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ALGR Allegro Merger

Filed: 24 May 21, 2:00pm

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended March 31, 2021

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to          

 

Commission File Number 001-38581

 

ALLEGRO MERGER CORP.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware 82-2425125
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification Number)

 

777 Third Avenue, 37th Floor
New York, NY
 10017
(Address of Principal Executive Offices) (Zip Code)

 

(212) 319-7676

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

None.

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
 Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒   No ☐

 

As of May 24, 2021, 4,110,000, shares of common stock, par value $0.0001 per share, were issued and outstanding.

 

 

 

 

 

 

ALLEGRO MERGER CORP.

 

FORM 10-Q FOR THE QUARTER ENDED March 31, 2021

 

TABLE OF CONTENTS

 

  Page
Part I. Financial Information  
 Item 1. Consolidated Financial Statements 1
  Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020 restated 1
  Statements of Operations for the three months ended March 31, 2021 and 2020 restated (unaudited) 2
  Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020 restated (unaudited) 3
  Statements of Cash Flows for the three months ended March 31, 2021 and 2020 restated (unaudited) 4
  Notes to Financial Statements (unaudited) 5
 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
 Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk 16
 Item 4. Controls and Procedures 16
    
Part II. Other Information  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities 18
 Item 6. Exhibits 19
    
Signatures 20

 

i

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Allegro Merger Corp.
Consolidated Balance Sheets

 

  March 31,
2021
  December 31,
2020
(restated)
 
ASSETS        
         
Current assets:        
Cash $86  $216 
Restricted cash  61,268   61,268 
Prepaid expenses and other current assets  58,249   58,249 
Total current assets  119,603   119,733 
Total assets $119,603  $119,733 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current liabilities:        
Accounts payable and accrued expenses $16,222  $16,222 
Notes payable- related party  800,600   795,600 
Total current liabilities  816,822   811,822 
Warrant liability  40   117 
Total liabilities  816,862   811,939 
         
Stockholders’ equity:        
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding        
Common stock, $0.0001 par value; 40,000,000 shares authorized, 4,110,000 and 4,110,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively  411   411 
Additional paid-in capital  (16,821,461)  (16,821,461)
Retained earnings  16,123,791   16,128,844 
Total stockholders’ equity  (697,259)  (692,206)
Total liabilities and stockholders’ equity $119,603  $119,733 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

1

 

Allegro Merger Corp.

Consolidated Statements of Operations

(Unaudited)

 

  Three months ended
March 31,
2021
  Three months ended
March 31,
2020
(restated)
 
  (unaudited)  (unaudited) 
General and administrative costs $5,130  $254,916 
Loss from operations  5,130   254,916 
         
Other Income:        
Investment income on Trust Account  -   356,167 
Change in fair value of warrants  77   1,994,623 
Income (loss) before income tax provision  (5,053)  2,095,874 
Provision for income taxes  -   69,586 
         
Net income (loss) $(5,053) $2,026,288 
         
Weighted average shares outstanding of common stock, basic and diluted- Public Shares  4,110,000   11,167,131 
Basic and diluted net income (loss) per share, Public Shares $(0.00) $0.03 
Weighted average shares outstanding of common stock, basic and diluted- Founders and Private Placement Shares  4,110,000   4,110,000 
Basic and diluted net loss per share, Founders and Private Placement Shares $(0.00) $0.08 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

2

 

Allegro Merger Corp.

Consolidated Statements of Changes in Stockholders’ Equity

 

For the three months ended March 31, 2021 (unaudited)

 

  Common Stock  Additional
Paid-In
  Retained  Stockholders’ 
  Shares  Amount  Capital  Earnings  Equity 
Balance at December 31, 2020 (restated)  4,110,000  $411  $(16,821,461) $16,128,844  $(692,206)
Net income  -   -   -   (5,053)  (5,053)
Balance at March 31, 2021  4,110,000  $411  $(16,821,461) $16,123,791  $(697,259)

 

 

For the three months ended March 31, 2020 (restated) (unaudited)

 

  Common Stock  Additional
Paid-In
  Retained
Earnings
(Accumulated
  Total
Stockholders’
 
  Shares  Amount  Capital  Deficit)  Equity 
Balance at December 31, 2019 (restated)  5,097,334  $510  $(8,316,941) $13,316,438  $5,000,007 
Stockholder redemptions  (3,782,869)  (378)  (38,679,922)  -   (38,680,300)
Common stock subject to possible redemption  3,665,363   367   36,653,642   -   36,654,009 
Net income�� -   -   -   2,026,288   2,026,288 
Balance at March 31, 2020 (restated)  4,979,828  $499  $(10,343,221) $15,342,726  $5,000,004 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

