UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No.1
For the quarterly period ended
OR
For the transition period from to________________
(Exact Name of Registrant as Specified in Charter)
| (State or Other Jurisdiction | (Commission File Number) | (IRS Employer | ||
| of Incorporation) | Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Common Stock and one Warrant to acquire one-half of a share of Common Stock | NOACU | The Nasdaq Stock Market LLC | ||
| The | ||||
| Warrants | NOACW | The Nasdaq Stock Market LLC |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of November 15, 2021,
Explanatory Note
This Amendment No. 1 on Form 10-Q/A (the “Form 10-Q/A”) amends the Quarterly Report on Form 10-Q for the period ended September 30, 2021 (the “Original Report”) of Natural Order Acquisition Corp. (the “Company”), as filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 15, 2021, to restate the financial statements as of and for the period ended September 30, 2021 included in the Original Report.
Restatement Background
The Company has re-evaluated its application of ASC 480-10-S99-3A to its accounting classification of the redeemable common stock, par value $0.0001 per share (the “Public Shares”), issued as part of the units sold in the Company’s initial public offering (the “IPO”) on November 13, 2020. Historically, a portion of the Public Shares was classified as permanent equity to maintain stockholders’ equity greater than $5 million on the basis that the Company will not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001, as described in the Company’s amended and restated certificate of incorporation (the “Charter”). Previously, the Company did not consider redeemable stock classified as temporary equity as part of net tangible assets. Effective with these financial statements, the Company revised this interpretation to include temporary equity in net tangible assets. Pursuant to such re-evaluation, the Company’s management has determined that the Public Shares include certain provisions that require classification of all of the Public Shares as temporary equity. In addition, in connection with the change in presentation for the Public Shares, the Company determined it should restate its earnings per share calculation to allocate income and losses shared pro rata among all shares of common stock. This presentation contemplates a business combination as the most likely outcome, in which case, all shares of common stock participate pro rata in the income and losses of the Company.
Therefore, on November 30, 2021, the Company’s management and the audit committee of the Company’s board of directors (the “Audit Committee”) concluded that the Company’s previously issued (i) audited balance sheet as of November 13, 2020 (the “Post IPO Balance Sheet”), as previously restated in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2020, filed with the SEC on May 24, 2021 (the “2020 Form 10-K/A No. 1”), (ii) audited financial statements included in the 2020 Form 10-K/A No. 1, (iii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC on May 24, 2021; (iv) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 12, 2021; and (v) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, filed with the SEC on November 15, 2021, and in particular footnote 2 to those unaudited interim financial statements and Item 4 of Part I (items (i) and (ii) being referred to as the “2020 Affected Periods” , items (iii)-(v) being referred to as the “2021 Affected Periods” and collectively, the “Affected Periods”), should be restated to report all Public Shares as temporary equity and should no longer be relied upon. As such, the Company (a) restated the financial statements for the 2020 Affected Periods in an amendment to the 2020 Form 10-K/A No. 1 filed with the SEC on February 7, 2022 and (b) is restating the financial statements for the 2021 Affected Periods in this Form 10-Q/A.
None of the above changes impacted the Company’s cash position and cash held in the trust account established in connection with the IPO.
The financial information that has been previously filed or otherwise reported for the affected quarterly periods is superseded by the information in this Form 10-Q/A, and the financial statements and related financial information contained in the Original Report should no longer be relied upon. On December 2, 2021, the Company filed a Current Report on Form 8-K disclosing the non-reliance on the financial statements included in the Original Report.
Internal Control Considerations
In connection with the restatement, management has re-evaluated the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of September 30, 2021. The Company’s management has concluded that, in light of the errors described above, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective as of September 30, 2021. Management plans to enhance the system of evaluating and implementing the accounting standards that apply to the Company’s financial statements, including enhanced training of its personnel and increased communication among its personnel and third-party professionals with whom it consults regarding the application of complex financial instruments. For a discussion of management’s consideration of its disclosure controls and procedures, internal controls over financial reporting, and the material weaknesses identified, see Part I, Item 4, “Controls and Procedures” of this Form 10-Q/A.
