References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to FTAC Emerald Acquisition Corp. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Sponsor" refer collectively to Emerald ESG Sponsor, LLC and Emerald ESG
Advisors, 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 and Section 21E of 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", 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 Form 10-K 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 in Delaware on February 19, 2021 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 target businesses. We intend to effectuate our business combination
using cash from the proceeds of our initial public offering and the sale of the
private placement units that occurred simultaneously with the completion of our
initial public offering, 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 (other than searching for a Business
Combination after the Public Offering) nor generated any revenues to date. Our
only activities from inception through March 31, 2022 were organizational
activities, those necessary to prepare for the Public Offering, described below,
and, after the 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 Business Combination, at the earliest. We expect to
generate non-operating income in the form of interest income on the 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, 2022, we had a net loss of $464,263, which
consisted of formation and operating costs of $489,504, partially offset by
interest income earned on investments held in Trust Account of $25,241.
For the period from February 19, 2021 (inception) through March 31, 2021, we had
a net loss of $208, which consisted of formation and operating costs.
Liquidity and Capital Resources
On December 20, 2021, we consummated the Public Offering of 22,000,000 units
generating gross proceeds of $220,000,000. Each unit consists of one share of
Class A common stock and one-half of one redeemable warrant, with each whole
warrant entitling the holder thereof to purchase one share of Class A common
stock for $11.50 per share, subject to adjustment. On January 11, 2022, the
underwriter partially exercised its over-allotment option, resulting in the sale
on January 14, 2022 of an additional 2,869,342 units for total gross proceeds of
$28,693,420.
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Simultaneously with the closing of the Public Offering, we consummated the sale
of 890,000 Private Placement Units at a price of $10.00 per Private Placement
Unit in a private placement to our Sponsor, generating gross proceeds of
$8,900,000. On January 14, 2022, the underwriter partially exercised its
over-allotment option, resulting in the sale of an additional 86,081 Private
Placement Units to our Sponsor for total gross proceeds of $860,810, bringing
the total aggregate gross proceeds of the Private Placement to $9,760,810.
We incurred $14,181,568 in transaction costs, including $4,973,868 of
underwriting fees ($660,000 of which was reimbursed to us to pay the advisory
fee due to CCM), $8,704,270 of deferred underwriting fees and $503,430 of other
offering costs.
Following the Public Offering, the partial exercise of the over-allotment
option, and the sale of the Private Placement Units, a total of $251,180,354
($10.10 per Unit) was placed in the Trust Account and invested in U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the "Investment Company Act"), with
a maturity of 185 days or less, or in money market funds meeting certain
conditions under Rule 2a-7 of the Investment Company Act, as determined by us,
until the earlier of: (i) the consummation of a Business Combination or (ii) the
distribution of the funds in the Trust Account to the Company's stockholders, as
described below.
As of March 31, 2022, we had $887,943 in cash and working capital of $1,152,150.
Prior to the completion of our Public Offering, our liquidity needs had been
satisfied through a capital contribution from the Sponsor of $25,000 and a loan
to us of up to $300,000 by our Sponsor under an unsecured promissory note, which
had no outstanding balance as of March 31, 2022. The outstanding balance under
the promissory note of $105,260 was repaid on December 27, 2021 and the
promissory note was terminated.
As of March 31, 2022, we had cash, investments and marketable securities held in
the Trust Account of $251,206,125. 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 taxes. During the three months ended March 31, 2022, we
did not withdraw any interest income from the Trust Account. 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.
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.
In order to finance transaction costs in connection with a Business Combination,
our Sponsor or an affiliate of our Sponsor, or certain of our directors and
officers 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 $2,000,000 of such loans
may be convertible into units, at a price of $10.00 per unit, at the option of
the lender at the time of the Business Combination. The units would be identical
to the Placement Units. The terms of such loans, if any, have not been
determined and no written agreements exist with respect to such loans. We do not
expect to seek loans from parties other than our Sponsor or an affiliate of our
Sponsor as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
trust account. As of March 31, 2022, no such loans were outstanding.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business through the earlier of the
consummation of a Business Combination or one year from the date of this
Quarterly Report. 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 March 31, 2022. 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.
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Contractual obligations
Other than the below, we do not have any long-term debt obligations, capital
lease obligations, operating lease obligations, purchase obligations or
long-term liabilities.
We entered into an administrative services agreement pursuant to which we pay
the Sponsor or its designee a monthly fee of $30,000 for office space,
administrative and shared personnel support services to the Company. We began
incurring these fees on December 16, 2021 and will continue to incur these fees
monthly until the earlier of the completion of the Business Combination and our
liquidation. As of March 31, 2022, we incurred and paid $90,000 for the
administrative support services.
