Table of Contents

As filed with the Securities and Exchange Commission on July 13,August 31, 2020

Registration No. 333-      

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933


HYCROFT MINING HOLDING CORPORATION


(Exact name of registrant as specified in its charter)

Delaware

1040

82-2657796

(State or Other Jurisdiction of Incorporation
or Organization)

(Primary Standard Industrial Classification
Code Number)

(I.R.S. Employer Identification No.)

8181 E. Tufts Ave., Suite 510

Denver, Colorado 80237

(303) 253-3267


(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Stephen M. Jones

President and Chief Executive Officer

Hycroft Mining Holding Corporation

8181 E. Tufts Ave., Suite 510

Denver, Colorado 80237

(303) 524-1947


(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Neal, Gerber & Eisenberg LLP

2 N. LaSalle Street, Suite 1700

Chicago, IL 60602

Attention: David S. Stone, Esq.

Tel: (312) 269-8000


Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer x

Non-accelerated filer ¨

Smaller reporting company x

Emerging Growth Company x

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 7(a)(2)(B) of the Securities Act. ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities
to be Registered
Amount to be
Registered(1)
Proposed
Maximum
Offering Price
Per Unit
Proposed
Maximum
Aggregate
Offering Price
Amount of
Registration Fee
Primary Offering    
Shares of Class A common stock, par value $0.0001 per share(2)34,289,999$11.50(3)$394,334,989$51,185
Shares of Class A common stock, par value $0.0001 per share(4)3,210,213$44.82(5)$143,881,747$18,676
Secondary Offering    
Class A common stock, par value $0.0001 per share(6)60,867,645$9.09(7)$553,286,893$71,817
Warrants, each to purchase one share of Class A common stock, par value $0.0001 per share(8)13,489,999(8)
Total  $1,091,503,629$141,678

Title of Each Class of Securities
to be Registered

Proposed Maximum Aggregate Offering Price(1)(2)

Amount of Registration Fee

Class A common stock, par value $0.0001 per share

$74,750,000

$9,702.55

(1)InEstimated solely for the eventpurposes of a stock split, reverse stock split, stock dividend or similar transaction involving our common stock,calculating the number of shares of Class A common stock, par value $0.0001 per share (the “Common Stock”) registered shall automatically be adjusted to cover the additional shares of common stock issuableregistration fee pursuant to Rule 416457(o) under the Securities Act of 1933, as amended.

(2)

Consists of (i) 20,800,000 shares of Common Stock that may be issued upon exercise of the public warrants (as such term is defined under “Selected Definitions”) based on the number of public warrants outstanding as of July 9, 2020; (ii) 7,740,000 shares of Common Stock that may be issued upon exercise of the private placement warrants (as such term is defined under “Selected Definitions”); (iii) 2,500,000 shares of Common Stock that may be issued upon exercise of the forward purchase warrants (as such term is defined under “Selected Definitions”) and (iv) 3,249,999 shares of Common Stock that may be issued upon exercise of the PIPE warrants (as such term is defined under “Selected Definitions”). The aggregate number of shares of Common Stock shall be adjusted to include any additional shares of Common Stock that may become issuable as a result of any

Includes Class A common stock dividend, stock split, recapitalization or other similar transaction.

(3)Based upon the exercise price per share of Common Stock issuable upon exercise of the public warrants, private placement warrants, forwardunderwriters’ option to purchase warrants and PIPE warrants.

(4)Consists of 3,210,213 shares of Common Stock that may be issued upon exercise of the Seller warrants (as such term is defined under “Selected Definitions”). The aggregate number of shares of Common Stock shall be adjusted to include any additional shares of Common Stock that may become issuable as a result of any stock dividend, stock split, recapitalization or other similar transaction.

(5)Based upon an exercise price, as of July 1, 2020, of $44.82 per share. Each of the 12,721,623 Seller warrants is exercisable into approximately 0.2523 shares of Common Stock.

(6)

Consists of (i) 1,688,180 shares of Common Stock converted from founder shares (as such term is defined under “Selected Definitions”); (ii) 20,871,236 shares of Common Stock issued to the 1.5 Lien Note Holders (as such term is defined under “Selected Definitions”) pursuant to the terms of the Exchange Agreement (as such term is defined under “Selected Definitions”) and to the Excess Note Holders (as such term is defined under “Selected Definitions”) pursuant to the terms of the Exchange Agreement (as such term is defined under “Selected Definitions”) upon the consummation of the business combination; (iii) 14,595,892 shares of Common Stock distributed to the Initial Subscribers (as such term is defined under “Selected Definitions”) by the Seller pursuant to its plan of dissolution immediately following issuance to the Seller in the business combination; (iv) 7,596,309 shares of Common Stock issued pursuant to the Subscription/Backstop Agreements (as such term is defined under “Selected Definitions”) upon the consummation of the business combination; (v) 3,125,000 shares of Common Stock issued pursuant to the terms of the Forward Purchase Contract (as such term is defined under “Selected Definitions”) upon consummation of the business combination; (vi) 44,395 shares of Common Stock issued to Cantor (as such term is defined under “Selected Definitions”) pursuant to the Underwriting Agreement, dated as of February 7, 2018, between the Company and Cantor, as amended; (vii) 437,940 shares of Common Stock issued to Lender (as such term is defined under “Selected Definitions”) pursuant to the Sprott Credit Agreement (as such term is defined under “Selected Definitions”); (viii) 31,604 shares of Common Stock issued to Lender and transferred to Prisma Pelican Fund as a participating lender in the Sprott Credit Agreement; (ix) 4,515 shares of Common Stock issued to Lender and transferred to Ninepoint Credit Opportunities Fund as a participating lender in the Sprott Credit Agreement; (x) 9,030 shares of Common Stock issued to Lender and transferred to Natural Resource Income Investing Limited Partnership, a Limited Partnership, as a participating lender in the Sprott Credit Agreement; (xi) 13,545 shares of Common Stock issued to Lender and transferred to Sprott Private Resource Streaming and Royalty (Collector), LP. as a participating lender in the Sprott Credit Agreement; (xii) 6,700,000 shares of Common Stock issuable upon exercise of the sponsor private placement warrants; (xiii) 2,500,000 shares of Common Stock issuable upon exercise of the forward purchase warrants; and (xiv) 3,249,999 shares of Common Stock issuable upon exercise of the PIPE warrants. The aggregate number of shares of Common Stock shall be adjusted to include any additional shares of Common Stock that may become issuable as a result of any stock dividend, stock split, recapitalization or other similar transaction. Class A common stock.

(7)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act, based upon the average of the high and low sales prices of the Registrant’s common stock as reported on the NASDAQ Capital Market on July 6, 2020.

(8)Consists of (i) 7,740,000 private placement warrants, (ii) 2,500,000 forward purchase warrants and (iii) 3,249,999 PIPE warrants. Pursuant to Rule 457(g), no separate registration fee is required for the warrants. The applicable registration fee has been allocated to the common stock underlying the warrants.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


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The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 13,AUGUST 31, 2020

Preliminary Prospectus

$65,000,000

Graphic

HYCROFT MINING HOLDING CORPORATION

60,867,645Class A Common Stock

We are offering [●] shares of Common Stockour Class A common stock.

13,489,999 Warrants

37,500,212 shares of Common Stock Issuable upon Exercise of the Warrants

This prospectus relates to: (1) the issuance by us of up to (i) 34,289,999 shares ofOur Class A common stock par value $0.0001 per share (“Common Stock”), of Hycroft Mining Holding Corporation, a Delaware corporation (the “Company,” “we,” “our”), that may be issued upon exercise of warrants, including the public warrants, private placement warrants, forward purchase warrants and PIPE warrants (as such terms are defined under “Selected Definitions”) at an exercise price of $11.50 per share of Common Stock, and (ii) 3,210,213 shares of Common Stock that may be issued upon exercise of the Seller warrants (as such term is defined under “Selected Definitions”) at an exercise price, determined as of July 1, 2020 pursuant to the Seller Warrant Agreement (as such term is defined under “Selected Definitions”), of $44.82 per share upon the exercise of 12,721,623 Seller warrants, each currently exercisable into approximately 0.2523 shares of Common Stock, which exercise price and number of shares may fluctuate under the terms of the Seller Warrant Agreement; and (2) the offer and sale, from time to time, by the selling security holders identified in this prospectus (the “Selling Securityholders”), or their permitted transferees of up to (i) 60,867,645 shares of Common stock, (ii) up to 13,489,999 warrants to purchase shares of Common Stock, including the private placement warrants, forward purchase warrants and PIPE warrants.

This prospectus provides you with a general description of such securities and the general manner in which we and the Selling Securityholders may offer or sell the securities. More specific terms of any securities that we and the Selling Securityholders may offer or sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement may also add, update or change information contained in this prospectus.

We will not receive any proceeds from the sale of the securities under this prospectus, although we could receive up to approximately $538.2 million for the issuance by us of the Common Stock registered under this prospectus assuming the exercise of all of the outstanding public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants, to the extent such warrants are exercised for cash. However, we will pay the expenses associated with the sale of securities pursuant to this prospectus. Any amounts we receive from such exercises will be used for working capital and other general corporate purposes.

Information regarding the Selling Securityholders, the amounts of shares of Common Stock and warrants that may be sold by them and the times and manner in which they may offer and sell the shares of Common Stock and warrants under this prospectus is provided under the sections entitled “Selling Securityholders” and “Plan of Distribution,” respectively, in this prospectus. We have not been informed by any of the Selling Securityholders that they intend to sell their securities covered by this prospectus and do not know when or in what amount the Selling

Securityholders may offer the securities for sale. The Selling Securityholders may sell any, all, or none of the securities offered by this prospectus.

The Selling Securityholders and intermediaries through whom such securities are sold may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended, with respect to the securities offered hereby, and any profits realized or commissions received may be deemed underwriting compensation. We have agreed to indemnify certain of the Selling Securityholders against certain liabilities, including liabilities under the Securities Act.

You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities.

Our Common Stock and our public warrants, which are not being registered hereunder, are listed on the Nasdaq Capital Market or NASDAQ,under the symbols “HYMC” and “HYMCW,” respectively. The Seller warrants (as defined herein) have been approved for listing on the Nasdaq Capital Market under the symbol “HYMC”“HYMCZ” and “HYMCW” respectively. We will use our commercially reasonable best efforts to list the Seller warrantscommece trading on NASDAQ as soon as reasonably practicable subject to applicable listing requirements.September 1, 2020. On July 10,August 28, 2020, the last reported sale pricesclosing price of our Common StockClass A common stock was $10.97$9.63 per share and the last reported salesclosing price of our public warrants was $1.60 per share. The warrants registered hereunder are not currently listed or quoted on any exchange or marketplace and, other than the Seller warrants, we do not intend to apply for listing or quotation of such warrants on any exchange or marketplace in the future.

$1.55.

We are an “emerging growth company” under federal securities laws and are subject to reduced public company reporting requirements. Investing in our Class A common stock involves a high degree of risk. See Risk Factors“Risk Factors” beginning on page 87 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Per Share

Total

Public offering price

$

$

Underwriting discounts and commissions (1)

$

$

Proceeds, before expenses, to us

$

$


(1)We have also agreed to reimburse certain expenses of the underwriters. See “Underwriting” beginning on page 99 of this prospectus for additional information regarding underwriting compensation.

You should rely only on the information contained in this prospectus. We have not authorized any dealer, salespersongranted the underwriters an option to purchase up to an additional [●] shares of Class A common stock from us at the public offering price, less the underwriting discounts and commissions, within [●] days of this prospectus to cover over-allotments, if any.

The underwriters expect to deliver the shares of Class A common stock to investors on or other personabout September [●], 2020, subject to provide you with information about the Company, exceptcustomary closing conditions.


BMO Capital Markets

Stifel

Canaccord Genuity

The date of this prospectus is [●], 2020


Table of Contents

TABLE OF CONTENTS

About This Prospectus

ii

Market, Ranking and Other Industry Data

ii

Selected Definitions

ii

Cautionary Notes Regarding Forward-Looking Statements

1

Prospectus Summary

3

The Offering

7

Risk Factors

8

Use of Proceeds

24

Capitalization

24

Dilution

25

Description of Business

27

Description of Property

42

Legal Proceedings

56

Market Price of and Dividends on Common Stock and Related Stockholder Matters

57

Management’s Discussion and Analysis of Financial Condition and Results of Operations

57

Management

76

Executive Compensation

80

Certain Relationships and Related Party Transactions

90

Security Ownership of Certain Beneficial Owners and Management

94

United States Federal Income Tax Considerations

96

Description of Securities

99

Underwriting

101

Interest of Named Experts

107

Legal Matters

107

Where You Can Find Additional Information

107

Change in Auditor

108

Index to Financial Statements

F-1

We are responsible for the information contained in this prospectus. Neither we nor the underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus and we take no responsibility for any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is complete and accurate only as of the date on the front cover page of this prospectus, regardless of the time of delivery of this prospectus or the sale of any securities. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. The information contained in this prospectus may change after the date of this prospectus. Do not assume after the date of this prospectus that the information contained in this prospectus is still correct.

For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering and the distribution of this prospectus outside the United States.

The date of this prospectus is July 13, 2020

TABLE OF CONTENTS

About this Prospectusii
Market, Raking and Other Industry Dataiii
Selected Definitionsiii
Cautionary Notes Regarding Forward-Looking Statements1
Prospectus Summary2
The Offering6
Risk Factors8
Use of Proceeds26
Selling Securityholders26
Description of Business30
Description of Property40
Legal Proceedings56
Market Price and Dividends on Common Equity and Related Stockholder Matters57
Management’s Discussion and Analysis of Financial Condition and Results of Operations58
Management79
Executive Compensation84
Certain Relationships and Related Transactions94
Security Ownership of Certain Beneficial Owners and Management98
Plan of Distribution100
Description of Securities to be Registered108
Interest of Named Experts and Counsel116
Legal Matters116
Where You Can Find Additional Information116
Change in Auditor116
Index to Financial StatementsF-1

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, from time to time, the Selling Securityholders may offer and sell, and we may offer, issue and sell, as applicable, any combination of the securities described in this prospectus in one or more offerings We may use the shelf registration statement to issue up to an aggregate of 37,500,212 shares of Common Stock upon exercise of the public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants. The Selling Securityholders may use the shelf registration statement to sell up to an aggregate of 60,867,645 shares of Common Stock, and 13,489,999 warrants, from time to time through any means described in the section entitled “Plan of Distribution.” Additional terms of any securities set forth herein that the Selling Securityholders offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the Common Stock and warrants being offered and the terms of the offering.

A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. See “Where You Can Find More Information.”

Neither we nor the Selling Securityholders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any accompanying prospectus supplement or any free writing prospectus we have prepared. We and the Selling Securityholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security.our Class A common stock. Our business, operating results or financial condition results of operations and prospects may have changed since those dates.such date.


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ABOUT THIS PROSPECTUS

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

On May 29, 2020, the Company,entity formerly known as Mudrick Capital Acquisition Corporation (the “Company”), consummated the transactions contemplated by the Purchase Agreement, dated as of January 13, 2020, by and among the Company, MUDS Acquisition Sub, Inc., (“Acquisition Sub”) and Hycroft Mining Corporation, a Delaware corporation (the “Seller”), as amended by that certain Amendment to Purchase Agreement, dated as of February 26, 2020 (the(as amended, thePurchase Agreement”). Pursuant to the Purchase Agreement, Acquisition Sub acquired all of the issued and outstanding equity interests of the direct subsidiaries of the Seller and substantially all of the other assets and assumed substantially all of the liabilities of the Seller, a US-basedU.S.-based gold and silver producer operating the Hycroft Mine located in the mining region of northern Nevada. In connection with the completion of the business combination transaction contemplated by the Purchase Agreement (the “Recapitalization Transaction”), the Company changed its name from Mudrick Capital Acquisition Corporation to Hycroft Mining Holding Corporation. The above description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by the full text of the Purchase Agreement, which is included as Exhibit 2.1 and Exhibit 2.2 to the registration statement of which this prospectus forms a part and is incorporated herein by reference.part. Common terms and their meaning are set forth below under the heading “Selected Definitions.”

ii

MARKET, RANKING AND OTHER INDUSTRY DATA

Certain market, ranking and industry data included in this prospectus, including the size of certain markets and our size or position and the positions of our competitors within these markets, including its products and services relative to its competitors, are based on estimates of our management. These estimates have been derived from our management’s knowledge and experience in the markets in which we operate, as well as information obtained from surveys, reports by market research firms, our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate, which, in each case, we believe are reliable.

We are responsible for all of the disclosure in this prospectus and while we believe the data from these sources to be accurate and complete, we have not independently verified data from these sources or obtained third-party verification of market share data and this information may not be reliable. In addition, these sources may use different definitions of the relevant markets. Data regarding our industry is intended to provide general guidance, but is inherently imprecise.

Assumptions and estimates of our future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk factors—Risks Related to Our Business.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Statement Regarding Forward-Looking Statements.”

SELECTED DEFINITIONSSelectED DEFINITIONS

Unless stated in this prospectus or the context otherwise requires, references to:

1.25 Lien Exchange” means the exchange by the 1.25 Lien Noteholders of the outstanding 1.25 Lien Notes for Newthe Subordinated Notes.

1.25 Lien Exchange Agreement” means that certain note exchange agreement,Note Exchange Agreement, dated as of January 13, 2020, by and among the Seller and certain investment funds affiliated with or managed by Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine, as amended, pursuant to which the 1.25 Lien Exchange occurred immediately prior to the consummation of the business combination.

Recapitalization Transaction.

1.25 Lien Notes” means the notes issued pursuant to the Note Purchase Agreements, dated as of February 22, 2019, May 21, 2019, June 27, 2019, August 6, 2019, August 29, 2019, September 25, 2019, October 16, 2019, November 21, 2019, December 17, 2019, January 17, 2020, February 7, 2020, March 12, 2020, April 16, 2020 and May 7, 2020 between the Seller, the guarantors and the purchasers named therein and WBox 2015-5 Ltd., as collateral agent.

1.25 Lien Noteholders” means the holders of the 1.25 Lien Notes and, subsequent to the 1.25 Lien Exchange, the holders of the New Subordinated Notes.

1.5 Lien Notes” means the notes issued pursuant to the Note Purchase Agreements, dated as of May 3, 2016, July 29, 2016, September 22, 2016, November 30, 2016, February 2, 2017, April 12, 2017, June 30, 2017, July 14, 2017, December 20, 2017,

ii


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March 8, 2018, May 10, 2018, July 10, 2018, August 22, 2018, November 1, 2018, and December 19, 2018 between the Seller, the guarantors and the purchasers named therein and WBox 2015-5 Ltd., as collateral agent.

1.5 Lien Noteholders” means certain investment funds affiliated with Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine that hold the 1.5 Lien Notes.

Amended and Restated Registration Rights Agreement” means that certain Amended and Restated Registration Rights Agreement entered into at the closing of the business combination,Recapitalization Transaction, by and among the Company and the restricted stockholders.

Acquisition Sub” means MUDS Acquisition Sub, Inc., a Delaware corporation and an indirect, wholly-ownedwholly owned subsidiary of the Company.

Company now known as Autar Gold Corporation.

