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Summary of Significant Accounting Policies (Policies) | 6 Months Ended | 12 Months Ended
--- | --- | ---
Jun. 30, 2022 | Dec. 31, 2021
Accounting Policies [Abstract] |  |
Basis of Presentation | Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission. | Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission.
Emerging growth company | 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. NORTHERN LIGHTS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS Note 2 — Summary of Significant Accounting Policies (Continued) | 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 auditor 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. NORTHERN LIGHTS ACQUISITION CORP. NOTES TO FINANCIAL STATEMENTS
Use of estimates | Use of Estimates The preparation of the balance sheets 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 financial statements and the reported amounts of revenues and expenses during the reporting period. 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. | Use of estimates The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value. The Company had $172,441 and $254,523, respectively, in cash and no cash equivalents as of June 30, 2022 and December 31, 2021. | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value. The Company had $254,523 in cash and no cash equivalents as of December 31, 2021.
Trust Account | Trust Account Upon the closing of the Initial Public Offering and the Private Placement, $117,300,000 ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was held in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act 1940, as amended (the “Investment Company Act”), which will be invested only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. On June 27, 2022, the Company, with proceeds advanced from an affiliate of the Sponsor, deposited $1,150,000 in the Trust Account extending operations for three months from June 28, 2022. On June 30, 2022, $168,617 in Trust Account interest income was released to the Company and utilized to pay franchise taxes. | Trust Account Upon the closing of the Initial Public Offering and the Private Placement, $117,300,000 ($10.20 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was held in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act 1940, as amended (the “Investment Company Act”), which will be invested only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
Income taxes | Income Taxes The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of June 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. ASC 740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in interim periods. If management is unable to estimate a portion of its ordinary income, but is otherwise able to reliably estimate the remainder, ASC 740-270-25-3 provides that the tax applicable to that item be reported in the interim period in which the item occurs. The tax (or benefit) related to ordinary income (or loss) shall be computed at an estimated annual effective tax rate and the tax (or benefit) related to all other items shall be individually computed and recognized when the items occur. Management is unable to estimate a portion of its ordinary income and as a result had computed the company’s tax provision in accordance with ASC 740-270-25-3 The Company’s effective tax rate was (0.75%) and 0.00% for the three months ended June 30, 2022 and 2021, respectively, and (1.31%) and 0.00% for the six months ended June 30, 2022 and the period February 26, 2021 to June 30, 2021 respectively. The effective tax rate differs from the statutory tax rate of 21% for the three months ended June 30, 2022 and 2021 and for the six months ended June 30, 2022 and the period February 26, 2021 to June 30, 2021, primarily due to changes in fair value in warrant liability, changes in fair value in the Forward Purchase Agreement derivative liability, and the valuation allowance on the deferred tax assets. ASC Topic 740 also prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. NORTHERN LIGHTS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS Note 2 — Summary of Significant Accounting Policies (Continued) | Income taxes The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company’s management determined United States is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits as of December 31, 2021 and no amounts accrued for interest and penalties. 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’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. NORTHERN LIGHTS ACQUISITION CORP. NOTES TO FINANCIAL STATEMENTS Note 2 — Summary of Significant Accounting Policies (Continued) The Company is considered an exempted State of Delaware company and is presently not subject to income taxes or income tax filing requirements in the State of Delaware or the United States. As such, the Company’s tax provision is zero for the period presented.
Offering Costs Associated with the Initial Public Offering | Offering Costs Associated with the Initial Public Offering and PIPE Offering Offering costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as offering costs allocated to warrants in the condensed statements of operations. Offering costs associated with the Public Shares were charged to stockholders’ equity upon the completion of the Initial Public Offering. Deferred offering costs as of June 30, 2022 consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the PIPE Offering. | Offering Costs Associated with the Initial Public Offering Offering costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as offering costs allocated to warrants in the condensed statements of operations. Offering costs associated with the Public Shares were charged to stockholders’ equity upon the completion of the Initial Public Offering.
