The following discussion and analysis of the financial condition and results of
operations of B. Riley Principal 250 Merger Corp. should be read in conjunction
with the financial statements and the notes thereto contained elsewhere in this
Annual Report. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and
uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report includes forward-looking statements. All statements, other
than statements of historical fact included in this Annual Report including,
without limitation, statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the Company's financial
position, business strategy and the plans and objectives of management for
future operations, are forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as "may," "should,"
"could," "would," "expect," "plan," "anticipate," "believe," "estimate,"
"continue," or the negative of such terms or other similar expressions. We have
based these forward-looking statements on our current expectations and
projections about future events. Forward-looking statements are subject to known
and unknown risks, uncertainties and assumptions about us that may cause our
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Factors
that might cause or contribute to such a discrepancy include, but are not
limited to, those described in the Risk Factors section of our final prospectus
for our Public Offering and in our other SEC filings. Except as expressly
required by applicable securities law, we disclaim any intention or obligation
to update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses (the "Initial Business Combination")
We intend to effectuate an Initial Business Combination using cash from the
proceeds of our Public Offering, including the proceeds from the sale of the
Over-Allotment Public Units, the proceeds from the sale of the Private Placement
Units, including the Over-Allotment Private Placement Units, and from additional
issuances of, if any, our capital stock and our debt, or a combination of cash,
stock and debt.
Results of Operations
Our business activities from inception to December 31, 2022 consisted primarily
of our preparation for our Public Offering that was completed on May 11, 2021
and, since the Public Offering on May 11, 2021, identification and evaluation of
prospective acquisition targets for an Initial Business Combination. We will not
generate any operating revenues until after completion of our Initial Business
Combination. We generate non-operating income in the form of net gain from
investments held in Trust Account.
For the year ended December 31, 2022, we had net income of $5,439,084. Our net
income for the year ended December 31, 2022, consisted of interest income earned
in the amount of $2,488,208 on funds held in the Trust Account, loss from
operations in the amount of $1,180,024, unrealized gain on change in fair value
of warrants in the amount of $4,585,500, and provision for income tax expense of
$454,600.
For the year ended December 31, 2021, we had net income of $166,254. Our net
income for the year ended December 31, 2021, consisted of interest income earned
in the amount of $7,535 on funds held in the Trust Account, loss from operations
in the amount of $574,977, warrant issue costs of $124,789, unrealized gain on
change in fair value of derivative liability of $84,985 and an unrealized gain
on change in fair value of warrants in the amount of $773,500.
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Liquidity and Capital Resources
Until the closing of the Public Offering, our only source of liquidity was an
initial sale of shares of Class B common stock, par value $0.0001 per share (the
"Founder Shares"), to our Sponsor, and the proceeds of a promissory note (the
"Note") from the Sponsor, in the amount of $300,000. We had an outstanding
balance on the Note of $100,000 at the time of the Public Offering and the Note
was repaid in full on May 17, 2021 with proceeds raised from the closing of the
Public Offering.
As of December 31, 2022, the Company had $442,978 in its operating bank account,
$174,437,246 in investments held in the Trust Account to be used for an Initial
Business Combination or to repurchase or redeem its Public Shares in connection
therewith and working capital of $342,570, which excludes accrued interest
receivable of $558,497, income taxes payable of $454,600 and Delaware franchise
taxes payable of $95,122 (which is included in accounts payable and accrued
expenses at December 31, 2022) as franchise taxes are paid from the Trust
Account from interest income earned.
Income on the funds held in the Trust Account may be released to us to pay our
franchise and income taxes.
Our registration statement for our initial public offering (the "Public
Offering") was declared effective on May 7, 2021. On May 11, 2021, we
consummated the Public Offering of 15,000,000 units (the "Public Units") at
$10.00 per Public Unit, generating gross proceeds of $150,000,000. Each Public
Unit consists of one share of Class A common stock (the "Public Shares") of the
Company, par value $0.0001, and one-third of one redeemable warrant (the "Public
Warrants") of the Company, with each Public Warrant entitling the holder thereof
to purchase one share of Class A common stock for $11.50 per share, subject to
adjustment. On June 14, 2021, the underwriters exercised the over-allotment
option in full and purchased an additional 2,250,000 Public Units (the
"Over-Allotment Public Units"), generating additional gross proceeds of
$22,500,000 million. We incurred total offering costs of approximately
$4,021,103 consisting of $3,450,000 (2% of gross proceeds) million in
underwriting fees and other offering costs of $571,103.
