The following discussion and analysis of the Company's financial condition and
results of operations of B. Riley Principal 150 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 whose
business purpose is to effect a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. Our Sponsor is B. Riley Principal 150 Sponsor Co., LLC,
a Delaware limited liability company (the "Sponsor").
The registration statement for our initial public offering (the "Public
Offering") was declared effective on February 18, 2021. On February 23, 2021, we
consummated our Public Offering of 17,250,000 Units, including 2,250,000
over-allotment Units, at $10.00 per Unit, generating gross proceeds of
$172.5 million.
Simultaneously with the closing of the Public Offering, we consummated the sale
of 520,000 Private Placement Units, at a price of $10.00 per Private Placement
Unit to the Sponsor, generating proceeds of $5.2 million.
Upon the closing of the Public Offering and the private placement,
$172.5 million ($10.00 per Unit) of the net proceeds of the Public Offering and
certain of the proceeds of the private placement was placed in a trust account
located in the United States with Continental Stock Transfer & Trust Company
acting as Trustee (the "Trust Account"), and will be invested only in
United States "government securities" within the meaning of Section 2(a)(16) of
the Investment Company 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 which invest only in direct U.S. government treasury
obligations, as determined by the Company, until the earlier of: (i) the
completion of a business combination and (ii) the distribution of the Trust
Account as described below.
If we are unable to complete a business combination by February 23, 2023, we
will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not 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 us to pay
our 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), and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of the remaining stockholders and the board of directors, liquidate and
dissolve, subject in each case to our obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
On October 24, 2021, the Company, entered into an Agreement and Plan of Merger
(as amended on December 29, 2021 and March 10, 2022 the "Merger Agreement") with
BRPM Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the
Company ("Merger Sub"), and FaZe Clan Inc., a Delaware Corporation ("FaZe"),
pursuant to which, subject to the satisfaction or waiver of certain conditions
set forth therein, Merger Sub will merge with and into FaZe (the "Merger"), with
FaZe surviving the merger in accordance with the Delaware General Corporation
Law as a wholly owned subsidiary of the Company (the transactions contemplated
by the Merger Agreement and the related ancillary agreements, the "Business
Combination"). At the closing of the Business Combination (the "Closing"), the
Company will change its name to "FaZe Holdings Inc." (the "Pubco").
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Concurrently with the execution of the Merger Agreement, the Company entered
into subscription agreements with investors (including investors related to or
affiliated with the Sponsor and an investor related to or affiliated with
existing FaZe stockholders) for an aggregate investment $118.0 million (the
"PIPE Investment"). On January 12, 2022, Cox Investment Holdings, Inc. assigned
all of its investments in FaZe, including its FaZe securities and its rights and
obligations under the subscription agreement, to its affiliate, AEV Esports, LLC
(the "FaZe PIPE Investor"). The closing of the PIPE Investment is conditioned
upon, among other things, (i) the satisfaction or waiver of all conditions
precedent to the Business Combination and the substantially concurrent
consummation of the Business Combination, (ii) the accuracy of all
representations and warranties of the Company and the PIPE Investors in the
Subscription Agreements, subject to certain bring-down standards, and (iii) the
satisfaction of all covenants, agreements, and conditions required to be
performed by the Company and the PIPE Investors pursuant to the Subscription
Agreements. The Subscription Agreements provide for certain customary
registration rights for the PIPE Investors. Affiliates of the Sponsor have
subscribed to purchase 2,200,000 shares of Class A common stock at $10.00 per
share in the PIPE Investment, for an aggregate purchase price of $22.0 million.
The parties have ascribed an equity value of the combined company, following the
consummation of the Business Combination, of $987.0 million, assuming none of
the Company's public stockholders seek to redeem their public shares for a pro
rata portion of the funds in the Trust Account.
Results of Operations
Our business activities from inception to March 31, 2022 consisted primarily of
our preparation for our Public Offering that was completed on February 23, 2021.
Since the Public Offering on February 23, 2021, our business activities have
consisted primarily of identification and evaluation of prospective acquisition
targets for an initial business combination. We have neither engaged in any
operations nor generated any revenues to date. We will not generate any
operating revenues until after completion of our Initial Business Combination.
We will generate non-operating income in the form of net gain from investments
held in Trust Account. We expect to incur increased expenses as a result of
being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the three months ended March 31, 2022, we had net income of $2,333,072. Our
net income for the three months ended March 31, 2022, consisted of interest
income earned in the amount of $16,401 on funds held in the Trust Account, loss
from operations in the amount of $945,787, and an unrealized gain on change in
fair value of warrant liability in the amount of $3,262,458. For the three
months ended March 31, 2021, we had a net loss of $587,600. Our net loss for the
three months ended March 31, 2021, consisted of interest income earned in the
amount of $4,075 on funds held in the Trust Account, loss from operations in the
amount of $180,104, warrant issue costs of $115,404, and an unrealized loss on
change in fair value of warrant liability in the amount of $296,167.
