UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
(Mark One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
Or
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 001-39291
B. RILEY PRINCIPAL MERGER CORP.
II
(Exact Name of Registrant as
Specified in Its Charter)
|
Delaware |
|
84-4290188 |
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
|
|
|
|
299
Park Avenue, 21st Floor
New
York, New York
|
|
10171
|
|
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
(212) 457-3300
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer”, “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act. (Check one)
| |
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
| |
Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
| |
Emerging
growth company |
☒ |
|
|
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes ☒ No ☐
Securities registered pursuant to
Section 12(b) of the Act:
|
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which
registered |
|
Units, each consisting of one share
of Class A common stock and one-half of one redeemable
warrant |
|
BMRG.U |
|
The New York Stock
Exchange |
|
Class A common stock, par value
$0.0001 per share |
|
BMRG |
|
The New York Stock
Exchange |
|
Warrants, each whole warrant
exercisable to purchase one share of Class A common stock, each at
an exercise price of $11.50 per share |
|
BMRG WS |
|
The New York Stock
Exchange |
As of June 24, 2020, there were
18,150,000 shares of the registrant’s Class A common stock, par
value $0.0001 per share, and 5,031,250 shares of the registrant’s
Class B common stock, par value $0.0001 per share,
outstanding.
B. Riley Principal Merger Corp.
II
Quarterly Report on Form
10-Q
Table of Contents
PART I. FINANCIAL
INFORMATION
Item 1. Financial
Statements.
B. RILEY PRINCIPAL MERGER
CORP. II
Condensed Balance
Sheets
| |
|
March 31, |
|
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
(Unaudited) |
|
|
|
|
| Assets |
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
| Cash |
|
$ |
14,894 |
|
|
$ |
— |
|
|
Due from related party |
|
|
1 |
|
|
|
1 |
|
| Total current assets |
|
|
14,895 |
|
|
|
1 |
|
|
Deferred offering costs |
|
|
70,000 |
|
|
|
— |
|
|
Total assets |
|
$ |
84,895 |
|
|
$ |
1 |
|
| Liabilities and Stockholder's Deficit |
|
|
|
|
|
|
|
|
| Current
liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued offering
costs |
|
$ |
35,626 |
|
|
$ |
278 |
|
|
Note payable - related
party |
|
|
50,000 |
|
|
|
— |
|
| Total liabilities |
|
|
85,626 |
|
|
|
278 |
|
| |
|
|
|
|
|
|
|
|
| Stockholder's deficit: |
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value;
1,000,000 shares authorized; none issued and
outstanding |
|
|
— |
|
|
|
— |
|
|
Class A Common stock, $0.0001 par
value; 100,000,000 shares authorized; none issued and outstanding
issued and outstanding as of March 31, 2020 and December 31,
2019, respectively. |
|
|
— |
|
|
|
— |
|
| Class B Common stock, $0.0001 par value;
25,000,000 shares authorized; 5,750,000 issued and outstanding
as of March 31, 2020 and December 31, 2019,
respectively. |
|
|
575 |
|
|
|
575 |
|
| Additional paid-in capital |
|
|
— |
|
|
|
— |
|
|
Accumulated deficit |
|
|
(1,306 |
) |
|
|
(852 |
) |
|
Total stockholder's
deficit |
|
|
(731 |
) |
|
|
(277 |
) |
|
Total liabilities and stockholder's
deficit |
|
$ |
84,895 |
|
|
$ |
1 |
|
The accompanying notes are an integral part of these unaudited
condensed financial statements.
B. RILEY PRINCIPAL MERGER
CORP. II
Condensed Statement of
Operations
(Unaudited)
| |
|
Three |
|
| |
|
Months Ended |
|
| |
|
March 31,
2020 |
|
| |
|
|
|
|
Formation, general and administrative
expenses |
|
$ |
454 |
|
|
Net loss |
|
$ |
454 |
|
| |
|
|
|
|
| Basic loss per share |
|
$ |
0.00 |
|
| Diluted loss per
share |
|
$ |
0.00 |
|
| |
|
|
|
|
| Weighted average basic shares
outstanding (1) |
|
|
5,000,000 |
|
| Weighted average diluted shares
outstanding (1) |
|
|
5,000,000 |
|
|
(1) |
Excludes an aggregate of 750,000 shares that
are subject to forfeiture to the extent that the underwriter’s
over-allotment is not exercised in full (Note 4). On February
3, 2020, the Company conducted a 1:575 stock split and
reclassification for each share outstanding (Note 4). |
The accompanying notes are an integral part of these unaudited
condensed financial statements.
B. RILEY PRINCIPAL MERGER
CORP. II
Condensed Statement of Changes in
Stockholder’s Deficit
(Unaudited)
| |
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Total |
|
| |
|
Class B Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholder's |
|
| |
|
Shares (1) |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
|
| Balance,
January 1, 2020 |
|
|
5,750,000 |
|
|
$ |
575 |
|
|
$ |
— |
|
|
$ |
(852 |
) |
|
$ |
(277 |
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(454 |
) |
|
|
(454 |
) |
| Balance, March 31, 2020 |
|
|
5,750,000 |
|
|
$ |
575 |
|
|
$ |
— |
|
|
$ |
(1,306 |
) |
|
$ |
(731 |
) |
|
(1) |
Includes an aggregate of 750,000 shares that
are subject to forfeiture to the extent that the underwriter’s
over-allotment is not exercised in full (Note 4). On February
3, 2020, the Company conducted a 1:575 stock split and
reclassification for each share outstanding (Note 4). |
The accompanying notes are an integral part of these unaudited
condensed financial statements.