Class A Common Stock Subject to Possible Redemption | Class A Common Stock Subject to Possible Redemption The Company accounts for its shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are 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, shares are classified as stockholders’ equity. The Company’s shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. On June 30, 2022 and December 31, 2021, there were 4,333,047 and 528,175 shares, respectively, of Class A Common Stock issued and outstanding that were issued as component securities of the Private Placement Units (Note 4). At December 31, 2021, 11,500,000 shares of Class A Common Stock were subject to possible redemption. At June 30, 2022, 7,695,128 shares of Class A Common Stock were subject to possible redemption with 3,804,872 shares held by purchasers subject to the forward purchase agreement who have waived their redemption rights. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). As of December 31, 2021, the Class A Common Stock reflected on the balance sheets is reconciled in the following table: Schedule of Common Stock Reflected on the Balance Sheets
Gross Proceeds |  | $ | 115,000,000 |
Less: |  |  |  |
Proceeds allocated to public warrants |  |  | (5,031,474 | )
Proceeds allocated to shares not subject to redemption |  |  | (59 | )
Issuance costs related to Class A Common Stock |  |  | (6,263,677 | )
Extension payment classified as temporary equity |  |  |  |
Plus: |  |  |  |
Accretion of carrying value to redemption value |  |  | 13,595,210 |
Class A Common Stock subject to possible redemption |  | $ | 117,300,000 |
As of June 30, 2022, the Class A Common Stock reflected on the balance sheets are reconciled in the following table:
Class A Common Stock subject to possible redemption at December 31, 2021 |  | $ | 117,300,000 |
Gross Proceeds |  | $ | 117,300,000 |
Less: |  |  |  |
Proceeds allocated to shares not redeemed - Class A Common Stock par value (1) |  |  | (380 | )
Proceeds allocated to shares not subject to redemption |  |  | (380 | )
Proceeds allocated to shares not redeemed – additional paid in capital (1) |  |  | (38,809,314 | )
Extension payment classified as temporary equity |  |  | 769,513 |
Proceeds allocated to public warrants |  |  | (38,809,314 | )
Class A Common Stock subject to possible redemption |  | $ | 79,259,819 |
| (1) | Represents 3,804,872 in shares subject to the forward purchase agreement.
NORTHERN LIGHTS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS Note 2 — Summary of Significant Accounting Policies (Continued) | Class A Common Stock Subject to Possible Redemption The Company accounts for its shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are 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, shares are classified as stockholders’ equity. The Company’s shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. On December 31, 2021, there are 528,175 shares of Class A Common Stock in Private Placement Unit (Note 5) outstanding. 11,500,000 shares of Class A Common Stock are subject to possible redemption. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). As of December 31, 2021, the Class A Common Stock reflected on the balance sheet are reconciled in the following table: Schedule of Common Stock Reflected on the Balance Sheets
|  | As of December 31, 2021 |
Gross Proceeds |  | $ | 115,000,000 |
Less: |  |  |  |
Proceeds allocated to public warrants |  |  | (5,031,474 | )
Proceeds allocated to shares not subject to redemption |  |  | (59 | )
Issuance costs related to Class A common stock |  |  | (6,263,677 | )
Plus: |  |  |  |
Accretion of carrying value to redemption value |  |  | 13,595,210 |
Class A common stock subject to possible redemption |  |  | 117,300,000 |
NORTHERN LIGHTS ACQUISITION CORP. NOTES TO FINANCIAL STATEMENTS
Concentration of credit risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times, may exceed the Federal Depository Insurance Corporation coverage limit 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. | Concentration of credit risk Financial instruments that potentially subject the Company to concentration 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. At December 31, 2021, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Net Income Per Share | Net Income (Loss) Per Share Net loss per share is computed by dividing net loss by the weighted average number of common stock shares outstanding for the period. The calculation of diluted loss per share does not consider the effect of the warrants issued in connection with the Initial Public Offering and warrants issued as components of the Private Placement Units (the “Placement Warrants”) since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The Company applies the two-class method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net loss per common share is computed by dividing the pro rata net loss between the redeemable shares and the non-redeemable shares by the weighted average number of common shares outstanding for each of the periods. The calculation of diluted loss per common stock does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable for 6,014,088 shares of common stock in the aggregate. The following table reflects the calculation of basic and diluted net loss per common share: Schedule of Calculation of Basic and Diluted Net Income Per Share
|  | For the Three Months |  |  | For the Three Months |
|  | Ended June 30, 2022 |  |  | Ended June 30, 2021 |
Redeemable Class A Common Stock subject to possible redemption |  |  |  |  |  |  |  |
Numerator: net loss allocable to redeemable Class A Common Stock subject to possible redemption |  | $ | (1,389,484 | ) |  | $ | (9,478 | )
Denominator: weighted average number of redeemable Class A Common Stock |  |  | 11,332,753 |  |  |  | 10,302,592 |
