Business Context and Reporting Period
Company: Hycroft Mining Holding Corp (formerly Mudrick Capital Acquisition Corporation)
Filing Date: May 4, 2021
Reporting Period: This 8-K addresses the non-reliance on previously issued financial statements for the years ended December 31, 2020 and 2019, and interim periods in 2020. The filing follows an April 12, 2021 SEC Staff Statement regarding the accounting treatment of warrants issued by Special Purpose Acquisition Companies (SPACs).
Key Financial Metrics and Adjustments
The filing does not report current operational revenue, profit, or cash flow. Instead, it details preliminary, unaudited adjustments to balance sheet and income statement items resulting from the reclassification of private warrants from equity to liabilities.
| Financial Item | Period | Previously Reported ($ millions) | Estimated Adjustment Range ($ millions) | Estimated Adjusted Range ($ millions) |
|---|---|---|---|---|
| Total Liabilities | Dec 31, 2020 | 200.7 | 13.0 to 17.0 | 213.7 to 217.7 |
| Stockholders' Equity (Deficit) | Dec 31, 2020 | 31.9 | (13.0) to (17.0) | 14.9 to 18.9 |
| Net Income (Loss) | Year Ended Dec 31, 2020 | (132.7) | (2.0) to (4.0) | (134.7) to (136.7) |
| Total Liabilities | Dec 31, 2019 | 573.9 | 0 | 573.9 |
| Net Income (Loss) | Year Ended Dec 31, 2019 | (98.9) | 0 | (98.9) |
Note: The filing states that these adjustments are non-cash fair value changes and have no impact on revenues, operating income, or cash flows.
Material Changes Versus Prior Period
- Accounting Reclassification: The primary change is the reclassification of private warrants issued during the May 2020 business combination and the October 2020 unit offering. These are now classified as liabilities measured at fair value rather than equity.
- Impact on Equity: Stockholders' equity is expected to decrease by approximately $13.0 million to $17.0 million for the period ended December 31, 2020.
- Impact on Net Loss: Net loss for the year ended December 31, 2020, is expected to increase (become more negative) by $2.0 million to $4.0 million due to fair value adjustments.
- Historical Data: No adjustments are expected for the year ended December 31, 2019.
Guidance, Outlook, and Risks
- Non-Reliance Statement: The Audit Committee concluded that previously issued audited and unaudited financial statements for 2020 and 2019 should not be relied upon. Investors should disregard prior earnings releases and presentations regarding these periods.
- Future Filings: The Company is working with auditors and valuation experts to finalize the warrant valuation. An amended Annual Report on Form 10-K for the year ended December 31, 2020, will be filed as soon as practicable to reflect these changes.
- Volatility Risk: The remeasurement of the warrant liability will fluctuate commensurate with the Company's stock price, affecting reported earnings in future periods without impacting cash flow.
- Internal Controls: The Company is evaluating the impact of this reclassification on its internal controls over financial reporting.
Key Facts for Investor Verification
- Verify the final valuation of private warrants in the forthcoming Amended 10-K to confirm the exact impact on liabilities and equity.
- Monitor the Company's stock price, as future earnings will be impacted by non-cash fair value adjustments to the warrant liability.
- Review the amended 10-K for updated disclosures on basic and diluted earnings per share, which will be affected by the reclassification.
- Confirm the status of the Company's internal controls over financial reporting following this accounting change.