UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
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Check whether the issuer (1) filed all reports
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| Emerging growth company |
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As of November 14, 2023, there were
NORTHERN STAR INVESTMENT CORP. II
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
i
PART I—FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
NORTHERN STAR INVESTMENT CORP. II
CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Marketable investments held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Income taxes payable | ||||||||
| Excise tax payable | ||||||||
| Promissory notes - related party | ||||||||
| Redemption payable | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Deferred underwriting fee payable | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments | ||||||||
| Class A common stock subject to possible redemption | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1
NORTHERN STAR INVESTMENT CORP. II
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Interest earned on marketable investments held in Trust Account | ||||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||||||||||
| Total other income, net | ||||||||||||||||
| (Loss) Income before provision for income taxes | ( | ) | ||||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income | $ | ( | ) | $ | $ | $ | ||||||||||
| $ | ( | ) | $ | $ | $ | |||||||||||
| Basic and diluted net (loss) income per share, Class A common stock non-redeemable | $ | ( | ) | $ | $ | $ | ||||||||||
| $ | ( | ) | $ | $ | $ | |||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
NORTHERN STAR INVESTMENT CORP. II
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement adjustment on redeemable common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement adjustment on redeemable common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement adjustment on redeemable common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Excise tax payable attributable to redemption of common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Shareholder non-redemption agreement | — | — | ||||||||||||||||||||||||||
| Shareholder non-redemption agreement | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement adjustment on redeemable common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement adjustment on redeemable common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – September 30, 2022 | — | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
NORTHERN STAR INVESTMENT CORP. II
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on marketable investments held in Trust Account | ( | ) | ( | ) | ||||
| Changes in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Income taxes payable | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account to pay franchise and income taxes | ||||||||
| Cash withdrawn from Trust Account in connection with redemption | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from promissory notes - related party | ||||||||
| Redemption of redeemable shares | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Supplementary cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Excise tax payable attributable to redemption of common stock | $ | $ | ||||||
| Remeasurement adjustment on redeemable stock | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
NOTE 1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Northern Star Investment Corp. II (the “Company”) is a blank check company incorporated in Delaware on November 12, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”).
The Company has two wholly-owned subsidiaries, NSICII-A Merger LLC and NSICII-B LLC, both of which were incorporated in the state of Delaware on February 15, 2021. There was no activity for the subsidiaries through September 30, 2023.
The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2023, the Company had not commenced any operations. All activity through September 30, 2023 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, seeking to identify a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on marketable investments held in the Trust Account (as defined below).
The registration statements for the Company’s
Initial Public Offering were declared effective on January 25, 2021. On January 28, 2021, the Company consummated the Initial Public
Offering of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of
Transaction costs amounted to $
Following the closing of the Initial Public Offering
on January 28, 2021, an amount of $
While the Company’s management has broad
discretion with respect to the specific application of the cash held outside of the Trust Account, substantially all of the net proceeds
from the Initial Public Offering and the sale of the Private Placement Warrants, which are placed in the Trust Account, are intended
to be applied generally toward completing a Business Combination. The Company must complete its initial Business Combination having an
aggregate fair market value of at least
5
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
The Company will provide its stockholders with
the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection
with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether
the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in
its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the
Trust Account (initially $
The Company will proceed with a Business Combination
only if the Company has net tangible assets of at least $
Notwithstanding the above, if the Company seeks
stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and
Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an
aggregate of
The holders of Founder Shares have agreed (a)
to waive their redemption rights with respect to its Founder Shares and Public Shares held by them in connection with the completion
of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) that would
affect the substance or timing of the Company’s obligation to redeem
On December 30, 2022, the Company filed the amendment
to the Amended and Restated Certificate of Incorporation to extend the date by which the Company has to consummate a business combination
from January 28, 2023 to July 28, 2023. In connection with the Meeting, the Sponsor entered into Non-Redemption Agreements with several
unaffiliated third parties and agreed to transfer an aggregate of
On July 28, 2023, the Company entered into Non-Redemption
Agreements with various stockholders pursuant to which these stockholders committed not to redeem their Public Shares. In consideration
of these agreements, the Sponsor has agreed to transfer a portion of its Founder shares to the Non-Redeeming Stockholders at the closing
of the Business Combination. The Company estimated the aggregate fair value of the
6
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
On December 30, 2022, the Sponsor voluntarily
converted
On February 24, 2023, the Company issued a press release announcing that it would transfer its listing from the New York Stock Exchange to the NYSE American LLC (the “NYSE American”). The Company received written confirmation that it received the final approval for listing from the staff of the NYSE American on February 24, 2023. In connection with listing on the NYSE American, the Company voluntarily delisted from the New York Stock Exchange. The Company’s securities commenced trading on the NYSE American on March 1, 2023.
