The accompanying notes are
an integral part of the unaudited condensed financial statements.
The accompanying notes are
an integral part of the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(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 March 31, 2023, the Company had not commenced
any operations. All activity through March 31, 2023 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
MARCH 31, 2023
(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 “Charter”), 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.
On March 3, 2023 the proposal to amend the Company’s
Charter to extend the date by which the Company has to consummate a business combination from March 4, 2023 to September 4, 2023 was
voted upon. In connection with the Meeting, the Sponsor entered into Non-Redemption Agreements with several unaffiliated third parties
and agreed to transfer an aggregate of 1,035,500 shares of common stock to such parties in exchange for them agreeing not to redeem their
public shares at the Meeting. As a result of the foregoing, effective March 3, 2023, public holders of an aggregate of 35,999,848 public
shares exercised their right to redeem their public shares (leaving an aggregate of 4,000,152 public shares outstanding after the Meeting)
resulting in payment to such holders of an aggregate of $365,991,196. The Company performed a valuation of the shares of common stock
the Sponsor agreed to transfer to the non-redeeming third parties and determined the shares had a value of $82,840, or $0.08 per share.
On March 3, 2023, the Sponsor voluntarily converted
9,708,334 shares of Class B common stock of the Company it held as of such date into 9,708,334 shares of Class A common stock of the
Company in accordance with the Charter. As a result of the foregoing and the results of the Meeting, the Company has an aggregate of
13,708,486 shares of Class A common stock outstanding and 291,666 shares of Class B common stock outstanding.
If the Company seeks stockholder approval of
a Business Combination and it does not conduct conversions pursuant to the tender offer rules, the Charter 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 Charter (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 September 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.
NORTHERN STAR INVESTMENT CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(Unaudited)
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, 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 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 seeks 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.
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.
NORTHERN STAR INVESTMENT CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(Unaudited)
Any redemption or other repurchase that occurs
after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether
and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise
would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business
Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE”
or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination
but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury.
In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment
of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business
Combination and in the Company’s ability to complete a Business Combination. Notwithstanding the foregoing, the Company has agreed
that the per share price payable to stockholders exercising their redemption rights, whether in connection with the vote on an extension
or an initial Business Combination, will not be reduced by payments required to be made by the Company under the IR Act.
The Company held a meeting on March 3, 2023 to vote on the proposal
to amend the Company’s amended and restated certificate of incorporation to extend the date by which the Company must consummate
a business combination or, if it fails to do so, cease its operations and redeem or repurchase 100% of the shares of the Company’s
common stock issued in the Company’s initial public offering, from March 4, 2023 to September 4, 2023 (the “Extension”,
and such extension date the “Extended Date”). In connection with the meeting, 35,999,848 shares of the Company’s common
stock were redeemed with a total redemption payment of $365,991,196. As a result, the Company booked a liability of $3,659,912 for the
excise tax based on 1% of shares redeemed during the reporting period. For interim periods, an entity is not required to estimate future
stock repurchases and stock issuances to measure its excise tax obligation. Rather, an entity can generally record the obligation on an
as-incurred basis. In other words, the excise tax obligation recognized at the end of a quarterly financial reporting period is calculated
as if the end of the quarterly period was the end of the annual period for which the excise tax obligation is payable.
Going Concern
As of March 31, 2023, the Company had $144,684
in its operating bank accounts, $42,309,518 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 $3,827,976. As of March 31, 2023, $8,300,713 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
September 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 likely a 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 September 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
MARCH 31, 2023
(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 and six months ended March 31, 2023 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 March 31, 2023 and September 30, 2022.
Marketable Securities Held in Trust Account
At March 31, 2023 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 sheets.
NORTHERN STAR INVESTMENT CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(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. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional
paid in capital and accumulated deficit.
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 March 31,
2023 and September 30, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it.
Our effective tax rate was 21.94% and 0.00% for
the three months ended March 31, 2023 and 2022, respectively, and 20.76% and 0.0% for the six months ended March 31, 2023 and 2022, respectively.
The effective tax rate differs from the statutory tax rate of 21% for the three and six months ended March 31, 2023 and 2022, 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 March 31, 2023. 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.