Aristeia” means Aristeia Capital, LLC.

iii

Assumed New Subordinated Notes” means $80,000,000 in aggregate principal amount of New Subordinated Notes assigned to, and assumed by, the Company in connection with the business combination, on a pro rata basis across holders of New Subordinated Notes.

Board” means the board of directors of Hycroft Mining Holding Corporation.

business combination” means the transactions contemplated by the Purchase Agreement, the Exchange Agreement and the Second Lien Conversion Agreement consummated on May 29, 2020.

business day” means a day, other than Saturday, Sunday or such other day on which commercial banks in New York, New York are authorized or required by applicable laws to close.

Cantor” means Cantor Fitzgerald & Co.

“Common Stock” means the Class A common stock, par value $0.0001 per share, of the Company.

conversion” means the conversion of the Second Lien Notes into shares of Seller common stock, pursuant to the terms of the Second Lien Conversion Agreement.

DGCL” means the General Corporation Law of the State of Delaware.

debt and warrant assumption” means the assignment by Seller and the assumption by the Company of (x) $80,000,000 in aggregate principal amount of New Subordinated Notes, (y) the Sprott Credit Agreement and (z) Seller’s liabilities and obligations under the Seller Warrant Agreement.

effective time” means 9:00 a.m. New York time on May 29, 2020.

employee benefit plan” means any material “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended.

Excess Noteholders” means the holders of the Excess Notes.

Excess Notes” means the $48,459,232 in aggregate principal amount of New Subordinated Notes exchanged pursuant to the Exchange Agreement.

note exchange” means the exchange of the 1.5 Lien Notes and the Excess Notes, if any, for shares of Common Stock valued at $10.00 per share and/or cash payment pursuant to the terms of the Exchange Agreement.

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Exchange Agreement” means that certain Exchange Agreement, dated as of January 13, 2020, by and among the Seller, Acquisition Sub, the 1.5 Lien Noteholders and the 1.25 Lien Noteholders, as amended.

Feasibility Study” means the NI 43-101 Technical Report: Heap Leaching Feasibility Study prepared by M3 Engineering and Technology Corporation with an effective date of July 31, 2019, which formed the substantive basis for the Hycroft Technical Report that was prepared to comply with subpart 1300 of Regulation S-K.

First Lien Credit Agreement” means the first lien term loan credit agreement between the Seller and The Bank of Nova Scotia, as administrative agent, and other lenders.

First Lien Notes” means the notes under the First Lien Credit Agreement.

forward purchase” means the issuance to sponsor of shares of Common Stock pursuant to the terms of the Forward Purchase Contract.

Forward Purchase Contract” means the Forward Purchase Contract, dated January 24, 2018, by and between the Company and sponsor, pursuant to which sponsor purchased 3,125,000 shares of Common Stock and 2,500,000 forward purchase warrants exercisable at $11.50 per share, for gross proceeds of $25,000,000, concurrently with the consummation of the business combination.

Recapitalization Transaction.

forward purchase warrants” means the warrants to purchase one share of Common Stock at a price of $11.50 per share issued to the sponsor upon consummation of the business combinationRecapitalization Transaction pursuant to the Forward Purchase Contract.

iv

founder shares” means shares of Class B common stock, par value $0.0001 per share, of the Company initially purchased by sponsor which were redeemed or converted into shares of Common Stock upon the consummation of the business combination.

Recapitalization Transaction.

GAAP” means generally accepted accounting principles in the United States.

Highbridge” means Highbridge Capital Management, LLC.

iii


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HRD” means Hycroft Resources & Development, LLC, a Delaware limited liability company and an indirect, wholly-ownedwholly owned subsidiary of the Seller.

Company.

Hycroft,” “Company,” “we,” “our,” or “us,” means Hycroft Mining Holding Corporation, a Delaware corporation.

Hycroft Mine” means the Hycroft Open Pit Mine, located in Winnemucca, Nevada that produces gold and silver using a heap leach mining process.

Hycroft Technical Report” means that certain Technical Report Summary, Heap Leaching Feasibility Study prepared for the Seller with an effective date of July 31, 2019 by M3 Engineering and Technology Corporation and other qualified persons, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K.

Incentive Plan” means the HYMC 2020 Performance and Incentive Pay Plan.

initial stockholders” means holders of founder shares prior to the IPO.

Initial Subscribers” means investment funds affiliated with or managed by Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine (together with any permitted assigns under the Subscription/Backstop Agreements).

IPO” means the Company’s initial public offering, consummated on February 12, 2018, through the sale of 20,800,000 public units (including 800,000 units sold pursuant to the underwriters’ partial exercise of their overallotment option) at $10.00 per unit.

JOBS Act” means the Jumpstart our Business Startups Act of 2012.

Lender” means Sprott Private Resource Lending II (Collector), LP.

Mudrick Capital” means Mudrick Capital Management, L.P., a Delaware limited partnership, an affiliate of sponsor.

Nasdaq” means The Nasdaq Stock Market LLC.

NASDAQNew Mining Rules” means the National AssociationModernization of Securities Dealers Automated Quotations Capital Market.

Property Disclosures for Mining Registrants final rule promulgated by the SEC.

New Subordinated NotesNote exchange” means the 10% payment-in-kind subordinated notesexchange of the Seller issued1.5 Lien Notes and the Excess Notes, if any, for shares of Common Stock valued at $10.00 per share pursuant to the 1.25 Lienterms of the Exchange Agreement.

Parent Sponsor Letter Agreement” means that certain letter agreement, dated as of January 13, 2020, by and between the Company and sponsor, as amended from time to time.

PIPE warrants” means the warrants to purchase one share of Common Stock at a price of $11.50 per share issued to the Initial Subscribers in the private investment.

private investment” means the equity financing through a private placement of equity securities in the Company pursuant to Section 4(a)(2) of the Securities Act, for gross proceeds to the Company in an aggregate amount of approximately $76.0 million funded in accordance with the terms of the Subscription/Backstop Agreements.

private placement warrants” means the warrants issued to sponsor and Cantor in a private placement simultaneously with the closing of the IPO.

v

public shares” means shares of Common Stock sold as part of the units in the IPO.

public units” means one share of Common Stock and one redeemable public warrant of the Company, whereby each public warrant entitles the holder thereof to purchase one share of Common Stock at an exercise price of $11.50 per share of Common Stock, sold in the IPO.

public warrants” means the warrants included in the units issued in the IPO, where one warrant entitles the holder thereof to purchase one share of Common Stock at an exercise price of $11.50 per share of Common Stock in accordance with the terms of the Warrant Agreement.

Purchase Agreement” means that certain Purchase Agreement, dated January 13, 2020, as amended on February 26, 2020, by and among the Company, Acquisition Sub and the Seller.

Recapitalization Transaction” means the transactions contemplated by the Purchase Agreement, the Exchange Agreement and the Second Lien Conversion Agreement consummated on May 29, 2020.

representatives” means a Person’s officers, directors, employees, accountants, consultants, agents, legal counsel, and other representatives.

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Table of Contents

restricted stockholders” means, collectively, sponsor, Cantor, certain directors and officers of the Company (as set forth in the Amended and Restated Registration Rights Agreement), the 1.5 Lien Noteholders, certain stockholders of the Seller that receive Common Stock in the business combination,Recapitalization Transaction, the Initial Subscribers pursuant to the private investment, and Lender.

SEC” means the United States Securities and Exchange Commission.

Second Amended and Restated Charter” means the Second Amended and Restated Certificate of Incorporation of the Company filed with the Delaware Secretary of State on May 29, 2020.

Second Lien Conversion Agreement” means that certain note conversionNote Conversion and consent agreementConsent Agreement by and among Seller and the Second Lien Noteholders, dated January 13, 2020.

Second Lien Notes” means the notes issued pursuant to (a) that certain Note Purchase Agreement, dated as of October 22, 2015, by and among the Seller, certain of its affiliates and the purchasers named therein and (b) that certain Note Purchase Agreement, dated as of December 2, 2015, by and among Seller, certain of the Seller’s subsidiaries and the purchasers named therein, in each case, entered into pursuant to the 15% Senior Secured Convertible Notes Due 2020 Indenture, dated as of October 22, 2015, by and among Seller, the guarantors (as defined therein) and Wilmington Trust, National Association, as trustee and collateral agent as of January 6, 2016 and March 24, 2016.

Second Lien Noteholders” means certain funds affiliated with Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine and two additional noteholders.

Securities Act” means the Securities Act of 1933, as amended.

Seller” means Hycroft Mining Corporation, a Delaware corporation.

Seller common stock” means Seller’s common stock, par value $0.001 per share.

Seller warrants” means a warrant to purchase shares of Common Stock issued pursuant to the Seller Warrant Agreement following the assumption of the Seller Warrant Agreement by the Company pursuant to the Purchase Agreement and effective as of the consummation of the business combination.

Recapitalization Transaction.

Seller Warrant Agreement” means that certain warrant agreement, dated as of October 22, 2015, by and between Seller and Computershare Inc., a Delaware corporation, and its wholly-ownedwholly owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company, collectively as initial warrant agent; such warrant agreement was assumed by the Company pursuant to the Purchase Agreement and Continental Stock Transfer & Trust Company, LLC is the successor warrant agent.

sponsor” means Mudrick Capital Acquisition Holdings LLC, a Delaware limited liability company, which is 100% owned by investment funds and separate accounts managed by Mudrick Capital.

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Sprott Credit Agreement” means that certain amended and restated credit agreement, dated as of May 29, 2020, between Hycroft Mining Holding Corporation, as borrower, MUDS Acquisition Sub, Inc., MUDS Holdco, Inc., Hycroft Resources & Development, LLC, a Delaware limited liability company, and Allied VGH LLC, a Delaware limited liability company, as guarantors, Sprott Private Resource Lending II (Collector), LP, as lender, and Sprott Resource Lending Corp., as arranger.

Sprott Royalty Agreement” means that certain royalty agreement between the Company, Hycroft Resources & Development, LLC, a Delaware limited liability company and Sprott Private Resource Lending II (Co), Inc.

Subordinated Notes” means the $80.0 million in aggregate principal amount of 10% payment in-kind subordinated notes issued pursuant to the 1.25 Lien Exchange Agreement and assigned to, and assumed by, the Company in connection with the Recapitalization Transaction.

Subscription/Backstop Agreements” means those certain Subscription/Backstop Agreements, dated as of January 13, 2020, by and among the Company and the Initial Subscribers, as amended on May 28, 2020.

Treasury RegulationRegulations” means the regulations promulgated by the U.S. Department of the Treasury pursuant to and in respect of provisions of the U.S. Tax Code.

trust account” means the trust account of the Company that held the proceeds from the IPO.

U.S. Holder” means a beneficial owner of the Company’s securities who or that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof ofor the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust, if (a) a court within the United States is able to exercise primary supervision over the administration of the trust or one or more U.S. persons (as defined in the U.S. Tax

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Table of Contents

Code) have authority to control all substantial decisions of the trust or (b) it has a valid election in effect under Treasury Regulations to be treated as a U.S. person.

U.S. Tax Code” means the Internal Revenue Code of 1986, as amended.

Warrant Agreement” means the Warrant Agreement, dated February 7, 2018, by and between Mudrick Capital Acquisition Corporation and Continental Stock Transfer & Trust Company, LLC

LLC.

Warrants” means, unless the context indicates otherwise, the public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants.

Whitebox” means Whitebox Advisors, LLC.

Wolverine” means Wolverine Asset Management, LLC.

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CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS

We make “forward-looking statements” in the Summary,“Summary,Risk“Risk Factors,,Description“Description of Business,,Description“Description of Properties,Property,” and Management’s“Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations” sections and elsewhere throughout this prospectus. All statements, other than statements of historical facts, included in this prospectus and in press releases 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, including but not limited to such things as future business strategy, plans and goals, competitive strengths and expansion and growth of our business.

The words “estimate”, “plan”, “anticipate”, “expect”, “intend”, “believe” “target”, “budget”, “may”, “schedule” and similar words or expressions identify forward-looking statements. Forward-looking statements in this prospectus may include, for example, statements about:

Use of proceeds from this offering;
Industry-related risks including:
oFluctuations in the price of gold and silver;
oUncertainties concerning estimates of reserves and mineralized material;
oUncertainties relating to the a novel coronavirus (“COVID-19”) pandemic;
oThe intense competition within the mining industry and state of Nevada;
oThe inherently hazardous nature of mining activities, including environmental risks;
oOur insurance may not be adequate to cover all risks associated with our business, or cover the replacement costs of our assets;
oPotential effects on our operations of U.S. federal and state governmental regulations, including environmental regulation and permitting requirements;
oCost of compliance with current and future government regulations;
oUncertainties relating to obtaining or retaining approvals and permits from governmental regulatory authorities;
oPotential challenges to title in our mineral properties;
oRisks associated with proposed legislation in Nevada that could significantly increase the costs or taxation of our operations; and
oChanges to the climate and regulations and pending legislation regarding climate change.
Business-related risks including:
oRisks related to our liquidity and going concern considerations;
oRisks related to the heap leaching process at the Hycroft Mine and estimates of production;
oOur ability to achieve our estimated production and sales rates and stay within our estimated operating and production costs and capital expenditure projections;
oRisks related to our limited experience with a largely untested process of oxidizing and heap leaching sulfide ores;
oThe decline of our gold and silver production;
oRisks related to our reliance on one mine with a new process;
oUncertainties and risks related to our reliance on contractors and consultants;
oUncertainties related to our ability to replace and expand our ore reserves;
oThe costs related to our land reclamation requirements;
oAvailability and cost of equipment, supplies, energy, or commodities;
oThe commercial success of, and risks relating to, our development activities;
oRisks related to slope stability;
oOur ability to raise capital on favorable terms or at all;


oRisks related to our substantial indebtedness, including cross acceleration and our ability to generate sufficient cash to service our indebtedness;
oUncertainties resulting from the possible incurrence of operating and net losses in the future;
oRisks related to disruption of our business due to the historical chapter 11 proceedings;
oThe loss of key personnel or our failure to attract and retain personnel;
oRisks related to technology systems and security breaches;
oRisks related to current and future legal proceedings;
oOur current intention or future decisions whether or not to use streaming or forward-sale arrangements;
oRisks associated with possible future joint ventures; and
oRisks that our principal stockholders will be able to exert significant influence over matters submitted to stockholders for approval.
Risks related to our Common Stock and warrants, including
oVolatility in the price of our common stock;
oRisks related to a lack of liquidity in the trading of our common stock;
oPotential declines in the value of our common stock due to substantial future sales of our common stock and/or warrants;
oDilution of your investment;
oWe do not intend to pay cash dividends; and
oAnti–takeover provisions could make a third party acquisition of us difficult.

These statements involve known and unknown risks, uncertainties, assumptions and other factors which may cause our actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on current expectations. Although our management believes that its expectations are based on reasonable assumptions, we can give no assurance that these expectations will prove correct. Please see “Risk Factors” below for more information about these and other risks. Potential investors are cautioned against attributing undue certainty to forward-looking statements. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that our forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in the statements. We assume no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. It does not contain all the information that you may consider important in making your investment decision. Therefore, you should read the entire prospectus carefully, including, in particular, the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our and Seller’s consolidated financial statements and related notes.

As used in this prospectus, unless the context otherwise requires or indicates, references to “Hycroft,” “Company,” “we,” “our,” and “us,” refer to Hycroft Mining Holding Corporation and its subsidiaries. “Seller” refers to Hycroft Mining Corporation prior to the business combination.Corporation.

Overview

We are a U.S.-based gold producer that has historicallyis focused on mining,operating and developing and exploring properties in the state of Nevadaour wholly owned Hycroft Mine in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales have historically represented 100% of the Seller’s operating revenues and are expected to represent 100% of our operating revenues in the future. Accordingly,and the market prices of gold and silver significantly impact our financial position, operating results and cash flows. The Hycroft Mine is located in the state of Nevada.

The mailing addressDuring the second quarter of our principal executive office is 8181 E. Tufts Ave., Suite 510, Denver, CO 80237. The telephone number of Hycroft is (303) 253-3267. For more information about Hycroft, please see the sections entitled “Description of Business,” “Description of Property,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operation,” “Management” and “Executive Compensation” in this prospectus.

Company History

The Seller was incorporated as Allied Nevada Gold Corp. under the laws of the State of Delaware on September 14, 2006 and commenced operations on May 10, 2007. The Seller suspended2019, we restarted open pit mining operations at the Hycroft Mine, on July 8, 2015 to maximize cash flow and, minimize spending throughduring the remainderthird quarter of the chapter 11 process2019, produced and changed its name from Allied Nevada Gold Corp. to Hycroft Mining Corporation on October 9, 2015 in connection with its restructuring and emergence from federal bankruptcy proceedings. The Seller continued to process and producesold gold and silver through the operationwhich we have continued to do on an approximate weekly basis since restarting. As part of the heap2019 restart of mining operations, existing equipment was re-commissioned, including haul trucks, shovels and a loader, upgrades were made to the crushing system and new leach padspad space was added to the existing leach pads. During the first half of 2020, we continued to increase our operations by mining more tons, procuring additional mobile equipment rentals, and Merrill-Crowe processing plants located onincreasing our total headcount. During the property, but in 2017, with revenue no longer covering the costfirst six months of the reagents necessary for production,2020 the Hycroft Mine was placed into care and maintenance mode to minimize expenditures and conserve cash. While in care and maintenance,produced 12,342 ounces of gold and 73,717 ounces of silver production was a byproductand sold 10,797 ounces of maintenance activities.

Effective July 31, 2019, M3 Engineeringgold and Technology Corporation (“M3 Engineering”), in conjunction with SRK Consulting (U.S.), Inc. (“SRK”) and the Seller, completed the Hycroft Technical Report Summary, Heap Leaching Feasibility Study prepared for Seller with an effective date70,703 ounces of July 1, 2019, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K, for a two-stage, heap oxidation and subsequent leaching of transition and sulfide ores.

Our Business

silver.

As of June 30, 2019, based on the Hycroft Technical Report, the Hycroft Mine had proven and probable mineral reserves of 12.0 million ounces of gold and 481.4 million ounces of silver, which are contained in oxide, transition and sulfide ores. The Hycroft Mine ranks among one of the 20 largest gold deposits in the world, and the second largest in the United States, based on resource sizes. Pursuant to the current 34-year life of mine plan in the Hycroft Technical Report, once fully operational, mining will range from approximately 85 – 100 million tons per year. As set forth in the Hycroft Technical Report, during the initial five-year ramp-up we expect mining will be performed by a contract mining company or we will primarily use a short-term equipment rental fleet during the initial five-year ramp-up using customary truck and shovel open pit mining methods. After the initial ramp-up, we expect to self-perform mining with our own equipment fleet.

Effective July 31, 2019, M3 Engineering and Technology Corporation (“M3 Engineering”), in conjunction with SRK Consulting (U.S.), Inc. (“SRK”) and Seller, completed the Hycroft Technical Report Summary, Heap Leaching Feasibility Study prepared for Seller with an effective date of July 1, 2019, and prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K, for a two-stage, heap oxidation and subsequent leaching of transition and sulfide ores.

Our Properties

All of oursole mining properties areproperty is located in Nevada. We currently have one Operating Property, namelyoperating property, which is the Hycroft Mine as discussed herein.


Recent Developments

On May 29, 2020, we completed the business combinationRecapitalization Transaction described abovebelow in the Section entitled “Description of Business..

