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ITEM 1. BUSINESS
In this Annual Report on Form 10-K (the “Form 10-K”), references to the “Company” and to “we,” “us,” and “our” refer to Legato Merger Corp. II.
We are a blank check company formed under the laws of the State of Delaware on July 14, 2021. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” Our efforts to identify a prospective target business are not be limited to a particular industry or geographic location.
In July 2021, we issued an aggregate of 5,750,000 shares of our common stock (“founders’ shares”) for an aggregate purchase price of $25,000, or approximately $0.005 per share, to our initial stockholders. In November 2021, we effectuated a stock dividend of 0.2 shares of common stock for each outstanding share of common stock, resulting in our initial stockholders holding an aggregate of 6,900,000 founders’ shares.
In August 2021, we also issued to designees of EarlyBirdCapital, Inc., the representative of the underwriters in our initial public offering (“IPO”), an aggregate of 240,000 shares of common stock (after giving effect to the stock dividend referred to above) (“representative shares”) at a price of $0.0001 per share.
On November 24, 2021, we consummated the IPO of 24,000,000 units. Each unit (“Unit”) consists of one share of common stock and one-half of one redeemable warrant (“Warrant”), with each whole Warrant entitling the holder to purchase one share of common stock at a price of $11.50 per share. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $240,000,000.
Simultaneously with the consummation of the IPO, we consummated the private placement (“Private Placement”) of 1,045,000 units (“Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $10,450,000. The Private Units were sold to our initial stockholders and EarlyBirdCapital and its designees. The Private Units are identical to the Units included in the Units sold in the IPO.
On December 1, 2021, as a result of the underwriters’ election to fully exercise their over-allotment option, we consummated the sale of an additional 3,600,000 Units at $10.00 per Unit, generating gross proceeds of $36,000,000. Simultaneously with the closing of the sale of additional Units, we consummated the sale of an additional 126,000 Private Units at $10.00 per Private Unit, generating total proceeds of $1,260,000. Following the closing of the over-allotment option and sale of additional Private Units, an aggregate amount of $280,140,000 has been placed in the trust account established in connection with the IPO. As a result of the underwriters’ election to fully exercise their over-allotment option, a total of 900,000 founder shares’ are no longer subject to forfeiture.
Transaction costs amounted to $15,660,526, consisting of $5,520,000 of underwriting fees, $9,660,000 of deferred underwriting fees and $480,526 of other offering costs. As of December 31, 2021, $1,100,031 of cash was held outside of the trust account established in connection with the IPO and is available for working capital purposes.
On December 22, 2021, the shares of Common Stock and Warrants included in the Units began separate trading.
For further details regarding our business, see the section titled “Proposed Business” contained in our prospectus dated November 22, 2021, incorporated by reference herein.
ITEM 1A. RISK FACTORS
For the risks relating to our operations, see the section titled “Risk Factors” contained in our prospectus dated November 22, 2021, incorporated by reference herein. Since such date, there have been no material changes to the risks relating to our operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTY
We currently maintain our principal executive offices at 777 Third Avenue, 37th Floor, New York, NY 10017. The cost for this space is included in the $15,000 per-month fee Crescendo Advisors II, LLC, an entity controlled by Eric Rosenfeld, our Chief SPAC Officer, charges us for general and administrative services. We consider our current office space, combined with the other office space otherwise available to our executive officers, adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our units, common stock and warrants are listed on the Nasdaq Global Market (“Nasdaq”) under the symbols LGTOU, LGTO and LGTOW, respectively.
Holders
As of February 22, 2022, there were 27 holders of record of our units, 31 holders of record of our common stock and 1 holder of record of our warrants. We believe we have in excess of 300 beneficial holders of our securities.
Dividends
We have not paid any cash dividends on our shares of common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition subsequent to completion of a business combination. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On November 24, 2021, we consummated our IPO of 24,000,000 units. Each unit consisted of one share of common stock and one-half of one redeemable warrant, with each whole warrant entitling the holder to purchase one share of common stock at a price of $11.50 per share. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $240,000,000. EarlyBirdCapital, Inc. acted as sole book-running manager of the offering. The securities sold in the IPO were registered under the Securities Act on a registration statement on Form S-1 (No. 333-260816) which was declared effective by the Securities and Exchange Commission on November 22, 2021, and a registration statement on Form S-1MEF (No. 333-261260) which became effective automatically upon filing on November 22, 2021.
Simultaneously with the consummation of the IPO, we consummated the Private Placement of 1,045,000 Private Units at a price of $10.00 per Private Unit, generating total proceeds of $10,450,000. The Private Units were sold to our initial stockholders, and EarlyBirdCapital and its designees. The Private Units are identical to the warrants included in the units sold in the IPO.
Following the closing of the IPO on November 24, 2021, an amount of $240,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Units was placed in a trust account (the “Trust Account”)
On December 1, 2021, as a result of the underwriters’ election to exercise their over-allotment option in full, we consummated the sale of an additional 3,600,000 Units, at $10.00 per Unit, and the sale of an additional 126,000 Private Units, at a price of $10.00 per Private Unit, generating total gross proceeds of $1,260,000. A total of $36,540,000 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $280,140,000.
On or about December 22, 2021, the shares of Common Stock and Warrants included in the Units began separate trading.
Transaction costs amounted to $15,660,526, consisting of $5,520,000 in underwriting fees, $9,660,000 of deferred underwriting fees and $480,526 of other offering costs. In addition, as of December 31, 2021, cash of $1,100,031 was held outside of the Trust Account (as defined below) and is available for the payment of offering costs and for working capital purposes.
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under “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. When used in this Form 10-K, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the 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.
Overview
We are a blank check company formed under the laws of the State of Delaware on July 14, 2021, 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.
We have neither engaged in any operations nor generated any revenues to date. Our only activities through December 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).
For the period from July 14, 2021 (inception) to December 31, 2021, we had a net loss of ($138,439), which consisted of operating costs of $162,602, offset by Investment income on Trust Account of $24,163.
Liquidity and Capital Resources
As of December 31, 2021, the Company had $1,100,031 in cash, and a working capital balance of $1,432,742.
The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from our initial stockholder exchange for issuance of Founder Shares (as defined in Note 5), and loan proceeds from Eric Rosenfeld, the Company’s Chief SPAC Officer, of $65,000 under the Note (as defined in Note 5). The Note balance was settled on November 26, 2021, shortly after the consummation of the Initial Public Offering. The facility is no longer available. Subsequent to the consummation of the Public Offering, the Company’s liquidity has been satisfied through the net proceeds held outside of the Trust Account.