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, 2020

 

☐ 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 No.)

 

777 Third Avenue, 37th Floor

New York, New York 10017

(Address of principal executive offices)

 

(212) 319-7676

(Issuer’s telephone number)

 

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 filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller 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 June 30, 2020, 4,110,000, shares of common stock, par value $0.0001 per share, were issued and outstanding.

 

 

 

EXPLANATORY NOTE

 

As disclosed in the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on May 14, 2020 by Allegro Merger Corp., (the “Company”), on March 4, 2020, the SEC issued an order (Release No. 34-88318) under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), granting exemptions from specified provisions of the Exchange Act and certain rules thereunder, as amended by Release No. 34-88465 issued on March 25, 2020 (as amended, the “Order”). The Company is relying on the Order and was unable to file this Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Quarterly Report”) on a timely basis due to the outbreak of, and local, state and federal governmental responses to, the novel coronavirus pandemic (“COVID-19”). The Company’s operations have experienced disruptions due to the circumstances surrounding COVID-19 including, but not limited to, suggested and mandated social distancing and stay home orders. These mandates and the resulting office closure have severely limited access to the Company’s facilities by the Company’s financial reporting and accounting staff involved in the preparation of the Quarterly Report and impacted the Company’s ability to fulfill required preparation and review processes and procedures with respect to the Quarterly Report. In light of the impact of the factors described above, the Company was unable to compile and review certain information necessary to permit the Company to timely file the Quarterly Report by May 15, 2020, the original filing deadline, without unreasonable effort and expense. This Quarterly Report on Form 10-Q is being filed in reliance on the SEC Order.

 

 

ALLEGRO MERGER CORP.

 

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2020

TABLE OF CONTENTS

 

	Page
Part I. Financial Information
Item 1. Consolidated Financial Statements	1
Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019	1
Statements of Operations for the three months ended March 31, 2020 and 2019 (unaudited)	2
Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2020 and 2019 (unaudited)	3
Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)	4
Notes to Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk	18
Item 4. Controls and Procedures	18
Part II. Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	19
Item 6. Exhibits	20
Signatures	21

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Allegro Merger Corp.

Consolidated Balance Sheets

 

		March 31, 2020				December 31, 2019
		(unaudited)
ASSETS
Current assets:
Cash		$	12,680			$	87,797
Prepaid expenses and other current assets			58,249				83,811
Total current assets			70,929				171,608
Cash and marketable securities held in Trust Account			115,232,882				152,997,948
Total assets		$	115,303,811			$	153,169,556
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	125,891			$	70,448
Franchise tax payable			22,874				77,502
Notes payable – related party			781,700				-
Total current liabilities			930,465				147,950
Deferred underwriting commission			5,622,500				5,622,500
Total liabilities			6,552,965				5,770,450
Commitments and contingencies
Common stock subject to possible redemption, 10,375,084 and 14,239,910 shares at redemption value of approximately $10.00 per share as of March 31, 2020 and December 31, 2019, respectively			103,750,842				142,399,102
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, 4,902,047 and 4,820,090 shares issued and outstanding (excluding 10,375,084 and 14,239,910 shares subject to possible redemption as of March 31, 2020 and December 31, 2019, respectively)			490				482
Additional paid-in capital			2,093,192				2,124,865
Retained earnings			2,906,322				2,874,657
Total stockholders’ equity			5,000,004				5,000,004
Total liabilities and stockholders’ equity		$	115,303,811			$	153,169,556

 

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

 

  

Allegro Merger Corp.

Consolidated Statements of Operations

 

		Three months ended March 31, 2020				Three months ended March 31, 2019
		(unaudited)				(unaudited)
General and administrative costs		$	254,916			$	212,166
Loss from operations			254,916				212,166
Other Income:
Investment income on Trust Account			356,167				877,142
Income before income tax provision			101,251				664,976
Provision for income taxes			69,586				177,312
Net income		$	31,665			$	487,664
Weighted average shares outstanding of common stock, basic and diluted- Public Shares			11,167,131				14,950,000
Basic and diluted net income per share, Public Shares		$	(0.03	)		$	(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		$	(0.08	)		$	(0.09	)

 

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

 

 

Allegro Merger Corp.