On July 1, 2020, Randy Buffington, our former Chairman, President, and CEO departed the Company. Mr. Buffington is assisting us during this transition period and has entered into a consulting agreement for 24 months, through July 1, 2022. See Note 22 — Subsequent Events to the Notes to Unaudited Consolidated Financial Statements.

On August 31, 2020, the Company announced that it will appoint Diane R. Garrett, Ph.D, as the Company’s President and Chief Executive Officer and as a director, effective as of September 8, 2020. For more information about Dr. Garrett’s biography and compensation arrangements, see “Management” and “Executive Compensation — Compensation Arrangements with Diane R. Garrett,” respectively.

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Risk Factors

An investment in our common stockCommon Stock involves substantial risk. The occurrence of one or more of the events or circumstances described in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may have a material adverse effect on our business, cash flows, financial condition and results of operations. Important factors and risks that could cause actual results to differ materially from those in the forward-looking statements include, among others:

Industry-related risks including:

·Fluctuations in the price of gold;gold and silver;

·Uncertainties concerning estimates of reserves and mineralized material;

·Uncertainties relating to the ongoing COVID-19 pandemic;

·The intense competition within the mining industry;industry and state of Nevada;

·The inherently hazardous nature of mining activities;activities, including environmental risks;

·Our insurance may not be adequate to cover all risks associated with our business;business, or cover the replacement costs of our assets;

·Potential effects on our operations of U.S. federal and state governmental regulations, including environmental regulation and permitting requirements;

·Cost of compliance with current and future government regulations;

·Uncertainties relating to obtaining or retaining approvals and permits from governmental regulatory authorities;

·Potential challenges to title in our mineral properties;

·Risks associated with proposed legislation in Nevada that could significantly increase the costs or taxation of our operations; and

·Changes to the climate and regulations and pending legislation regarding climate change.

Business-related risks including:

·Risks related to our liquidity and going concern considerations;
Risks related to the heap leaching process at the Hycroft Mine and estimates of production;

·Our ability to achieve our estimated production and sales rates and stay within our estimated operating and production costs;costs and capital expenditure projections;

·Risks related to our limited experience with a largely untested process of oxidizing and heap leaching Sulfidesulfide ores;

·The decline of our gold and silver production;

·Risks related to our reliance on one mine with a new process;

·Uncertainties and risks related to our reliance on contractors and consultants;

·Uncertainties related to our ability to replace and expand our ore reserves;

·The costs related to our land reclamation requirements;

·Availability and cost of equipment, supplies, energy or commodities;

·The commercial success of, and risks relating to, our development activities;

·Risks related to slope stability;

·Our ability to raise capital on favorable terms or at all;


·Risks related to our substantial indebtedness, including cross acceleration and our ability to generate sufficient cash to service our indebtedness;

·Uncertainties resulting from the possible incurrence of operating and net losses in the future;

4


·Risks related to disruption of our business due to the historical chapter 11 proceedings;

·The loss of key personnel or our failure to attract and retain personnel;

·Risks related to technology systems and security breaches;

·Risks related to current and future legal proceedings;

·Our current intention or future decisions whether or not to use streaming or forward-sale arrangements;

·Risks associated with possible future joint ventures; and

·Risks that our principal stockholders will be able to exert significant influence over matters submitted to stockholders for approval.

Risks related to our Common Stock and warrants and this offering, including:

·Volatility in the price of our Common Stock;

·Risks related to a lack of liquidity in the trading of our Common Stock;

·Potential declines in the value of our Common Stock due to substantial future sales of our Common Stock and/or warrants;

·Dilution of your investment;

·We do not intend to pay cash dividends; and

·Anti–takeoverAnti-takeover provisions could make a third party acquisition of us difficult.

You should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” beginning on page 87 of this prospectus.

Implications of Being anAn Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the “JOBS Act.JOBS Act.” An emerging growth company may take advantage of specified reduced requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

·we may present only two years of audited financial statements and only two years of related Management'sManagement’s Discussion & Analysis of Financial Condition and Results of Operations;

·we are exempt from the requirement to obtain an attestation report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

·we are permitted to provide less extensive disclosure about our executive compensation arrangements; and

·we are not required to give our stockholders non-binding votes on executive compensation or "golden parachute" arrangements.

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We may take advantage of these provisions for up to five full fiscal years or such earlier time that we are no longer an emerging growth company. We may choose to take advantage of some but not all of these reduced burdens. We would cease to be an emerging growth company if we have $1.07 billion or more than $1 billion in annual revenues, have more than $700 million in market value of our shares of common stock held by non-affiliates, or issue more than $1 billion of non-convertible debt over a three-year period.


Additionally, although The Company has elected not to opt out of the JOBS Act providesextended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can take advantageadopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s 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 for complying with newdifficult or revisedimpossible because of the potential differences in accounting standards we have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

used.

Corporate Information

We were incorporated on August 28, 2017 as a Delaware corporation under the name “Mudrick Capital Acquisition Corporation” and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On May 29, 2020, in connection with the consummation of the business combination,Recapitalization Transaction, we changed our name to “Hycroft Mining Holding Corporation”.

Corporation.”

Our principal executive offices are located at 8181 E. Tufts Ave., Suite 510, Denver, Colorado, and our telephone number is (303) 253-3267. Our website is www.hycroftmining.com. The information found on, or that can be accessed from or that is hyperlinked to, our website is not part of this prospectus.

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THE OFFERING

We are registering the issuance by us of upThe following summary contains general information about this offering. The summary is not intended to 37,500,212 shares of our Common Stock that may be issued by us upon exercise of warrants to purchase Common Stock, including the public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants. We are also registering the resale by the Selling Securityholders or their permitted transferees of (i) up to 60,867,645 shares of Common Stock, and (ii) up to 13,489,99 warrants to purchase Common Stock, including the private placement warrants, forward purchase warrants and PIPE warrants. Any investment in the securities offered hereby is speculative and involves a high degree of risk.complete. You should carefully considerread the information set forth under “Risk Factors” on page 8 offull text and more specific details contained elsewhere in this prospectus.prospectus.

As of July 9, 2020, we had 50,160,042 shares of Common Stock outstanding. The following information is as of July 9, 2020 and does not give effect to issuances of shares of our Common Stock or warrants after such date, or the exercise of warrants after such date.

Issuance of Securities - Common Stock and Warrants

Shares of Common Stock to be issued upon exercise of all public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrantsoffered by us

37,500,212

[●] shares

Underwriters’ option to purchase additional shares

Use of proceeds

We will receivehave granted the underwriters a 30-day option to purchase up to an aggregateadditional [●] shares from us at the public offering price, less underwriting discounts and commissions, to cover over-allotments, if any.

Common stock to be outstanding immediately after this offering

[●] shares (or [●] shares if the underwriters exercise their option to purchase additional shares in full).

Use of approximately $538.2 millionproceeds

We estimate that the net proceeds from the exercisesale of allshares of our Common Stock in this offering will be approximately $[●] million (or approximately $[●] million if the underwriters’ option to purchase additional shares in this offering is exercised in full), based upon an assumed public warrants, private placement warrants, forward purchase warrants, PIPE warrantsoffering price of $[●] per share, which was the closing sale price of our Common Stock on the Nasdaq Capital Market on [●], 2020, and Seller warrants assuming the exercise in full of all such warrants for cash. Unless we inform you otherwise in a prospectus supplement or free writing prospectus, weafter deducting underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use the net proceeds of this offering to fund working capital expenditures as we seek to continue to ramp up operations at the Hycroft Mine and to construct a new leach pad and associated infrastructure. See the section of this prospectus entitled “Use of Proceeds” for a more complete description of the intended use of proceeds from the exercise of such warrants for general corporate purposes which may include acquisitions or other strategic investments or repayment of outstanding indebtedness.this offering.

Risk factors

Resale of Common Stock and Warrants
Shares of Common Stock offered by the Selling Securityholders60,687,645
Warrants offered by the Selling Securityholders
Private placement warrants, forward purchase warrants and PIPE warrants13,489,999
Exercise Price$11.50 per share of Common Stock
Use of proceedsWe will not receive any proceeds from the sale of the Common Stock and warrants to be offered by the Selling Securityholders. With respect to shares of Common Stock underlying the warrants, we will not receive any proceeds from the sale of such shares except with respect to amounts received by us upon exercise of such warrants to the extent such warrants are exercised for cash.
Restrictions to SellPursuant to the Amended and Restated Registration Rights Agreement the restricted stockholders agreed


not to sell, transfer, pledge or otherwise dispose of certain securities they hold or receive, for certain time periods specified therein. For more information, please see

See the section of this prospectus entitled “PlanRisk Factors” beginning on page 7 of Distribution – Restrictionsthis prospectus for a discussion of factors you should carefully consider before deciding to Sell.”

NASDAQ Ticker Symbols1

invest in our Common Stock: HYMC

Public Warrants: HYMCWStock.

Except as otherwise indicated, the information in this prospectus reflects or assumes the following:

no exercise of warrants outstanding as of [●], 2020; and
no exercise by the underwriters of their option to purchase up to an additional [●] shares of our Common Stock in this offering.

7

1 We will use our commercially reasonable best efforts to list the Seller warrants for trading on NASDAQ as soon as reasonably practicable subject to applicable listing requirements.



RISK FACTORS

Investing in our securities involves a high degree of risk. Investors should carefully consider the risks described below and all of the other information set forth in the registration statement of which this prospectus forms a part, including our and Seller’s financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our Common Stock or warrants.Stock. If any of the events or developments described below occur, our business, financial condition, or results of operations could be materially or adversely affected. As a result, the market price of our Common Stock and warrants could decline, and investors could lose all or part of their investment. The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Notes Regarding Forward-Looking Statements” below.above.

Risks Related toTo Our Industry

The market prices of gold and silver are volatile. A decline in gold and silver prices could result in decreased revenues, decreased net income, increased losses and decreased cash inflows, which maywould negatively affect our business.

Gold and silver are commodities. Their prices fluctuate and are affected by many factors beyond our control, including interest rates, expectations regarding inflation, speculation, currency values, central bank activities, governmental decisions regarding the disposal of precious metals stockpiles, global and regional demand and production, political and economic conditions and other factors. The prices of gold and silver, as quoted by The London Bullion Market Association on July 9,August 28, 2020, December 31, 2019 and December 31, 2018, were $1,812,$1,957, $1,515 and $1,279 per ounce for gold, respectively, and $18.84, $18.04$27.35, $18.05 and $15.46 per ounce for silver, respectively. The prices of gold and silver may decline in the future. A substantial or extended decline in gold or silver prices would adversely impact our financial position, revenues, net income and cash flows, particularly in light of our current strategy of not engaging in hedging transactions with respect to gold or silver. In addition, sustained lower gold or silver prices may:

·reduce revenue potential due to cessation of the mining of deposits, or portions of deposits, that have become uneconomic at the then-prevailing gold or silver price;

·reduce or eliminate the profit, if any, that we currently expect from mining operations;

·halt, delay, modify, or cancel plans for the mining of oxide and sulfide ores or the development of new and existing projects;

·make it more difficult for us to satisfy and/or service our debt obligations;

·reduce existing reserves by removing ores from reserves that can no longer be economically processed at prevailing prices; and

·cause us to recognize an impairment to the carrying values of mineral properties and long-lived assets.

Reserve and other mineralized material calculations are estimates only, and are subject to uncertainty due to factors including metal prices, inherent variability of the ore and recoverability of metal in the mining process.

The calculation of mineral reserves, mineral resources and grades are estimates and depend upon geological interpretation and statistical inferences or assumptions drawn from drilling and sampling analysis, which may prove to be unpredictable. There is a degree of uncertainty attributable to the calculation of mineral reserves and mineral resources, and corresponding grades. Until mineral reserves and mineral resources are actually mined and processed, the quantity of ore and grades must be considered as an estimate only. In addition, the quantity of mineral reserves and mineral resources may vary depending on metal prices, which largely determine whether mineral reserves and other mineralized materials are classified as ore (economic to mine) or waste (uneconomic to mine). A decline in metal prices may result in previously reported mineral reserves (ore) becoming uneconomic to mine (waste). Current reserve estimates were calculated using a $1,200 per ounce


gold price and $16.50 per ounce silver price. A material decline in the current price of gold or silver could require a reduction in our reserve estimates. Any material change in the quantity of mineral reserves, mineral resources, mineralization, grade or stripping ratio may affect the economic viability of our properties. In addition, we can provide no assurance that gold and silver recoveries experienced in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production.

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Our activities may be adversely affected by the ongoing COVID-19 pandemic, whether those effects are local, nationwide or global. Matters outside our control may prevent us from executing on our mining operations, limit travel of Company representatives, adversely affect the health and welfare of Company personnel or prevent important vendors and contractors from performing normal and contracted activities, including mining operations.

The currentOur business could be adversely impacted by the effects of the ongoing COVID-19 pandemic. In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, is significantly impactingwhich continues to spread throughout the United States. Efforts implemented by local and national governments, as well as businesses, including temporary closures, are expected to have adverse impacts on local, national and the global economy and commodity and financial markets.economies. The full extent and impact ofto which the COVID-19 pandemic is unknown and to date has included extreme volatility in financial markets, a slowdown in economic activity, extreme volatility in commodity prices (including precious metals) and has raised the prospect of a global recession. The response to COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in consumer activity, globally. Matters outside our control have affectedimpacts our business, andincluding our operations and may continue to prevent us from executingthe market for our securities, will depend on our mining operations; limit travelfuture developments, which are highly uncertain and cannot be predicted at this time. Uncertainties include the duration, severity and scope of our representatives, including between our corporate headquarters in Coloradothe outbreak and the Hycroft Mine in Nevada; adversely affect the health and welfare of our personnel;actions taken to contain or prevent important vendors and contractors from performing normal and contracted activities, including mining operations. If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection withtreat the COVID-19 pandemic, our operations will likely be adversely impacted. It is possible thatoutbreak. In particular, the continued spread of COVID-19 could also further cause disruption in our supply chains,materially and adversely affect our business partners, delay our mining operations or cause other unpredictable events.

We, our people, investors, contractors or other stakeholders, have been and may continue to be limited or prevented from travel or normal attendance to activities in conductingimpact our business including mining operations,without limitation, employee health, limitations on travel, the availability of industry experts and conducting presentations, meetings orpersonnel, restrictions to planned drill programs, assaying, and other activities. The spread of COVID-19 throughout Colorado and Nevada may result in our employees being forced to work from home or missing work if they or a member of their family contract COVID-19, which could harm our operations and negatively impact our financial condition. We have and may continue to also be limited or prevented from receiving goods or services from contractors. Decisionsfactors that will depend on future developments beyond our control such as canceled events, restricted travel, barriers to entry or other factorsthat may affect our ability to accomplish drilling programs, mining operations, equity raising activities,have a material and other needs that would normally be accomplished without such limitations. The extent to which the COVID-19 outbreak will impact our operations, our business and the economy is highly uncertain. We cannot predict the impact of the COVID-19 pandemic, but it may materially and adversely affect ouradverse effect on its business, financial condition and results of operations. There can be no assurance that our personnel will not be impacted by such disease and we may ultimately see our workforce productivity reduced or incur increased medical and related costs as a result of these health risks. In addition, a significant outbreak of COVID-19 could result in a widespread global health crisis that could adversely affect global economies and financial markets resulting in an economic downturn that could have an adverse effect on the demand for precious metals and our future prospects.

Moreover, the actual and threatened spread of the COVID-19 pandemic globally has had a material adverse effect on the global economy, could continue to negatively impact stock markets, including the trading price of our shares, could adversely impact our ability to raise capital, could cause continued interest rate volatility and movements that could make obtaining financing or refinancing our debt obligations more challenging or more expensive and could result in any operations affected by COVID-19 becoming subject to quarantine. Any of these developments, and others, could have a material adverse effect on our business and results of operations.

We face intense competition in the mining industry.

The mining industry is intensely competitive. As a result of this competition, some of which is with large established mining companies with substantial mining capabilities and with greater financial and technical resources than ours, we compete with other mining companies in the recruitment and retention of qualified managerial and technical employees and in acquiring attractive mining claims. If we are unable to successfully attract and retain qualified employees, our development programs and/or our operations may be slowed down or suspended, which may adversely impact our development, financial condition and results of operations.

Mining development and processing operations pose inherent risks and costs that may negatively impact our business.

Mining development and processing operations involve many hazards and uncertainties, including, among others:

·metallurgical or other processing problems;

·ground or slope failures;


·industrial accidents;

·unusual and unexpected rock formations or water conditions;

·environmental contamination or leakage;

·flooding and periodic interruptions due to inclement or hazardous weather conditions or other acts of nature;

·fires;

·seismic activity;

·organized labor disputes or work slow-downs;

·mechanical equipment failure and facility performance problems; and

·the availability of critical materials, equipment and skilled labor.

These occurrences could result in damage to, or destruction of, our properties or production facilities, personal injury or death, environmental damage, delays in mining or processing, increased production costs, asset write downs, monetary losses and legal liability, any of which could have an adverse effect on our results of operations and financial condition and adversely affect Ourour projected development and production estimates.

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Our insurance may not cover all of the risks associated with our business.

The mining business is subject to risks and hazards, including, but not limited to, construction risks, environmental hazards, industrial accidents, the encountering of unusual or unexpected geological formations, slide-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, reduced production and delays in mining, asset write-downs, monetary losses and possible legal liability. Insurance fully covering many of these risks is not generally available to us and if it is, we may elect not to obtain it because of the high premium costs or commercial impracticality. We do not currently carry business interruption insurance and have no plans to obtain such insurance in the future. Any liabilities incurred for these risks and hazards could be significant and could adversely affect our results of operation, cash flows and financial condition.

Environmental regulations could require us to make significant expenditures or expose us to potential liability.

To the extent we become subject to environmental liabilities, the payment of such liabilities or the costs that we may incur, including costs to remedy environmental pollution, would reduce funds otherwise available to us and could have a material adverse effect on our financial condition, results of operations, and liquidity. If we are unable to fully remedy an environmental violation or release of hazardous substances, we might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy or corrective action. The environmental standards that may ultimately be imposed at a mine site can vary and may impact the cost of remediation. Actual remedial costs may exceed the financial accruals that have been made for such remediation. The potential exposure may be significant and could have a material adverse effect on our financial condition and results of operations.

Moreover, governmental authorities and private parties may bring lawsuits based upon damage to property or natural resources and injury to persons resulting from the environmental, health and safety impacts of our past and current operations, which could lead to the imposition of substantial fines, remediation costs, penalties, injunctive relief and other civil and criminal sanctions. Substantial costs and liabilities, including those required to restore the environment after the closure of mines, are inherent in our operations. We cannot provide any assurance that any such law, regulation, enforcement or private claim will not have a negative effect on our business, financial condition or results of operations.


Our operations are subject to extensive environmental regulations, which could result in the incurrence of operational delays, penalties and costs.

All phases of our operations are subject to extensive federal and state environmental regulation, including those enacted under the following laws:

·Comprehensive Environmental Response, Compensation, and Liability Act;

·The Resource Conservation and Recovery Act;

·The Clean Air Act;

·The National Environmental Policy Act;

·The Clean Water Act; and

·The Safe Drinking Water Act.