****
Except as described above, and with respect to the reconciliation table in Note 3, this Form 10-Q/A does not amend, update or change any other items or disclosures in the Original Report and does not purport to reflect any information or events subsequent to the filing thereof. As such, this Form 10-Q/A speaks only as of the date the Original Report was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original Report to give effect to any subsequent events. Accordingly, this Form 10-Q/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Report, including any amendment to those filings.
Table of Contents
| PART I. FINANCIAL INFORMATION | ||
| Item 1. | Unaudited Condensed Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 2 |
| Item 3. | Quantitative and Qualitative Disclosure about Market Risks | 5 |
| Item 4. | Controls and Procedures | 5 |
| PART II. OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 6 |
| Item 1A. | Risk Factors | 6 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities | 6 |
| Item 3. | Defaults Upon Senior Securities | 6 |
| Item 4. | Mine Safety Disclosures | 6 |
| Item 5. | Other Information | 6 |
| Item 6. | Exhibits | 7 |
| Signatures | 8 | |
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NATURAL ORDER ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
1
NATURAL ORDER ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Cash and investments held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accrued expenses | $ | $ | ||||||
| Total Current Liabilities | ||||||||
| Warrant liability | ||||||||
| Deferred underwriting fee payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Common stock subject to possible redemption, $ | ||||||||
| Stockholders’ Equity/(Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity/(Deficit) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
F-1
NATURAL ORDER ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND THE PERIOD FROM AUGUST 10, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
| Three Months Ended | Nine Months Ended | Period from August 20, 2020 (inception through | ||||||||||
| September 30, 2021 | September 30, 2021 | September 30, 2020 | ||||||||||
| General and administrative expenses | $ | $ | $ | |||||||||
| Income (Loss) from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Other income: | ||||||||||||
| Change in fair value of warrant liability | ||||||||||||
| Interest earned on investments held in Trust Account | ||||||||||||
| Dividend income earned on investment held in Trust Account | ||||||||||||
| Other income | ||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | |||||||
| Weighted average shares outstanding of common stock | ||||||||||||
| Basic and diluted income per share, common stock | $ | $ | $ | |||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
F-2
NATURAL ORDER ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2021 AND THE PERIOD FROM
AUGUST 10, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity/(Deficit) | ||||||||||||||||
| Balance – January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net income (loss) | - | ( | ) | ( | ) | |||||||||||||||
| Balance – March 31, 2021 (unaudited, as restated) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net income (loss) | - | |||||||||||||||||||
| Balance – June 30, 2021 (unaudited, as restated) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net income (loss) | - | |||||||||||||||||||
| Balance – September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity/(Deficit) | ||||||||||||||||
| Balance – August 10, 2020 (inception) | ||||||||||||||||||||
| Issuance of common stock to Initial Shareholders | ||||||||||||||||||||
| Net income (loss) | - | ( | ) | ( | ) | |||||||||||||||
| Balance – September 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
F-3
NATURAL ORDER ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND THE PERIOD FROM AUGUST 10, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
| Nine Months Ended September 30, 2021 | August 10, 2020 (inception) through September 30, 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income(loss) to net cash used in operating activities: | ||||||||
| Interest earned on investments held in Trust Account | ( | ) | ||||||
| Dividend earned on investments held in Trust Account | ( | ) | ||||||
| Change in fair value of warrants | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of issuance of common stock to Initial Stockholders | ||||||||
| Proceeds from promissory notes – related party | ||||||||
| Payment of deferred offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ||||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Deferred offering costs included in accrued offering costs | $ | $ | ||||||
| Deferred underwriting fee payable | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
F-4
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Natural Order Acquisition Corp. (the “Company”) was incorporated in Delaware on August 10, 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 (the “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. 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, 2021, the Company had not commenced any operations. All activity for the period from August 10, 2020 (inception) through December 31, 2020, and for the three and nine months ended September 30, 2021, relates to the Company’s formation and the initial public offering (“Initial Public Offering”) and expenses incurred in relation to the pursuit of a business combination, which are described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement
for the Company’s Initial Public Offering was declared effective on November 10, 2020. On November 13, 2020 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 November 13, 2020, an amount of $
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private
Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or
more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least
The Company will provide
the holders of the outstanding Public Shares (the “Public 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. 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 $
F-5
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Company will only proceed
with a Business Combination if the Company has net tangible assets of at least $
Notwithstanding the foregoing,
if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules,
the 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 Initial Stockholders
have agreed (a) to waive their redemption rights with respect to the 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 Certificate of Incorporation (i) to
modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to
redeem
The Company has until November
13, 2022 (the “Combination Period”) to complete a Business Combination. If the Company has not consummated a Business Combination
by the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and
not previously released to pay taxes (less up to $
F-6
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Initial Stockholders
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 Initial Stockholders acquire Public Shares in or after the Initial Public Offering, 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. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note
6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such
event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the
Public Shares. 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 Initial Stockholders have 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 $
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete a Business Combination by November 13, 2022, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and 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 November 13, 2022. The Company intends to complete a Business Combination before the mandatory liquidation date.
