Business context and reporting period
Entity mismatch: The supplied filing is for M I Acquisitions, Inc., not Priority Technology Holdings, Inc. It is a Form 10-Q for the quarter ended June 30, 2017, filed August 10, 2017.
M I Acquisitions was a blank-check company seeking a business combination, with an intended focus on technology, media and telecommunications. It had not begun operating activities and reported no operating revenue.
Financial results and position
- Revenue: None; the company expected no operating revenue before completing a business combination.
- Net loss: $75,024 for Q2 2017 and $263,869 for the first six months of 2017. Q2 loss per share was $0.03; six-month loss per share was $0.11.
- Expenses and income: Q2 operating costs were $132,035 and related-party administrative fees were $30,000; interest income was $87,011. For the first six months, those amounts were $347,501, $60,000 and $143,632, respectively. Profit margins are not meaningful given the absence of revenue.
- Cash flow: Six-month cash used in operating activities was $286,847; investing activities provided net cash of $49,095. Cash outside the trust account declined by $237,752 to $124,783.
- Liquidity and assets: At June 30, cash outside the trust was $124,783, with $54.83 million held in the restricted trust account, primarily in U.S. Treasury bills. Total assets were $55.07 million. The company disclosed a working-capital deficit of approximately $89,800 and substantial doubt about its ability to continue as a going concern.
- Debt and liabilities: Total liabilities were $1.39 million, including a $27,500 note payable, $1.06 million deferred underwriting fee payable and $332,179 in current liabilities. The deferred underwriting fee was payable upon completion of a business combination.
Material changes versus comparable periods
Compared with Q2 2016, when no expenses or loss were reported, Q2 2017 included $162,035 of total expenses, partly offset by $87,011 of interest income, resulting in a $75,024 net loss. For the first six months, the net loss increased from $7,264 in 2016 to $263,869 in 2017, reflecting the company’s post-offering activity, including administrative fees and operating costs. Cash outside the trust fell from $362,535 at December 31, 2016 to $124,783 at June 30, 2017; trust assets rose to $54.83 million.
Outlook, risks and unusual items
- Management said approximately $125,000 of cash outside the trust was expected to be insufficient to fund operations through the business-combination deadline without additional financing. Shareholders, officers and directors were not obligated to provide funding; financing availability was uncertain.
- The company had 18 months from the offering to complete a business combination, with up to three one-month extensions if insiders deposited required funds. Failure to complete a transaction would require redemption of public shares and liquidation; warrants would expire worthless.
- The filing identifies substantial doubt about going-concern continuity. Trust funds were restricted and could be subject to third-party claims; insider protection obligations might not be satisfiable.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. No off-balance-sheet arrangements were reported, and management considered market-risk exposure immaterial due to short-term Treasury investments.
- The filing states that an affiliate was owed monthly administrative fees of $10,000 and that payment was deferred beginning in April 2017.
Important facts to verify
- Confirm whether this is the intended filing: the document identifies M I Acquisitions, Inc., not Priority Technology Holdings, Inc.
- Verify the applicable business-combination deadline and extension terms: the filing gives 18 months and refers to March 19, 2018 in one section, while other text cites March 13, 2018.
- Review available financing, spending needs and the going-concern uncertainty, including the status of deferred related-party administrative fees.
- Confirm the amount and availability of trust funds, redemption obligations, and any subsequent business-combination or extension developments.