Additional regulatory authorities also have jurisdiction over some of our operations and mining projects including the Environmental Protection Agency, the Nevada Division of Environmental Protection, the U.S. Fish and Wildlife Service, the U.S. Bureau of Land Management (the “BLM”), and the Nevada Department of Wildlife.

These environmental regulations require us to obtain various operating permits, approvals and licenses and also impose standards and controls relating to development and production activities. For instance, we are required to hold a Nevada Reclamation Permit with respect to the Hycroft Mine. This permit mandates concurrent and post-mining reclamation of mines and requires the posting of reclamation bonds sufficient to guarantee the cost of mine reclamation. Changes to the amount required to be posted for reclamation bonds for our operations at the Hycroft Mine could materially affect our financial position, results of operations, cash flows and liquidity. Also, the U.S. Fish and Wildlife Service may designate critical habitat and suitable habitat areas it believes are necessary for survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for our development. For example, we had to obtain certain permits associated with mining in the area of an eagle habitat. Failure to obtain such required permits or failure to comply with federal and state regulations could also result in delays in beginning or expanding operations, incurring additional costs for investigation or

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cleanup of hazardous substances, payment of penalties for non-compliance or discharge of pollutants, and post-mining closure, reclamation and bonding, all of which could have an adverse impact on our financial performance, results of operations and liquidity.

Compliance with current and future government regulations may cause us to incur significant costs.

Our operations are subject to extensive federal and state legislation governing matters such as mine safety, occupational health, labor standards, prospecting, exploration, production, exports, toxic and hazardous substances, explosives, management of natural resources, land use, water use, air emissions, waste disposal, environmental review and taxes. Compliance with this and other legislation could require us to make significant financial outlays. The enactment of new legislation or more stringent enforcement of current legislation may increase costs, which could have a negative effect on our financial position, results of operations, and liquidity. We cannot provide any assurances that we will be able to adapt to these regulatory developments on a timely or cost-effective basis. Violations of these laws, regulations and other regulatory requirements could lead to substantial fines, penalties or other sanctions, including possible shut-down of the Hycroft Mine or future operations, as applicable.

Changes in environmental regulations could adversely affect our cost of operations or result in operational delays.

The regulatory environment in which we operate is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. New environmental laws and regulations or changes in existing environmental laws and regulations could have a negative effect on exploration activities, operations, production levels and methods of production.


We cannot provide any assurance that future changes in environmental laws and regulations will not adversely affect our current operations or future projects. Any changes to these laws and regulations could have an adverse impact on our financial performance and results of operations by, for example, requiring changes to operating constraints, technical criteria, fees or surety requirements.

Our operations are subject to numerous governmental permits that are difficult to obtain and we may not be able to obtain or renew all of the permits we require, or such permits may not be timely obtained or renewed.

In the ordinary course of business we are required to obtain and renew governmental permits for our operations, including in connection with our plans for heap leaching our transition and sulfide ores at the Hycroft Mine. We will also need additional governmental permits to accomplish our long-term plans to mine sulfide ores, including without limitation, permits to allow construction of additional leach pad space. Obtaining or renewing the necessary governmental permits is a complex and time-consuming process involving costly undertakings by us. The duration and success of our efforts to obtain and renew permits are contingent upon many variables not within our control, including the interpretation of applicable requirements implemented by the permitting authority and intervention by third parties in any required environmental review. We may not be able to obtain or renew permits that are necessary to our operations on a timely basis or at all, and the cost to obtain or renew permits may exceed our estimates. Failure to comply with the terms of our permits may result in injunctions, fines, suspension or revocation of permits and other penalties. We can provide no assurance that we have been, or will at all times, be in full compliance with all of the terms of our permits or that we have all required permits. The costs and delays associated with compliance with these permits and with the permitting process could alter the mine plan, delay or stop us from proceeding with the operation or development of the Hycroft Mine or increase the costs of development or production, any or all of which may materially adversely affect our business, results of operations, financial condition and liquidity.

There are uncertainties as to title matters in the mining industry. Any defects in such title could cause us to lose our rights in mineral properties and jeopardize our business operations.

Our mineral properties consist of private mineral rights, leases covering private lands, leases of patented mining claims and unpatented mining claims. Areas of the Hycroft Mine are unpatented mining claims located on lands administered by the BLM, Nevada State office to which we have only possessory title. Because title to unpatented mining claims is subject to inherent uncertainties, it is difficult to determine conclusively ownership of such claims. These uncertainties relate to such things as sufficiency of mineral discovery, proper location and posting and marking of boundaries, and possible conflicts with other claims not determinable from descriptions of record. We believe a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, and this uncertainty is inherent in the mining industry.

The present status of our unpatented mining claims located on public lands allows us the right to mine and remove valuable minerals, such as precious and base metals, from the claims conditioned upon applicable environmental reviews and permitting programs. We also are generally allowed to use the surface of the land solely for purposes related to mining and processing the mineral-bearing ores. However, legal ownership of the land remains with the United States. We remain at risk that the mining claims may be forfeited either to the United States or to rival private claimants due to failure to comply with statutory requirements. Prior to

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1994, a mining claim locator who was able to prove the discovery of valuable, locatable minerals on a mining claim, and to meet all other applicable federal and state requirements and procedures pertaining to the location and maintenance of federal unpatented mining claims, had the right to prosecute a patent application to secure fee title to the mining claim from the Federal government. The right to pursue a patent, however, has been subject to a moratorium since October 1994, through federal legislation restricting the BLM from accepting any new mineral patent applications. If we do not obtain fee title to our unpatented mining claims, we can provide no assurance that we will be able to obtain compensation in connection with the forfeiture of such claims.

There may be challenges to title to the mineral properties in which we hold a material interest. If there are title defects with respect to any properties, we might be required to compensate other persons or perhaps reduce our interest in the affected property. Also, in any such case, the investigation and resolution of title issues would divert our management’s time from ongoing production and development programs.


Legislation has been proposed periodically that could, if enacted, significantly affect the cost of our operations on our unpatented mining claims or the amount of Net Proceeds of Mineral Tax we pay to the State of Nevada.

Members of the U.S. Congress have periodically introduced bills which would supplant or alter the provisions of the Mining Law of 1872. Such bills have proposed, among other things, to either eliminate or greatly limit the right to a mineral patent and to impose a federal royalty on production from unpatented mining claims. Such proposed legislation could change the cost of holding unpatented mining claims and could significantly impact our ability to develop mineralized material on unpatented mining claims. A majority of our mining claims are unpatented claims. Although we cannot predict what legislated royalties might be, the enactment of these proposed bills could adversely affect the potential for development of our unpatented mining claims and the economics of our existing operating mines on federal unpatented mining claims. Passage of such legislation could adversely affect our financial performance and results of operations.

We pay Net Proceeds of Mineral Tax (“NPT”), to the State of Nevada on up to 5% of net proceeds generated from the Hycroft Mine. Net proceeds are calculated as the excess of gross yield over direct costs. Gross yield is determined as the value received when minerals are sold, exchanged for anything of value or removed from the state. Direct costs generally include the costs to develop, extract, produce, transport and refine minerals. From time to time Nevada legislators introduce bills which aim to increase the amount of NPT that mining companies operating in the state pay. Recently a resolution was introduced in each of the Assembly and Senate of the state of Nevada to repeal the NPT and replace it with a tax on gross revenue. If legislation is passed that increases the NPT we pay to the state of Nevada or if the NPT is replaced with a tax on gross revenue, our business, results of operations, and cash flows could be negatively impacted.

Regulations and pending legislation governing issues involving climate change could result in increased operating costs, which could have a material adverse effect on our business.

A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to various climate change interest groups and the potential impact of climate change. Legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting and other costs to comply with such regulations. Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such regulations. Given the emotion, political significance and uncertainty around the impact of climate change and how it should be dealt with, we cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation.

Climate change could have an adverse impact on our cost of operations.

The potential physical impacts of climate change on our operations are highly uncertain and would be particular to the area in which we operate. These climate changes may include changes in rainfall and storm patterns and intensities, water shortages and changing temperatures. These changes in climate could adversely affect our mining operations, including by affecting the moisture levels and pH of ore on our leach pads, increase the cost of production at the Hycroft Mine and adversely affect the financial performance of our operations.

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Risks Related to Our Business

Due to uncertainty surrounding our ability to achieve sales, production, cost and other operating targets, as well as our ability to raise sufficient additional working capital in this offering to fund construction of a leach pad, substantial doubt exists as to our ability to continue as a going concern. Our plans to alleviate the substantial doubt about our ability to continue as a going concern may not be successful, and we may be forced to limit our business activities or be unable to continue as a going concern, which would have a material adverse effect on our results of operations and financial condition.

The consolidated financial statements as of and for the periods ended June 30, 2020 included in this prospectus have been prepared on a “going concern” basis, which contemplates the presumed continuation of the Company even though events and conditions exist that, when considered individually or in the aggregate, raise substantial doubt about our ability to continue as a going concern because it is probable that, without sufficient additional capital injections, we will be unable to meet our obligations as they become due within one year after the date that such financial statements were issued.

For the six months ended June 30, 2020, we incurred a net loss of $84.4 million and the cash used in operating activities was $57.6 million. As of June 30, 2020, we had available cash on hand of $47.3 million, working capital of $68.0 million, total liabilities of $195.4 million, and an accumulated deficit of $468.8 million. Although we recently completed the Recapitalization Transaction, using our internal forecasts and cash flow projection models, we now project, without the net proceeds from this offering, there is insufficient cash to meet our future obligations as they become due or ramp up the Hycroft Mine’s operations from current levels or to levels which are contemplated by the Hycroft Technical Report.

Our ability to continue as a going concern is contingent upon achieving sales, production, cost, and other operating targets, as well as the success of this offering to provide additional capital financing for working capital and construction of a leach pad. If we are unable to secure sufficient additional financing or capital on terms favorable to us, we may be forced to limit our business activities or be unable to continue as a going concern, which would have a material adverse effect on our results of operations, financial condition and liquidity.

In addition, the consolidated financial statements contained herein do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of any liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern. As such, recorded amounts in these financial statements (including without limitation, stockholders’ equity) have been prepared in accordance with GAAP on a historical-cost basis, as required, which do not reflect or approximate the current fair value of our assets or management’s assessment of our overall enterprise or equity value. As a result, the amounts recorded for such assets, liabilities and adjustments as of the date of the consolidated financial statements herein may not be indicative of the values in the future which could be materially impacted if we do not secure sufficient additional funding or capital.

Our ability to continue as a going concern is dependent on, among other things, generating profitable operating results, having sufficient liquidity, and maintaining compliance with the covenants and other requirements under the Sprott Credit Agreement and the Subordinated Notes. As of June 30, 2020, we had recorded $139.0 million of debt on our condensed consolidated balance sheets, comprised of the carrying value of the obligations under the Sprott Credit Agreement and the Subordinated Notes, which were $63.1 million and $80.7 million, respectively, and debt issuance costs of $4.8 million. The documents governing these obligations contain various operating and financial covenants, the breach of which would result in a default under such agreements, and in certain cases, cross-defaults under other agreements. As of June 30, 2020, we were in compliance with all applicable indebtedness covenants but no assurances can be given that such compliance will continue if we are unable to secure sufficient additional financing or capital. If we default under such indebtedness, it would have a material adverse impact on our operations, financial condition and results of operations. In addition, the terms of certain additional financing or capital available to us may not be permitted under the Sprott Credit Agreement and the Subordinated Notes and/or we may be unable to obtain waivers of such covenants to allow for us to secure additional financing or capital, which events would have a material adverse impact on our results of operations, financial condition and liquidity.

The estimation of the ultimate recovery of gold and silver from the Hycroft Mine, although based on standard industry sampling and estimating methods, is subjective. Our results of operations, liquidity, and financial position may be negatively impacted if actual recoveries are lower than initial estimations.

The Hycroft Mine historically utilized a heap leach process to extract gold and silver from ore. Our new plans outlined in the Hycroft Technical Report are also based on a heap leach process. The heap leach process extracts gold and silver by placing ore on an impermeable pad and applying a dilute cyanide solution that dissolves a portion of the contained gold and silver, which are then recovered in metallurgical processes. We use several integrated steps in the process of extracting gold and silver to estimate the metal content of ore placed on the leach pad. Although we refine our estimates as appropriate at each step in the process, the final amounts are not determined until a third-party smelter refines the doré and/or metal-laden carbon and determines the final ounces of gold and

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silver available for sale. We then review this end result and reconcile it to the estimates we developed and used throughout the production process. Based on this review, we adjust our estimation procedures when appropriate. Due to the complexity of the estimation process and the number of steps involved, among other things, actual recoveries can vary from estimates, and the amount of the variation could be significant and could have a material adverse impact on our financial condition, results of operations and liquidity.

We may not achieve our production and/or sales estimates and our costs may be higher than our estimates, thereby reducing our cash flows and negatively impacting our results of operations and liquidity.

We prepare estimates of future production, sales, and costs for our operations. We develop our estimates based on, among other things, mining experience, mineral reserve and resource estimates, assumptions regarding ground conditions and physical characteristics of ores (such as hardness and presence or absence of certain metallurgical characteristics), costs to construct new leach pads and estimated rates and costs of mining and processing. All of our estimates are subject to numerous uncertainties, many of which are beyond our control. Our actual production and/or sales may be lower than our estimates and our actual costs may be higher than our estimates, which could negatively impact our cash flows and results of operations. While we believe that our estimates are reasonable at the time they are made, actual results will vary and such variations may be material. These estimates are speculative in nature, and it may be the case that one or more of the assumptions underlying such projections and estimates may not materialize. You are cautioned not to place undue reliance on the projections and estimates set forth in this prospectus.

We may need to raise additional capital after this offering but such additional capital may not be available on favorable terms or at all.

The continuing operation of the Hycroft Mine under the new mine plan will require significant investment. Failure to obtain sufficient financing may result in the delay or indefinite postponement of development or production at the Hycroft Mine. The covenants in the Sprott Credit Agreement and the Sprott Royalty Agreement could significantly limit our ability to secure new or additional credit facilities, increase our cost of borrowing, and make it difficult or impossible to raise additional capital on favorable terms or at all.

Our primary future cash requirements will be to fund working capital as we ramp up operations at the Hycroft Mine and to fund future and sustaining capital expenditures. Using current metal price levels and our estimates of future metal sales, production and operating costs, expenses, and project, development, and capital expenditures contemplated under our plan for the second half of 2020, we currently expect recurring negative monthly cash flows for the remainder of 2020. You are cautioned that management’s expectations regarding our liquidity and capital resources are based on a number of assumptions that we believe are reasonable but could prove to be incorrect. For example, our expectations are based on assumptions regarding commodity price levels, gold and silver recovery percentages and rates, production estimates, timing of oxidation, anticipated costs and other factors that are subject to a number of risks, many of which are beyond our control. If our assumptions prove to be incorrect, we may require additional financing sooner than we expect to continue to operate our business, which may not be available on favorable terms or at all and which could have a material adverse effect on our results of operations, financial condition and liquidity.

Cost estimates of operating the Hycroft Mine are uncertain, which may adversely affect our expected production and profitability.

The expenditures to implement our new two-stage pre-oxidation and leach process, and access our transition and sulfide ores, are considerable and changes in costs, construction schedules, commodity prices and other factors can adversely affect project economics and expected production and profitability. There are a number of factors that can affect costs and construction schedules and result in our assumptions and estimates about the anticipated benefits of a project being incorrect, including, among others:

·changes in input commodity prices and labor costs;

·oxidation rates and recovery rates of gold and silver from the ore;

·available leach pad space on which to place ore for leaching and recovery of gold and silver;
availability and terms of financing;

·availability of labor, energy, transportation, equipment, and infrastructure;

·changes in anticipated tonnage, grade and metallurgical characteristics of the ore to be mined and processed;

·difficulty of estimating construction costs over a period of years;

·delays in completing any environmental review or in obtaining environmental or other governmental permits;

·weather and severe climate impacts; and

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·potential delays related to social and community issues.

We have previously recovered gold and silver from oxide and transition ores at the Hycroft Mine through our heap leach operations. In connection with our restarted mining operations, in addition to mining oxide ore, we are also mining gold and silver from transition and sulfide ores using a modified heap leach process, in which soda ash is being used to manage pH and alkalinity in a two-stage oxidation and leach process, in accordance with the Hycroft Technical Report. However, it is important to note that the economic parameters described in a Feasibility Study,feasibility study, such as the Hycroft Technical Report, include a number of assumptions and estimates that could prove to be incorrect. We use feasibility studies to make a reasoned determination of whether to proceed with a project and to support the required financing for a project but you should not assume that the economic analysis contained in a Feasibility Studyfeasibility study is a guarantee of future performance or that the estimated net present value or internal rates of return will be achieved. Actual results may differ materially. In particular, the processing of sulfide ore and additional transition ore at the Hycroft Mine is uncertain and, therefore, the costs and timing of the commencement


of the production of sulfide ore and additional transition ore operations at the Hycroft Mine could vary greatly from our estimates.

There is only limited experience of recovering gold and silver from sulfide ores using a heap leaching process and we may not be able to economically recover gold and silver.

Under our current mine plan, we have begun to mine and extract gold and silver from transition and sulfide ores using a two-step pre-oxidation process on transition and sulfide ores using soda ash to manage pH and alkalinity during the oxidation process in accordance with the methods set forth in the Hycroft Technical Report. However, the economic parameters described in the Hycroft Technical Report include a number of assumptions and estimates that could prove to be incorrect. Additionally, this two-step process to oxidize transition and sulfide ores before heap leaching to extract gold and silver is a new and relatively untested process, is used only on a limited basis worldwide and has not been widely accepted as a viable process. We cannot provide any assurance that the development and advancement of the Hycroft Mine transition and sulfide ores leaching operations will result in economically viable mining operations, yield new mineral reserves or other mineralized material, enable us to convert other mineralized material (included within mineral resources identified by the Feasibility Study)Hycroft Technical Report), or be implemented on an economic and profitable basis.

We currently depend on a single mine and there is no assurance that after restarting operations we will not incur any interruptions or stoppages in our mining activities which would have a material adverse effect on our results of operations and financial condition.

The Hycroft Mine is our only mining property. We can provide no assurance that we will be successful in profitably operating the Hycroft Mine using the sulfide leaching process. Further, any interruption in our ability to operate the Hycroft Mine, such as, but not limited to, a natural disaster, pandemic (such as COVID-19)the ongoing COVID-19 outbreak), loss of material permits, processing interruptions or difficulties or labor strike would have a materially adverse effect on our ability to produce gold and silver and to generate revenue.

Our reliance on third party contractors and consultants to conduct our operations and construction projects exposes us to risks.

In connection with the operation of the Hycroft Mine, we will contract and engage third party contractors and consultants to assist with aspects of our operations and related construction projects, including construction of the new leach pad, repair of the crushing facility, and mining of our ore and waste. As a result, our operations and construction projects are subject to a number of risks, some of which are outside our control, including:

·negotiating agreements with contractors and consultants on acceptable terms;

·the inability to replace a contractor or consultant and their operating equipment in the event that either party terminates the agreement;

·reduced control over those aspects of operations which are the responsibility of the contractor or consultant;

·failure of a contractor or consultant to perform under their agreement or disputes relative to their performance;

·interruption of operations or increased costs in the event that a contractor or consultant ceases their business due to insolvency or other unforeseen events;

·failure of a contractor or consultant to comply with applicable legal and regulatory requirements, to the extent they are responsible for such compliance; and

·problems of a contractor or consultant with managing their workforce, labor unrest or other employment issues.

