UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-40244

ALDEL FINANCIAL INC.

(Exact name of registrant as specified in its charter)

Delaware

86-1213144

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

105 S. Maple Street, Itasca, Illinois 60143

(Address of Principal Executive Offices, including zip code)

(847) 791-6817

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Units, each consisting of one share of Class A common stock and one-half of one redeemable warrant	ADF.U	The New York Stock Exchange
Class A common stock, par value $0.0001 per share	ADF	The New York Stock Exchange
Warrants, each exercisable for one share of Class A common stock	ADF.WS	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ⌧

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	☐ Large accelerated filer	☐ Accelerated filer
	⌧ Non-accelerated filer	☒ Smaller reporting company
		☒ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☒ No ☐

As of November 12, 2021, there were 12,072,500 shares of Class A common stock, par value $0.0001, and 2,875,000 shares of Class B common stock, $0.0001 par value, issued and outstanding.


PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
SIGNATURES		29


	September 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Current assets
Cash	$	407,664	$	—
Prepaid expenses		812,393		—
Deferred offering costs		—		55,000
Total current assets		1,220,057		55,000

Marketable securities held in trust account		116,163,621		—
TOTAL ASSETS	$	117,383,678	$	55,000

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accrued offering costs	$	—	$	55,000
Accounts payable		86,470		1,470
Total current liabilities		86,470		56,470

Warrant liabilities		15,025,604		—
TOTAL LIABILITIES	$	15,112,074	$	56,470

COMMITMENTS AND CONTINGENCIES
Class A common stock, $0.0001 par value, subject to possible redemption, 11,500,000 and 0 shares at redemption value, respectively	$	116,150,000	$	—

STOCKHOLDERS’ DEFICIT
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding	$	—	$	—
Class A common stock, $0.0001 par value; 380,000,000 shares authorized; 572,500 and 0 shares issued and outstanding, respectively (excluding 11,500,000 and 0 shares subject to possible redemption, respectively)		58		—
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 2,875,000 shares issued and outstanding		287		—
Additional paid-in capital		—		—
Accumulated deficit		(13,878,741)		(1,470)
Total Stockholders’ Deficit	$	(13,878,396)	$	(1,470)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	117,383,678	$	55,000


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2021		2021
Operating expenses:
General and administrative expenses	$	1,191,550	$	1,471,300
Loss from operations	$	(1,191,550)	$	(1,471,300)

Other income (expenses):
Change in fair value of warrant liabilities	$	(7,776,110)	$	(9,107,979)
Investment income on trust account		7,504		13,621
Total other income (expense)	$	(7,768,606)	$	(9,094,358)

Net loss	$	(8,960,156)	$	(10,565,658)

Weighted average common shares outstanding
Basic and diluted (1)		3,447,500		3,899,158

Basic and diluted net loss per share	$	(0.47)	$	(0.41)


	Common	Common		Additional				Total
	Stock	Stock		Paid-in		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity/ (Deficit)
Balance at December 31, 2021	—	$	—	$	—	$	(1,470)	$	(1,470)
Issuance of 5,750,000 common shares to initial stockholders	5,750,000		575		24,425		—		25,000
Forfeiture of 2,875,000 common shares by initial stockholders	(2,875,000)		(288)		288		—		—
Net loss			—		—		(1,140)		(1,140)
Balance at March 31, 2021	2,875,000		287		24,713		(2,610)		22,390
Sale of 11,500,000 units at $10 per unit in IPO,including over-allotment, net of underwriters' discount and offering expenses	11,500,000		1,150		113,450,107		—		113,451,257
Sale of 515,000 units at $10 per unit in private placement, including over-allotment	515,000		52		5,149,948		—		5,150,000
Sale of 1,300,000 $15 strike warrants $0.10 in private placement	—		—		130,000		—		130,000
Issuance of 57,500 underwriter units, including over-allotment	57,500		6		94		—		100
Classification of warrants as liabilities at issuance	—		—		(5,917,625)		—		(5,917,625)
Net Loss	—		—		—		(1,604,362)		(1,604,362)
Adjustment to increase Class A common shares subject to possible redemption to maximum redemption value - revised	(11,500,000)		(1,150)		(112,837,237)		(3,311,613)		(116,150,000)
Balance at June 30, 2021 - revised	3,447,500		345		—		(4,918,585)		(4,918,240)
Net loss	—		—		—		(8,960,156)		(8,960,156)
Balance at September 30, 2021	3,447,500		345		—		(13,878,741)		(13,878,396)