Basic and diluted net loss per redeemable Class A Common Stock |  | $ | (0.12 | ) |  | $ | (0.00 | )
Non-redeemable Class A and Class B common stock |  |  |  |  |  |  |  |
Numerator: net loss allocable to non-redeemable Class A and Class B common stock |  | $ | (437,761 | ) |  | $ | (1,753,205 | )
Denominator: weighted average number of non-redeemable Class A and Class B common stock |  |  | 3,570,422 |  |  |  | 2,931,887 |
Basic and diluted net income per non-redeemable Class A and Class B common stock |  | $ | (0.12 | ) |  | $ | (0.59 | )
|  | For the Six Months |  |  | For the Period from February 26, 2021 (inception) |
|  | Ended June 30, 2022 |  |  | Through June 30, 2021 |
Redeemable Class A Common Stock subject to possible redemption |  |  |  |  |  |  |  |
Numerator: net loss allocable to redeemable Class A Common Stock subject to possible redemption |  | $ | (798,712 | ) |  | $ | (9,478 | )
Denominator: weighted average number of redeemable Class A Common Stock |  |  | 11,415,914 |  |  |  | 10,302,592 |
Basic and diluted net loss per redeemable Class A Common Stock |  | $ | (0.07 | ) |  | $ | (0.00 | )
Non-redeemable Class A and Class B common stock |  |  |  |  |  |  |  |
Numerator: net loss allocable to non-redeemable Class A and Class B common stock |  | $ | (243,985 | ) |  | $ | (1,753,205 | )
Denominator: weighted average number of non-redeemable Class A and Class B common stock |  |  | 3,487,261 |  |  |  | 2,916,414 |
Basic and diluted net loss per non-redeemable Class A and Class B common stock |  | $ | (0.07 | ) |  | $ | (0.59 | )
NORTHERN LIGHTS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS Note 2 — Summary of Significant Accounting Policies (Continued) | Net Income Per Share Net income per share is computed by dividing net income by the weighted average number of common stock shares outstanding for the period. The calculation of diluted income per share does not consider the effect of the warrants issued in connection with the Initial Public Offering and warrants issued as components of the Private Placement Units (the “Placement Warrants”) since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The Company applies the two-class method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net income per common share is computed by dividing the pro rata net loss between the redeemable shares and the non-redeemable shares by the weighted average number of common shares outstanding for each of the periods. The calculation of diluted income per common stock does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable for 6,014,088 shares of common stock in the aggregate. The following table reflects the calculation of basic and diluted net income per common share: Schedule of Calculation of Basic and Diluted Net Income Per Share
|  | For the Period from February 26, 2021 (inception) |
|  | Through December 31, 2021 |
Redeemable Class A common stock subject to possible redemption |  |  |  |
Numerator: earnings allocable to redeemable Class A common stock subject to possible redemption |  | $ | 852,903 |
Denominator: weighted average number of redeemable Class A common stock |  |  | 6,944,805 |
Basic and diluted net income per redeemable Class A common stock |  | $ | 0.12 |
Non-redeemable Class A and Class B common stock |  |  |  |
Numerator: net income allocable to non-redeemable Class A and Class B common stock |  | $ | 392,255 |
Denominator: weighted average number of non-redeemable Class A and Class B common stock |  |  |  |
Non-redeemable Class A private placement and Class B common shares, basic and diluted |  |  | 3,193,963 |
Basic and diluted net income per non-redeemable Class A and Class B common stock |  | $ | 0.12 |
NORTHERN LIGHTS ACQUISITION CORP. NOTES TO FINANCIAL STATEMENTS Note 2 — Summary of Significant Accounting Policies (Continued)
Fair value of financial instruments | 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,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature. | 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 Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Fair Value Measurements | 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. U.S. 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 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. | 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. U.S. 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 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 | 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 statements 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. NORTHERN LIGHTS ACQUISITION CORP. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 2 — Summary of Significant Accounting Policies (Continued) | 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 statements 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. NORTHERN LIGHTS ACQUISITION CORP. NOTES TO FINANCIAL STATEMENTS
Recently Issued Accounting Standards | Recently Issued Accounting Standards In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470- 0) 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 U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company 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 pronouncements, if currently adopted, would have a material effect on the Company’s financial statements. | Recently Issued Accounting Standards In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion and Other Options(Subtopic 470- 0) 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 U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company 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 pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

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