SEC Filing Summary
Business context and reporting period
This is EG Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2023, signed May 22, 2023. Despite the request metadata naming flyExclusive Inc., the registrant in this filing is EG Acquisition Corp., a SPAC that had not begun operating and had no operating revenue. The filing describes a pending business combination with LGM, which would result in a combined company expected to be named flyExclusive, Inc.; the transaction had not closed as of the filing date.
Financial results and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Operating revenue | None | None; the company had not commenced operations |
| Formation and operating costs | $641,451 | $372,277 |
| Net income | $1,495,342 | $4,290,197 |
| Trust interest income | $2,421,890 | $22,658 |
| Warrant fair-value gain | $213,000 | $4,639,816 |
| Income tax provision | $498,097 | None reported |
| Net income per share | $0.05 | $0.15 |
| Cash used in operating activities | $144,205 | $198,559 |
At March 31, 2023, cash outside the trust was $193,648; current assets were $334,065 and current liabilities were $5,545,900, producing a working-capital deficit of $3,664,515. Trust investments were $230,675,967. Total liabilities were $15,491,733, including $1,400,000 in non-interest-bearing sponsor promissory notes due at the earlier of May 27, 2023 or a business-combination closing, and a $7,875,000 deferred underwriting discount payable upon a combination. Redeemable Class A shares were classified as temporary equity at $229,128,647. No conventional operating margins are meaningful because the company had no operating revenue.
Material changes and transaction developments
Net income fell year over year, primarily because the prior-year period included a much larger warrant fair-value gain; Q1 2023 trust interest income rose substantially. Operating costs also increased. The company’s trust balance increased from $228,254,077 at December 31, 2022 to $230,675,967 at March 31, 2023.
The October 2022 agreement provides for acquiring LGM through an Up-C structure. LGM’s existing equity holders would receive PubCo Class B shares with voting rights but no economic rights, and the transaction’s consideration and capitalization depend on redemptions and potential financing. LGM had $85 million of bridge notes bearing 10% annual interest; the notes were expected to convert into PubCo Class A shares at closing, subject to the agreement’s terms. The filing does not establish that the business combination was completed.
After quarter-end, an April 21 amendment allowed the company to seek an extension of its combination deadline to no later than December 28, 2023. At a May 19 extension meeting, stockholders approved the extension proposal, and holders of 18,268,171 Class A shares elected cash redemption. The filing does not provide the resulting post-redemption trust balance.
Outlook, risks, and unusual items
- Going concern: Management stated that the low operating cash, working-capital deficit, need for additional financing, and approaching liquidation deadline raised substantial doubt about the company’s ability to continue as a going concern. Management intended to complete a business combination before the deadline; sponsor and affiliate funding was possible but not committed.
- Deadline and liquidation risk: The original combination period was 24 months from the May 28, 2021 IPO closing. Without an approved extension or completed combination, the company would be required to cease operations and redeem public shares, subject to applicable terms.
- Internal controls: Disclosure controls were deemed ineffective due to material weaknesses associated with prior financial-statement restatements involving redeemable-share classification, stock-based compensation, and fees under an agreement. Management described remediation steps but gave no assurance they would be effective.
- Other exposures: The filing discusses uncertainty from COVID-19, the war in Ukraine and related sanctions, and a potential 1% federal excise tax on certain share repurchases. The amount of any excise tax exposure is not established.
- Contingent transaction costs: The deferred underwriting discount and BTIG advisory/private-placement fees may be payable upon a transaction; aggregate BTIG fees under the specified agreements are capped at $7,875,000, excluding amounts previously paid in connection with the IPO.
- Guidance: No operating or financial guidance for flyExclusive is provided. Results reflect SPAC trust income, warrant remeasurement and administrative costs, not the target’s operating performance.
Most important facts for investors to verify
- Confirm the correct issuer and reporting entity: this 10-Q is for EG Acquisition Corp., not standalone flyExclusive Inc.
- Check subsequent filings for the final business-combination status, extension terms, actual redemption count and post-redemption trust cash.
- Verify the transaction’s closing conditions, capitalization and dilution, including bridge-note conversion, any PIPE or other financing, and the treatment of warrants.
- Assess the company’s ability to fund expenses and complete a transaction given its small operating cash balance, substantial working-capital deficit and going-concern warning.
- Review progress on remediation of the disclosed material weaknesses and any later changes to controls or financial reporting.