Form 10-K
FORM 10-K |
(Mark One) |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR |
MUDRICK CAPITAL ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
HYCROFT MINING HOLDING CORPORATION | ||||||||
(Exact name of registrant as specified in its charter) |
Delaware | 82-2657796 | |||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer
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PO Box 3030 Winnemucca, Nevada 89446 | ||||||||
(Address of principal executive offices) (Zip code) | ||||||||
(775) 304-0260 | ||||||||
( |
Registrant’s telephone number:(646) 747-9500
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act: | ||||||||
Title of | Trading Symbol(s) | Name of | ||||||
Class A | HYMC | The | ||||||
Warrants to purchase | HYMCW | The | ||||||
HYMCL | The | |||||||
Securities registered pursuant to Section 12(g) of the Act: None |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x
Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ | ||||||||
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ | ||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ | ||||||||
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ | ||||||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. |
☐ | Large accelerated filer | ☐ | Accelerated filer | |||||||||||
☒ | Non-accelerated filer | ☒ | Smaller reporting company | |||||||||||
☐ | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | ||||||||
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ | ||||||||
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ | ||||||||
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b)). ☐ | ||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒ | ||||||||
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, was $52,124,124. | ||||||||
As of March 13, 2024, there were 21,005,192 shares of the Company’s common stock and no shares of the Company’s preferred stock issued and outstanding. |
Portions of the registrant’s definitive Proxy Statement for its 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2023. |
Page | |||||||||||
PART | ITEM | ||||||||||
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisyear ended December 31, 2023, (“2023 Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of June 30, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the Class A common stock outstanding, other than shares held by persons who10-K”) may be deemed affiliates of the registrant, computed by reference to the closing sales price for the Class A common stock on June 30, 2018, as reported on the NASDAQ Capital Market, was approximately $200,512,000.
As of March 25, 2019, there were 5,200,000 shares of Class B common stock and 20,800,000 shares of Class A common stock of the registrant issued and outstanding.
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-lookingconstitute “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, andas amended ( the “Securities Act”), Section 21E of the Securities Exchange Act of 1934. These1934, as amended (the “Exchange Act”), or the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included herein and public statements by our officers or representatives, that address activities, events or developments that our management expects or anticipates will or may occur in the future are forward-looking statements, can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including but not limited to:
The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. assumptions.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We cautionreasonable when made, you are cautioned that forward-looking statements are not guarantees of future performance and that our actual results, of operations, financial condition and liquidity, and developments in the industry in which we operateperformance or achievements may differ materially from those made in or suggested by the forward-looking statements contained in this report.2023 Form 10-K. In addition, even if our results, performance, or operations, financial condition and liquidity, and developments in the industry in which we operateachievements are consistent with the forward-looking statements contained in this report,2023 Form 10-K, those results, performance or developmentsachievements may not be indicative of results, performance or developmentsachievements in subsequent periods.
Unless otherwise stated Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements made in this report, or the context otherwise requires, references to:
Overview
We are a blank check company formed as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Report as our initial business combination. While we may pursue an initial business combination target in any stage of its corporate evolution, we have focused our search on companies that have recently emerged from bankruptcy court protection, often referred to as post-bankruptcy or post-restructured companies. Our management team and Mudrick Capital, an affiliate of our sponsor, have extensive experience investing in post-restructured companies. We believe that this experience makes us very well situated to identify, source, negotiate and execute a business combination at a favorable valuation with an attractive post-restructured company.
Business Strategy
Our business strategy is to identify, combine with and maximize the value of a company that has recently emerged from bankruptcy court protection. In particular, we believe that many post-restructured companies suffer from a valuation discount due to their opaqueness, complexity, non-long term ownership base and overall illiquidity. We believe that our in depth understanding of restructurings and post-restructuring company analysis, coupled with the more liquid publicly traded vehicle the company offers in an initial business combination, could result in significant value creation for our stockholders. Creating value for our stockholders is the ultimate goal of this business strategy.
Post-restructured companies can provide an attractive investment opportunity due to the unique set of circumstances surrounding balance sheet restructurings and post-restructured equities. First, balance sheets are typically restructured by swapping old debt for new equity. This often results in an equity ownership base comprised of former creditors that may not be long-term holders of the new company’s equity, resulting in a technical overhang. Second, post-restructured companies are often difficult to analyze, as the new company can have a different balance sheet, different cost structure, different asset base and sometimes a different management team relative to the pre-restructured company. This can result in historical financial reporting being less relevant than traditional, non-restructured companies. This difficulty can be exacerbated by a lack of institutional research coverage often found in post-restructured companies. Finally, in many instances, a number of the turnaround initiatives undertaken before and during the balance sheet restructuring have yet to manifest themselves in the operating results of the new company, resulting in a valuation that may not fully reflect the future positive operating results of the company.
Due to the large size of many distressed credit investment firms, we have observed that in recent years many post-restructured companies often have highly concentrated ownership structures upon emerging from bankruptcy. In many instances, this limits these companies’ abilities to emerge as public companies due their limited number of shareholders. This situation is often exacerbated for mid-cap and small-cap companies. In our experience, it is quite common for five or six former creditors to control significantly more than half of the new company’s equity. This can result in such private companies trading at material discounts to their publicly traded peers. In our opinion, this private market discount makes post-restructured equities particularly attractive candidates for a publicly traded blank check company such as ours.
Investments in post-restructured equities are subject to various risks. Investments in such companies are speculative, prices are volatile, and market movements are difficult to predict. Supply and demand for distressed securities change rapidly and are affected by a variety of market factors over which we have no control and which may reduce the pool of profitable investment opportunities. Moreover, our ability to identify undervalued investment opportunities that fit our business strategy involves a high degree of uncertainty, and no assurance can be given that we will be able to identify such opportunities. In addition, such investments may take a substantial period of time before realizing their anticipated value and returns generated from such investments may not adequately compensate for the business and financial risks assumed. There is no guarantee that we will be able to achieve our investment objectives or provide any return on invested capital.
Business Combination Criteria
Consistent with our business strategy, we have identified the following general criteria that we believe are important in evaluating candidates for our initial business combination. While we utilize these criteria in evaluating business combination opportunities, we expect that no individual criterion will entirely determine a decision to pursue a particular opportunity. Further, any particular initial business combination opportunity that we ultimately determine to pursue may not meet one or more of these criteria.
1.Post-Restructured Companies. We seek candidates that have recently restructured their balance sheet. We believe that post-restructured companies may be valued at a discount to their publicly traded peers due to the non-long term nature of their ownership base (former creditors are typically the new equity owners post-restructuring), the complexity in understanding their restructuring, the lack of clarity and information regarding their financial performance, the concentrated nature of their ownership base and the lack of a publicly traded equity, among other reasons. We also believe that post-restructured companies are where we have the strongest network to identify opportunities and the greatest ability and experience to provide shareholder value.
2.Middle-Market Companies. We seek candidates with an enterprise value of approximately $500 million to $1 billion, determined in the sole discretion of our officers and directors according to reasonably accepted valuation standards and methodologies. We believe that post-restructured middle-market companies suffer from a larger valuation discount to their publicly traded peers than larger companies. We also believe that post-restructured middle-market companies have a more difficult time accessing the public markets compared to their larger peers, and therefore could benefit more from an initial business combination with our company.
3.Market Leaders with Stable Cash Flows. We target companies that restructured their balance sheets due to a bad balance sheet, and not a bad business. We seek candidates that are market leaders in their industry, and have stable, defensible and predictable cash flows.
4.Discount to Publicly Traded Peers. We intend to seek candidates that are valued in the private market at a significant discount to their publicly traded peers. We believe that this discount will facilitate the initial business combination negotiation by allowing the opportunity for liquidity and multiple expansion for the targets’ current shareholders, while at the same time allowing meaningful upside for our stockholders post-business combination.
5.Strong Management Teams. We target businesses that have strong, experienced management teams. We also may be able to assist with potential management additions from our network of experienced turnaround professionals. Additionally, we may seek to optimize the management team of a potential target business by introducing board members with relevant insight and experience.
6.Benefit from Being a Public Company. We intend to pursue a business combination with a company that will benefit from being publicly traded and can effectively utilize the broader access to capital and public profile that are associated with being a publicly traded company.
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management team may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to our initial business combination, which, as discussed in this Report, would be in the form of proxy solicitation materials or tender offer documents that we would file with the U.S. Securities and Exchange Commission.
Initial Business Combination
NASDAQ rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects.
We may, at our option, pursue a business combination opportunity jointly with one or more entities affiliated with Mudrick Capital and/or one or more investors in funds or separate accounts managed by Mudrick Capital, which we refer to as an “Affiliated Joint Acquisition.” Any such parties would co-invest only if (i) permitted by applicable regulatory and other legal limitations; (ii) we and Mudrick Capital considered a transaction to be mutually beneficial to us as well as the affiliated entity; and (iii) other business reasons exist to do so, such as the strategic merits of including such co-investors, the need for additional capital beyond the amount held in our trust account to fund the initial business combination and/or the desire to obtain committed capital for closing the initial business combination. An Affiliated Joint Acquisition may be effected through a co-investment with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the initial business combination by issuing to such parties a class of equity or equity-linked securities. We refer to this potential future issuance, or a similar issuance to other specified purchasers, as a “specified future issuance” throughout this Report. Any such Affiliated Joint Acquisition or specified future issuance would be in addition to, and would not include, the forward purchase securities issued pursuant to the forward purchase contract. The amount and other terms and conditions of any such specified future issuance would be determined at the time thereof. We are not obligated to make any specified future issuance and may determine not to do so. This is not an offer for any specified future issuance. Pursuant to the anti-dilution provisions of our Class B common stock, any such specified future issuance would result in an adjustment to the conversion ratio such that our initial stockholders and their permitted transferees, if any, would retain their aggregate percentage ownership at 20% of the sum of the total number of all shares of common stock outstanding upon completion of our initial public offering plus all shares issued in the specified future issuance, unless the holders of a majority of the then-outstanding shares of Class B common stock agreed to waive such adjustment with respect to the specified future issuance at the time thereof. We cannot determine at this time whether a majority of the holders of our Class B common stock at the time of any such specified future issuance would agree to waive such adjustment to the conversion ratio. They may waive such adjustment due to (but not limited to) the following: (i) closing conditions which are part of the agreement for our initial business combination; (ii) negotiation with Class A stockholders on structuring an initial business combination; (iii) negotiation with parties providing financing which would trigger the anti-dilution provisions of the Class B common stock; or (iv) as part of the Affiliated Joint Acquisition. If such adjustment is not waived, the specified future issuance would not reduce the percentage ownership of holders of our Class B common stock, but would reduce the percentage ownership of holders of our Class A common stock. If such adjustment is waived, the specified future issuance would reduce the percentage ownership of holders of both classes of our common stock. The issuance of the forward purchase securities will not result in such an adjustment to the conversion of our Class B common stock.
We anticipate structuring our initial business combination either (i) in such a way so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other reasons, including an Affiliated Joint Acquisition as described above. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of NASDAQ’s 80% of net assets test. If the initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the transactions and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
Our Business Combination Process
In evaluating prospective business combinations, we will conduct a thorough due diligence review process that encompasses, among other things, a review of historical and projected financial and operating data, meetings with management and their advisors (if applicable), on-site inspection of facilities and assets, discussion with customers and suppliers, legal reviews and other reviews as we deem appropriate. We also utilize our expertise and Mudrick Capital’s expertise analyzing post-restructured companies and evaluating operating projections, financial projections and determining the appropriate return expectations given the risk profile of the target business.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with Mudrick Capital, investment funds or separate accounts advised by Mudrick Capital or our officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with Mudrick Capital, investment funds advised by Mudrick Capital or our sponsor, officers or directors, we, or a committee of independent directors, obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view.
Our sponsor has committed, pursuant to a forward purchase contract with us, to purchase, in a private placement for gross proceeds of $25,000,000 to occur concurrently with the consummation of our initial business combination, 2,500,000 of our units on substantially the same terms as the sale of units in our initial public offering at $10.00 per unit, and 625,000 shares of Class A common stock. The funds from the sale of units be used as part of the consideration to the sellers in the initial business combination; any excess funds from this private placement will be used for working capital in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their public shares and provides us with a minimum funding level for the initial business combination.
Investment funds or separate accounts advised by Mudrick Capital indirectly own founder shares and/or private placement warrants. Additionally, Mr. Mudrick or Mudrick Capital is the beneficial owner of founder shares and/or private placement warrants by virtue of exercising investment power of such shares or warrants on behalf of such investment funds or separate accounts. Because of this ownership, Mudrick Capital, investment funds or separate accounts advised by Mudrick Capital and our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors were to be included by a target business as a condition to any agreement with respect to our initial business combination.
All of the members of our management team are employed by Mudrick Capital. Mudrick Capital is continuously made aware of potential business opportunities, one or more of which we may desire to pursue for an initial business combination; we have not, however, selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target.
Mudrick Capital and each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We believe, however, that the fiduciary duties or contractual obligations of Mudrick Capital and our officers or directors will not materially affect our ability to complete our initial business combination. In addition to the forward purchase obligation described elsewhere in this Report, we may, at our option, pursue an Affiliated Joint Acquisition opportunity with an entity to which Mudrick Capital, investment funds advised by Mudrick Capital or an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the initial business combination by making a specified future issuance to any such entity. Any such Affiliated Joint Acquisition or specified future issuance would be in addition to, and would not include, the forward purchase securities issued pursuant to the forward purchase contract. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our sponsor, officers and directors and Mudrick Capital have agreed not to participate in the formation of, or become an officer or director of any other special purpose acquisition company with a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination by February 12, 2020.
Our Management Team
Members of our management team are not obligated to devote any specific number of hours to our matters but they devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that any member of our management team devotes in any time period varies based on whether a target business has been selected for our initial business combination and the current stage of the business combination process.
We believe our management team’s operating and transaction experience and relationships with companies provide us with a substantial number of potential business combination targets. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships in various industries in connection with distressed credit and post-restructured equities investing. This network has grown through the activities of our management team sourcing, acquiring and financing businesses, our management team’s relationships with sellers, financing sources and target management teams and the experience of our management team in executing transactions under varying economic and financial market conditions.
Status as a Public Company
We believe our structure makes us an attractive business combination partner to target businesses. As a public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination with us. Following an initial business combination, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. A target business can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our shares of Class A common stock (or shares of a new holding company) or for a combination of our shares of Class A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers.
Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more expeditious and cost effective method to becoming a public company than the typical initial public offering. The typical initial public offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road show efforts that may not be present to the same extent in connection with an initial business combination with us.
Furthermore, once a proposed initial business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business combination, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our structure and our management team’s backgrounds makes us an attractive business partner, some potential target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed initial business combination, negatively.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Financial Position
With funds available for an initial business combination initially in the amount of approximately $205,637,000 as of December 31, 2018, after payment of $7,280,000 of deferred underwriting fees, and in addition to the proceeds from the $25,000,000 forward purchase contract to purchase 2,500,000 units by our sponsor, in each case before fees and expenses associated with our initial business combination, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, there can be no assurance that third party financing will be available to us.
Significant Activities Since Inception
On February 12, 2018, the Company consummated its IPO of 20,000,000 units (the “Initial Units”). On February 28, 2018, in connection with the partial exercise of the underwriters’ 3,000,000 unit over-allotment option, the Company consummated the sale of 800,000 units (the “Over-Allotment Units”; collectively with the Initial Units, the “Units”). Each Unit consists of one share of Class A common stock, $0.0001 par value per share (“Class A Common Stock”), and one warrant (“Public Warrant”), each warrant entitling the holder to purchase one share of Class A Common Stock at $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $208,000,000. As a result of the underwriters’ partial exercise of the over-allotment option, the Company’s sponsor forfeited 550,000 shares of Class B Common Stock. Simultaneously with the consummation of the IPO and the sale of the Units, the Company consummated the private placement (“Private Placement”) of an aggregate of 7,740,000 warrants (“Placement Warrants”) at a price of $1.00 per Placement Warrant, generating total proceeds of $7,740,000.
A total of $210,080,000 million of the net proceeds from our initial public offering (including the partial over-allotment) and the private placement were deposited in a trust account established for the benefit of the Company’s public stockholders.
Our units began trading on February 8, 2018 on the NASDAQ Capital Market under the symbol MUDSU. Commencing on March 12, 2018, the securities comprising the units began separate trading. The units, common stock, and warrants are trading on the NASDAQ Capital Market under the symbols “MUDSU,” “MUDS” and “MUDSW,” respectively.
Effecting Our Initial Business Combination
We are not presently engaged in, and we will not engage in, any operations until the consummation of our initial business combination. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the private placement of the private placement warrants and from the $25,000,000 forward purchase contract to purchase 2,500,000 units by our sponsor, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of our initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A common stock, we may apply the balance of the cash released to us from the trust account, as well as the $25,000,000 private placement described elsewhere in this Report, for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
In addition to the $25,000,000 private placement described elsewhere in this Report, we may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination (which may include a specified future issuance), and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. In addition, we intend to target businesses larger than we could acquire with the net proceeds of our initial public offering and the sale of the private placement warrants, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously with the completion of our initial business combination. In the case of an initial business combination funded with assets other than the trust account assets, our proxy materials or tender offer documents disclosing the initial business combination would disclose the terms of the financing and, only if required by law, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately, including pursuant to any specified future issuance, or through loans in connection with our initial business combination.
