NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Northern
Star Investment Corp. III (the “Company”) is a blank check company incorporated in Delaware on November 30, 2020. The Company
was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar
business combination with one or more businesses or entities (the “Business Combination”).
The
Company 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 December 31, 2022, the Company had not commenced any operations. All activity through December 31, 2022 relates to the Company’s
formation, its initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial
Public Offering, seeking to identify a target company for a Business Combination. The Company believes it will not generate any operating
revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income
on cash and cash equivalents in the form of interest income from the proceeds derived from the Initial Public Offering and simultaneous
private placement described below.
The
registration statements for the Company’s Initial Public Offering were declared effective on March 1, 2021. On March 4, 2021, the
Company consummated the Initial Public Offering of 40,000,000 units (the “Units” and, with respect to the shares of Class
A common stock included in the Units sold, the “Public Shares”), which includes the partial exercise by the underwriters
of the over-allotment option in the amount of 5,000,000 Units, at $10.00 per Unit, generating gross proceeds of $400,000,000, which is
described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 9,750,000 warrants (each, a “Private Warrant”
and, collectively, the “Private Warrants”) at a price of $1.00 per Private Warrant in a private placement to Northern Star
III Sponsor LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $9,750,000, which is
described in Note 4.
Transaction
costs amounted to $22,531,113, consisting of $8,000,000 of underwriting fees, $14,000,000 of deferred underwriting fees and $531,113
of other offering costs.
Following
the closing of the Initial Public Offering on March 4, 2021, an amount of $400,000,000 ($10.00 per Unit) from the net proceeds of the
sale of the Units in the Initial Public Offering and the sale of the Private Warrants was placed in a trust account (the “Trust
Account”), located in the United States and held as cash items or invested only in U.S. government securities, within the meaning
set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity
of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting
the conditions of paragraph (d) of- Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i)
the completion of a Business Combination and (ii) the distribution of the assets held in the Trust Account, as described below.
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 the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. The Company must complete its initial Business Combination having an aggregate fair market value of at least
80% of the assets held in the Trust Account (net of amounts previously disbursed to management for tax obligations and working capital
purposes and excluding the amount of deferred underwriting discounts held in the Trust Account) at the time of the agreement to enter
into an initial Business Combination. Notwithstanding the foregoing, if the Company is not then listed on the NYSE for whatever reason,
it would no longer be required to meet the foregoing 80% fair market value test. The Company intends to only complete a Business Combination
if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires
a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company
Act. There is no assurance that the Company will be able to complete a Business Combination successfully.
The
Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a
Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for
a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public Share, plus any pro rata interest earned on the
funds held in the Trust Account and not previously released to the Company). There will be no conversion rights upon the completion of
a Business Combination with respect to the Company’s warrants.
NORTHERN
STAR INVESTMENT CORP. III
NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either immediately prior
to or upon the consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted
are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold
a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation
(the “Amended and Restated Certificate of Incorporation”), conduct the conversions pursuant to the tender offer rules of
the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business
Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval
for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy
rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination,
the holders of the Founder Shares (as defined below in Note 5) have agreed to vote their Founder Shares and any Public Shares purchased
after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem
their Public Shares irrespective of whether they vote for or against the proposed Business Combination or do not vote at all.
If
the Company seeks stockholder approval of a Business Combination and it does not conduct conversions pursuant to the tender offer rules,
the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The
holders of Founder Shares have agreed (a) to waive their conversion rights with respect to their Founder Shares and any Public Shares
held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated
Certificate of Incorporation (i) that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public
Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’
rights or pre-business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their
Public Shares in conjunction with any such amendment.
If
the Company is unable to complete a Business Combination by March 4, 2023 (the “Combination Period”) and such period is not
extended by stockholders, 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 the Company (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public
Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive
further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate,
subject in the case of clauses (ii) and (iii) to the Company’s obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s
warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The
Company received a notification of the removal of Redeemable Warrants, each whole warrant exercisable for shares of Class A common stock
at an exercise price of $11.50 per share from the New York Stock Exchange.
The
holders of the Founder Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to
complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire Public Shares 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. 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 ($10.00).
In
order to protect the amounts held in the Trust Account, the Sponsor will agree to be liable to the Company if and to the extent any claims
by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below(i) $10.00 per share or (ii) the actual
amount per public share held in the Trust Account as of the date of the liquidation of the trust account, if less than $10.00 per share
due to reductions in the value of the trust assets. This liability will not apply with respect to any claims by a third party who executed
a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the
Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to
be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.
The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors
by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business,
execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
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 the condensed financial statements. The condensed financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
NORTHERN
STAR INVESTMENT CORP. III
NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
Inflation
Reduction Act of 2022 (the “IR Act”)
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and
certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed
on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the
abuse or avoidance of the excise tax. The Treasury recently issued interim guidance that redemptions in connection with a SPAC liquidation
would not be subject to the excise tax under certain circumstances. In addition, redemptions that occur in the same taxable year as a
liquidation is completed will also be exempt from such tax.
