NORTHERN STAR INVESTMENT CORP. III Management’s Report of Financial Condition and Results of Operations (Form 10-Q)

References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Northern Star Investment Corp. III References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Northern Star III 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, as amended (the "Securities Act")
and Section 21E of the Exchange Act that are not historical facts, and involve
risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of
historical fact included in this Form10-Qincluding, without limitation,
statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position, business
strategy and the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's Annual Report on Form
10-K
filed with the 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 30, 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 (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 raise capital or to
complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2021 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below,
and, after our Initial Public Offering, identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate
non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the three months ended December 31, 2021, we had net income of $1,571,594,
which consisted of formation and operational costs of $242,081, offset by change
in fair value of warrant liabilities of $1,805,833, and interest earned on
marketable securities held in Trust Account of $7,842.
For the period from November 30, 2020 (inception) through December 31, 2020, we
had a net loss of $875 which consisted of formation and operational costs.
Liquidity and Capital Resources
On March 4, 2021, we consummated the Initial Public Offering of 40,000,000
Units, which included the partial exercise by the underwriter of the
over-allotment option in the amount of 5,000,000 Units, at $10.00 per Unit,
generating gross proceeds of $400,000,000. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 9,750,000 Private
Warrants to the Sponsor at a price of $1.00 per warrant, generating gross
proceeds of $9,750,000.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Private Warrants, a total of
$400,000,000 was placed in the Trust Account. We incurred $22,531,113 in
transaction costs, including $8,000,000 of underwriting fees, $14,000,000 of
deferred underwriting fees and $531,113 of other costs.
For the three months ended December 31, 2021, net cash used in operating
activities was $312,408. Net income of $1,571,594 was affected by change in fair
value of warrant liability of $1,805,833, and interest earned on marketable
securities held in Trust Account of $7,842. Changes in operating assets and
liabilities used $70,327 of cash for operating activities.
As of December 31, 2021, we had marketable securities held in the Trust Account
of $400,028,849 (including $28,849 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.

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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 December 31, 2021, we had cash of $719,622. 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 our officers, directors
or their respective 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
identical to the Private Warrants, at a price of $1.00 per warrant at the option
of the lender.
The Company may need to raise additional capital through loans or additional
investments from its Sponsor, shareholders, 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. These conditions
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 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.
Off-Balance
Sheet 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.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$14,000,000 in the aggregate. The deferred fee will be forfeited by the
underwriters solely in the event that we fail to complete a Business
Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in
ASC815-40-15-7Dand
7F under which the Warrants do not meet the criteria for equity treatment and
must be recorded as liabilities. Accordingly, we classify the Warrants as
liabilities at their fair value and adjust the Warrants to fair value at each
reporting period. This liability is subject tore-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in our
statements of operations. The Private Placement Warrants and the Public Warrants
for periods where no observable traded price was available are valued using a
Monte Carlo simulation. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the
fair value as of each relevant date.
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' equity section of our condensed balance sheets.

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Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding for the
period. The Company applies the
two-class
method in calculating earnings per share. Accretion associated with the
redeemable shares of Class A 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
(Subtopic470-20)
and Derivatives and Hedging-Contracts in Entity's Own Equity
(Subtopic815-40):Accounting
for Convertible Instruments and Contracts in an Entity's Own Equity"
("ASU2020-06"),which
simplifies accounting for convertible instruments by removing major separation
models required under current GAAP. ASU2020-06removes 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. ASU2020-06is effective for fiscal years beginning
after December 15, 2023, including interim periods within those fiscal years,
with early adoption permitted. The Company is currently assessing the impact, if
any, that ASU2020-06would 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 condensed financial statements.
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 and procedures are designed to ensure that information
required to be disclosed by us in our Exchange Act reports is recorded,
processed, summarized, and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to our management, including our principal executive officer and principal
financial officer or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial and accounting officer,
we conducted an evaluation of the effectiveness of our disclosure controls and
procedures as of the end of the fiscal quarter ended December 31, 2021, as such
term is defined in Rules
13a-15(e)
and
15d-15(e)under
the Exchange Act. Based on this evaluation, our principal executive officer and
principal financial and accounting officer have concluded that during the period
covered by this report, our disclosure controls and procedures (as defined in
Rules
13a-15(e)
and
15d-15(e)under
the Exchange Act) were not effective due to a material weakness in internal
controls over financial reporting related to the Company's accounting for
complex financial instruments. To address this material weakness, management has
devoted, and plans to continue to devote, significant effort and resources to
the remediation and improvement of its internal control over financial
reporting. We are monitoring our processes to ensure proper identification and
appropriate application of applicable accounting requirements. These processes
include timely evaluation of relevant accounting guidance to better understand
the nuances of the complex accounting standards that apply to our financial
statements. We are also ensuring enhanced access to accounting literature,
research materials and documents and are monitoring our processes to ensure
increased communication among our personnel and third-party professionals with
whom we consult regarding complex accounting applications.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2021, there has been no change in our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting, as the circumstances that led to the material weakness described
above had not yet been identified. We are in the process of implementing changes
to our internal control over financial reporting to remediate such material
weaknesses, as more fully described above. 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.

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