Sources of Target Businesses
Target business candidates have been brought to our attention from various unaffiliated sources, including investment bankers and investment professionals. These sources have also introduced us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read our public filings and know what types of businesses we are targeting. Our officers and directors, as well as our sponsor and their affiliates that specialize in business acquisitions bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we have received a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors and our sponsor and their affiliates. We may engage professional firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee, advisory fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors, or any entity with which our sponsor or officers are affiliated, be paid any finder’s fee, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation by the company prior to, or in connection with any services rendered for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). None of our sponsor, executive officers or directors, or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated initial business combination. We have agreed to pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support and to reimburse our sponsor for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination. Some of our officers and directors may enter into employment or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an initial business combination candidate.
We are not prohibited from pursuing an initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors or making the initial business combination through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek to complete our initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
If any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us. We may, at our option, pursue an Affiliated Joint Acquisition opportunity with an entity to which Mudrick Capital or an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the initial business combination by making a specified future issuance to any such entity. Any such Affiliated Joint Acquisition or specified future issuance would be in addition to, and would not include, the forward purchase securities issued pursuant to the forward purchase contract.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, we intend to focus our search for an initial business combination in a single industry. By completing our initial business combination with only a single entity, our lack of diversification may:
Limited Ability to Evaluate the Target’s Management Team
Although we closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’ management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following an initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
Under NASDAQ’s listing rules, stockholder approval would be required for our initial business combination if, for example:
Permitted Purchases of our Securities
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and NASDAQ rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination.
The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrantholders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our sponsor, officers, directors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such stockholder has already submitted a proxy with respect to our initial business combination. Our sponsor, officers, directors, advisors or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our sponsor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchases are subject to such reporting requirements.
Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account was 10.24 per public share as of December 31, 2018. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Under NASDAQ rules, asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. If we structure an initial business combination with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed initial business combination. We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons. So long as we obtain and maintain a listing for our securities on NASDAQ, we are required to comply with such rules.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares which are not purchased by our sponsor, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
If, however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial stockholders will count toward this quorum and pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote their founder shares and any public shares purchased (including in open market and privately negotiated transactions) in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial stockholders’ founder shares, we would need only 5,200,000, or 25%, of the 20,800,000 public shares to be voted in favor of an initial business combination (assuming all outstanding shares are voted) in order to have our initial business combination approved. We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction.
Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our initial public offering, which we refer to as the “Excess Shares.” Such restriction shall also be applicable to our affiliates. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in our initial public offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in our initial public offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with an initial business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two days prior to the vote on the initial business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the stockholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If our initial proposed initial business combination is not completed, we may continue to try to complete an initial business combination with a different target until February 12, 2020.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated certificate of incorporation provides that we will have until February 12, 2020 to complete our initial business combination. If we are unable to complete our initial business combination by February 12, 2020, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by February 12, 2020.
Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination by February 12, 2020. However, if our sponsor, officers or directors acquire public shares, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination by February 12, 2020.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 12, 2020 or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $535,946 of proceeds held outside the trust account (as of December 31, 2018), although we cannot assure you that there will be sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any franchise and income tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay franchise and income taxes on interest income earned on the trust account balance, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our initial public offering and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.10 as of December 31, 2018. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.10. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we have sought, and will continue to seek, to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. WithumSmith+Brown, PC, our independent registered public accounting firm, and Cantor, the underwriters of the offering, did not execute agreements with us waiving such claims to the monies held in the trust account.
In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.10 per public share and (ii) the actual amount per public share held in the trust account as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the liquidationresults of the trust account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not applyany revisions to any claims by a third partyof those statements to reflect future events or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the trust account are reduced below (i) $10.10 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot assure you that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.10 per public share.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters in our initial public offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately $212,916,691 (as of December 31, 2018) from the proceeds of our initial public offering with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by February 12, 2020 may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by February 12, 2020, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our initial business combination by February 12, 2020, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following by February 12, 2020 and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we have sought, and will continue to seek, to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claimsdevelopments. For information identifying important factors that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.10 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.10 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend any provisions of our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 12, 2020 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, and (iii) the redemption of all of our public shares if we are unable to complete our business combination by February 12, 2020, subject to applicable law. In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the initial business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights as described above. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote.
Competition
In identifying, evaluating and selecting a target business for our initial business combination, we have encountered, and may continue to encounter, intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic business combinations. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses is limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Employees
We currently have five officers. These individuals are not obligated to devote any specific number of hours to our matters but they devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they devote in any time period varies based on whether a target business has been selected for our initial business combination and the stage of the initial business combination process we are in. We do not intend to have any full time employees prior to the completion of our initial business combination.
Periodic Reporting and Financial Information
Our units, Class A common stock and warrants are registered under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. We in accordance with the requirements of the Exchange Act, this Report contains, and future annual reports will contain, financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential targets we may conduct an initial business combination with because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential business combination candidate will have financial statements prepared in accordance with GAAP or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.
We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2019 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer, and no longer an emerging growth company, or an accelerated filer will we be required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of Class A common stock that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
You should consider carefully the risk factors described below, together with the other information contained in this report, including the financial statements and the notes thereto. This report also contains forward-looking statements that involve risks and uncertainties. Ourcause actual results couldto differ materially from those anticipated in the forward-looking statements, see the
We are a company with no operating historysubsequent studies and no revenues,analyses, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a company with no operating results. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination with one or more target businesses. We may be unable to complete our initial business combination. If we fail to complete our initial business combination, we will neverprovide an updated technical report at an appropriate time.
Our auditors have expressed substantial doubt as segment and includes operations, exploration, and development activities and accounts for 100% of our
In its reportthe Consolidated Financial Statements for additional information on our financial statements forsegments.
GOLD PRICES | SILVER PRICES | |||||||||||||||||||||||||||||||||||||
Year | High | Low | Average | High | Low | Average | ||||||||||||||||||||||||||||||||
2021 | $ | 1,943 | $ | 1,684 | $ | 1,799 | $ | 29.59 | $ | 21.53 | $ | 25.04 | ||||||||||||||||||||||||||
2022 | $ | 2,039 | $ | 1,628 | $ | 1,800 | $ | 26.18 | $ | 17.77 | $ | 21.71 | ||||||||||||||||||||||||||
2023 | $ | 2,150 | $ | 1,907 | $ | 1,944 | $ | 24.43 | $ | 22.00 | $ | 23.33 | ||||||||||||||||||||||||||
2024 (through Mar. 12th) | $ | 2,180 | $ | 1,985 | $ | 2,046 | $ | 24.50 | $ | 22.09 | $ | 22.98 |
Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.
We may choose not to hold a stockholder vote to approve our initial business combination unlessmarket over the initial business combination would require stockholder approval under applicable law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or other legal reasons. Except as required by law, the decision as to whether we will seek stockholder approval of a proposed initial business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, andlong-term will be based on our ability to develop and cost effectively operate the Hycroft Mine in a varietysafe and environmentally responsible manner.
If we seek stockholder approvalenvironment. These laws and regulations are continually changing and, in general, are becoming more restrictive. The federal laws and regulations, among other things:
PursuantEnvironmental Protection, which has the authority to implement and enforce many of the letter agreement, our sponsor, officers and directors have agreed to vote their founder shares,federal regulatory programs described above as well as any public shares purchased (including in open marketstate environmental laws and privately negotiated transactions), in favor of our initial business combination. As aregulations. Compliance with these and other federal and state laws and regulations could result in additiondelays in obtaining, or failure to obtain, government permits and approvals, delays in beginning or expanding operations, limitations on production levels, incurring additional costs for investigation or cleanup of hazardous substances, payment of fines, penalties or remediation costs for non-compliance, and post-mining closure, reclamation and bonding.
Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of the initial business combination.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of our initial business combination. Since our board of directors may complete an initial business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the initial business combination, unless we seek such stockholder vote. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.
The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into an initial business combination with a target.
We may seek to enter into an initial business combination agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. While we have access to the proceeds from the $25,000,000 private placement from our sponsor, if too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the initial business combination. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters’ fees and commissions or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemptionobtain, and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into an initial business combination with us.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.
At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements, or arrange for third party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing. Raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. Furthermore, this dilution would increase to the extent that the anti-dilution provision of the Class B common stock result in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock at the time of our business combination. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure. The amount of the deferred underwriting commissions payable to the underwriters will not be adjusted for any shares that are redeemed in connection with an initial business combination. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commission and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commissions.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating an initial business combination and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning an initial business combination will be aware that we must complete our initial business combination by February 12, 2020. Consequently, such target business may obtain leverage over us in negotiating an initial business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
WeCompany may not be able to complete our initial business combination withinobtain or renew all of the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.24 per share (based on the trust account balance as of December 31, 2018),required permits, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our amended and restated certificate of incorporation provides that we must complete our initial business combination by February 12, 2020. Wepermits may not be abletimely obtained or renewed;
If we seek stockholder approval of our initial business combination, our sponsor, directors, officers, advisors and their affiliates may elect to purchase shares or warrants from public stockholders, which may influence a vote on a proposed initial business combination and reduce the public “float” of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, officers, advisors or their affiliates may purchase shares or public warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares or public warrants in such transactions.
Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination, or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrantholders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of our Class A common stock or public warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails•Failure to comply with environmental regulations could result in penalties and costs; and
We will comply withCompany to incur significant costs.
You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) our completion of an initial business combination,regain compliance. During 2023 and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 12, 2020 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (iii) the redemption of our public shares if we are unable to complete an initial business combination by February 12, 2020, subject to applicable law and as further described herein. In no other circumstances will a public stockholder have any right or interest of any kind in the trust account. Holders of warrants will not have any right to the proceeds held in the trust account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
NASDAQ may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our securities are currently listed on NASDAQ. However, we cannot guarantee that our securities will continue to be listed on NASDAQ. Although the minimum initial listing standards set forth in the NASDAQ listing standards, we cannot assure you that our securities will be, or will continue to be, listed on NASDAQ in the future or prior to our initial business combination. In order to continue listing our securities on NASDAQ prior to our initial business combination, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with NASDAQ’s initial listing requirements, which are more rigorous than NASDAQ’s continued listing requirements, in order to continue to maintain the listing of our securities on NASDAQ. For instance, our stock price would generally be required to be at least $4.00 per share, our stockholders’ equity would generally be required to be at least $5.0 million and we would be required to have a minimum of 300 round lot holders of our securities. We cannot assure you that we will be able to meet those initial listing requirements at that time.
If NASDAQ delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
•a limited availability of market quotations for our securities;
•reduced liquidity for our securities;
•a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
•a limited amount of news and analyst coverage; and
•a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our units, Class A common stock and warrants are listed on NASDAQ, our units, Class A common stock and warrants are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if2022, there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on NASDAQ, our securities wouldknown material environmental incidents. We did not be covered securitiesincur material capital expenditures for environmental control facilities during 2023 and we would be subject to regulation in each state in which we offer our securities, including in connection with our initial business combination.
You will not be entitled to protections normally afforded to investors of many other blank check companies.
Since the net proceeds of our initial public offering2022, and the sale of the private placement warrants are intended to be used to complete an initial business combination with a target business that had not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However, because had net tangible assets in excess of $5,000,000 upon the completion of our initial offering and the sale of the private placement warrants and filed a Current Report on Form 8-K, including audit balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419. Moreover, if our initial public offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of an initial business combination.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our initial public offering without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our initial business combination. And as a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.24 per share (based on the trust account balance as of December 31, 2018) on our redemption of our public shares, or less than such amount in certain circumstances, and our warrants will expire worthless.
We have encountered, and expect to continue to encounter, intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more industry knowledge than we do, and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net proceeds of our initial public offering and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, because we are obligated to pay cash for the shares of Class A common stock which our public stockholders redeem in connection with our initial business combination, target companies will be aware that this may reduce the resources available to us for our initial business combination. This may place us at a competitive disadvantage in successfully negotiating an initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.24 per share (based on the trust account balance as of December 31, 2018) on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.24 per share upon our liquidation.
If the net proceeds of our initial public offering and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate until at least February 12, 2020, we may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.24 per share (based on the trust account balance as of December 31, 2018), or less than such amount in certain circumstances, and our warrants will expire worthless.
The funds available to us outside of the trust account may not be sufficient to allow us to operate until at least February 12, 2020, assuming that our initial business combination is not completed during that time. We believe that the funds available to us outside of the trust account are sufficient to allow us to operate until at least by February 12, 2020; however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.24 per share (based on the trust account balance as of December 31, 2018) on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.24 per share upon our liquidation.
If the net proceeds of our initial public offering and the sale of the private placement warrants not being held in the trust account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor or management team to fund our search for an initial business combination, to pay our franchise and income taxes and to complete our initial business combination. If we are unable to obtain these loans, we may be unable to complete our initial business combination.
Of the net proceeds of our initial public offering and the sale of the private placement warrants, only approximately $535,946 (as of December 31, 2018) is available to us outside the trust account to fund our working capital requirements. If we are required to seek additional capital, we would need to borrow funds from our sponsor, management team or other third parties to operate or may be forced to liquidate. None of our sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination. Up to $1,500,000 of such loans may be convertible into private placement-equivalent warrants at a price of $1.00 per warrant at the option of the lender. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor or an affiliateincur any material expenditures in 2024 for such environmental control facilities.
Subsequentponds beginning in 2024 and continuing through 2026. No additional material reclamation expenditures are expected to the completion of our initial business combination,be incurred until after mining and mineral processing are completed. If we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining debt financing to partially finance the initial business combination. Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the initial business combination constituted an actionable material misstatement or omission.
If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.24 per share (based on the trust account balance as of December 31, 2018).
Our placing of funds in the trust account may not protect those fundsadditional long-term environmental impacts from third-party claims against us. Althoughfuture mining activities, we will seek tolikely have all vendors, service providers, prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims,additional reclamation obligations, as well as claims challenging the enforceability of the waiver,additional financial assurance requirements. For our existing obligations, as well as any future obligations we may incur, we may choose to engage in each case in orderreclamation activities before mining and mineral processing are completed, but these expenses are not anticipated to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claimsbe material to the monies held in the trust account, our management willoverall reclamation obligation. When we perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. WithumSmith+Brown, PC, our independent registered public accounting firm, and the underwriters of our initial public offering, did not execute agreements with us waiving such claims to the monies held in the trust account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may havereclamation work in the future, as a result of, or arising out of, any negotiations, contracts or agreements with usthe work will be planned to conform to our mining operations and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.10 per share initially held in the trust account, due to claims of such creditors. Pursuant to a letter agreement, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.10 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claimsdocumented when completed under our indemnity ofgoverning permits with the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsorgovernment regulatory agencies. The reclamation obligation would be ableadjusted accordingly as allowed under current regulations, and the financial assurance requirements would be adjusted to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.10 per share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account if less than $10.10 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.10 per share.
We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
completed reclamation work. If after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our board may be exposed to claims of punitive damages.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
•restrictions on the nature of our investments; and
•restrictions on the issuance of securities, each of which may make it difficult for us to complete our initial business combination.
In addition, we may have imposed upon us burdensome requirements, including:
•registration as an investment company;
•adoption of a specific form of corporate structure; and
•reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify and complete an initial business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
We do not believe that our anticipated principal activities subject us to the Investment Company Act. To this end, the proceeds held in the trust account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. The trust account is intended as a holding place for funds pending the earliest to occur of: (i) the completion of our initial business combination; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 12, 2020 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; or (iii) absent an initial business combination by February 12, 2020, our return of the funds held in the trust account to our public stockholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete an initial business combination or may result in our liquidation. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.24 per share (based on the trust account balance as of December 31, 2018) on the liquidation of our trust account and our warrants will expire worthless.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with material unanticipated financial assurance requirements in the future, our financial position could be adversely affected, or our posted financial assurance may
Those laws
Our stockholders
Under the DGCL, stockholdersin any required environmental review. The Company may be held liable for claims by third parties againstunable to obtain or renew necessary permits on a corporationtimely basis or at all, and the cost to obtain or renew permits may exceed the extentCompany’s estimates. Failure to comply with permit terms may result in injunctions, fines, suspension or revocation of distributions received by thempermits and other penalties. The Company can provide no assurance that it has been, or will at all times be, in a dissolution.full compliance with all of the terms of its permits or that the Company has all required permits. The pro ratacosts and delays associated with compliance with these permits and with the permitting process could alter all or a portion of our trust account distributed to our public stockholders upon the redemption of our public sharesany mine plan proposed in the event we do not complete our initial business combination by February 12, 2020 offering may be considered a liquidating distribution under Delaware law. If a corporation compliesfuture, delay or stop the Company from proceeding with certain procedures set forth in Section 280the development of the DGCL intendedHycroft Mine or increase the costs of development or production, any or all of which may materially adversely affect the Company’s business, prospects, results of operations, financial condition and liquidity.
Because we will not be complying with Section 280, Section 281(b) ofvarious covenants in any agreement governing the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us withinindebtedness, the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to ariseCompany would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by February 12, 2020 is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors.
In accordance with NASDAQ corporate governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our listing on NASDAQ. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
We have not registered the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis. If the issuance of the shares upon exercise of warrants is not registered, qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.