The holders of the founder shares, private placement units (including securities
contained therein) and units that may be issued upon conversion of working
capital loans (including securities contained therein) will be entitled to
registration rights pursuant to a registration rights agreement requiring us to
register such securities for resale (in the case of the founder shares, only
after conversion to the Class A common stock). The holders of these securities
are entitled to make up to three demands, excluding short form demands, that we
register such securities. In addition, the holders have certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
the completion of the initial Business Combination and rights to require us to
register for resale such securities pursuant to Rule 415 under the Securities
Act.
We granted the underwriter of the Public Offering a 45-day option to purchase up
to 3,300,000 additional Units to cover any over-allotments, if any, at the
Public Offering price less the underwriting discounts and commissions. On
January 14, 2022, the underwriter purchased an additional 2,869,342 Units
pursuant to the over-allotment option.
The underwriter earned a cash underwriting discount of two percent (2%) of the
gross proceeds of the Units sold in the Public Offering and pursuant to the
over-allotment option, or $4,973,868. Additionally, the underwriter will be
entitled to a deferred underwriting discount of 3.5% of the gross proceeds of
the Units sold in the Public Offering and pursuant to the over-allotment option,
or $8,704,270. The deferred underwriting discount will become payable to the
underwriter 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.
We engaged Cohen & Company Capital Markets, a division of J.V.B. Financial
Group, LLC ("CCM"), to provide financial advisory services in connection with
the Public Offering. We paid CCM a fee in an amount equal to 0.3% of the
aggregate proceeds of the Public Offering (excluding the proceeds of the
exercise of the over-allotment option) net of underwriter's expenses, upon the
closing of the Public Offering. We also intend to engage CCM to act as an
advisor in connection with the Business Combination for which it will earn an
advisory fee of 0.525% of the proceeds of the Public Offering (excluding the
proceeds of the exercise of the over-allotment option) payable at closing of the
Business Combination. CCM will also be entitled to an advisory fee equal to
0.825% of the aggregate proceeds of the exercise of the over-allotment option,
payable at the closing of the Business Combination. CCM's fees will be
reimbursed to us by the underwriter as it becomes payable out of the
underwriting commission and will not result in any incremental fees to us.
Accordingly, a reimbursement receivable and deferred advisory fee of $1,155,000
has been reflected in the accompanying balance sheets.
Critical Accounting Policies
The preparation of the financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements.
Making estimates requires management to exercise significant judgment. It is at
least reasonably possible that the estimate of the effect of a condition,
situation or set of circumstances that existed at the date of the financial
statements, which management considered in formulating its estimate, could
change in the near term due to one or more future confirming events.
Accordingly, the actual results could differ significantly from those estimates.
We have identified the following as our critical accounting policies:
Offering Costs
Offering costs consist of underwriting, legal, accounting and other expenses
incurred through the balance sheet date that are directly related to the Public
Offering. The Company complies with the requirements of ASC 340-10-S99-1.
Offering costs directly attributable to the issuance of an equity contract to be
classified in equity are recorded as a reduction of equity. Offering costs for
equity contracts that are classified as assets and liabilities are expensed
immediately. As of March 31, 2022, the Company incurred offering costs amounting
to $14,181,568 consisting of $4,973,868 of underwriting commissions, $8,704,270
of deferred underwriting fees, and $503,430 of other offering costs. These
offering costs are allocated between components of temporary and permanent
equity based on the relative fair value of these components.
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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 Accounting Standards Codification ("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
the Company's control) is classified in temporary equity. At all other times,
common stock is classified as stockholders' equity. Our Class A common stock
feature certain redemption rights that are considered to be outside of our
control and subject to the occurrence of uncertain future events. Accordingly,
at March 31, 2022 and December 31, 2021, the 24,869,342 and 22,000,000 shares of
Class A common stock are presented at redemption value as temporary equity,
outside of the stockholders' deficit section of our balance sheets,
respectively.
We recognize changes in redemption value immediately as they occur and adjust
the carrying value of Class A common stock to equal the redemption value at the
end of each reporting period. Increases or decreases in the carrying amount of
redeemable Class A common stock are affected by charges against additional paid
in capital and accumulated deficit. This method would view the end of the
reporting period as if it were also the redemption date for the security.
Net Loss Per Common Share
We have two classes of shares, which are referred to as Class A common stock and
Class B common stock. Earnings and losses are shared pro rata between the two
classes of shares. We have not considered the effect of the warrants in the
calculation of diluted loss per share, if any, since their exercise is
contingent upon future events. As a result, diluted net loss per common stock is
the same as basic net loss per common stock.
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 condensed financial statements.
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