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 for the year ended December 31, 2021 filed with the SEC (the "2021 Annual Report"). 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 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" in the 2021 Annual Report 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 March 31, 2022 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 March 31, 2022, we had net income of $5,093,731, which consisted of a change in fair value of warrant liabilities of $5,341,575 and interest earned on marketable securities held in the trust account of $8,537, offset by operating costs of $256,381.

For the three months ended March 31, 2021, we had net income of $2,458,268, which consisted of a change in fair value of warrant liabilities of $2,707,000 and interest earned on marketable securities held in the trust account of $1,953, offset by operating costs of $250,685.


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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 three months ended March 31, 2022, cash used in operating activities was $202,104. Net income of $5,093,731 was affected by interest earned on marketable securities held in the trust account of $8,537 and a change in fair value of warrant liabilities of $5,341,575. Changes in operating assets and liabilities provided $54,277 of cash for operating activities.

For the three months ended March 31, 2021, cash used in operating activities was $155,255. Net income of $2,458,268 was affected by interest earned on marketable securities held in the trust account of $1,953 and a change in fair value of warrant liabilities of $2,707,000. Changes in operating assets and liabilities provided $95,430 of cash for operating activities.

At March 31, 2022, we had cash and marketable securities held in the trust account of $132,270,363. 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 March 31, 2022, 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.

At March 31, 2022, we had cash of $101,511 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.

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

At March 31, 2022, we had $101,511 of cash within the operating bank account, a working capital deficit balance of $233,342, 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.


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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.

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 and Estimates

The preparation of condensed consolidated 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 and estimates:

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.


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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 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 condensed 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 condensed consolidated financial statements.

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