Simultaneously with the closing of the Public Offering, we consummated the
private placement ("Private Placement") of 555,000 units (the "Private Placement
Units") to our Sponsor, at a purchase price of $10.00 per Private Placement
Unit, generating gross proceeds to the Company of $5,550,000. Each Private
Placement Unit consists of one share of Class A common stock (the "Private
Placement Shares") of the Company, par value $0.0001, and one-third of one
redeemable warrant (the "Private Placement Warrants") of the Company, with each
Private Placement Warrant entitling the holder thereof to purchase one share of
Class A common stock for $11.50 per share, subject to adjustment. On June 14,
2021, simultaneously with the sale of the Over-Allotment Public Units, we
consummated a private sale of an additional 45,000 Private Placement Units (the
"Over-Allotment Private Placement Units") to our Sponsor, generating gross
proceeds of $450,000.
A total of $172,500,000, comprised of $169,050,000 of the proceeds from the
Public Offering and the sale of the Over-Allotment Public Units (which amount
includes a $6,037,500 fee payable to B. Riley Securities, Inc. pursuant to the
business combination marketing agreement upon completion of an Initial Business
Combination) and $3,450,000 from the proceeds of the sale of the Private
Placement Units and the Over-Allotment Private Placement Units, was placed in a
U.S.-based trust account at Bank of America, N.A. maintained by Continental
Stock Transfer & Trust Company, acting as trustee. Except with respect to
interest earned on the funds held in the Trust Account that may be released to
the Company to pay its franchise and income tax obligations (less up to $100,000
of interest to pay dissolution expenses), the funds held in the Trust Account
will not be released from the Trust Account until the earliest of (i) the
completion of the Company's Initial Business Combination, (ii) the redemption of
any Public Shares properly submitted in connection with a stockholder vote to
amend the Company's amended and restated certificate of incorporation (the
"Amended Charter") to modify the substance or timing of the Company's obligation
to redeem 100% of the Company's Public Shares if the Company does not complete
its Initial Business Combination by May 11, 2023 or with respect to any other
material provisions relating to stockholders' rights or pre-initial business
combination activity and (iii) the redemption of 100% of the Company's Public
Shares if the Company is unable to complete an Initial Business Combination by
May 11, 2023, subject to applicable law.
48
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or entered into any non-financial agreements involving assets.
As of December 31, 2022, we did not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities.
Going Concern Consideration
We have principally financed our operations from inception using proceeds from
the promissory note from the Sponsor prior to the Public Offering and such
amount of proceeds from the Public Offering, the sale of the Private Placement
Units, and the underwriters exercise of the over-allotment in full that were
placed in a bank account outside of the Trust Account for working capital
purposes. In connection with the closing of the Public Offering, Private
Placement, and the underwriters exercise of the over-allotment in full,
$172,500,000 (or $10.00 per Class A common stock) of proceeds were placed in the
Trust Account. As of December 31, 2022, we had $442,978 in our operating bank
account, $174,437,246 in investments held in the Trust Account to be used for an
Initial Business Combination or to repurchase or redeem its public shares in
connection therewith and working capital of $342,570, which excludes accrued
interest receivable of $558,497, income taxes payable of $454,600 and Delaware
franchise taxes payable of $95,122 (which is included in accounts payable and
accrued expenses at December 31, 2022) as franchise taxes and income taxes are
paid from the Trust Account from interest income earned.
If our funds are insufficient to meet the expenditures required for operating
our business in the attempt to find an Initial Business Combination or in the
event that an Initial Business Combination is not consummated, we will likely
need to raise additional funds in order to meet the expenditures required for
operating our business. We may not be able to obtain additional financing or
raise additional capital to finance its ongoing operations. If we are unable to
raise additional capital, we may be required to take additional measures to
conserve liquidity, which could include, but not necessarily be limited to,
curtailing operations, suspending the pursuit of a potential transaction and
reducing overhead expenses. If we are unable to raise additional funds to
alleviate liquidity needs and complete an Initial Business Combination by May
11, 2023, then we will cease all operations except for the purpose of
liquidating. We cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about our ability to continue as a going concern for one
year from the issuance date of these financial statements. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
Administrative Services Agreement
On May 7, 2021, we entered into an administrative support agreement pursuant to
which we have agreed to pay an affiliate of the Sponsor a total of $3,750 per
month for office space, administrative and support services. Upon the earlier of
the completion of the Initial Business Combination and the Company's
liquidation, we will cease paying these monthly fees.