On May 12, 2023, Joanna Coles resigned from her position as Chairperson of the Board of Directors (and as a director) and Chief Executive Officer of the Company in order to focus on other business opportunities. Ms. Coles’ resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
The holders of Founder Shares have agreed to
waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the
Combination Period. However, if the holders of Founder Shares acquire Public Shares, such Public Shares will be entitled to liquidating
distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. In the event
of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the
Initial Public Offering price per Unit ($
In order to protect the amounts held in the Trust
Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or
products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below (i) $
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statement. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company is exposed to volatility in the banking market. At various times, we could have deposits with certain U.S. banks in excess of the maximum amounts insured by the U.S. Federal Deposit Insurance Corporation (“FDIC”). On March 10, 2023, Silicon Valley Bank became insolvent. State regulators closed the bank and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as its receiver. The Company did not hold any deposits with Silicon Valley Bank as of December 31, 2022 and September 30, 2023.
7
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination. Notwithstanding the foregoing, the Company has agreed that the per share price payable to stockholders exercising their redemption rights, whether in connection with the vote on an extension or an initial Business Combination, will not be reduced by payments required to be made by the Company under the IR Act.
The Company held a meeting on July 28, 2023 to vote on a proposal to
amend the Charter to extend the date by which the Company must consummate a Business Combination or, if it fails to do so, cease its operations
and redeem or repurchase
Liquidity and Going Concern
As of September 30, 2023, the Company had $
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it 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. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. Management has determined that the date for mandatory liquidation and subsequent dissolution as well as the low cash balance and working capital deficit raise substantial doubt about our ability to continue as a going concern. Management has determined that these conditions as well as the low cash balance raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
8
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended December 31, 2022, as filed with the SEC on March 30, 2023. The interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future periods.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these unaudited condensed consolidated financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.
9
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2023 and December 31, 2022.
Marketable Securities Held in Trust Account
At September 30, 2023 and December 31, 2022, substantially all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable investments held in the Trust Account in the accompanying consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Offering Costs
Offering costs consisted of legal, accounting
and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs
were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared
to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred in the consolidated statements
of operations. Offering costs associated with the Class A common stock issued were charged to temporary equity and warrants upon the
completion of the Initial Public Offering. Offering costs amounted to $
Class A Common Stock Subject to Possible Redemption
The Company accounts for its 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 is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2023 and December 31, 2022, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s consolidated balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the remeasurement adjustment from carrying value to redemption value. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital (to the extent available) and accumulated deficit.
Components of Equity
Upon the Initial Public Offering, the Company
issued Class A common stock and Public Warrants. The Company also issued Private Placement Warrants. The Company allocated the proceeds
received from the issuance using the with-and-without method. Under that method, the Company first allocated the proceeds to the Warrants
based on their initial fair value measurement of $
As a result of the Sponsor’s conversion
of
10
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
Warrant Liabilities
The Company assessed its warrants under ASC 480-25, “Distinguishing liabilities from equity” and ASC 815-40 “Derivatives and Hedging—Contracts in Entity’s Own Equity”. The Company accounts for the Public Warrants (as defined below) and Private Placement Warrants (collectively, the “Warrants”) as derivative liabilities. A provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Company accounts for Warrants for shares of the Company’s common stock that are not indexed to its own stock as derivative liabilities at fair value on the consolidated balance sheets and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, with changes in fair value recognized in the consolidated statements of operations in the period of change.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it.