In addition, we may incur liability to third parties as a result of the actions of our contractors or consultants. The occurrence of one or more of these risks could decrease our gold and silver production, increase our costs, interrupt or delay our mining operations or our ability to access our ores, and adversely affect our liquidity, results of operations and financial position.

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Our lack of exploration activities will lead to our inability to replace depleted reserves.

To maintain production levels over time we must replace depleted reserves by exploiting known ore bodies and locating new deposits. Pursuant to the Seller’s emergence from bankruptcy, all exploration properties other than those associated with the Hycroft Mine were sold in the chapter 11 proceedings. We have no current plans to continue further exploration other than related to the mining and processing of gold and silver contained in ore within the Hycroft Mine, and there can be no assurance that such projects will be successful. Our mineral base will decline if reserves are mined without adequate replacement, and we may not be able to sustain production beyond the currently contemplated mine life, based on projected production rates.

Land reclamation requirements for the Hycroft Mine may be burdensome and expensive.

Land reclamation requirements are generally imposed on companies with mining operations in order to minimize long-term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents; treat ground and surface water to drinking water standards; and reasonably re-establish pre-disturbance land forms and vegetation.

In order to carry out reclamation obligations imposed on us in connection with our activities, we must allocate financial resources that might otherwise be spent on further development programs. We have established a provision for our reclamation obligations on the Hycroft Mine property, as appropriate, but this provision may not be adequate. If we are required to carry out unanticipated reclamation work, our financial position could be adversely affected.

The sale by Seller of our mineral properties and suspension of acquisition and exploration activities greatly limit our ability to generate new reserves or identify other mineralized materials to replace or expand our current reserves.

Because theThe Hycroft Mine has a limited life based on proven and probable mineral reserves and resources, we have previously soughtresources. Identifying promising mining properties to replaceexpand and expandreplace our mineral reserves and resources. Identifying promising mining propertiesresources is difficult and speculative. As part of ourSeller’s emergence from federal bankruptcy proceedings, pursuant to ourits plan of reorganization, weSeller sold ourits remaining exploration properties. The sale of oursuch mineral properties greatly limits our ability to develop or grow our reserves or identify new mineral resources. As a result, our revenues from the future sale of gold and silver may decline, resulting in lower income and reduced growth. Further, we expect to encounter strong competition from other mining companies in connection with the acquisition of properties producing or capable of producing gold and silver.

Although we haveare not currently suspended ourconducting any acquisition and exploration activities, if or when those activities are resumed, we will face competition from many of these companies that have greater financial resources than we do. Consequently, we may be unable to replace and expand current ore reserves through the acquisition of new mining properties or interests therein on terms we consider acceptable.

A shortage of equipment and supplies and/or the time it takes such items to arrive at the Hycroft Mine could adversely affect our ability to operate our business.

We are dependent on various supplies and equipment to engage in mining and development operations. The shortage of such supplies, equipment and parts and/or the time it takes such items to arrive at the Hycroft Mine could have a material adverse effect on our ability to carry out our operations and develop the Hycroft Mine, and therefore limit or increase the cost of production. Such shortages could also result in increased construction costs and cause delays in expansion projects.

The inability to obtain soda ash or delays in obtaining soda ash could adversely affect our ability to profitably operate our business.

There are a limited number of suppliers that produce and supply soda ash and, to our knowledge, such suppliers do not typically mine soda ash in excess of what they believe they can sell. We have entered into a three-year agreement with a soda ash supplier to provide soda ash for our operations. However, if the contracted supplier cancels the contract, is unable to produce and supply enough soda ash or ceases operations because of the large


quantities of soda ash required in our operations, we may have to temporarily stop mining until we can obtain a new contract to purchase soda ash. Further, we cannot provide any assurance as to the costs that we might incur in obtaining soda ash from a substitute supplier which could adversely affect the profitability and cash flow of our mining operations.

Changes in the cost or supply of energy or commodities used in operations may adversely affect the profitability of our operations and our financial condition.

Our mining operation is an intensive user of energy. Our principal energy sources are electricity and diesel fuel. We rely upon third parties for our supply of energy resources consumed in our mining activities. Energy prices can be affected by numerous factors beyond our control, including global and regional supply and demand, political and economic conditions, including the impact of

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global public health crises such as the spread of the novel coronavirus, COVID-19 on the global economy, and applicable regulatory regimes. The prices of various sources of energy may increase significantly from current levels. An increase in energy prices could materially and adversely affect our results of operations and financial condition.

Disruptions in the supply of our energy resources could temporarily impair our ability to produce gold and silver or delay any construction or expansion projects or plans. Our mining operation is in a remote location requiring the long distance transmission of power. A disruption in the transmission of energy, inadequate energy transmission infrastructure or the termination of any of our energy supply contracts could interrupt our energy supply and adversely affect our operations or expansion projects.

Our production costs are also affected by the prices of commodities we consume or use in our operations, such as diesel fuel, sodium cyanide, soda ash, lime, tires, and explosives. The prices of such commodities are influenced by supply and demand trends affecting the mining industry in general and other factors outside our control. Increases in the price for materials consumed in our mining and production activities could materially and adversely affect our liquidity, results of operations, financial condition and cash flows.

We cannot be certain that our future development activities will be commercially successful.

Substantial expenditures are required to construct additional leach pads to extract gold and silver from our transition and sulfide ore utilizing the new metallurgical processes to extract gold and silver from the transition and sulfide ores described in the Hycroft Technical Report, to further develop the Hycroft Mine to identify new mineral reserves and resources, and to expand or establish mineral reserves and resources through drilling and analysis. We cannot provide assurance that our process to extract gold and silver from transition and sulfide ores using a heap leach process can be maintained on an economic and profitable basis, that any mineral reserves or resources discovered will be in sufficient quantities to justify commercial operations or that the funds required for development can be obtained on a timely or economic basis. A number of factors, including costs, actual mineralization, consistency and reliability of ore grades and commodity prices affect successful project development. The efficient operation of processing facilities, the existence of competent operational management, as well as the availability and reliability of appropriately skilled and experienced consultants also can affect successful project development. We can provide no assurance that the development and advancement of the Hycroft Mine sulfide leaching operations will result in economically viable mining operations or yield new mineral reserves or resources.

We may be adversely affected by challenges relating to slope stability.

Our open pit mine gets deeper as we mine it, presenting certain geotechnical challenges including the possibility of slope failure. If we are required to decrease pit slope angles or provide additional road access to prevent such a failure, our stated mineral reserves could be negatively affected. Further, hydrological conditions relating to pit slopes, renewal of material displaced by slope failures and increased stripping requirements could also negatively affect our stated mineral reserves. We cannot provide any assurances that we will not have to take additional action to maintain slope stability in the future or that our actions taken to date will be sufficient. Unexpected failure or additional requirements to prevent slope failure may negatively affect our results of operations and financial condition, as well as have the effect of diminishing our stated ore reserves.


We may need to raise additional capital but such capital may not be available on favorable terms or at all.

The continuing operation of the Hycroft Mine under the new mine plan will require significant investment. Failure to obtain sufficient financing may result in the delay or indefinite postponement of development or production at the Hycroft Mine. The covenants in the Sprott Credit Agreement the Sprott Royalty Agreement, could significantly limit our ability to secure new or additional credit facilities, increase our cost of borrowing, and make it difficult or impossible to raise additional capital on favorable terms or at all.

Our primary future cash requirements will be to fund working capital as we ramp up operations at the Hycroft Mine and to fund future and sustaining capital. As of May 29, 2020, we had cash and cash equivalents of $68.8 million. Using current metal price levels and our estimates of future metal sales and costs, under our new mine plan described in the Hycroft Technical Report to mine sulfide and transition ore using a heap leach process, we currently expect our future net cash used in investing activities during the fiscal years ending December 31, 2019 and 2020 to exceed our cash flows provided by operating activities during the same periods. You are cautioned that management’s expectations regarding our liquidity and capital resources are based on a number of assumptions that we believe are reasonable but could prove to be incorrect. For example, our expectations are based on assumptions regarding commodity price levels, gold and silver recovery percentages and rates, production estimates, anticipated costs and other factors that are subject to a number of risks, many of which are beyond our control. If our assumptions prove to be incorrect, we may require additional financing sooner than we expect to continue to operate our business, which may not be available on favorable terms or at all and which could have a material adverse effect on our results of operations, financial condition and liquidity.

The Sprott Credit Agreement and Sprott Royalty Agreement impose significant operating and financial restrictions that may limit our ability to operate our business.

The Sprott Credit Agreement and the Sprott Royalty Agreement impose significant operating and financial restrictions on us and our restricted subsidiaries. These restrictions limit our ability and the ability of our restricted subsidiaries to, among other things, as applicable:

·incur additional debt;

·pay dividends or make other restricted payments, including certain investments;

·create or permit certain liens;

·sell assets;

·engage in certain transactions with affiliates; and

·consolidate or merge with or into other companies, or transfer all or substantially all of our assets or the assets of our restricted subsidiaries.

These restrictions could limit our ability to finance our future operations or capital needs, make acquisitions or pursue available business opportunities.

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In addition, the Sprott Credit Agreement and the Sprott Royalty Agreement require us to comply with a number of customary covenants, including:

·covenants related to the delivery of monthly, quarterly and annual financial statements, budgets and annual projections;

·maintaining required insurance;

·compliance with laws (including environmental);

·compliance with ERISA;

·maintenance of ownership of 100% of the Hycroft Mine;

·restrictions on consolidations, mergers or sales of assets;


·limitations on liens;

·limitations on issuance of certain equity interests;

·limitations on issuance of additional indebtedness;

·limitations on transactions with affiliates; and

·other customary covenants.

We cannot assure you that we will satisfy these covenants or that our lenders will waive any future failure to do so. A breach of any of the covenants under the Sprott Credit Agreement and the Sprott Royalty Agreement could result in a default. If a default occurs under the Sprott Credit Agreement and the Sprott Royalty Agreement, the lenders could elect to declare the debt, together with accrued interest and other fees, to be immediately due and payable and proceed against the collateral securing that debt, which, in the case of the Sprott Credit Agreement and the Sprott Royalty Agreement, constitutes all or substantially all of our assets.

Our substantial indebtedness could adversely affect our financial condition.

We have a significant amount of outstanding indebtedness. As of June 30, 2020, the closingcarrying value of the business combination on May 29, 2020, we had outstanding indebtedness of $150 million, including $70 million in aggregate principal amount of indebtednessobligations under the Sprott Credit Agreement and $80 million in aggregate principal amount of Newthe Subordinated Notes assumed by us on May 29, 2020.were $63.1 million and $80.7 million, respectively. Subject to the limits contained in the Sprott Credit Agreement and the Sprott Royalty Agreement, if we are able to incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes, then the risks related to our high level of debt could intensify. Our high level of debt and royalty payment obligations could:

·make it more difficult for us to satisfy our obligations with respect to our outstanding debt;

·require a substantial portion of our cash flows to be dedicated to debt service and/or royalty payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

·limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

·increase our vulnerability to commodity price volatility, including increases in prices of commodities that we purchase and decreases in prices of gold and silver that we sell, each as part of our operations, general adverse economic and industry conditions;

·limit our flexibility in planning for and reacting to changes in the industry in which we compete;

·place us at a disadvantage compared to other, less leveraged competitors; and

·increase our cost of borrowing.

Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under our debt, and the price of our Common Stock and warrants.Stock. The Sprott Credit Agreement and the Sprott Royalty Agreement each contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of nearly all of our debt.

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If we default on our obligations to pay any of our indebtedness or otherwise default under the agreements governing our indebtedness, lenders could accelerate such debt and we may be subject to restrictions on the payment of our other debt obligations or cause a cross-acceleration.

Any default under the agreements governing our indebtedness that is not waived by the required lenders or holders of such indebtedness, and the remedies sought by the holders of such indebtedness, could prevent us from paying principal, premium, if any, and interest on other debt instruments. If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness and royalty payment obligations, or if we otherwise fail to comply with the various


covenants in any agreement governing our indebtedness, we would be in default under the terms of the agreements governing such indebtedness and other indebtedness under the cross-default and cross-acceleration provisions of such agreements. In the event of such default:

·the lenders or holders of such indebtedness could elect to terminate any commitments thereunder, declare all the funds borrowed thereunder to be due and payable and, if not promptly paid, in the case of our secured debt, institute foreclosure proceedings against our assets; and

·even if these lenders or holders do not declare a default, they may be able to cause all of our available cash to be used to repay indebtedness owed to them.

As a result of such default and any actions the lenders may take in response thereto, we could be forced into bankruptcy or liquidation.

We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on our debt and royalty obligations or refinance our debt obligations (if necessary) depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control, including the market prices of gold and silver. We may be unable to maintain a level of cash flow from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness and our royalty obligations.

If our cash flows and capital resources are insufficient to fund our debt service obligations and our royalty obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The Sprott Credit Agreement and the Sprott Royalty Agreement restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service and royalty payment obligations then due.

In addition, we conduct a substantial portion of our operations through our subsidiaries, certain of which in the future may not be guarantors of our indebtedness. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of our indebtedness, our subsidiaries do not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.

Our inability to generate sufficient cash flows to satisfy our debt and royalty obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations.

If we cannot make scheduled payments on our debt, we will be in default and the lenders under the Sprott Credit Agreement and the Sprott Royalty Agreement could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

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Hycroft Mining Corporation’sSeller’s history of operations included periods of operating and net losses, and we may incur operating and net losses in the future. Hycroft Mining Corporation’sSeller’s significant net losses and Hycroft Mining Corporation’sSeller’s significant amount of indebtedness led Hycroft Mining CorporationSeller to declare bankruptcy in 2015.

Prior to Hycroft Mining Corporation’sSeller’s emergence from bankruptcy proceedings on October 22, 2015, Hycroft Mining CorporationSeller generated operating losses of $368.9 million for the period from January 1, 2015 through October 22, 2015 and $480.1 million for the year ended December 31,

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2014. In the years ended December 31, 2018 and 2017, Hycroft Mining CorporationSeller generated operating losses of $8.2 million and $32.9 million, respectively, and net losses of $55.8 million and $74.1 million, respectively. In connection with the restart of operations beginning in 2019, in the year ended December 31, 2019, Hycroft Mining Corporationwe generated operating losses of $33.9 million and net losses of $98.9 million. Additionally, Seller generated operating losses of $49.6 million and net losses of $84.4 million for the six months ended June 30, 2020. If we continue to suffer operating and net losses, our business, financial condition, results of operations and cash flows may be negatively impacted.

We have material indebtedness. We may not generate sufficient revenues in future periods to cover our payment obligations under the Sprott Credit Agreement, the Assumed New Subordinated Notes, and the Sprott Royalty Agreement to pay for all of our operating or other expenses, which could have a material adverse effect on our business, results of operations and financial condition.

The chapter 11 proceedings may have disrupted our business relationships, which may materially and adversely affect our operations.

The chapter 11 reorganization that Hycroft Mining CorporationSeller went through in 2015 may have created a negative public perception of us in relation to our competitors and adversely impacted our relationships with our employees, suppliers, customers and other parties. Consequently, our relationships with our customers, suppliers, certain liquidity providers and employees may have been adversely impacted and our operations, currently and going forward, could be materially and adversely affected, such as if we are not extended customary business credit or payment terms.

If we lose key personnel or are unable to attract and retain additional personnel, we may be unable to develop our business.

Our development in the future will be highly dependent on the efforts of key management employees, and other key employees that we may hire in the future. We will need to recruit and retain other qualified managerial and technical employees to build and maintain our operations. If we are unable to successfully recruit and retain such persons, our development and growth could be significantly curtailed.

We are dependent upon information technology systems, which are subject to disruption, damage, failure and risks associated with implementation and integration.

We are dependent upon information technology systems in the conduct of our operations. Our information technology systems are subject to disruption, damage or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyber-attacks, natural disasters and defects in design. Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, extortion to prevent or the unauthorized release of confidential or otherwise protected information and the corruption of data. Given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to production downtimes, operational delays, extortion, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our cash flows, financial condition or results of operations.

We could also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into our operations. System modification failures could have a material adverse effect on our business, financial position and results of operations and could, if not successfully implemented, adversely impact the effectiveness of our internal controls over financial reporting.


We may be subject to legal proceedings.

Due to the nature of our business, we may be subject to regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of our business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be reversed on appeal. We can provide no assurances that these matters will not have a material adverse effect on our business.

We are not currently a party to any forward sale or other significant hedging arrangements to protect against gold and silver prices and commodity prices and, as a result, our operating results are exposed to the impact of any significant decrease in the price of gold or silver or any significant increase in commodity prices.

We are not currently a party to any forward sales or other hedging arrangements to reduce the risk of exposure to volatility in commodity prices. Accordingly, our future operations will be exposed to the impact of any significant decrease in gold or silver prices

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and any significant increase in commodity prices. If such prices adversely change significantly, we will realize reduced revenues and increased costs.

Further, we cannot provide any assurance that the use of hedging techniques will always be to our benefit. Hedging instruments that protect against gold and silver market price volatility may prevent us from realizing the full benefit from subsequent increases in market prices with respect to covered production, which would cause us to record a mark-to-market loss, decreasing our profits. Hedging contracts also are subject to the risk that the other party may be unable or unwilling to perform its obligations under these contracts. Any significant nonperformance could have a material adverse effect on our financial condition, results of operations and cash flows.

Joint ventures and other partnerships may expose us to risks.

In the future, we may enter into joint ventures or other partnership arrangements with other parties in relation to the exploration, development and production of certain properties. Joint ventures can often require unanimous approval of the parties to the joint venture or their representatives for certain fundamental decisions such as an increase or reduction of registered capital, merger, division, dissolution, amendments of constituting documents, and the pledge of joint venture assets, which means that each joint venture party may have a veto right with respect to such decisions which could lead to a deadlock in the operations of the joint venture or partnership. Further, we may be unable to exert control over strategic decisions made in respect of such properties. Any failure of such other companies to meet their obligations to us or to third parties, or any disputes with respect to the parties’ respective rights and obligations, could have a material adverse effect on the joint ventures or their properties and therefore could have a material adverse effect on our results of operations, financial performance and cash flows.

Our four largest stockholders will be able to exert significant influence over matters submitted to stockholders for approval, which could delay or prevent a change in corporate control or result in the entrenchment of management of our Board, possibly conflicting with the interests of our other stockholders.

As of July 9, 2020, Mudrick Capital, Whitebox, Highbridge and Aristeia beneficially ownowned approximately 53.5%43.8%, 25.5%24.1%, 14.7%13.8% and 9.9%9.2% of the outstanding shares of our Common Stock (includingas of August 28, 2020 (excluding shares acquirable within 60 days upon exercise of outstanding warrants)warrants held by Mudrick Capital, Whitebox, Highbridge and Aristeia and based on information filed with the SEC or otherwise provided by them), respectively. Because of their significant stockholdings, each of Mudrick Capital, Whitebox, sponsor and Highbridge could exert significant influence in determining the outcome of corporate actions requiring stockholder approval and otherwise influence our business. This influence could have the effect of delaying or preventing a change in control or entrenching management of our Board, which could conflict with the interests of other stockholders and, consequently, could adversely affect the market price of the Common Stock.