Business Combination Marketing Agreement
We have engaged B. Riley Securities, Inc. as advisors in connection with the
Initial Business Combination to assist us in arranging meetings with
stockholders to discuss the potential Initial Business Combination and the
target business' attributes, introduce us to potential investors that may be
interested in purchasing our securities, assist us in obtaining stockholder
approval for our Initial Business Combination and assist us with the preparation
of press releases and public filings in connection with the Initial Business
Combination. We will pay B. Riley Securities, Inc. for such services upon the
consummation of the Initial Business Combination a cash fee in an amount equal
to 3.5% of the gross proceeds of the Public Offering (exclusive of any
applicable finders' fees which might become payable). Pursuant to the terms of
the business combination marketing agreement, no fee will be due if we do not
complete an Initial Business Combination.
Registration Rights Agreement
The holders of Founder Shares, Private Placement Units and warrants that may be
issued upon conversion of working capital loans, if any, (and any shares of
Class A common stock issuable upon the exercise of the Private Placement Units
or working capital warrants) are entitled to registration rights pursuant to a
registration rights agreement signed upon the consummation of the Public
Offering. These holders are entitled to certain demand and "piggyback"
registration rights. We will bear the expenses incurred in connection with the
filing of any such registration statements.
49
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and income and expenses during the periods
reported. Actual results could materially differ from those estimates. We have
identified the following as our critical accounting policies:
Warrant Derivative Liability
In accordance with FASB ASC 815-40, Derivatives and Hedging: Contracts in an
Entities Own Equity, an entity must consider whether to classify contracts that
may be settled in its own stock, such as warrants, as equity of the entity or as
an asset or liability. If an event that is not within the entity's control could
require net cash settlement, then the contract should be classified as an asset
or a liability rather than as equity. We have determined because the terms of
Public Warrants include a provision that entitles all warrant holders to cash
for their Public Warrants in the event of a qualifying cash tender offer, while
only certain of the holders of the underlying shares of common stock would be
entitled to cash, our Public Warrants should be classified as derivative
liability measured at fair value, with changes in fair value each period
reported in earnings. Further if our Private Placement Warrants are held by
someone other than initial purchasers of the Private Placement Warrants or their
permitted transferees, the Private Placement Warrants will be redeemable by the
Company and exercisable by such holders on the same basis as the Public
Warrants. Because the terms of the Private Placement Warrants and Public
Warrants are so similar, we classified both types of Warrants as a derivative
liability measured at fair value. Volatility in our Public Shares and Public
Warrants may result in significant changes in the value of the derivatives and
resulting gains and losses on our statement of operations.
Earnings (Loss) per Common Share
Basic earnings (loss) per common share is computed by dividing net income
applicable to common stockholders by the weighted average number of common
shares outstanding during the period. All shares of Class B common stock are
assumed to convert to shares of Class A common stock on a one-for-one basis.
Earnings and losses are shared pro rata between the two classes of shares.
Potential common shares for outstanding warrants to purchase the Company's stock
were excluded from diluted earnings per share for the years ended December 31,
2022 and 2021 because the Warrants are contingently exercisable, and the
contingencies have not yet been met. For the year ended December 31, 2022 and
2021, we did not have any dilutive Warrants, securities or other contracts that
could, potentially, be exercised or converted into common stock. As a result,
diluted earnings (loss) per common share is the same as basic earnings per
common share for all periods presented. For the year ended December 31, 2022, we
reported earnings per redeemable and non-redeemable common share of $0.25.
Redeemable Shares
All of the 17,250,000 Public Shares sold as part of the Public Offering contain
a redemption feature as described in the Final Prospectus. In accordance with
FASB ASC 480, "Distinguishing Liabilities from Equity", redemption provisions
not solely within the control of the Company require the security to be
classified outside of permanent equity. Conditionally redeemable Class A common
stock (including shares of Class A common stock that feature redemption rights
that are either within the control of the holder or subject to redemption upon
the occurrence of uncertain events not solely within our control) is classified
as temporary equity. At all other times, Class A common stock is classified as
stockholders' equity. Our Class A common stock features certain redemption
rights that are considered to be outside of our control and subject to the
occurrence of uncertain future events. Accordingly, as of December 31, 2022,
17,250,000 shares of Class A common stock subject to possible redemption at the
redemption amount were presented at redemption value as temporary equity,
outside of stockholders' equity on our Balance Sheet.
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B. RILEY PRINCIPAL 250 MERGER CORP. 
