Business Context and Reporting Period
This filing is Mudrick Capital Acquisition Corporation’s Form 10-K for the fiscal year ended December 31, 2018, filed March 25, 2019. The request metadata identifies Hycroft Mining Holding Corp., but the supplied filing is for Mudrick Capital Acquisition Corporation, a Delaware blank-check company and special purpose acquisition company (SPAC). The company had not commenced operating activities and was seeking an initial business combination, with a stated focus on post-bankruptcy or post-restructured companies.
The company completed its initial public offering in February 2018 and had not selected a target or initiated substantive discussions with a specific target as of the filing date.
Key Financial Metrics
| Metric | Fiscal year ended December 31, 2018 | Comparable period |
|---|---|---|
| Operating revenue | None | None |
| Net income (loss) | $1.680 million | $(2,784) for the period from August 28, 2017 through December 31, 2017 |
| Interest income | $2.845 million, including $2.837 million from trust-account securities | None |
| General and administrative expenses | $609,581 | $2,784 |
| Income tax provision | $555,449 | None |
| Cash used in operating activities | $452,715 | $55 |
| Cash held outside the trust account | $535,946 | $24,945 |
| Marketable securities in trust account | $212.917 million | None |
| Accounts payable and accrued expenses | $201,392 | $533 |
| Deferred underwriting fees | $7.280 million | None |
| Total assets | $213.505 million | $191,445 |
| Stockholders’ equity | $5.000 million | $22,216 |
| Basic and diluted income per Class A share | $0.10 | Not applicable |
The company had no long-term debt, capital leases, operating leases or off-balance-sheet financing arrangements. It paid its sponsor $10,000 per month for office space, utilities and administrative support and incurred $110,000 of such fees in 2018.
Material Changes Versus the Prior Comparable Period
- The company completed its IPO and partial over-allotment exercise, selling 20.8 million units at $10.00 per unit and raising gross IPO proceeds of $208.0 million.
- The company raised $7.740 million from the sale of 7.740 million private placement warrants.
- Approximately $212.917 million was held in the trust account at year-end, compared with no trust-account securities at December 31, 2017.
- Net income increased to $1.680 million from a $2,784 net loss, primarily because of interest earned on trust-account investments.
- Cash outside the trust account increased to $535,946 from $24,945, while accounts payable and accrued expenses increased to $201,392 from $533.
- Founder shares outstanding declined from 5.750 million to 5.200 million after the sponsor forfeited 550,000 shares in connection with the partial exercise of the over-allotment option.
Guidance, Outlook, Risks, Contingencies and Unusual Items
- The company expected to generate no operating revenue until after completing an initial business combination. Its near-term activities were limited to identifying, evaluating and negotiating with potential targets.
- The sponsor committed to purchase $25.0 million of forward-purchase securities at the closing of an initial business combination, including 2.5 million units and 625,000 Class A shares. The commitment was intended to provide minimum transaction funding but was not supported by a separate reserve of sponsor funds.
- The company was required to complete an initial business combination by February 12, 2020. If unsuccessful, it would cease operations, redeem public shares using trust-account proceeds and liquidate; public warrants would expire worthless.
- The independent auditor included an explanatory paragraph stating that the mandatory liquidation deadline created substantial doubt about the company’s ability to continue as a going concern.
- Public stockholders had redemption rights generally equal to their pro rata share of the trust account. The trust account balance was approximately $10.24 per public share at December 31, 2018, although creditor claims, taxes and other circumstances could reduce the actual distribution.
- The company was required to maintain at least $5,000,001 of net tangible assets after a business combination and could not complete a transaction that failed NASDAQ’s 80% fair-market-value test.
- Management indicated that approximately $535,946 outside the trust account was expected to fund operations through the liquidation deadline, but acknowledged that additional sponsor or affiliate loans might be needed. No such loans were outstanding at year-end.
- Principal risks included failure to identify or complete a suitable transaction, limited liquidity outside the trust account, redemption pressure, dilution from founder shares and warrants, potential additional debt or equity financing, conflicts of interest involving Mudrick Capital, and the possibility that third-party claims could reduce trust-account proceeds.
- The company had no pending litigation known to management, no unresolved SEC staff comments and no identified material changes in internal control over financial reporting.
Most Important Facts an Investor Should Verify
- Confirm that the filing belongs to Mudrick Capital Acquisition Corporation rather than Hycroft Mining Holding Corp.; the supplied document does not appear to be a Hycroft 10-K.
- Verify whether an initial business combination was completed before February 12, 2020 and identify the resulting entity, if any.
- Verify the ultimate disposition of the $212.917 million trust account, public-share redemptions and deferred underwriting fees.
- Review the auditor’s going-concern language and the company’s ability to fund expenses outside the trust account.
- Assess dilution from 20.8 million public warrants, 7.740 million private placement warrants, 5.2 million founder shares and the $25.0 million forward-purchase commitment.
- Review subsequent filings for any target announcement, related-party transaction, sponsor financing, litigation or claims against the trust account.