Business Context and Reporting Period
The filing is a Form 10-Q for the quarter ended June 30, 2020. The filing identifies the registrant as Mountain Crest Acquisition Corp., not Playboy, Inc.; this company-name mismatch should be verified. Mountain Crest was a newly formed special purpose acquisition company (SPAC) with no operating business or revenue and was seeking a business combination, primarily with a North American target.
The unaudited interim financial statements cover the three and six months ended June 30, 2020. The company completed its initial public offering (IPO) on June 9, 2020 and a partial over-allotment offering on June 19, 2020.
Key Financial Metrics
| Metric | Three months ended June 30, 2020 | Six months ended June 30, 2020 |
|---|---|---|
| Operating and formation costs | $22,749 | $22,960 |
| Net loss | $19,600 | $19,811 |
| Basic and diluted loss per share | $0.01 loss | $0.01 loss |
| Interest income on Trust Account | $4,074 | $4,074 |
| Unrealized loss on Trust Account securities | $1,171 | $1,171 |
| Net cash used in operating activities | Not separately provided | $93,236 |
- No operating revenue was generated, and no operating margin is meaningful because the company had not commenced operations.
- Cash at June 30, 2020 was $340,118 outside the Trust Account.
- Marketable securities held in the Trust Account totaled $58,650,863, substantially invested in U.S. Treasury securities.
- Total assets were $59,077,694, including $52,044,843 of common stock subject to possible redemption.
- Total liabilities were $2,032,846, including a $2,012,430 deferred underwriting fee payable.
- The company reported no long-term debt, capital lease obligations, operating lease obligations, or off-balance-sheet arrangements.
- Financing activities provided $59,081,314 during the six months, while investing activities used $58,647,960 for deposits into the Trust Account.
Material Changes Versus the Prior Comparable Period
- December 31, 2019 balance-sheet amounts primarily reflected formation activity; by June 30, 2020, the company had completed its IPO and held approximately $58.7 million in the Trust Account.
- Total assets increased from $100,231 at December 31, 2019 to $59.1 million at June 30, 2020.
- The company issued 5,749,800 public units and 355,241 private units, net of the partial over-allotment activity, and classified 5,102,647 shares as subject to possible redemption.
- Stockholders’ equity improved from a deficit of $492 to $5,000,005, primarily due to the IPO and private placements, partly offset by the redemption classification and net loss.
- No prior-year comparable quarterly operating results are presented in the filing, and the company stated that it had not commenced operations.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expected to continue incurring costs while identifying and evaluating a target and did not expect operating revenue until after a business combination.
- The company was required to complete a business combination by June 9, 2021, subject to up to three three-month extensions. Each extension required a $500,000 deposit into the Trust Account, or $575,000 if the over-allotment had been exercised in full.
- If no business combination was completed within the permitted period, the company would cease operations, redeem the public shares using the Trust Account, and liquidate.
- Public stockholders could redeem their shares for a pro rata portion of the Trust Account in connection with a business combination or liquidation. Public rights could expire worthless if no business combination occurred.
- The deferred underwriting fee would become payable only if a business combination was completed. The Sponsor also agreed to protect the Trust Account against certain third-party claims, subject to stated exceptions.
- COVID-19 could negatively affect the company’s financial position, operations, or search for a target, but the specific effect was not determinable at the reporting date.
- Management disclosed risks associated with failure to complete a business combination, potential dilution from additional equity issuance, possible financing needs, redemption obligations, and negative interest rates on Trust Account investments.
- The company paid an affiliate of the Sponsor $10,000 per month for office space and administrative support beginning June 4, 2020.
- Disclosure controls and procedures were reported effective as of June 30, 2020, with no material change in internal control over financial reporting.
Investor Verification Checklist
- Verify the registrant identity: the supplied filing is for Mountain Crest Acquisition Corp., although the request identifies Playboy, Inc.
- Confirm the Trust Account balance, redemption shares, deferred underwriting fee, and the terms governing public-share redemptions.
- Review whether a business combination was completed by the June 9, 2021 deadline or under any permitted extension.
- Assess the effect of Sponsor, private-unit, founder-share, rights, and potential working-capital-loan terms on dilution.
- Review subsequent SEC filings for any target transaction, liquidation, extensions, changes to the Trust Account, or COVID-19-related effects.