References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to NightDragon Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to NightDragon Acquisition 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 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 Form 10-Q 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. You should read these statements carefully because they discuss future expectations or state other "forward-looking" information. These statements relate to our future plans, objectives, expectations, intentions and performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to:

• our ability to select an appropriate target business or businesses;





     •    our ability to complete our initial business combination, particularly
          given competition from other blank check companies and financial and
          strategic buyers;



  •   our ability to continue as a going concern;



     •    our expectations around the performance of the prospective target
          business or businesses, including competitive prospects of the business
          following our initial business combination;



     •    our success in retaining or recruiting, or changes required in, our
          officers, key employees or directors following our initial business
          combination;



     •    our officers and directors allocating their time to other businesses and
          potentially having conflicts of interest with our business or in
          approving our initial business combination;



     •    our potential ability to obtain additional financing to complete our
          initial business combination;



  •   our pool of prospective target businesses;



     •    our ability to consummate an initial business combination amidst the
          uncertainty resulting from the ongoing
          COVID-19
          pandemic, the economy and any business or businesses with which we
          consummate our initial business combination;



     •    the ability of our officers and directors to generate a number of
          potential acquisition opportunities;



  •   our public securities' potential liquidity and trading;



  •   the lack of a market for our securities;



  •   our ability to remain in compliance with Nasdaq listing rules;



     •    the use of proceeds not held in the trust account or available to us from
          interest income on the trust account balance;



  •   the trust account not being subject to claims of third parties; or



  •   our financial performance.

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. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A "Risk Factors" and elsewhere in this report. Our risk factors are not guarantees that no such conditions exist at this time and should not be interpreted as an affirmative statement that such risk or conditions have not materialized, in whole or in part. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments.



                                       18

--------------------------------------------------------------------------------

Table of Contents

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Overview

We are a blank check company incorporated under the laws of the State of Delaware on December 8, 2020 for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses, collectively referred to as the Business Combination. We intend to effectuate our Business Combination using cash from the proceeds of our initial public offering, or the Initial Public Offering, and the sale of the private placement SCALE units, or the Private Placement SCALE Units, 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 December 8, 2020 (inception) through March 31, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying 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 in the trust account, or 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 income of $2,372,999 which consists of the change in fair value of warrant liabilities of $2,782,214 and interest earned on marketable securities held in the Trust Account of $32,803 offset by general and administrative expenses of $442,018.

For the three months ended March 31, 2021, we had net loss of $1,333,304, which consists of general and administrative expenses of $121,235, the change in fair value of warrant liabilities of $638,925, transaction costs associated with the Initial Public Offering of $579,585, offset by interest earned on marketable securities held in the Trust Account of $6,441.

Liquidity and Capital Resources

On March 4, 2021, we consummated the Initial Public Offering of 34,500,000 SCALE (Stakeholder-Centered Aligned Listed Equity) Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of 4,500,000 SCALE Units, at $10.00 per SCALE Unit, generating gross proceeds of $345,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 1,035,000 Private Placement SCALE Units at a price of $10.00 per Private Placement SCALE Unit in a private placement to NightDragon Acquisition Sponsor, LLC, generating gross proceeds of $10,350,000.

Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Placement SCALE Units, a total of $345,000,000 was placed in the Trust Account. We incurred $19,601,538 in Initial Public Offering related costs, including $6,900,000 of underwriting fees, $12,075,000 of deferred underwriting fees and $626,538 of other offering costs.

For the three months ended March 31, 2022, cash used in operating activities was $318,481. Net income of $2,372,999 was affected by change in fair value of warrant liabilities of $2,782,214, and interest income on marketable securities held in the Trust Account of $32,803. Changes in operating assets and liabilities provided $123,537 of cash for operating activities.

For the three months ended March 31, 2021, cash used in operating activities was $1,282,639. Net loss of $1,333,304 was affected by change in fair value of warrant liabilities of $638,925, transaction costs associated with the Initial Public Offering of $579,585, and interest earned marketable securities held in the Trust Account of $6,441. Changes in operating assets and liabilities used $1,161,404 of cash for operating activities.

As of March 31, 2022, we had marketable securities held in the Trust Account of $345,063,493 (including approximately $63,000 of interest income) consisting of U.S. Treasury Bills with a maturity of 185 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through March 31, 2022, we have not withdrawn any interest earned from the Trust Account.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable), to complete our Business Combination. 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 March 31, 2022, we had cash of $784,438. 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.



                                       19

--------------------------------------------------------------------------------

Table of Contents

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates 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 SCALE Units at a price of $10.00 per SCALE Unit, at the option of the lender. The SCALE Units would be identical to the Private Placement SCALE Units.

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.



                                       20

--------------------------------------------------------------------------------


  Table of Contents

Off-Balance
Sheet 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.

Liquidity and Going Concern

We may need to raise additional capital through loans or additional investments from our Sponsor, or an affiliate of our Sponsor, stockholders, officers or directors, or third parties. Our officers, directors and Sponsor may, but are not obligated to loan us additional funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain such additional financing. If we are unable to raise such additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board (the "FASB")'s Accounting Standards
Update ("ASU")
2014-15,
"Disclosures of Uncertainties about an Entity's Ability to Continue as a Going
Concern," have until March 4, 2023 to consummate an initial business
combination, or June 4, 2023 if we have executed a letter of intent, agreement
in principle or definitive agreement for an initial business combination by
March 4, 2023. It is uncertain that we will be able to consummate an initial
business combination by this time or any extended deadline, if approved. If an
initial business combination is not consummated by our initial deadline date or
an extended deadline date (if approved), there will be a mandatory liquidation
and subsequent dissolution of our company. Management has determined that the
mandatory liquidation, should an initial business combination not occur and an
extension is not requested by our sponsor, and potential subsequent dissolution
raises substantial doubt about our ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after March 4, 2023.

Contractual obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

The underwriters are entitled to a deferred fee of $0.35 per SCALE Unit, or $12,075,000 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 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:

Warrant Liabilities

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"), 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.

Class A Common Stock Subject to Possible Redemption

We account for our common stock subject to possible conversion 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 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, shares of Class A Common Stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' deficit section of our balance sheets.

Net Income (Loss) Per Common Share



Net income (loss) per share of common stock is computed by dividing net income
(loss) by the weighted average number of share of common stock outstanding for
the period. The Company applies 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. The Company complies with
accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per
Share."

Recent Accounting Standards

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.

© Edgar Online, source Glimpses