Business Context and Reporting Period
This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2018. The filing identifies the registrant as Mudrick Capital Acquisition Corporation, not Hycroft Mining Holding Corp.; investors should verify the requested company and filing association.
Mudrick was a Delaware blank-check company formed on August 28, 2017 to pursue a merger, acquisition, or similar business combination, with an intended focus on companies recently emerging from bankruptcy. It had not commenced operating activities or generated operating revenue as of September 30, 2018.
Financial Position and Key Metrics
| Metric | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 |
|---|---|---|
| Operating expenses | $136,590 | $407,781 |
| Trust-account interest income | $913,360 | $1,804,362 |
| Net income | $597,572 | $1,053,601 |
| Income tax provision | $181,865 | $348,595 |
| Basic and diluted Class A earnings per share | $0.03 | $0.06 |
| Basic and diluted Class B loss per share | $(0.02) | $(0.05) |
- Total assets were $212.6 million at September 30, 2018, including $211.9 million in marketable securities held in the Trust Account and $679,154 of cash outside the Trust Account.
- Total liabilities were $7.8 million, including $7.28 million of deferred underwriting fees contingent on completion of a business combination.
- Common stock subject to possible redemption was recorded as temporary equity at a redemption value of $199.8 million, or $10.10 per share.
- The company had no long-term debt, capital leases, or operating leases reported. Current liabilities included $175,902 of accounts payable and accrued expenses and $348,595 of income taxes payable.
- Cash used in operating activities was $309,507 for the nine months. Cash provided by financing activities was $211.0 million, while $210.1 million was invested in the Trust Account.
- There were no operating revenues; reported profit resulted primarily from interest earned on Trust Account investments.
Material Changes Versus Prior Comparable Period
- Compared with the period from inception through September 30, 2017, when the company reported a $1,196 net loss and no investment income, the company reported $1.05 million of net income for the first nine months of 2018.
- The company completed its initial public offering in February 2018, selling 20.8 million units and raising gross proceeds of $208.0 million, including the partial exercise of the over-allotment option.
- The company also raised $7.74 million from the sale of private-placement warrants. Approximately $210.08 million was placed in the Trust Account.
- Cash increased from $24,945 at December 31, 2017 to $679,154 at September 30, 2018, while Trust Account securities increased from zero to $211.9 million.
- Founder shares outstanding declined from 5.75 million to 5.2 million following the forfeiture of 550,000 shares related to the underwriters’ partial over-allotment exercise.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expected to continue incurring costs for identifying, evaluating, and negotiating a target business and for public-company compliance. No operating revenue was expected before completion of a business combination.
- The company was required to complete a qualifying business combination by February 12, 2020. If unsuccessful, it must cease operations, redeem the public shares using the Trust Account, and liquidate.
- Public stockholders had redemption rights for a pro rata portion of the Trust Account, subject to specified limitations. Warrants could expire worthless if no business combination occurred.
- The sponsor committed to purchase $25.0 million of forward-purchase securities concurrently with a business combination, providing a stated minimum level of additional funding.
- The sponsor agreed to provide administrative services for $10,000 per month. The company incurred $30,000 in such fees during the quarter and $80,000 year to date.
- The company had no material legal proceedings and reported no material changes to the risk factors in its IPO prospectus.
- Principal risks included failure to complete a business combination, insufficient funds to complete a transaction, public-share redemptions, dilution from additional equity or warrants, and potential financing or debt-related constraints.
- Trust Account assets were invested in short-term U.S. government securities or qualifying money market funds; management reported no material interest-rate risk.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2018, with no material change in internal control over financial reporting.
Important Facts for Investors to Verify
- Confirm that this Mudrick Capital Acquisition Corporation Form 10-Q, rather than a Hycroft Mining Holding Corp. filing, is the intended source document.
- Verify the status and terms of any subsequent business combination, including the February 12, 2020 deadline disclosed in this filing.
- Reconcile the $211.9 million Trust Account balance with redemption rights, deferred underwriting fees, taxes, and liquidation provisions.
- Assess potential dilution from 20.8 million public warrants, 7.74 million private-placement warrants, founder shares, and the forward-purchase commitment.
- Review whether the company completed a qualifying business combination and whether any later filings superseded the financial and risk information presented here.