B. RILEY PRINCIPAL MERGER
CORP. II
Condensed Statement of Cash
Flows
(Unaudited)
| |
|
Three |
|
| |
|
Months Ended |
|
| |
|
March 31,
2020 |
|
| Cash
flows from operating activities: |
|
|
|
|
|
Net loss |
|
$ |
(454 |
) |
| Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
|
|
| Increase in deferred offering costs |
|
|
(70,000 |
) |
|
Increase in accounts payable and
accrued offering costs |
|
|
35,348 |
|
| Net cash used in operating activities |
|
|
(35,106 |
) |
| Cash
flows from financing activities: |
|
|
|
|
|
Proceeds from note payable - related
party |
|
|
50,000 |
|
| Net cash provided by financing
activities |
|
|
50,000 |
|
|
Increase in cash |
|
|
14,894 |
|
| Cash,
beginning of year |
|
|
— |
|
| Cash,
end of period |
|
$ |
14,894 |
|
| |
|
|
|
|
| Supplemental disclosures: |
|
|
|
|
| Interest paid |
|
$ |
— |
|
| Taxes paid |
|
$ |
— |
|
The accompanying notes are an integral part of these unaudited
condensed financial statements.
B. RILEY PRINCIPAL MERGER
CORP. II
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
NOTE 1—ORGANIZATION AND NATURE OF
BUSINESS OPERATIONS
Organization and
General
B. Riley Principal Merger Corp. II
(the “Company”), a blank check company, was incorporated as a
Delaware corporation on June 3, 2019. The Company is an emerging
growth company, as defined in Section 2(a) of the Securities
Act of 1933, as amended, (the “Securities Act”), as modified by the
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The
Company was 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 (an
“Initial Business Combination”).
As of March 31, 2020, the Company had
not commenced any operations. All activity of the Company includes
the activity of the Company from inception and activity related to
the initial public offering (the “Public Offering”) described
below. The Company will not generate any operating revenues until
after completion of its Initial Business Combination, at the
earliest. The Company will generate non-operating income in the
form of interest income on cash and cash equivalents from the
proceeds derived from the Public Offering described below. The
Company has selected December 31st as its fiscal year
end.
Public
Offering
The Company completed the sale of
17,500,000 units (the “Units”) at an offering price of $10.00 per
Unit in the Public Offering on May 22, 2020. B. Riley Principal
Sponsor Co. II, LLC (the “Sponsor”), a Delaware limited liability
company and a wholly-owned indirect subsidiary of B. Riley
Financial, Inc. (“B. Riley Financial”), purchased an aggregate of
650,000 Units at a price of $10.00 per Unit (the “Private Placement
Units”) in a private placement that closed on May 22, 2020
simultaneously with the Public Offering. The sale of the 17,500,000
Units in the Public Offering (the “Public Units”) generated gross
proceeds of $175,000,000, less underwriting commissions of
$3,500,000 (2% of the gross proceeds of the Public Offering) and
other offering costs of $561,189. The Private Placement Units
generated $6,500,000 of gross proceeds.
Each Unit consists of one share of
the Company’s Class A common stock, $0.0001 par value (each a
“public share”), and one-half of one redeemable warrant, with each
whole warrant exercisable for one share of Class A common
stock (each, a “Warrant” and, with respect to the warrants
underlying the Private Placement Units, the “Private Placement
Warrants” and, collectively, the “Warrants”). One Warrant entitles
the holder thereof to purchase one whole share of Class A
common stock at a price of $11.50 per share.
The
Company has also granted the underwriters a 45-day option to
purchase up to 2,625,000 additional Units at the Public Offering
price less the underwriting discounts. On May 28, 2020, the underwriters confirmed that
they will not be exercising their over-allotment option in whole or
in part.
Sponsor and Note Payable -
Related Party
On February 4, 2020, the Sponsor
agreed to loan the Company up to $300,000 (see Note 3) to support
the Company’s initial formation and operations. At March 31, 2020,
the Note Payable balance was $50,000. On April 21, 2020, the
Company borrowed an additional $50,000 which increased the Note
Payable balance to $100,000 which was paid in full using proceeds
from the Public Offering and the Private Placement.
The Trust
Account
Upon completion of the Public
Offering, $176,750,000 of proceeds were held in the Company’s trust
account at J.P. Morgan Chase Bank, N.A., with Continental Stock
Transfer & Trust Company acting as trustee (the “Trust
Account”) and will be invested in permitted United States
“government securities” within the meaning of Section 2(a)(16) of
the Investment Company Act of 1940, as amended, which we refer to
as the Investment Company Act, having a maturity of 185 days or
less or in money market funds meeting certain conditions under Rule
2a-7 promulgated under the Investment Company Act that invest only
in direct U.S. government treasury obligations.. Unless and until
the Company completes the Initial Business Combination, it may pay
its expenses only from the net proceeds of the Public Offering and
the Private Placement held outside the Trust Account, which was
$1,284,805 on May 22, 2020, of which $100,000 was used to pay the
Note Payable to Sponsor and $523,135 was used to pay the offering
costs.
Except with respect to interest
earned on the funds held in the Trust Account that may be released
to the Company to pay its taxes, the proceeds from the Public
Offering may not be released from the Trust Account until the
earliest of: (i) the completion of the 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 to
modify the substance or timing of the Company’s obligation to
redeem 100% of its public shares if it does not complete the
Initial Business Combination by November 22, 2021, 18 months from
the closing of the Public Offering; or (iii) the redemption of
all of the Company’s public shares if the Company is unable to
complete the Initial Business Combination by November 22, 2021, 18
months from the closing of the Public Offering (at which such time
up to $100,000 of interest shall be available to the Company to pay
dissolution expenses), subject to applicable law. The proceeds
deposited in the Trust Account could become subject to the claims
of the Company’s creditors, if any, which could have priority over
the claims of the holders of the Company’s public shares (the
“public stockholders”).
Initial Business
Combination
The Company’s management has broad
discretion with respect to the specific application of the net
proceeds of the Public Offering, although substantially all of the
net proceeds of the Public Offering and the Private Placement are
intended to be generally applied toward consummating an Initial
Business Combination. The Initial Business Combination must occur
with one or more businesses or assets with a fair market value
equal to at least 80% of the assets held in the Trust Account.
There is no assurance that the Company will be able to successfully
effect an Initial Business Combination.
The Company will provide its public
stockholders with the opportunity to redeem all or a portion of
their shares upon the completion of the Initial Business
Combination, either (i) in connection with a stockholder
meeting called to approve the business combination or (ii) by
means of a tender offer. However, in no event will the Company
redeem its public shares in an amount that would cause its net
tangible assets to be less than $5,000,001.