3

 

Allegro Merger Corp.
Consolidated Statements of Cash Flows

(Unaudited)

 

  For the three months ended
March 31,
 
  2021  2020
(restated)
 
Cash flow from operating activities        
Net income $(5,053) $2,026,288 
Adjustments to reconcile net income to net cash used in operating activities:        
Change in fair value of warrants  (77)  (1,994,623)
Income earned on investment held in Trust Account  -   (356,167)
Changes in operating assets and liabilities:        
Prepaid expenses and other current assets  -   2,974 
Accounts payable and accrued expenses  -   55,818 
Franchise tax payable  -   (54,628)
Prepayment of income taxes  -   22,588 
Net cash used in operating activities  (5,130)  (297,750)
         
Cash flow from investing activities        
Cash released from Trust Account  -   38,902,933 
Cash deposited in Trust Account  -   (781,700)
Net cash provided by investing activities  -   38,121,233 
         
Cash flows from financing activities        
Proceeds from notes payable- related party  5,000   781,700 
Proceeds from sale of private units  -   (38,680,300)
Net cash provided by (used) in financing activities  5,000   (37,898,600)
         
Net decrease in cash, cash equivalents and restricted cash  (130)  (75,117)
Cash, cash equivalents and restricted cash at beginning of period  61,484   87,797 
Cash, cash equivalents and restricted cash at end of period $61,354  $12,680 
         
Supplemental cash flow disclosure:        
Cash paid for income taxes $-  $47,000 
         
Supplemental disclosure of non-cash financing activities:        
Change in value of common stock subject to possible redemption $-  $36,653,634 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

Note 1 — Organization and Plan of Business Operations

 

Allegro Merger Corp. (the “Company”) was incorporated in Delaware on August 7, 2017 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a “Business Combination”).

 

All activity through March 31, 2021 relates to the Company’s formation, the Company’s initial public offering of units (“Initial Public Offering”) described below and, since the Initial Public Offering, the search for a prospective initial Business Combination.

 

The registration statement for the Company’s Initial Public Offering was declared effective on July 2, 2018. On July 6, 2018, the Company consummated the Initial Public Offering of 14,950,000 units (“Units” and, with respect to the common stock included in the Units being offered, the “Public Shares”), including 1,950,000 Units issued pursuant to the exercise in full of the underwriters’ overallotment option, generating gross proceeds of $149,500,000, which is described in Note 3. Each Unit consisted of one share of the Company’s common stock, $0.0001 par value, one redeemable common stock purchase warrant (the “Warrants”) and one right (the “Rights”). Each Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share (see Note 7). Each Right entitles the holder to receive one tenth (1/10) of one share of common stock upon the completion of a Business Combination.

 

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 372,500 units (“Private Units”), at a price of $10.00 per Private Unit in a private placement to certain of the Initial Stockholders (defined below), Cantor Fitzgerald & Co. and Chardan Capital Markets LLC (collectively, the “Insiders”), generating gross proceeds of $3,725,000, which is described in Note 4.

 

Following the closing of the Initial Public Offering on July 6, 2018, an amount of $149,500,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Units was placed in a trust account (“Trust Account”) and was invested in United States government treasury bills, bonds or notes, having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act.

 

On July 6, 2018, in connection with the underwriters’ election to fully exercise their over-allotment option, the Company consummated the sale of an additional 1,950,000 Units, at $10.00 per Unit.

 

Proposed Business Combination

 

On November 8, 2019, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) by and among the Company, Allegro Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, TGIF Holdings, LLC, a Delaware limited liability company (“Holdings”), TGIF Midco, Inc., a Delaware corporation (“Midco”), and Rohit Manocha, solely in his capacity as the initial representative of the equityholders of Holdings and Midco.

 

On March 31, 2020, the Company and Holdings mutually determined, due to extraordinary market conditions and the failure to meet necessary closing conditions, to terminate the Merger Agreement.

 

As previously disclosed, on March 26, 2020, the Company’s shareholders approved an amendment to the Company’s amended and restated certificate of incorporation (“Charter”) to extend the time by which the Company has to complete an initial business combination from March 31, 2020 to April 30, 2020. However, in light of the termination of the Merger Agreement and due to extraordinary market conditions, the Company determined on March 31, 2020 that it would not so amend its Charter.