Any
redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise,
may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business
Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions
and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii)
the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued
not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content
of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the
redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction
in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
Going
Concern
As
of December 31, 2022, the Company had $68,692 in its operating bank accounts, $404,713,765 in securities held in the Trust Account to
be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of
$6,670. As of December 31, 2022, $4,713,765 of the amount on deposit in the Trust Account represented interest income, which is available
to pay the Company’s tax obligations.
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating
prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The
Company will need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers,
directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company
funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the
Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is
unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but
not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead
expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if
at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable
period of time, which is considered to be one year from the issuance date of the financial statements. These condensed financial
statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities
that might be necessary should the Company be unable to continue as a going concern.
In
connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s
Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue
as a Going Concern,” the Company has until March 4, 2023 to consummate a Business Combination. It is uncertain that the Company
will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and stockholders
do not approve an extension of such date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management
has determined that the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor,
and potential subsequent dissolution raises 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 March 4, 2023.
NOTE
2. 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.
NORTHERN
STAR INVESTMENT CORP. III
NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K
for the year ended September 30, 2022, as filed with the SEC on December 22, 2022. The interim results for the three months ended
December 31, 2022 are not necessarily indicative of the results to be expected for year ended September 30, 2023, or for any future
periods.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of the condensed 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 condensed
financial statements and the reported amounts of revenues and expenses during the reporting periods.
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 condensed 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 condensed financial statements is the determination of the fair value of the warrant liability. Such estimates
may be subject to change as more current information becomes available and, 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 did not have any cash equivalents as of December 31, 2022 and September 30, 2022.
Marketable
Securities Held in Trust Account
At
December 31, 2022 and September 30, 2022, the assets held in the Trust Account were substantially held in money market funds which
are invested primarily in U.S. Treasury Securities.
Class A
Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is
classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered
to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common stock
subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section
of the Company’s balance sheet.
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. Increases or decreases in the carrying amount of redeemable common stock
are affected by charges against additional paid in capital and accumulated deficit.
NORTHERN
STAR INVESTMENT CORP. III
NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
Warrant
Liabilities
The
Company assessed its warrants under ASC 480-25, “Distinguishing liabilities from equity” and ASC 815-40 “Derivatives
and Hedging—Contracts in Entity’s Own Equity”. The Company accounts for the Public Warrants (as defined below) and
Private Placement Warrants (collectively, the “Warrants”) as derivative liabilities. A provision in the Warrant Agreement
related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants
meet the definition of a derivative as contemplated in ASC 815, the Company accounts for Warrants for shares of the Company’s common
stock that are not indexed to its own stock as derivative liabilities at fair value on the balance sheets and measured at fair value
at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, with changes in fair
value recognized in the statements of operations in the period of change.
Income
Taxes
The
Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred
tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis
of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740
additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets
will not be realized. As of December 31, 2022 and September 30, 2022, the Company’s deferred tax asset had a full valuation
allowance recorded against it.
Our
effective tax rate was 19.58% and 0.00% for the three months ended December 31, 2022 and 2021, respectively. The effective tax rate
differs from the statutory tax rate of 21% for the three months ended December 31, 2022 and 2021, due to changes in fair value in warrant
liability and valuation allowance on the deferred tax assets.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of December 31, 2022. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The
Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation
by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus
of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net
Income Per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. The Company has
two classes of shares, which are referred to as Class A common stock and class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income per share of common stock is calculated by dividing net income by the weighted average
number of shares of common stock outstanding for the respective period. Remeasurement adjustment associated with the redeemable shares
of Class A common stock is excluded from income per common share as the redemption value approximates fair value.
The
calculation of diluted income per common share does not consider the effect of the warrants issued in connection with the (i) Initial
Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events.
The warrants are exercisable to purchase 16,416,667 shares of Class A common stock in the aggregate. At December 31, 2022 and 2021, the
Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock
and then share in the earnings of the Company. As a result, diluted net income per common share is the same as basic net income per common
share for the periods presented.
The
following table reflects the calculation of basic and diluted net income per common share (in dollars, except per share amounts):
| |
Three Months Ended December 31, | |
| |
2022 | | |
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per common share | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income, as adjusted | |
$ | 2,299,264 | | |
$ | 574,816 | | |
$ | 1,257,275 | | |
$ | 314,319 | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 40,000,000 | | |
| 10,000,000 | | |
| 40,000,000 | | |
| 10,000,000 | |
Basic and diluted net income per common share | |
$ | 0.06 | | |
$ | 0.06 | | |
$ | 0.03 | | |
$ | 0.03 | |
NORTHERN
STAR INVESTMENT CORP. III
NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
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 $250,000. The Company has not experienced losses on this
account and management believes the Company is not exposed to significant risks on such account.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities which qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximate the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature,
except for warrant liabilities (see Note 8).
