The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form
10-K.
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.
Recent Developments
On December 9, 2021, we entered into the Merger Agreement, by and among North
Mountain, Corcentric, Merger Sub I, a direct, wholly owned subsidiary of North
Mountain and Merger Sub II, a direct, wholly owned subsidiary of North Mountain.
See "Item 1. Business" for a description of the contemplated Business
Combination and the related agreements.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 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.
53
--------------------------------------------------------------------------------
Table of Contents
For the year ended December 31, 2021, we had net income of $4,990,116, which
consisted of a change in fair value of warrant liabilities of $6,154,025 and
interest earned on marketable securities held in the trust account of $8,733,
offset by operating costs of $1,172,642.
For the period from July 14, 2020 (inception) through December 31, 2020, we had
a net loss of $4,563,349, which consists of operating costs of $648,442 and a
change in the fair value of warrant liabilities of $3,918,000, offset by
interest earned on marketable securities held in the trust account of $3,093.
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.
For the year ended December 31, 2021, cash used in operating activities was
$667,854. Net income of $4,990,116 was affected by interest earned on marketable
securities held in the trust account of $8,733 and a change in fair value of
warrant liability of $6,154,025. Changes in operating assets and liabilities
provided $504,788 of cash for operating activities.
For the period from July 14, 2020 (inception) through December 31, 2020, cash
used in operating activities was $441,479. Net loss of $4,563,349 was affected
by interest earned on marketable securities held in the trust account of $3,093,
a change in the fair value of warrant liabilities of $3,918,000, transaction
costs allocable to warrant liabilities of $355,812, compensation expense related
to warrant liabilities of $55,000 and changes in operating assets and
liabilities, which used $203,849 of cash from operating activities.
As of December 31, 2021, we had cash and marketable securities held in the trust
account of $132,261,826. 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 December 31, 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 December 31, 2021, we had cash of $303,615 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.
We have material cash requirements related to entered agreements in connection
with our proposed merger. The Underwriting Agreement, Pipe Engagement Agreement,
and Capital Markets Agreement aggregate to approximately $8,100,000 of fees that
are required to be paid at the closing of the merger. We intend to use a
combination of the remaining funds within our operating bank account of $303,615
as well as the $50,000,000 of funds related to the Subscribers of the proposed
merger, as detailed in our Subscription Agreement, to settle our cash
requirements. The purpose of this paragraph is to appropriately present our
current and projected cash requirements as we continue to close on our proposed
merger.
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.
54
--------------------------------------------------------------------------------
Table of Contents
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 December 31, 2021, we had $303,615 of cash within the operating bank
account, a working capital balance of $14,502, and less than twelve months to
complete a business combination. No assurances can be given that the Company
will complete a business combination before September 22, 2022, the Company's
liquidation date, or through twelve months following the issuance of this
report.
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 December 31, 2021 and 2020. 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.
55
--------------------------------------------------------------------------------
Table of Contents
Critical Accounting 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 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:
Share-Based Compensation
We adopted ASC Topic 718, Compensation-Stock Compensation, guidance to account
for our share-based compensation. The guidance defines a fair value-based method
of accounting for an employee share option or similar equity instrument. We
recognize all forms of share-based payments, including share option grants,
warrants and restricted share grants, at their fair value on the grant date,
which are based on the estimated number of awards that are ultimately expected
to vest. Share-based payments, excluding restricted shares, are valued using a
Black-Scholes option pricing model. Grants of share-based payment awards issued
to nonemployees for services rendered have been recorded at the fair value of
the share-based payment, which is the more readily determinable value. The
grants are amortized on a straight-line basis over the requisite service
periods, which is generally the vesting period. If an award is granted, but
vesting does not occur, any previously recognized compensation cost is reversed
in the period related to the termination of service. Share-based compensation
expenses are included in costs and operating expenses depending on the nature of
the services provided in the statements of operations.
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
statements 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' deficit section of our consolidated 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
financial statements.
© Edgar Online, source Glimpses