If the Company holds a stockholder
meeting to approve the Initial Business Combination, a public
stockholder will have the right to redeem its public shares for an
amount in cash equal to its pro rata share of the aggregate amount
then on deposit in the Trust Account as of two business days prior
to the consummation of the Initial Business Combination, including
interest but less taxes payable. As a result, such shares of
Class A common stock have been recorded at redemption amount
and classified as temporary equity upon the completion of the
Public Offering, in accordance with the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
480, “Distinguishing Liabilities from Equity.”
Pursuant to the Company’s amended and
restated certificate of incorporation, if the Company is unable to
complete the Initial Business Combination by November 22, 2021, 18
months from the closing of the Public Offering, the Company will
(i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but no more than ten
business days thereafter redeem the public shares, at a per-share
price, payable in cash, equal to the aggregate amount then on
deposit in the Trust Account including interest earned on the funds
held in the Trust Account and not previously released to the
Company to pay franchise and income taxes (less up to $100,000 of
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, which redemption will completely
extinguish public stockholders’ rights as stockholders (including
the right to receive further liquidating distributions, if any),
subject to applicable law, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the
Company’s remaining stockholders and the Company’s board of
directors, dissolve and liquidate, subject in each case to the
Company’s obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable law. There will
be no redemption rights or liquidating distributions with respect
to the Company’s warrants, which will expire worthless if the
Company fails to complete the Initial Business Combination within
18 months of the closing of the Public Offering.
The Sponsor and the Company’s
officers and directors have entered into a letter agreement with
the Company, pursuant to which they have agreed to waive their
rights to liquidating distributions from the Trust Account with
respect to any Founder Shares and Private Placement Shares (as
defined below) held by them if the Company fails to complete the
Initial Business Combination within 18 months of the closing of the
Public Offering. However, if the Sponsor or any of the Company’s
directors or officers acquires shares of Class A common stock in or
after the Public Offering, they will be entitled to liquidating
distributions from the Trust Account with respect to such public
shares if the Company fails to complete the Initial Business
Combination within the prescribed time period.
In the event of a liquidation,
dissolution or winding up of the Company after an Initial Business
Combination, the Company’s remaining stockholders are entitled to
share ratably in all assets remaining available for distribution to
them after payment of liabilities and after provision is made for
each class of stock, if any, having preference over the common
stock. The Company’s stockholders have no preemptive or other
subscription rights. The Company will provide its stockholders with
the opportunity to redeem their public shares for cash equal to
their pro rata share of the aggregate amount then on deposit in the
Trust Account, under the circumstances, and, subject to the
limitations, described herein.
Letter
Agreement
The Company’s Sponsor, officers and
directors have entered into a letter agreement with the Company,
pursuant to which they have agreed, among other things (a) to waive
their redemption rights with respect to any Founder Shares, Private
Placement Shares and any Public Shares held by them in connection
with the completion of the Initial Business Combination, (b) to
waive their redemption rights with respect to their Founder Shares,
Private Placement Shares and public shares in connection with a
stockholder vote to approve an amendment to the Company’s amended
and restated certificate of incorporation to modify the substance
or timing of its obligation to redeem 100% of its public shares if
it does not complete an Initial Business Combination within 18
months from the closing of the Public Offering and (c) to vote
their Founder Shares and any Public Shares purchased during or
after the Public Offering (including in open market and privately
negotiated transactions) in favor of the Initial Business
Combination.
Forward Purchase
Agreement
B. Riley Principal Investments, LLC
(“BRPI”), a Delaware limited liability company, an affiliate of the
Sponsor entered into a forward purchase agreement (the “Forward
Purchase Agreement”) with the Company to provide for the purchase
by it (or its designees) of an aggregate of 2,500,000 Units at
$10.00 per Unit (the “Forward Purchase Units”) for an aggregate
purchase price of $25,000,000 in a private placement to close
concurrently with the closing of the Initial Business Combination
(the “Forward Purchase”). The obligations under the Forward
Purchase Agreement do not depend on whether any public stockholders
redeem their Class A common stock and provide the Company with a
minimum funding level for the Initial Business Combination. The
Forward Purchase Agreement includes registration rights with
respect to the Forward Purchase Units.
The proceeds from the sale of the
Forward Purchase Units may be used as part of the consideration to
the sellers in the Initial Business Combination, to pay expenses in
connection with the Initial Business Combination or for working
capital in the post-Business Combination company. The Forward
Purchase will be required to be made regardless of whether any
Class A common stock is redeemed by the Company’s public
stockholders and is intended to provide the Company with a minimum
funding level for the Initial Business Combination. The purchaser
will not have the ability to approve the Initial Business
Combination prior to the signing of a material definitive
agreement. The Forward Purchase Units will be issued only in
connection with the closing of the Initial Business
Combination.
NOTE 2 — SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of
Presentation
The financial statements of the
Company are presented in conformity with accounting principles
generally accepted in the United States of America
(“GAAP”).
Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply
with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act
registration statement declared effective or do not have a class of
securities registered under the Securities Exchange Act of 1934, as
amended) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but
any such an election to opt out is irrevocable. The Company has
elected not to opt out of such extended transition period which
means that when a standard is issued or revised and it has
different application dates for public or private companies, the
Company, as an emerging growth company, can adopt the new or
revised standard at the time private companies adopt the new or
revised standard.
This may make comparison of the
Company’s financial statement with another public company which is
neither an emerging growth company nor an emerging growth company
which has opted out of using the extended transition period
difficult or impossible because of the potential differences in
accounting standards used.
The Company’s unaudited condensed
interim financial statements have been prepared in accordance with
U.S. GAAP and the rules and regulations of the SEC for interim
financial information and the instructions to
Form 10-Q. Accordingly, the financial statements do not
include all of the information and footnotes required by U.S. GAAP.
In the opinion of management, all adjustments considered for a fair
presentation have been included. Operating results for the
three months ended March 31, 2020 are not necessarily indicative of
the results that may be expected for the year ending
December 31, 2020 or any other period. The accompanying
unaudited condensed interim financial statements should be read in
conjunction with the Company’s audited financial statements and
notes thereto included in the Company’s prospectus filed with the
SEC on May 20, 2020, as well as the Company’s audited balance sheet
statement and notes thereto included in the Company’s Form 8-K
filed with the SEC on May 28, 2020.