NOTE 2 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company has concluded
it should restate its previously issued financial statements to classify all common stock subject to possible redemption in temporary
equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments in ASC 480-10-S99, redemption provisions
not solely within the control of the Company, require common stock subject to redemption to be classified outside of permanent equity.
The Company had previously classified a portion of its common stock in permanent equity. Although the Company did not specify a maximum
redemption threshold, its charter currently provides that the Company will not redeem its Public Shares in an amount that would cause
its net tangible assets to be less than $
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that the related impact was material to the previously filed financial statements that contained the error, including the previously issued balance sheet as of November 13, 2020 included in the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2020, and financial statements for the period from August 10, 2020 (inception) through December 31, 2020 included in the Company’s Form 10-K as amended, filed on May 24, 2021 (the “2020 Affected Periods”), as well as the unaudited interim financial statements included in the Company’s Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC on May 24, 2021 and Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 12, 2021 (the “2021 Affected Periods”) and that those financial statements should no longer be relied upon . Therefore, the Company, in consultation with its Audit Committee, concluded that the 2020 Affected Periods and the 2021 Affected Periods should be restated to present all common stock subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering and to calculate earnings per share for all common shares take as a whole. As such, the Company is reporting these restatements to the 2021 Affected Periods in this restated quarterly report and reported the restatements for the 2020 Affected Periods under a separate Form 10-K/A. See also the changes made to the reconciliation table in Note 3.
F-7
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The impact of the restatement on the financial statements for the Affected Quarterly Periods is presented below.
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported balance sheet as of March 31, 2021:
| As of March 31, 2021 (Unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Common stock subject to possible redemption | ||||||||||||
| Common stock | ( | ) | ||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total stockholders’ equity (deficit) | $ | ( | ) | ( | ) | |||||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for the three months ended March 31, 2021:
Three Months Ended March 31, 2021 (Unaudited)
| As Reported | Adjustment | As Restated | ||||||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Initial classification of common stock subject to possible redemption | ( | ) | ||||||||||
| Change in the value of common stock subject to possible redemption | ( | ) | ||||||||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported balance sheet as of June 30, 2021:
| As of June 30, 2021 (Unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Common stock subject to possible redemption | ||||||||||||
| Common stock | ( | ) | ||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total stockholders’ equity (deficit) | $ | ( | ) | ( | ) | |||||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for the six months ended June 30, 2021:
Six Months ended June 30, 2021 (Unaudited)
| As Reported | Adjustment | As Restated | ||||||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Initial classification of common stock subject to possible redemption | ( | ) | ||||||||||
| Change in the value of common stock subject to possible redemption | ( | ) | ||||||||||
F-8
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The impact to the reported amounts of weighted average shares outstanding and basic and diluted earnings per common share is presented below for the Affected Quarterly Periods:
| Earnings Per Share | ||||||||||||
| Three Months Ended March 31, 2021 (Unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Weighted average shares outstanding - common stock | ||||||||||||
| Basic and diluted earnings per share - common stock | $ | ( | ) | |||||||||
| Weighted average shares outstanding - common stock non-redeemable | $ | ( | ) | |||||||||
| Basic and diluted earnings per share - common stock non-redeemable | $ | ( | ) | |||||||||
| Earnings Per Share | ||||||||||||
| Three Months Ended June 30, 2021 (Unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Weighted average shares outstanding - common stock | ||||||||||||
| Basic and diluted earnings per share - common stock | $ | |||||||||||
| Weighted average shares outstanding - common stock non-redeemable | $ | ( | ) | $ | ||||||||
| Basic and diluted earnings per share - common stock non-redeemable | ||||||||||||
| Earnings Per Share | ||||||||||||
| Six Months ended June 30, 2021 (Unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Weighted average shares outstanding - common stock | ||||||||||||
| Basic and diluted earnings per share - common stock | ||||||||||||
| Weighted average shares outstanding - common stock non-redeemable | ( | ) | ||||||||||
| Basic and diluted earnings per share - common stock non-redeemable | ||||||||||||
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with 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 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 financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on February 7, 2022, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2020 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2020. The interim results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
F-9
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (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 the financial statements in conformity with GAAP requires 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 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 are the determination of the fair value of the warrant liabilities. Accordingly, the actual results could differ significantly from those estimates.
