The following discussion and analysis of the Company's financial condition and
results of operations of B. Riley Principal 250 Merger Corp. (the "Company")
should be read in conjunction with the financial statements and the notes
thereto contained elsewhere in this report (the "Quarterly 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 Quarterly Report includes forward-looking statements. All statements, other
than statements of historical fact included in this Quarterly 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 Annual Report on
Form 10-K for the year ended December 31, 2021 and in our other Securities and
Exchange Commission ("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 initial public offering (the "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 September 30, 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 gains from
investments held in Trust Account.
For the three months ended September 30, 2022, we had net income of $1,174,584.
Our net income for the three months ended September 30, 2022, consisted of
interest income earned in the amount of $463,758 on funds held in the Trust
Account, loss from operations in the amount of $215,374, unrealized gain on
change in fair value of warrant liability in the amount of $1,011,500, and
provision for income taxes of $85,300. For the three months ended September 30,
2021, we had net income of $2,308,212. Our net income for the three months ended
September 30, 2021, consisted of interest income earned in the amount of $2,219
on funds held in the Trust Account, loss from operations in the amount of
$215,082, and an unrealized gain on change in fair value of warrant liability in
the amount of $2,521,075.
For the nine months ended September 30, 2022, we had net income of $3,823,631.
Our net income for the nine months ended September 30, 2022, consisted of
interest income earned in the amount of $708,813 on funds held in the Trust
Account, loss from operations in the amount of $901,282, an unrealized gain on
change in fair value of warrant liability in the amount of $4,107,500, and
provision for income taxes of $91,400. For the nine months ended September 30,
2021, we had net income of $908,005. Our net income for the nine months ended
September 30, 2021, consisted of interest income earned in the amount of $3,890
on funds held in the Trust Account, loss from operations in the amount of
$342,171, warrant issue costs of $124,789, and an unrealized gain on change in
fair value of warrant liability in the amount of $1,371,075.
19
Liquidity, Capital Resources and Going Concern Consideration
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 B. Riley Principal 250 Sponsor Co. LLC (the "Sponsor"), a
Delaware limited liability company, 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.
Our registration statement for our 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
the Trust Account. 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.
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 September 30, 2022 and December 31, 2021, we did not have any long-term
debt, capital lease obligations, operating lease obligations or long-term
liabilities.
As of September 30, 2022, the Company had $513,763 in its operating bank
account, $173,216,348 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 $597,532, which excludes income
taxes payable of $91,400 and Delaware franchise taxes payable of $71,342 (which
is included in accounts payable and accrued expenses at September 30, 2022) as
franchise taxes are paid from the Trust Account from interest income earned.
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, it 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. 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 through May 11, 2023, the scheduled liquidation date.
20
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 any
potential Initial Business Combination to assist us in arranging meetings with
stockholders to discuss such 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 such Initial Business
Combination. We will pay B. Riley Securities, Inc. for such services upon the
consummation of such 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,
underlying Private Placement Warrants 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.
Critical Accounting Policies
Our financial statements and the notes thereto contain information that is
pertinent to management's discussion and analysis. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities. Estimates are used when
accounting for certain items such as valuation of investments held in Trust
Account, derivative and warrant liabilities, and accounting for income tax
valuation allowances. Estimates are based on historical experience, where
applicable, and assumptions that management believes are reasonable under the
circumstances. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. On a continual basis, management reviews its estimates utilizing
currently available information, changes in facts and circumstances, historical
experience and reasonable assumptions. After such reviews, and if deemed
appropriate, management's estimates are adjusted accordingly. Actual results may
vary from these estimates and assumptions under different and/or future
circumstances. Management considers an accounting estimate to be critical if:
? it requires assumptions to be made that were uncertain at the time the estimate
was made; and
? changes in the estimate, or the use of different estimating methods that could
have been selected, could have a material impact on results of operations or
financial condition.
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus (the "COVID-19
outbreak"). In March 2020, the WHO classified the COVID-19 outbreak as a
pandemic, based on the rapid increase in exposure globally. The full impact of
the COVID-19 outbreak continues to evolve, with the emergence of new variant
strains and breakthrough infections becoming prevalent both in the U.S. and
worldwide. As the U.S. economy recovers, aided by stimulus packages and fiscal
and monetary policies, inflation has been rising at historically high rates, and
the Federal Reserve has signaled that it will begin increasing the target
federal funds effective rate. The impact of the COVID-19 outbreak and these
related matters on our results of operations, financial position and cash flows
will depend on future developments, including the duration and spread of the
outbreak and related advisories and restrictions and the success of vaccines and
natural immunity in controlling the pandemic. These developments and the impact
of the COVID-19 outbreak on the financial markets and the overall economy
continue to be highly uncertain and cannot be predicted. If the financial
markets and/or the overall economy continue to be impacted, our results of
operations, financial position and cash flows may be materially adversely
affected.
21
The global spread and unprecedented impact of COVID-19, including variants of
the virus (such as the Delta and Omicron variants), has resulted in significant
disruption and has created additional risks to the Company's and target
companies' businesses, the industry and the economy. In March 2020, the World
Health Organization declared novel coronavirus disease 2019 (COVID-19) a global
pandemic. The COVID-19 pandemic has negatively impacted the global economy,
disrupted global supply chains, lowered equity market valuations, created
significant volatility and disruption in financial markets, and increased
unemployment levels, all of which may become heightened concerns upon a second
wave of infection or future developments. In addition, the pandemic has resulted
in temporary closures of many businesses and the institution of social
distancing and sheltering in place requirements in many states and communities.
The COVID-19 pandemic has and a significant outbreak of other infectious
diseases could result in a widespread health crisis that could adversely affect
the economies and financial markets worldwide, and the business of any potential
partner business with which we consummate an Initial Business Combination could
be materially and adversely affected.
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 per Common Share
Basic earnings 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 three and nine months ended September 30, 2022 and
2021 because the Warrants are contingently exercisable, and the contingencies
have not yet been met. As a result, diluted earnings per common share is the
same as basic earnings per common share for all periods presented.
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 filed in connection
with our Public Offering. 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 Public
Shares feature certain redemption rights that are considered to be outside of
our control and subject to the occurrence of uncertain future events.
Accordingly, as of September 30, 2022 and December 31, 2021, 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 Condensed Balance Sheet.
22
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-06,
"Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity", which
simplifies accounting for convertible instruments by removing major separation
models required under current U.S. GAAP. The ASU also removes certain settlement
conditions that are required for equity-linked contracts to qualify for the
derivative scope exception, and it simplifies the diluted earnings per share
calculation in certain areas. The new standard is effective for the Company on
January 1, 2024, although early adoption is permitted. The ASU allows the use of
the modified retrospective method or the fully retrospective method. The Company
is still in the process of evaluating the impact of this new standard; however,
the Company does not believe the initial impact of adopting the standard will
result in any changes to the Company's statements of financial position,
operations or cash flows.
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. The Company is considering
the impact of this pronouncement on the financial statements.
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B. RILEY PRINCIPAL 250 MERGER CORP. 