Risks Related to Our Common Stock and Warrantsthis Offering

The price of our Common Stock may be volatile, and you could lose all or part of your investment.

The trading price of our Common Stock and warrants following this registrationoffering may fluctuate substantially. This may be especially true for companies, like ours, with a small public float. The trading price of our Common Stock and


warrants following this registrationoffering will depend on several factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our Common Stock or warrants since you might be unable to sell your shares or warrants at or above the price you paid for them, if any. Factors that could cause fluctuations in the trading price of our Common Stock or warrants include:

·price and volume fluctuations in the overall stock market from time to time;

·volatility in gold and silver commodity prices and in the market prices and trading volumes of gold mining stocks;

·changes in operating performance, including challenges to our ability to economically and profitably recover gold and silver through heap leaching of sulfide ores, and stock market valuations of other mining companies generally, or those in our industry in particular.particular;

·sales of shares of our Common Stock or warrants by us or our stockholders;

·the public’s reaction to our press releases, other public announcements and filings with the SEC;

·rumors and market speculation involving us or other companies in our industry;

·actual or anticipated changes in our operating results or fluctuations in our operating results; actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

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·litigation involving us;

·developments; or disputes concerning our mining rights;

·new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

·changes in accounting standards, policies, guidelines, interpretations or principles;

·any major change in our management; and

·other events or factors, including those resulting from war, global pandemics, incidents of terrorism or responses to these events.

In addition, the stock market in general, and the market for mining companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our Common Stock, or warrants, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our Common Stock or warrants shortly following this registration.

offering.

In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Litigation of this type, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments.

If securities or industry analysts issue an adverse opinion regarding our stock or do not publish research or reports about our company, our stock price and trading volume could decline.

The trading market for our Common Stock and warrants will depend in part on the research and reports that equity research analysts publish about us and our business. Currently, we do not have any analyst coverage and we may not obtain analyst coverage in the future. If we obtain analyst coverage, we would have no control over such analysts or the content and opinions in their reports. Securities analysts may elect not to provide research coverage of our company, and such lack of research coverage may adversely affect the market price of our Common Stock and warrants.Stock. The price of our Common Stock or warrants could also decline if one or more equity research analysts downgrade our Common Stock or if those analysts issue other unfavorable commentary or cease publishing reports


about us or our business. If one or more equity research analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

Substantial future sales of shares of our Common Stock or warrants could cause the market price of our Common Stock or public warrants to decline.

The market price of shares of our Common Stock or public warrants could decline as a result of substantial sales of our Common Stock, or warrants, particularly sales by our significant stockholders, aand/or sales by selling stockholders under an effective shelf registration statement, large number of shares of our Common Stock or warrants becoming available for sale or the perception in the market that holders of a large number of shares or warrants intend to sell their shares or warrants.shares. As of July 9,August 27, 2020, we had outstanding 50,160,04250,160,143 shares of Common Stock and 34,289,99934,289,898 warrants exercisable at a price of $11.50 per share for an equivalent number of shares of Common Stock (not including the Seller warrants which, with an exercise price of $44.82 per share, are significantly out of the money).

We may issue additional shares of Common Stock and warrants or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of our Common Stock.

We may issue additional shares of Common Stock and warrants or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or our equity incentive plan, without stockholder approval, in a number of circumstances.

Our issuance of additional shares of Common Stock and warrants or other equity securities of equal or senior rank would have the following effects:

·our existing stockholders’ proportionate ownership interest in us will decrease;

·the relative voting strength of each previously outstanding share of Common Stock may be diminished; and

·the market price of our shares of our Common Stock and warrants may decline.

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We do not intend to pay cash dividends for the foreseeable future.

We have agreed to restrictions against paying cash dividends in the Sprott Credit Agreement. We intend to retain all of our earnings for the foreseeable future to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the future. As a result, you may only receive a return on your investment in our Common Stock if the market price of our Common Stock increases. Our Board retains the discretion to change this policy at any time subject to the restrictions to which we have agreed.

Anti-takeover provisions in our organizational documents and under Delaware law could make a third party acquisition of the Company difficult.

Our second amendedSecond Amended and restated certificate of incorporationRestated Charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make it more difficult to remove management by our Board and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:

·no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

·the right of our Board to appoint a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;

·a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of the our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;


·the ability of the our Board to determine whether to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

·limiting the liability of, and providing indemnification to, our directors and officers; and

·advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of Hycroft.

As an "emerging“emerging growth company," we cannot be certain if the reduced disclosure requirements applicable to "emerging“emerging growth companies"companies” will make our shares of Common Stock and warrants less attractive to investors.

We are an "emerging“emerging growth company," as defined in 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 the following:

·exemption from the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act of 2002;

·reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements;

·exemption from the requirements of holding non-binding stockholder votes on executive compensation arrangements; and

·exemption from any rules requiring mandatory audit firm rotation and auditor discussion and analysis and, unless the SEC otherwise determines, any future audit rules that may be adopted by the Public Company Accounting oversightOversight Board.

We could be an emerging growth company until the last day of the fiscal year following the fifth anniversary after our initial public offering, or until the earlier of (i) the last day of the fiscal year in which we have annual gross revenue of $1$1.07 billion or more, (ii) the date on which we have, during the previous three year period, issued more than $1 billion in non-convertible debt or (iii) the date on which we are deemed to be a large accelerated filer under the federal securities laws. We will qualify as a large accelerated filing as of the first day of the first fiscal year after we have (i) more than $700 million market value in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.

We cannot predict if investors will find our Common Stock or warrants less attractive if we rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock or warrants and our stock price may be more volatile.

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Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we are an "emerging“emerging growth company."

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we filed with the SEC after our IPO, and generally requires a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an "emerging“emerging growth company." We could be an "emerging“emerging growth company"company” for up to five fiscal years.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. 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 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 accounting standards used.


USE OF PROCEEDS

We are not selling any securities under this prospectus and we will not receive anyestimate that the net proceeds from this offering after deducting estimated underwriters’ fees and offering expenses will be approximately $[●] million, or approximately $[●] million if the saleunderwriters exercise their over-allotment option, based on an assumed public offering price of securities by$[●] per share, which represents the Selling Securityholders, although we could receive up to approximately $538.2 million assuming the exercise of allmidpoint of the outstanding warrants, includingprice range set forth on the Seller warrants, for cash. Any amountscover of this prospectus. We anticipate using the net proceeds from this offering to fund capital as we receive from such exercises will be used for working capitalseek to continue to ramp up operations at the Hycroft Mine and other general corporate purposes. The holdersto construct a new leach pad and associated infrastructure. Our actual use of the warrants are not obligated to exercise the warrantsnet proceeds may vary depending on our operating and we cannot assure you that the holders of the warrants will choose to exercise any or all of the warrants.

SELLING SECURITYHOLDERS

The Selling Securityholders maycapital needs from time to time offer and sell any or all of our securities set forth below pursuant to this prospectus. When we refer to “Selling Securityholders” in this prospectus, we mean the persons listed in the table below, and the pledgees, donees, permitted transferees, assignees, successors and others who later come to hold any of the Selling Securityholders’ interests in our securities other than through a public sale.time.

CAPITALIZATION

The following table sets forth our cash and capitalization as of the date of this prospectus:

June 30, 2020:

·the nameOn an actual basis; and
On an as-adjusted basis to reflect our receipt of the Selling Securityholders for whom we are registeringnet proceeds from our sale of [●] shares of Common Stock in this offering at an assumed public offering price of $[●] per share, which was the closing sale price of our Common Stock on the Nasdaq Capital Market on [●], 2020, after deducting underwriting discounts and warrants for resale to the public,commissions and estimated offering expenses payable by us.

You should read this table together with the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our and Seller’s financial statements and the related notes thereto appearing elsewhere in this prospectus.

24


As of June 30, 2020

 

Actual

As Adjusted(1)

(in thousands, except for share
numbers)

Cash, cash equivalents and short-term investments

$

47,293 

$

Current debt, net

— 

Long-term debt, net

139,044 

Total liabilities

195,404 

Stockholders’ equity (deficit):

Class A Common stock, $0.001 par value per share; 400 million shares authorized, actual and as adjusted; 50,160,042 shares issued and outstanding, actual; [●] shares issued and outstanding, as adjusted

Additional paid-in capital

466,047 

Accumulated deficit

(468,775)

Total stockholders’ equity

(2,723)

Total capitalization

$

192,681 


(1)·A $1.00 increase or decrease in the assumed public offering price of $[●] per share, the last reported sale of our Common Stock on the Nasdaq Capital Market on [●], 2020, after deducting the estimated underwriting discounts and commissions and estimated offering expenses, would increase or decrease, as applicable, our as adjusted amount of each of cash, cash equivalents and short-term investments, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $[●], assuming that the number of shares of Common Stock and warrants thatoffered, as set forth on the Selling Securityholders beneficially owned prior to the offering for resalecover page of the securities under this prospectus,

· remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses. We may also increase or decrease the number of shares we are offering. Each 100,000 share increase or decrease in the number of Common Stockshares offered in this offering would increase or decrease, as applicable, the as adjusted amount of each of cash, cash equivalents and warrantsshort-term investments, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $[●], assuming that may be offered for resale for the accountassumed public offering price of $[●] remains the Selling Securityholders pursuant to this prospectus,same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses.

The number of shares of our Common Stock issued and outstanding actual and adjusted in the table above is based on 50,160,042 shares of Common Stock outstanding as of June 30, 2020, and excludes:

·the number and percentage of shares to be beneficially owned by the Selling Securityholders after the offering of the resale securities (assuming all of the offered2,508,002 additional shares of Common Stock and warrants are sold by the Selling Securityholders).reserved for future issuance under our Incentive Plan;

Shares of Common Stock

  Beneficial
Ownership Before
the Offering
  Shares to be Sold in
the Offering
  Beneficial
Ownership After  
the Offering
 
Name of Selling Securityholder Number of Shares %(1)  Number of Shares %  Number of Shares % 
Mudrick Capital Management, L.P.(2) 32,477,130 53.5% 32,477,130 53.5% 0 * 
Whitebox Advisors LLC(3) 13,012,516 25.5% 13,012,516 25.5% 0 * 
Highbridge Capital Management, LLC(4) 7,427,412 14.7% 7,427,412 14.7% 0 * 
Aristeia Capital, L.L.C.(5) 4,989,085 9.9% 4,989,085 9.9% 0 * 
Wolverine Asset Management, LLC(6) 2,420,473 4.8% 2,420,473 4.8% 0 * 
Sprott Private Resource Lending II (Collector), LP(7) 437,940 1.0% 496,634 1.0% 0 * 
Cantor Fitzgerald & Co(8) 244,395 *  44,395 *  200,000 * 
Prisma Pelican Fund(9) 31,604 *  31,604 *  0 * 
Ninepoint Credit Opportunities Fund(10) 4,515 *  4,515 *  0 * 
Natural Resource Income Investing Limited Partnership(11) 9,030 *  9,030 *  0 * 
Sprott Private Resource Streaming and Royalty (Collector), LP.(12) 13,545 *  13,545 *  0 * 

*Less than 1%

(1)Based on 50,160,04234,289,999 shares of Common Stock issued andissuable upon exercise of warrants outstanding on July 9, 2020

(2)Includes: (i) 14,013,180 sharesas of Common Stock (including 9,200,000 shares of Common Stock underlying warrants) held by Mudrick Capital Acquisition Holdings LLC (the “Sponsor”); (ii) 7,952,541 shares of Common Stock (including 381,348 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Fund Global L.P.; (iii) 1,858,052 shares of Common Stock (including 40,493 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Drawdown Fund, L.P.; (iv) 866,762 shares of Common Stock (including 213,920 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Drawdown Fund II, L.P.; (v) 640,297 shares of Common Stock (including 45,263 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Specialty Fund, LP; (vi) 49,132 shares of Common Stock (including 14,722 shares of Common Stock underlying warrants) held by Mudrick Distressed Senior Secured Fund Global, L.P.; and (vii) 7,097,166 shares of Common Stock (including 600,146 shares of Common Stock underlying warrants) held by certain accounts managed by Mudrick Capital Management, L.P. (collectively the “Mudrick Funds”). Mudrick Capital Management, L.P. is the investment manager of the Mudrick Funds other than the Sponsor and is the managing member of the Sponsor. Mudrick Capital Management, L.P. holds voting and dispositive power over the shares of Common Stock held by the Mudrick Funds and the Sponsor. Mudrick Capital Management, LLC is the general partner of Mudrick Capital Management, L.P., and Jason Mudrick is the sole member of Mudrick Capital Management, LLC. As such, Mudrick Capital Management, L.P., Mudrick Capital Management, LLC and Jason Mudrick may be deemed to have beneficial ownership of the shares of Common Stock held by the Mudrick Funds. Each such entity or person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. The business address of such holders is 527 Madison Avenue, 6th Floor, New York, New York 10022.


(3)Includes (i) 638,377 shares of Common Stock held by Whitebox Asymmetric Partners, LP; (ii) 1,661,147 shares of Common Stock held by Whitebox Credit Partners, LP; (iii) 404,352 shares of Common Stock held by Whitebox Institutional Partners, LP; (iv) 1,398,282 shares of Common Stock held by Whitebox Multi-Strategy Partners, LP; and (v) 8,910,358 shares of Common Stock (including 913,017 shares of Common Stock underlying warrants) held by WBox 2015-5 Ltd. Whitebox Advisors LLC is the investment manager of, and WBox 2015-5 Ltd.is the collateral agent for, Whitebox Asymmetric Partners, LP, Whitebox Credit Partners, LP, Whitebox Institutional Partners, LP, Whitebox Multi-Strategy Partners, LP (collectively, the “Whitebox Funds”) and holds voting and disposable power over the shares of the Company held by the Whitebox Funds. Whitebox Advisors LLC is owned by Robert Vogel, Paul Twitchell, Jacob Mercer, Paul Roos, and Mark Strefling and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in Whitebox Advisors LLC or such Whitebox Funds. The address of these persons is 3033 Excelsior Blvd., Suite 500, Minneapolis, Minnesota 55416.

(4)Includes (i) 2,295,708 shares of Common Stock (including 167,050 shares of Common Stock underlying the warrants) held by Highbridge Tactical Credit Master Fund, L.P. (“TCF”); and (ii) 5,131,704 shares of Common Stock (including 353,482 shares of Common Stock underlying warrants) held by Highbridge MSF International Ltd. (“MSF” and, together with TCF, the “Highbridge Funds”). Highbridge Capital Management, LLC (“HCM”), the trading manager of the Highbridge Funds, may be deemed to be the beneficial owner of the shares held by the Highbridge Funds. Mark Vanacore is responsible for the investment and voting decisions made by HCM with respect to the shares held by MSF, and Jonathan Segal and Jason Hempel are responsible for the investment and voting decisions made by HCM with respect to the shares held by TCF. The Highbridge Funds and the foregoing individuals disclaim any beneficial ownership of these shares. The business address of HCM is 277 Park Avenue, 23rd Floor, New York, NY 10172 and the business address of the Highbridge Funds is c/o HedgeServ (Cayman) Ltd., Cricket Square, Floor 6, George Town, Grand Cayman KY1-1104, Cayman Islands.

(5)Includes (i) 2,164,791 shares of Common Stock (including 152,086 shares of Common Stock underlying warrants) held by ALSV Limited; (ii) 607 shares of Common Stock held by Windermere Ireland Fund PLC; and (iii) 2,823,687 shares of Common Stock (including 198,487 shares of Common Stock underlying warrants) held by APSV, LLC (collectively, the “Aristeia Funds”). Aristeia Capital, L.L.C. (“Aristeia”) may be deemed the beneficial owner of the securities described herein in its capacity as the investment manager of the Aristeia Funds, which are the holders of such securities. As investment manager of each Aristeia Fund, Aristeia has voting and investment control with respect to the securities held by each Aristeia Fund. Anthony M. Frascella and William R. Techar are the Co-Chief Investment Officers of Aristeia. Each of Aristeia and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in the Aristeia Funds. The business address of such holders is One Greenwich Plaza, Third Floor, Greenwich, Connecticut 06830.

(6)Includes 2,420,473 shares of Common Stock (including 169,985 shares of Common Stock underlying warrants) held by Wolverine Flagship Fund Trading Limited (the “WF Fund”). Wolverine Asset Management, LLC (“WAM”) is the investment manager to WF Fund and has voting and investment power over these securities. The sole member and manager of WAM is Wolverine Holdings, L.P. (“Wolverine Holdings”). Robert R. Bellick and Christopher L. Gust may be deemed to control Wolverine Trading Partners, Inc. (“WTP”), the general partner of Wolverine Holdings. Each of Robert R. Bellick, Christopher L. Gust, Wolverine Holdings, WTP, and WAM disclaims beneficial ownership of the securities held by the WF Fund. The business address of such holders is 175 W. Jackson Blvd., Suite 340, Chicago, Illinois 60604.

(7)Sprott Resource Lending Corp. is the investment manager of Sprott Private Resource Lending II (Collector), LP and may be deemed to be the beneficial owner of the shares held by Sprott Private Resource Lending II (Collector), LP . Peter Grosskopf, Jim Grosdanis, Narinder Nagra and Varinder Bhathal are responsible for the investment and voting decisions made by Sprott Resource Lending Corp. The business address of such holders is 200 Bay Street, Suite 2600, Toronto, ON, Canada, M5J 2J1.


(8)The business address of Cantor Fitzgerald& Co. is 110 East 59th Street, New York, NY 10022.

(9)Prisma Capital Partners LP is the investment manager of Prisma Pelican Fund LLC and may be deemed to be the beneficial owner of the shares held by Prisma Pelican Fund LLC. The business address of such holders is 9 West 57th Street, Suite 2600, New York, NY 10019.

(10)Ninepoint Partners LP is the investment manager of Ninepoint Credit Income Opportunities Fund and may be deemed to be the beneficial owner of the shares held by Ninepoint Credit Income Opportunities Fund. The business address of such holders is 200 Bay Street, Suite 2700, Toronto, ON, Canada, M5J 2J2.

(11)Resource Capital Investment Corp. is the investment manager of Natural Resource Investing LP and may be deemed to be the beneficial owner of the shares held by Natural Resource Investing LP. Arthur Rule, Varinder Bhathal and Thomas Ulrich are responsible for the investment and voting decisions made by Resource Capital Investment Corp. The business address of such holders is 1910 Palomar Point Way, Suite 200, Carlsbad, CA 92008.

(12)Sprott Resource Streaming and Royalty Corp. is the investment manager of Sprott Private Resource Streaming and Royalty (Collector), LP and may be deemed to be the beneficial owner of the shares held by Sprott Private Resource Streaming and Royalty (Collector), LP. Michael Harrison and Varinder Bhathal are responsible for the investment and voting decisions made by Sprott Resource Streaming and Royalty Corp. Michael Harrison disclaims beneficial ownership of such shares. The business address of such holders is 200 Bay Street, Suite 2600, Toronto, ON, Canada, M5J 2J1.

