Business context and reporting period
This is EG Acquisition Corp.’s unaudited Form 10-Q for the quarter ended September 30, 2022—not an operating-company filing under the name FLYEXCLUSIVE INC. EG was a blank-check company seeking a business combination and had not commenced operations or generated operating revenue. The proposed combination with LGM, the company associated with flyExclusive, was announced after quarter-end.
Financial results and position
| Metric | Period or date | Amount |
|---|---|---|
| Operating revenue | Q3 2022 | None |
| Formation and operating costs | Q3 2022 | $1.331 million |
| Net loss | Q3 2022 | $269,493 |
| Net income | Nine months ended September 30, 2022 | $4.656 million |
| Operating cash flow | Nine months ended September 30, 2022 | $(664,326) |
| Cash outside trust | September 30, 2022 | $54,894 |
| Trust account investments | September 30, 2022 | $226.351 million |
| Working capital deficit | September 30, 2022 | $1.162 million |
| Promissory note payable to sponsor | September 30, 2022 | $400,000 |
| Total liabilities | September 30, 2022 | $11.454 million |
The trust funds are held for the business combination or public-share redemptions and are not the same as cash available for ordinary expenses. The company reported no long-term debt or lease obligations; a $7.875 million deferred underwriting discount is payable upon completion of a business combination. Operating margins are not meaningful because there was no operating revenue.
Material changes versus prior comparable period
Q3 2022’s $269,493 net loss compares with $3.446 million net income in Q3 2021. The main swing was the warrant fair-value gain, which fell to $248,483 from $3.791 million; trust interest rose to $1.016 million from $2,895, while operating costs increased to $1.331 million from $347,406. For the nine months ended September 30, 2022, net income was $4.656 million, including a $5.904 million warrant fair-value gain and $1.342 million of trust interest. The filing’s 2021 nine-month comparison is inception-to-September 30, 2021, rather than a full nine-month period.
Trust assets increased from $225.009 million at December 31, 2021, largely reflecting interest and redemption-value accretion. Warrant liabilities declined from $7.384 million to $1.479 million. The company had $54,894 of operating cash versus $319,220 at year-end 2021.
Outlook, transaction, and risks
- Proposed combination: On October 17, 2022, EG entered an agreement to combine with LGM. The planned post-combination structure is an Up-C, and EG would change its name to flyExclusive, Inc. Closing, redemptions, any PIPE financing, and transaction terms remained subject to conditions; the filing does not provide a definitive closing outcome.
- Bridge financing: LGM borrowed $50 million under a senior subordinated convertible note bearing 10% annual interest and agreed to seek an additional $35 million on the same terms, for a planned total of $85 million. At closing, the notes are to convert into PubCo Class A shares at $10 per share, subject to adjustments. Proceeds are primarily intended for aircraft acquisitions and related expenses.
- Liquidity and deadline: Management said the low operating cash and working capital deficit raise substantial doubt about EG’s ability to continue as a going concern. It depended on potential sponsor or third-party financing, which was not assured. The SPAC’s 24-month deadline was May 28, 2023; management intended to complete a combination before then. A further $420,000 sponsor loan was agreed on October 6, 2022.
- Controls: Management concluded disclosure controls were ineffective because of a material weakness related to prior restatements of redeemable Class A share classification. It described remediation steps but gave no assurance they would be effective.
- Other uncertainties: The filing discusses possible effects from COVID-19, the war in Ukraine and related sanctions, and the new 1% federal excise tax on certain stock repurchases from 2023. The tax could reduce cash available for a transaction; the company had not determined its potential impact.
- Guidance: No operating forecast or revenue guidance was provided. Results are driven by SPAC expenses, trust interest, and non-cash warrant revaluations.
Important facts for investors to verify
- Confirm the subsequent status and closing conditions of the EG–LGM transaction, including shareholder redemptions and any PIPE financing.
- Verify the final amount, terms, use of proceeds, and conversion mechanics of the bridge notes, including whether the planned additional $35 million was funded.
- Assess available cash outside the trust, sponsor funding capacity, transaction expenses, and the consequences of missing the May 28, 2023 deadline.
- Review the material weakness, prior restatements, and progress on control remediation.
- Distinguish EG’s SPAC financial results from flyExclusive/LGM operating results; this filing does not provide a clear value for the target’s revenue, profitability, or operating cash flow.