We have not registered the shares of Class A common stock issuable upon exercise of the warrants issued in our initial public offering under the Securities Act or any state securities laws. However,default under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registrationagreements governing such indebtedness and other indebtedness under the Securities Actcross-default and cross-acceleration provisions of such agreements. In the event of such default:
If you exercise your public warrants on a “cashless basis,” you will receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
There are circumstances in which the exercise of the public warrants may be required or permitted to be made on a cashless basis. First, if a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of our initial business combination, warrantholders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Second, if our Class A common stock is at any time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Actother stockholders and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. Third, if we call the public warrants for redemption, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (as defined in the next sentence) by (y) the fair market value. The “fair market value” is the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable. As a result, you would receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
The grant of registration rights to our initial stockholders may make it more difficult to complete our initial business combination, and the future exercise of such rights mayconsequently, could adversely affect the market price of our Class Athe Company’s common stock.
Pursuant
Because we are not limited to evaluating a target business in a particular industry sector, you are unable to ascertain the merits or risks of any particular target business’s operations.
We seek to complete an initial business combination with companies that have recently emerged from bankruptcy court protection but may also pursue other business combination opportunities, except that we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations. There is currently no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement or material omission.
Past performance by Mudrick Capital, including our management team, may not be indicative of future performance of an investment in the Company.
Information regarding performance by, or businesses associated with, Mudrick Capital and its affiliates is presented for informational purposes only. Past performance by Mudrick Capital, including our management team, is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to locate a suitable candidate for our initial business combination. You should not rely on the historical record of Mudrick Capital’s or our management team’s performance as indicative of our future performance of an investment in the company or the returns the company will, or is likely to, generate going forward. Our officers and directors have not had experience with blank check companies or special purpose acquisition companies in the past.
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We may seek business combination opportunities in industries or sectors which may or may not be outside of our management’s area of expertise.
Although we are focused on identifying post-bankruptcy companies, we will consider an initial business combination outside of our management’s area of expertise if an initial business combination candidate is presented to us and we determine that such candidate offers an attractive business combination opportunity for our company or we are unable to identify a suitable candidate in this sector after having expanded a reasonableaggregate amount of time and effort in an attempt to do so. Although our management will endeavor to evaluate the risks inherent in any particular business combination candidate, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our securities will not ultimately prove to be less favorable to investors than a direct investment, if an opportunity were available, in an initial business combination candidate. In the event we elect to pursue a business combination outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or operation, and the information contained in this Report regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.24 (as of December 31, 2018) per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.24 per share on the redemption of their shares.
We may seek business combination opportunities with a financially unstable business or an entity lacking an established record of revenue, cash flow or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with a financially unstable business or an entity lacking an established record of revenues or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
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We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our initial business combination with an affiliated entity or our board cannot independently determine the fair market value of the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy materials or tender offer documents, as applicable, related to our initial business combination.
We may issue additional common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation authorizes the issuance of up to 100,000,000 shares of Class A common stock, par value $0.0001 per share, 10,000,000 shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. There are 52,500,000 and 5,000,000 authorized but unissued shares of Class A common stock and Class B common stock, respectively, available for issuance, which amount takes into account the shares of Class A common stock reserved for issuance upon exercise of outstanding warrants but not the shares of Class A common stock issuable upon conversion of Class B common stock. There are currently no shares of preferred stock issued and outstanding. Shares of Class B common stock are convertible into shares of our Class A common stock initially at a one-for-one ratio but subject to adjustment as set forth herein, including in certain circumstances in which we issue Class A common stock or equity-linked securities related to our initial business combination. Shares of Class B common stock are also convertible at the option of the holder at any time. These amounts exclude the issuance of 2,500,000 units issuable pursuant to our sponsor’s forward purchase contract and an additional 625,000 shares of Class A common stock issuable to our sponsor at the time of the initial business combination.
We may issue a substantial number of additional shares of common or preferred stock to complete our initial business combination (including pursuant to a specified future issuance) or under an employee incentive plan after completion of our initial business combination (although our amended and restated certificate of incorporation provides that we may not issue securities that can vote with common stockholders on matters related to our pre-initial business combination activity). We may also issue shares of Class A common stock upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. However, our amended and restated certificate of incorporation provides, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with the approval of our stockholders. However, our executive officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 12, 2020 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their7,740,000 shares of common stock upon approvalat an exercise price of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares.
The issuance of additional shares of common or preferred stock:
Resources could be wasted in researching business combinations that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.24 per share (as of December 31, 2018), or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
We anticipate that investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments requires substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.24$11.50 per share on the liquidation of our trust accountMay 29, 2020, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.24 per share on the redemption of their shares
Our ability to successfully effect our initial business combination and to be successful thereafter will be dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we employ after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements. In addition, the officers and directors of an initial business combination candidate may resign upon completion of our initial business combination. The departure of an initial business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an initial business combination candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an initial business combination candidate’s management team will remain associated with the initial business combination candidate following our initial business combination, it is possible that members of the management of an initial business combination candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
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Mudrick Capital’s financial position could change, negatively impacting its role in helping us complete our initial business combination.
Mudrick Capital’s financial position could be negatively impacted due to a variety of factors, including lower management fees and/or performance fees and higher operating expenses. From time to time, Mudrick Capital may be a party to lawsuits, which if resolved in an unfavorable manner for Mudrick Capital, could have a material impact on Mudrick Capital’s financial position. To the extent Mudrick Capital’s financial position is less stable, it may have difficulty retaining certain key investment professionals, which could negatively impact Mudrick Capital’s ability to help us complete our initial business combination.
We are dependent upon our executive officers and directors and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular, our executive officers and directors. We believe that our success depends on the continued service of our executive officers and directors, at least until we have completed our initial business combination. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or executive officers. The unexpected loss of the services of one or more of our directors or executive officers could have a detrimental effect on us.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the initial business combination. Such negotiations would take place simultaneously with the negotiation of the initial business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the initial business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our initial business combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business combination.
We may have a limited ability to assess the management of a prospective target business and, as a result, may effect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company, which could, in turn, negatively impact the value of our stockholders’ investment in us.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
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Our officers and directors allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required to, and do not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for an initial business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our officers is engaged in other business endeavors for which he may be entitled to substantial compensation and our officers are not obligated to contribute any specific number of hours per week to our affairs. In particular, all of our officers and directors are employed by Mudrick Capital, which is an investment manager to various public and private investment funds, which make investments in securities or other interests of or relating to companies in industries we may target for our initial business combination. Our independent directors may also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination.
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.
Until we consummate our initial business combination, we will continue to engage in the business of identifying and combining with one or more businesses. Our sponsor and officers and directors are, and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business, although they may not participate in the formation of, or become an officer or director of, any other special purpose acquisition companies with a class of securities registered under the Exchange Act until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within by February 12, 2020.
Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties.
Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into an initial business combination with a target business that is affiliated with our sponsor, our directors or officers, although we do not intend to do so, or we may acquire a target business through an Affiliated Joint Acquisition with one or more affiliates of Mudrick Capital. We do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.
In particular, Mudrick Capital and its affiliates also are focused on investments in the distressed debt and post-restructured company sector. As a result, there may be substantial overlap between companies that would be a suitable business combination for us and companies that would make an attractive target for such other affiliates.
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We may engage in an initial business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers, directors or existing holders which may raise potential conflicts of interest.
In light of the involvement of our sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsor, officers or directors. Our directors also serve as officers and board members for other entities. Such entities may compete with us for business combination opportunities. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, regarding the fairness to our stockholders from a financial point of view of an initial business combination with one or more domestic or international businesses affiliated with our officers, directors or existing holders, potential conflicts of interest still may exist and, as a result, the terms of the initial business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest. In order to satisfy applicable regulatory or other legal requirements applicable to an Affiliated Joint Acquisition, our initial business combination may be effected on less favorable terms than otherwise would apply if the initial business combination were not an Affiliated Joint Acquisition.
We may acquire a target business through an Affiliated Joint Acquisition with one or more affiliates of Mudrick Capital. This may result in conflicts of interest as well as dilutive issuances of our securities.
We may, at our option, pursue an Affiliated Joint Acquisition opportunity with an entity affiliated with Mudrick Capital. Any such parties would co-invest only if (i) permitted by applicable regulatory and other legal limitations; (ii) we and Mudrick Capital considered a transaction to be mutually beneficial to us as well as the affiliated entity; and (iii) other business reasons exist to do so, such as the strategic merits of including such co-investors, the need for additional capital beyond the amount held in our trust account to fund the initial business combination and/or the desire to obtain committed capital for closing the initial business combination. An Affiliated Joint Acquisition may be effected through a co-investment with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the initial business combination by issuing to such parties a class of equity or equity-linked securities. Accordingly, such persons or entities may have a conflict between their interests and ours. Any such Affiliated Joint Acquisition or specified future issuance would be in addition to, and would not include, the forward purchase securities issued pursuant to the forward purchase contract.
In addition, any specified future issuance in connection with Affiliated Joint Acquisition would trigger the anti-dilution provisions of our Class B common stock, which, unless waived, would result in an adjustment to the conversion ratio of our Class B common stock such that our initial stockholders and their permitted transferees, if any, would retain their aggregate percentage ownership at 20% of the sum of the total number of all shares of common stock currently outstanding plus all shares issued in the specified future issuance. If such adjustment is not waived as described elsewhere in this Report, the specified future issuance would not reduce the percentage ownership of holders of our Class B common stock, but would reduce the percentage ownership of holders of our Class A common stock. The issuance of the forward purchase securities will not result in such an adjustment to the conversion of our Class B common stock.
Since our sponsor, officers and directors will lose their entire investment in us if our initial business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
On September 25, 2017, our sponsor purchased an aggregate of 5,750,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.004 per share. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares after our initial public offering. The founder shares will be worthless if we do not complete an initial business combination. In addition, our sponsor and Cantor purchased an aggregate of 7,500,000 warrants (or 8,400,000 warrants if the over-allotment option is exercised in full) at a price of $1.00 per warrant (6,500,000 warrants by our sponsor (or 7,250,000 warrants if the over-allotment option is exercised in full)) and 1,000,000 warrants by Cantor (or 1,150,000 warrants if the over-allotment option is exercised in full) for an aggregate purchase price of $7,500,000, or $8,400,000 if the over-allotment option is exercised in full, or $1.00 per warrant, that will also be worthless if we do not complete an initial business combination. Holders of founder shares have agreed (A) to vote any shares owned by them in favor of any proposed initial business combination and (B) not to redeem any founder shares in connection with a stockholder vote to approve a proposed initial business combination. In addition, we may obtain loans from our sponsor, affiliates of our sponsor or an officer or director. The personal and financial interests of our officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination.
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We may issue notes or other debt securities, or otherwise incur substantial debt, to complete an initial business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments as of the date of this Report to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
We may only be able to complete one business combination with the proceeds of our initial public offering, the sale of the private placement warrants and the $25,000,000 forward purchase contract, which will cause us to be solely dependent on a single business which may have a limited number of services and limited operating activities. This lack of diversification may negatively impact our operating results and profitability.
Of the net proceeds from our initial public offering and the sale of the private placement warrants, $212,916,691 is available to complete our initial business combination and pay related fees and expenses (which includes up to $ 7,000,000 for the payment of deferred underwriting commissions). In addition, our sponsor has committed, pursuant to a forward purchase contract with us, to purchase, in a private placement for gross proceeds of $25,000,000 to occur concurrently with the consummation of our initial business combination, 2,500,000 of our units on substantially the same terms as the sale of units in our initial public offering at $10.00 per unit, and 625,000 shares of Class A common stock.
We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. In addition, we intend to focus our search for an initial business combination in a single industry.
Accordingly, the prospects for our success may be:
This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. We do not, however, intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete our initial business combination with a private company about which little information is available, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all.
In pursuing our initial business combination strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all.
Our management may not be able to maintain control of a target business after our initial business combination.
We may structure an initial business combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A common stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
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We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete an initial business combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. As a result, we may be able to complete our initial business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our sponsor, officers, directors, advisors or their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and other governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us to complete our initial business combination that our stockholders may not support.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds and extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. Amending our amended and restated certificate of incorporation requires the approval of holders of 65% of our common stock, and amending our warrant agreement requires a vote of holders of at least 65% of the public warrants. In addition, our amended and restated certificate of incorporation requires us to provide our public stockholders with the opportunity to redeem their public shares for cash if we propose an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 12, 2020 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity. To the extent any such amendments would be deemed to fundamentally change the nature of any securities offered through this registration statement, we would register, or seek an exemption from registration for, the affected securities. We cannot assure you that we will not seek to amend our charter or governing instruments or extend the time to consummate an initial business combination in order to effectuate our initial business combination.
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The provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account), including an amendment to permit us to withdraw funds from the trust account such that the per share amount investors will receive upon any redemption or liquidation is substantially reduced or eliminated, may be amended with the approval of holders of 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders may not support.
Our amended and restated certificate of incorporation provides that any of its provisions related to pre-initial business combination activity (including the requirement to deposit proceeds of our initial public offering and the private placement of warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein and including to permit us to withdraw funds from the trust account such that the per share amount investors receive upon any redemption or liquidation is substantially reduced or eliminated) may be amended if approved by holders of 65% of our common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules. We may not issue additional securities that can vote on amendments to our amended and restated certificate of incorporation. Our initial stockholders, who collectively beneficially own 20% of our common stock, participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which govern our pre-initial business combination behavior more easily than some other blank check companies, and this may increase our ability to complete an initial business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended and restated certificate of incorporation.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they do not propose any amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 12, 2018 or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by the number of then outstanding public shares. These agreements are contained in a letter agreement that we have entered into with our sponsor, officers and directors. Our stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, do not have the ability to pursue remedies against our sponsor, officers or directors for any breach of these agreements. As a result, in the event of a breach, our stockholders would need to pursue a stockholder derivative action, subject to applicable law.
We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination.
We intend to target businesses larger than we could acquire with the net proceeds of our initial public offering, the sale of the private placement warrants as well as the $25,000,000 private placement to be made by our sponsor. As a result, we may be required to seek additional financing to complete such proposed initial business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. Further, the amount of additional financing we may be required to obtain could increase as a result of future growth capital needs for any particular transaction, the depletion of the available net proceeds in search of a target business, the obligation to repurchase for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination and/or the terms of negotiated transactions to purchase shares in connection with our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share plus any pro rata interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes on the liquidation of our trust account and our warrants will expire worthless. In addition, even if we do not need additional financing to complete our initial business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing outside of the forward purchase contract could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination. If we are unable to complete our initial business combination, our public stockholders may only receive approximately $10.24 per share (based on the trust account balance as of December 31, 2018) on the liquidation of our trust account, and our warrants will expire worthless.
46
In evaluating a prospective target business for our initial business combination, our management will rely on the availability of all of the funds from the sale of the forward purchase securities to be used as part of the consideration to the sellers in the initial business combination. If the sale of some or all of the forward purchase securities fails to close, we may lack sufficient funds to consummate our initial business combination.
Our sponsor has committed, pursuant to a forward purchase contract with us, to purchase, in a private placement for gross proceeds of $25,000,000 to occur concurrently with the consummation of our initial business combination, 2,500,000 of our units on substantially the same terms as the sale of units in our initial public offering at $10.10 per unit, and 625,000 shares of Class A common stock. The funds from the sale of the forward purchase securities are expected to be used as part of the consideration to the sellers in our initial business combination, and may be used to pay expenses in connection with our initial business combination or for working capital in the post-transaction company. The obligations under the forward purchase contract do not depend on whether any public stockholders elect to redeem their shares in connection with our initial business combination and provide us with a minimum funding level for the initial business combination. However, if the sale of the forward purchase securities does not close by reason of the failure of our sponsor to abide by its contractual obligation to fund the purchase price for the forward purchase securities, either because our sponsor lacks sufficient funds or because our sponsor determines that it is not in the best interest of our sponsor or its members to fund the purchase price for the forward purchase securities, we may lack sufficient funds to consummate our initial business combination, or we may need to seek alternative financing. In the event of any such failure to fund by our sponsor, we may not be able to obtain additional funds to account for such shortfall on terms favorable to us or at all. Any such shortfall may also reduce the amount of funds that we have available for working capital of the post-business combination company. We have not obligated the sponsor to reserve funds to satisfy its obligations under the forward purchase contract.
Our initial stockholders may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Our initial stockholders own shares representing 20% of our issued and outstanding shares of common stock excluding the securities issuable pursuant to the forward purchase contract). Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate transactions. If our initial stockholders purchase any units in our initial public offering or if our initial stockholders purchase any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Factors that would be considered in making such additional purchases would include consideration of the current trading price of our Class A common stock. In addition, our board of directors, whose members were elected by our initial stockholders, is and will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our initial business combination, in which case all of the current directors will continue in office until at least the completion of the initial business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial stockholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our initial stockholders will continue to exert control at least until the completion of our initial business combination.
47
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants have been issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of our Class A common stock purchasable upon exercise of a warrant.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in our initial public offering. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the private placement warrants will be redeemable by us so long as they are held by the sponsor or its permitted transferees.
Our warrants and founder shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate our initial business combination.
We issued warrants to purchase 20,800,000 shares of our Class A common stock as part of the units offered in our initial public offering and, simultaneously with the closing of our initial public offering, we will be issuing in a private placement warrants to purchase an aggregatethe Recapitalization Transaction, as part of 7,740,000 issued shares of Class A common stock at $11.50 per share. Our initial stockholders currently own an aggregate of 5,200,000 founder shares. The founder shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment. Furthermore, our sponsor has committed, pursuant to a forward purchase contract with us,unit offering, the Company issued an additional 2,500,000 5-Year Private Warrants to purchase, inthe SPAC sponsor at an exercise price of $11.50 per share.
