References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to North Mountain Merger Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to North Mountain 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"
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 Form 10-K filed with 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.
This Management's Discussion and Analysis of Financial Condition has been
amended and restated to give effect to the restatement of our financial
statements as of September 30, 2020, December 31, 2020, March 31, 2021, and June
30, 2021. Management identified errors made in its historical financial
statements where, at the closing of our Initial Public Offering, we improperly
valued our Class A common stock subject to possible redemption. We previously
determined the Class A common stock subject to possible redemption to be equal
to the redemption value of $10.00 per share of Class A common stock while also
taking into consideration a redemption cannot result in net tangible assets
being less than $5,000,001. Management determined that the Class A common stock
issued during the Initial Public Offering can be redeemed or become redeemable
subject to the occurrence of future events considered outside of the Company's
control. Therefore, management concluded that the redemption value should
include all Class A common stock subject to possible redemption, resulting in
the Class A common stock subject to possible redemption being equal to their
redemption value. As a result, management has noted a reclassification error
related to temporary equity and permanent equity. This resulted in a restatement
to the initial carrying value of the Class A common stock subject to possible
redemption with the offset recorded to additional paid-in capital (to the extent
available), accumulated deficit and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware 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 raise capital or to
complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through September 30, 2021 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below,
and, after our Initial Public Offering, 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. 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 September 30, 2021, we had net income of $4,199,914,
which consisted of a change in fair value of warrant liabilities of $4,401,125
and interest earned on marketable securities held in the Trust Account of
$1,997, offset by operating costs of $203,208.
For the nine months ended September 30, 2021, we had net income of $4,288,586,
which consisted of a change in fair value of warrant liabilities of $4,974,875
and interest earned on marketable securities held in the Trust Account of
$5,926, offset by operating costs of $692,215.
For the period from July 14, 2020 (inception) through September 30, 2020, we had
a net loss of $396,369, which consisted of formation and operational costs of
$18,185, change in value of warrant liability of $41,000, and transaction costs
of $355,812, offset by interest earned on marketable securities held in the
Trust Account of $443.
Liquidity and Capital Resources
On September 22, 2020, we consummated the Initial Public Offering of 13,225,000
Units, which includes the full exercise of 1,725,000 Units by the underwriters
of the over-allotment option, at $10.00 per unit, generating gross proceeds of
$132,250,000. Simultaneously with the closing of the Initial Public Offering, we
consummated the sale of 4,145,000 Private Placement Warrants to the Sponsor at a
price of $1.00 per warrant, generating gross proceeds of $4,145,000.
Following the Initial Public Offering, the exercise of the over-allotment option
and the sale of the Private Placement Warrants, a total of $132,250,000 was
placed in the Trust Account. We incurred $7,385,802 in transaction costs,
including $2,417,300 of underwriting fees, $4,628,750 of deferred underwriting
fees and $339,752 of other offering costs.
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For the nine months ending September 30, 2021 cash used in operating activities
was $395,032. Net income of $4,288,586 was affected by interest earned on
marketable securities held in the Trust Account of $5,926 and a change in fair
value of warrant liability of $4,974,875. Changes in operating assets and
liabilities provided $297,183 of cash for operating activities.
For the period from July 14, 2020 (inception) through September 30, 2020, cash
used in operating activities was $404,152. Net loss of $414,554 was affected by
interest earned on marketable securities held in the Trust Account of $443,
change in value of warrant liability of $41,000, and transaction costs of
$355,812. Changes in operating assets and liabilities used $385,967 of cash for
operating activities.
As of September 30, 2021, we had cash and marketable securities held in the
trust account of $132,259,019. 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 deferred underwriting commissions and income taxes
payable), to complete our Business Combination. We may withdraw interest to pay
franchise and income taxes. During the period ended September 30, 2021, we did
not withdraw any interest earned on 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.
As of September 30, 2021, we had cash of $576,437 outside of the Trust Account.
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 fund working capital deficiencies or finance transaction costs in
connection with a Business Combination the Sponsor, an affiliate of the Sponsor,
or our officers and directors 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 warrants
identical to the Private Placement Warrants, at a price of $1.00 per warrant at
the option of the lender.
We will need to raise additional funds in order to meet the expenditures
required for operating our business. We may also 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 in connection 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.
Going Concern
As of September 30, 2021, the company had $576,437 of cash within the operating
bank account and a working capital balance of $633,103.
The Company has incurred and expects to continue to incur significant costs in
pursuit of its acquisition plans. In connection with the Company's assessment of
going concern considerations in accordance with Accounting Standards Update
("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to
Continue as a Going Concern," we believe that we will need to obtain additional
capital in order to have adequate liquidity to sustain operations, which
consists of pursuing a Business Combination. While the Company expects to have
sufficient access to additional sources of capital if necessary, there is no
current commitment on the part of any financing source to provide additional
capital and no assurances can be provided that such additional capital will
ultimately be available. These conditions raise substantial doubt about the
Company's ability to continue as a going concern for a period of time through at
least one year from the date the financial statements are issued. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Off-Balance Sheet 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 an agreement to pay an
affiliate of the Sponsor a monthly fee of $10,000 for office space,
administrative and support services to the Company. We began incurring these
fees on September 22, 2020 and will continue to incur these fees monthly until
the earlier of the completion of the Business Combination and our liquidation.
The underwriter is entitled to a deferred fee of $4,628,750 in the aggregate.
The deferred fee will be forfeited by the underwriter solely in the event that
we fail to complete a Business Combination, subject to the terms of the
underwriting agreement. The underwriter did not receive any underwriting
discount or commissions on Units purchased by Millais Limited, the indirect
majority owner of our sponsor.
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:
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Warrant Liabilities
We account for the warrants issued in connection with our Initial Public
Offering in accordance 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"), 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 fair value of the private warrants was estimated
using a Modified Black-Scholes Model. The fair value of the public warrants was
initially measured using the Modified Black-Scholes model, and then subsequently
measured at the public trading price. The key inputs and assumptions used for
the Modified Black-Scholes model were the common stock price, expected term in
years, expected volatility derived using a Monte Carlo Simulation, exercise
price, and risk-free interest rate.
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 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 unaudited condensed
balance sheets.
Net Income per Common Stock
We calculate earnings per share to allocate net income (loss) evenly to Class A
and Class B common shares. This presentation contemplates a Business Combination
as the most likely outcome, in which case, both classes of common stock share
pro rata in the income (loss) of the Company.
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.
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