Loss Per Common
Share
The Company complies with accounting
and disclosure requirements of ASC Topic 260, “Earnings Per Share.”
Net loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding for the
period, excluding shares of common stock subject to forfeiture. Net
loss per common share is computed by dividing net gain/(loss)
applicable to common stockholders by the weighted average number of
common shares outstanding during the period, plus, to the extent
dilutive, the incremental number of shares of common stock to
settle warrants, as calculated using the treasury stock method. At
March 31, 2020, the Company did not have any dilutive securities
and other contracts that could, potentially, be exercised or
converted into common stock and then share in the earnings of the
Company under the treasury stock method. As a result, diluted loss
per common share is the same as basic loss per common share for the
periods. In February 2020, the Company completed a stock split of 1
to 575 shares of Class B common stock, resulting in
5,750,000 shares of Class B common stock issued and
outstanding. The financial statements have been retroactively
adjusted to reflect the stock split for all periods
presented.
Cash and Cash
Equivalents
The Company considers all short-term
investments with an original maturity date of three months or less
when purchased to be cash equivalents. The Company did not have any
cash equivalents as of March 31, 2020 and December 31,
2019.
Concentration of Credit
Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk
consist of cash accounts in a financial institution, which, at
times, may exceed the Federal Depository Insurance Coverage of
$250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant
risks on such accounts.
Fair Value of Financial
Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments
under ASC Topic 820, “Fair Value Measurement,” approximates the
carrying amounts represented in the balance sheet, primarily due to
their short-term nature.
Use of
Estimates
The preparation of financial
statements in conformity with GAAP requires the Company’s
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Deferred Offering
Costs
The Company complies with the
requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin Topic 5A — “Expenses of Offering.” Deferred offering costs
of $35,000 as of March 31, 2020, consisted principally of costs
incurred in connection with preparation for the Public Offering.
The total offering costs incurred by the Company in connection with
the Public Offering was $561,189. These costs and the underwriter
discount, of $3,500,000, were charged to capital upon completion of
the Public Offering on May 22, 2020.
Income Taxes
The Company is included in the
consolidated tax return of B. Riley Financial (the
“Parent”). The Company calculates the provision for income
taxes by using a “separate return” method. Under this method
the Company is assumed to file a separate return with the tax
authority, thereby reporting its taxable income or loss and paying
the applicable tax to, or receiving the appropriate refund from,
the Parent. The Company’s current provision is the amount of
tax payable or refundable on the basis of a hypothetical, current
year, separate return.
Any difference between the tax
provision (or benefit) allocated to the Company under the separate
return method and payments to be made by (or received from) the
Parent for tax expense are treated as either dividends or capital
contribution. Accordingly, the amount by which the Company’s
tax liability under the separate return method exceeds the amount
of tax liability ultimately settled as a result of using
incremental expenses of the Parent is periodically settled as a
capital contribution from the Parent to the Company.
The Company complies with the
accounting and reporting requirements of ASC Topic 740 “Income
Taxes,” which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts, based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
ASC Topic 740 prescribes a
recognition threshold and a measurement attribute for the financial
statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be
recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company
recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of March 31, 2020 and
December 31, 2019, there were no unrecognized tax benefits and no
amounts accrued for interest and penalties. The Company is
currently not aware of any issues under review that could result in
significant payments, accruals or material deviation from its
position.
The Company may be subject to
potential examination by federal, state and city taxing authorities
in the areas of income taxes. These potential examinations may
include questioning the timing and amount of deductions, the nexus
of income among various tax jurisdictions and compliance with
federal, state and city tax laws. The Company’s management does not
expect that the total amount of unrecognized tax benefits will
materially change over the next twelve months.
There was no provision for income
taxes for the three months ended March 31, 2020.
Following changes in ownership on May
22, 2020, the Company deconsolidated from the Parent for tax
purposes. Beginning May 22, 2020, the Company files separate
corporate federal and state and local income tax
returns.
Unrecognized Tax
Benefits
The Company recognizes tax positions
in its financial statements only when it is more likely than not
that the position will be sustained on examination by the relevant
taxing authority based on the technical merits of the
position. A position that meets this standard is measured at
the largest amount of benefit that will more likely than not be
realized on settlement. A liability is established for
differences between positions taken in a tax return and amounts
recognized in the financial statements. There were no
unrecognized tax benefits as of March 31, 2020. The Company
recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. No amounts were accrued
for interest expense and penalties related to income tax matters as
of March 31, 2020. The Company is subject to income tax
examinations by major taxing authorities since
inception.
Recent Accounting
Standards
Management does not believe that any
recently issued, but not yet effective, accounting standards
updates, if currently adopted, would have a material effect on the
Company’s financial statements.
NOTE 3 — RELATED PARTY
TRANSACTIONS
Founder
Shares
On June 3, 2019, 10,000 shares of the
Company’s common stock were issued to B. Riley Principal
Investments, LLC. On February 3, 2020, the Company conducted a
1:575 stock split and reclassification, resulting in B. Riley
Principal Investments, LLC holding 5,750,000 shares of Class B
common stock (the “Founder Shares”). All of the Founder Shares were
contributed to the Sponsor in January 2020. The financial
statements reflect the issuance of these shares retroactively for
all periods presented. On April 21, 2020, 20,000 Founder
Shares were transferred to each of Patrick Bartels, Jamie Kempner,
Timothy Presutti and Robert Suss, the Company’s independent
directors, at their par value. On May 19, 2020, the Sponsor
returned 718,750 shares of Class B common stock to Company for
cancellation, resulting in a total of 5,031,250 Founder Shares
outstanding. As used herein, unless the context otherwise requires,
Founder Shares shall be deemed to include the shares of Class A
common stock issuable upon conversion thereof. The Founder Shares
are identical to the Class A common stock included in the Units
sold in the Public Offering, the Founder Shares will automatically
convert into shares of Class A common stock at the time of the
Initial Business Combination and are subject to certain transfer
restrictions, as described in more detail below, and the holders of
the Founder Shares, as described in more detail above, have agreed
to certain restrictions and will have certain registration rights
with respect thereto. Up to 656,250 Founder Shares were subject to
forfeiture depending on the extent to which the underwriters’
over-allotment option to purchase additional Units was exercised.
