References to the "Company," "EAC," "our," "us" or "we" refer to Edify
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 interim condensed financial statements and the notes thereto
contained elsewhere in this report. 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
U.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company formed under the laws of the State of Delaware on
September 30, 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 operating revenues
to date. Our only activities from inception through September 30, 2021 were
organizational activities, those necessary to prepare for the Initial Public
Offering, and, after our Initial Public Offering, searching for a target
business to acquire. 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 in connection with searching for, and
completing, a Business Combination.
For the three months ended September 30, 2021, we had net income of
approximately $1.6 million, which consists of income of approximately $1.8
million derived from the changes in fair value of the warrant liabilities and
interest earned on marketable securities of approximately $7,000, offset by
general and administrative expenses of approximately $0.23 million.
For the nine months ended September 30, 2021, we had net income of approximately
$7.0 million, which consists of income of approximately $12.0 million derived
from the changes in fair value of the warrant liabilities and interest earned on
marketable securities of approximately $19,000, offset by general and
administrative expenses of approximately $1.8 million.
19
Table of Contents
Liquidity and Capital Resources
On January 20, 2021, we consummated the Initial Public Offering of 27,600,000
Units, at a price of $10.00 per Units, which included the full exercise by the
underwriters of their over-allotment option in the amount of 3,600,000 Units,
generating gross proceeds of $276,000,000. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 5,640,000 Private
Placement Warrants to the Sponsor at a price of $1.00 per Private Placement
Warrant generating gross proceeds of $5,640,000.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $276,000,000
was placed in the Trust Account, and we had $1,305,151 of cash held outside of
the Trust Account, after payment of costs related to the Initial Public
Offering, and available for working capital purposes. We incurred $14,214,049 in
transaction costs, including $4,140,000 of underwriting fees, net of $1,380,000
reimbursed from the underwriters, $9,660,000 of deferred underwriting fees and
$414,049 of other offering costs.
For the nine months ended September 30, 2021, cash used in operating activities
was $1,043,007. Net income of $7,067,522 was affected by non-cash charges
(income) related to interest income on marketable securities held in the Trust
Account of $19,134, changex in the fair value of warrant liabilities of
$11,991,600, transaction costs incurred in connection with warrant liabilities
$943,412, and a loss on issuance of warrant liabilities of $3,158,400. Changes
in operating assets and liabilities used $201,607 of cash for operating
activities.
As of September 30, 2021, we had marketable securities held in the Trust Account
of $276,019,134 consisting of securities held in a money market fund and
government bonds that invests in United States government treasury bills, bonds
or notes with a maturity of 180 days or less. Interest income on the balance in
the Trust Account may be used by us to pay taxes. Through September 30, 2021, we
did not withdraw any interest earned on the Trust Account to pay our taxes. We
intend to use substantially all of the funds held in the Trust Account, to
acquire a target business and to pay our expenses relating thereto. To the
extent that our capital stock is used in whole or in part as consideration to
effect a Business Combination, the remaining funds held in the Trust Account
will be used as working capital to finance the operations of the target
business. Such working capital funds could be used in a variety of ways
including continuing or expanding the target business' operations, for strategic
acquisitions and for marketing, research and development of existing or new
products. Such funds could also be used to repay any operating expenses or
finders' fees which we had incurred prior to the completion of our Business
Combination if the funds available to us outside of the Trust Account were
insufficient to cover such expenses.
As of September 30, 2021, we had cash of $67,944. We intend to use the funds
held outside the Trust Account for identifying and evaluating prospective
acquisition candidates, performing business due diligence on prospective target
businesses, traveling to and from the offices, plants or similar locations of
prospective target businesses, reviewing corporate documents and material
agreements of prospective target businesses, selecting the target business to
acquire and structuring, negotiating and consummating the Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a 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 a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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 $1.00 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants.
20
Table of Contents
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 Financing 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
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than described below, an agreement
to pay the Sponsor a monthly fee of $10,000 for office space, utilities and
secretarial, and administrative and support services. We began incurring these
fees on January 14, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
Upon closing of a Business Combination, the underwriters will be entitled to a
deferred fee of $0.35 per share, or $9,660,000 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 we complete 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 period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
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 Private Placement Warrants for periods where no
observable traded price was available are valued using the Black-Scholes Option
Pricing Model. The Public Warrants for periods where no observable traded price
was available were valued using a binomial/lattice 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 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
21
Table of Contents
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 balance sheet.
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 common shares outstanding for the period. The
Company has two classes of shares, which are referred to as Class A common stock
and Class B common stock. 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. 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 are currently assessing the impact, if any, that
ASU 2020-06 would have on our financial position, results of operations or cash
flows.
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.
© Edgar Online, source Glimpses