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 on
January 11, 2021, for the purpose of entering into a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses or entities (the "Business
Combination"). We intend to effectuate our Business Combination using cash from
the proceeds of the IPO 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 complete a Business
Combination will be successful.
Recent Developments
We entered to a Personnel Services Agreement, dated April 1, 2021, with Northern
Genesis Sponsor III LLC (the "Sponsor") pursuant to which, subject to
maintaining funds adequate for our projected obligations, we expect to pay up to
$2,000,000 in the aggregate in respect of the services of personnel affiliated
with the Sponsor, including persons who may be our directors or officers, for
activities on our behalf, including services related to identifying,
investigating and completing an initial business combination and other
operational and support services. To the extent any amounts are in respect of
the services of individuals who also serve as directors or executive officers of
the Company, such amounts will be reviewed and approved by its audit committee.
The Sponsor, our officers and directors or any of their respective affiliates
will be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable business combinations. There is no cap or
ceiling on the reimbursement of out-of-pocket expenses incurred by such persons
in connection with activities on our behalf.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from January 11, 2021 (inception) through December 31, 2021,
were organizational activities, those necessary to prepare for the IPO,
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. 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.
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For the period from January 11, 2021 (inception) through December 31, 2021, we
had net income of $2,363,492, which consisted of the change in fair value of
warrant liabilities of $4,281,447 and interest earned on cash and marketable
securities held in Trust Account of $12,172, offset by transaction costs
incurred in connection with IPO of $362,705, the change in the fair value of the
overallotment liability of $148,081, and formation and operating costs of
$1,588,681.
Liquidity and Capital Resources
On March 26, 2021, we consummated the IPO of 15,000,000 Units at $10.00 per
Unit, generating gross proceeds of $150,000,000. Simultaneously with the closing
of the IPO, we consummated the sale of 3,166,667 Private Placement Warrants at a
price of $1.50 per Private Placement Warrant in a private placement to Northern
Genesis Sponsor III LLC, the Sponsor, generating gross proceeds of $4,750,000.
Following the IPO, the partial exercise of the over-allotment option, and the
sale of the Private Placement Warrants, a total of $172,450,000 was placed in
the Trust Account. We incurred $9,807,785 in IPO related costs, including
$3,449,000 of underwriting fees, net of reimbursement, $6,035,750 of deferred
underwriting fees and $323,035 of other costs.
For the period from January 11, 2021 (inception) through December 31, 2021, cash
used in operating activities was $1,195,226. Net income of $2,363,492 was
affected by interest earned on cash and marketable securities held in the Trust
Account of $12,172, change in fair value of warrant liabilities of $4,281,447,
change in the fair value of the overallotment liability of $148,081,
compensation expense of $34,661, and transaction costs incurred in connection
with IPO of $362,705. Changes in operating assets and liabilities provided
$358,794 of cash for operating activities include amount of compensation expense
(see SCF).
As of December 31, 2021, we had cash held in the Trust Account of $172,462,172
(including $12,172 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 December 31, 2021, 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
income 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.
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, 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 $2,000,000 of such loans may be convertible into warrants
at a price of $1.50 per warrant, at the option of the lender. The warrants would
be identical to the Private Placement Warrants. On September 30, 2021, the
Sponsor has signed a Commitment Letter to provide up to $3,000,000 in working
capital loans if required.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity from the sponsor or an
affiliate of the Sponsor, or certain of the Company's officers and directors to
meet its needs through the earlier of the consummation of a Business Combination
or one year from this filing. Over this time period, the Company will be using
these funds for paying existing accounts payable, identifying and evaluating
prospective initial Business Combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination.
Going Concern
In connection with our assessment of going concern considerations in accordance
with ASC Topic 205-40 Presentation of Financial Statements - Going Concern,
management has determined that mandatory liquidation and subsequent dissolution
raises substantial doubt about our company's ability to continue as a going
concern. No adjustments have been made to the carrying amounts of assets or
liabilities should our company be required to liquidate after March 26, 2023.
Although we intend to consummate a business combination on or before March 26,
2023, and may seek an extension, it is uncertain that we will be able to
consummate a business combination, or obtain an extension, by this time. This,
as well as our liquidity condition, raise substantial doubt about our ability to
continue as a going concern. See "Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations - Going Concern. The financial
statements do not include any adjustment that might be necessary if our company
is unable to continue as a going concern.
