Business context and reporting period
American Acquisition Opportunity Inc. (the registrant in this filing; a blank-check company, not Royalty Management Holding Corp) filed this unaudited Form 10-Q for the quarter ended June 30, 2022. It was seeking a U.S. land-holdings or resources business combination. On June 28, 2022, it entered into a merger agreement with Royalty Management Co., an Indiana corporation.
Financial results and position
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | No operating revenue reported | No operating revenue reported |
| Expenses | $277,173 | $515,587 |
| Net income (loss) | $(673,853) | $3,018,101 |
| Basic and diluted earnings (loss) per share | $(0.15) | $0.36 |
| Operating cash flow | Not separately provided for the quarter | $138,952 provided |
- The six-month profit chiefly reflected a $3,505,895 non-cash gain from warrant fair-value changes; the quarter recorded a $422,853 warrant fair-value loss.
- At June 30, cash outside the trust was $127,187; trust assets were $15,811,165 and escrow cash was $280,875. Current liabilities were $126,595. The company reported no outstanding related-party loans and no long-term debt.
- Deferred underwriter commissions were $3.5 million. Public shares classified at redemption value were reported at $15,783,119.
- Liquidity outside the trust was limited. Management said it did not expect to need additional funds for operating expenditures, but warned that cost overruns or transaction financing needs could require additional financing.
Changes, outlook, risks and contingencies
- Trust assets declined from $106.1 million at December 31, 2021 to $15.8 million at June 30, 2022. The filing reports substantial share redemptions and an extension of the business-combination deadline from March 22 to September 21, 2022.
- Forward share purchase agreements covered 1,123,499 shares. Eligible investors could elect to sell shares for $10.35 each, funded with $10.10 per share from the trust and $0.25 from escrow; the company deposited approximately $280,875 in escrow.
- The company had no operating business or revenue and did not provide financial guidance. It said results were not necessarily indicative of future periods. It cited COVID-19 uncertainty and the risk that it might fail to complete a business combination before the deadline, potentially requiring liquidation.
- Warrants are recorded as liabilities and remeasured at fair value each reporting date, which may cause material non-cash earnings volatility. Public warrants may expire worthless if no business combination is completed. The sponsor’s trust-account indemnity has stated limitations, including for claims by parties that executed waivers.
- Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material change in internal control over financial reporting. No legal proceedings were reported.
Important facts to verify
- Confirm the registrant and transaction identity: this is American Acquisition Opportunity Inc.’s filing, which identifies Royalty Management Co. as its merger counterparty.
- Reconcile apparent filing inconsistencies: reported total assets of $116,397,608 do not match the balance-sheet components, which sum to $16,397,608; the equity statement’s ending accumulated deficit/equity figures also differ by $10,000 from related statements.
- Confirm the reported private-warrant fair value: the balance sheet and fair-value roll-forward show $772,522, while one fair-value table shows $722,522.
- Reconcile Class A share counts: the balance sheet reports 1,582,685 shares at redemption value, while the equity note and August 16 cover page report 1,562,685 shares.
- Review the merger’s completion status, extension deadline, redemption and forward-purchase obligations, and the availability of funds outside the trust.