 

5

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

Dissolution of Trust Account; Delisting and Deregistration of Securities

 

Pursuant to the Charter, on March 31, 2020, the Company began the process of liquidating and distributing to its public stockholders their pro rata portion of the funds contained in the Trust Account, including interest earned on the amounts on deposit, less amounts that be released to the Company to pay franchise and income taxes and up to $100,000 of interest which may be released to the Company to pay dissolution expenses. On April 21, 2020, all of the public shares were redeemed at a per share redemption price of $10.30. As of March 31, 2021, we have an aggregate of $61,268 of restricted cash in connection with the unused portion of our dissolution allowance and allowance for taxes. We expect to distribute such amount, pro rata, to our former public stockholders. 

 

An aggregate of approximately $781,700 of loans made by the initial stockholders to the Company in connection with extensions of time to complete an initial business will not be repaid and will be forgiven if we are unable to consummate a business combination and determine to liquidate and dissolve.

 

The initial stockholders waived their redemption rights with respect to the common stock issued prior to the Company’s initial public offering and the common stock underlying the Private Units. Accordingly, such initial stockholders did not participate in the redemption and an aggregate of 4,110,000 shares of common stock remain outstanding. Additionally, the Company’s rights and warrants remain outstanding.

 

On April 20, 2020, Nasdaq filed a Form 25 to delist and deregister the units, common stock, rights, and warrants. Such securities were delisted from Nasdaq as of April 30, 2020 and deregistered under Section 12(b) of the Exchange Act as of July 9, 2020.

 

Going Concern

 

As of March 31, 2021, the Company had a cash and restricted cash balance of $86 and $61,268, respectively and a working capital deficit of $697,219.

 

In addition, 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”, management has determined that the liquidity, mandatory liquidation and 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 liquidate after March 31, 2021.

 

Note 2 — Restatement of Previously Issued Financial Statements

 

The Company previously accounted for its outstanding Public and Private Placement Warrants issued in connection with its Initial Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant.

 

In connection with the review of the Company’s financial statements for the period ended March 31, 2021, the Company’s management further evaluated the warrants under Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts on an Entity’s Own Equity” (“ASC 815-40”). ASC 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s audit committee, in consultation with management and after discussion with the Company’s independent registered public accounting firm, concluded that the Company’s Public and Private Placement Warrants are not indexed to the Company’s common stock in the manner contemplated by ASC 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares.

 

6

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

As a result of the foregoing, the Company corrected certain line items related to the previously audited financial statements as of December 31, 2020 in the Form 10-K filed with the SEC on March 29, 2021, as well as the unaudited interim financial statements as of March 31, 2020, filed with the SEC on June 29, 2020. The corrections are related to misstatements identified in improperly applying accounting guidance on warrants, recognizing them as components of equity instead of a derivative warrant liability under the guidance of ASC 815-40. As of December 31, 2020, our warrant liability increased from $0 to $117, additional paid-in capital decreased from ($3,607,240) to ($16,821,461), and retained earnings increased from $2,914,742 to $16,123,791. As of March 31, 2020, the change in fair value of warrants went from $0 to $1,994,623, which increased net income from $40,085 to $2,026,288.

 

The Company’s accounting for the warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported assets.

 

Note 3 — Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for any future period. The accompanying unaudited financial statements should be read in conjunction with the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 29, 2021.

 

Principles of Consolidation

 

The unaudited consolidated financial statements of the Company include its wholly-owned subsidiary, Allegro Merger Sub, Inc., a Delaware corporation incorporated on November 7, 2019. All inter-company accounts and transactions are eliminated in consolidation.

 

Marketable securities held in Trust Account

 

As of December 31, 2019, the assets held in the Trust Account were substantially held in U.S. Treasury Bills. On April 21, 2020 the remaining cash held in the Trust Account was fully liquidated.

 

Common stock subject to possible redemption

 

The Company accounts for its common stock shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemptions (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including 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, common stock is classified as stockholders’ equity. The Company’s 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. Upon redemption, we were required to distribute to the public stockholders their pro rata portion of the funds contained in the Trust Account, including interest earned on the amounts on deposit, less amounts that may be released to the Company to pay franchise and income taxes and up to $100,000 of interest which may be released to the Company to pay dissolution expenses. Accordingly, during the three month period ended March 31, 2021, pursuant to the Charter, all outstanding Public Shares were redeemed on April 21, 2020 at a per share redemption price of approximately $10.30 per Public Share. On March 31, 2021, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets. As of March 31, 2021, we have an aggregate of $61,268 of restricted cash in connection with the unused portion of our dissolution allowance and allowance for taxes. We expect to distribute such amount, pro rata, to our former public stockholders.

 

7

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

Warrant Liability

 

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

 

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants was estimated using both a probability adjusted Black-Scholes option pricing model and a Monte Carlo simulation approach.

