Filing summary
Important entity mismatch: The request identifies Alta Equipment Group Inc., but the supplied Form 10-Q is for B. Riley Principal Merger Corp., a blank-check company. The figures and disclosures below describe B. Riley Principal Merger Corp., not Alta Equipment Group.
Business context and reporting period
This unaudited quarterly report covers the three and six months ended June 30, 2019. B. Riley Principal Merger Corp. was formed to pursue an initial business combination and had not begun operating a revenue-generating business. Since its April 2019 IPO, its activities were limited to identifying and evaluating potential acquisition targets.
Financial results and liquidity
- Revenue: None reported; the company stated it would not generate operating revenue before a business combination.
- Three months ended June 30, 2019: Operating costs were $117,403, interest income was $860,847, income before tax was $743,444, income tax expense was $156,100, and net income was $587,344. The comparable 2018 quarter had no reported income or expenses.
- Six months ended June 30, 2019: Operating costs were $118,424, interest income was $860,847, income before tax was $742,423, tax expense was $156,100, and net income was $586,323. The comparable 2018 period reported an $800 net loss.
- Per-share result: Reported basic and diluted loss per common share was $0.01 for the 2019 quarter and $0.02 for the six-month period, despite positive net income. The filing attributes this presentation to income allocated to redeemable shares; adjusted net loss attributable to other common shares was $55,619 for the quarter and $56,202 for six months.
- Cash and liquidity at June 30, 2019: Cash outside the trust was $1,001,050; trust assets were $144,610,199. Current liabilities were $253,836, and management reported working capital of $1,112,880, excluding income and franchise taxes payable that it expected to pay from trust interest.
- Cash flow, six months: Operating activities used $193,885; investing activities used $143,750,000, primarily reflecting the trust deposit; financing activities provided $144,895,277. Ending cash was $1,001,050.
- Debt and obligations: No long-term debt or lease obligations were reported at quarter-end. The $67,950 sponsor note was repaid after the IPO. The filing disclosed monthly administrative fees of $10,000 and a contingent business-combination advisory fee of 3.5% of IPO gross proceeds if a transaction closes.
Material changes and transaction funding
- The company completed its IPO in April 2019, selling 14,375,000 public units, including the fully exercised over-allotment, for gross proceeds of $143.75 million. Sponsor private placements generated an additional $4.625 million.
- $143.75 million was deposited in the trust account. At June 30, 13,988,107 public shares were classified as subject to possible redemption at approximately $10.05 per share.
- An affiliate agreed to purchase 2.5 million forward-purchase units for $25 million at the business-combination closing. The purchase is intended to help fund a transaction and is required regardless of public-share redemptions.
- Interest earned on trust investments drove reported income; the company had no operating revenue. Accordingly, reported net income does not reflect earnings from an operating business.
Outlook, risks, and unusual items
- No earnings or revenue guidance was provided. Management said it expected existing funds to cover operating expenditures, but warned that underestimated search, diligence, and negotiation costs could leave insufficient operating funds. Additional financing might be needed to complete a transaction or address substantial redemptions.
- The company generally had 18 months from the April 11, 2019 IPO closing to complete a business combination; otherwise, public shares are to be redeemed and the company liquidated, subject to the filing’s terms.
- The trust funds are restricted pending a business combination, specified shareholder actions, or liquidation. Creditor claims could have priority over public shareholders’ claims to trust assets.
- Management stated there was no material change to the risk factors in the IPO prospectus and no material market or interest-rate exposure. It reported no legal proceedings and no off-balance-sheet arrangements.
- The filing reported disclosure controls as effective based on an evaluation stated to be as of March 31, 2019, although this report covers the quarter ended June 30.
Most important facts to verify
- Confirm the intended issuer: the supplied filing is for B. Riley Principal Merger Corp., not Alta Equipment Group Inc.
- Verify whether a business combination was pursued or completed, and the applicable deadline and trust-account outcome.
- Check the treatment and current status of redeemable public shares, trust assets, and the $25 million forward-purchase commitment.
- Review the IPO prospectus risk factors and related-party arrangements, including the contingent advisory fee and administrative payments.
- Reconcile the positive net income with the reported loss per share and its allocation to redeemable shares.