Equity Distribution Acquisition Corp. - Quarter Report: 2021 September (Form 10-Q)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware		85-1876561
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Units, each consisting of one share of Class A common stock and one-third of one redeemable warrant		EQD.U		New York Stock Exchange
Class A common stock, par value $0.0001 per share		EQD		New York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share		EQD WS		New York Stock Exchange

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☒

		September 30, 2021				December 31, 2020
		(Unaudited)				(Revised)
ASSETS
Current assets
Cash		$	712,556			$	882,702
Prepaid expenses			160,391				262,556
Total Current Assets			872,947				1,145,258
Marketable securities held in Trust Account			414,083,323				414,118,187
TOTAL ASSETS		$	414,956,270			$	415,263,445
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accrued expenses		$	1,027,550			$	219,312
Promissory note – related party			750,000				—
Total Current Liabilities			1,777,550				219,312
Warrant liability			18,588,000				36,969,466
Deferred underwriting fee payable			14,490,000				14,490,000
TOTAL LIABILITIES			34,855,550				51,678,778
Commitments and Contingencies
Class A common stock, $0.0001 par value; 500,000,000 shares authorized; 41,400,000 shares issued and outstanding, subject to possible redemption at redemption value as of September 30, 2021 and December 31, 2020			414,000,000				414,020,869
Stockholders’ Deficit
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding			—				—
Class A common stock, $0.0001 par value; 500,000,000 shares authorized			—				—
Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 10,350,000 shares issued and outstanding, as of September 30, 2021 and December 31, 2020			1,035				1,035
Accumulated deficit			(33,900,315	)			(50,437,237	)
Total Stockholders’ Deficit			(33,899,280	)			(50,436,202	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	414,956,270			$	415,263,445

		Class A Common Stock								Class B Common Stock								Additional Paid-in Capital				Ac c umulated Deficit				Total Stockholders’ Deficit
		Shares				Amount				Shares				Amount
Balance — January 1, 2021			—			$	—				10,350,000			$	1,035			$	—			$	(50,437,237	)		$	(50,436,202	)
Accretion for Class A common stock to redemption value			—				—				—				—				—				(111,005	)			(111,005	)
Net income			—				—				—				—				—				13,517,723				13,517,723
Balance – March 31, 2021			—			$	—				10,350,000			$	1,035			$	—			$	(37,030,519	)		$	(37,029,484	)
Accretion for Class A common stock to redemption value			—				—				—				—				—				131,874				131,874
Net loss			—				—				—				—				—				(2,623,966	)			(2,623,966	)
Balance – June 30, 2021			—			$	—				10,350,000			$	1,035			$	—			$	(39,522,611	)		$	(39,521,576	)
Net income			—				—				—				—				—				5,622,296				5,622,296
Balance – September 30, 2021			—			$	—				10,350,000			$	1,035			$	—				(33,900,315	)			(33,899,280	)

		Class A Common Stock								Class B Common Stock								Additional Paid-in Capital				Accumulated Deficit				Total Stockholders’ Deficit
		Shares				Amount				Shares				Amount
Balance — July 7, 2020 (Inception)			—			$	—				—			$	—			$	—			$	—			$	—
Issuance of Class B common stock to Sponsor			—				—				10,350,000				1,035				23,965				—				25,000
Accretion for Class A common stock to redemption value			—				—				—				—				(23,965	)			(47,688,160	)			(47,712,125	)
Net income			—				—				—				—				—				546,045				546,045
Balance – September 30, 2020			—			$	—				10,350,000			$	1,035			$	—			$	(47,142,115	)		$	(47,141,080	)

		Nine Months Ended September 30,				For the Period from July 7, 2020 (Inception) through September 30,
		2021				2020
Cash Flows from Operating Activities:
Net income		$	16,516,053			$	546,045
Adjustments to reconcile net income to net cash used in operating activities:
Interest earned on marketable securities held in Trust Account			(104,230	)			(9,267	)
Unrealized loss on marketable securities held in Trust Account			1,467				36,520
Change in fair value of warrant liability			(18,381,466	)			(4,750,267	)
Warrant liability in excess of purchase price of Private Placement Warrants			—				2,535,733
Transaction costs associated with Initial Public Offering			—				1,477,685
Deferred tax benefit			—				(7,670	)
Changes in operating assets and liabilities:
Prepaid expenses			102,165				(307,941	)
Accrued expenses			808,238				162,749
Net cash used in operating activities			(1,057,773	)			(316,413	)
Cash Flows from Investing Activities:
Investment of cash into Trust Account			—				(414,000,000	)
Cash withdrawn from Trust Account to pay franchise and i n come taxes			137,627				—
Net cash provided by (used in) investing activities			137,627				(414,000,000	)
Cash Flows from Financing Activities:
Proceeds from sale of Units, net of underwriting discounts paid			—				405,720,000
Proceeds from sale of Private Placement Warrants			—				10,280,000
Proceeds from promissory note – related party			750,000				157,250
Repayment of promissory note – related party			—				(157,250	)
Payment of offering costs			—				(576,565	)
Net cash provided by financing activities			750,000				415,423,435
Net Change in Cash			(170,146	)			1,107,022
Cash – Beginning			882,702				—
Cash – Ending		$	712,556			$	1,107,022
Supplemental cash flow information:
Cash paid for income taxes		$	16,402			$	—
Non-cash investing and financing activities:
Offering costs included in accrued offering costs		$	—			$	39,498
Offering costs paid by Sponsor in exchange for issuance of Founder Shares		$	—			$	25,000
Initial classification of Class A common stock subject to possible redemption		$	—			$	414,000,000
Change in value of Class A common stock subject to possible redemption		$	(20,869	)		$	(27,253	)
Deferred underwriting fee payable		$	—			$	14,490,000