 

Net Income (Loss) Per Share

 

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. The Company has not considered the effect of the warrants and rights sold in the Initial Public Offering and Private Placement to purchase an aggregate of 16,854,750 Public Shares in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted earnings per share is the same as basic earnings per share for the period.

 

The Company’s consolidated statements of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. Net income per share, basic and diluted for Public Shares is calculated dividing the net income (loss) of ($5,053) and $2,026,288, reduced by the investment income on the trust, change in warrant liability and other income of $77 and $2,350,790 respectively, by the weighted average number of Public Shares outstanding during the period. All outstanding Public Shares were redeemed. The Founder and Private Placement shares are calculated separately from the Public Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.

 

Restricted Cash

 

As of March 31, 2021, we have an aggregate of $61,268 of restricted cash in connection with the unused portion of our dissolution allowance and allowance for taxes. We expect to distribute such amount, pro rata, to our former public stockholders.

 

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 sheets, primarily due to their short-term nature.

 

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

 

8

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

 

 Level 1:Quoted prices in active markets for identical assets and liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
   
 Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
   
 Level 3:Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

 

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statement.

 

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis. The Company is currently evaluating the timing, method of adoption and overall impact of this standard on its condensed financial statements.

 

Note 4 — Initial Public Offering

 

On July 6, 2018, the Company consummated the Initial Public Offering and sold 14,950,000 Units, including 1,950,000 Units issued pursuant to the exercise in full of the underwriters’ over-allotment option, at a purchase price of $10.00 per Unit. Each Unit consisted of one share of the Company’s common stock, $0.0001 par value, one Warrant and one Right. Each Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share (see Note 7). Each Right entitles the holder to receive one tenth (1/10) of one share of common stock upon the completion of a Business Combination.

 

9

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

Note 5 — Private Placement

 

Simultaneously with the Initial Public Offering, the Insiders purchased an aggregate of 372,500 Private Units, at $10.00 per Private Unit for an aggregate purchase price of $3,725,000. Each Private Unit consists of one Private Share, one warrant (“Private Warrant”) and one right (“Private Right”). The proceeds from the Private Units were added to the proceeds from the Initial Public Offering held in the Trust Account. The proceeds from the sale of the Private Units were used to fund the redemption of the Public Shares.

 

The Private Units are identical to the Units sold in the Public Offering, except that the holders have agreed to vote the Private Shares in favor of any Business Combination. Additionally, the holders have agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to certain permitted transferees) until the completion of the initial Business Combination.

 

The holders of the Private Units (or underlying shares of common stock) are entitled to registration rights described in Note 6.

 

Note 6 — Related Party Transactions

 

Administrative Service Fee

 

The Company presently occupies office space provided by Crescendo Advisors II, LLC (“Crescendo”), an entity controlled by the Company’s Chief Executive Officer. Crescendo has agreed that until the Company consummates a Business Combination, it will make such office space, as well as general and administrative services including utilities and administrative support, available to the Company as may be required by the Company from time to time. The Company agreed to pay an aggregate of $12,500 per month for such services commencing on the effective date of the Initial Public Offering. The Company and Crescendo agreed to suspend payment on this agreement on March 31, 2020. The Company expensed and paid Crescendo $0 and $37,500 for such services for the three months ended March 31, 2021, and 2020, respectively.

 

Promissory Notes — Related Parties

 

The Company issued an unsecured promissory note totaling $5,000 to Eric S. Rosenfeld, the Company’s Chief Executive Officer, in February 2021. The note is non-interest bearing, payable on demand and outstanding as of March 31, 2021.

 

Notes Payable — Related Parties

 

Certain individuals and entities (the “Contributors”) that participated in the private placement of units that occurred simultaneously with the Company’s initial public offering contributed to the Company an aggregate amount of $781,700, representing contributions covering a prorated amount of $0.02 per unconverted public share for the partial month of January 2020 and $0.025 per unconverted public share for each of February 2020 and March 2020 (each, a “Contribution”). The Contributions will not bear any interest and will be repayable by the Company to the Contributors upon consummation of an initial business combination. The Contributions will be forgiven if the Company is unable to consummate an initial business combination except to the extent of any funds held outside of the Company’s trust account.

 

The Company deposited $223,342, the first contribution on January 6, 2020, into the trust account established in connection with the Company’s initial public offering. The Company deposited the second Contribution of $279,178 on January 31, 2020, and deposited the third Contribution of $279,180 on March 2, 2020, in each case, to the same trust account; provided that any such additional Contribution was only to be made if the previously announced merger agreement with TGI Fridays is still then in effect, or, if such agreement is earlier terminated, the Board of Directors of the Company by majority vote determines to require such additional Contribution.