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 our Sponsor, and the proceeds of a promissory note (the
"Note") from the Sponsor, in the amount of $300,000. We had an outstanding
balance on the Note of $100,000 at the time of the Public Offering and the Note
was repaid in full on May 17, 2021 with proceeds raised from the closing of the
Public Offering.
Our registration statement for our Public Offering was declared effective on
February 18, 2021. On February 23, 2021, we consummated our Public Offering of
17,250,000 Units, including 2,250,000 over-allotment Units, at $10.00 per Unit,
generating gross proceeds of $172.5 million. Simultaneously with the closing of
the Public Offering, we consummated the sale of 520,000 Private Placement Units,
at a price of $10.00 per Private Placement Unit to the Sponsor, generating
proceeds of $5.2 million.
Upon the closing of the Public Offering and the Private Placement,
$172.5 million ($10.00 per Unit) of the net proceeds of the Public Offering and
certain of the proceeds of the private placement was placed in a Trust Account
located in the United States with Continental Stock Transfer & Trust Company
acting as Trustee, and will be invested only in United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company
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 which
invest only in direct U.S. government treasury obligations, as determined by the
Company, until the earlier of: (i) the completion of a business combination and
(ii) the distribution of the Trust Account as described below.
As of March 31, 2022, the Company had $85,204 in its operating bank account,
$172,532,601 in cash and cash equivalents 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 deficit of $3,053,182, which
excludes Delaware franchise taxes payable of $50,000 (which is included in
accounts payable and accrued expenses at March 31, 2022) as franchise taxes are
paid from the Trust Account from interest income earned.
18
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 February 23, 2023, the scheduled liquidation date.
Administrative Services Agreement
As of March 31, 2022, we did not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities. On February
18, 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 Proposed Transaction or another Initial Business Combination
and the Company's liquidation, we will cease paying these monthly fees.
Business Combination Marketing Agreement
We have engaged B. Riley Securities, Inc. as advisors in connection with the
Initial Business Combination to assist us in arranging meetings with
stockholders to discuss the potential Initial Business Combination and the
target business' attributes, introduce us to potential investors that may be
interested in purchasing our securities, assist us in obtaining stockholder
approval for our Initial Business Combination and assist us with the preparation
of press releases and public filings in connection with the Initial Business
Combination. We will pay B. Riley Securities, Inc. for such services upon the
consummation of the Initial Business Combination a cash fee in an amount equal
to 3.5% of the gross proceeds of the Public Offering (exclusive of any
applicable finders' fees which might become payable). Pursuant to the terms of
the business combination marketing agreement, no fee will be due if we do not
complete an Initial Business Combination.
Additionally, we engaged B. Riley Securities as the placement agent for the PIPE
Investment. Pursuant to this engagement, at the closing of the Proposed
Transaction, we will pay B. Riley Securities a fee of $3,471,625. If the
Proposed Transaction is not consummated, B. Riley Securities Inc. will not
receive such fee.
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. Due to the inherent uncertainty involved with estimates, actual
results may differ. 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.
19
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 continued to evolve, with the emergence of 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.
We have identified the following as our critical accounting policies:
Warrant Derivative Liability
In accordance with FASB ASC 815-40, "Derivatives and Hedging: Contracts in an
Entities Own Equity", an entity must consider whether to classify contracts that
may be settled in its own stock, such as warrants, as equity of the entity or as
an asset or liability. If an event that is not within the entity's control could
require net cash settlement, then the contract should be classified as an asset
or a liability rather than as equity. We have determined because the terms of
Public Warrants include a provision that entitles all warrant holders to cash
for their Public Warrants in the event of a qualifying cash tender offer, while
only certain of the holders of the underlying shares of common stock would be
entitled to cash, our Public Warrants should be classified as derivative
liability measured at fair value, with changes in fair value each period
reported in earnings. Further if our Private Placement Warrants are held by
someone other than initial purchasers of the Private Placement Warrants or their
permitted transferees, the Private Placement Warrants will be redeemable by the
Company and exercisable by such holders on the same basis as the Public
Warrants. Because the terms of the Private Placement Warrants and Public
Warrants are so similar, we classified both types of Warrants as a derivative
liability measured at fair value. Volatility in our Public Shares and Public
Warrants may result in significant changes in the value of the derivatives and
resulting gains and losses on our statement of operations.
Earnings (Loss) per Common Share
Basic earnings (loss) per common share is computed by dividing net income
applicable to common stockholders by the weighted average number of common
shares outstanding during the period. All shares of Class B common stock are
assumed to convert to shares of Class A common stock on a one-for-one basis.
Earnings and losses are shared pro rata between the two classes of shares.
Potential common shares for outstanding warrants to purchase the Company's stock
were excluded from diluted earnings per share for the three months ended March
31, 2022 and 2021 because the Warrants are contingently exercisable, and the
contingencies have not yet been met. As a result, diluted earnings (loss) 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 Class A
common stock features certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, as of March 31, 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.
20
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 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) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and was adopted by the Company on
January 1, 2022 and the impact of adopting this ASU is immaterial to the
financial statements.
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