References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to NightDragon Acquisition Corp. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Sponsor" refer to NightDragon Acquisition Sponsor, LLC. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
are forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. You
should read these statements carefully because they discuss future expectations
or state other "forward-looking" information. These statements relate to our
future plans, objectives, expectations, intentions and performance and the
assumptions that underlie these statements. These forward-looking statements
include, but are not limited to:
• our ability to select an appropriate target business or businesses;
• our ability to complete our initial business combination, particularly
given competition from other blank check companies and financial and
• our expectations around the performance of the prospective target
business or businesses, including competitive prospects of the business
following our initial business combination;
• our success in retaining or recruiting, or changes required in, our
officers, key employees or directors following our initial business
• our officers and directors allocating their time to other businesses and
potentially having conflicts of interest with our business or in
approving our initial business combination;
• our potential ability to obtain additional financing to complete our
initial business combination;
• our pool of prospective target businesses;
• our ability to consummate an initial business combination amidst the
uncertainty resulting from the ongoing COVID-19 pandemic, the economy and
any business or businesses with which we consummate our initial business
• the ability of our officers and directors to generate a number of
potential acquisition opportunities;
• our public securities' potential liquidity and trading;
• the lack of a market for our securities;
• our ability to regain compliance with Nasdaq listing rules;
• the use of proceeds not held in the trust account or available to us from
interest income on the trust account balance;
• the trust account not being subject to claims of third parties; or
• our financial performance following this offering.
A number of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those anticipated in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in this report in Part II, Item 1A "Risk Factors" and elsewhere in
this report. These statements, like all statements in this report, speak only as
of their date, and we undertake no obligation to update or revise these
statements in light of future developments.
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In addition, statements that "we believe" and similar statements reflect our
beliefs and opinions on the relevant subject. These statements are based upon
information available to us as of the date of this report, and although we
believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read
to indicate that we have conducted a thorough inquiry into, or review of, all
potentially available relevant information. These statements are inherently
uncertain and you are cautioned not to unduly rely upon these statements.
We are a blank check company incorporated under the laws of the State of
Delaware on December 8, 2020 for the purpose of effectuating a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or other
similar business combination with one or more businesses. We intend to
effectuate our Business Combination using cash from the proceeds of the Initial
Public Offering and the sale of the Private Placement SCALE Units, our capital
stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from December 8, 2020 (inception) through March 31, 2021
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
For the three months ended March 31, 2021, we had a net loss of $1,333,304,
which consists of operating costs of $121,235, change in fair value of warrant
liability of $638,925 and transaction costs associated with Initial Public
Offering of $579,585, offset by interest income on marketable securities held in
the Trust Account of $6,441.
Liquidity and Capital Resources
On March 4, 2021, we consummated the Initial Public Offering of 34,500,000 SCALE
(Stakeholder-Centered Aligned Listed Equity) Units, which includes the full
exercise by the underwriter of its over-allotment option in the amount of
4,500,000 SCALE Units, at $10.00 per SCALE Unit, generating gross proceeds of
$345,000,000. Simultaneously with the closing of the Initial Public Offering, we
consummated the sale of 1,035,000 Private Placement SCALE Units at a price of
$10.00 per Private Placement SCALE Unit in a private placement to NightDragon
Acquisition Sponsor, LLC, generating gross proceeds of $10,350,000.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement SCALE Units, a total of
$345,000,000 was placed in the Trust Account. We incurred $19,601,538 in Initial
Public Offering related costs, including $6,900,000 of underwriting fees,
$12,075,000 of deferred underwriting fees and $626,538 of other offering costs.
For the three months ended March 31, 2021, cash used in operating activities was
$1,282,639. Net loss of $1,333,304 was affected by change in fair value of
warrant liability of $638,925, transaction costs associated with Initial Public
Offering of $579,585 and interest income on marketable securities held in the
Trust Account of $6,441. Changes in operating assets and liabilities used
$1,161,404 of cash for operating activities.
As of March 31, 2021, we had marketable securities held in the Trust Account of
$345,006,441 (including approximately $6,400 of interest income) consisting of
U.S. Treasury Bills with a maturity of 185 days or less. Interest income on the
balance in the Trust Account may be used by us to pay taxes. Through March 31,
2021, we have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
taxes payable), to complete our Business Combination. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to complete
our Business Combination, the remaining proceeds held in the Trust Account will
be used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
As of March 31, 2021, we had cash of $1,982,144. We intend to use the funds held
outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into SCALE
Units at a price of $10.00 per SCALE Unit, at the option of the lender. The
SCALE Units would be identical to the Private Placement SCALE Units.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
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Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per SCALE Unit, or
$12,075,000 in the aggregate. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, subject to the terms of the underwriting
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
We account for the warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in Accounting Standards
Codification ("ASC") Topic 815, "Derivatives and Hedging," under which the
warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. The fair value of the Public Warrants was estimated using a Monte
Carlo simulation approach and the fair value of the Private Placement Warrants
was estimated using a Modified Black Scholes approach.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Common stock subject to mandatory redemption is classified as a liability
instrument and measured at fair value. Conditionally redeemable common stock
(including common stock that features redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within our control) is classified as temporary
equity. At all other times, common stock is classified as stockholders' equity.
Our common stock features certain redemption rights that are considered to be
outside of our control and subject to occurrence of uncertain future events.
Accordingly, common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders' equity
section of our condensed balance sheets.
Net Loss Per Common Share
We apply the two-class method in calculating earnings per share. Net income
(loss) per common share, basic and diluted for Class A common stock subject to
possible redemption is calculated by dividing the interest income earned on the
Trust Account, net of applicable taxes, if any, by the weighted average number
of shares of Class A common stock subject to possible redemption outstanding for
the period. Net income (loss) per common share, basic and diluted for and
non-redeemable common stock is calculated by dividing net loss less income
attributable to Class A common stock subject to possible redemption, by the
weighted average number of shares of non-redeemable common stock outstanding for
the period presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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