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 had $
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 of $
Marketable Securities Held in Trust Account
At September 30, 2021 and December 31, 2020, substantially all of the assets held in the Trust Account were held in U.S. treasury securities.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption, if any, 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 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. Common stock issued in the IPO features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2021 and December 31, 2020, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
F-10
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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.
At September 30, 2021, the common stock reflected in the condensed balance sheet is reconciled in the following table:
| Gross Proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants(1) | ( | ) | ||
| Common stock issuance costs | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value(1) | ||||
| Common stock subject to redemption | $ |
| (1) |
Offering Costs
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 and presented as non-operating expenses in the unaudited condensed statements of operations. Offering costs associated with the common stock issued were charged against the carrying value of the common stock subject to possible redemption upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Income Taxes
The Company follows the asset
and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of September
30, 2021 and December 31, 2020, the Company had deferred tax assets of approximately $
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. 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, 2021 and December 31, 2020. 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 is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) per Common Share
The Company complies
with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Income and losses are shared pro
rata among all shares of common stock. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted
average number of common shares outstanding for the respective period. The Company has not considered the effect of warrants sold in
the Initial Public Offering and private placement to purchase
As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and nine months ended September 30, 2021 and for the period from August 10, 2020 (inception) through September 30, 2020. Accretion associated with the redeemable common stock is excluded from earnings per share as the redemption value approximates fair value.
F-11
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
As of September 30, 2021 and 2020, basic and diluted shares are the same as there are no non-redeemable securities that are dilutive to the Company’s stockholders.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. As of September 30, 2021 and December 31, 2020, the Public Warrants met all of the criteria for equity classification whereas the Private Warrants did not. See Note 8 for further discussion of the methodology used to determine the fair value of warrants classified as liability-classified instruments.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)(“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if- converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company has not early adopted ASU 2020-06 effective January 1, 2021, but the Company intends to adopt on January 1, 2022. The Company does not expect the adoption of ASU 2020-06 to have a material impact on the 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 financial statements.
NOTE 4 — INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold
F-12
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 5 — PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
The Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants will be exercisable for cash (even if a registration statement covering the issuance of the common stock issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option and will not be redeemable by the Company, in each case so long as they are held by the initial purchasers or their affiliates.
