Business context and reporting period
This is an unaudited Form 10-Q for the quarter and nine months ended September 30, 2022, filed by American Acquisition Opportunity Inc. (AMAO), a blank-check company seeking a business combination, with an intended focus on U.S. land holdings and resources businesses. Although the request identifies Royalty Management Holding Corp, the filing names AMAO as the registrant; it reports that AMAO signed a merger agreement with Royalty Management Co. on June 28, 2022.
AMAO extended its business-combination deadline first to September 21, 2022 and then to March 21, 2023. The company identifies itself as a shell company. The statements are unaudited and should be read with its 2021 audited financial statements.
Financial results and liquidity
| Metric | September 30, 2022 / period | Comparison or context |
|---|---|---|
| Revenue | No operating revenue reported | Management does not expect operating revenue before a business combination. |
| Net income | $34,667 for Q3; $3,052,768 for the first nine months | Q3 2021: $584,592. The filing’s prior-year nine-month comparison is inception through September 30, 2021: $2,541,321. |
| Expenses | $307,965 for Q3; $823,552 for the first nine months | Primarily professional and general and administrative costs. |
| Warrant fair-value gain | $412,481 for Q3; $3,918,376 for the first nine months | Non-cash remeasurement gain; it materially contributed to reported net income. |
| Cash and cash equivalents outside trust | $98,439 | $293,153 at December 31, 2021. |
| Trust account | $7,548,977 | $106,116,023 at December 31, 2021. |
| Total assets | $8,029,822 | $107,186,710 at December 31, 2021. |
| Current liabilities | $422,432 | Includes $315,825 payable to a related party. |
| Other significant liabilities | $3,500,000 deferred underwriter commissions; $1,380,865 warrant liabilities | Warrant liabilities comprise $780,015 for public warrants and $600,850 for private warrants. |
| Debt and cash flow | No long-term debt reported; operating cash flow was $40,355 for the first nine months | Cash decreased by $194,714 during the period. The filing says related-party advances and a promissory note had been repaid and had no balance outstanding. |
Profit margins are not meaningful because AMAO had no operating revenue. Net income principally reflects the non-cash warrant valuation gain, rather than operating performance. Total liabilities were $5,303,297, while shareholders’ equity was negative $4,770,786; redeemable Class A shares are presented outside shareholders’ equity as temporary equity. The filing does not provide a clear operating cash-flow comparison for the same nine-month prior-year period.
Material changes and notable items
- Trust assets fell to $7.55 million from $106.12 million at year-end 2021, and Class A shares subject to redemption fell to 742,308 from 10,506,002. The supplied filing text does not clearly reconcile the full trust-account and share-count changes.
- Public and private warrant liabilities declined from a combined $5.30 million at year-end 2021 to $1.38 million at September 30, 2022. The resulting fair-value gain boosted reported earnings and is subject to quarterly remeasurement.
- Forward share purchase agreements covering up to 1,123,499 shares expired on September 22, 2022, ending the associated obligations. The filing reports $187,406 held in escrow at quarter-end.
- The company reported no long-term debt, off-balance-sheet arrangements, or legal proceedings. A $3.5 million deferred underwriting commission is payable upon a business combination, subject to the underwriting agreement.
Outlook, risks, and management commentary
Management said it intended to use trust funds, net of applicable taxes, toward a business combination and expected outside-trust cash to fund target searches, diligence, and transaction costs. It stated that it did not believe additional funds would be needed for current operating expenditures, but cautioned that actual transaction costs or significant redemptions could require additional financing. If AMAO cannot complete a transaction with sufficient funds, it may have to cease operations and liquidate the trust account.
The filing does not provide financial guidance or target-company operating forecasts. Key risks include the March 21, 2023 business-combination deadline, limited outside-trust cash, possible financing needs, and the possibility that public warrants expire worthless if no transaction is completed. Management noted potential COVID-19 effects but said the impact was not readily determinable. It reported that disclosure controls were effective at a reasonable-assurance level and that there was no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer and transaction status: this filing is by American Acquisition Opportunity Inc., not Royalty Management Holding Corp, and describes a June 28, 2022 merger agreement with Royalty Management Co.
- Review subsequent filings for the merger’s status, financing terms, completion prospects, and any further deadline extensions or liquidation actions.
- Reconcile the substantial trust-account decrease and reduction in redeemable Class A shares; the supplied text does not clearly explain the full changes.
- Assess available operating liquidity separately from trust assets: reported outside-trust cash was only $98,439, versus $422,432 in current liabilities.
- Distinguish reported net income from cash-generating performance, given the $3.92 million nine-month non-cash warrant valuation gain.
- Check the status and settlement of the $187,406 escrow balance following expiration of the forward share purchase agreements, and confirm obligations tied to deferred underwriting commissions.