 

10

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

On March 31, 2020, the Company and Holdings mutually determined, due to extraordinary market conditions and the failure to meet necessary closing conditions, to terminate the Merger Agreement.

 

The loans made by the Contributors will not be repaid and will be forgiven if we are unable to consummate a business combination and determine to liquidate and dissolve.

 

Note 7 — Commitments and Contingencies

 

Registration Rights 

 

The holders of the Founder Shares, Private Shares, Private Warrants, Private Rights, and any shares, warrants and rights that may be issued upon conversion of working capital loans (and any shares issued upon the exercise of such warrants or conversion of such rights) will be entitled to registration rights pursuant to a registration rights agreement executed prior to the Initial Public Offering. The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities, except that Cantor, Chardan, and/or their designees may only make a demand registration (i) on one occasion and (ii) during the five year period beginning on July 2, 2018, the effective date of Allegro’s registration statement in connection with Allegro’s initial public offering. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of an initial Business Combination. Cantor, Chardan, and/or their designees may participate in a “piggy-back” registration only during the seven year period beginning on July 2, 2018. The Company will bear the costs and expenses of filing any such registration statements.

 

Underwriting Agreement

 

The Company entered into an agreement with the underwriters of the Initial Public Offering (“Underwriting Agreement”), pursuant to which the Company paid an underwriting discount of 2.0% of the gross proceeds of the Initial Public Offering, excluding the over-allotment option, or $2,600,000 in the aggregate, to the underwriters at the closing of the Initial Public Offering, with an additional fee (the “Deferred Underwriting Discount”) of 3.5% of the gross offering proceeds of the Initial Public Offering, excluding the over-allotment option, and 5.5% of the gross proceeds of the over-allotment option, or $5,622,500 in the aggregate. The Underwriting Agreement provided that the Deferred Underwriting Discount would only be payable to the underwriters from the amounts held in the Trust Account solely in the event the Company would complete its initial Business Combination. As previously indicated, the Company was unable to consummate its initial Business Combination in the time period prescribed by the Charter and, accordingly, the Company distributed the proceeds held in the Trust Account to public stockholders. As a result, the Deferred Underwriting Discount is no longer owed.

 

Note 8 — Stockholders’ Equity

 

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 designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.

 

Common Stock

 

The Company is authorized to issue 40,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the Company’s common stock are entitled to one vote for each share. At March 31, 2021 and December 31, 2020, there were 4,110,000 and 4,110,000 shares of common stock issued and outstanding.

 

Following termination of the Merger Agreement, the Company liquidated the funds held in the Trust Account. Pursuant to the Charter, all outstanding Public Shares) were redeemed at a per share redemption price of approximately $10.30 per Public Share (the “Redemption Amount”). The cash used for common stock redemptions was $153,755,272 and the change in the value of common stock due to redemptions was ($148,023,096).

 

The initial redemption occurred on April 21, 2020. As of the close of business on such date, the Public Shares were deemed cancelled and will represent only the right to receive the per share Redemption Amount. The Company’s officers, directors, initial stockholders, and the purchasers of Private Units have waived their redemption rights with respect to the common stock issued prior to the Company’s initial public offering and the common stock underlying the Private Units.

 

11

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

Rights

 

Each holder of a Right will receive one-tenth (1/10) of one common stock upon consummation of a Business Combination. No fractional shares will be issued upon exchange of the Rights. No additional consideration will be required to be paid by a holder of Rights in order to receive its additional shares upon consummation of a Business Combination as the consideration related thereto has been included in the Unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of Rights to receive the same per share consideration the holders of the common stock will receive in the transaction on an as-converted into common stock basis and each holder of Rights will be required to affirmatively covert its rights in order to receive 1/10 of a share underlying each right (without paying additional consideration). The common stock issuable upon exchange of the Rights was registered at the time of our initial public offering. Accordingly, when issued, such shares will not be restricted securities (except to the extent held by affiliates of the Company).

 

Warrants 

 

The Company has accounted for both the Public and Private Warrants as a liability (see note 3 and note 9).

 

The Warrants will become exercisable 30 days after the consummation of a Business Combination. No Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the Warrants and a current prospectus relating to such shares. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon the exercise of the Warrants is not effective within 20 business days from the consummation of a Business Combination, the holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise the Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their Warrants on a cashless basis. The Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.

 

The Placement Warrants are identical to the Warrants underlying the Units sold in the Initial Public Offering, except the Placement Warrants are exercisable for cash (even if a registration statement covering the shares of common stock issuable upon exercise of such Placement Warrants is not effective) or on a cashless basis, at the holder’s option, and not redeemable by the Company, in each case so long as they are still held by the original purchasers or their affiliates.