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
● |
Level 1,
defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
|
● |
Level 2,
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
|
● |
Level 3,
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each
reporting date, with changes in the fair value reported in the statement of operations. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date.
Recent
Accounting Standards
In
August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early
adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results
of operations or cash flows.
Management
does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s financial statements.
NOTE
3. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 40,000,000 Units, which includes a partial exercise by the underwriters of their over-allotment
option in the amount of 5,000,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-sixth
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class
A common stock at a price of $11.50 per share.
NORTHERN
STAR INVESTMENT CORP. III
NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 9,750,000 Private Warrants at a price of $1.00
per Private Warrant, for an aggregate purchase price of $9,750,000, in a private placement. Each Private Warrant is exercisable to purchase
one share of Class A common stock at an exercise price of $11.50. The proceeds from the sale of Private Warrants were added to the proceeds
from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination
Period, the proceeds of the sale of the Private Warrants will be used to fund the redemption of the Public Shares (subject to the requirements
of applicable law), and the Private Warrants will expire worthless.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
On
December 18, 2020, the Company’s sponsor purchased an aggregate of 8,625,000 shares of the Company’s Class B common stock
(the “Founder Shares”) for an aggregate price of $25,000. On March 1, 2021, the Company effected a dividend of approximately
0.167 shares for each outstanding share, resulting in there being an aggregate of 10,062,500 Founder Shares outstanding.
The
Founder Shares included an aggregate of up to 62,500 shares of Class B common stock that remained subject to forfeiture by the Sponsor
following the underwriters’ election to partially exercise their over-allotment option so that the number of Founder Shares would
collectively represent 20% of the Company’s issued and outstanding shares upon the completion of the Initial Public Offering. The
underwriters’ over-allotment option expired unexercised on April 18, 2021, and, accordingly, 62,500 Founder Shares were forfeited,
resulting in an aggregate of 10,000,000 Founder Shares outstanding.
The
holders of Founder Shares have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of their Founder Shares
until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination,
(x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days
after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar
transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash,
securities or other property.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Company’s officers, directors, Sponsor or an
affiliate of the foregoing, may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
event that a Business Combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay
the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the
foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to
such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the
lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination
entity at a price of $1.00 per warrant. The warrants would be identical to the Private Warrants.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Registration
Rights
Pursuant
to a registration rights agreement entered into on March 1, 2021, the holders of the Founder Shares (and any shares of Class A common
stock issuable upon conversion of the Founder Shares), Private Warrants (and any shares of Class A common stock issuable upon the exercise
of the Private Warrants), and warrants (and any shares of Class A common stock issuable upon exercise of such warrants) that may be issued
upon conversion of working capital loans are entitled to registration rights pursuant to a registration rights agreement requiring the
Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The
holders of the majority of these securities are entitled to make up to two demands, excluding short form demands, that the Company register
such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statement
filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities
pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such
registration statement.
NORTHERN
STAR INVESTMENT CORP. III
NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
Underwriting
Agreement
The
Company granted the underwriters in the initial public offering a 45-day option from the effective date of the Initial Public Offering
to purchase up to 5,250,000 additional Units, at the Initial Public Offering price less the underwriting discounts and commissions. As
a result of the underwriters’ election to partially exercise the over-allotment option to purchase an additional 5,000,000 Public
Shares, a total of 250,000 Public Shares remained available for purchase at a price of $10.00 per Public Share. The underwriters elected
not to exercise the over-allotment option to purchase such additional 250,000 Units at a price of $10.00 per Unit. The over-allotment
option expired on April 18, 2021.
The
underwriters are entitled to a deferred fee of $0.35 per Unit, or $14,000,000 in the aggregate. The deferred fee will be forfeited by
the underwriters solely in the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting
agreement.
Consulting
Agreement
On
February 1, 2022, the Company entered into an agreement with a consultant for advisory services. The agreement specifies that the Company
pays $8,333.33 a month plus any out-of-pocket expenses to the consultant. The agreement is terminable within 30 days written notice.
NOTE
7. STOCKHOLDERS’ DEFICIT
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with
such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
At December 31, 2022 and September 30, 2022, there were no shares of preferred stock issued or outstanding.
Class
A Common Stock — The Company is authorized to issue up to 125,000,000 shares of Class A common stock, $0.0001 par value.
Holders of the Company’s Class A common stock are entitled to one vote for each share. At December 31, 2022 and September 30, 2022,
there were no shares of Class A common stock issued and outstanding, excluding 40,000,000 shares of Class A common stock subject to possible
redemption which are presented as temporary equity.