NOTE 6 — RELATED PARTIES
Founder Shares
In
August 2020, the Company issued an aggregate of
The Initial Stockholders have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of their Founder Shares until, with respect to 50% of the Founder Shares, the earlier of six months after the consummation of a Business Combination and the date on which the closing price of the common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after a Business Combination and, with respect to the remaining 50% of the Founder Shares, until the six months after the consummation of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Administrative Support Agreement
The Company entered into
an agreement, commencing on November 10, 2020 through the earlier of the Company’s consummation of a Business Combination or its
liquidation, to pay the Sponsor a total of $
Promissory Notes — Related Party
In
August 2020, the Company entered into unsecured promissory notes (the “Promissory Notes”) with affiliates of the Sponsor,
pursuant to which the Company could borrow up to an aggregate principal amount of $
F-13
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Related Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Initial Stockholders, or an affiliate of the Initial
Stockholders, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be
required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid
upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management continues to evaluate 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 these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration Rights
Pursuant to a registration rights agreement entered into on November 10, 2020, the holders of the Founder Shares, Private Warrants and securities that may be issued upon conversion of Working Capital Loans will be entitled to registration and stockholder rights. The holders of a majority of these securities are entitled to make up to two demands that the Company registers such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Private Warrants (and underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
underwriters are entitled to a deferred fee of $
NOTE 8 — STOCKHOLDERS’ EQUITY
Preferred
Stock — The Company is authorized to issue
Common stock — The
Company is authorized to issue
Public
Warrants —
F-14
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
No Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within 120 days from the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act.
The Company may redeem the Public Warrants:
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of shares of common stock at a price below its exercise price. The Company has agreed to use its best efforts to have declared effective a prospectus relating to the common stock issuable upon exercise of the warrants and keep such prospectus current until the expiration of the warrants. However, if the Company does not maintain a current prospectus relating to the common stock issuable upon exercise of the warrants, holders will be unable to exercise their warrants for cash and the Company will not be required to net cash settle or cash settle the warrant exercise. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.50 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsors or its affiliates, without taking into account any Founder Shares held by the Initial Stockholders or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of its common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its Business Combination (such price, the “Market Value”) is below $9.50 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the Market Value and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the Market Value.
F-15
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 9 — FAIR VALUE MEASUREMENTS
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. |
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts.
At
September 30, 2021 assets held in the Trust Account were comprised of $0 in cash and
$7,357 in U.S. Treasury securities. At December 31, 2020, assets held in the Trust
Account were comprised of $
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The gross holding gains and fair value of held-to-maturity securities at September 30, 2021 and December 31, 2020 are as follows:
| September 30, 2021 | |||||||||||||||||
| Held-To-Maturity | Level | Amortized Cost | Gross Holding Loss | Fair Value | |||||||||||||
| Assets | 1 | $ | $ | ( | ) | $ | |||||||||||
| Liabilities | 3 | $ | |||||||||||||||
| December 31, 2020 | |||||||||||||||||||
| Held-To-Maturity | Level | Amortized Cost | Gross Holding Gain | Fair Value | |||||||||||||||
| Assets | 1 | $ | $ | $ | |||||||||||||||
| Liabilities | 3 | $ | |||||||||||||||||
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers during the period.
The Private Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Company’s condensed 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 statement of operations.
F-16
NATURAL ORDER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Fair Value Measurement
The Private Warrants are measured at fair value on a recurring basis, using a Black-Scholes Model and are considered Level 3 liabilities with inherent uncertainties involved. If factors or assumptions change, the estimated fair values could be materially different.. The key inputs into the Black-Scholes Model for the Private Warrants were as follows:
| September 30, 2021 | December 31, 2020 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Stock price | $ | $ | ||||||
| Dividend yield | % | % | ||||||
The following table presents the changes in the fair value of warrant liability:
| Warrant Liability | ||||
| Warrant liability on August 10, 2020 | $ | |||
| Issuance of Private Warrants | ||||
| Change in fair value of warrant liability | ||||
| Fair value as of December 31, 2020 | ||||
| Change in fair value of warrant liability | ( | ) | ||
| Fair value as of March 31, 2021 | ||||
| Change in fair value of warrant liability | ( | ) | ||
| Fair value as of June 30, 2021 | ||||
| Change in fair value of warrant liability | ( | ) | ||
| Fair value as of September 30, 2021 | ||||
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, other than the restatement discussed in Note 2, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
F-17
Item 2. Management’s Discussion and Analysis of Financial Statements
References to the “Company,” “NOAC,” “our,” “us” or “we” refer to Natural Order Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings.
Overview
Natural Order Acquisition Corp. (“NOAC”) is a Delaware company incorporated on August 10, 2020 as a blank check company for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, with one or more target businesses. Although there is no restriction or limitation on what industry our target operates in, it is our intention to pursue prospective targets that are focused on technologies and products related to sustainable plant-based food and beverages, alternative protein, and ingredients. More specifically, our target market includes companies that use plant-based, cell-based or precision fermentation technologies to develop food products that eliminate animals from the food supply chain.