 

The Company may call the Warrants for redemption (excluding the Placement Warrants but including any outstanding Warrants issued upon exercise of the unit purchase option issued to its underwriter), in whole and not in part, at a price of $.01 per Warrant:

 

 -upon not less than 30 days’ prior written notice of redemption to each Warrant holder,

 

 -if, and only if, the reported last sale price of the shares of common stock (or the closing bid price of our common stock in the event shares of our common stock are not traded on any specific day) equals or exceeds $18.00 per share, for any 20 trading days within a 30 trading day period ending on the third business day prior to the notice of redemption to Warrant holders, and

 

 -if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such Warrants at the time of redemption and for the entire 30-day redemption period and continuing each day thereafter until the date of redemption.

 

If the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants to do so on a “cashless basis,” as described in the warrant agreement.

 

The exercise price and number of shares of common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for issuances of shares of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Warrants.

 

12

 

Allegro Merger Corp.
Notes to Consolidated Financial Statements
(unaudited)

 

Note 9 — Fair Value Measurements

 

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.

 

March 31, 2021

 

Description Quoted
Price in
Active
Market
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Other
Unobservable
Inputs
(Level 3)
 
Assets:               
Investments held in Trust Account $-  $     -  $- 
Liabilities:            
Derivative warrant liabilities $-  $-  $40 

 

March 31, 2020 (restated)

 

Description Quoted
Price in
Active
Market
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Other
Unobservable
Inputs
(Level 3)
 
Assets:              
Investments held in Trust Account $115,232,882  $-  $- 
Liabilities:            
Derivative warrant liabilities $747,500  $-  $30,316 

 

There were no transfers to/from Levels 1, 2, and 3 securities at the end of the reporting period.

 

The fair value of the Public and Private Placement Warrants were estimated using a Monte Carlo model that values the derivative liability of the warrants. For the period ended March 31, 2021, the Company recognized income on the unaudited condensed statement of operations resulting from a decrease in the fair value of liabilities of $77 presented as change in fair value of warrant liabilities on the accompanying unaudited condensed statement of operations.

 

The following table provides quantitative information regarding Level 3 fair value measurements inputs utilized to measure the fair value of the Private Placement Warrants at the measurement dates as of March 31, 2021 and March 31, 2020:

 

  March 31,
2021
  March 31,
2020
 
Volatility  24.4%  21.6%
Risk Free Rate  1.42%  0.65%
Estimated Term Remaining  4.27   5.27 

 

The change in the fair value of the derivative warrant liabilities for the three months ended March 31, 2021 is summarized as follows:

 

Derivative warrant liabilities as of December 31, 2020 $117 
Change in fair value of derivative warrant liabilities $(77)
Derivative warrant liabilities as of March 31, 2021 $40 

 

The change in the fair value of the derivative warrant liabilities for the three months ended March 31, 2020 is summarized as follows:

 

Derivative warrant liabilities as of December 31, 2019 $2,772,439 
Change in fair value of derivative warrant liabilities $(1,994,623)
Derivative warrant liabilities as of March 31, 2020 $777,816 

 

Note 10 — Subsequent Events 

 

The Company disclosed those set forth in Note 2 relating to the correction of certain line items related to the previously audited financial statements as of December 31, 2020. Additionally, the Company issued two unsecured promissory note totaling $15,000 to Eric S. Rosenfeld, the Company’s Chief Executive Officer, in April 2021. The notes are non-interest bearing and payable on demand.

 

13

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

References to the “Company,” “our,” “us” or “we” refer to Allegro Merger Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Cautionary Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.

 

Overview

 

We are a blank check company incorporated on August 7, 2017 as a Delaware corporation and 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 (“business combination”). We are not limited to a particular industry or sector for purposes of consummating a business combination.

 

Results of Operations

 

For the three months ended March 31, 2021, we had a net loss of $5,053, which consisted of operating costs and change in value of warrant liabilities of $5,130 and $77 respectively. For the three months ended March 31, 2020, we had net income of $2,026,288, which consisted of operating costs of $254,916, and an income tax provision of $69,586, offset by investment income from cash and marketable securities held in the Trust Account and change in value of warrant liability of $356,167 and $1,994,623.

 

Liquidity and Capital Resources

 

We presently have no revenue; our net loss of $5,053 for the three months ended March 31, 2021 consists primarily of operating expenses. Through March 31, 2021, our liquidity needs were satisfied through receipt of $5,000 in loans made to the company.

