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.
4
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.
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