Cash flows from operating activities
Net loss	$	(10,565,658)
Adjustments to reconcile net loss to net cash used in operating activities:
Chane in fair value of warrant liabilities		9,107,979
Changes in operating assets and liabilities:
Offering cost payable		(55,000)
Accounts payable		85,000
Deferred offering cost		55,000
Prepaid expense		(812,393)
Net cash used in operating activities	$	(2,185,072)

Cash flows from investing activities
Investment in marketable securities		(116,163,621)
Net cash used in investing activities	$	(116,163,621)

Cash flows from financing activities
Proceeds from promissory notes		250,000
Repayment of promissory note		(250,000)
Proceeds from sale of shares of common stock to initial stockholders		25,000
Proceeds from sale of units in IPO, including over-allotment, net of offering costs		113,451,257
Proceeds from sale of private units in private placement		5,150,000
Proceeds from sale of $15 exercise warrants in private placements		130,000
Proceeds from sale of underwritter units in private placement		100
Net cash provided by financing activities	$	118,756,357

Net increase in cash	$	407,664
Cash at beginning of period		—
Cash at end of period	$	407,664


	As previously
	reported		Adjustment		As Revised
Balance sheet as of June 30, 2021
Class A common stock subject to possible redemption	$	106,231,750	$	9,918,249	$	116,150,000
Class A common stock		156		(98)		58
Class B common stock		287		—		287
Additional paid-in capital		6,606,539		(6,606,539)		—
Accumulated deficit		(1,606,972)		(3,311,613)		(4,918,585)
Total Stockholders' Equity (Deficit)	$	5,000,010	$	(9,918,250)	$	(4,918,240)


Description	Level	Fair Value
Liabilities:
Public Warrants	1	$	11,615,000
Private Unit Warrants	3	$	460,221
OTM Warrants	3	$	2,898,999
Underwriter Warrants	3	$	51,384
Total warrant liabilities		$	15,025,604


	Private Unit				Underwriter
Inputs	Warrant		OTM Warrant		Warrant
Exercise price	$	11.50	$	15.00	$	11.50
Common stock price	$	10.09	$	10.09	$	10.09
Volatility		5% pre-merger / 30% post-merger		5% pre-merger / 30% post-merger		5% pre-merger / 30% post-merger
Probability of completing a Business Combination		90%		90%		90%
Expected term of the warrants		5.53		10.54		5.53
Risk-free rate		0.05% pre-merger / 0.98% post-merger		0.05% pre-merger / 1.52% post-merger		0.05% pre-merger / 0.98% post-merger
Dividend yield		0		0		0
Discount for lack of marketability		15%		15%		15%


Warrant liabilities as of December 31, 2020	$	—
Warrant liability recorded at fair value at issuance of warrants at close of IPO, private placement, and Underwriters’ over-allotment option as of April 12, 2021		5,917,625
Change in fair value of warrant liabilities		9,107,979
Total warrant liabilities as of September 30,2021(1)	$	15,025,604


No.		Description of Exhibit
2.1		Business Combination Agreement, dated as of August 17, 2021, by and among Aldel Financial Inc. Aldel Merger Sub LLC and The Hagerty Group, LLC (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.1		Form of Subscription Agreement, dated as of August 17, 2021, by and among Aldel Financial Inc. and certain institutional and accredited investors (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.2		Form of Sponsor Letter Agreement by and among Aldel Financial Inc., certain stockholders of Aldel Financial Inc., and The Hagerty Group, LLC (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.3		Form of Amended and Restated Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.4		Form of Tax Receivable Agreement (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.5		Form of Lock-up Agreement (incorporated by reference to Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.6		Form of Fourth Amended and Restated Limited Liability Company Agreement of The Hagerty Group, LLC (incorporated by reference to Exhibit 10.6 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.7		Form of Sponsor Warrant Lock-up Agreement (incorporated by reference to Exhibit 10.7 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.8		Investor Rights Agreement (incorporated by reference to Exhibit 10.8 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
10.9		Form of Exchange Agreement (incorporated by reference to Exhibit 10.9 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021).
31.1		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


Date: November 12, 2021	ALDEL FINANCIAL INC.


	By:	/s/ Hassan R. Baqar
		Name: Hassan R. Baqar
		Title: Chief Financial Officer (Principal Financial Officer and Accounting Officer)

SEC Form 10-Q filed by Aldel Financial Inc.