On May 28, 2020, the underwriters confirmed that they will not be
exercising their over-allotment option in whole or in part, as such
656,250 Founder Shares have been forfeited. The number of Founder
Shares issued was determined based on the expectation that the
Founder Shares would represent 20% of the outstanding shares of
Company common stock upon completion of the Public Offering
excluding the shares underlying the Private Placement Units (the
“Private Placement Shares”).
The Company’s initial stockholders,
officers and directors have agreed, subject to limited exceptions,
not to transfer, assign or sell any Founder Shares held by them
until the earlier to occur of: (i) one year after the completion of
the Initial Business Combination, (ii) the last sale price of Class
A common stock equals or exceeds $12.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day
period commencing at least 150 days after the Initial Business
Combination, or (iii) the date following the completion of the
Initial Business Combination on which the Company completes a
liquidation, merger, stock exchange, reorganization or other
similar transaction that results in all of the public stockholders
having the right to exchange their shares of common stock for cash,
securities or other property.
Business Combination Marketing
Agreement
Pursuant to a business combination
marketing agreement, the Company engaged B. Riley FBR, Inc. as
advisors in connection with its Initial Business Combination to
assist it in arranging meetings with its stockholders to discuss a
potential business combination and the target business’ attributes,
introduce it to potential investors that may be interested in
purchasing its securities, assist it in obtaining stockholder
approval for its Initial Business Combination and assist it with
the preparation of press releases and public filings in connection
with the Initial Business Combination. The Company will pay B.
Riley FBR, 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 the Company does not complete an Initial Business
Combination.
Administrative
Fees
Commencing on May 19, 2020, the
Company agreed to pay an affiliate of the Sponsor a total of
$10,000 per month for office space, utilities and secretarial and
administrative support. Upon completion of the Initial Business
Combination or the Company’s liquidation, it will cease paying
these monthly fees.
Registration
Rights
The holders of Founder Shares (and
any shares of Class A common stock issuable upon conversion of the
Founder Shares), Private Placement Units, Private Placement Shares,
Private Placement Warrants (and any shares of Class A common stock
issuable upon the exercise of the Private Placement Warrants) and
any securities that may be issued upon conversion of working
capital loans, if any, have registration rights to require the
Company to register the resale of any of its securities held by
them (in the case of the Founder Shares, only after conversion of
such shares to shares of Class A common stock) pursuant to a
registration rights agreement. The holders of the majority of these
securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities.
These holders are also entitled to certain piggyback registration
rights with respect to registration statements filed subsequent to
the completion of the Initial Business Combination and rights to
require the Company to register for resale such securities pursuant
to Rule 415 under the Securities Act. However, the registration
rights agreement provides that the Company will not permit any
registration statement filed under the Securities Act to become
effective until termination of the applicable lock-up period for
the securities to be registered. The Company will bear the expenses
incurred in connection with the filing of any such registration
statements. Notwithstanding the foregoing, the Sponsor may not
exercise its demand and piggyback registration rights after five
and seven years, respectively, after the effective date of the
registration statement of which this prospectus forms a part and
may not exercise its demand rights on more than one occasion. The
Forward Purchase Units and securities underlying the Forward
Purchase Units have substantially similar registration
rights.
Note Payable - Related
Party
The Company had a Note Payable to the
Sponsor which allowed the Company to borrow up to $300,000 without
interest to be used for a portion of the expenses associated with
the Public Offering. The Note Payable was payable on the earlier
of: (i) December 31, 2019 or (ii) the date on which the Company
consummated an initial public offering of its securities. At March
31, 2020, the Note Payable balance was $50,000. On April 21, 2020,
the Company borrowed an additional $50,000 which increased the Note
Payable balance to $100,000 which was paid in full using proceeds
from the Public Offering and the Private Placement on May 27,
2020.
NOTE 4 — STOCKHOLDER’S
EQUITY
Common Stock
The authorized common stock of the Company includes up to
100,000,000 shares of Class A common stock and 25,000,000
shares of Class B common stock. If the Company enters into an
Initial Business Combination, it may (depending on the terms of
such an Initial Business Combination) be required to increase the
number of shares of Class A common stock which the Company is
authorized to issue at the same time as the Company’s stockholders
vote on the Initial Business Combination, to the extent the Company
seeks stockholder approval in connection with the Initial Business
Combination. Holders of the Company’s common stock are entitled to
one vote for each share of common stock. On February 3, 2020, the
Company conducted a 1:575 stock split and reclassification
resulting in 5,750,000 shares of Class B common stock outstanding
(up to 750,000 shares of which are subject to forfeiture
depending on the extent to which the underwriters’
over-allotment option is exercised) at March 31, 2020 and
December 31, 2019. On April 21, 2020, 80,000 founder shares
were transferred to the Company’s independent directors, at their
par value. On May 19, 2020, 718,750 shares of Class B common
stock were returned to Company by the Sponsor for cancellation,
resulting in a total of 5,031,250 Class B common stock outstanding
(up to 656,250 shares of which are subject to forfeiture
depending on the extent to which the underwriters’
over-allotment option is exercised).
Preferred
Stock
The Company is authorized to issue
1,000,000 shares of preferred stock with such designations, voting
and other rights and preferences as may be determined from time to
time by the Company’s board of directors. At March 31, 2020 and
December 31, 2019, there were no shares of preferred stock issued
or outstanding.
Warrants
Warrants may only be exercised for a
whole number of shares. No fractional Warrants will be issued upon
separation of the Units and only whole Warrants will trade. The
Warrants will become exercisable on the later of (a) 30 days after
the completion of the Initial Business Combination or (b) 12 months
from the closing of the Public Offering; provided in each case that
the Company has an effective registration statement under the
Securities Act covering the shares of Class A common stock issuable
upon exercise of the Warrants and a current prospectus relating to
them is available (or the Company permits holders to exercise their
Warrants on a cashless basis and such cashless exercise is exempt
from registration under the Securities Act). The Company will as
soon as practicable, but in no event later than 15 business days,
after the closing of the Initial Business Combination, use its best
efforts to file with the Securities and Exchange Commission (“SEC”)
a registration statement for the registration, under the Securities
Act, of the shares of Class A common stock issuable upon exercise
of the Warrants, to cause such registration statement to become
effective within 60 business days after the closing of the Initial
Business Combination and to maintain a current prospectus relating
to those shares of Class A common stock until the Warrants expire
or are redeemed, as specified in the Company’s warrant agreement.