Class
B Common Stock —The Company is authorized to issue 25,000,000 shares of Class B common stock with a par value of $0.0001
per share. Holders of Class B common stock are entitled to one vote for each share. At December 31, 2022 and September 30, 2022, there
were 10,000,000 shares of Class B common stock issued and outstanding respectively.
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on
a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business
Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless
the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance
or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock
will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding
upon the completion of the Initial Public Offering, net of conversions, plus all shares of Class A common stock and equity-linked securities
issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be
issued, to any seller in a Business Combination, any private placement-equivalent securities issued, or to be issued, to any seller in
a Business Combination, any private placement equivalent securities issued to the initial stockholders or their affiliates upon conversion
of loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal
number of shares of Class A common stock, subject to adjustment as provided above, at any time.
NOTE
8. FAIR VALUE MEASUREMENTS
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
December 31, 2022 and September 30, 2022, assets held in the Trust Account were comprised of $404,713,765 and $402,417,004 in a mutual
fund that invests in U.S. Treasury securities, respectively. During the three months ended December 31, 2022, the Company did withdrew
an amount of $1,085,061 in the interest income from the Trust Account to pay tax obligations.
NORTHERN
STAR INVESTMENT CORP. III
NOTES
TO CONDENSED FINANCIAL STATEMENTS
DECEMBER
31, 2022
(Unaudited)
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis at December 31, 2022 and September 30, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized
to determine such fair value.
Description | |
Level | | |
December 31, 2022 | | |
Level | | |
September 30, 2022 | |
Assets: | |
| | |
| | |
| | |
| |
Marketable securities held in Trust Account – U.S Treasury Securities Money Market Fund | |
| 1 | | |
$ | 404,713,765 | | |
| 1 | | |
$ | 402,417,004 | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liabilities – Public | |
| 3 | | |
$ | 66,667 | | |
| 1 | | |
$ | 266,667 | |
Warrant Liabilities – Private Warrants Placement | |
| 3 | | |
$ | 97,500 | | |
| 2 | | |
$ | 390,000 | |
The
Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the 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 statements of operations.
The
subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units are classified as Level 1 due
to the use of an observable market quote in an active market under the ticker NSTC.WS. For periods subsequent to the detachment of the
Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value of the Warrants as of each relevant
date.
On November 28, 2022, the Company received a notification of the removal
of Redeemable Warrants, each whole warrant exercisable for shares of Class A common stock at an exercise price of $11.50 per share from
the New York Stock Exchange. As a result, the warrants are now classified as Level 3. At December 31, 2022,
the warrants were in valued using a Monte Carlo Simulation method. The Monte Carlo simulation model’s primary unobservable input
utilized in determining the fair value of the warrants is the expected volatility of the common stock.
The following table
presents the quantitative information regarding Level 3 fair value measurements:
| |
December 31, 2022 | |
Stock price | |
$ | 10.05 | |
Exercise price | |
$ | 11.50 | |
Expected term (in years) | |
| 5.18 | |
Volatility | |
| 3.9 | % |
Number of trading days | |
| 250 | |
Expected date of transaction | March 4, 2023
| |
Probability of acquisition | |
| 1 | % |
Risk-free rate | |
| 3.91 | % |
Dividend yield | |
| 0.0 | % |
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period in which a change in valuation technique or methodology occurs.
The following
table presents the changes in the fair value of the Level 3 warrant liabilities :
| |
Private Placement | | |
Public | | |
Warrant Liabilities | |
Fair value as of September 30, 2022 | |
$ | - | | |
$ | - | | |
$ | - | |
Transfer to Level 3 | |
| 390,000 | | |
| 266,667 | | |
| 656,667 | |
Change in fair value | |
| (292,500 | ) | |
| (200,000 | ) | |
| (492,500 | ) |
| |
| | | |
| | | |
| | |
Fair value as of December 31 2022 | |
$ | 97,500 | | |
$ | 66,667 | | |
$ | 164,167 | |
The following table presents the changes in the fair
value of warrant liabilities:
| |
Private Placement | | |
Public | | |
Warrant Liabilities | |
Fair value as of September 30, 2022 | |
$ | 390,000 | | |
$ | 266,667 | | |
$ | 656,667 | |
Change in fair value | |
| (292,500 | ) | |
| (200,000 | ) | |
| (492,500 | ) |
Fair value as of December 31, 2022 | |
$ | 97,500 | | |
$ | 66,667 | | |
$ | 164,167 | |
NOTE
9. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed
financial statements were issued. The Company did not identify any subsequent events, other than those listed below, that would have
required adjustment or disclosure in the financial statements.
Effective
February 1, 2023, the Company terminated its agreement with a consultant for monthly advisory services.