References to the "Company," "NOAC," "our," "us" or "we" refer to Natural Order
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
Natural Order Acquisition Corp. is a Delaware company incorporated on August 10,
2020 as a blank check company for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, recapitalization, reorganization or
other similar business combination, with one or more target businesses. Although
there is no restriction or limitation on what industry our target operates in,
it is our intention to pursue prospective targets that are focused on
technologies and products related to sustainable plant-based food and beverages,
alternative protein, and ingredients. More specifically, our target market
includes companies that use plant-based, cell-based or precision fermentation
technologies to develop food products that eliminate animals from the food
supply chain.
The outbreak of the COVID-19 coronavirus and the military conflict between
Russia and Ukraine , including related inflationary and supply chain issues,
have adversely affected the economies and financial markets worldwide, and
potential target companies may defer or end discussions for a potential business
combination with us whether or not COVID-19 or the Russia/Ukraine military
conflict affects their business operations. The extent to which COVID-19 or the
Russia/Ukraine military conflict impacts our search for a business combination
will depend on future developments, which are highly uncertain and cannot be
predicted, including new information which may emerge concerning the severity of
COVID-19 and the actions to contain COVID-19 or treat its impact, the impact of
any sanctions enacted in response to the Russia/Ukraine military conflict, among
others. We may be unable to complete a business combination if continued
concerns relating to COVID-19 restrict travel, limiting our ability to conduct
meetings to negotiate and consummate transactions in a timely manner with
potential investors, target company's personnel, or vendors and services
providers.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure stockholders 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 June 30, 2022 were
organizational activities and those necessary to prepare for our initial public
offering (the "IPO"), and, after our IPO, searching for a target business to
acquire, described below. We do not expect to generate any operating revenues
until after the completion of our initial business combination. We expect to
generate non-operating income in the form of interest income on investment
securities held since the IPO. We expect that we will incur increased 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 and six months ended June 30, 2022, we had net income of $607,026
and $2,266,533, respectively, which consisted of general and administrative
expenses of $351,011 and $571,667, respectively, offset by interest and
dividends earned on investments held in the Trust Account of $318,944 and
$431,108, respectively, a decrease in the fair value of the Private Warrants of
$680,000 and $2,448,000, respectively, and income tax expense of $40,908 and
$40,908, respectively.
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For the three and six months ended June 30, 2021, we had net income of $487,499
and $353,057, respectively, which consisted of general and administrative
expenses of $277,706 and $510,118, respectively, offset by interest and
dividends earned on investments held in the Trust Account of $17,205 and
$47,175, respectively, and a decrease in the fair value of the Private Warrants
of $748,000 and $816,000, respectively.
Liquidity and Capital Resources; Going Concern
On November 13, 2020, we consummated our IPO of 23,000,000 units (the "Units"),
each Unit consisting of one share of common stock of the Company, par value
$0.0001 per share (the "Common Stock") and one redeemable warrant to purchase
one-half of one share of Common Stock for $11.50 ("Warrant"). The closing
included the full exercise of the underwriter's over-allotment option. The Units
were sold at a price of $10.00 per Unit, generating gross proceeds to the
Company of $230,000,000. Simultaneously with the consummation of the IPO, we
consummated the private placement ("Private Placement") with Natural Order
Sponsor LLC (the "Sponsor") of 6,800,000 warrants (the "Private Warrants") at a
price of $1.00 per Private Warrant, generating total proceeds of $6,800,000.
Following the IPO, the full exercise of the over-allotment option, and the sale
of the Private Warrants, a total of $230,000,000 was placed in the Trust
Account, and we had $1,726,624 of cash held outside of the Trust Account, after
payment of costs related to the Initial Public Offering, and available for
working capital purposes.
Transaction costs amounted to $13,173,201, consisting of $4,600,000 in cash
underwriting fees, $8,050,000 of deferred underwriting fees and $523,201 of
other offering costs. Of these total transaction costs, $8,714 related to the
issuance of the Private Warrants and were charged to expense and the remaining
$13,164,487 were charged to temporary equity.
For the six months ended June 30, 2022, cash used in operating activities was
$629,383. Net income of $2,266,533 was affected by interest and dividends earned
on investment securities held in the Trust Account of $431,108 and a non-cash
decrease in the fair value of warrant liabilities of $2,448,000. Changes in
operating assets and liabilities used $16,808 of cash for operating activities.
For the six months ended June 30, 2021, cash used in operating activities was
$271,023. Net loss of $353,057 was affected by interest earned on investment
securities held in the Trust Account of $45,851 and a non-cash decrease in the
fair value of warrant liabilities of $816,000. Changes in operating assets and
liabilities provided $237,771 of cash for operating activities.
As of June 30, 2022, we had investments held in the Trust Account of
$230,193,046. 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 June 30, 2022, we had $43,104 of cash held outside of the Trust Account.
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 $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 Warrants.
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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 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.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that if the Company is unable to complete a business
combination by November 13, 2022, then the Company will cease all operations
except for the purpose of liquidating. The date for mandatory liquidation and
subsequent dissolution and the working capital deficit raise substantial doubt
about the Company's ability to continue as a going concern. No adjustments have
been made to the carrying amounts of assets or liabilities should the Company be
required to liquidate after November 13, 2022. The Company intends to complete a
business combination before the mandatory liquidation date. However, there can
be no assurance that the Company will be able to consummate a business
combination by November 13, 2022.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 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.
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 November 10, 2020 and will continue to incur these fees monthly until
the earlier of the completion of the business combination or our liquidation.
The underwriters from our IPO are entitled to a deferred fee of $0.35 per share,
or $8,050,000 in the aggregate. The deferred fee will become payable to the
underwriters from our IPO 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.
Further, certain legal fees will become payable solely in the event that we
successfully complete a business combination. The amount of such fees at June
30, 2022 was approximately $2.1 million. Due to the contingent nature of a
business combination, and the uncertainty surrounding the successful completion
of a business combination, this amount is not included in our condensed balance
sheet as of June 30, 2022 nor has it been included as an expense in the
statement of operations for the period then ended.
Critical Accounting Estimates and 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 unaudited condensed 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:
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Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and 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. Common stock issued in the IPO features
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, common stock
subject to possible redemption is presented at redemption value as temporary
equity, outside of the stockholders' equity section of our balance sheets.
Net Income (Loss) per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." Income and losses are shared pro rata among all
shares of common stock. Net income (loss) per share of stock is calculated by
dividing the net income (loss) by the weighted average number of shares of
commons stock outstanding for the respective period. The Company has not
considered the effect of warrants sold in the IPO and private placement to
purchase 14,900,000 shares of common stock in the calculation of diluted income
per share, since the exercise of the warrants are contingent upon the occurrence
of future events and the inclusion of such warrants would be anti-dilutive.
As a result, diluted net income (loss) per share is the same as basic net income
(loss) per share for the three and six months ended June 30, 2022 and 2021.
Accretion associated with the redeemable common stock is excluded from earnings
per share as the redemption value approximates fair value.
As of June 30, 2022, basic and diluted shares are the same as there are no
non-redeemable securities that are dilutive to the Company's stockholders.
Warrant Liability
The Company accounts 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 ("ASC") 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 the Company's own common stock, 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 on the
statements of operations.
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Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 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) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if- converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2023 for smaller reporting companies and
should be applied on a full or modified retrospective basis, with early adoption
permitted beginning on January 1, 2021. The Company has not implemented the
standard and management is evaluating its potential impact. The adoption of ASU
2020-06 is not expected have a material impact on the unaudited condensed
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 the Company's unaudited condensed financial
statements.
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