as consideration to complete our 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 September 30, 2021, we had cash of $712,556 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 a Business Combination. We may also borrow
additional amounts from our Sponsor under the Second Promissory Note, as
described below under "Contractual Obligations."
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, an affiliate of the
Sponsor, or our officers and directors may, but are not obligated to, loan us
funds as may be required. If we complete a Business Combination, we would repay
such loaned amounts. In the event that a 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 warrants,
at a price of $1.50 per warrant at the option of the lender. The warrants would
be identical to the Private Placement Warrants, including as to exercise price,
exercisability and exercise period. The terms of such loans by our officers and
directors, if any, have not been determined and no written agreements exist with
respect to such loans. The loans would be repaid upon consummation of a Business
Combination, without interest.
We do not 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 a 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 Business Combination. Moreover, we may need to obtain
additional financing either to complete our Business Combination or because we
become obligated to redeem a significant number of our public shares upon
consummation of our 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 Business Combination. If we
are unable to complete our 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 Business Combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
Off-Balance
Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance
sheet arrangements as of September 30, 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
On June 29, 2021, we issued an unsecured promissory note to our Sponsor (the
"Second Promissory Note"), pursuant to which we may borrow up to an aggregate
principal amount of $2,500,000. The Second Promissory Note is
non-interest
bearing and payable on the earlier of (i) September 18, 2022 or (ii) the
consummation of the Initial Business Combination. As of September 30, 2021, the
outstanding balance under the Second Promissory Note was $750,000 and the
remaining amount available to be drawn was $1,750,000.
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than the Second Promissory Note and
an agreement to pay an affiliate of the Sponsor a monthly fee of $10,000 for
office space and administrative support to the Company. We began incurring these
fees on September 15, 2020 and will continue to incur these fees monthly until
the earlier of the completion of the Business Combination and the Company's
liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$14,490,000 in the aggregate. Subject to the terms of the underwriting
agreement, (i) the deferred fee will be placed in the Trust Account and released
to the underwriters only upon the completion of a Business Combination and
(ii) the deferred fee will be waived by the underwriters in the event that we do
not complete a Business Combination. Up to 50% of the deferred underwriting
commissions may be paid at the sole discretion of our management team to the
underwriters in the allocations determined by our management team and/or to
third parties not participating in the Initial Public Offering (but who are
members of the Financial Industry Regulatory Authority) that assist us in
consummating its initial Business Combination.


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Critical Accounting Policies
The preparation of 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:
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ("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 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.
Warrant Liabilities
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification 480, Distinguishing Liabilities from
Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to our own common
shares and whether the warrant holders could potentially require "net cash
settlement" in a circumstance outside of our control, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional
paid-in
capital at the time of issuance. For issued or modified warrants that do not
meet all the criteria for equity classification, the warrants are required to be
recorded at their initial fair value on the date of issuance, and each balance
sheet date thereafter. Changes in the estimated fair value of the warrants are
recognized as a
non-cash
gain or loss within change in fair value of warrant liability on the condensed
statements of operations. The fair value of the warrants was estimated using the
publicly traded price of our warrants.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding during the
period. We apply the
two-class
method in calculating earnings per share. Accretion associated with the
redeemable shares of Class A common stock is excluded from earnings per share as
the redemption value approximates fair value.
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. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. We adopted ASU
2020-06
on January 1, 2021. Adoption of ASU
2020-06
did not impact our financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.

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