The Company’s effective tax rate was (
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net (Loss) Income Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding for the period. Remeasurement adjustment associated with the redeemable shares of Class A common shares is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted (loss) income per
share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the
private placement. The warrants are exercisable to purchase
11
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
| For the Three Months Ended September 30, 2023 | For the Nine Months Ended September 30, 2023 | |||||||||||||||||||||||
| Class A | Class A | Class B | Class A | Class A | Class B | |||||||||||||||||||
| Redeemable | Non-Redeemable | Redeemable | Redeemable | Non-Redeemable | Redeemable | |||||||||||||||||||
| Basic and diluted net (loss) income per common share | ||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||
| Allocation of net (loss) income, as adjusted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||
| For the Three Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2022 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income per common share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income, as adjusted | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s consolidated balance sheet, primarily due to their short-term nature, except for warrant liabilities (see Note 8).
Recent Accounting Standards
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.
12
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the
Company sold
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor purchased an aggregate of
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On November 25, 2020, the Sponsor paid $
The Founder Shares included an aggregate of up
to
On December 30, 2022, the Sponsor voluntarily
converted
The holders of Founder Shares have agreed, subject
to certain limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year
after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Class A
common stock equals or exceeds $
13
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Company’s officer, directors, Sponsor or an affiliate of the foregoing, may, but are not obligated
to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination,
the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working
Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination is not completed,
the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held
in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans,
if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be
repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
On March 16, 2023, the Company signed a convertible
promissory note with a related party for $
Non-Redemption Agreements
In December 2022, the Company entered into Non-Redemption
Agreements with various stockholders pursuant to which these stockholders committed not to redeem their Public Shares. In consideration
of these agreements, the Sponsor has agreed to transfer a portion of its Founder shares to the Non-Redeeming Stockholders at the closing
of the Business Combination. The Company estimated the aggregate fair value of the
On July 28, 2023, the Company entered into Non-Redemption
Agreements with various stockholders pursuant to which these stockholders committed not to redeem their Public Shares. In consideration
of these agreements, the Sponsor has agreed to transfer a portion of its Founder shares to the Non-Redeeming Stockholders at the closing
of the Business Combination. The Company estimated the aggregate fair value of the
| July 27, | December 30, | |||||||
| 2023 | 2022 | |||||||
| Risk-free interest rate | % | % | ||||||
| Remaining life of SPAC | ||||||||
| Underlying stock price | $ | $ | ||||||
| Probability of transaction | % | % | ||||||
14
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
NOTE 6 — COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on January 25, 2021, the holders of the Founder Shares (and any shares of Class A common stock issuable upon conversion of the Founder Shares), Private Placement Warrants (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants), and warrants (and any shares of Class A common stock issuable upon exercise of such warrants) that may be issued upon conversion of working capital loans will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of the majority of these securities are entitled to make up to two demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Consulting Agreement
On January 21, 2021, the Company entered into
an agreement with a consultant for advisory services related to a Business Combination. The agreement specified that the consultant would
assist with due diligence, deal structuring, documentation and obtaining stockholder approval for a Business Combination. The consultant
would receive a fee of
On February 1, 2022, the Company entered into
an agreement with a consultant for advisory services. The agreement specified that the Company pays $
Effective January 31, 2023, the Company terminated its consulting agreement for advisory services.
