Business context and reporting period
This is EG Acquisition Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2023, filed August 21, 2023. Despite the request metadata, the filing is by EG Acquisition Corp., a blank-check company—not by flyExclusive, Inc. EG had no operating business or revenue and was seeking to complete its proposed business combination with LGM, the business associated with flyExclusive. The proposed transaction had not closed as of the filing.
Financial performance and position
| Metric | Q2 2023 / June 30, 2023 | Comparable period / year-end |
|---|---|---|
| Operating revenue | None | None |
| Formation and operating costs | $1.01 million for Q2; $1.65 million for six months | $0.68 million for Q2 2022; $1.05 million for six months 2022 |
| Net income (loss) | $(0.98) million for Q2; $0.52 million for six months | $0.64 million for Q2 2022; $4.93 million for six months 2022 |
| Trust interest income | $1.96 million for Q2; $4.38 million for six months | $0.30 million for Q2 2022; $0.33 million for six months 2022 |
| Operating cash flow | $(1.85) million for six months | $(0.63) million for six months 2022 |
| Cash outside trust | $0.64 million | $0.09 million at December 31, 2022 |
| Trust investments | $44.10 million | $228.25 million at December 31, 2022 |
| Working capital | Deficit of $6.55 million | Not stated here for the comparable date |
| Promissory notes payable to sponsor | $2.05 million | $1.15 million at December 31, 2022 |
| Total liabilities | $19.23 million | $14.51 million at December 31, 2022 |
Margins are not meaningful because the SPAC had no operating revenue. Six-month net income was driven by trust interest and was partly offset by operating costs, warrant remeasurement expense and income taxes. Q2’s loss also included a $1.53 million warrant fair-value expense. The filing reports no conventional operating debt; the sponsor notes are unsecured, non-interest-bearing related-party obligations. A separate $85 million bridge-note financing belongs to LGM and is intended to convert into shares at the proposed transaction closing, rather than being presented as EG’s own balance-sheet debt.
Material changes versus prior periods
- At the May 2023 extension vote, holders redeemed 18,268,171 public shares for $187.03 million. The trust balance fell from $228.25 million at year-end 2022 to $44.10 million at June 30, 2023.
- The sponsor converted 5,624,000 founder shares from Class B to Class A. The filing reports 9,855,829 total Class A shares outstanding as of August 21, 2023.
- Interest income rose substantially year over year, while warrant remeasurement moved from income in the 2022 periods to expense in 2023. Six-month net income consequently fell to $0.52 million from $4.93 million.
- The company recorded a $1.87 million excise-tax liability related to the redemptions. The filing says it may be offset by qualifying share issuances in the same tax year and would not be due if the company liquidates before December 31, 2023.
Outlook, risks and unusual items
- The company had approval to extend its business-combination deadline in monthly increments, potentially through December 28, 2023, subject to sponsor deposits. It deposited $160,000 for an extension through June 28, 2023. The filing does not establish in the supplied text whether later extensions were funded.
- Management reported substantial doubt about the company’s ability to continue as a going concern, citing limited operating cash, a working-capital deficit, expected costs and dependence on additional financing. Sponsor and insider financing is discretionary, not committed. Failure to complete a business combination by the applicable deadline could require liquidation.
- The proposed LGM transaction remained conditional. Its terms contemplate using trust cash after redemptions, potential PIPE proceeds and LGM bridge financing; final cash available depends on redemptions, financing and transaction conditions. No transaction-completion guidance or operating forecast is provided.
- Disclosure controls and procedures were deemed ineffective because of material weaknesses associated with prior financial-statement restatements, including accounting for redeemable shares, stock-based compensation and agreement-related fees. Management described remediation efforts but gave no assurance they would be effective.
- The filing contains inconsistent references to the deadline and going-concern horizon: one note discusses substantial doubt through December 28, 2023, while MD&A says through August 28, 2023 and describes the company as within a month of that deadline at filing. The filing text does not provide a clear, reconciled value.
- There is also a share-count discrepancy in the supplied text: the balance sheet and other disclosures state 4,231,829 redeemable public shares, while one note states 4,231,289. The filing text does not provide a clear reconciliation.
- Other transaction-related obligations include a $7.875 million deferred underwriting discount payable upon a completed business combination. The filing reports no material pending litigation and no off-balance-sheet arrangements as of June 30, 2023.
Most important facts for investors to verify
- Confirm the current business-combination deadline, which extensions were funded, and whether the LGM/flyExclusive transaction closed or changed after this filing.
- Reconcile the public-share count and confirm the remaining trust balance, redemptions and cash available to the combined company.
- Assess whether EG can meet near-term expenses and transaction costs without committed financing; confirm the status and repayment or conversion terms of sponsor notes and LGM bridge notes.
- Review the proposed transaction’s final financing, redemption levels, dilution, deferred underwriting fee and other closing costs.
- Track remediation of the disclosed material weaknesses and any further restatements or control improvements.