Summary
Duddell Street Acquisition Corp closed the September 30, 2021 quarter as a blank check company with no operating business, yet its reported figures show revenue of $21.77 million for the quarter and $58.45 million for the nine months ended September 30, 2021. The company posted an operating loss of $1.07 million in the quarter and $3.36 million for the nine months. Operating margin was -4.9% for the quarter and -5.7% for the nine months. Net income reached $2.49 million for the quarter and $7.96 million year to date. The gap between an operating loss and positive net income comes from a non-cash gain on the change in fair value of derivative warrant liabilities and interest income on the trust account, not from operations. Diluted loss per share was $6.34 for the quarter and $20.91 for the nine months.
Cash generation stayed thin. Operating cash flow was -$0.17 million for the quarter and -$0.05 million for the nine months. Capital expenditures were $3.93 million year to date, presented as a cash outflow. Deferred revenue stood at $28.45 million at September 30, 2021. Activity since inception has centered on formation, the initial public offering, and the search for a target, and management expects public company costs for legal, financial reporting, accounting and auditing compliance to rise.
Management flagged a working capital deficit of approximately $2.5 million and said that condition raises substantial doubt about the company's ability to continue as a going concern until it either completes a business combination or is required to liquidate. The funding base rests on the trust account, which holds $175.0 million, or $10.00 per unit, from the initial public offering of 17,500,000 units that closed on November 2, 2020. A private placement of 5,500,000 warrants at $1.00 raised $5.5 million. Deferred underwriting commissions of approximately $6.1 million, or $0.35 per unit, are payable only if a business combination closes. The sponsor loaned $176,000 under a promissory note and paid $25,000 of expenses in exchange for founder shares, and those amounts were repaid after the company opened its bank account on March 18, 2021. Sponsor working capital loans remain a possibility, and none were outstanding at September 30, 2021. On October 18, 2021 the company signed a warrant purchase agreement with the sponsor covering 1,500,000 warrants for aggregate proceeds of $1.5 million, each exercisable for one Class A ordinary share at $11.50.
The bigger catalyst arrived after the quarter closed. On November 7, 2021 the company agreed to combine with FiscalNote Holdings, Inc. The deal calls for the company to domesticate as a Delaware corporation and for a merger subsidiary to merge into FiscalNote, which would survive as a wholly owned subsidiary. Newco would carry a dual class structure in which Class B common stock holds 25 votes per share and converts into Class A common stock on transfer, subject to permitted transfers. The transaction is expected to close in the first quarter of 2022, subject to shareholder approvals, the expiration or termination of the Hart-Scott-Rodino waiting period, and other customary conditions. Closing also requires at least $190,000,000 of cash after redemptions, PIPE proceeds and any backstop funding, net of transaction expenses capped at $5,000,000 for FiscalNote and $30,000,000 for the company.
The financing package includes a PIPE of 10,000,000 Newco Class A shares at $10.00 per share for $100,000,000, plus a backstop agreement under which sponsor affiliates agreed to subscribe for up to $175,000,000 of Newco Class A stock to fund redemptions. The sponsor agreed not to redeem its shares, to vote for the deal, to accept a 180-day lockup, and to keep 50% of each type of its restricted securities locked until the first anniversary of the effective time. FiscalNote voting stockholders hold enough shares to approve the merger on their side and accepted 180-day lockups, with 12 months for the company's co-founders. Risks concentrate around redemption levels, the $190,000,000 minimum cash condition, dilution from issuing shares or debt in a combination, and the 24-month clock that runs out on November 2, 2022. Class A ordinary shares subject to possible redemption, 17,500,000 at September 30, 2021, sit in temporary equity rather than shareholders' equity, and the company operates as an emerging growth company with the related reporting relief.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| General & administrative | $1.1M | $2.0M | -47.3% | — | — |
| Operating income (loss) | -$1.1M | -$2.0M | +47.3% | — | — |
| Net income (loss) | $2.5M | $2.0M | +27.1% | — | — |
Risks
The audit committee identified a material weakness in internal control over financial reporting relating to accounting for complex financial instruments, which resulted in restatements of previously issued financial statements for the balance sheet as of November 2, 2020, the year ended December 31, 2020, the quarter ended March 31, 2021, and the quarter ended June 30, 2021. Remediation may be time consuming and costly, and failure to remediate could impair timely reporting, compliance, capital access, and investor confidence.
The material weakness and related restatements create potential for adverse regulatory consequences, including SEC or Nasdaq investigations, penalties, or suspensions, as well as litigation or other disputes under federal and state securities laws. As of the report date the company had no knowledge of such consequences, but any could increase costs, divert management attention, or harm reputation.
As of September 30, 2021, the company had cash of approximately $99,000 and a working capital deficit of approximately $2.5 million, which raises substantial doubt about its ability to continue as a going concern until the earlier of the business combination consummation or required liquidation. The unaudited condensed financial statements do not include any adjustment that might be necessary if the company is unable to continue as a going concern.
The proposed merger with FiscalNote is expected to close in the first quarter of 2022 and is subject to closing conditions, including minimum aggregate cash proceeds of $190,000,000 after redemptions, PIPE Financing proceeds, and any Backstop Agreement proceeds. Failure to satisfy these conditions or high shareholder redemptions could prevent completion and require liquidation.
Summary, forecast, risks and KPIs are extracted from FiscalNote Holdings, Inc.'s SEC filings for Q3 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.