Underwriting Agreement
The underwriters from the Initial Public Offering
are entitled to a deferred fee of $
NOTE 7 — STOCKHOLDERS’ DEFICIT
Preferred Stock — The Company
is authorized to issue
Class A Common Stock — The
Company is authorized to issue
Class B Common Stock —
The Company is authorized to issue
15
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
The shares of Class B common stock will automatically
convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the
case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts
offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common
stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares
of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares
of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted
basis,
NOTE 8 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
At September 30, 2023 and December 31, 2022,
respectively, assets held in the Trust Account of $
| Description | Level | September 30, 2023 | December 31, 2022 | |||||||||
| Assets: | ||||||||||||
| Cash and Marketable investments held in Trust Account | 1 | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Warrant liability – Public Warrants(1) | 1 | $ | $ | |||||||||
| Warrant liability – Private Placement Warrants(1) | 2 | $ | $ | |||||||||
| (1) |
Warrants
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed consolidated statements of operations.
16
NORTHERN STAR INVESTMENT CORP. II
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
The Public and Private Warrants were initially valued using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s primary unobservable inputs utilized in determining the fair value of the Private Warrants are the expected volatility of the common stock and the probability and expected timing to consummate a business combination. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own public stock pricing. A Monte Carlo simulation methodology was used in estimating the fair value of the Public Warrants for the initial measurement, using the same expected volatility as was used in measuring the fair value of the Private Warrants. For periods subsequent to the detachment of the warrants from the Units, the closing price of the Public Warrants was used as the fair value of the Public Warrants as of each relevant date. At December 31, 2021, the Private Warrants were transferred to Level 2 due to the use of an observable market quote for a similar asset in an active market.
As of September 30, 2023 and December 31, 2022,
the aggregate values of the Public Warrants and Private Placement Warrants were $
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. There were no transfers during the three and nine months ended September 30, 2023 and during the year ended December 31, 2022.
| Private Placement | Public | Warrant Liabilities | ||||||||||
| Fair value as of January 1, 2023 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of March 31, 2023 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of June 30, 2023 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions | ||||||||||||
| Fair value as of September 30, 2023 | $ | $ | $ | |||||||||
NOTE 9 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to NORTHERN STAR INVESTMENT CORP. II. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Northern Star II 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 including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), 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, including that the conditions of the Proposed Business Combination are not satisfied. 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 U.S. Securities and Exchange Commission (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.
Overview
We are a blank check company formed under the laws of the State of Delaware on November 12, 2020 for the purpose of effecting 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 Initial Public Offering and the sale of the Private 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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 12, 2020 (inception) through September 30, 2023 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and searching for a target company with which to consummate an initial 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 investments 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, 2023, we had a net loss of $134,049, which consists of change in fair value of warrant liabilities of $177,500, formation and operational costs of $149,536 and provision for income taxes of $48,190, offset by interest earned on marketable investments held in the Trust Account of $241,177.
For the three months ended September 30, 2022, we had a net income of $2,487,691, which consists of change in fair value of warrant liabilities of $1,242,500 and interest earned on marketable investments held in the Trust Account of $1,769,455, offset by general and administrative expenses of $160,169 and provision for income taxes of $364,095.
For the nine months ended September 30, 2023, we had a net income of $666,274, which consists of change in fair value of warrant liabilities of $532,500 and interest earned on marketable investments held in the Trust Account of $696,401, offset by formation and operational costs of $430,180 and provision for income taxes of $132,447.
For the nine months ended September 30, 2022, we had a net income of $11,987,173, which consists of change in fair value of warrant liabilities of $10,650,000, and interest earned on marketable investments held in the Trust Account of $2,321,328, offset by general and administrative expenses of $560,464 and provision for income taxes of $423,691.
18
Liquidity and Capital Resources
The registration statements for the Company’s Initial Public Offering were declared effective on January 25, 2021. On January 28, 2021, we completed the Initial Public Offering of 40,000,000 Units, which includes the partial exercise by the underwriter of its over-allotment option in the amount of 5,000,000 Units, at $10.00 per Unit, generating gross proceeds of $400,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 9,750,000 Private Placement Warrants at a price of $1.00 per Private Warrant in a private placement to the Sponsor, generating gross proceeds of $9,750,000, which is described in Note 4.