 

The accompanying financial statements have been prepared assuming we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of March 31, 2021, we had a working capital deficit of $697,219. Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. Our plans to raise capital or to consummate the initial business combination may not be successful. These matters, among others, raise substantial doubt about our ability to continue as a going concern. Based on the foregoing, we currently do not have sufficient cash and working capital to meet our needs through the mandatory liquidation date unless our initial stockholders provide us additional funds for our working capital needs, or we obtain other financing.

 

The accompanying financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

 

Off-balance sheet financing arrangements

 

We did not have any off-balance sheet arrangements as of March 31, 2021 and December 31, 2020.

 

14

 

Contractual obligations

 

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

 

As discussed above, we entered into an agreement to pay an affiliate of our Chief Executive Officer an aggregate monthly fee of $12,500 for office space and office and administrative support provided to the Company. The company and the affiliate have agreed to suspend payment on this agreement on March 31, 2020.

 

We have engaged our underwriters as advisors in connection an initial business combination to assist us in holding meetings with our shareholders to discuss the potential business combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities, assist us in obtaining shareholder approval for the business combination and assist us with our press releases and public filings in connection with the business combination. The Underwriting Agreement provided that a deferred underwriting discount of 3.5% of the gross offering proceeds of the initial public offering, excluding the over-allotment option, and 5.5% of the gross proceeds of the over-allotment option, or $5,622,500 in the aggregate (“Deferred Underwriting Discount”) would only be payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completed its initial Business Combination. As previously indicated, the Company was unable to consummate its initial business combination in the time period required by the Charter and, accordingly, distributed the proceeds held in the Trust Account to public stockholders. As a result, the Deferred Underwriting Discount is no longer owed.

 

Critical Accounting Policies

 

The preparation of 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. The Company has identified the following critical accounting policy:

 

Common stock subject to possible redemption

 

The Company accounts for its common stock shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemptions (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including 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, common stock is classified as stockholders’ equity. The Company’s 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. Upon redemption, we were required to distribute to the public stockholders their pro rata portion of the funds contained in the Trust Account, including interest earned on the amounts on deposit, less amounts that may be released to the Company to pay franchise and income taxes and up to $100,000 of interest which may be released to the Company to pay dissolution expenses. Accordingly, during the period ended March 31, 2021, pursuant to the Charter, all outstanding Public Shares were redeemed on April 21, 2020 at a per share redemption price of approximately $10.30 per Public Share. As of March 31, 2021, we have an aggregate of $61,268 of restricted cash in connection with the unused portion of our dissolution allowance and allowance for taxes. We expect to distribute such amount, pro rata, to our former public stockholders.

 

Recent Accounting Pronouncements

 

The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

 

Insider Shares

 

The Initial Stockholder purchased an aggregate of 4,312,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.0058 per share (“Founder Shares”).

 

In April 2018, the Initial Stockholders surrendered an aggregate of 575,000 shares for no additional consideration, leaving them with an aggregate of 3,737,500 Founder Shares.

 

15

 

Critical Accounting Policies and Estimates

 

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instrument and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no significant changes in our critical accounting policies as discussed in our Annual Report on Form 10-K filed with the SEC on March 29, 2021.

 

Off-Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of March 31, 2021 and December 31, 2020.

 

JOBS Act

 

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As of March 31, 2021, and December 31, 2020, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the trust account, may be invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our chief executive officer and chief financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective.

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for the Public Warrants and Private Placement Warrants. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.

 

16

 

PART II - OTHER INFORMATION

 

Item 1A. Risk Factors

 

Recent SEC guidance required us to reconsider the accounting of warrants and led us to conclude that our warrants be accounted for as liabilities rather than as equity and such requirement resulted in a restatement of our previously issued financial statements.

 

On April 12, 2021, the staff of the SEC issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”) (the “Statement”). In the Statement, the SEC staff expressed it view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since issuance, our warrants were accounted for as equity within our balance sheet, and after discussion and evaluation, including with our independent auditors, we have concluded that our warrants should be presented as liabilities with subsequent and periodic fair value re-measurement. Therefore, we conducted a valuation of our warrants and restated our previously issued financial statements, which resulted in unanticipated costs and diversion of management resources and may result in potential loss of investor confidence. Although we have now completed the restatement, we cannot guarantee that we will have no further inquiries from the SEC or Nasdaq regarding our restated financial statements or matters relating thereto.

 

Any future inquiries from the SEC or Nasdaq as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with the restatement itself.

 

Certain of our warrants are accounted for as warrant liabilities and are recorded at fair value upon issuance with changes in fair value each reporting period to be reported in earnings, which may have an adverse effect on the market price of our Common Stock.