If the shares issuable upon exercise of the Warrants are not
registered under the Securities Act by the
60th business day after the closing of the Initial
Business Combination, the Company will be required to permit
holders to exercise their Warrants on a “cashless basis” in
accordance with Section 3(a)(9) of the Securities Act or another
exemption. Notwithstanding the above, if the Company’s Class A
common stock is at the time of any exercise of a Warrant not listed
on a national securities exchange such that it satisfies the
definition of a “covered security” under Section 18(b)(1) of the
Securities Act, the Company may, at its option, require holders of
Warrants who exercise their Warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in
the event the Company elects, the Company will not be required to
file or maintain in effect a registration statement, but the
Company will use its best efforts to register or qualify the shares
under applicable blue sky laws to the extent an exemption is not
available.
The Warrants will expire at 5:00
p.m., New York City time, five years after the completion of a
Business Combination or earlier upon redemption or
liquidation.
The Private Placement Warrants are
identical to the Warrants underlying the Units sold in the Public
Offering, except that the Private Placement Warrants and the shares
of Class A common stock issuable upon exercise of the Private
Placement Warrants will not be transferable, assignable or salable
until 30 days after the completion of the Initial Business
Combination, subject to certain limited exceptions. Additionally,
the Private Placement Warrants will be non-redeemable so long as
they are held by the Sponsor or its permitted transferees. If the
Private Placement Warrants are held by someone other than the
Sponsor or its permitted transferees, the Private Placement
Warrants will be redeemable by the Company and exercisable by such
holders on the same basis as the Warrants.
The Company may call the Warrants for
redemption (except with respect to the Private Placement
Warrants):
|
· |
in
whole and not in part; |
|
· |
at a price of $0.01 per
warrant; |
|
· |
upon a minimum of 30 days’ prior
written notice of redemption (the “30-day redemption period”);
and |
|
· |
if,
and only if, the last sale price of the Class A common stock equals
or exceeds $18.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any
20 trading days within a 30-trading day period ending on the third
trading day prior to the date on which the Company sends the notice
of redemption to the warrant holders. |
If the Company calls the Warrants for
redemption, management will have the option to require all holders
that wish to exercise the Warrants to do so on a “cashless basis,”
as described in the warrant agreement.
The exercise price and number of
shares of Class A common stock issuable upon exercise of the
Warrants may be adjusted in certain circumstances including in the
event of a share dividend, or recapitalization, reorganization,
merger or consolidation. In addition, if (x) the Company issues
additional shares of Class A common stock or securities convertible
into or exercisable or exchangeable for shares of Class A common
stock for capital raising purposes in connection with the closing
of the Initial Business Combination (excluding any issuance of
securities under the forward purchase agreement), at an issue price
or effective issue price of less than $9.20 per share of Class A
common stock (with such issue price or effective issue price to be
determined in good faith by the Company’s board of directors and,
in the case of any such issuance to the Sponsor or its affiliates,
without taking into account any Founder Shares held by the Sponsor
or such affiliates, as applicable, prior to such issuance (the
“Newly Issued Price”)), (y) the aggregate gross proceeds from such
issuances represent more than 60% of the total equity proceeds, and
interest thereon, available for funding the Initial Business
Combination, and (z) the volume weighted average trading price of
the Class A common stock during the 20 trading day period starting
on the trading day prior to the day on which the Company
consummates the Initial Business Combination (the “Market Value”)
is below $9.20 per share, the exercise price of the Warrants will
be adjusted (to the nearest cent) to be equal to 115% of the higher
of the Market Value and the Newly Issued Price, and the $18.00 per
share redemption trigger price described above will be adjusted (to
the nearest cent) to be equal to 180% of the higher of the Market
Value and the Newly Issued Price. Additionally, in no event
will the Company be required to net cash settle any Warrant. In the
event that a registration statement is not effective for the
exercised Warrants, the purchaser of a Unit containing such Warrant
will have paid the full purchase price for the Unit solely for the
share of Class A common stock underlying such Unit. There will be
no redemption rights or liquidating distributions with respect to
the Warrants, which will expire worthless if the Company fails to
complete an Initial Business Combination within the 18-month time
period.
NOTE 5 — SUBSEQUENT
EVENTS
The Company evaluates subsequent events and transactions that occur
after the balance sheet date up to the date that the financial
statements were issued. Other than described in these financial
statements in relation to the Company’s Initial Public Offering and
the transaction on June 24, 2020 described below, the Company did
not identify any subsequent events that would have required
adjustment or disclosure in the financial statements.
On June 24, 2020, the Company executed a letter of intent with
privately held Eos Energy Storage LLC (“EOS”) for a business
combination transaction which would result in privately held EOS
becoming a publicly listed company. Founded in 2008, EOS is an
established provider of long-duration energy storage focused on
providing a domestic solution to a global need: low-cost, safe, and
environmentally friendly energy storage. The transaction
contemplates a valuation of EOS of approximately $290,000,000. The
proposed transaction would provide EOS with approximately
$225,000,000 of additional new equity financing, including
$50,000,000 of proceeds from a fully backstopped private placement
of private equity by B. Riley Financial, assuming no public
shareholders of the Company exercise their redemption rights at
closing. The proposed transaction is expected to be completed in
the fourth quarter of 2020, subject to, among other things, the
negotiation and execution of a definitive agreement providing for
the transaction, the approval by the Company’s shareholders,
satisfaction of the conditions stated in the letter of intent and
other customary closing conditions. Accordingly, there can be no
assurance that a definitive agreement will be entered into or that
the proposed transaction will be consummated.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
References in this Quarterly Report
on Form 10-Q (this “Quarterly Report”) to “we,” “us,”
“our” or the “Company” are to B. Riley Principal Merger Corp. II.