For the nine months ended September 30, 2023, cash used in operating activities was $685,283. Net income of $666,274 was affected by change in fair value of warrant liabilities of $532,500, and interest earned on marketable investments held in the Trust Account of $696,401. Changes in operating assets and liabilities used $122,656 of cash for operating activities.
For the nine months ended September 30, 2022, cash used in operating activities was $543,395. Net income of $11,987,173 was affected by change in fair value of warrant liabilities of $10,650,000, and interest earned on marketable investments held in the Trust Account of $2,321,328. Changes in operating assets and liabilities provided $440,760 of cash for operating activities.
As of September 30, 2023, we had marketable securities held in the Trust Account of $16,768,064 (including approximately $558,174 of interest income). Interest income on the balance in the Trust Account may be used by us to pay taxes.
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. 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, 2023, we had cash of $64,613. 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 $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per unit, at the option of the lender. The warrants would be identical to the Private Warrants.
On March 16, 2023, the Company signed a convertible promissory note with a related party for $321,250 for working capital purposes. The note is non-interest bearing and payable on a Business Combination. On March 31, 2023, the note was amended and restated to remove the conversion option. The Company has concluded that the modification of the note is not a substantive modification under ASC 470-50-40-10 and recorded the note at face value. On May 12, 2023, the Company signed another promissory note with a related party for $100,000 for working capital purposes. The note is non-interest bearing and payable on a Business Combination. As of September 30, 2023, there was $421,000 outstanding on these notes which is included in Promissory notes - related party on the Company’s condensed consolidated balance sheets.
The Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it 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. 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.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until January 28, 2024 (or such earlier liquidation and dissolution date as the Company’s board of directors may approve) to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an extension has not been requested by the Sponsor and approved by the Company’s stockholders, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the low cash balance as well as the mandatory liquidation, should a Business Combination not occur and an extension not requested by the Sponsor, and potential subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 28, 2024. The Company intends to continue to search for and seek to complete a Business Combination before the mandatory liquidation date.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023. 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.
19
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $14,000,000 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.
In December 2022, the Sponsor entered into Non-Redemption Agreements with several unaffiliated third parties and agreed to transfer an aggregate of 363,848 shares of common stock to such parties in exchange for them agreeing not to redeem their public shares at the Meeting to extend the time to consummate an initial Business Combination until July 28, 2023. As a result of the foregoing, effective December 30, 2022, public holders of an aggregate of 37,926,283 public shares exercised their right to redeem their public shares (leaving an aggregate of 2,073,717 public shares outstanding after the Meeting) resulting in payment to such holders of an aggregate of $383,250,434 in cash and payable at December 31, 2022. On January 6, 2023, the redemptions were paid.
On February 1, 2022, the Company entered into an agreement with a consultant for advisory services. The agreement specified that the Company pays $8,333.33 a month plus any out-of-pocket expenses to the consultant. The agreement is terminable within 30 days written notice. As of September 30, 2023 and 2022, the Company incurred $8,333 and $66,667 in related expenses, respectively.
Effective January 31, 2023, the Company terminated its consulting agreement for advisory services.
On July 28, 2023, the Sponsor entered into additional Non-Redemption Agreements with several unaffiliated third parties and agreed to transfer an aggregate of 226,605 shares of common stock to such parties in exchange for them agreeing not to redeem their public shares at the Meeting. As a result of the foregoing, effective July 28, 2023, public holders of an aggregate of 452,728 public shares exercised their right to redeem their public shares (leaving an aggregate of 1,620,989 public shares outstanding after the Meeting).
Critical Accounting Policies
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.