To the extent we issue shares of Class A common stock to effectuate an initial business combination, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants and conversion rights could make us a less attractive business combination vehicle to a target business. Any such issuance will increase the number of issued and outstanding shares of our Class ACompany’s
The private placement warrants are identical to the warrants sold as part of the units in our initial public offering except that, so long asa third-party, they are held by our sponsor or its permitted transferees, (i) they will not be redeemable by us, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until 30 days after the completion of our initial business combinationclassified as public warrants and (iii) they may be exercised by the holders on a cashless basis.
The requirements of being a public company may strain our resources and divert management’s attention.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of NASDAQ and other applicable securities rules and regulations. Compliance with these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may need to hire more employeesmarked-to-market.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on an initial business combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standardsbylaws, as issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.
49
We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act,well as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial financial and management resources, and increase the time and costs of completing an initial business combination.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2019. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
Provisions in our amended and restated certificate of incorporation and Delaware law, may inhibitcould impair a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.
Our amended and restated certificate of incorporation containattempt.
We are also subject•no cumulative voting in the election of directors, which limits the ability of minority stockholders to anti-takeover provisions under Delaware law,elect director candidates;
U.S. federal income tax reform could adversely affect us and holders of our units.
On December 22, 2017, President Trump signed into law H.R. 1, originally known as the “Tax Cuts and Jobs Act,” which significantly reformed the Internal Revenue Code of 1986, as amended. The new legislation, among other things, changes the U.S. federal tax rates, imposes significant additional limitationsmeasured on the deductibilitylast business day of interest, allows the expensingsecond fiscal quarter, or the Company’s annual revenues are $100 million or more during the most recently completed fiscal year and the voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of capital expenditures,the second fiscal quarter. Smaller reporting companies are able to provide simplified executive compensation disclosure and putshave certain other reduced disclosure obligations, including, among other
Provisions in our amended and restated certificate of incorporation and Delaware law maycybersecurity incidents, that have thehad a materially adverse effect of discouraging lawsuits against our directors and officers.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel. This provision may have the effect of discouraging lawsuits against our directors and officers.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
If we effect our initial business combination with a company with operations, or opportunities outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
If we effect our initial business, combination with a company with operations or opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations, andor financial condition.
Investments
Business combinationsbeing re-graded in accordance with post-restructured entities entail special considerations and risks. If we are successful in completing a business combination with such a target business, wethe reclamation plan approved by the BLM. It is considered that the other existing components of the mine property may be subject to,utilized for future development. The Hycroft Mine operates under permit authorizations from the BLM, NDEP, NDOW, Nevada Department of Water Resources (“NDWR”), and possibly adversely affected by,County agencies.
AnyCompany, along with its third-party consultants, completed and filed the 2023 Hycroft TRS prepared in accordance with the Modernization Rules. The 2023 Hycroft TRS provides an initial assessment of the foregoing could have an adverse impact on our operations followingmineral resource estimate utilizing a business combination. However, our efforts in identifying prospective target businesses are not limited to post-restructured entities. Accordingly, if we acquiremilling and POX process for sulfide and transition mineralization and heap leaching process for oxide mineralization. As a target business that is not a post-restructured entity, it is possible that these specific risks would not affect us in the same manner, but we would be subject to other risks attendant with the specific industry in which we operate or target business which we acquire, noneresult of which can be presently ascertained.
None.
We do not own any real estate or other physical properties materially important to our operation. We currently maintain our principal executive offices at 527 Madison Avenue, 6th Floor, New York, New York 10022. The cost for this space isadditional information, including historical assay certificates and drilling results obtained during 2022 and included in the $10,000 per-month aggregate fee our sponsor charges us for general2023 Hycroft TRS, the 2023 Hycroft TRS supersedes and administrative services. We consider our current office space, combined withreplaces the other office space otherwise available2022 Hycroft TRS. Accordingly, the 2022 Hycroft TRS should no longer be relied upon. In addition, see the sections entitled “
To the knowledge of our management, there is no litigation currently pending against us, any of our officers or directors in their capacity as such or against any of our property.
Not applicable.
53
Market Information
Our units, Class A common stock and warrants are each traded on the NASDAQ Capital Market under the symbols “MUDSU,U.S. Investors Regarding Mineral Resources,
Holders
On March 22, 2019, there was one holder of record of our units, one holder of record of our Class A common stock and one holder of record of our warrants.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Not required for smaller reporting companies.
54
Special“
All statements other than statements of historical fact included
Hycroft Mine – Summary of Gold and Silver Mineral Resources as of March 27, 2023 | ||||||||||||||||||||||||||
Classification | Cutoff Grade $ Net of Process | Approximate Cutoff, AuEq oz/ton | Ktons | Au oz/ton | Ag oz/ton | Sulfide Sulfur% | Au Contained Ounces (000) | Ag Contained Ounces (000) | ||||||||||||||||||
Heap Leach Resource | ||||||||||||||||||||||||||
Measured | $0.01 | 0.002 | 94,162 | 0.008 | 0.17 | 2.14 | 753 | 15,725 | ||||||||||||||||||
Indicated | $0.01 | 0.002 | 59,751 | 0.007 | 0.13 | 1.78 | 436 | 7,529 | ||||||||||||||||||
Meas + Ind | $0.01 | 0.002 | 153,913 | 0.008 | 0.15 | 2.00 | 1,189 | 23,254 | ||||||||||||||||||
Inferred | $0.01 | 0.002 | 46,118 | 0.007 | 0.14 | 1.62 | 337 | 6,549 | ||||||||||||||||||
Flotation Mill + Concentrate by POX and Cyanide Leach Process | ||||||||||||||||||||||||||
Measured | $0.01 | 0.010 | 402,735 | 0.013 | 0.50 | 1.78 | 5,236 | 200,965 | ||||||||||||||||||
Indicated | $0.01 | 0.010 | 346,308 | 0.012 | 0.39 | 1.58 | 4,156 | 136,445 | ||||||||||||||||||
Meas + Ind | $0.01 | 0.010 | 749,043 | 0.013 | 0.45 | 1.69 | 9,391 | 337,410 | ||||||||||||||||||
Inferred | $0.01 | 0.010 | 249,494 | 0.012 | 0.36 | 1.52 | 3,019 | 89,568 | ||||||||||||||||||
Combined Mineral Resources Leach Plus Process Plant | ||||||||||||||||||||||||||
Measured | $0.01 | 0.002 - 0.010 | 496,897 | 0.012 | 0.44 | 1.85 | 5,989 | 216,690 | ||||||||||||||||||
Indicated | $0.01 | 0.002 - 0.010 | 406,059 | 0.011 | 0.35 | 1.61 | 4,592 | 143,947 | ||||||||||||||||||
Meas + Ind | $0.01 | 0.002 - 0.010 | 902,956 | 0.012 | 0.40 | 1.74 | 10,581 | 360,664 | ||||||||||||||||||
Inferred | $0.01 | 0.002 - 0.010 | 295,612 | 0.011 | 0.33 | 1.54 | 3,356 | 96,117 | ||||||||||||||||||
Total material in the Pit (tons) = | 3.631 billion |
$1.00 minimum bid price requirement for continued listing on Nasdaq. See
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes to the Financial Statements for further details.Overview
Company
The issuance of additional shares of common stock or preferred stock:
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
We expect to continue to incur significant costsHycroft Mine in the pursuitprolific mining region of our acquisition plans.Northern Nevada. We cannot assure you that our plans to raise capital or to completeare focused on exploring the Hycroft Mine’s claims comprising approximately 64,085 acres and developing the Hycroft Mine in a Business Combination will be successful.
Resultssafe, environmentally responsible, and cost-effective manner. We ceased mining activities in November 2021, and as of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from August 28, 2017 (date of inception) through December 31, 2018 were organizational activities, those necessary to prepare for the Initial Public Offering, which was consummated2022, we completed processing of gold and silver ore previously placed on February 12, 2018, and identifying a target company for a Business Combination.leach pads. We do not expect to generate any operating revenues
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Gold revenue | $ | — | $ | 32,249 | |||||||
Gold ounces recovered | — | 14,032 | |||||||||
Gold ounces sold | — | 17,728 | |||||||||
Average realized price (per ounce) | $ | — | $ | 1,819 | |||||||
Silver revenue | $ | — | $ | 980 | |||||||
Silver ounces recovered | — | 37,281 | |||||||||
Silver ounces sold | — | 44,084 | |||||||||
Average realized price (per ounce) | $ | — | $ | 22.23 |
Financial Statements)
Year Ended December 31, | ||||||||||||||
2023 | 2022 | |||||||||||||
Cost of sales: | ||||||||||||||
Production costs | $ | — | $ | 30,756 | ||||||||||
Mine site period costs – Note 2 | — | 13,720 | ||||||||||||
Asset retirement obligation adjustments – Notes 2 and 8 | — | 4,701 | ||||||||||||
Depreciation and amortization – Note 2 | — | 3,361 | ||||||||||||
Write-down of supplies inventories – Notes 2 and 4 | — | 1,051 | ||||||||||||
Total cost of sales | — | 53,589 | ||||||||||||
Operating expenses: | ||||||||||||||
Projects, exploration, and development | 20,637 | 18,355 | ||||||||||||
General and administrative | 12,673 | 14,367 | ||||||||||||
Mine site period costs – Note 2 | 11,886 | — | ||||||||||||
Depreciation and amortization – Note 2 | 2,814 | — | ||||||||||||
Accretion – Note 8 | 1,087 | 408 | ||||||||||||
Write-down of supplies inventories – Notes 2 and 4 | 495 | — | ||||||||||||
Gain on settlement of accrued liability – Note 10 | (1,151) | — | ||||||||||||
Asset retirement obligation adjustments – Notes 2 and 8 | (2,887) | — | ||||||||||||
Total cost of sales and operating expenses | $ | (45,554) | $ | 86,719 |
For the period from August 28, 2017 (inception) throughyear ended December 31, 2017, we had a net loss2023, compared to $3.4 million during the same period of $2,784, which consists2022. The decrease in total
Liquidity and Capital Resources
The completiondepreciation of the Initial Public Offering and simultaneous Private Placement Warrants, inclusive of the underwriters’ partial exercise oftest leach pads in July 2022, following their over-allotment option, generated gross proceeds tofull depreciation.
As of December 31, 2018, we had securities held in the Trust Account of $212,916,691, substantially all of which is invested in U.S. treasury securities money market fund. Interest income earned on the balance in the Trust Account is available to us to pay taxes.
As of December 31, 2018, we had cash of $535,946 held outside the Trust Account, which is available for use by us to cover the costs associated with identifying a target business, negotiating a Business Combination, due diligence procedures and other general corporate uses. In addition, as of December 31, 2018, we had accounts payable and accrued expenses of $201,392.
supplies inventories
Forexcess supplies inventories. In addition, the period from August 28, 2017 (inception) throughCompany sold an uninstalled regrind mill and ball mill that are not expected to be needed for a future milling operation.
We intend to usecash equivalents
December 31, 2023 | December 31, 2022 | ||||||||||
Cash and cash equivalents | $ | 106,210 | $ | 141,984 | |||||||
Accounts receivable | — | 2,771 | |||||||||
Income tax receivable | 1,530 | 1,530 | |||||||||
Interest receivable | 667 | 459 | |||||||||
Assets held for sale, net of payments received of $1.6 million(1) | 5,598 | 6,098 | |||||||||
Total projected sources of future liquidity | $ | 113,338 | $ | 152,383 |
Our Sponsor has committed, pursuant to the Forward Purchase Contract with us, to purchase, in a private placementallows for gross proceeds of $25,000,000 to occur concurrently with the consummation of a Business Combination, 2,500,000 Units on substantially the same terms as the sale of Units in Initial Public Offering at $10.00 per Unit, and 625,000 shares of Class A common stock. The funds from the sale will be used as partsome or all of the considerationEquipment to third parties and for the sellersBuyer to
We intendtotal of $1.6 million received to usedate. Effective March 1, 2024, the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses (as well as pay personnel and advisors to do the forgoing), structure, negotiate and complete a Business Combination.
Going Concern
In order to fund working capital deficiencies or finance transaction costs in connection with an intended Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our Business Combination, we would repay such loaned amounts. In the event that our Business Combination does not close, we may usebuyer terminated a portion of the agreement. For additional information, see
Year Ended December 31, | ||||||||||||||
2023 | 2022 | |||||||||||||
Net loss | $ | (55,024) | $ | (60,828) | ||||||||||
Net non-cash adjustments | 14,286 | 16,304 | ||||||||||||
Net change in operating assets and liabilities | (709) | 9,669 | ||||||||||||
Net cash used in operating activities | (41,447) | (34,855) | ||||||||||||
Net cash provided by (used in) investing activities | (507) | 8,337 | ||||||||||||
Net cash provided by (used in) financing activities | (1,461) | 155,849 | ||||||||||||
Net increase (decrease) in cash | (43,415) | 129,331 | ||||||||||||
Cash, cash equivalents and restricted cash, beginning of period | 175,966 | 46,635 | ||||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 132,550 | $ | 175,966 |
Payments Due by Period | |||||||||||||||||||||||||||||
Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | |||||||||||||||||||||||||
Operating activities: | |||||||||||||||||||||||||||||
Net smelter royalty(1) | $ | 241,199 | $ | — | $ | — | $ | — | $ | 241,199 | |||||||||||||||||||
Remediation and reclamation expenditures(2) | 86,915 | 3,172 | 1,453 | — | 82,290 | ||||||||||||||||||||||||
Interest payments(3) | 14,637 | 4,298 | 8,567 | 1,772 | — | ||||||||||||||||||||||||
Crofoot Royalty(4) | 4,344 | — | — | — | 4,344 | ||||||||||||||||||||||||
Financing activities: | |||||||||||||||||||||||||||||
Repayments of debt principal(5) | 199,635 | 130 | 76 | 199,429 | — | ||||||||||||||||||||||||
Additional interest payments(6) | 3,300 | 2,200 | 1,100 | — | — | ||||||||||||||||||||||||
Total | $ | 550,030 | $ | 9,800 | $ | 11,196 | $ | 201,201 | $ | 327,833 |
In connectionCompany was in compliance with all covenants under its debt agreements.
Off-balance sheet financing arrangements
perform reclamation activity at the Hycroft Mine in the future. As a result of this requirement, an
Asset retirement obligation has been recorded on our Consolidated Balance Sheets that is based on our expectation of the costs that will be incurred years in the future. Any underestimate or unanticipated reclamation costs or any changes in governmental reclamation requirements could require us to record or incur additional reclamation costs. We accrue an Asset retirement obligation when they become known, are probable, and can be reasonably estimated. Whenever a previously unrecognized Asset retirement obligation becomes known, or a previously estimated reclamation cost is increased or decreased, the amount of that liability and any additional cost will be recorded at that time and could materially reduce our consolidated net income attributable to stockholders.Page | |||||
Consolidated Financial Statements | |||||
Report of Independent Registered Public Accounting Firm, PCAOB ID 659 | |||||
Consolidated Balance Sheets | |||||
Consolidated Statements of Operations | |||||
Consolidated Statements of Cash Flows | |||||
Consolidated Statements of Stockholders’ Equity (Deficit) | |||||
Notes to Consolidated Financial Statements |
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support provided to the Company. We began incurring these fees on February 8, 2018 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination or the Company’s liquidation.
57
Critical Accounting Policies
The preparation of financial statements and related disclosuresyear then ended, in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.
Recent accounting pronouncements
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. We anticipate our first presentation of the expanded disclosure requirements on changes in stockholders’ equity will be included in our Form 10-Q for the quarter ended March 31, 2019.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.
The net proceeds of our initial public offering and the sale of the private units held in the trust account are invested in U.S. government treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Our financial statements and notes thereto begin on Page F-1
None.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officer”), the effectiveness of our disclosure controls and procedures as of December 31, 2018, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of December 31, 2018, our disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls over Financial Reporting
This report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by the rules of the Commission for newly public companies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
Directors and Executive Officers
As of the date of this report, our directors and officers are as follows:
Jason Mudrick has been our Chief Executive Officer and a member of our board of directors since September 2017. Mr. Mudrick is the founder and Chief Investment Officer of Mudrick Capital, an investment firm that specializes in long and short investments in distressed credit. Mudrick Capital was founded in 2009 with $5 million under management. As of February 28th, 2018, the firm had grown to approximately $2.4 billion under management, primarily for institutional clients. Mr. Mudrick began his Wall Street career in 2000 advising on mergers and acquisition transactions as an Associate in Merrill Lynch’s Mergers & Acquisitions Investment Banking Group. In 2001, he joined Contrarian Capital Management, where he began his focus on distressed investing. Beginning in October 2002, Mr. Mudrick served as Managing Director and Portfolio Manager of the Contrarian Equity Fund, a fund specializing in post-restructured equities, which he managed until his departure at the end of 2008. As Managing Director and Portfolio Manager of the Contrarian Equity Fund, Mr. Mudrick specialized in investing in post-restructured equities, among other things. In 2009, Mr. Mudrick founded Mudrick Capital to continue his specialty of investing in distressed debt and post-restructured equities. Mr. Mudrick has served on numerous ad hoc creditors’ committees and seven post-restructured companies’ boards of directors, including Safety-Kleen Holdings, Integrated Alarm Services Group, Salton, Rotech Healthcare, NJOY Holdings, Corporate Risk Holdings, Proenza Schouler and Dex Media Holdings, Inc., where he is currently the Chairman of the Board. Jason also spent two years in graduate school teaching economics classes to Harvard University undergraduates. Mr. Mudrick has a B.A. in Political Science from the College of the University of Chicago and a J.D. from Harvard Law School. Mr. Mudrick was previously admitted to the New York State Bar. Mr. Mudrick’s qualifications to serve on our board of directors include his extensive leadership and board experience, his track record as a founder and Chief Investment Officer of Mudrick Capital, his current board experience, including as Chairman of the Board of Dex Media Holdings, Inc., and his network of contacts in the distressed investing field.
