Business context and reporting period
This is EG Acquisition Corp.’s Form 10-K for the year ended December 31, 2022, filed April 12, 2023—not an operating-company 10-K for flyExclusive, Inc. EG Acquisition was a special purpose acquisition company (SPAC) with no operating business or operating revenue. It had signed an agreement to combine with LGM Enterprises, LLC, the business known as flyExclusive; the filing describes the transaction as proposed.
Financial results and position
- Revenue and operations: No operating revenue or operations through year-end; the company was pursuing a business combination.
- Net income: $3.67 million in 2022, versus $2.15 million from inception on January 28, 2021 through December 31, 2021. 2022 income included $5.10 million from a decrease in warrant fair value and $3.25 million of trust-account interest, offset by $4.08 million of formation and operating costs and $0.60 million of income taxes. These figures do not reflect operating profitability.
- Cash flow: Operating cash outflow was $1.38 million in 2022. Financing provided $1.15 million, consisting of sponsor promissory-note proceeds. Cash was $87,853 at December 31, 2022, down from $319,220 a year earlier.
- Liquidity and assets: Working capital deficit was $3.07 million. Total assets were $228.53 million, including $228.25 million in trust-account marketable securities. The trust balance was classified separately from operating cash and was primarily reserved for a business combination or redemptions.
- Liabilities and debt: Total liabilities were $14.51 million, including $1.15 million in sponsor promissory notes, $2.41 million in accounts payable and accrued expenses, $0.60 million in income taxes payable, $2.28 million in warrant liabilities, and $7.88 million in deferred underwriting commissions. The sponsor notes were non-interest-bearing and due at the earlier of May 27, 2023 or a business-combination closing.
- Margins and dividends: Not meaningful for this pre-combination SPAC; no dividends had been paid.
Material changes and proposed transaction
- Trust-account securities rose from $225.01 million at December 31, 2021 to $228.25 million at December 31, 2022, principally reflecting interest income. Redeemable Class A shares were carried at $227.26 million, approximately $10.10 per share, versus $225.01 million, approximately $10.00 per share, at the prior year-end.
- On October 17, 2022, EG Acquisition signed an equity purchase agreement with LGM Enterprises. The contemplated post-transaction company would use an Up-C structure and be renamed flyExclusive, Inc. The filing does not establish that the transaction ultimately closed.
- LGM borrowed $85 million under bridge notes bearing 10% annual interest. Under the proposed terms, the notes would automatically convert at closing into PubCo Class A shares at $10 per share, subject to adjustments. The proceeds were primarily intended for additional aircraft and related expenses.
- The agreement includes cash-repurchase mechanics tied to closing cash contributions, subject to a cap intended to preserve at least 51% ownership of LGM common units by existing LGM equityholders. Actual redemption levels, PIPE proceeds, closing cash and resulting dilution are not provided as completed outcomes in this filing.
Outlook, risks and unusual items
- Going concern: Management and the auditor reported substantial doubt about EG Acquisition’s ability to continue as a going concern. Its business-combination deadline was May 28, 2023; management intended to complete a transaction before then, but said additional financing might not be available. The financial statements contain no adjustments for a failure to continue as a going concern.
- Accounting controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022. Disclosed material weaknesses involved redeemable-share classification and earnings-per-share accounting, stock-based compensation, and accrued fees. The company reported restatements of earlier interim financial statements and said remediation efforts were underway, with no assurance of success.
- Transaction and liquidity risks: The proposed deal could fail; substantial transaction costs could then remain, financing may be unavailable, and the SPAC could have to liquidate. Public-share redemptions, fees, creditor claims and financing needs could reduce cash available to the combined company. If no combination occurred by the deadline, public shares generally would be redeemed from the trust, while warrants could expire worthless; trust recoveries could be reduced by creditor claims.
- Other uncertainties: The filing notes potential effects from COVID-19, the Russia-Ukraine conflict, banking-sector stress and the new 1% federal excise tax on certain stock repurchases. It also warns that the excise tax could reduce cash available for a transaction. No operating-company guidance or quantified forecast is provided.
Important facts for investors to verify
- Confirm the identity and scope of the filing: this 10-K is for EG Acquisition Corp., not flyExclusive’s operating-company financial statements.
- Verify whether and on what terms the LGM/flyExclusive transaction closed, including redemptions, PIPE funding, bridge-note conversion, fees, cash delivered and post-closing ownership and dilution.
- Review flyExclusive’s separate operating-company financials and current filings for revenue, profitability, cash burn, aircraft investment, debt, liquidity and outlook; this SPAC filing does not provide those operating metrics.
- Check whether the May 28, 2023 deadline was extended or a business combination was completed, and how the trust funds and public shares were ultimately handled.
- Assess whether the reported control weaknesses were remediated and whether any further restatements or reporting delays occurred.