The outbreak of the COVID-19 coronavirus has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide, and potential target companies may defer or end discussions for a potential business combination with us whether or not COVID-19 affects their business operations. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. We may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limiting our ability to conduct meetings to negotiate and consummate transactions in a timely manner with potential investors, target company’s personnel, or vendors and services providers.
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 operating revenues to date. Our only activities from inception through September 30, 2021 were organizational activities and those necessary to prepare for our initial public offering (the “IPO”), and, after our IPO, searching for a target business to acquire, described below. We do not expect to generate any operating revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form of interest income on marketable securities held after IPO. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a business combination.
For the three months ended September 30, 2021, nine months ended September 30, 2021, and the period from August 20, 2020 (inception) through September 30, 2021, we had a net gain of $1,226,387, net gain of 1,579,444, and net loss of $1,000, respectively, which consisted of general and administrative expenses of $212,297, $722,416, and $1,000, respectively, offset by interest and dividends earned on investments held in the Trust Account of $10,684, $57,860, and $0, respectively, and a decrease in the fair value of the Private Warrants of $1,428,000, $2,244,000, and $0, respectively.
2
Liquidity and Capital Resources
On November 13, 2020, we consummated our IPO of 23,000,000 units (the “Units”), each Unit consisting of one share of common stock of the Company, par value $0.0001 per share (the “Common Stock”) and one redeemable warrant to purchase one-half of one share of Common Stock for $11.50 (“Warrant”). The closing included the full exercise of the underwriter’s over-allotment option. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $230,000,000. Simultaneously with the consummation of the IPO, we consummated the private placement (“Private Placement”) with Natural Order Sponsor LLC (the “Sponsor”) of 6,800,000 warrants (the “Private Warrants”) at a price of $1.00 per Private Warrant, generating total proceeds of $6,800,000.
Following the IPO, the full exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $230,000,000 was placed in the Trust Account, and we had $1,726,624 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available for working capital purposes.
Transaction costs amounted to $13,173,201, consisting of $4,600,000 in cash underwriting fees, $8,050,000 of deferred underwriting fees and $523,201 of other offering costs. Of these total transaction costs, $8,714 related to the issuance of the Private Warrants and were charged to expense and the remaining $13,164,487 were charged to temporary equity.
For the quarter ended September 30, 2021, cash provided by operating activities was $92,242. Net gain of $1,226,387 was affected by interest and dividends earned on marketable securities held in the Trust Account of $10,684 and a non-cash increase in the fair value of warrant liabilities of $1,428,000. Changes in operating assets and liabilities used $120,055 of cash for operating activities.
As of September 30, 2021, we had investments held in the Trust Account of $230,078,467. We intend to use substantially all of the funds held in the Trust Account, to acquire a target business and to pay our expenses relating thereto. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the remaining funds held in the Trust Account will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our business combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.
As of September 30, 2021, we had $1,010,087 of cash held outside of the Trust Account. We intend to use the funds held outside the Trust Account for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. 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 $500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our business combination. Moreover, we may need to obtain additional financing either to complete our business combinationor because we become obligated to redeem a significant number of our public shares upon consummation of our cusiness bombination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our business combination. If we are unable to complete our business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete a business combination by November 13, 2022, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and 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 November 13, 2022. The Company intends to complete a business combination before the mandatory liquidation date.
3
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below, an agreement to pay the Sponsor a monthly fee of $10,000 for office space, utilities and secretarial, and administrative and support services. We began incurring these fees on November 10, 2020 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per share, or $8,050,000 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.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the period reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption 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. Common stock issued in the IPO 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 balance sheet.
Net Income (Loss) per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Income and losses are shared pro rata among all shares of common stock. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding for the respective period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 14,900,000 shares of common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and nine months ended September 30, 2021 and for the period from August 10, 2020 (inception) through September 30, 2020. Accretion associated with the redeemable common stock is excluded from earnings per share as the redemption value approximates fair value.