References to our “management” or our “management team” refer to
our officers and directors. The following discussion and analysis
should be read in conjunction with our unaudited condensed
financial statements and related notes thereto included elsewhere
in this Quarterly Report.
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 final prospectus for
our Public Offering (as defined below) 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”) that closed on May 22, 2020
(the “Closing Date”) and the private placement units to purchase
shares of our Class A common stock (“Private Placement
Warrants”) that closed on the Closing Date and from additional
issuances of, if any, our capital stock and our debt, or a
combination of cash, stock and debt.
Our business activities from
inception to March 31, 2020 consisted primarily of our formation
and preparation for our Public Offering that was completed on May
22, 2020, and since the offering on May 22, 2020, our activity has
been limited to identifying and evaluating prospective acquisition
targets for an Initial Business Combination.
At March 31, 2020, we had cash of $14,894 and current liabilities
of $85,625. Further, we expect to continue to incur significant
costs in the pursuit of our acquisition plans. We cannot assure you
that our plans to complete an Initial Business Combination will be
successful.
Results of
Operations
For the three months ended March 31,
2020, we had a net loss of $454. Our net loss for the three months
ended March 31, 2020, solely consisted of formation costs and
general and administrative expenses. There was no operation of the
Company during the three months ended March 31, 2019 as the Company
was formed on June 3, 2019.
Liquidity and Capital
Resources
Until the closing of the Public
Offering, our only source of liquidity was an initial sale of
shares (the “Founder Shares”) of Class B common stock, par
value $0.0001 per share, to our sponsor, B. Riley Principal Sponsor
Co. II, LLC, a Delaware limited liability company (the “Sponsor”),
and the proceeds of a promissory note (the “Note”) from the
Sponsor, in the amount of $300,000. The Note was repaid upon the
closing of the Public Offering.
At March 31, 2020 we had cash of $14,894 and working capital
deficit of $70,731.
We completed the sale of 17,500,000
units at an offering price of $10.00 per unit in the Public
Offering. The Sponsor subscribed to purchase an aggregate of
650,000 units at a price of $10.00 per Private Placement Unit in a
private placement that closed on May 22, 2020 simultaneously with
the Public Offering. The sale of the 17,500,000 Units generated
gross proceeds of $175,000,000, less underwriting commissions of
$3,500,000 (2% of gross proceeds) and other offering costs of
$523,135. The Private Placement Units generated $6,500,000 of
proceeds.
Each unit consists of one share of
our Class A common stock, $0.0001 par value (each a “public
share”), and one-half of one redeemable warrant, with each whole
warrant exercisable for one share of Class A common stock
(each, a “Warrant” and, collectively, the “Warrants” and, with
respect to the warrants underlying the Private Placement Units, the
“Private Placement Warrants”). One Warrant entitles the holder
thereof to purchase one whole share of Class A common stock at
a price of $11.50 per share.
We
granted the underwriters a 45-day option to purchase on a pro rata
basis up to 2,625,000 additional units at the initial public
offering price less the underwriting discounts and
commissions. On May 28, 2020,
the underwriters confirmed that they will not be exercising their
over-allotment option in whole or in part.
In addition, income on the funds held
in the Trust Account may be released to us to pay our franchise and
income taxes.
We do not believe we will need to
raise additional funds other than the funds raised in the Public
Offering on May 22, 2020 in order to meet the expenditures required
for operating our business. However, if our estimates of the costs
of identifying a target business,
undertaking in-depth due diligence and negotiating an
Initial Business Combination are less than the actual amount
necessary to do so, we may have insufficient funds available to
operate our business prior to our Initial Business Combination.
Moreover, we may need to obtain additional financing either to
complete our Initial Business Combination or because we become
obligated to redeem a significant number of our shares of
Class A common stock upon completion of our Initial Business
Combination, in which case we may issue additional securities or
incur debt in connection with such business combination (including
from our affiliates or affiliates of our Sponsor).
Off-Balance Sheet
Arrangements
We have no obligations, assets or
liabilities which would be considered off-balance sheet
arrangements. We do not participate in transactions that create
relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities,
which would have been established for the purpose of
facilitating off-balance sheet arrangements.
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.
Contractual
Obligations
At March 31, 2020, we did not have
any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities. On May 19, 2020, we entered
into an administrative support agreement pursuant to which we have
agreed to pay an affiliate of the Sponsor a total of $10,000 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.
We have engaged B. Riley FBR, Inc. as
advisors in connection with the Initial Business Combination to
assist us in arranging meetings with stockholders to discuss a
potential 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 FBR,
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.
Critical Accounting
Policies
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
condensed 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:
Deferred Offering
Costs
We comply with the requirements of the FASB ASC 340-10-S99-1 and
SEC Staff Accounting Bulletin Topic 5A — “Expenses of Offering.”
Deferred offering costs of $70,000 as of March 31, 2020 consist
principally of costs incurred in connection with preparation for
the Public Offering. These costs, together with the underwriter
discount, were charged to capital upon completion of the Public
Offering in May 2020.
Recent Accounting
Pronouncements
Management does not believe that any
recently issued, but not yet effective, accounting pronouncements,
if currently adopted, would have a material effect on our financial
statements.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk.
As of March 31, 2020, we were not
subject to any material market or interest rate risk. The net
proceeds of the Public Offering and the Private Placement Warrants,
including amounts in the Trust Account, were invested in money
market funds that meet certain conditions
under Rule 2a-7 under the Investment Company Act.
Due to the short-term nature of these investments, we believe there
was no associated material exposure to interest rate
risk.
We have not engaged in any hedging
activities since our inception. We do not expect to engage in any
hedging activities with respect to the market risk to which we are
exposed.
Item 4. Controls and
Procedures.
Disclosure controls and procedures
are controls and other procedures that are designed to ensure that
information required to be disclosed in our reports filed or
submitted under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), is recorded, processed, summarized and
reported within the time periods specified in the SEC’s
rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that
information required to be disclosed in company reports filed or
submitted under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer (who serves as
our Principal Executive Officer) and Chief Financial Officer (who
serves as our Principal Financial and Accounting Officer), as
appropriate, to allow timely decisions regarding required
disclosure.