Consolidated Statements of Changes in Stockholders’ Equity

 

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

 

		Common Stock								Additional Paid-In				Retained Earnings (Accumulated				Total Stockholders’
		Shares				Amount				Capital				Deficit)				Equity
Balance at December 31, 2019			4,820,090			$	482			$	2,124,865			$	2,874,657			$	5,000,004
Stockholder redemptions			(3,782,869	)			(378	)			(38,679,922	)			-				(38,680,300	)
Common stock subject to possible redemption			3,864,826				386				38,648,249				-				38,648,635
Net income			-				-				-				31,665				31,665
Balance at March 31, 2020			4,902,047			$	490			$	2,093,192			$	2,906,322			$	5,000,004

 

For the three months ended March 31, 2019 (unaudited)

 

		Common Stock								Additional Paid-In				Retained				Stockholders’
		Shares				Amount				Capital				Earnings				Equity
Balance at December 31, 2018			5,012,805			$	501			$	4,051,993			$	947,510			$	5,000,004
Common stock subject to possible redemption			(47,967	)			(5	)			(487,659	)			-				(487,664	)
Net income			-				-				-				487,664				487,664
Balance at March 31, 2019			4,964,838			$	496			$	3,564,334			$	1,435,174			$	5,000,004

 

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

 

  

Allegro Merger Corp.

Consolidated Statements of Cash Flows

 

		(Unaudited) For the three months ended March 31,
		2020				2019
Cash flow from operating activities
Net income		$	31,665			$	487,664
Adjustments to reconcile net income to net cash used in operating activities:
Income earned on investment held in Trust Account			(356,167	)			(877,142	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			2,974				17,215
Accounts payable			55,818				6,411
Franchise tax payable			(54,628	)			(33,026	)
Prepayment of income taxes			22,588				177,312
Net cash used in operating activities			(297,750	)			(221,566	)
Cash flow from investing activities
Cash released from Trust Account			38,902,933				-
Cash deposited into Trust Account			(781,700	)			-
Net cash provided by investing activities			38,121,233				-
Cash flows from financing activities
Proceeds from notes payable			781,700				-
Cash used for common stock redemption			(38,680,300	)			-
Net cash used in financing activities			(37,898,600	)			-
Net decrease in cash			(75,117	)			(221,566	)
Cash at beginning of period			87,797				408,481
Cash at end of period		$	12,680			$	186,915
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		$	38,648,635			$	487,660

  

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

 

  

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, 2020 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.

 

 

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

 

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. 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.

 

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.

 

Going Concern

 

As of March 31, 2020, the Company had a cash balance of $12,680 and a working capital deficit of $859,536 of which $22,873 of franchise tax can be paid by interest income from investments held in the Trust Account, which includes interest income of $356,167. The interest income is available to the Company for tax obligations and withdrawal of up to $125,000 for certain working capital purposes on an annual basis. During the quarter ended March 31, 2020, the Company has withdrawn $223,005 of interest income to pay its franchise and income taxes and various operating expenses as permitted by the trust agreement.

 

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, 2020.

 

 

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

 

Note 2 — 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, 2020 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, 2019 filed with the SEC on February 19, 2020.

 

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 

 

At March 31, 2020 the assets held in the Trust Account were substantially held in cash, and as of December 31, 2019, the assets held in the Trust Account were substantially held in U.S. Treasury Bills.   

 

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. Accordingly, at March 31, 2020 and December 31, 2019, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.

 

 

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

 

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 of $31,665 and $487,664, reduced by the investment income on the trust of $356,167 and $877,142 respectively, by the weighted average number of Public Shares outstanding during the period. The Founder and Private Placement shares of 3,737,500 and 372,500, respectively 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. 

 

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.

 

 

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

 

Note 3 — 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.

 

Note 4 — 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.

  

  

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

 

Note 5 — Related Party Transactions

 

Administrative Service Fee

 

The Company presently occupies office space provided by an entity controlled by the Company’s Chief Executive Officer. Such entity 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 has 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 the affiliate have agreed to suspend payment on this agreement on March 31, 2020. The Company expensed and paid the affiliate $37,500 for such services for the three months ended March 31, 2020, and 2019, respectively.

 

Promissory Notes — Related Parties

 

The Company issued two unsecured promissory notes totaling $30,000 to Eric S. Rosenfeld, the Company’s Chief Executive Officer, in 2017. On February 5, 2018 the Company issued a $35,000 principal amount unsecured promissory note to Eric S. Rosenfeld. The notes were non-interest bearing. The notes were paid off in full on July 13, 2018.

