Business context and reporting period
Entity mismatch: The supplied filing is EG Acquisition Corp.’s Form 10-Q, not a filing by FLYEXCLUSIVE INC. EG Acquisition Corp. was a newly formed blank-check company seeking a business combination. This unaudited report covers the quarter ended June 30, 2021, and the period from inception on January 28, 2021 through June 30, 2021.
EG Acquisition had not selected a target or begun substantive discussions with one by June 30. It completed its IPO on May 28, 2021, selling 22.5 million units at $10 each and raising $225 million gross; it also raised $6.5 million through a private placement of warrants.
Financial results and position
- Revenue and profit: No operating revenue. Net loss was $658,869 for the quarter and $659,645 from inception through June 30. The quarter’s loss included $123,718 of formation and operating costs, $390,561 of warrant issuance costs, and $145,534 of warrant fair-value expense, partly offset by $944 of trust interest income. Operating margins are not applicable.
- Cash flow: From inception, operating activities used $413,815; investing activities used $225 million to fund the trust account; financing activities provided $226.3 million. Ending operating cash was $912,304.
- Liquidity and assets: Working capital was approximately $0.9 million. Total assets were $226.8 million, including $225.0 million in trust-account securities. Management said available working capital was expected to cover needs through a business combination or one year from the filing.
- Liabilities and equity: Total liabilities were $19.2 million, including a $10.8 million warrant liability and $7.875 million deferred underwriting discount payable upon a business combination. Current liabilities were $472,565. No senior debt or working-capital loans were outstanding; stockholders’ equity was $5.0 million. Separately, $202.6 million of Class A shares was classified as temporary equity subject to possible redemption.
Changes versus prior comparable period
The company began operations in January 2021 and completed its IPO in May, so the filing provides no prior-year comparable period. The quarter and inception-to-date results are similar because nearly all activity occurred during the quarter.
Outlook, risks, and unusual items
- The company had 24 months from the May 28, 2021 IPO closing to complete a business combination; otherwise, it generally must cease operations and redeem public shares.
- COVID-19 could adversely affect the company’s financial position or search for a target, but the impact was not determinable. The sponsor’s trust-account indemnity may be difficult to collect: the company had not verified the sponsor’s ability to pay and believed its only assets were company securities.
- Warrants are Level 3 fair-value liabilities. Changes in model assumptions could materially affect their valuation and reported results.
- After quarter-end, 843,750 founder shares were forfeited in July because the underwriters’ over-allotment option was not exercised.
- No material litigation or off-balance-sheet arrangements were reported. Management found disclosure controls effective and reported no material change in internal control over financial reporting.
Important facts to verify
- Confirm that EG Acquisition Corp., rather than FLYEXCLUSIVE INC., is the intended filing; the supplied document does not report FlyExclusive’s operating or financial results.
- Verify the trust-account balance, redemption terms, and the 24-month business-combination deadline.
- Review the warrant-liability valuation assumptions and the deferred underwriting fee payable at a transaction closing.
- Assess the sponsor’s capacity to meet its indemnity obligations and the company’s reliance on sponsor-related support.