References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Legato Merger Corp. References to our "management" or our
"management team" refer to our officers and directors. The following discussion
and analysis of the Company's financial condition and results of operations
should be read in conjunction with the financial statements and the notes
thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Exchange Act that are not historical facts, and involve
risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of
historical fact included in this Form 10-Q including, without limitation,
statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position, business
strategy and the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's final prospectus for its Initial Public Offering filed with the U.S.
Securities and Exchange Commission (the "SEC"). The Company's securities filings
can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
June 26, 2020, for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Units, our capital stock, debt or a combination of cash,
stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to raise capital or to
complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through March 31, 2021 were organizational activities, those
necessary to prepare for the Initial Public Offering and, after our Initial
Public Offering, identifying a target company for a Business Combination. We do
not expect to generate any operating revenues until after the completion of our
Business Combination, at the earliest. We generate non-operating income in the
form of interest income on marketable securities held in the Trust Account. We
incur expenses as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as for due diligence
expenses.
For the three months ended March 31, 2021, we had a net income of $225,523,
which consisted of operating costs of $224,437 and offering costs attributable
to the private placement warrants of $15,748, offset by an unrealized gain on
marketable securities held in the Trust Account of $37,066 and a change in the
value of the warrant liabilities by $428,642.
Liquidity and Capital Resources
On January 22, 2021, the Company consummated the Initial Public Offering of
20,500,000 units at $10.00 per Unit, generating gross proceeds of $205,000,000
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the sale of 542,500 units, at a price of $10.00 per unit in a
private placement to certain holders of the Company's founder shares ("Initial
Stockholders") and EarlybirdCapital, Inc., the representative of the
underwriters in the Initial Public Offering ("EBC"), generating gross proceeds
of $5,425,000 ("Private Units"). On January 25, 2021, the underwriters fully
exercised their over-allotment option, resulting in an additional 3,075,000
Units issued for an aggregate amount of $30,750,000. In connection with the
underwriters' exercise of their over-allotment option, the Company also
consummated the sale of an additional 61,500 private units at $10.00 per unit,
generating total proceeds of $615,000.
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Following the Initial Public Offering and the sale of the Private Units, a total
of $235,750,000 was placed in the Trust Account and we had $861,801 of cash held
outside of the Trust Account, after payment of costs related to the Initial
Public Offering, and available for working capital purposes. We incurred
$5,210,204 in transaction costs, including $4,715,000 of underwriting fees and
$495,204 of other costs.
At March 31, 2021, we had marketable securities held in the Trust Account of
$235,787,065. We intend to use substantially all of the funds held in the Trust
Account (excluding deferred underwriting commissions and interest to pay taxes)
to acquire a target business or businesses and to pay our expenses relating
thereto. To the extent that our common stock is used in whole or in part as
consideration to affect our Business Combination, the remaining proceeds held in
the Trust Account as well as any other net proceeds not expended will be used as
working capital to finance the operations of the target business or businesses.
As of March 31, 2021, the Company had a cash balance of approximately $487,493
and a working capital balance of $630,629 but $37,066 can be paid with interest
income from investments held in the Trust Account, which includes interest
income of 37,066 which is available to the Company for tax obligations (as
allowed by the Underwriting Agreement). During the quarter ended March 31, 2021,
the Company has not withdrawn any interest income to pay its franchise and
income taxes.
Until the consummation of a Business Combination, the Company will be using
funds held outside of the Trust Account for paying existing accounts payable,
identifying and evaluating prospective acquisition candidates, performing
business due diligence on prospective target businesses, traveling to and from
the offices, plants or similar locations of prospective target businesses,
reviewing corporate documents and material agreements of prospective target
businesses, selecting the target business to acquire and structuring,
negotiating and consummating the business combination. If the Company's
estimates of the costs of identifying a target business, undertaking in-depth
due diligence and negotiating a Business Combination are less than the actual
amount necessary to do so, the Company may have insufficient funds available to
operate its business prior to a Business Combination. Moreover, the Company may
need to obtain additional financing either to complete a Business Combination or
because it becomes obligated to redeem a significant number of its public shares
upon completion of a Business Combination, in which case the Company may issue
additional securities or incur debt in connection with such Business
Combination. In order to finance transaction costs in connection with a Business
Combination, our officers, directors and initial stockholders and their
affiliates may, but are not obligated to, loan us funds as may be required. If
the Company completes a Business Combination, the Company would repay such
loaned amounts. In the event that a Business Combination does not close, the
Company may use any funds available to it outside of the Trust Account to repay
any such loaned amounts.
If the Company is unable to raise additional capital, it may be required to take
additional measures to conserve liquidity, which could include, but not
necessarily be limited to, suspending the pursuit of a potential transaction.
The Company cannot provide any assurance that new financing will be available to
it on commercially acceptable terms, if at all.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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