 

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 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.

 

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 unless additional funds become available to the company. 

 

  

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

 

Founder Shares

 

The Initial Stockholders purchased an aggregate of 4,312,500 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.0058 per share.

  

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.

 

Note 6 — 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 to be signed prior to or on the effective date of 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. 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. 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 provides that the Deferred Underwriting Discount will only be payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.

 

 

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

  

Note 7 — 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, 2020 and December 31, 2019, 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, 2020 and December 31, 2019, there were 15,277,131 and 19,060,000 shares of common stock issued and outstanding, respectively including 10,375,084 and 14,239,910 shares issued and possible to redemption, respectively.

 

Rights

 

Each holder of a Right will receive one-tenth (1/10) of one common stock upon consummation of a Business Combination, even if a holder of such right converted all common stock held by it in connection with 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 will be freely tradable (except to the extent held by affiliates of the Company).

 

 

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

 

Warrants

 

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.

 

 

Allegro Merger Corp.

Notes to Consolidated Financial Statements

(unaudited)

Note 8 — Fair Value Measurements

 

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019, indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

Description		Quoted Prices in Active Market (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Other Unobservable Inputs (Level 3)
Cash and Marketable securities held in Trust Account
March 31, 2020		$	115,232,882				-				-
December 31, 2019		$	152,997,948				-				-

 

As of March 31, 2020, and December 31, 2019, there was a balance of $115,232,882 and $152,997,948, respectively, held as cash in Trust Account.

 

There were no transfers between the levels during the reporting period.

 

Note 9 — Subsequent Events

 

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 $10.3047 per Public Share (the “Redemption Amount”).

 

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. The loans made by the Company’s initial stockholders in connection with the previously disclosed extension of time to complete an initial business combination will not be repaid and will be forgiven unless additional funds become available to the Company.

  

It is possible that the Company will make a small additional payment to the holders of Public Shares, pro rata, in connection with the unused portion of the dissolution allowance and any tax refunds which the Company may receive. However, the Company cannot assure you of the timing of such additional payment or that such additional payment will be made.

 

  

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.

 

We consummated our initial public offering (“Initial Public Offering”) on July 6, 2018.

 

Results of Operations

  

For the three months ended March 31, 2020, we had net income of $31,665, which consisted of operating costs of $254,916, and an income tax provision of $101,251, offset by investment income from cash and marketable securities held in the Trust Account of $356,167.

 

For the three months ended March 31, 2019, we had net income of $487,664, which consisted of operating costs of $212,166, and an income tax provision of $177,312 offset by investment income from cash and marketable securities held in the Trust Account of $877,142.

 

  

Liquidity and Capital Resources

 

We presently have no revenue; our net income of $31,665 for the three months ended March 31, 2020 consists primarily of interest income on the trust account. Through March 31, 2020, our liquidity needs were satisfied through receipt of $356,167 in interest income on the trust account.

 

In order to finance transaction costs in connection with an initial business combination and working capital expenses, our initial stockholders, officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lender’s discretion, up to $1,000,000 of the notes may be converted upon consummation of our business combination into additional private placement units at a price of $10.00 per unit.

 

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, 2020, we had a working capital deficit of $859,536. 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 have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2020. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

 

  

Contractual obligations

 

Other than the administrative service fee agreement, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities

 

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. Accordingly, at March 31, 2020 and December 31, 2019, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.

 

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.

 

 

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 February 19, 2020.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2020, and December 31, 2019, we did not have any off-balance sheet arrangements as defined in Regulation S-K and did not have any commitments or contractual obligations other than administrative services agreement.

 

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, 2020, and December 31, 2019, 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, 2020, 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 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, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

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.

 

Total offering costs amounted to $8,725,551, consisting of $5,622,500 of deferred underwriting discount, $2,600,000 of underwriting fees and $503,051 of other costs. In addition, $12,680 of cash was held outside of the trust account and was available for working capital purposes at that time.

 

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 $10.3047 per Public Share.

 

It is possible that the Company will make a small additional payment to the holders of Public Shares, pro rata, in connection with the unused portion of the dissolution allowance and any tax refunds which the Company may receive. However, the Company cannot assure you of the timing of such additional payment or that such additional payment will be made.

 

 

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

 

  

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: June 30, 2020	By:	/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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