 

Following the restatement of our historical financial statements, we account for our public and private warrants as warrant liabilities and recorded at fair value upon issuance with any changes in fair value each reporting period to be reported in earnings as determined by the Company based the available publicly traded warrant price or based on a valuation report obtained from its independent third party valuation firm.

 

We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

As described elsewhere in this Quarterly Report, we identified a material weakness in our internal control over financial reporting related to the accounting for a significant and unusual transaction related to the warrants we issued in connection with our public and private placements in connection with our IPO. As a result of this material weakness, our management concluded that our internal control over financial reporting were not effective as of March 31, 2021. This material weakness resulted in a material misstatement of our warrant liabilities, change in fair value of warrant liabilities, additional paid-in capital, accumulated deficit and related financial disclosures.

 

To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

 

17

 

Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Failure to timely file will cause us to be ineligible to utilize short form registration statements on Form S-3 or Form S-4, which may impair our ability to obtain capital in a timely fashion to execute our business strategies or issue shares to effect an acquisition. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

 

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS FROM REGISTERED SECURITIES

 

In connection with our organization in August 2017, we issued to Eric Rosenfeld, our Chief Executive Officer, an aggregate of 4,312,500 shares of common stock in exchange for a capital contribution of $25,000, or approximately $0.01 per share. The foregoing issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (“Securities Act”). Mr. Rosenfeld thereafter transferred such shares to our other shareholders prior to the Initial Public Offering (the “initial stockholders”). In April 2018, our initial stockholders contributed to our capital for no additional consideration an aggregate of 575,000 shares, resulting in our initial stockholders holding an aggregate of 3,737,500 shares of common stock.

 

On July 6, 2018, we consummated the Initial Public Offering of 14,950,000 units, including 1,950,000 units subject to the underwriters’ over-allotment option. The units sold in the Initial Public Offering, including pursuant to the over-allotment option, were sold at an offering price of $10.00 per unit, generating total gross proceeds of $149,500,000. Cantor Fitzgerald & Co. acted as the sole book running manager for the Initial Public Offering. Chardan Capital Markets LLC acted as lead manager. of the Initial Public Offering. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333- 225270). The Securities and Exchange Commission declared the registration statement effective on July 2, 2018.

 

Simultaneous with the consummation of the Initial Public Offering, we consummated the private placement of an aggregate of 372,500 units (“Private Units”) to our initial stockholders at a price of $10.00 per Private Unit, generating total proceeds of $3,725,000. This issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

 

The Private Units are identical to the units sold in the Initial Public Offering, except the warrants included in the Private Units are non-redeemable, may be exercised on a cashless basis, and may be exercisable for unregistered shares of common stock if the prospectus relating to the common stock issuable upon exercise of the warrants is not current and effective, in each case so long as they continue to be held by the sponsor or its permitted transferees. The holders of the Private Units have agreed (A) to vote the common stock included in the Private Units (“Private Shares”) in favor of any proposed business combination, (B) not to convert any Private Shares into the right to receive cash from the trust account in connection with a stockholder vote to approve a proposed initial business combination or sell any Private Shares to us in a tender offer in connection with a proposed initial business combination and (C) that such Private Shares shall not participate in any liquidating distribution upon winding up if a business combination is not consummated within the required time period. Additionally, the holders have agreed not to transfer, assign or sell any of the Private Units (except to certain permitted transferees) until 30 days after the completion of an initial business combination.

 

Of the gross proceeds received from the Initial Public Offering and private placement of Private Units, $149,500,000 was placed in a trust account.

 

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Total offering costs amounted to $8,513,427, consisting of $5,622,500 of deferred underwriting discount, $2,600,000 of underwriting fees and $290,927 of other costs. In addition, $61,306 of cash was held outside of the trust account.

 

Following termination of the Merger Agreement, the Company liquidated the funds held in the Trust Account. Pursuant to the Charter, all outstanding shares of the Company’s common stock that were included in the units sold in the Company’s initial public offering (the “Public Shares”) were redeemed at a per share redemption price of approximately $10.30 per Public Share. As of March 31, 2021, we have an aggregate of $61,268 of restricted cash in connection with the unused portion of our dissolution allowance and allowance for taxes. We expect to distribute such amount, pro rata, to our former public stockholder.

 

ITEM 6. EXHIBITS

 

Exhibit No. Description
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 ALLEGRO MERGER CORP.
   
Date: May 24, 2021By:/s/ Eric S. Rosenfeld
 Name:Eric S. Rosenfeld
 Title:Chief Executive Officer
(Principal Executive Officer)
   
 By:/s/ Adam H. Jaffe
 Name:Adam H. Jaffe
 Title:Chief Financial Officer
(Principal Financial and Accounting Officer)

 

 

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