Victor Danh has been our Vice President since September 2017. Mr. Danh is a Managing Director, Head of Research, and Senior Analyst at Mudrick Capital, where he is responsible for analyzing distressed credit and equity opportunities across a diverse range of industries and overseeing and coordinating the research team. Prior to joining Mudrick Capital, Mr. Danh was a Vice President and Assistant Portfolio Manager at Contrarian Capital Management, LLC from 2003 to 2009 where he focused on deep value and distressed investments in a wide range of industries across the entire capital structure. Previously, Mr. Danh worked at Merrill Lynch in the Mergers and Acquisitions Group and at UBS in the Technology Investment Banking Group. Mr. Danh is currently serving on the board of directors of Expanse Energy Solutions, Inc. Mr. Danh received a B.A. in Economics from Harvard College.
David Kirsch has been our Vice President since September 2017 and is one of our directors as of the date hereof. Mr. Kirsch is a Managing Director and Senior Analyst at Mudrick Capital, where he is responsible for analyzing distressed credit and equity opportunities across a diverse range of industries. Prior to joining Mudrick Capital, from 2008 to 2010 Mr. Kirsch was a Senior Analyst and Managing Director at Miura Global Management, a large global long-short equity hedge fund, where he was responsible for coverage of the financial and consumer industries across the Americas, Europe and Asia. Mr. Kirsch gained extensive restructuring experience as a Director at Alvarez & Marsal from 2003 – 2008. At Alvarez & Marsal, he held primary or lead management roles on an interim basis for distressed companies and advised creditors on balance sheet solutions to maximize the value of their investments. Selected assignments include representing Senior Secured Creditors in the Delphi and Oneida restructurings and overseeing the Tarragon (a public real estate development company) Finance Department during its restructuring. Mr. Kirsch began his Wall Street career as an Analyst in the Healthcare Industry Group in the Investment Banking Division of Banc of America Securities. He is currently serving on the board of directors of Hycroft Mining, NJOY Holdings, Proenza Schouler, Targus Holdings, NYDJ Holdco Corporation and Nelson Education, where he is the Chairman of the Board. David received his B.S. Magna Cum Laude in Economics from the Wharton School at the University of Pennsylvania. Mr. Kirsch’s qualifications to serve on our board of directors include his extensive leadership and board experience, his track record as Managing Director and Senior Analyst of Mudrick Capital, his current board experience, including as Chairman of the Board of Nelson Education, and his network of contacts in the distressed investing field.
Glenn Springer has been our Chief Financial Officer since September 2017. Mr. Springer is the Chief Financial Officer of Mudrick Capital, where he oversees the finance, accounting and operations functions. Prior to joining Mudrick Capital, Mr. Springer was Chief Financial Officer and Chief Operating Officer at Turtle Creek Investment Advisors, LLC from 2007 to 2008 where he developed from inception, its operational and financial infrastructure. Prior to joining Turtle Creek, Mr. Springer served as Chief Financial Officer & Chief Compliance Officer of SBZ Select Investments, LLC from 2005 to 2007 where he was responsible for the finance, accounting and compliance functions, including the registration of two investment advisors with the SEC. Previously, Mr. Springer served as Controller (A.A.I.UK), Director of Fund Accounting and a Risk Management Affiliated Fund Analyst at Asset Alliance Corporation from 2000 to 2004. Prior to Asset Alliance, Mr. Springer was a Senior Accountant in PricewaterhouseCoopers, LLP’s Financial Services and Business Advisory Services Group from 1998 to 2000 where his focus was on audits of a variety of investment companies including hedge funds and private equity funds. Mr. Springer began his career at Richard A. Eisner & Co. LLP from 1996 to 1998 where he was a Senior Accountant in the Audit Department. Mr. Springer received a B.A. from the State University of Albany and an M.B.A. from Baruch College, CUNY. Mr. Springer is a Certified Public Accountant in the State of New York.
Dennis Stogsdill, one of our directors since February 2018, has in excess of 20 years of experience in management consulting, advising troubled companies, lenders and equity sponsors in distressed and non-distressed situations. Mr. Stogsdill began his career in 1994 working as a management consultant at GB Consulting and later in 1996 joined the global restructuring group of Arthur Andersen. In 2001 he helped form the restructuring group of the investment bank Berenson Minella. In 2002, he joined Alvarez & Marsal, a global consulting firm specializing in corporate turnarounds and financial restructurings. Mr. Stogsdill is currently Managing Director at Alvarez & Marsal and has been involved in all aspects of the reorganization process, including acting in executive-level roles such as Chief Restructuring Officer. Mr. Stogsdill periodically served as Chief Restructuring Officer (or in an analogous position) of companies which elected to utilize bankruptcy proceedings as a part of their financial restructuring process and, as such, he served as an executive officer of various companies which filed bankruptcy petitions under federal law, including, without limitation, Fairway Group Holdings in 2015, Revel Casino in 2013, Fresh & Easy Markets in 2013 and M&G Chemicals SA in 2017. He is currently serving as Chief Restructuring Officer of M&G Chemicals SA, a global petrochemicals business. Mr. Stogsdill has a B.S. from Rutgers University. Mr. Stogsdill is well-qualified to serve on our board of directors due to his experience in finance, business, operations and in restructuring and turnaround situations.
Tim Daileader, one of our directors since February 2018, is a partner at Drivetrain, LLC, an independent fiduciary and advisory firm, and the chief operating officer of Drivetrain Trust Company, LLC, a specialty New Hampshire trust company formed to serve as a successor trustee on defaulted bond indentures. In these capacities, Mr. Daileader leads several post-bankruptcy liquidation and litigation trusteeships, including those of Abengoa’s North American businesses, SunEdison’s, Paragon Offshore’s and Relativity Media’s post-bankruptcy estates. From 2011 to 2015, Mr. Daileader served as a senior investment analyst at Litespeed Partners, the N.Y. based hedge fund. From 2007 to 2011, Mr. Daileader also served as the Director of Research for debt and equity research at Knight Capital Group and Libertas Partners (acquired by Knight Capital Group) where he also was part of the Senior Operating, New Business and Credit Policy committees. From 1997 to 2007, Mr. Daileader was a senior investment professional at Stanfield Capital Partners and Strategic Value Partners. Between 1994 and 1997, Mr. Daileader worked at GiroCredit AG and Banque Francais du Commerce Exterieur in their Corporate Finance/ Commercial Lending departments. From 1992 and 1994, Mr. Daileader completed formal credit training at National Westminster Bank USA and worked in its Credit Department. Mr. Daileader received a B.A. in Economics from Georgetown University where he was a George F. Baker Scholar, and is a CFA charter holder. Mr. Daileader is well-qualified to serve on our board of directors due to his experience in financial restructurings, corporate finance, leveraged finance, compliance and asset management.
Dr. Brian Kushner, one of our directors since February 2018, has since 2009 served as a Senior Managing Director at FTI Consulting, Inc. (NYSE: FCN), a global business advisory firm, where he serves as the leader of the Private Capital Advisory Services practice and as the co-leader of the Technology practice, the Aerospace, Defense and Government Contracting practice and the Activism and M&A Solutions practice. Prior to joining FTI, Dr. Kushner was the co-founder of CXO, L.L.C., a boutique interim and turnaround management consulting firm that was acquired by FTI at the end of 2008. Over the past two decades, he has served as Chief Executive Officer, the Chief Restructuring Officer or a Director of more than two dozen public and private technology, manufacturing, telecom and defense companies, and has led, or participated in the sale or acquisition of over 25 companies. Dr. Kushner periodically served as Chief Restructuring Officer (or in an analogous position) of companies which elected to utilize bankruptcy proceedings as a part of their financial restructuring process and, as such, he served as an executive officer of various companies which filed bankruptcy petitions under federal law, including, without limitation, Relativity Media LLC in 2015. Dr. Kushner began his career in 1982 at BDM International, a defense firm, and remained with them following their acquisition by Ford Motor Company, and stayed on to become Chief Scientist and General Manager as part of the management team that completed a leveraged buyout of BDM in 1990 with the Carlyle Group. Dr. Kushner serves as an independent director and Chair of the Audit Committee of Cumulus Media, Inc. (NASDAQ: CMLS), a leader in the radio broadcasting industry, since 2018; an independent director and Chair of the Audit Committee of Dex Media Holdings Inc, a digital and print marketing company since 2016; an independent director and Chair of the Audit Committee of Gibson Brands, Inc., a manufacturer of guitars and other musical instruments, since 2018; an independent director of DevelopOnBox Holding, LLC d/b/a Zodiac Interactive, a software development company for the cable and video processing industry, where he has served on the Audit and Governance Committees since 2016. Dr. Kushner is also a member of the Advisory Council of the College of Natural Sciences at the University of Texas at Austin, Chairman Emeritus of the Physics Advisory Council at the University of Texas at Austin, and is an Emeritus member of the Engineering College Council at Cornell University in Ithaca, New York. Previously, from 2016 – 2018, he served as a non-executive independent director, Chair of the Remuneration Committee and a member of the Audit Committee of the Luxfer Group, PLC (NYSE: LXFR), a specialty materials manufacturing company; from 2015 to 2016 he served as an independent director and Chair of the Audit Committee of Everyware Global, Inc, the manufacturing company that is the parent of the Oneida and Anchor Hocking brands (since renamed the Oneida Group); from 2013 to 2015 the Lead Independent Director of Damovo, LLC, the ultrahigh reliability and data systems integration company; from 2010 to 2013 as Chair of Caribbean Asset Holdings, the voice, video and telephony company serving many Caribbean islands; from 2009 to 2013 as managing member and director of DLN Holdings, LLC, a mid-tier defense contractor; from 2007 to 2012 as director and acting Chair of Sage Telecom, Inc., a competitive local exchange carrier and a Silver Point Capital portfolio company; from 2006 to 2009 a director of Pacific Crossing Limited, a telecom carrier; and from 2003 to 2008 an independent director of Headway Resources, a staffing company. Dr. Kushner has a Ph.D. in Applied and Engineering Physics with a minor in Electrical Engineering from Cornell University, as well as an M.S. and B.S. in Applied and Engineering Physics from Cornell. Dr. Kushner is well-qualified to serve on our board of directors due to his substantial executive-level operational experience in a broad spectrum of industries, his knowledge and expertise in M&A and in IT, his extensive experience over the last 20 years as an independent director, and his extensive network of contacts in both private equity, hedge funds and distressed investing.
Number and Terms of Office of Officers and Directors
We have 5 directors. Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with NASDAQ corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on NASDAQ. The term of office of the first class of directors, consisting of Mr. Stogsdill, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Messrs. Daileader and Kushner, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Messrs. Mudrick and Kirsch, will expire at the third annual meeting of stockholders.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Senior Managing Directors, Managing Directors, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Committees of the Board of Directors
Our board of directors has two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited exception, NASDAQ rules and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and NASDAQ rules require that the compensation committee of a listed company be comprised solely of independent directors.
Audit Committee
We have established an audit committee of the board of directors. Messrs. Stogsdill, Daileader and Kushner serve as members of our audit committee, and Mr. Kushner chairs the audit committee. Under the NASDAQ listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent. Each of Messrs. Stogsdill, Daileader and Kushner meet the independent director standard under NASDAQ listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Each member of the audit committee is financially literate and our board of directors has determined that Mr. Stogsdill qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
Compensation Committee
We have established a compensation committee of the board of directors. Messrs. Stogsdill and Daileader serve as members of our compensation committee. Under the NASDAQ listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent. Messrs. Stogsdill and Daileader are independent and Mr. Daileader chairs the compensation committee.
We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
Notwithstanding the foregoing, other than the payment to our sponsor of $10,000 per month, for up to 24 months, for office space, utilities and secretarial and administrative support and reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC.
Director Nominations
We do not have a standing nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by law or NASDAQ rules. In accordance with Rule 5605 of the NASDAQ rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who will participate in the consideration and recommendation of director nominees are Messrs. Stogsdill, Daileader and Kushner. In accordance with Rule 5605 of the NASDAQ rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more officers serving on our board of directors.
Code of Ethics
We have adopted a Code of Ethics applicable to our directors, officers and employees. We filed a copy of our Code of Ethics and our audit and compensation committee charters as exhibits to the registration statement relating to our initial public offering. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Availability of Documents
We have filed a copy of our form of Code of Ethics, our audit committee charter, our nominating committee charter and compensation committee charter as exhibits to the registration statement filed in connection with our initial public offering. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Executive Officer and Director Compensation
None of our officers has received any cash compensation for services rendered to us. We pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. No compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
The following table sets forth information regarding the beneficial ownership of our common stock as of March 25, 2019 based on information obtained from the persons named below, with respect to the beneficial ownership of shares of our common stock, by:
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
Class A Common Stock | Class B Common Stock | |||||||||||||||
Name and Address of Beneficial Owner (1) | Number of Shares Beneficially Owned | % of Class | Number of Shares Beneficially Owned | % of Class | ||||||||||||
Mudrick Capital Acquisition Holdings LLC(2) | — | — | 5,200,000 | 100 | % | |||||||||||
Jason Mudrick(2) | — | — | 5,200,000 | 100 | % | |||||||||||
Victor Danh(3) | — | — | — | — | ||||||||||||
David Kirsch(3) | — | — | — | — | ||||||||||||
Glenn Springer(3) | — | — | — | — | ||||||||||||
Dennis Stogsdill(3) | — | — | — | — | ||||||||||||
Timothy Daileader(3) | — | — | — | — | ||||||||||||
Dr. Brian Kushner(3) | — | — | — | — | �� | |||||||||||
All directors and executive officers as a group (7 individuals) | — | — | 5,200,000 | 100 | % | |||||||||||
Polar Asset Management Partners Inc.(4) | 2,079,800 | 9.99 | % | — | — | |||||||||||
AQR Capital Management, LLC(5) | 1,150,000 | 5.53 | % | — | — | |||||||||||
Basso Capital Management, L.P.(6) | 1,427,243 | 6.9 | % | — | — | |||||||||||
Glazer Capital, LLC(7) | 1,648,282 | 7.9 | % | — | — | |||||||||||
Weiss Asset Management LP (8) | 1,454,766 | 6.69 | % | — | — |
|
The table above does not include the shares of common stock underlying the private placement warrants or forward purchase securities held or to be held by our sponsor because these securities are not exercisable within 60 days of this report.
Changes in Control
Not applicable.
Certain Relationships and Related Transactions
On September 25, 2017, we issued an aggregate of 5,750,000 founder shares to our sponsor for an aggregate purchase price of $25,000 in cash, or approximately $0.004 per share. On February 28, 2018, our sponsor forfeited 550,000 founder shares because the over-allotment option was not exercised in full in connection with our initial public offering. The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Our sponsor and Cantor purchase an aggregate of 7,740,000 warrants at a price of $1.00 per warrant (6,700,000 warrants by our sponsor and 1,040,000 warrants by Cantor), each exercisable to purchase one share of our Class A common stock at a price of $11.50 per share, in a private placement that closed simultaneously with the closing of our initial public offering. The private placement warrants (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Our sponsor has committed, pursuant to a forward purchase contract with us, to purchase, in a private placement for gross proceeds of $25,000,000 to occur concurrently with the consummation of our initial business combination, 2,500,000 of our units on substantially the same terms as the sale of units in our initial public offering at $10.00 per unit, and 625,000 shares of Class A common stock. The funds from the sale of units will be used as part of the consideration to the sellers in the initial business combination; any excess funds from this private placement will be used for working capital in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their public shares and provides us with a minimum funding level for the initial business combination.
If any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us. We may, at our option, pursue an Affiliated Joint Acquisition opportunity with an entity to which Mudrick Capital or an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the initial business combination by making a specified future issuance to any such entity. Any such Affiliated Joint Acquisition or specified future issuance would be in addition to, and would not include, the forward purchase securities issued pursuant to the forward purchase contract.
We pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Prior to the closing of our initial public offering, our sponsor loaned us $293,953, which were used for a portion of the expenses of such offering. These loans were non-interest bearing, unsecured and were due at the earlier of March 31, 2018 or the closing of such offering. The loan was repaid upon the closing of such offering.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.
We entered into a registration rights agreement with respect to the private placement warrants, the forward purchase securities, the warrants issuable upon conversion of working capital loans (if any) and the shares of Class A common stock issuable upon exercise of the foregoing, and upon conversion of the founder shares.
Related Party Policy
We have adopted a code of ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company. A copy of the code of ethics that we adopted is filed as an exhibit to the registration statement relating to our initial public offering.
In addition, our audit committee, pursuant to a written charter that we adopted, is responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction. A majority of the members of the entire audit committee will constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party transaction. A copy of the audit committee charter that we adopted is filed as an exhibit to the registration statement relating to our initial public offering. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors unless we, or a committee of independent directors, have obtained an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view. Furthermore, no finder’s fees, reimbursements, consulting fee, monies in respect of any payment of a loan or other compensation will be paid by us to our sponsor, officers or directors, or any affiliate of our sponsor or officers, for services rendered to us prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is).
