Business context and reporting period
This June 26, 2020 Form 10-Q is for the three months ended March 31, 2020 and was filed by B. Riley Principal Merger Corp. II, a blank-check company—not by Eos Energy Enterprises. The company had not begun operations and reported no revenue. Its activity was formation and preparation for an IPO.
After the reporting period, the SPAC completed its IPO and private placement on May 22, 2020. On June 24, it signed a letter of intent to combine with privately held Eos Energy Storage LLC (EOS), a long-duration energy-storage provider. The proposed transaction contemplated an approximately $290 million valuation and approximately $225 million of additional equity financing, including a fully backstopped $50 million private placement, assuming no public-share redemptions. These are proposed transaction terms, not completed financing or EOS operating results.
Financial results and liquidity
- Revenue and profit: No operating revenue. Net loss was $454, consisting of formation, general and administrative expenses; basic and diluted loss per share were each reported as $0.00.
- Cash flow: Operating cash outflow was $35,106; related-party financing provided $50,000; cash increased by $14,894 to $14,894 at quarter-end.
- Balance sheet: Cash was $14,894 and current liabilities were $85,626. The company reported a $70,731 working-capital deficit in MD&A and total stockholders’ deficit of $731.
- Debt: A $50,000 non-interest-bearing note payable to the sponsor was outstanding at March 31. It was later increased to $100,000 and repaid after the IPO. No long-term debt or lease obligations were reported at quarter-end.
- Offering and liquidity after quarter-end: The IPO raised $175 million gross and the private placement raised $6.5 million gross. The company reported $176.75 million placed in the trust account. The underwriters’ over-allotment option was not exercised.
There are no meaningful operating margins or comparable year-over-year operating results to assess: the company was formed in June 2019 and had no operations in the first quarter of 2019.
Material changes, outlook and risks
- The key post-quarter development was the proposed EOS business combination. Management expected completion in the fourth quarter of 2020, subject to definitive agreements, shareholder approval and other conditions; the filing cautioned that completion was not assured.
- The SPAC was required to complete a business combination within 18 months after the May 22, 2020 IPO closing, or redeem public shares and liquidate, subject to the filing’s terms. Public-share redemptions could affect funds available for a transaction.
- A forward purchase agreement provided for an affiliate to purchase $25 million of units at a business-combination closing, regardless of public-share redemptions. This is separate from the proposed $50 million backstopped private placement described in the EOS letter of intent.
- Management said it expected IPO proceeds to cover operating expenditures, but warned that higher-than-expected target-search and transaction costs could leave insufficient funds and that additional financing might be needed.
- The filing discussed COVID-19 uncertainty, including potential effects on markets, financing, negotiations and the timing or ability to complete a business combination. It reported no material change to previously disclosed risk factors.
- Disclosure controls were assessed as effective, with no material change in internal control over financial reporting during the quarter. No legal proceedings were reported.
Important facts to verify
- Confirm the definitive terms, financing sources, redemption levels and closing status of the proposed EOS transaction; the 10-Q reports only a letter of intent.
- Clarify the filing’s deferred-offering-cost figures: the balance sheet and MD&A report $70,000 at March 31, while a note describes $35,000.
- Verify available operating cash outside the trust account and expected transaction and administrative costs, particularly if redemptions or delays occur.
- Do not treat this SPAC’s reported results as EOS’s financial performance; this filing provides no EOS revenue, profitability, cash-flow or debt metrics.