Warrants

  Beneficial
Ownership Before
the Offering
  Shares to be Sold in
the Offering
  Beneficial
Ownership After 
 the Offering
 
Name of Selling Securityholder Number of Shares  %(1)  Number of Shares  %  Number of Shares  % 
Mudrick Capital Management, L.P.(2)  10,495,892   30.6%  10,495,892   30.6%  0   * 
Whitebox Advisors LLC(3)  913,017   2.7%  913,017   2.7%  0   * 
Highbridge Capital Management, LLC(4)  520,532   1.5%  520,532   1.5%  0   * 
Aristeia Capital, L.L.C.(5)  350,573   1.0%  350,573   1.0%  0   * 
Wolverine Asset Management, LLC(6)  169,985   *   169,985   *   0   * 
Cantor Fitzgerald & Co(7)  1,040,000   3.0%  1,040,000   3.0%  0   * 

*Less than 1%

(1)Based on 34,289,999 warrants issued and outstanding on July 9,June 30, 2020, with an exercise price of $11.50 per share but excluding theshare; and
3,210,213 shares of Common Stock issuable upon exercise of 12,721,623 Seller warrants which are significantly outoutstanding as of the moneyJune 30, 2020, with an exercise price of $44.82 per share.

DILUTION

(2)Includes (i) 9,200,000 warrants held by the Sponsor, (ii) 381,348 warrants held by Mudrick Distressed Opportunity Fund Global L.P.; (iii) 40,493 warrants held by Mudrick Distressed Opportunity Drawdown Fund, L.P.; (iv) 213,920 warrants held by Mudrick Distressed Opportunity Drawdown Fund II, L.P.; (v) 45,263 warrants held by Mudrick Distressed Opportunity Specialty Fund, LP; and (vi) 14,722 warrants held by Mudrick Distressed Senior Secured Fund Global, L.P., and (vii) 600,146 warrants held by certain accounts managed by Mudrick Capital Management, L.P. (collectively, the “Mudrick Funds”). Mudrick Capital Management, L.P. is the investment manager of the Mudrick Funds other than the Sponsor and is the managing member of the Sponsor. Mudrick Capital Management, L.P. holds voting and dispositive power over the securities held by the Mudrick Funds. Mudrick Capital Management, LLC is the general partner of Mudrick Capital Management, L.P., and Jason Mudrick is the sole member of Mudrick Capital Management, LLC. As such, Mudrick Capital Management, L.P., Mudrick Capital Management, LLC and Jason Mudrick may be deemed to have beneficial ownership of the warrants held by the Mudrick Funds. Each such entity or person disclaims any beneficial ownership of the reported warrants other than

If you invest in our Common Stock in this offering, your ownership interest will be diluted to the extent of any pecuniary interest they may have therein, directly or indirectly. The business address of such holders is 527 Madison Avenue, 6th Floor, New York, New York 10022.

(3)WBox 2015-5 Ltd. is the record holder of such warrants and is the collateral agent for the Whitebox Funds. Whitebox Advisors LLC is the investment manager of the Whitebox Funds and holds voting and disposable power over the warrants of the Company held by the Whitebox Funds. Whitebox Advisors LLC is owned by Robert Vogel, Paul Twitchell, Jacob Mercer, Paul Roos, and Mark Strefling and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in Whitebox Advisors LLC or such Whitebox Funds. The address of these persons is 3033 Excelsior Blvd., Suite 500, Minneapolis, Minnesota 55416.

(4)Includes (i) 167,050 warrants held by TCF and (ii) 353,482 warrants held by MSF. HCM, the trading manager of the Highbridge Funds, may be deemed to be the beneficial owner of the warrants held by the Highbridge Funds. Mark Vanacore is responsible for the investment and voting decisions made by HCM with respect to the warrants held by MSF, and Jonathan Segal and Jason Hempel are responsible for the investment and voting decisions made by HCM with respect to the warrants held by TCF. The Highbridge Funds and the foregoing individuals disclaim any beneficial ownership of these warrants. The business address of HCM is 277 Park Avenue, 23rd Floor, New York, NY 10172 and the business address of the Highbridge Funds is c/o HedgeServ (Cayman) Ltd., Cricket Square, Floor 6, George Town, Grand Cayman KY1-1104, Cayman Islands.


(5)Includes (i) 152,086 warrants held by ALSV Limited and (ii) 198,487 warrants held by APSV, LLC. Aristeia may be deemed the beneficial owner of the securities described herein in its capacity as the investment manager of the Aristeia Funds, which are the holders of such securities. As investment manager of each Aristeia Fund, Aristeia has voting and investment control with respect to the securities held by each Aristeia Fund. Anthony M. Frascella and William R. Techar are the Co-Chief Investment Officers of Aristeia. Each of Aristeia and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in the Aristeia Funds. The business address of such holders is One Greenwich Plaza, Third Floor, Greenwich, Connecticut 06830.

(6)WF Fund is the record holder of such warrants. WAM is the investment manager to WF Fund and has voting and investment power over these securities. The sole member and manager of WAM is Wolverine Holdings. Robert R. Bellick and Christopher L. Gust may be deemed to control WTP, the general partner of Wolverine Holdings. Each of Robert R. Bellick, Christopher L. Gust, Wolverine Holdings, WTP, and WAM disclaims beneficial ownership of the securities held by the WF Fund. The business address of such holders is 175 W. Jackson Blvd., Suite 340, Chicago, Illinois 60604.

(7)The business address of Cantor Fitzgerald& Co. is 110 East 59th Street, New York, NY 10022.

Each of the Selling Securityholders thatdifference between the public offering price per share of our Common Stock and the as-adjusted net tangible book value per share of our Common Stock immediately after this offering. Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of Common Stock in this offering and the as-adjusted net tangible book value per share of Common Stock immediately after completion of this offering.

The difference between the per share offering price paid by purchasers of our Common Stock in this offering and the net tangible book value per share of our Common Stock after this offering constitutes the dilution to purchasers in this offering. Net tangible book value (or deficit) per share is determined by dividing our net tangible book value (or deficit), which is our total tangible assets less total liabilities, by the number of outstanding shares of our Common Stock.

Our net tangible book deficit as of June 30, 2020, was $2.7 million, or $0.05 per share of Common Stock.

After giving effect to our sale of [●] shares of Common Stock in this offering at an assumed public offering price of $[●] per share, which was the closing sale price of our Common Stock on the Nasdaq Capital Market on [●], 2020, and after deducting the underwriting discount and estimated offering expenses payable by us in connection with this offering, our net tangible book value as of June 30, 2020 would have been $[●], or $[●] per share. This represents an immediate increase in net tangible book value to existing

25


stockholders of $[●] per share and an immediate dilution to new investors of $[●] per share. The following table illustrates this per share dilution:

Assumed public offering price per share

$

Historical net tangible book deficit per share as of June 30, 2020

$

(2,723)

Increase in net tangible book value per share attributable to new investors in this offering

$

As adjusted net tangible book value per share after this offering

$

Dilution per share to new investors in this offering

$

If the underwriters exercise their option to purchase an additional [●] shares in full, the as-adjusted net tangible book value per share of our Common Stock immediately after this offering would be $[●] per share, and the dilution in net tangible book value per share to new investors in this offering would be $[●] per share, assuming a broker-dealer or an affiliatepublic offering price of a broker-dealer has represented$[●] per share, which was the closing sale price of our Common Stock on the Nasdaq Capital Stock on [●], 2020, and after deducting the underwriting discount and estimated offering expenses payable by us in connection with this offering.

A $1.00 increase (decrease) in the assumed public offering price of $[●] per share of Common Stock, which is the closing sale price of our Common Stock on the Nasdaq Capital Market on [●], 2020, would increase (decrease) the net tangible book value by $[●] per share (assuming no exercise of the underwriters’ option to us that it purchasedpurchase additional shares) and would increase (decrease) the securitiesdilution to new investors by $[●] per share (assuming no exercise of the underwriters’ option to purchase additional shares), assuming the number of shares of Common Stock offered, byas set forth on the cover page of this prospectus, remains the same and without deducting the estimated underwriting discounts and offering expenses payable by us in connection with this offering.

If the ordinary courseunderwriters exercise their option to purchase additional shares of business and, atCommon Stock in full, the timenumber of purchaseshares of those securities, did not have any agreements, understandingsCommon Stock held by new investors will increase to [●], or other plans, directly or indirectly, with any person to distribute those shares.

Material Relationships withapproximately [●] percent, of the Selling Holders

For a descriptiontotal number of our relationships with the Selling Securityholders and their affiliates see the section entitled “Certain Relationships and Related Transactions” and “Description of Securities to be Registered.

Other Material Relationships

David Kirsch, the Chairman of our Board, has no pecuniary interest in shares of our Common Stock or warrants and disclaims any beneficial ownershipoutstanding after this offering.

26


Michael Harrison, a member of our board of directors, has an indirect pecuniary interest in shares of our Common Stock beneficially owned by Sprott Private Resource Streaming and Royalty (Collector), LP. and Sprott Private Resource Lending II (Collector), LP as chief executive officer of Sprott Resource Streaming and Royalty Corp. and/or through his fiduciary role as a Managing Partner of Sprott Private Resource Streaming and Royalty (Collector), LP. Mr. Harrison disclaims any beneficial ownership of the shares of our Common Stock beneficially owned by Sprott Private Resource Streaming and Royalty (Collector), LP. and Sprott Private Resource Lending II (Collector), LP.


DESCRIPTION OF BUSINESS

Overview

We are a U.S.-based gold producer that has historically focused on mining, developing, and exploring properties in the state of Nevada in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales have historically represented 100% of our operating revenues and are expected to represent 100% of our operating revenues in the future. Accordingly, the market prices of gold and silver significantly impact our financial position, operating results and cash flows.

On May 29, 2020, we consummated the transactions contemplated by the Purchase AgreementRecapitalization Transaction pursuant to which Acquisition Sub, our indirect wholly owned subsidiary, acquired all of the issued and outstanding equity interests of the direct subsidiaries of the Seller and substantially all of the other assets and assumed substantially all of the liabilities of the Seller. In connection with the completion of the business combination contemplated by the Purchase Agreement,Recapitalization Transaction, we changed our name from Mudrick Capital Acquisition Corporation to Hycroft Mining Holding Corporation.

The Hycroft Mine, our sole operating property, is located outside of Winnemucca, Nevada. Our corporate headquarters is located at 8181 E. Tufts Avenue, Suite 510, Denver, Colorado 80237, and our telephone number is (303) 253-3267. Our website is www.hycroftmining.com. Information on our website is not incorporated by reference into this prospectus.

Recent Historyranks among one of the 20 largest gold deposits in the world, and second largest in the United States, based on resource sizes.

Graphic


Source: Hycroft BusinessTechnical Report and the Policy Perception Index from the Fraser Institute Fraser Institute Annual Surveys of Mining Companies 2019 and 2018

Hycroft AuEq. calculated based on Hycroft Technical Report commodity pricing of $1,300/oz for gold and $17.33/oz for silver; includes stockpiled sulfide ore.
Presents other assets’ gold and gold equivalent silver ounces converted at long-term street consensus pricing of $1,500/oz for gold and $18.00/oz for silver.
Lower risk denotes a Fraser Institute Policy Perception Index score above 75; mid risk indicates a Policy Perception Index score between 50 and 75; higher risk indicates a Policy Perception Index score below 50.

Recapitalization Transaction

As indicated above, the Company completed the business combinationRecapitalization Transaction with the Seller on May 29, 2020, in accordance with the terms of the Purchase Agreement.

In accordance with the Purchase Agreement, Allied VGH Inc., a Nevada corporation (“Allied VGH”), and Allied Nevada Delaware Holdings Inc., a Delaware corporation (“Allied Delaware”), were converted into Delaware limited liability companies prior to the consummation of the business combination.Recapitalization Transaction. Pursuant to the business combination,Recapitalization Transaction, Acquisition Sub (a) acquired from the Seller (i) all of the issued and outstanding equity interests of Allied Nevada Gold Holdings, LLC, a Nevada limited liability company, Allied VGH (as converted), and Allied Delaware (as converted), the direct subsidiaries of Seller and (ii) substantially all of the remaining assets of the Seller subject to specified retained assets and (b) assumed substantially all of the liabilities of Seller, including, without limitation, the Seller.

liabilities and obligations of Seller under the Seller Warrant Agreement.

The value of the aggregate consideration was estimated at approximately $615.0 million, which amount was inclusive of the value of the 15,140,584 shares of the Company’s Common Stock issued as consideration to the Seller in the business combinationRecapitalization Transaction (and promptly distributed pro rata to the Seller’s stockholders), the value of Seller’s debt assumed by the Company at the closing of the business combination,Recapitalization

27


Transaction, and the value of Seller’s debt paid off or exchanged for shares of Common Stock and cancelled by the Seller at the closing of the business combination.

Recapitalization Transaction.

On May 29, 2020, immediately prior to the consummation of the business combination,Recapitalization Transaction, the Company issued pursuant to the private investment an aggregate of 7,596,309 shares of Common Stock and 3,249,999 million PIPE warrants for an aggregate purchase price of approximately $76.0 million to the Initial Subscribers, pursuant to the terms of separate Subscription/Backstop Agreements. In addition, on May 29, 2020, immediately prior to the consummation of the business combination,Recapitalization Transaction, sponsor surrendered to the Company 3,511,820 founder shares (included in the 15,140,584 shares distributed pro rata to Seller’s stockholders) in accordance with the terms of the Purchase Agreement and the Parent Sponsor Letter Agreement.

At the consummation of the business combination,Recapitalization Transaction, the Company, sponsor, Cantor, Excess Noteholders and 1.5 Lien Noteholders that received shares of Common Stock upon exchange of Excess Notes and 1.5 Lien Notes, certain stockholders of the Seller that received shares of Common Stock in the business combinationRecapitalization Transaction and, may besome of which are affiliates of the Company after consummation of the business combination,Recapitalization Transaction, the Initial Subscribers and Lender, and such persons or entities, collectively, referred to as the restricted“restricted stockholders, entered into the Amended and Restated Registration Rights Agreement, pursuant to which the restricted stockholders are entitled to, among other things, customary registration rights, including demand, piggy-back and shelf registration rights, subject to cut-back provisions. Pursuant to the Amended and Restated Registration Rights Agreement, a registration statement on Form S-1 was filed with the SEC and declared effective on July 22, 2020, which registers for resale the Common Stock and certain warrants of the Company owned by the restricted stockholders. The restricted stockholders have agreed in the Amended and Restated Registration Rights Agreement not to sell, transfer,


pledge or otherwise dispose of shares of Common Stock they hold or receive for certain time periods, ranging from between 30 days after the consummation of the business combinationRecapitalization Transaction for warrants purchased in the private investment to six months for shares received in the noteNote exchange, to one year after the consummation of the business combinationRecapitalization Transaction for converted founder shares, subject to certain exceptions. Pursuant to the terms of the Amended and Restated Registration Rights Agreement, the Company is filing the registration statement of which this prospectus forms a part.

Concurrently with the consummation of the business combination,Recapitalization Transaction, sponsor also purchased 3,125,000 shares of Common Stock and 2,500,000 forward purchase warrants to purchase one share of Common Stock per warrant for $11.50 per share, in accordance with the terms of the Forward Purchase Contract.

On October 4, 2019, the Seller, as borrower, certain subsidiaries of the Seller, as guarantors, Lender, and Sprott Resource Lending Corp., as arranger, executed a secured multi-advance term credit facility pursuant to which Lender committed to make, subject to certain conditions set forth therein, term loans in an aggregate principal amount up to $110.0 million (the “Initial Sprott Credit Agreement”). On May 29, 2020, the Company and certain of its subsidiaries, as guarantors, entered into the Amended and Restated Credit Agreement (the “Sprott Credit Agreement”) to update the conditions precedent and effect certain other changes to conform the terms of the Initial Sprott Credit Agreement to the details of the business combination.Recapitalization Transaction. At the consummation of the business combination,Recapitalization Transaction, the Company assumed the Initial Sprott Credit Agreement pursuant to the terms of the Purchase Agreement, entered into the Sprott Credit Agreement, borrowed $70.0 million under such facility and issued to Lender 496,634 shares of Common Stock equal to approximately 1% of the Company’s post-closing shares of Common Stock outstanding. In addition, concurrently with the consummation of the business combination,Recapitalization Transaction, the Company and HRD entered into the Sprott Royalty Agreement with Lender, pursuant to which, among other things, HRD received $30.0 million in cash consideration in exchange for a 1.5% net smelter perpetual royalty payment relating to the Hycroft mine,Mine, the principal asset of HRD acquired in the business combination.

Recapitalization Transaction.

On May 28, 2020, in connection with the closing of the business combination, theRecapitalization Transaction, Seller, Acquisition Sub, the 1.25 Lien Noteholders and the 1.5 Lien Noteholders entered into an Omnibus Amendment to the Note Purchase Agreements and Exchange Agreement (the “Omnibus Amendment”), which effected certain technical changes, and added certain representations and warranties to, the Exchange Agreement.

On May 29, 2020, in connection with the consummation of the business combination,Recapitalization Transaction, the Company amended and restated its existing amended and restated certificate of incorporation (the “Second Amended and Restated Charter”) to:

(a) 
(a)change the name of the Company to Hycroft Mining Holding Corporation;
(b)increase the total number of authorized shares of all classes of capital stock from 111,000,000 shares to 410,000,000 shares, consisting of (i) 400,000,000 shares of Common Stock and (ii) 10,000,000 shares of preferred stock;
(c)remove or amend those provisions of our prior certificate of incorporation which terminated or otherwise ceased to be applicable following the completion of the Recapitalization Transaction, including removal of certain provisions relating to the Company’s prior status as a blank check company and the Company’s Class B Common Stock that no longer applied;
(d)clarify the exclusive forum provision to provide the Court of Chancery of the State of Delaware as the exclusive forum for certain stockholder litigation shall not apply to any action to enforce any liability or duty under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, for which there is exclusive federal or concurrent federal and state jurisdiction;

28


(e)permit stockholder action by written consent;
(f)provide that the Company will not be governed by Section 203 of the DGCL, and included a provision that is substantially similar to Section 203 of the DGCL, but excluded the investment funds affiliated with sponsor and their respective successors and affiliates and the investment funds affiliated with or managed by the Initial Subscribers from the definition of “interested stockholder,” and
(g)reclassify the board of directors.

(f) declassify the board of directors.

Upon consummation of the business combination,Recapitalization Transaction, the Company assumed the Seller’s liabilities and obligations under the Seller Warrant Agreement. Each Seller warrant outstanding and unexercised immediately prior to the effective time of the business combinationRecapitalization Transaction is exercisable to purchase shares of our Common Stock at an exercise price, as of July 1, 2020, of $44.82 per share, and each Seller warrant is exercisable into approximately 0.2523 shares of our Common Stock for a total of 3,210,213 shares of our Common Stock.

The foregoing descriptions of the Sprott Credit Agreements, the Sprott Royalty Agreement, the Seller Warrant Agreement, the Subscription/Backstop Agreements, the amendments thereto, the Amended and Restated Registration Rights Agreement, the Omnibus Amendment, and the Second Amended and Restated Charter do not purport to be complete and are subject to and qualified in their entirety by reference to such documents, copies of which are included as Exhibits 10.1, 10.2, 4.1, 10.3, 10.4, 10.5, 10.1210.13 and 3.1, respectively, of the registration statement of which this prospectus forms a part.

