Summary
Duddell Street Acquisition Corp., a blank check company, reported net income of $3.5 million for the first quarter of fiscal 2021, which ended March 31, 2021. The quarter also produced an operating loss of $0.25 million. Diluted earnings per share came to $0.46. Operating cash flow was negative $0.09 million. The company will not generate operating revenue until it completes an initial business combination. Its results therefore reflect SPAC formation and public company costs rather than an operating business.
The company completed its initial public offering on November 2, 2020. It sold 17,500,000 units at $10.00 per unit, generating gross proceeds of $175.0 million. Offering costs were approximately $10.1 million, including approximately $6.1 million in deferred underwriting commissions. Simultaneously, the company closed a private placement of 5,500,000 warrants at $1.00 per warrant with its sponsor, generating gross proceeds of $5.5 million. Net proceeds of $175.0 million were placed in a trust account. Those funds are invested in U.S. government securities or qualifying money market funds and are intended for a business combination, not for general operations.
Liquidity remains the central issue. Management stated that the working capital deficit raises substantial doubt about the company's ability to continue as a going concern until the earlier of a business combination or required liquidation. The company has 24 months from the IPO closing, or until November 2, 2022, to complete a business combination. If it fails, it will cease operations, redeem public shares at a per-share price equal to the aggregate amount in the trust account, and liquidate. The company has no long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations, or long-term liabilities. Deferred underwriting commissions of approximately $6.1 million become payable only if it completes a business combination.
Related party arrangements add context. The sponsor agreed to loan up to $250,000 for IPO costs. The company borrowed approximately $176,000 under the note and repaid it after opening its bank account on March 18, 2021. As of March 31, 2021, no amounts were outstanding under working capital loans. On August 31, 2020, the company issued 5,031,250 founder shares. After the over-allotment option expired on November 27, 2020, 656,250 founder shares were surrendered. The sponsor transferred founder shares to independent directors. These arrangements align sponsor incentives with a completed deal but also create potential dilution for public shareholders.
The quarter's net income was driven by non-operating items, including changes in the fair value of derivative warrant liabilities and interest income on the trust account, offset by general and administrative expenses. The company recognized 8,750,000 public warrants and 5,500,000 private placement warrants as derivative liabilities. Fair value changes on those instruments can swing reported earnings from period to period without affecting cash. Operating cash flow of negative $0.09 million shows that the SPAC's ongoing expenses continue to consume cash outside the trust account. The going concern language is a direct warning about the company's dependence on completing a deal within the combination period.
Risks to public shareholders are substantial. A business combination could require issuing additional Class A ordinary shares, which would dilute existing holders. The anti-dilution provisions in the Class B ordinary shares could increase that dilution. Preferred shares with senior rights could subordinate Class A holders. A large share issuance could cause a change of control and limit the company's ability to use net operating loss carryforwards. Debt financing could lead to default, foreclosure, accelerated repayment, covenants that restrict financing, and limits on dividends. The company also qualifies as an emerging growth company and may delay adoption of new accounting standards. Management adopted ASU 2020-06 on January 1, 2021, and reported no impact on financial position, results of operations, or cash flows. The company had no off-balance sheet arrangements as of March 31, 2021.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| General & administrative | $250.4K | — | — | — | — |
| Operating income (loss) | -$250.4K | — | — | — | — |
| Net income (loss) | $3.5M | — | — | — | — |
Risks
MD&A states that the working capital deficit as of March 31, 2021 raises substantial doubt about the Company's ability to continue as a going concern until the earlier of the consummation of a Business Combination or the date it is required to liquidate. Cash was approximately $148,000 and working capital approximately $591,000 at March 31, 2021, and the Company has generated no operating revenues since inception.
The Company has only 24 months from the November 2, 2020 closing of its Initial Public Offering, or November 2, 2022, to complete an Initial Business Combination. If it fails, it must cease operations except for winding up, redeem the public shares from the Trust Account and liquidate and dissolve.
Quarterly results depend on non-cash items rather than operations. For the three months ended March 31, 2021, net income of approximately $3.5 million consisted of a roughly $3.7 million change in fair value of derivative warrant liabilities and $46,000 of interest income, offset by approximately $250,000 of general and administrative expenses. The 8,750,000 Public Warrants and 5,500,000 Private Placement Warrants are re-measured to fair value each reporting period.
The Company states that issuance of additional ordinary shares in a Business Combination may significantly dilute investors, with dilution increasing if the anti-dilution provisions in the Class B ordinary shares result in Class A shares issued on a greater than one-to-one basis. Such issuance could also cause a change in control and affect the ability to use net operating loss carryforwards.
If the Company issues debt securities or incurs significant debt to finance a Business Combination, it could face default and foreclosure on its assets, acceleration of obligations upon covenant breach, limits on obtaining additional financing, and reduced funds available for dividends and general corporate purposes.
Liquidity needs to date were met through the Sponsor, including a $25,000 payment for expenses, a roughly $176,000 promissory note, approximately $2.0 million of net offering proceeds held in an affiliate's bank account, and roughly $1.6 million of expenses paid on the Company's behalf by an affiliate. Working Capital Loans from the Sponsor or founding team are optional, not committed, and there were no amounts outstanding under them as of March 31, 2021.
The Company qualifies as an emerging growth company and is electing to delay adoption of new or revised accounting standards using private company effective dates, so its financial statements may not be comparable to companies complying with public company effective dates, and it may rely on reduced disclosure exemptions for up to five years after the Initial Public Offering.
Summary, forecast, risks and KPIs are extracted from FiscalNote Holdings, Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.