Filing summary
Entity mismatch: The supplied filing is M I Acquisitions, Inc.’s Form 10-Q for the quarter ended September 30, 2017—not a filing identified as Priority Technology Holdings, Inc. This summary reflects the filing text provided.
Business context and reporting period
M I Acquisitions was a shell company seeking a business combination, with a stated focus on technology, media and telecommunications. It had not begun operating activities or generated operating revenue by September 30, 2017. The financial statements are unaudited and cover the third quarter and nine months ended September 30, 2017.
Financial results and liquidity
- Third-quarter 2017: Net income was $152,350, versus a $36,382 loss in the third quarter of 2016. Total expenses were $397,033; other income was $549,383, including $427,701 of settlement income and $121,682 of interest income. Basic and diluted earnings per share were $0.02.
- Nine months ended September 30, 2017: Net loss was $111,519, versus a $43,646 loss in the comparable 2016 period. Expenses were $804,534, offset by $693,015 of other income, including the $427,701 settlement and $265,314 of interest income. Basic and diluted loss per share was $0.14.
- Revenue and margins: No operating revenue was reported; operating margins are not meaningful for this pre-combination shell company.
- Cash flow: Nine-month operating cash flow was positive $67,752 and investing cash flow was positive $49,095. There was no financing cash flow in the period. Cash outside the trust account rose to $479,382 from $362,535 at December 31, 2016.
- Assets and trust: Total assets were $55.46 million, including $54.95 million held in trust, primarily in U.S. Treasury bills. Trust funds were generally restricted to a business combination or redemption, subject to permitted tax withdrawals.
- Debt and liabilities: Total liabilities were $1.64 million, including a $27,500 note payable, $1.06 million deferred underwriting fee payable, and $534,677 in accounts payable and accrued expenses, including related-party payables.
- Working capital: The company disclosed a $59,089 working capital deficit. It also reported $5.0 million of stockholders’ equity and $48.83 million of common stock subject to possible conversion, classified outside equity as temporary equity.
Material changes, outlook and risks
- Quarterly results improved year over year, but were driven materially by the one-time settlement payment and trust interest, not operating revenue. The nine-month loss widened from the prior-year period.
- The settlement was received from a prospective transaction counterparty after its letter of intent expired; the amount approximately reimbursed expenses incurred pursuing that transaction.
- Management said outside-trust funds were expected to be insufficient to fund operations through the business-combination deadline without additional financing. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern. Insiders and other potential lenders were not obligated to provide funding.
- The company generally had 18 months from its offering to complete a business combination, with up to three one-month extensions if insiders funded the trust. Failure to complete a transaction would trigger redemption of public shares; warrants would expire worthless. The filing gives inconsistent deadline dates—March 19, 2018 in one discussion and March 13, 2018 elsewhere—which investors should verify.
- Management reported no off-balance-sheet arrangements and no material market or interest-rate risk. Disclosure controls were judged effective, with no material quarterly change in internal control over financial reporting.
- No operating guidance was provided. Management expected continuing public-company, due-diligence and acquisition-related expenses and warned that additional financing might not be available on acceptable terms or at all.
Important facts to verify
- Confirm the filing’s registrant and period: the source document is for M I Acquisitions, Inc., not Priority Technology Holdings, Inc.
- Verify the applicable business-combination deadline and extension status, given the conflicting March 13 and March 19, 2018 dates.
- Assess the sustainability of liquidity outside the trust and whether additional financing or insider support was obtained.
- Review the settlement’s circumstances and the status and terms of any subsequent business-combination transaction.
- Confirm trust-account restrictions, redemption exposure, deferred underwriting fees and other transaction costs before evaluating funds available to shareholders.