NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Northern Star Investment Corp. II (the “Company”) is a blank check company incorporated in Delaware on November 12, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
On February 21, 2021, the Company entered into an Agreement and Plan of Reorganization (“Merger Agreement”) by and among the Company,
NISC II-A
Merger LLC, a Delaware limited liability company and wholly-owned subsidiary of Northern Star (“Merger Sub I”),
NISC II-B
Merger LLC, a Delaware limited liability company and wholly-owned subsidiary of Northern Star (“Merger Sub II” and, together with Merger Sub I, the “Merger Subs”) and Apex Clearing Holdings LLC, a Delaware limited liability company (“Apex”).
Apex is the parent company of Apex Clearing Corporation (“Apex Clearing”), a custody and clearing company to broker-dealers, ATS’s, routing firms, professional trading firms, hedge funds, institutions and emerging managers.
Pursuant to the Merger Agreement, Merger Sub I will merge with and into Apex (the “Initial Merger”), with Apex being the surviving entity (the “Initial Surviving Company”) of the Initial Merger and Apex’s members receiving shares of the Company’s Class A common stock in exchange for their membership interests in Apex, and (ii) immediately following the Initial Merger and as part of the same overall transaction as the Initial Merger, the Initial Surviving Company will merge with and into Merger Sub II (the “Final Merger” and, together with the Initial Merger, the “Mergers”), with Merger Sub II being the surviving entity of the Final Merger. As a result of the Mergers, Apex will become a wholly-owned subsidiary of the Company, with the members of Apex becoming stockholders of the Company.
Under the Merger Agreement, the members of Apex will receive an aggregate of 470,000,000 shares of the Company’s common stock, subject to adjustment as set forth in the Merger Agreement. In addition, each convertible promissory note issued by Apex and outstanding immediately prior to the Initial Merger will remain outstanding and will become convertible in accordance with its terms into shares of the Company’s common stock. Immediately following the Mergers, PEAK6 and its affiliates will own a majority of the Company’s common stock.
Effective as of February 21, 2021, the Company entered into subscription agreements (“Subscription Agreements”) with certain institutional accredited investors (collectively, the “Investors”), pursuant to which the Company would, substantially concurrently with, and contingent upon, the consummation of the Mergers, issue an aggregate of 45,000,000 shares of the Company’s Class A common stock to the Investors at a price of $10.00 per share, for aggregate gross proceeds to Northern Star of $450,000,000 (the “PIPE”). The Subscription Agreements were scheduled to terminate in accordance with their terms on September 30, 2021. Accordingly, the Company approached the Investors to give them the opportunity to extend the termination date of the Subscription Agreements until
November
3
0
, 2021 (the “Extended Date”) by entering into an amendment to the Subscription Agreements. As a result of the foregoing, the Company
re-confirmed
commitments from the Investors through the Extended Date of an aggregate of 41,000,000 shares of Class A Common Stock at a price of $10.00 per share, for an updated aggregate commitment of $410,000,000. The closing of the Subscription Agreements is conditioned upon, among other things, (i) the substantially concurrent consummation of the Mergers and (ii) the accuracy of all representations and warranties of Northern Star in the Subscription Agreements (subject to certain bring-down standards).
The Subscription Agreements were scheduled to terminate in accordance with their terms on August 31, 2021, and the Company had intended to consummate the transactions contemplated by the Merger Agreement and the Subscription Agreements by such date. However, the registration statement on
Form S-4 relating
to the transactions has not yet been declared effective and accordingly the transactions have not been consummated. The Company is in the process of reconfirming commitments and/or obtaining new commitments from investors to total the full $410,000,000 of commitments that had previously been obtained. As of September 30, 2021, the Company has received binding commitments from investors of $175,000,000 to extend the termination date to November 30, 2021, and has received indications of interest for up to an additional $235,000,000 in funding, representing the full $410,000,000 previously obtained. Northern Star intends to complete discussions with such parties and will file a Current Report on
Form 8-K at
such time to disclose the full terms of the proceeds to be received from such financings.
The Company has agreed that, as soon as reasonably practicable, but in no event later than 15 business days following the closing date of the Mergers, it shall file a registration statement with the SEC covering the resale by the Investors of the shares of the Company’s common stock issued to them in the PIPE and use its best efforts to have such registration statement declared effective as promptly as practicable thereafter.
The Merger is expected to be consummated in the fourth quarter of 2021, after the required approval by the stockholders of the Company and the fulfillment of certain other conditions set forth in the Merger Agreement.
The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity through September 30, 2021 relates to the Company’s formation, its initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. As discussed above, on February 21, 2021, the Company entered into the Merger Agreement with Apex. The Company 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.
The registration statements for the Company’s Initial Public Offering were declared effective on January 25, 2021. On January 28, 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 underwriter of its 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 4.
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 II Sponsor LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $9,750,000, which is described in Note 5. Upon issuance, the Company recorded a compensation charge of $195,000 representing the amount by which the aggregate fair value of the Private Warrants exceeded the purchase price.
Transaction costs amounted to $22,524,463, consisting of $8,000,000 of underwriting fees, $14,000,000 of deferred underwriting fees and $524,463 of other offering costs.
Following the closing of the Initial Public Offering on January 28, 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, 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
Rule2a-7of
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.
While the Company’s management has broad discretion with respect to the specific application of the cash held outside of the Trust Account, substantially all of the net proceeds from the Initial Public Offering and the sale of the Private Placement Warrants, which are placed in the Trust Account, are intended to be applied generally toward completing 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-Business Combination 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 of 1940, as amended (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.
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