NORTHERN STAR INVESTMENT CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(Unaudited)
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 March 31, 2023 and 2022, 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 March 31, 2023 | | |
Three Months Ended March 31, 2022 | | |
Six Months Ended March 31, 2023 | | |
Six Months Ended March 31, 2022 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per common stock | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Allocation of net income | |
$ | 2,298,907 | | |
$ | 504,252 | | |
$ | 5,652,721 | | |
$ | 1,413,180 | | |
$ | 4,591,067 | | |
$ | 1,086,172 | | |
$ | 6,909,996 | | |
| 1,727,499 | |
Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 31,820,418 | | |
| 6,979,629 | | |
| 40,000,000 | | |
| 10,000,000 | | |
| 35,955,152 | | |
| 8,506,410 | | |
| 40,000,000 | | |
| 10,000,000 | |
Basic and diluted net income per common stock | |
$ | 0.07 | | |
$ | 0.07 | | |
$ | 0.14 | | |
$ | 0.14 | | |
$ | 0.13 | | |
$ | 0.13 | | |
$ | 0.17 | | |
$ | 0.17 | |
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).
NORTHERN STAR INVESTMENT CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(Unaudited)
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.
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.
NORTHERN STAR INVESTMENT CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(Unaudited)
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On December 18, 2020, the 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 issued or 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.
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.
NORTHERN STAR INVESTMENT CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(Unaudited)
Consulting Agreement
On June 30, 2021, the Company entered into agreements
with two consultants for advisory services. Each agreement specified that the Company pays $5,000 a month plus any out-of-pocket expenses
to the consultant. On February 1, 2022, the Company entered into an agreement with a consultant for advisory services. The agreement
specified that the Company pays $8,333.33 a month plus any out-of-pocket expenses to the consultant.
Effective February 1, 2023, the Company terminated
its agreements with all consultants for monthly advisory services.
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 March 31, 2023 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 March 31, 2023, there were 9,708,334 shares of Class A common stock issued
and outstanding, excluding 4,000,152 shares of Class A common stock subject to possible redemption which are presented as temporary equity.
At 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. On March 3, 2023, the Sponsor voluntarily converted 9,708,334 shares of Class B common
stock of the Company it held as of such date into 9,708,334 shares of Class A common stock of the Company in accordance with the Charter.
As a result, the Company has an aggregate of 291,666 shares of Class B common stock issued and outstanding as of March 31, 2023. At September
30, 2022, there were 10,000,000 shares of Class B common stock issued and outstanding.
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 March 31, 2023 and September 30, 2022, assets
held in the Trust Account were comprised of $42,309,518 and $402,417,004 in a mutual fund that invests in U.S. Treasury securities, respectively.
During the six months ended March 31, 2023, the Company did withdraw an amount of $1,296,511 in the interest income from the Trust Account
to pay tax obligations and $365,991,195 in connection with redemption.
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2023 and September 30, 2022
and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
Description | |
Level | | |
March
31,
2023 | | |
Level | | |
September 30, 2022 | |
Assets: | |
| | |
| | |
| | |
| |
Marketable securities held in Trust Account –
U.S Treasury Securities Money Market Fund | |
1 | | |
$ | 42,309,518 | | |
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 | |
NORTHERN STAR INVESTMENT CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(Unaudited)
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 11, 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 trading on the New York Stock Exchange. As a result, the warrants are now classified as Level 3. At March
31, 2023, the warrants were valued using a Monte Carlo Simulation model. 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:
| |
March 31, 2023 | |
Stock price | |
$ | 10.11 | |
Exercise price | |
$ | 11.50 | |
Expected term (in years) | |
| 5.76 | |
Volatility | |
| 4.5 | % |
Probability of acquisition | |
| 1 | % |
Risk-free rate | |
| 3.52 | % |
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 | |
Change in fair value | |
| — | | |
| — | | |
| — | |
Fair value as of March 31, 2023 | |
$ | 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 | |
Change in fair value | |
| — | | |
| — | | |
| — | |
Fair value as of March 31, 2023 | |
$ | 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 listed below, that would have required adjustment or disclosure in the financial statements.
On May 12, 2023, the Company issued an unsecured promissory note for $100,000 with a related party. The note is non-interest bearing and
payable upon completion of a Business Combination.