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Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 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 the Sponsor
a monthly fee of $10,000 for office space, utilities, secretarial support and
administrative services. We began incurring these fees on March 23, 2021 and
will continue to incur these fees monthly until the earlier of the completion of
the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of 3.5% of the gross proceeds of
the IPO, or $5,250,000 (or up to $6,037,500 if the underwriters' over-allotment
is exercised in full). 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.
In connection with the IPO, the Company entered into a forward purchase
agreement (the "Original Agreement") with Northern Genesis Capital III LLC
("NGC"), an entity which is affiliated with the Company's Sponsor.
On April 21, 2021, the Company entered into an Amended and Restated Forward
Purchase Agreement with NGC (the "NGC Forward Purchase Agreement"), and certain
additional Forward Purchase Agreements with additional institutional investors
(collectively, with the NGC Forward Purchase Agreement, the "Forward Purchase
Agreements"). The Forward Purchase Agreements collectively replace the Original
Agreement.
Pursuant to the Forward Purchase Agreements, if the Company determines to raise
capital by the private placement of equity securities in connection with the
closing of Business Combination (subject to certain limited exceptions), the
members of NGC (institutional investors that also are members of the Company's
Sponsor) and the parties to the additional Forward Purchase Agreements have the
first right to purchase an aggregate amount of up to 7,500,000 "forward purchase
units" of the Company (under all Forward Purchase Agreements, taken together)
for $10.00 per forward purchase unit, or an aggregate total of $75,000,000. Each
forward purchase unit would consist of one share of the Company's common stock
and one-eighth of one warrant, with each whole warrant exercisable to purchase
one share of the Company's common stock at $11.50 per share. The common stock
and warrants included in the forward purchase units would have the same terms as
the Company's publicly traded common stock and warrants but would not be freely
tradable until registered. As with the Original Agreement, any commitment by any
potential purchaser under any of the Forward Purchase Agreements is subject to
and conditioned upon written confirmation from the prospective purchaser,
following the Company's notification to such purchaser of its intention to enter
into an initial business combination agreement, which a prospective purchaser
was grant or withhold in its sole discretion.
In addition, if a private placement of equity securities in connection with the
Company's initial business combination exceeds $75,000,000, the Company agreed
under each Forward Purchase Agreement to use its commercially reasonable efforts
to permit priority participation in such additional amount by the members of NGC
and the parties to the additional Forward Purchase Agreements, in an aggregate
additional amount up to $150,000,000, on the same terms as those offered to
other prospective purchasers in connection with such additional private
placement amount.
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Each Forward Purchase Agreement that the holders of the shares of common stock
and warrants included in the forward purchase units will be entitled to
registration rights pursuant to the terms of any registration rights agreement
applicable to any equity securities issued by way of private placement in
connection with the closing of the Company's initial business combination or, in
the absence of the foregoing, pursuant to the terms of the registration rights
agreement entered into by the Company, Sponsor and NGC in connection with the
Company's IPO (the "Registration Rights Agreement"). Pursuant to the foregoing,
on April 21, 2021, the Registration Rights Agreement was amended to clarify that
the shares and warrants included in up to 7,500,000 total forward purchase units
remain subject to the Registration Rights Agreement, regardless of the specific
Forward Purchase Agreement pursuant to which they may be issued.
Each Forward Purchase Agreement contains representations and warranties by each
party, conditions to closing, and additional provisions that are customary for
agreements of this nature. The terms of all of the Forward Purchase Agreements
are substantively the same, except that the NGC Forward Purchase Agreement gives
NGC board observation rights prior to the Company's initial business combination
and gives the members of NGC a priority right to subscribe for any of the
forward purchase units that any other prospective purchasers do not elect to
purchase under any of the other Forward Purchase Agreements.
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:
Warrant Liabilities
We account 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 our
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 statement
of operations.
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." 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, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' deficit section of our balance sheet.
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Net Income Per Common Share
Net income per common stock is computed by dividing net income by the weighted
average number of common stock outstanding for the period. Accretion associated
with the redeemable shares of common stock is excluded from earnings per share
as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception, and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. We are currently assessing the impact, if any, that
ASU 2020-06 would have on its financial position, results of operations or cash
flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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