As of September 30, 2021, basic and diluted shares are the same as there are no non-redeemable securities that are dilutive to the Company’s stockholders
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
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Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if- converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company has not early adopted ASU 2020-06 effective January 1, 2021, but the Company intends to adopt on January 1, 2022. The Company does not expect the adoption of ASU 2020-06 to have a material impact on the 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 financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company we are not required to make disclosures under this Item.
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 officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 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 officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of September 30, 2021, because of a material weakness in our internal control over financial reporting. 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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for certain complex features of financial instruments issued by the Company was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of November 13, 2020, its financial statements for the period ended December 31, 2020 and its interim financial statements for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting except for the below.
Our principal executive officer and principal financial officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex features of equity and equity linked instruments. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the period presented.
The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. 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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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. Except as set forth below, as of the date of this Form 10-Q/A,here have been no material changes with respect to those risk factors previously disclosed in our Registration Statement dated November 10, 2020 and our Form 10-K/A, filed on February 7, 2022.
We have identified a material weakness in our internal control over financial reporting as of September 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
We have identified a material weakness in our internal control over financial reporting related to the Company’s accounting and reporting of complex financial instruments. As a result of this material weakness, our management has concluded that our disclosure controls and procedures were not effective as of September 30, 2021. We have taken measures to remediate such material weaknesses, however, if we are unable to remediate our material weaknesses in a timely manner or we identify additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and we may incorrectly report financial information. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities. The existence of material weaknesses in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our shares. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. Even if we are successful in strengthening 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.
The registration statement (the “Registration Statement”) for our IPO was declared effective on November 10, 2020. On November 13, 2020, we consummated our initial public offering (the “IPO”) of 23,000,000 units (the “Units”), each Unit consisting of one share of common stock of the Company, par value $0.0001 per share (the “Common Stock”) and one redeemable warrant to purchase one-half of one share of Common Stock for $11.50 (“Warrant”). The closing included the full exercise of the underwriter’s over-allotment option. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $230,000,000.
Simultaneously with the consummation of the IPO, we consummated the private placement (“Private Placement”) with Natural Order Sponsor LLC ( the “Sponsor”) of 6,800,000 warrants (the “Private Warrants”) at a price of $1.00 per Private Warrant, generating total proceeds of $6,800,000. The Private Warrants are identical to the Warrants underlying the Units sold in the IPO except that if held by the Sponsor or its permitted transferees, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption and (iii) subject to certain limited exceptions including the Common Stock issuable upon exercise of the Private Warrants, will be subject to transfer restrictions until 30 days following the consummation of the Company’s initial business combination. If the Private Warrants are held by holders other than the sponsor or its affiliates and permitted transferees, the Private Warrants will be redeemable by the Company in all redemption scenarios and exercisable by holders on the same basis as the Warrants sold in the IPO.
A total of $230,000,000 of the net proceeds from the sale of Units in the IPO and the private placement on November 13, 2020 were placed in a trust account established for the benefit of the Company’s public stockholders at JPMorgan Chase Bank, N.A. maintained by Continental Stock Transfer & Trust Company, acting as trustee. None of the funds held in trust will be released from the trust account, other than interest income to pay any tax obligations until the earlier of (i) our consummation of our initial business combination, and then only in connection with those shares of common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (ii) the redemption of our public shares if we are unable to consummate our initial business combination by December 13, 2022, or (iii) if we seek to amend our certificate of incorporation to affect the substance or timing of our obligation to redeem all public shares if we cannot complete an initial business combination by December 13, 2022, and such amendment is duly approved.
We paid $4,600,000 of underwriting fees (not including the 3.5% deferred underwriting commission payable at the consummation of the initial business combination) and approximately $523,201 for other costs and expenses related to our formation and our IPO.
For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits.
| * | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 7, 2022 |
NATURAL ORDER ACQUISITION CORP. | |
| By: | /s/ Paresh Patel | |
| Name: | Paresh Patel | |
| Title: | President, Chief Executive Officer and Director (Principal Executive Officer) | |
| By: | /s/ John Ritacco | |
| Name: | John Ritacco | |
| Title: | Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) | |
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