Warrant Liabilities
The company assessed its warrants under ASC 480-25, “Distinguishing liabilities from equity” and ASC 815-40 “Derivatives and Hedging—Contracts in Entity’s Own Equity”. The Company accounts for the Public Warrants (as defined below) and Private Placement Warrants (collectively, the “Warrants”) as derivative liabilities. A provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Company accounts for Warrants for shares of the Company’s common stock that are not indexed to its own stock as derivative liabilities at fair value on the balance sheets and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, with changes in fair value recognized in the statements of operations in the period of change.
Class A Common Stock Subject to Possible Redemption
We account for our 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 feature redemption rights that is 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 Class A 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 are presented as temporary equity, outside of the stockholders’ deficit section of our balance sheets.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the remeasurement from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net (Loss) Income Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of stock. Net (loss) income per common share is calculated by dividing the net (loss) income by the weighted average number of common stock outstanding for the respective period. We did not consider the effect of the warrants issued in connection with the initial public offering and the private placement in the calculation of diluted (loss) income per common share because their exercise is contingent upon future events. As a result, diluted net (loss) income per common share is the same as basic net (loss) income per common share. Remeasurement associated with the redeemable Class A common stock is excluded from income per common share as the redemption value approximates fair value.
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Recent Accounting Standards
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. We adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial statements.
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 condensed consolidated financial statements.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Principal Executive Officer and Principal Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon their evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for excise tax and complex financial instruments. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Quarter Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Management has identified a material weakness in internal controls related to the accounting for excise tax and complex financial instruments. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 5. Other Information
During the three months ended September 30, 2023, no director or officer adopted or terminated any (i) “Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K intending to satisfy the affirmative defense conditions of Rule 10b5–1(c) or (ii) “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K.
During the three months ended September 30, 2023, the Company did not adopt or terminate any Rule 10b5-1 trading arrangement.
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PART II—OTHER INFORMATION
Item 1A. Risk Factors
As of the date of this Quarterly Report, there have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 except as set forth below. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
We identified an additional material weakness in our internal control over financial reporting relating to excise tax and our complex financial instruments. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As described elsewhere in this report, in connection with the preparation of our financial statements as of September 30, 2023, management identified errors made in our historical financial statements where we improperly classified some of 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 that a redemption cannot result in net tangible assets being less than $5,000,001 pursuant to our amended and restated certificate of incorporation. Management determined that the Class A common stock issued during our initial public offering can be redeemed or become redeemable subject to the occurrence of future events considered outside our control. Therefore, management concluded that temporary equity should include all shares of Class A common stock subject to possible redemption. As a result, management has noted a classification 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.
Management concluded that the foregoing constituted a material weakness as of September 30, 2023.
As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented. However, we cannot assure you that the foregoing will not result in any future material weaknesses or deficiencies in internal control over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 28, 2021, we consummated the Initial Public Offering of 40,000,000 Units. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $400,000,000. Citi Group acted as sole book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (Nos. 333-251921 and 333-252421). The Securities and Exchange Commission declared the registration statements effective on January 25, 2021.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 9,750,000 warrants (each, a “Private Warrant” and, collectively, the “Private Warrants”) at a price of $1.00 per Private Warrant in a private placement to Northern Star II Sponsor LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $9,750,000. Each Private Warrant will be exercisable to purchase one share of Class A common stock at an exercise price of $11.50. Each whole Private Warrant is exercisable to purchase one share of common stock at an exercise price of $11.50 per share. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
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The Private Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering, the exercise of the over-allotment option and the Private Warrants, an aggregate of $400,000,000 was placed in the Trust Account.
We paid a total of $22,524,463 of transaction costs, consisting of $8,000,000 of underwriting fees, $14,000,000 of deferred underwriting fees and $524,463 of other costs and expenses related to the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NORTHERN STAR INVESTMENT CORP. II | ||
| Date: November 14, 2023 | By: | /s/ Jonathan Ledecky |
| Name: | Jonathan Ledecky | |
| Title: | President and Chief Operating Officer | |
| (Principal Executive Officer) | ||
| By: | /s/ Jim Brady | |
| Name: | Jim Brady | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
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