Business Context and Reporting Period
This unaudited Form 10-Q covers the three months ended March 31, 2018. The filing identifies the registrant as Mudrick Capital Acquisition Corporation, not Hycroft Mining Holding Corp.; investors should verify the company and filing association.
Mudrick was a newly formed blank-check company seeking a merger, acquisition, or similar business combination, with an intended focus on businesses recently emerging from bankruptcy. It had not commenced operating activities or generated operating revenue as of March 31, 2018. Its initial public offering closed in February 2018.
Financial Metrics
| Metric | March 31, 2018 / Q1 2018 |
|---|---|
| Cash outside Trust Account | $835,631 |
| Cash and marketable securities in Trust Account | $210.2 million |
| Total assets | $211.1 million |
| Total liabilities | $7.3 million |
| Common stock subject to possible redemption | $198.8 million, representing 19,681,326 shares at $10.10 per share |
| Stockholders’ equity | $5.0 million |
| Operating revenue | None |
| General and administrative expense | $105,860 |
| Interest income | $112,188, including $111,736 earned on Trust Account securities |
| Net loss | $6,732 |
| Net cash used in operating activities | $153,030 |
| Long-term debt | None reported |
Cash flow from financing activities was $211.0 million, primarily from $203.8 million of net unit proceeds and $7.7 million from private placement warrants. The Company invested $210.1 million in the Trust Account. The Trust Account was invested in U.S. Treasury securities or qualifying money market funds.
Material Changes Versus the Prior Comparable Period
- The company completed its initial public offering of 20.8 million units at $10.00 per unit, including 800,000 units issued upon partial exercise of the over-allotment option.
- It raised gross IPO proceeds of $208.0 million and received $7.74 million from the sale of private placement warrants.
- Trust Account assets increased from zero at December 31, 2017 to $210.2 million at March 31, 2018.
- Cash increased from $24,945 to $835,631, while total assets increased from $191,445 to $211.1 million.
- The related-party promissory note was repaid, and deferred underwriting fees of $7.28 million were recorded. These fees are payable only if a business combination is completed.
- There is no meaningful prior-quarter operating comparison because the company was formed in August 2017 and had not begun operations.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expects no operating revenue until after completion of an initial business combination and expects continued transaction, public-company compliance, diligence, and administrative expenses.
- The company must complete a qualifying business combination by February 12, 2020 or liquidate and redeem the public shares using the Trust Account, subject to applicable obligations and permitted deductions.
- A target business generally must have an aggregate fair market value of at least 80% of the Trust Account assets, excluding deferred underwriting commissions and applicable taxes.
- Public stockholders may redeem shares in connection with a business combination, subject to a 15% redemption limitation for an individual stockholder and its affiliates or group without company consent.
- The Sponsor committed to purchase $25.0 million of forward units and Class A shares concurrently with a business combination, providing a potential minimum funding source.
- The company has no long-term debt or off-balance-sheet financing arrangements. Sponsor administrative support costs are $10,000 per month until the earlier of a business combination or liquidation.
- Private and public warrants generally have an $11.50 exercise price and may expire worthless if no business combination is completed.
- Key risks include failure to identify or complete a business combination, redemption of a substantial portion of public shares, insufficient funds for transaction costs, dilution from additional equity or debt financing, and potential inability to obtain acquisition financing.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting. No legal proceedings or material changes to previously disclosed risk factors were reported.
Important Facts for Investors to Verify
- Confirm that this filing belongs to Mudrick Capital Acquisition Corporation and not Hycroft Mining Holding Corp.
- Verify the status of any subsequent business combination, liquidation deadline, redemption activity, and Trust Account balance after March 31, 2018.
- Review the terms and potential dilution from 28.54 million public and private warrants, founder shares, and the $25.0 million forward purchase commitment.
- Confirm that the $7.28 million deferred underwriting fee remains contingent on completion of a business combination.
- Assess whether cash outside the Trust Account was sufficient to fund transaction and operating expenses before any business combination.
- Review the final IPO prospectus and subsequent SEC filings for changes to target strategy, redemption rights, financing, or risk factors.