Business context and reporting period
Important entity mismatch: Although the request metadata names Inspired Entertainment, Inc., this filing is for Hydra Industries Acquisition Corp., a blank-check company. The unaudited Form 10-Q covers the three months ended March 31, 2015 and was signed May 7, 2015. Hydra had not begun operating a business; its activities concerned formation, its October 2014 IPO and evaluating potential acquisitions.
Financial results and position
- Revenue: No operating revenue. Interest income was $8,802.
- Profitability: Operating costs were $195,089; net loss was $186,287, or $0.07 per basic and diluted share. No comparable prior-year quarter is presented.
- Cash flow: Net cash used in operations was $255,747 in the cash-flow statement; MD&A states $255,748. Financing cash use was $109. Cash outside the trust account declined from $1,123,278 at December 31, 2014 to $867,422 at March 31, 2015.
- Liquidity and assets: Total assets were $81.05 million, including $80.01 million in the trust account and $0.87 million of available cash outside it. Trust funds were restricted principally for a business combination or public-stockholder redemptions.
- Liabilities and equity: Total liabilities were $2.83 million, including $2.80 million of deferred underwriting fees payable upon a business combination. Current liabilities were $30,000. The filing reports no long-term debt. Redeemable shares were classified as temporary equity at $73.22 million; stockholders’ equity was $5.00 million.
- Margins: Not meaningful because Hydra had no operating revenue.
Changes, outlook and risks
Compared with December 31, 2014, outside cash fell by approximately $256,000, trust assets increased by approximately $9,000, current liabilities declined, and the reported net loss increased the accumulated deficit. The filing provides no business-combination guidance, revenue forecast or operating outlook. Management expected ongoing public-company and target-evaluation costs and said existing outside cash was expected to cover expenditures, but acknowledged estimates could prove insufficient and additional financing might be needed.
Hydra had 24 months from the October 29, 2014 IPO closing to complete a business combination; otherwise it would wind up and distribute trust funds to public stockholders, subject to stated terms. Completion was uncertain. A proposed transaction required Macquarie Sponsor approval under the forward purchase contract; that sponsor had committed to invest approximately $20 million at closing, subject to conditions. Public-share redemptions, dilution or new debt could affect transaction funding and existing holders. Deferred underwriting fees are payable only if a business combination closes. Management reported no material change to the risk factors in its prior Form 10-K, no legal proceedings, and effective disclosure controls.
Key facts for investors to verify
- Confirm the filing issuer: this is Hydra Industries Acquisition Corp., not Inspired Entertainment, Inc.
- Verify the status and terms of any proposed business combination, including Macquarie Sponsor consent, the forward purchase commitment and redemption levels.
- Assess available operating cash separately from the restricted trust balance and confirm the applicable deadline and liquidation provisions.
- Reconcile the $1 difference in reported operating cash use ($255,747 in the cash-flow statement versus $255,748 in MD&A).
- Confirm capitalization and share counts, including shares subject to possible redemption and any potential transaction-related dilution.