Filing summary
Entity and period: The supplied filing is Adara Acquisition Corp.’s unaudited Form 10-Q for the quarter ended September 30, 2021, not a filing identified as Alliance Entertainment Holding Corp. The filing describes Adara as a blank-check company seeking a business combination, with a stated search focus on consumer products and related sectors. It had not commenced operating activities or generated operating revenue by quarter-end.
Financial position and results
| Metric | September 30, 2021 / period |
|---|---|
| Revenue | None; the company had no operating revenue. |
| Net result | Three months: net income of $1,041,503 in the financial statements. Nine months: net income of $3,089,413. |
| Operating costs | $217,525 for the quarter and $632,695 for the nine months. |
| Other income items | Quarterly warrant fair-value gain of $1,256,100 and trust interest income of $2,928. Nine-month warrant fair-value gain of $3,801,300 and trust interest income of $7,352; IPO-related warrant transaction costs were $86,544. |
| Cash and liquidity | $844,946 cash outside the trust; $116,157,352 in trust investments, principally U.S. Treasury money-market securities. Management said it did not expect to need additional funds for operations, but warned that actual search and transaction costs or substantial redemptions could require financing. |
| Debt and obligations | No long-term debt reported. The $600,000 related-party promissory note outstanding at December 31, 2020 had been repaid. The company accrued $80,000 under its $10,000-per-month sponsor administrative-services agreement. |
| Equity and warrants | All 11.5 million public Class A shares, with a $116.15 million redemption value, were classified as temporary equity. Warrant liabilities totaled $5,356,800; changes in fair value materially affected reported earnings. |
Margins are not meaningful because the company had no revenue. Operating cash used was $220,098 for the nine months; financing activities provided $117,112,748, and investing activities used $116,150,000, principally for the trust account.
Changes, outlook, and risks
- Prior-period comparison: The filing provides no comparable 2020 third-quarter results; the 2020 statement covers only the period from inception on August 5 through September 30 and reports an $835 loss. The 2021 nine-month result is not directly comparable to that short inception period.
- Accounting revision: The company revised presentation of redeemable Class A shares, classifying all public shares as temporary equity and recording accretion to redemption value. It said the revision did not change total assets, liabilities, or operating results; prior filings were not to be amended, with historical amounts recast in later filings.
- Outlook: No financial guidance was provided. The company planned to use trust proceeds primarily for a business combination and had until February 11, 2023 to complete one. No assurance of completion was given.
- Risks and contingencies: If no business combination is completed by the deadline, public shares are to be redeemed from the trust, while warrants may expire worthless. Additional financing may be needed for transaction costs or redemptions. Management said COVID-19 could adversely affect the company or its target search, but the impact was not determinable. The filing reported no legal proceedings and no subsequent events requiring adjustment or disclosure.
- Controls: Management concluded disclosure controls were effective at September 30, 2021. It stated remediation of a previously identified material weakness related to warrant accounting was completed by June 30, 2021.
Key facts for investors to verify
- Confirm the issuer identity: the filing is for Adara Acquisition Corp., despite the request metadata naming Alliance Entertainment Holding Corp.
- Reconcile a material inconsistency: the statements report quarterly net income of $1,041,503, while MD&A calls the quarter a net loss of $1,041,503. The stated quarterly income and expense components support positive net income.
- Assess how much reported income depends on noncash warrant remeasurement rather than operating activity.
- Review the temporary-equity revision and the related warrant-liability accounting and valuation disclosures.
- Track business-combination progress, cash available outside the trust, possible financing needs, and the February 11, 2023 deadline.