Filing summary
Important entity clarification: Despite the request metadata naming Southland Holdings, Inc., this filing is Legato Merger Corp. II’s Form 10-K. Legato was a blank-check company, not an operating construction business. The filing reports results from inception on July 14, 2021, through December 31, 2021; it does not provide Southland Holdings’ financial results.
Business context and reporting period
Legato was formed to pursue a business combination, initially focusing on infrastructure, engineering and construction, industrial, and renewables targets, but was not restricted to those sectors. It completed its IPO in November 2021 and the underwriters’ full over-allotment in December. No business combination had been completed by year-end.
Financial position and results
- Revenue and profit: No operating revenue. Net loss was $138,439 for the inception-to-year-end period, comprising $162,602 in general and administrative costs, partly offset by $24,163 of trust-account investment income. Basic and diluted loss per share was $0.01.
- Cash and liquidity: Year-end cash outside the trust was $1,100,031; working capital was $1,432,742. The trust held $280,164,163, including investment income, and $280,140,000 of public shares was classified as redeemable temporary equity.
- Cash flow: Operating activities used $495,313; investing activities used $280,140,000, principally the trust deposit; financing activities provided $281,735,344. Ending cash was $1,100,031.
- Debt and obligations: No long-term debt or working-capital loans were outstanding. Total liabilities were $9,743,301, including $9,660,000 of deferred underwriting commissions.
- Margins: Not meaningful because the company had no operating revenue.
Material changes and unusual items
- The IPO raised $276 million from 27.6 million public units, and private placements raised a further $11.71 million. Total reported transaction costs were $15,660,526.
- The company recorded an $8,203,095 stockholders’ deficit, largely reflecting the accounting accretion of redeemable shares to redemption value; this should not be read as ordinary operating debt.
- There is no prior-year comparable operating period: the company was formed in July 2021 and had no operations or revenue before the IPO.
Outlook, risks, and contingencies
- Management expected to incur costs while searching for a target and cautioned that available cash outside the trust might be insufficient; additional financing might be needed, but was not assured.
- The company had 15 months from the IPO to complete a business combination, with a possible extension to 18 months if it had signed a definitive agreement within the initial period. Failure to complete a transaction could result in liquidation and redemption of public shares; warrants would expire worthless.
- Public shareholders could redeem shares in connection with a business combination. A high level of redemptions could increase financing needs or affect transaction completion.
- The trust indemnity from an affiliate was subject to a notable limitation: the company said it had not verified the affiliate’s ability to pay and did not believe it had significant liquid assets.
- Management noted possible effects from COVID-19 and the Russia-Belarus military action and related sanctions, but said the specific impacts could not be determined.
- Disclosure controls were assessed as effective at December 31, 2021. The filing did not include management’s internal-control-over-financial-reporting assessment or an auditor attestation, citing the transition period for newly public companies.
Key facts for investors to verify
- Confirm that this is Legato Merger Corp. II’s filing, not Southland Holdings, Inc.’s operating-company 10-K.
- Check the subsequent status and terms of any business combination, including redemptions, financing, and dilution.
- Review how much trust cash remains available after redemptions, deferred underwriting commissions, and transaction expenses.
- Assess the ability of the company and any proposed transaction to fund operations and meet the applicable business-combination deadline.
- Review the trust indemnity’s scope and the affiliate indemnitor’s financial capacity.