As required
by Rules 13a-15 and 15d-15 under the
Exchange Act, our Chief Executive Officer and Chief Financial
Officer carried out an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures as
of March 31, 2020. Based upon his evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure
controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) were effective.
During the most recently completed
fiscal quarter, there has been no change in our internal control
over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.
Inherent Limitation on
Effectiveness of Controls
Our management, including our Chief
Executive Officer and Chief Financial Officer, does not expect that
our disclosure controls and procedures or our internal control over
financial reporting will prevent or detect all errors and all
fraud. A control system, no matter how well-designed and operated,
can provide only reasonable, not absolute, assurance that the
control system’s objectives will be met. The design of a control
system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their
costs. Further, because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all
control issues and instances of fraud, if any, have been detected.
The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any
evaluation of the effectiveness of controls to future periods are
subject to risks. Over time, controls may become inadequate because
of changes in conditions or deterioration in the degree of
compliance with policies or procedures.
PART II—OTHER
INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk
Factors.
Factors that could cause our actual
results to differ materially from those in this Quarterly Report
are any of the risks described in our prospectus dated May 19, 2020
filed with the SEC on May 20, 2020. Any of these factors could
result in a significant or material adverse effect on our results
of operations or financial condition. Additional risk factors not
presently known to us or that we currently deem immaterial may also
impair our business or results of operations.
As of the date of this Quarterly
Report on Form 10-Q, there have been no material changes
to the risk factors disclosed in our prospectus dated May 19, 2020
filed with the SEC on May 20, 2020. However, we may disclose
changes to such factors or disclose additional factors from time to
time in our future filings with the SEC.
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. The impact of the COVID-19
outbreak on the Company's 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. These developments and the impact of the COVID-19
outbreak on the financial markets and the overall economy are
highly uncertain and cannot be predicted. If the financial markets
and/or the overall economy are impacted for an extended period, the
Company's results of operations, financial position and cash flows
may be materially adversely affected. Additionally, the Company's
ability to complete an Initial Business Combination may be
materially adversely affected due to significant governmental
measures being implemented to contain the COVID-19 outbreak or
treat its impact, including travel restrictions, the shutdown of
businesses and quarantines, among others, which may limit the
Company's ability to have meetings with potential investors or
affect the ability of a potential target company's personnel,
vendors and service providers to negotiate and consummate an
Initial Business Combination in a timely manner. The Company's
ability to consummate an Initial Business Combination may also be
dependent on the ability to raise additional equity and debt
financing, which may be impacted by the COVID-19 outbreak and the
resulting market downturn. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity
Securities
On May 22,
2020, simultaneously with the closing of the Public Offering, we
completed the private sale of 650,000 Private Placement Units at a
purchase price of $10.00 per Private Placement Unit, to the
Sponsor, generating gross proceeds to us of $6,500,000. The Private
Placement Units are substantially identical to the units sold as
part of the units in the Public Offering (as described below),
except that our Sponsor has agreed not to transfer, assign or sell
any of the Private Placement Units (except to certain permitted
transferees) until 30 days after the completion of our Initial
Business Combination. The Private Placement Units are also not
redeemable by us so long as they are held by our Sponsor or its
permitted transferees, and they may be exercised by our Sponsor and
its permitted transferees on a cashless basis. The Private
Placement Units were issued in connection with our incorporation
pursuant to the exemption from registration contained in
Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”).
Use of Proceeds
On May 22, 2020, we consummated the
Public Offering of 17,500,000 Units. Each Unit consists of one
share of Class A common stock of the Company, par value
$0.0001 per share, and one-half of one redeemable warrant
of the Company. Each whole warrant entitles the holder thereof to
purchase one share of Class A Common Stock for $11.50 per
share, and only whole warrants are exercisable. The warrants will
become exercisable on the later of 30 days after the completion of
our Initial Business Combination and 12 months from the closing of
the Public Offering and will expire five years after the completion
of our Initial Business Combination or earlier upon redemption or
liquidation. Subject to certain terms and conditions, we may redeem
the warrants either for cash once the warrants become exercisable
or for shares of our Class A Common Stock commencing 90 days
after the warrants become exercisable.
The units were sold at a price of
$10.00 per unit, generating gross proceeds to the Company of
$175,000,000. B. Riley FBR, Inc. served as the sole book-running
manager for the offering. The securities sold in the Public
Offering were registered under the Securities Act on a registration
statement on Form S-1 (No. 333-237812). The SEC
declared the registration statements effective on May 20,
2020.
We paid a total of $3,500,000 in
underwriting discounts and commissions and $523,135 for other costs
and expenses related to the Public Offering. B. Riley FBR, Inc., an
underwriter in the Public Offering, and an affiliate of us and our
Sponsor (which Sponsor beneficially owns more than 10% of our
common stock) received a portion of the underwriting discounts and
commissions related to the Public Offering. After deducting the
underwriting discounts and commissions and incurred offering costs,
the total net proceeds from our Public Offering and the sale of the
Private Placement Warrants was approximately
$177,439,000, of
which $176,750,000 (or $10.10 per unit sold in the Public
Offering) was placed in the Trust Account. We also repaid $100,000
in noninterest bearing loans made to us by our Sponsor to cover
expenses related to the Public Offering. Other than as described
above, no payments were made by us to directors, officers or
persons owning ten percent or more of our common stock or to their
associates, or to our affiliates.
Item 3. Defaults Upon
Senior Securities.
None.
Item 4. Mine Safety
Disclosures.
Not applicable.
Item 5. Other
Information.
None.
Item 6.
Exhibits.
The
following exhibits are filed as part of, or incorporated by
reference into, this Quarterly Report on Form 10-Q.
Exhibit Index
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
B. Riley Principal Merger Corp. II |
|
|
|
|
Date:
June 26, 2020 |
By: |
/s/
DANIEL SHRIBMAN |
| |
|
Name:
Daniel Shribman |
| |
|
Title:
Chief Executive Officer and
Chief Financial
Officer
|
| |
|
(Principal
Executive Officer and |
| |
|
Principal
Financial
Officer) |
17
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