Director Independence
NASDAQ listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Messrs. Stogsdill, Daileader and Kushner are “independent directors” as defined in the NASDAQ listing standards and applicable SEC rules. Our independent directors have regularly scheduled meetings at which only independent directors are present.
The following is a summary of fees paid or to be paid to WithumSmith+Brown, PC, or Withum, for services rendered.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Withum in connection with regulatory filings. The aggregate fees billed by Withum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the year ended December 31, 2018 and for the period from August 28, 2017 (inception) through December 31, 2017 totaled $43,500 and $18,000, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay Withum for consultations concerning financial accounting and reporting standards during the year ended December 31, 2018 and for the period from August 28, 2017 (inception) through December 31, 2018.
Tax Fees. We did not pay Withum for tax planning and tax advice for the year ended December 31, 2018 and for the period from August 28, 2017 (inception) through December 31, 2017.
All Other Fees. We did not pay Withum for other services for the year ended December 31, 2018 and for the period from August 28, 2017 (inception) through December 31, 2017.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
71
All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes thereto in is Item 15 of Part IV below.
We hereby file as part of this report the exhibits listed in the attached Exhibit Index. Copies of such material can be obtained on the SEC website at www.sec.gov.
Not applicable.
72
EXHIBIT INDEX
* Filed herewith
** Furnished herewith
MUDRICK CAPITAL ACQUISTION CORPORATION
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Mudrick Capital Acquisition Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Mudrick Capital Acquisition Corporation (the “Company”) as of December 31, 2018 and 2017, and the related statements of operations, changes in stockholders’ equity and cash flows, for the year ended December 31, 2018 and for the period from August 28, 2017 (inception) to December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the year ended December 31, 2018 and for the period from August 28, 2017 (inception) to December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, if the Company is unable to complete a Business Combination by February 12, 2020, then the Company will cease all operations except for the purpose of liquidating. This date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
Moss Adams LLP
New York, New York
March 25, 2019
December 31, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | $ | 535,946 | $ | 24,945 | ||||
Prepaid expenses | 52,295 | — | ||||||
Total Current Assets | 588,241 | 24,945 | ||||||
Deferred offering costs | — | 166,500 | ||||||
Marketable securities held in Trust Account | 212,916,691 | — | ||||||
Total Assets | $ | 213,504,932 | $ | 191,445 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 201,392 | $ | 533 | ||||
Income taxes payable | 555,449 | — | ||||||
Accrued offering costs | — | 25,000 | ||||||
Promissory note – related party | — | 143,696 | ||||||
Total Current Liabilities | 756,841 | 169,229 | ||||||
Deferred underwriting fees | 7,280,000 | — | ||||||
Total Liabilities | 8,036,841 | 169,229 | ||||||
Commitments and Contingencies | ||||||||
Common stock subject to possible redemption, $0.0001 par value; 19,848,325 and -0- shares as of December 31, 2018 and 2017, respectively (at redemption value of $10.10 per share) | 200,468,083 | — | ||||||
Stockholders’ Equity: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of December 31, 2018 and 2017 | — | — | ||||||
Class A Common stock, $0.0001 par value; 100,000,000 shares authorized; 951,675 and -0- shares issued and outstanding (excluding 19,848,325 and -0- shares subject to possible redemption) as of December 31, 2018 and 2017, respectively | 95 | — | ||||||
Class B Common stock, $0.0001 par value; 10,000,000 shares authorized; 5,200,000 and 5,750,000 shares issued and outstanding as of December 30, 2018 and 2017, respectively | 520 | 575 | ||||||
Additional paid-in capital | 3,322,214 | 24,425 | ||||||
Retained earnings (Accumulated deficit) | 1,677,179 | (2,784 | ) | |||||
Total Stockholders’ Equity | 5,000,008 | 22,216 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 213,504,932 | $ | 191,445 |
December 31, 2023 | December 31, 2022 | ||||||||||
Assets: | |||||||||||
Cash and cash equivalents | $ | 106,210 | $ | 141,984 | |||||||
Prepaids and deposits – Note 3 | 3,326 | 2,840 | |||||||||
Supplies inventories, net – Note 4 | 1,834 | 2,808 | |||||||||
Income tax receivable | 1,530 | 1,530 | |||||||||
Interest receivable | 667 | 459 | |||||||||
Accounts receivable | — | 2,771 | |||||||||
Current assets | 113,567 | 152,392 | |||||||||
Property, plant, and equipment, net – Note 5 | 53,091 | 54,832 | |||||||||
Restricted cash – Note 6 | 26,340 | 33,982 | |||||||||
Assets held for sale – Note 7 | 7,148 | 7,148 | |||||||||
Prepaids – Note 3 | 1,547 | 600 | |||||||||
Total assets | $ | 201,693 | $ | 248,954 | |||||||
Liabilities: | |||||||||||
Asset retirement obligation – Note 8 | $ | 3,172 | $ | — | |||||||
Debt, net – Note 9 | 2,330 | 2,328 | |||||||||
Accounts payable and accrued expenses – Note 10 | 1,631 | 5,644 | |||||||||
Contract liabilities – Note 11 | 1,550 | 1,050 | |||||||||
Other liabilities – Note 12 | 3,063 | 3,011 | |||||||||
Current liabilities | 11,746 | 12,033 | |||||||||
Debt, net – Notes 9 and 21 | 142,617 | 132,690 | |||||||||
Deferred gain on sale of royalty – Note 13 | 29,839 | 29,837 | |||||||||
Asset retirement obligation – Note 8 | 4,801 | 10,302 | |||||||||
Warrant liabilities – Notes 14 and 21 | 26 | 786 | |||||||||
Other liabilities – Note 12 | 8 | — | |||||||||
Total liabilities | $ | 189,037 | $ | 185,648 | |||||||
Commitments and contingencies – Note 23 | |||||||||||
Stockholders’ equity – Note 15 | |||||||||||
Common stock, $0.0001 par value; 1,400,000,000 shares authorized; 20,736,612 issued and outstanding at December 31, 2023, and 20,027,060 issued and outstanding at December 31, 2022 | $ | 21 | $ | 20 | |||||||
Additional paid-in capital | 737,810 | 733,437 | |||||||||
Accumulated deficit | (725,175) | (670,151) | |||||||||
Total stockholders’ equity | 12,656 | 63,306 | |||||||||
Total liabilities and stockholders’ equity | $ | 201,693 | $ | 248,954 |
Year Ended December 31, 2018 | For the Period from August 28, 2017 (inception) Through December 31, 2017 | |||||||
General and administrative expenses | $ | 609,581 | $ | 2,784 | ||||
Loss from operations | (609,581 | ) | (2,784 | ) | ||||
Other income: | ||||||||
Interest income | 8,302 | — | ||||||
Interest earned on marketable securities held in Trust Account | 2,836,691 | — | ||||||
Other income | 2,844,993 | — | ||||||
Income (loss) before provision for income taxes | 2,235,412 | (2,784 | ) | |||||
Provision for income taxes | (555,449 | ) | — | |||||
Net income (loss) | $ | 1,679,963 | $ | (2,784 | ) | |||
Weighted average shares outstanding of Class A common stock | 20,800,000 | — | ||||||
Basic and diluted income per common share, Class A | $ | 0.10 | $ | — | ||||
Weighted average shares outstanding of Class B common stock(1) | 5,200,000 | 5,200,000 | ||||||
Basic and diluted loss per common share, Class B | $ | (0.08 | ) | $ | (0.00 | ) |
Year Ended December 31, | ||||||||||||||
2023 | 2022 | |||||||||||||
Revenues – Note 15 | $ | — | $ | 33,229 | ||||||||||
Cost of sales: | ||||||||||||||
Production costs | — | 30,756 | ||||||||||||
Mine site period costs – Note 2 | — | 13,720 | ||||||||||||
Asset retirement obligation adjustments – Notes 2 and 8 | — | 4,701 | ||||||||||||
Depreciation and amortization – Note 2 | — | 3,361 | ||||||||||||
Write-down of supplies inventories – Notes 2 and 4 | — | 1,051 | ||||||||||||
Total cost of sales | — | 53,589 | ||||||||||||
Operating expenses: | ||||||||||||||
Projects, exploration, and development | 20,637 | 18,355 | ||||||||||||
General and administrative | 12,673 | 14,367 | ||||||||||||
Mine site period costs – Note 2 | 11,886 | — | ||||||||||||
Depreciation and amortization – Note 2 | 2,814 | — | ||||||||||||
Accretion – Note 8 | 1,087 | 408 | ||||||||||||
Write-down of supplies inventories – Notes 2 and 4 | 495 | — | ||||||||||||
Gain on settlement of accrued liability – Note 10 | (1,151) | — | ||||||||||||
Asset retirement obligation adjustments – Notes 2 and 8 | (2,887) | — | ||||||||||||
Loss from operations | (45,554) | (53,490) | ||||||||||||
Other (expense) income: | ||||||||||||||
Interest expense – Note 9 | (18,467) | (18,481) | ||||||||||||
Interest income | 8,278 | 2,313 | ||||||||||||
Gain on sale of assets, net of commissions | 544 | 3,948 | ||||||||||||
Fair value adjustment to warrants – Notes 14 and 21 | 175 | (159) | ||||||||||||
Gain on extinguishment of debt – Note 9 | — | 5,041 | ||||||||||||
Net loss | $ | (55,024) | $ | (60,828) | ||||||||||
Loss per share(1) | ||||||||||||||
Basic – Note 19 | $ | (2.61) | $ | (3.58) | ||||||||||
Diluted – Note 19 | $ | (2.61) | $ | (3.58) | ||||||||||
Weighted average shares outstanding(1) | ||||||||||||||
Basic – Note 19 | 21,113,516 | 16,977,306 | ||||||||||||
Diluted – Note 19 | 21,113,516 | 16,977,306 |
Common Stock | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance – August 28, 2017 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B common stock to Sponsor | — | — | 5,750,000 | 575 | 24,425 | — | 25,000 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (2,784 | ) | (2,784 | ) | |||||||||||||||||||
Balance – December 31, 2017 | — | — | 5,750,000 | 575 | 24,425 | (2,784 | ) | 22,216 | ||||||||||||||||||||
Sale of 20,800,000 Units, net of underwriting discounts and offering expenses | 20,800,000 | 2,080 | — | — | 196,023,832 | — | 196,025,912 | |||||||||||||||||||||
Sale of 7,740,000 Private Placement Warrants | — | — | — | — | 7,740,000 | — | 7,740,000 | |||||||||||||||||||||
Forfeiture of founder shares | — | — | (550,000 | ) | (55 | ) | 55 | — | — | |||||||||||||||||||
Common stock subject to redemption | (19,848,325 | ) | (1,985 | ) | — | — | (200,466,098 | ) | — | (200,468,083 | ) | |||||||||||||||||
Net income | — | — | — | — | — | 1,679,963 | 1,679,963 | |||||||||||||||||||||
Balance – December 31, 2018 | 951,675 | $ | 95 | 5,200,000 | $ | 520 | $ | 3,322,214 | $ | 1,677,179 | $ | 5,000,008 |
CASH FLOWS
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows used in operating activities: | |||||||||||
Net loss | $ | (55,024) | $ | (60,828) | |||||||
Adjustments to reconcile net loss for the period to net cash used in operating activities: | |||||||||||
Non-cash portion of interest expense – Note 9 | 12,255 | 13,149 | |||||||||
Depreciation and amortization – Notes 2 and 5 | 2,814 | 3,356 | |||||||||
Stock-based compensation – Note 17 | 2,920 | 2,469 | |||||||||
Accretion – Note 8 | 1,087 | 408 | |||||||||
Impairment charges and write-downs – Notes 4, 5, and 7 | 495 | 1,051 | |||||||||
Non-cash (gain) loss on fair value adjustment for warrant liabilities – Notes 14 and 21 | (175) | 159 | |||||||||
Gain on sale of assets, net of commissions | (544) | (3,948) | |||||||||
Gain on settlement of accrued liability | (1,151) | — | |||||||||
Asset retirement obligation adjustments – Note 8 | (3,416) | 4,701 | |||||||||
Gain on extinguishment of debt – Note 9 | — | (5,041) | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | 2,774 | (2,774) | |||||||||
Contract liabilities – Note 11 | 500 | 1,050 | |||||||||
Supplies inventories – Note 4 | 479 | 1,464 | |||||||||
Interest receivable | (208) | (459) | |||||||||
Prepaids and deposits – Note 3 | (1,991) | (498) | |||||||||
Accounts payable and accrued expenses – Note 10 | (2,330) | (3,786) | |||||||||
Production-related inventories | — | 15,808 | |||||||||
Other liabilities – Note 12 | 67 | (1,136) | |||||||||
Net cash used in operating activities | (41,448) | (34,855) | |||||||||
Cash flows (used in) provided by investing activities: | |||||||||||
Additions to property, plant, and equipment | (1,070) | (951) | |||||||||
Proceeds from sale of assets – Note 5 | 563 | 2,714 | |||||||||
Proceeds from assets held for sale, net of commissions expense – Note 7 | — | 6,574 | |||||||||
Net cash (used in) provided by investing activities | (507) | 8,337 | |||||||||
Cash flows (used in) provided by financing activities: | |||||||||||
Proceeds from issuance of common stock and warrants, net of issuance expenses – Note 15 | 867 | 188,859 | |||||||||
Principal payments on debt and finance leases – Note 15 | (2,328) | (33,010) | |||||||||
Net cash (used in) provided by financing activities | (1,461) | 155,849 | |||||||||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (43,416) | 129,331 | |||||||||
Cash, cash equivalents, and restricted cash, beginning of period | 175,966 | 46,635 | |||||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 132,550 | $ | 175,966 | |||||||
Reconciliation of cash, cash equivalents, and restricted cash: | |||||||||||
Cash and cash equivalents | $ | 106,210 | $ | 141,984 | |||||||
Restricted cash | 26,340 | 33,982 | |||||||||
Total cash, cash equivalents, and restricted cash | $ | 132,550 | $ | 175,966 |
Year Ended December 31, 2018 | For the Period from August 28, 2017 (inception) Through December 31, 2017 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income (loss) | $ | 1,679,963 | $ | (2,784 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Interest earned on marketable securities held in Trust Account | (2,836,691 | ) | — | |||||
Increase in promissory note – related party | — | 2,196 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | (52,295 | ) | — | |||||
Accounts payable and accrued expenses | 200,859 | 533 | ||||||
Income taxes payable | 555,449 | — | ||||||
Net cash used in operating activities | (452,715 | ) | (55 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Investment of cash in Trust Account | (210,080,000 | ) | — | |||||
Net cash used in investing activities | (210,080,000 | ) | — | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of Class B common stock to Sponsor | — | 25,000 | ||||||
Proceeds from sale of Units, net of underwriting fees paid | 203,840,000 | — | ||||||
Proceeds from sale of Private Placement Warrants | 7,740,000 | — | ||||||
Repayment of promissory note – related party | (242,331 | ) | — | |||||
Payment of offering costs | (293,953 | ) | — | |||||
Net cash provided by financing activities | 211,043,716 | 25,000 | ||||||
Net Change in Cash | 511,001 | 24,945 | ||||||
Cash – Beginning of period | 24,945 | — | ||||||
Cash – End of period | $ | 535,946 | $ | 24,945 | ||||
Non-Cash investing and financing activities: | ||||||||
Deferred underwriting fees charged to additional paid in capital | $ | 7,280,000 | $ | — | ||||
Initial classification of common stock subject to possible redemption | $ | 198,787,536 | $ | — | ||||
Deferred offering costs included in accrued offering costs | $ | — | $ | 25,000 | ||||
Payment of deferred offering costs and expenses by Sponsor | $ | 240,135 | $ | 141,500 | ||||
Change in value of common stock subject to possible redemption | $ | 1,680,547 | $ | — |
STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Shares(1) | Amount | ||||||||||||||||||||||||||||
Balance at January 1, 2023(2) | 20,027,065 | $ | 20 | $ | 733,437 | $ | (670,151) | $ | 63,306 | ||||||||||||||||||||
Issuance of common stock and warrants – Note 15 | 523,329 | 1 | 866 | — | 867 | ||||||||||||||||||||||||
Vesting of restricted stock units – Note 17 | 186,218 | — | — | — | — | ||||||||||||||||||||||||
5-Year Private Warrants transferred to 5-Year Public Warrants – Notes 13 and 15 | — | — | 585 | — | 585 | ||||||||||||||||||||||||
Stock-based compensation costs | — | — | 2,922 | — | 2,922 | ||||||||||||||||||||||||
Net loss | — | — | — | (55,024) | (55,024) | ||||||||||||||||||||||||
December 31, 2023 | 20,736,612 | $ | 21 | $ | 737,810 | $ | (725,175) | $ | 12,656 |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ (Deficit) Equity | ||||||||||||||||||||||||||
Shares(1) | Amount | ||||||||||||||||||||||||||||
Balance at January 1, 2022 | 6,043,340 | $ | 6 | $ | 540,823 | $ | (609,323) | $ | (68,494) | ||||||||||||||||||||
Issuance of common stock and warrants – Note 15 | 13,687,006 | 14 | 187,482 | — | 187,496 | ||||||||||||||||||||||||
Vesting of restricted stock units – Note 17 | 111,496 | — | 727 | — | 727 | ||||||||||||||||||||||||
5-Year Private Warrants transferred to 5-Year Public Warrants – Notes 13 and 15 | — | — | 42 | — | 42 | ||||||||||||||||||||||||
Stock issuance – other – Note 15 | 185,218 | — | 1,907 | — | 1,907 | ||||||||||||||||||||||||
Stock-based compensation costs | — | — | 2,456 | — | 2,456 | ||||||||||||||||||||||||
Net loss | — | — | — | (60,828) | (60,828) | ||||||||||||||||||||||||
Balance at December 31, 2022 | 20,027,060 | $ | 20 | $ | 733,437 | $ | (670,151) | $ | 63,306 |
MUDRICK CAPITAL ACQUISITION
Mudrick Capital AcquisitionCompany Overview
Althoughsulfide ore. In March 2023, the Company, is not limitedalong with its third-party consultants, completed and filed the Hycroft Property Initial Assessment Technical Report Summary Humboldt and Pershing Counties, Nevada (“2023 Hycroft TRS”) that included a mineral resource estimate utilizing a pressure oxidation (“POX”) process for sulfide and transition mineralization and heap leaching process for oxide mineralization. The Company will continue to a particular industry or sector for purposes of consummating a Business Combination,build on the work and investigate opportunities identified through progressing the technical and data analyses leading up to the 2023 Hycroft TRS.
offering expenses, of $1.1 million. As of December 31, 2018,2023, there were $360.3 million shares of common stock available for issuance under the ATM Program. The net proceeds from the ATM Program are expected to be used for general corporate purposes, which may include the repayment, refinancing, redemption, or repurchase of existing indebtedness, exploration, working capital, or capital expenditures and other investments.