		As Previously Reported				Adjustment				As Revised
Balance Sheet as of December 31, 2020
Class A common stock subject to possible redemption		$	358,584,662			$	55,436,207			$	414,020,869
Class A common stock		$	554			$	(554	)		$	—
Additional paid-in capital		$	7,699,371			$	(7,699,371	)		$	—
Accumulated deficit		$	(2,700,955	)		$	(47,736,282	)		$	(50,437,237	)
Total Stockholders’ Equity (Deficit)		$	5,000,005			$	(55,436,207	)		$	(50,436,202	)
Statement of Operations for the Period from July 7, 2020 (inception) through September 30, 2020
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption			35,727,019				(35,727,019	)			—
Basic and diluted weighted average shares outstanding, Non-redeemable common stock			10,066,782				(10,066,782	)			—
Basic and diluted net  income ( loss ) per share, Non-redeemable common stock		$	0.05			$	(0.05	)		$	—
Weighted average shares outstanding of Class A common stock			—				6,288,608				6,288,608
Basic and diluted net income per share, Class A common stock		$	—			$	0.04			$	0.04
Weighted average shares outstanding of Class B common stock			—				9,205,063				9,205,063
Basic and diluted net income per share, Class B common stock		$	—			$	0.04			$	0.04
Statement of Cash Flows for the Period from July 7, 2020 (inception) through September 30, 2020
Initial classification of Class A common stock subject to possible redemption		$	357,270,187			$	56,729,813			$	414,000,000
Change in value of Class A common stock subject to possible redemption		$	4,561,471			$	(4,588,724	)		$	(27,253	)

Gross proceeds		$	414,000,000
Less:
Proceeds allocated to Public Warrants			(25,806,000	)
Class A common stock issuance costs			(21,933,378	)
Plus:
Accretion of carrying value to redemption value			47,739,378
Class A common stock subject to possible redemption		$	414,000,000

		Three Months Ended September 30, 2021								Nine Months Ended September 30, 2021								For the Period from July 7, 2020 (Inception) Through September 30, 2020
		Class A				Class B				Class A				Class B				Class A				Class B
Basic and diluted net income per common share
Numerator:
Allocation of net income, as adjusted		$	4,497,837			$	1,124,459			$	13,212,842			$	3,303,211			$	221,630			$	324,415
Denominator:
Basic and diluted weighted average shares outstanding			41,400,000				10,350,000				41,400,000				10,350,000				6,288,608				9,205,063
Basic and diluted net income per common share		$	0.11			$	0.11			$	0.32			$	0.32			$	0.04			$	0.04

•

in whole and not in part;

•

at a price of $0.01 per warrant;

•

upon not less than 30 days’ prior written notice of redemption to each warrant holder; and

•

if, and only if, the reported last reported sale price of the Class A common stock for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like).

•

in whole and not in part;

•

at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the Class A common stock;

•

if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like); and

•

if the Reference Value is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company follows the guidance in ASC Topic 820 for its financial assets and liabilities that are and reported at fair value at each reporting period, and assets and liabilities that are and reported at fair value at least annually.

The Warrants were accounted for as liabilities in accordance with and are presented within warrant liabilities on the condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations. As of September 30, 2021 and December 31, 2020, the Public Warrants are classified as Level 1 due to the use of a quoted price in an active market. As of September 30, 2021 and December 31, 2020, the Private Placement Warrants are classified as Level 2 due to the use of a quoted price in an active market for a similar liability.

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 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 . 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.

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 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.

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 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.

We have no obligations, assets or liabilities, which would be considered 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 sheet arrangements. We have not entered into any sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any assets.

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 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.

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 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 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 is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. We apply the 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.

In August 2020, the FASB issued ASU Debt—Debt with Conversion and Other Options (Subtopic and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 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 on January 1, 2021. Adoption of ASU did not impact our financial position, results of operations or cash flows.

We are a smaller reporting company as defined by Rule of the Exchange Act and are not required to provide the information otherwise required under this item.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on