The registration statement for the Company’s initial public offering (“Initial Public Offering”)reverse stock split was declared effective on February 7, 2018. On February 12, 2018, the Company consummated the Initial Public Offering of 20,000,000 units (“Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $200,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,500,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Company’s sponsor, Mudrick Capital Acquisition Holdings LLC ($6,500,000) (the “Sponsor”) and Cantor Fitzgerald & Co. ($1,000,000) (“Cantor”), generating gross proceeds of $7,500,000, which is described in Note 4.
Following the closing of the Initial Public Offering on February 12, 2018, an amount of $202,000,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants was placed in a trust account (“Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
On February 28, 2018, in connection with the underwriters’ election to partially exercise their over-allotment option, the Company consummated the sale of an additional 800,000 Units at $10.00 per Unit and the sale of an additional 240,000 Private Placement Warrants at $1.00 per warrant, generating total gross proceeds of $8,240,000. Following the closing, an additional $8,080,000 of net proceeds ($10.10 per Unit) was placed in the Trust Account, resulting in $210,080,000 ($10.10 per Unit) initially held in the Trust Account.
Transaction costs amounted to $11,974,088, consisting of $4,160,000 of underwriting fees, $7,280,000 of deferred underwriting fees payable (which are held in the Trust Account) and $534,088 of other costs. In addition, as of December 31, 2018, $535,946 of cash was held outside of the Trust Account and is available for working capital purposes. As described in Note 5, the $7,280,000 deferred underwriting fees payable is contingent upon the consummation of a Business Combination by February 12, 2020.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance thatincrease the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
The Company will provide its holders of the outstanding shares of its Class A common stock, par value $0.0001, (“Class A common stock”), sold in the Initial Public Offering (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares (as defined below in Note 3) upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.10price per Public Share). The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination.
If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, public stockholders may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) have agreed to vote their Founder Shares (as defined in Note 4) and any Public Shares held by them in favor of approving a Business Combination. In addition, the initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
Notwithstanding the foregoing, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A common stock sold in the Initial Public Offering, without the prior consent of the Company.
The Sponsor and the Company’s officers and directors (the “initial stockholders”) have agreed not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) that would affect the substance or timingshare of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their shares of Class A common stock in conjunction with any such amendment.
If the Company is unable to complete a Business Combination by February 12, 2020 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released toallow the Company to pay franchise and income taxes (less up to $100,000demonstrate compliance with the $1.00 minimum bid price requirement for continued listing on the Nasdaq Stock Market LLC (“Nasdaq”).
The initial stockholdersCompany have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.10 per share held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company's independent registered accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
Liquidity
As of December 31, 2018, the Company had a cash balance of approximately $536,000, which excludes interest income of approximately $2,837,000 from the Company’s investments in the Trust Account which is available to the Company for tax obligations. Through December 31, 2018, the Company has not withdrawn any interest income from the Trust Account to pay its taxes.
The Company intends to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting commissions) to complete its initial Business Combination. To the extent necessary, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required, up to $1,500,000. Such loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants (see Note 4).
Based on the foregoing, management believes that the Company will have sufficient working capital to meet the Company’s needs through February 12, 2020, the scheduled liquidation date. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination.
Going Concern
In connection with the Company’s assessment of going concern considerationsbeen prepared in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 12, 2020.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements are presented in conformity withU.S. generally accepted accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging growth company
U.S. Securities and Exchange Commission (“SEC”).
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. estimates
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in these consolidated financial statements and accompanying notes. The more significant areas requiring the reporteduse of management estimates and assumptions relate to: the useful lives of long-lived assets; estimates of mineral resources; estimates of life-of-mine production timing, volumes, costs, and prices; future mining and future processing plans; environmental reclamation and closure costs and timing; deferred taxes and related valuation allowances; estimates of the fair value of liability classified warrants; and estimates of fair value for long-lived assets and financial instruments. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable at the time the estimate is made. Actual results may differ from amounts estimated in these consolidated financial statements, and such differences could be material. Accordingly, amounts presented in these consolidated financial statements are not indicative of results that may be expected for future periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and cash equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2018 and 2017.
Marketable securities held in Trust Account
At December 31, 2018, substantially all of the assets heldconsideration received is non-refundable; or (iii) the contract has been terminated, and the consideration received from the customer is nonrefundable.
Common
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Production related costs | $ | — | $ | 13,328 | |||||||
Capitalized depreciation and amortization | — | 392 | |||||||||
Total | $ | — | $ | 13,720 | |||||||
Operating expense related costs | $ | 11,886 | $ | — | |||||||
performance conditions). The Company accountsrecords forfeitures as they occur. See
Offering Costs
Offering costs consist principally of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering. Offering costs amounting to $11,974,088 were charged to stockholders’ equity upon the completion of the Initial Public Offering.
fair value.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement ofuncertain tax positions taken or expected to be taken inon its tax filings. The necessity for and amount of a tax return. For those benefits to be recognized, a tax position must bereserve is established by determining, based on the weight of available evidence, the amount of benefit that is more likely than not to be sustained upon examinationaudit for each uncertain tax position. The difference, if any, between the full benefit recorded on the tax return and the amount more likely than not to be sustained is recorded as a liability on the Company’s Consolidated Balance Sheets unless the additional tax expense that would result from the disallowance of the tax position can be offset by taxing authorities.a net operating loss, a similar tax loss, or a tax credit carryforward. In that case, the reserve is recorded as a reduction to the deferred tax asset associated with the applicable net operating loss, similar tax loss, or tax credit carryforward.
On December 22, 2017,be applied retrospectively to prior periods presented, based on the U.S. Tax Cutssignificant segment expense categories identified and Jobs Act of 2017 (“Tax Reform”) was signed into law. As a result of Tax Reform, the U.S. statutory tax rate was lowered from 35% to 21% effective January 1, 2018, among other changes. FASB ASC 740 requires companies to recognize the effect of tax law changesdisclosed in the period of enactment; therefore,adoption. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that adopting this update will have on its financial statement disclosures.
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Current prepaids and deposits: | |||||||||||
Prepaids: | |||||||||||
Insurance | $ | 1,631 | $ | 1,221 | |||||||
Mining claims | 400 | 400 | |||||||||
Permitting fees | 95 | 95 | |||||||||
Surety bond fees | 643 | 446 | |||||||||
License fees | 280 | 287 | |||||||||
Other | 73 | 154 | |||||||||
Deposits | 204 | 238 | |||||||||
Total current prepaids and deposits | $ | 3,326 | $ | 2,840 | |||||||
Non-current prepaids: | |||||||||||
Insurance | $ | 947 | $ | — | |||||||
Royalty – advance payment on Crofoot Royalty | 600 | 600 | |||||||||
Total non-current prepaids | $ | 1,547 | $ | 600 |
Depreciation Life or Method | Year Ended December 31, | ||||||||||||||||
2023 | 2022 | ||||||||||||||||
Production leach pads | Units-of-production | $ | 11,190 | $ | 11,190 | ||||||||||||
Test leach pads | 18 months | 6,241 | 6,241 | ||||||||||||||
Process equipment | 5 - 15 years | 17,556 | 17,302 | ||||||||||||||
Buildings and leasehold improvements | 10 years | 9,419 | 9,280 | ||||||||||||||
Mine equipment | 5 - 7 years | 4,732 | 4,872 | ||||||||||||||
Vehicles | 3 - 5 years | 1,700 | 1,578 | ||||||||||||||
Furniture and office equipment | 7 years | 713 | 370 | ||||||||||||||
Mineral properties | Units-of-production | 50 | — | ||||||||||||||
Construction in progress and other | 35,504 | 35,721 | |||||||||||||||
87,105 | 86,554 | ||||||||||||||||
Less, accumulated depreciation and amortization | (34,014) | (31,722) | |||||||||||||||
Total | $ | 53,091 | $ | 54,832 |
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Reclamation and other surety bond cash collateral | $ | 26,287 | $ | 33,929 | |||||||
Credit card collateral | 53 | 53 | |||||||||
Total | $ | 26,340 | $ | 33,982 |
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
Net income (loss) per common share
Net income (loss) per common share is computed by dividing net income (loss) byThe Equipment Purchase Agreement was subsequently amended three additional times in 2023 (January 27, 2023, May 15, 2023, and December 29, 2023) and the weighted average number of common shares outstandingfinal payment period was extended up to and including June 30, 2024. Together the original agreement and the four amendments make up the entire agreement and allows for the period.sale of some or all of the Equipment to third parties and for the buyer to terminate all or a portion of the Equipment Purchase Agreement and the Company received non-refundable deposit payments totaling $0.5 million in the year ended December 31, 2023, for a total of $1.6 million received to date. As of December 31, 2023, the outstanding balance related to the Equipment Purchase Agreement was $12.1 million. Effective March 1, 2024, the buyer terminated a portion of the agreement. See Note 26 – Subsequent Events for additional information.
The Company’s statement of operations includes a presentation of income (loss) per share for common shares subject to redemption in a manner similar to the two-class method of income per share. Net income per common share, basic and diluted for Class A common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A common stock outstanding for the period. Net loss per common share, basic and diluted for Class B common stock is calculated by dividing the net income (loss), less income attributable to Class A common stock, by the weighted average number of Class B common stock outstanding for the period.
Concentration of credit risk
Financial instruments that potentially subjectyear ended December 31, 2022:
Fair value of financial instruments
Theestimated the fair value of the
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Balance, beginning of period | $ | 10,302 | $ | 5,193 | |||||||
Accretion | 1,087 | 408 | |||||||||
Liabilities reduced | (529) | — | |||||||||
10,860 | 5,601 | ||||||||||
Changes in estimates | (2,887) | 4,701 | |||||||||
Total, end of period | $ | 7,973 | $ | 10,302 | |||||||
Current | $ | 3,172 | $ | — | |||||||
Non-current | $ | 4,801 | $ | 10,302 |
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Debt, net, current: | |||||||||||
Sprott Credit Agreement, including $2.2 million additional interest | $ | 2,200 | $ | 2,200 | |||||||
Note payable | 130 | 128 | |||||||||
Total | $ | 2,330 | $ | 2,328 | |||||||
Debt, net, non-current: | |||||||||||
Sprott Credit Agreement, including $1.1 million additional interest and net of original issue discount ($10.5 million, net) | $ | 42,530 | $ | 42,503 | |||||||
Subordinated Notes | 101,639 | 92,080 | |||||||||
Note payable | 76 | 205 | |||||||||
Less, debt issuance costs | (1,628) | (2,098) | |||||||||
Total | $ | 142,617 | $ | 132,690 |
2024 | $ | 2,329 | |||
2025 | 1,154 | ||||
2026 | 22 | ||||
2027 | 151,329 | ||||
2028 | — | ||||
Total | 154,834 | ||||
Less, original issue discount, net of accumulated amortization ($11.9 million) | (8,259) | ||||
Less, debt issuance costs, net of accumulated amortization ($3.3 million) | (1,628) | ||||
Total debt, net | $ | 144,947 |
Year Ended December 31, | ||||||||||||||
2023 | 2022 | |||||||||||||
Sprott Credit Agreement(1) | $ | 6,206 | $ | 5,310 | ||||||||||
Subordinated Notes(2) | 9,565 | 9,620 | ||||||||||||
Amortization of original issue discount | 2,227 | 2,840 | ||||||||||||
Amortization of debt issuance costs(3) | 463 | 689 | ||||||||||||
Other interest expense | 6 | 22 | ||||||||||||
Total | $ | 18,467 | $ | 18,481 |
Recent accounting pronouncements
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure UpdateFebruary 2022 Waiver and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company anticipates its first presentation of the expanded disclosure requirements on the changes in stockholders’ equity will be included in its Form 10-Q for the quarter ended March 31, 2019.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
3. INITIAL PUBLIC OFFERING
Amendment with Sprott Private Resource Lending II (Collector) and LP (the “Lender”). Pursuant to the Initial Public Offering,February 2022 Waiver and Amendment, the Lender: (i) waived the Company’s obligation under the Sprott Credit Agreement (as then amended in 2020) to maintain at least $9.0 million of Unrestricted Cash on the last day of each calendar month during the period ending May 10, 2022 (the “Waiver Period”), provided that, the Company sold 20,800,000 unitsmaintained at a priceleast $7.5 million of $10.00 per Unit, inclusiveUnrestricted Cash on the last day of 800,000 Units soldFebruary 2022 and at least $9.0 million on February 28, 2018 upon the underwriters’ electionlast day of each month thereafter during the Waiver Period; (ii) waived all obligations of the Company to partially exercise their over-allotment option. Each Unit consistsprepay the facility with the net cash proceeds of one share of Class A common stock (such shares of Class A common stock includedany Mill Asset Sales (as defined in the Units being offered, the “Public Shares”),February 2022 Waiver and one redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 6).
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
4. RELATED PARTY TRANSACTIONS
Founder Shares
On September 25, 2017, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock, par value $0.001 (“Class B common stock”) for an aggregate price of $25,000. The Founder Shares will automatically convert into shares of Class A common stock at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions, as described in Note 6. Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment, at any time. As a result of the underwriters’ election to partially exercise their over-allotment option on February 28, 2018, 550,000 Founder Shares were forfeited.
The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder SharesAmendment) until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y)(a) the date on which the Company completes a liquidation, merger, capital stock exchangeprivate placement or other similar transaction that results in alloffering or issuance of its equity securities (the “Offering Date”); and (b) March 31, 2022; and (iii) extended the payment due date for the additional February interest payment and the February principal payment until the earlier of: (a) the Offering Date; and (b) March 31, 2022. Further, pursuant to the February 2022 Waiver and Amendment, any failure by the Company to comply with the terms of the Company’s stockholders havingpreceding sentence would constitute an immediate Event of Default under the rightCredit Agreement.
Private Placement Warrants
Concurrently with the closingwhich was equal to 1.0% of the Initial Public Offering,Company’s post-closing shares of common stock outstanding. The Company paid an original issuance discount equal to 2.0% ($1.4 million) of the Sponsor and Cantor purchased an aggregate of 7,500,000 Private Placement Warrantsamount borrowed.
The Private Placement Warrants have been deemed compensation by Financial Industry Regulatory Authority, or FINRA and are therefore subject$1.8 million paid to a 180-day lock-up pursuantthird-party was charged to Rule 5110(g)(1) of the FINRA Manual commencing on the effective date of the registration statement for the Initial Public Offering. Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement for the Initial Public Offering. Additionally, the Private Placement Warrants purchased by Cantor may not be sold, transferred, assigned, pledged or hypothecated for 180 days following the effective date of the Initial Public Offering except to any selected dealer participating in the Initial Public Offering
The Sponsor, Cantor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Related Party Loans
Amendment
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officersAmendment”), by and directors may, but are not obligated to, loanbetween the Company, funds as may be requiredthe Lender, and Sprott Private Resource Lending II (Co) Inc. (“Working Capital Loans”SPRL II” and together with the Lender, the “Sprott Parties”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account releasedPursuant to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, ifthe Sprott Credit Agreement, the Company agreed that while any haveindebtedness is outstanding under the Sprott Credit Agreement or while the credit facility under the Sprott Credit Agreement remains available to the Company, the Company and guarantors under the Sprott Credit Agreement would not been determined and noundertake certain corporate actions without the Lender’s prior written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummationconsent.
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
Administrative Support Agreement
The Company entered into an agreement whereby, commencing on February 8, 2018 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. ForDuring the year ended December 31, 2018,2021, the Company incurred $110,000recorded a loss of administrative service fees.
5. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant$2.1 million in the Statement of Operations related to a registration rightsfirm purchase commitment for crusher liners under consignment over a period of three years, commencing in August 2020. This loss represented the unfulfilled commitment obligation outstanding as of the date the Company terminated the agreement and that loss was initially recognized in
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Other liabilities, current | |||||||||||
Accrued compensation | $ | 3,000 | $ | 2,868 | |||||||
Accrued directors’ fees | 38 | 36 | |||||||||
Excise tax liability | — | 96 | |||||||||
Operating lease liability | 25 | 11 | |||||||||
Total | $ | 3,063 | $ | 3,011 | |||||||
Other liabilities, non-current | |||||||||||
Operating lease liability | $ | 8 | $ | — |
Underwriting Agreement
The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $4,160,000 in the aggregate.Sprott Credit Agreement. In addition the underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,280,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms generally described above, the Sprott Royalty Agreement contains other terms and conditions commonly contained in royalty agreements of the underwriting agreement.
Forward Purchase Contract
On January 24, 2018,this nature.
Transfers to 5-Year Public Warrants(2) | ||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | Fair Value Adjustments(1) | Balance at December 31, 2023 | ||||||||||||||||||||||||||||||||||||
Warrants | Amount | Warrants | Amount | Warrants | Amount | Warrants | Amount | |||||||||||||||||||||||||||||||
5-Year Private Warrants | 9,126,515 | $ | 786 | — | $ | (175) | (8,261,093) | $ | (585) | 865,422 | $ | 26 | ||||||||||||||||||||||||||
Balance at December 31, 2021 | Fair Value Adjustments(1) | Transfers to 5-Year Public Warrants(2) | Expiration | Balance at December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||
Warrants | Amount | Warrants | Amount | Warrants | Amount | Warrants | Amount | Warrants | Amount | ||||||||||||||||||||||||||||||||||||||
5-Year Private Warrants | 9,478,830 | $ | 664 | — | $ | 164 | (352,315) | $ | (42) | — | $ | — | 9,126,515 | $ | 786 | ||||||||||||||||||||||||||||||||
Seller Warrants | 12,721,901 | 5 | — | (5) | — | — | (12,721,901) | — | — | — | |||||||||||||||||||||||||||||||||||||
Total | 22,200,731 | $ | 669 | — | $ | 159 | (352,315) | $ | (42) | (12,721,901) | $ | — | 9,126,515 | $ | 786 |
6. STOCKHOLDERS’ EQUITY
Common Stock
Class A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. AsCompany’s outstanding warrants as of December 31, 20182023:
Exercise Price | Exercise Period | Expiration Date | Warrants Outstanding | |||||||||||||||||||||||
5-Year Private Warrants | $ | 11.50 | 5 years | May 29, 2025 | 865,422 |
Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. As of December 31, 2018 and 2017, there were 5,200,000 and 5,750,000 shares, respectively, of Class B common stock outstanding.
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock willcan be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination, any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company or any securities issued pursuant to the Forward Purchase Contract (see Note 5)). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2018 and 2017, there were no shares of preferred stock issued or outstanding.
Warrants — Public Warrants may only be exercised for a whole number of shares. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant toif the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public5-Year Private Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the 5-Year Private Placement Warrants are held bytransferred to someone other than the initial purchasers or their permitted transferees the Private Placement Warrants will be(an “Unrelated Third Party”), such warrants become redeemable by the Company and exercisable by such holders onunder substantially the same basisterms as the 5-Year Public Warrants.
The Company may redeem Since the original issue of private warrants, transfers to 5-Year Public Warrants (except with respect tototaled 9,374,578, including 8,261,093, 352,315, and 409,585 during the Private Placement Warrants):
Ifyears ended December 31, 2023, 2022, and 2021, respectively.
TheSeller Warrant Agreement) through August 3, 2022, in the aggregate amount of 2,570,602 restricted stock units convertible into shares of common stock and for the prospective issuance of up to 50,000 shares of common stock to participants who may be deemed to be Restricted Persons. These shares of common stock were not prospectively adjusted under the Seller Warrant provisions.
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
7. INCOME TAX
Information for the period from August 28, 2017 (inception) throughSales Agreement, and as of December 31, 2017 is not presented as it is not material.
The Company’s net deferred tax assets are as follows:
December 31, 2018 | ||||
Deferred tax asset | ||||
Organizational costs/Startup expenses | $ | 86,012 | ||
Total deferred tax assets | 86,012 | |||
Valuation allowance | (86,012 | ) | ||
Deferred tax asset, net of allowance | $ | — |
The income tax provision (benefit) consists2023, sold an additional 523,328 shares of the following:
Year Ended December 31, 2018 | ||||
Federal | ||||
Current | $ | 555,449 | ||
Deferred | (86,012 | ) | ||
State | ||||
Current | — | |||
Deferred | — | |||
Change in valuation allowance | 86,012 | |||
Income tax provision | $ | 555,449 |
common stock for aggregate gross proceeds of $1.1 million, less commissions and offering expenses of $0.3 million. As of December 31, 2018,2023, there were $360.3 million of common stock available for issuance under the ATM Program.
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Principal payments on debt | $ | (2,200) | $ | (32,885) | |||||||
Principal payments on finance leases | (128) | (125) | |||||||||
Total | $ | (2,328) | $ | (33,010) |
Balance at December 31, 2022 | Transfers from 5-Year Private Warrants(1) | Balance at December 31, 2023 | |||||||||||||||||||||||||||
Warrants | Amount | Warrants | Amount | Warrants | Amount | ||||||||||||||||||||||||
5-Year Public Warrants | 25,163,383 | $ | 28,954 | 8,261,093 | $ | 585 | 33,424,476 | $ | 29,539 | ||||||||||||||||||||
Public Offering Warrants | 9,583,334 | 12,938 | — | — | 9,583,334 | 12,938 | |||||||||||||||||||||||
Private Placement Offering Warrants | 46,816,480 | 25,604 | — | — | 46,816,480 | 25,604 | |||||||||||||||||||||||
Total | 81,563,197 | $ | 67,496 | 8,261,093 | $ | 585 | 89,824,290 | $ | 68,081 |
Balance at December 31, 2021 | Warrant Issuances | Transfers from 5-Year Private Warrants(1) | Balance at December 31, 2022 | |||||||||||||||||||||||||||||||||||
Warrants | Amount | Warrants | Amount | Warrants | Amount | Warrants | Amount | |||||||||||||||||||||||||||||||
5-Year Public Warrants | 24,811,068 | $ | 28,912 | — | $ | — | 352,315 | $ | 42 | 25,163,383 | $ | 28,954 | ||||||||||||||||||||||||||
Public Offering Warrants | 9,583,334 | 12,938 | — | — | — | — | 9,583,334 | 12,938 | ||||||||||||||||||||||||||||||
Private Placement Offering Warrants | — | — | 46,816,480 | 25,604 | — | — | 46,816,480 | 25,604 | ||||||||||||||||||||||||||||||
Total | 34,394,402 | $ | 41,850 | 46,816,480 | $ | 25,604 | 352,315 | $ | 42 | 81,563,197 | $ | 67,496 |
In assessingSeller Warrant Agreement. After deducting underwriting discounts and commission and offering expenses, the realizationproceeds net of discount and equity issuance costs to the Company were $83.1 million. The Public Offering Warrants are immediately exercisable and entitle the holder thereof to purchase one-tenth share of common stock (on a post 1-for-10 reverse stock split basis) at an exercise price of $10.50 for a period of five years from the closing date. The shares of common stock and the Public Offering Warrants were separated upon issuance. The Public Offering Warrants are listed for trading on the Nasdaq under the symbol “HYCML.”
As of March 15, 2022 | |||||
Expected term (years) | 5 | ||||
Risk-free interest rate | 2.1 | % | |||
Expected volatility | 118.4 | % | |||
Expected dividend yield | — |
Exercise price | Exercise period | Expiration date | Warrants outstanding | |||||||||||
5-Year Public Warrants | $ | 11.50 | 5 years | May 29, 2025 | 33,424,476 | |||||||||
Public Offering Warrants | $ | 10.50 | 5 years | October 6, 2025 | 9,583,334 | |||||||||
Private Placement Offering Warrants | $ | 1.068 | 5 years | March 15, 2027 | 46,816,480 |
Year Ended December 31, | ||||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||||
Amount | Ounces Sold | Amount | Ounces Sold | |||||||||||||||||||||||
Gold sales | $ | — | — | $ | 32,249 | 17,728 | ||||||||||||||||||||
Silver sales | — | — | 980 | 44,084 | ||||||||||||||||||||||
Total | $ | — | $ | 33,229 |
Year Ended December 31, | ||||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||||
Amount | Percentage | Amount | Percentage | |||||||||||||||||||||||
Customer A | $ | — | N/A | $ | 12,159 | 36.6 | % | |||||||||||||||||||
Customer B | — | N/A | 10,997 | 33.1 | % | |||||||||||||||||||||
Customer C | — | N/A | 10,073 | 30.3 | % | |||||||||||||||||||||
Total | $ | — | N/A | $ | 33,229 | 100.0 | % |
Number of Restricted Stock Units | Weighted Average Grant Date Fair Value Per Unit | ||||||||||||||||||||||
Unvested at December 31, 2022 | 354,715 | $ | 19.94 | ||||||||||||||||||||
Granted | 501,691 | 4.61 | |||||||||||||||||||||
Canceled/forfeited | (62,934) | 12.17 | |||||||||||||||||||||
Vested(1) | (186,374) | 14.12 | |||||||||||||||||||||
Unvested at December 31, 2023 | 607,099 | $ | 10.04 |
Number of Restricted Stock Units | Weighted Average Grant Date Fair Value Per Unit | ||||||||||||||||||||||
Unvested at December 31, 2021(2) | 221,091 | $ | 28.21 | ||||||||||||||||||||
Granted | 330,707 | 13.03 | |||||||||||||||||||||
Impact of fluctuations in share price(3) | (51,520) | 6.04 | |||||||||||||||||||||
Canceled/forfeited(1) | (28,250) | 30.96 | |||||||||||||||||||||
Vested | (117,313) | 29.64 | |||||||||||||||||||||
Unvested at December 31, 2022(1) | 354,715 | $ | 19.94 |
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Current | |||||||||||
Federal | $ | — | $ | — | |||||||
Deferred | |||||||||||
Federal | (11,428) | (17,719) | |||||||||
Change in Valuation Allowance | 11,428 | 17,719 | |||||||||
Income tax expense (benefit) | $ | — | $ | — |
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Loss before income taxes | $ | (55,026) | $ | (60,828) | |||||||
United States statutory income tax rate | 21% | 21% | |||||||||
Income tax (benefit) at United States statutory income tax rate | (11,555) | (12,774) | |||||||||
Change in valuation allowance | 11,428 | 17,719 | |||||||||
Warrant fair value adjustment | (37) | 33 | |||||||||
Adjustment of prior year income taxes | 164 | (4,978) | |||||||||
Income tax expense (benefit) | $ | — | $ | — |
A reconciliationa result of an increase in the valuation allowance of $17.7 million and adjustment to prior year income taxes.
Year Ended December 31, | |||||||||||
2023(1) | 2022 | ||||||||||
Net operating loss | $ | 74,821 | $ | 49,765 | |||||||
Mineral properties | 48,677 | 39,322 | |||||||||
Plant, equipment, and mine development | 1,373 | 23,219 | |||||||||
Intangible assets | 17,192 | 18,698 | |||||||||
Deferred gain on sale of royalty | 6,266 | 6,266 | |||||||||
Asset retirement obligation | 1,674 | 2,163 | |||||||||
Accrued compensation | 593 | 1,258 | |||||||||
Stock-based compensation | 1,835 | 536 | |||||||||
Inventories | 835 | 221 | |||||||||
Assets available for sale | (398) | — | |||||||||
Other | 31 | 23 | |||||||||
Valuation allowance | (152,899) | (141,471) | |||||||||
Total | $ | — | $ | — |
Year Ended December 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Net loss | $ | (55,024) | $ | (60,828) | |||||||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||||
Basic | 21,113,516 | 16,977,306 | |||||||||||||||||||||
Diluted | 21,113,516 | 16,977,306 | |||||||||||||||||||||
Basic loss per common share | $ | (2.61) | $ | (3.58) | |||||||||||||||||||
Diluted loss per common share | $ | (2.61) | $ | (3.58) |
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Shares after conversion of warrants | 9,069 | 9,069 | |||||||||
Restricted stock units | 607 | 355 | |||||||||
Total | 9,676 | 9,424 |
The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions and is subject to examinationreviewed by the various taxing authorities.executive decision-making group to make decisions about allocating the Company’s resources and to assess their performance. The Company considers New York to be a significant state tax jurisdiction.
Year Ended December 31, 2023 | ||||||||||||||||||||
Hycroft Mine | Corporate and Other | Total | ||||||||||||||||||
Operating costs | $ | 32,881 | $ | 12,673 | $ | 45,554 | ||||||||||||||
Loss from operations | (32,881) | (12,673) | (45,554) | |||||||||||||||||
Interest expense – Note 9 | (1) | (18,466) | (18,467) | |||||||||||||||||
Interest income | 2,422 | 5,856 | 8,278 | |||||||||||||||||
Gain on sale of assets, net of commissions | 544 | — | 544 | |||||||||||||||||
Fair value adjustment to warrants – Notes 14 and 21 | — | 175 | 175 | |||||||||||||||||
Net loss | $ | (29,916) | $ | (25,108) | $ | (55,024) | ||||||||||||||
Total Assets | $ | 66,129 | $ | 135,564 | $ | 201,693 | ||||||||||||||
Year Ended December 31, 2022 | ||||||||||||||||||||
Hycroft Mine | Corporate and Other | Total | ||||||||||||||||||
Revenues – Note 16 | $ | 33,229 | $ | — | $ | 33,229 | ||||||||||||||
Cost of sales | 53,589 | — | 53,589 | |||||||||||||||||
Other operating costs | 18,763 | 14,367 | 33,130 | |||||||||||||||||
Loss from operations | (39,123) | (14,367) | (53,490) | |||||||||||||||||
Interest expense – Note 9 | (10) | (18,471) | (18,481) | |||||||||||||||||
Interest income | 439 | 1,874 | 2,313 | |||||||||||||||||
Gain on extinguishment of debt | — | 5,041 | 5,041 | |||||||||||||||||
Fair value adjustment to warrants – Notes 14 and 21 | — | (159) | (159) | |||||||||||||||||
Gain on sale of assets, net of commissions | 3,948 | — | 3,948 | |||||||||||||||||
Net loss | $ | (34,746) | $ | (26,082) | $ | (60,828) | ||||||||||||||
Total Assets | $ | 102,057 | $ | 146,897 | $ | 248,954 |
MUDRICK CAPITAL ACQUISITION CORPORATIONNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018
8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at
measurements
The following table presents information about the Company’s assets that areliabilities measured at fair value on a recurring basis (in thousands).
Hierarchy Level | Year Ended December 31, | ||||||||||||||||
2023 | 2022 | ||||||||||||||||
5-Year Private Warrants | 2 | $ | 26 | $ | 786 |
Year Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Cash interest paid | $ | 6,212 | $ | 5,318 | |||||||
Significant non-cash financing and investing activities: | |||||||||||
Increase in debt from in-kind interest – Note 9 | 9,559 | 9,619 | |||||||||
Debt issuance costs paid in-kind – Note 9 | — | 3,300 | |||||||||
Shares of common stock issued as payment of Settlement Fee – Note 15 | — | 1,749 | |||||||||
Liability based restricted stock units transferred to equity – Note 17 | — | 727 | |||||||||
Shares of common stock issued for purchase of Subordinated Notes – Note 9 | — | 385 | |||||||||
Shares of common stock issued for salary continuation payments – Note 15 | — | 158 |
Description | Level | December 31, 2018 | December 31, 2017 | |||||||||
Assets: | ||||||||||||
Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund | 1 | $ | 212,916,691 | $ | — |
9. SUBSEQUENT EVENTS
the provisions of the Employee Retirement Income Security Act of 1974, as amended, and Section 401(k) of the IRC. Administration fees of the 401(k) Plan are paid by the Company. The assets of the 401(k) Plan are held and the related investments are executed by the 401(k) Plan’s trustee.
Exhibit Number | Description |
10.37 | |||||
10.38 | |||||
21.1* | |||||
23.1* | |||||
23.2* | |||||
23.3* | |||||
23.4* | |||||
31.1* | |||||
31.2* | |||||
32.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
32.2** | |||||
95.1* | |||||
96.1 | |||||
97.1* | |||||
101.INS* | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | ||||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | ||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||
*Filed herewith. ** Furnished herewith. † Management contract or compensatory plan or arrangement. |
HYCROFT MINING HOLDING CORPORATION (Registrant) | |||||||||||
Date: March 14, 2024 | By: | /s/ | |||||||||
|
Name | ||||||||||
/s/ | President and Chief Executive Officer (Principal Executive Officer) and Director | |||||||||
/s/ | Executive Vice President and Chief Financial Officer | |||||||||
(Principal Financial Officer and Principal Accounting Officer) | ||||||||||
Stanton Rideout | ||||||||||
/s/ Stephen Lang | Chairman | |||||||||
Stephen Lang | ||||||||||
/s/ | Director | |||||||||
/s/ Michael J. Harrison | Director | |||||||||
Michael James Harrison | ||||||||||
/s/ David C. Naccarati | Director | |||||||||
David C. Naccarati | ||||||||||
/s/ | Director | |||||||||
/s/ Marni Wieshofer | Director | |||||||||
Marni Wieshofer | ||||||||||