Hycroft Business

General

Historically, gold and silver sales from the Hycroft Mine have represented 100% of the Seller’s operating revenues and are expected to represent 100% of our operating revenues in the future. Due to declines in the price per gold and silver ounce in 2014 and 2015, the Seller’s predecessor filed voluntary petitions for relief under the Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware and on July 8, 2015, the Seller’s predecessor announced that it had suspended mining operations. On October 22, 2015, the Seller’s predecessor completed its financial restructuring process and emerged from the chapter 11 process.

Since suspending mining operations in July 2015, the Hycroft Mine’s operating cash flows have been limited and have related primarily to gold and silver produced from the previously mined ore that had been placed on leach pads. At the end of the first quarter of 2017, with the revenue from the gold and silver produced from the leach pads no longer covering the cost of the reagents necessary for production, the Hycroft Mine was placed into care and maintenance mode to minimize expenditures and conserve cash. Gold and silver production in care and maintenance is a byproduct of maintenance activities and not considered as sales revenues. The Hycroft Mine restarted mining operations during the first half of 2019. The first pour of gold and silver occurred in August 2019. As part of its restart of mining operations, the Seller obtained a Feasibility Studyfeasibility study as of July 31, 2019 for the heap leaching process for transition and sulfide ores.

Our sole operating mine, the Hycroft Mine, is an open-pit heap leach operation located approximately 54 miles west of Winnemucca, Nevada. Historically, gold and silver sales have represented 100% of our operating revenues and the market prices of gold and silver significantly impact our financial position, operating results and cash flows. Beginning in early 2019, with additional funding in the form of the 1.5 Lien Notes and 1.25 Lien Notes, repairs to the crushing system commenced and mining operations were again started at the Hycroft Mine. The first pour of gold and silver occurred in August 2019.

As reflected in the Hycroft Technical Report completed by M3 Engineering and Technology (“M3 Engineering”), SRK Consulting US (“SRK”) and the Seller, compliant with the recently adopted Modernization of Property Disclosures for Mining Registrants (the “New Mining Rules”), which we have voluntarily adopted early, as of June 30, 2019, the Hycroft Technical Report reflected proven and probable mineral reserves of 11.996 million ounces of gold and 481.4 million ounces of silver, which were contained in oxide, transition and sulfide ores. The Hycroft Technical Report also reported, as of June 30, 2019, the following measured, indicated and inferred mineral resources of gold and silver contained in oxide, transition and sulfide ores (in 000’s):

Mineral Resources(1) Gold (Oz)  Silver (Oz) 
Measured(2)  649   15,554 
Indicated(2)  3,050   93,438 
Inferred  5,769   129,754 


Mineral Resources(1)

    

Gold (Oz)

    

Silver (Oz)

 

Measured(2)

649 

15,554 

Indicated(2)

3,050 

93,438 

Inferred

5,769 

129,754 


(1)Under SEC standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time of the reserve determination. The term “economically,” as used in the SEC’s New Mining Rules, means that profitable extraction or production has been established or analytically demonstrated in a feasibility study to be viable and justifiable under reasonable investment and market assumptions. The term “legally”“legally,” as used in the New Mining Rules definition of reserves, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, we must

29


have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with our current mine plans. In accordance with the New Mining Rules, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” used in this prospectus are defined in the New Mining Rules.

(2)The measured and indicated mineral resources are exclusive of those mineral resources modified to produce the reported mineral reserves.

The Hycroft Technical Report does not include any assumptions for the conversion of mineral resources to mineral reserves.

You are specifically cautioned not to assume that any part or all of the mineral deposits (including any mineral resources) in these categories will ever be converted into mineral reserves, as defined by the SEC. You are also cautioned that mineral resources do not have demonstrated economic value. Inferred mineral resources have a high degree of uncertainty as to their existence as to whether they can be economically or legally mined. Under the New Mining Rules, estimates of inferred mineral resources may not form the basis of an economic analysis. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. A significant amount of exploration must be completed in order to determine whether an inferred mineral resource may be upgraded to a higher category. Therefore, you are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally mined, or that it will ever be upgraded to a higher category. Likewise, you are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be upgraded to mineral reserves.

Prior to the suspension of mining operations on July 8, 2015, the Seller’s predecessor recovered metals contained in oxide and transition ores through heap leach operations. As discussed below, the Hycroft Mine’s current mining plan and operations involve oxidizing and leaching transition and sulfide material in a heap leach application. As of July 31, 2019, based upon the findings in the Hycroft Technical Report, about 94% of the Hycroft Mine’s ore contains enough refractory gold to economically justify pretreatment by pre-oxidation prior to cyanide leaching.

Historical Test Work

Beginning in 2007, the Seller’s predecessor examined milling options to expand production, including direct cyanidation of high-grade oxide ore, and production of a flotation concentrate from sulfide ore, followed by an oxidative treatment of the concentrate. The original focus was on oxidation methods primarily employed in the Nevada gold industry, including pressure oxidation and roasting. Test work on these processes showed that each of these options could work well.

In 2013, the Seller’s predecessor began testing a suite of alternative oxidation methods, including chlorination, ambient pressure alkaline oxidation, fine-grinding with intense cyanidation, and a procedure similar to the patented Albion Process. The goal was to develop an economically viable process that would be less expensive to build and operate than autoclaves and that would eliminate the need for offsite concentrate sales.

Batch test results were positive and indicated that the Hycroft Mine’s concentrates were amenable to oxidation under atmospheric conditions, using trona as the acid neutralizing agent. Continuous pilot plant testing on three main domains was completed at Hazen Research to confirm these results.

In 2016, the viability of the atmospheric oxidation process using trona was demonstrated in a 10 ton-per-day integrated pilot plant at the mine site. This plant included primary grinding of 3/8” material, followed by flotation, atmospheric oxidation, cyanide leaching, counter-current decantation and Merrill-Crowe precipitation.


Previous testing and analysis of the Hycroft Mine indicated that transition and sulfide ore can be oxidized in a heap leach operation prior to irrigation with cyanide solution and previous studies have all contributed to the development of the proposed process for the two-stage, heap oxidation and subsequent leaching of sulfide and transition ores. Aside from offering an extensive characterization of the ore, our past test work has served to demonstrate the relationship between oxidation and recovery, to quantify the carbonate consumption requirements for oxidation and to establish reaction rates under varying operating conditions. Knowledge of the oxidation mechanism that was established in past work has favorably assisted the advancement of the pre-oxidation process that we are using at the Hycroft Mine.

The Hycroft Technical Report prepared by M3 Engineering, in association with SRK and Seller was issued effective July 31, 2019 and followed the requirements of the New Mining Rules. The Hycroft Technical Report provides the results of the heap leach Feasibility Studyfeasibility study that evaluated the possibility of oxidizing and leaching transitional and sulfidic material in a heap leach application. The Hycroft Technical Report presents a mineral reserve and resource estimate, a supporting life-of-mine plan and the results of metallurgical testing to determine the applicability of oxidizing and leaching transition and sulfide ore in a heap leach process. The metallurgical testing includes three phases of the ongoing test program using extensive column and bottle roll test work. The objective

30


of the Hycroft Technical Report was to determine if soda ash, a refined form of trona, can be used to oxidize sulfides in a heap leach operation prior to irrigation with cyanide solution. This process, which is the subject of a pending patent application, is intended to accomplish two goals, namely, the liberation of gold and silver in the sulfides by oxidation, thereby increasing its recovery, and the reduction of the heap’s potential to turn acidic during cyanide leaching.

Over a decade of research into various carbonate oxidation systems has laid the foundation for the pre-oxidation and cyanidation process. A history of processes that have contributed to the development of this technology is included in the Hycroft Technical Report to show the progression of the mechanism used for oxidation as well as the logic that leadled to current operating procedures.

The metallurgical test programs conducted on the Hycroft Mine deposit consisted of a series of comminution, flotation, concentrate oxidation, and cyanide leaching tests on whole ore, flotation tailing, and oxidized sulfide concentrate. The samples were mostly derived from drill cores.

Ore is classified as “oxide,” “transitional,” or “sulfide,” depending on the solubility of its gold content in cyanide solution (refractoriness). Ores having cyanide soluble gold contents of 70% or higher are classified as oxide ore. Those with cyanide-soluble gold contents below 30% are considered sulfide. The remainder, with cyanide-soluble contents between 30 to 70% are considered transition ores. The classification has been shown to have no strong correlation with sulfide sulfur content.

Heap Leach Test Work

In October 2015, the Seller began testing the possibility of oxidizing (using trona to manage the pH) and leaching the transition and sulfide ores in a heap leach scenario in order to reduce the capital intensity of recovering the gold and silver ounces contained in such ores. Heap leach oxidation and cyanide leach tests began with traditional column lab work. Core samples for metallurgical testing were selected to represent the most significant domains within the orebody,orebody. Central, Brimstone and Vortex, will be the main sources of ore going forward. Tests were conducted in plexiglass cylindrical columns that were 1-ft diameter and 4-ft high. Ore samples were crushed to 1/2”, blended and loaded into the columns.

Between the oxidation and leach stages, the columns were rinsed with water followed by lime-saturated water. The objective of the water rinse was to remove as much of the sulfate produced and excess carbonate alkalinity as practicable from the ore column. Sulfate that remains will react with calcium in the leach solution to precipitate CaSO4, which could form a passivation layer over the solids that are being leached. Bicarbonate has been shown to react with cyanide resulting in high cyanide consumptions. The objective of the lime-water rinse was to neutralize residual bicarbonate after the water rinse. Depending on the efficiency of the water rinse, the lime-saturated rinse may not be required but this will have to be tested to determine the trade-off between the cost of lime-water rinse and the cyanide loss.


Oxidation was performed for different periods ranging from 60 days to 180 days, by adding soda ash to the ore column and applying just enough solution to the column to keep the ore wet. This status was maintained to ensure that the interstices in the ore column are filled with oxygen-supplying air and not flooded with solution. A small amount of solution was allowed to drain at the bottom of the column, enough to collect at least 50 ml of sample each day for pH analysis, and to create a weekly composite for sulfate analysis. Oxidation was tracked by the amount of sulfate produced.

The results of the column oxidation followed by leach tests in general supported the hypothesis that higher oxidation levels of transition and sulfide ores produce better gold and silver recoveries in the subsequent cyanide leach process. From the overall trend observed in the test results, it appears that gold recoveries of 70% are possible for all the domains if the conditions are right. It is recommended that testing be continued using optimal conditions to provide experimental support for this recovery target. These optimal conditions include soda ash dosage, crush size, oxidation time, maintaining moist conditions during oxidation and ensuring access to air. During operations, testing of ore is likewise recommended to fine tune the conditions to be used in the heap. The duration of the oxidation cycle is variable and dependent on parameters found in the head assay.

While trona was initially used in testing to manage the pH and alkalinity during oxidation, for commercial production the Seller determined to use soda ash, a trona product, as they believed that soda ash can deliver higher carbonate concentrations than trona and requires less mass to be moved and stored in order to provide the same total alkalinity.

31


As reported in the Hycroft Technical Report, operating parameters and expected recoveries for heap leaching were as follows:

Domain

    

Nominal* Target
Oxidation, %

    

CN —Leach Time,
days

    

Au Recovery, %

    

Ag Recovery, %

Northwest (Bay)

31 

60 

55 

55 

West (Central)

40 

60 

70 

70 

Southwest (Camel) Above Water Table

40 

60 

70 

70 

Southwest (Camel) Below Water Table

40 

60 

65 

70 

Brimstone

40 

60 

65 

70 

Vortex

40 

60 

65 

70 

Domain Nominal* Target
Oxidation, %
  CN — Leach Time,
days
  Au Recovery, %  Ag Recovery, % 
Northwest (Bay)  31   60   55   55 
West (Central)  40   60   70   70 
Southwest (Camel) Above Water Table  40   60   70   70 
Southwest (Camel) Below Water Table  40   60   65   70 
Brimstone  40   60   65   70 
Vortex  40   60   65   70 

The Hycroft Technical Report indicated that maximum recoveries can be attained if the correct operating conditions are observed, including the following:

1.It is essential that pH be maintained above 9.5 during the oxidation process but not higher than 11. This ensures that the catalytic action of the ferrous-ferric carbonate redox pair is prevailing.

2.The total carbonate alkalinity must be maintained at a minimum of 20,000 parts per million, preferably up to 60,000 ppm to stabilize enough iron in solution.

3.During oxidation, the ore must be maintained wet.

4.However, the heap must not be saturated with solution to allow oxygen to migrate to the oxidation sites.

5.When the desired oxidation level is attained, excess carbonate and bicarbonate must be rinsed out of the heap. This may be followed by a lime water rinse to neutralize any residual carbonate.

Maintaining permeability in the heap is important during both oxidation and leach stage.

stages.

Hycroft Business Strategy

Based on the test work outlined above, we have developed a mine plan to profitably produce gold and silver at the Hycroft Mine (in a stable jurisdiction) that focuses on two-stage, heap leach oxidation of transition and sulfide ores using soda ash to manage the pH

32


and alkalinity during oxidation and subsequent cyanidation of the oxidized ores. The following simplified schematic outlines the process that we intend to use, which is further described in the Hycroft Technical Report.


Graphic

Restart of Mining

and Leach Pad Expansion Project

Under the mine plan that was developed by the Seller, we currently intend to mine using typical truck and shovel open pit mining methods.

We plan toThe Hycroft Technical Report contemplates that the Hycroft Mine will ramp up production over five years to the design crushed ore tonnage of 36 million tons per year, starting with 4.5 million tons in 2019, increasing to 12.6 million tons in 2020, 23.3 million tons in 2021, and reaching the target 36 million tons per year byin 2024. The Company currently believes that the Hycroft Mine's production is approximately one year behind the production levels described in the Hycroft Technical Report.

The yearly tonnage will be supplemented by a small percentage of ore that will be placed and leached as run-of-mine ore.

Mining at the Hycroft Mine is currently in the initial stage of our restart plan. In connection with the restart of mining operations, we made repairs to the crushing systemsystem. Our primary crusher was reconditioned and brought into operation in late March 2019. Our secondary and tertiary crushers were also recommissioned and brought into operation in March. During the second quarter of 2020, we commenced in-pit contractor drilling and blasting activities to provide fresh ore feed for the crusher, fresh run-of-mine ore and waste removal in support of the full year plan. We currently operate the Brimstone Merrill-Crowe facility and refinery and have begun planning to restart the North Merrill-Crowe plant in 2021 to meet our expectations of increasing solution flows from the new leach pad. With 24-hour mining operations, we are currently operating with our own fleet of six 200-ton haul trucks, two shovels, and support equipment, supplemented with a contractor’s fleet of one shovel, seven 240-ton haul trucks and one loader. Gold and silver ounces produced, and related ounces sold, were lower than levels set forth in the Hycroft Technical Report due to our inability to properly execute our processing plans and delays in getting the pads under leach. However, we continue to believe that the production level referenced in the Hycroft Technical Report are ultimately achievable once infrastructure is ramped up and we can execute the mine and processing plans successfully.The gold and silver grades of ore mined in the first half of 2020 were as planned and decreased from the comparable period of 2019 in which existing higher grade stockpile ore was mined prior to commencement of drilling and blasting activities.

33


Thus far, our demonstrated process on initial leach pads one and two is achieving higher than feasibility level gold recoveries for Brimstone ore (82% versus 65% in the Hycroft Technical Report) and Central ore (91% versus 70% in the Hycroft Technical Report) as set forth in more detail below:

Brimstone, Vortex, lower Camel Testing

Represents:

81% of total reserve ore tons
81% of total reserve gold ounces
85% of total reserve silver ounces

Recoveries:

82% and 91% vs Hycroft Technical Report of 65%
Rate of Oxidation 21% faster than the Hycroft Technical Report
76 operating days per annum increase

Gold Produced:

Using 80% recovery: +1.3M oz gold sold with no additional operating costs

Graphic

Central Testing

Represents:

19% of total reserve ore tons
18% of total reserve Gold ounces
14% of total reserve Silver ounces

Recoveries:

95% and 91% vs Hycroft Technical Report of 70%
Rate of Oxidation 21% faster than the Hycroft Technical Report
76 operating days per annum increase

34


Gold Produced:

Using 80% recovery: +0.4M oz gold sold with no additional operating costs

Graphic

You are cautioned that these rates of recovery are initial results from only two of our leach test pads and do not represent our current overall recovery rate on the majority of our leach pads.

In July 2019, we received approval of an amendment to our permits for construction of a new leach pad. During the second quarter of 2020, we commenced a leach pad expansion project on the north side of the Hycroft Mine, having an ultimate pad capacity of 550 million tons. This expansion project will provide us with the leach pad space required for future operations. The initial stage of the leach pad expansion project is being constructed in two phases. The first phase will consist of approximately 4.0 million square feet of pad space and infrastructure for ponds, pipes and electricity, and the second phase will consist of approximately 4.6 million square feet (which we expect to construct in 2021). Thus far, all groundwork and the underliner have been completed, as well as the pond lining. We began placing the leach pad liner in mid-July of 2020. With respect to this first phase of leach pad expansion, we expect the earthworks and leach pad construction to be completed in the fourth quarter of 2020 and the related infrastructure completed and initially commissioned shortly thereafter.

The Hycroft Mine is a senior-scale asset with an expected average annual production of approximately 366,000 ounces of gold equivalents, based on a 34 year mine life for mining and processing mineral reserves. As set forth in the Hycroft Technical Report, the production schedule is based upon the following projections of average annual gold and silver production over the life-of-mine:

ProcessingProduction Schedule

Graphic


Source: Hycroft Technical Report

35


Note: Gold equivalent production calculated assuming $1,300/oz gold and $17.33/oz silver; See “Cautionary Note Regarding Forward-Looking Statements.”

The chart below presents life-of-mine (“LOM”) free cash flow projected by us to be generated by the Hycroft Mine over the 34 year LOM as presented in the Hycroft Technical Report, also using sale prices per ounce of $1,300 for gold and $17.33 for silver. See “Cautionary Note Regarding Forward-Looking Statements” section and Table 19-6 of the Hycroft Technical Report, filed herewith as Exhibit 96.1 for more detail on the line item components of the unlevered free cash flow estimates presented.

Graphic


1.Unlevered free cash flow is defined as after-tax cash flow provided by operating activities, plus changes in operating restricted funds, less capital expenditures.
2.Unlevered free cash flow is a non-GAAP financial measure. The Company’s projections of unlevered free cash flow are not based on GAAP net income/loss or cash flow provided by operating activities, respectively, and are anticipated to be adjusted to exclude the effects of events or circumstances over the periods presented that are not representative or indicative of the Company’s results of operations and that are not currently determinable. Due to the recent restart of operations, continuing ramp up of operations and the uncertainty of the likelihood, amount and timing of any such adjusting items, the Company does not have information available, without undertaking unreasonable efforts, to provide a quantitative reconciliation of any projected non-GAAP financial measures at this time.
3.Unlevered free cash flow is derived from an asset-level analysis of the Hycroft Mine, as provided in the Hycroft Technical Report.

The chart below provides additional cumulative financial projections of all-in-sustaining costs (“AISC”) and free cash flow contained in the Hycroft Technical Report. AISC and Unlevered Free Cash Flow are non-GAAP financial measures.

    

Years 1 – 5

    

Years 1 – 10

    

LOM

 

Production AuEq (k oz)

908 

2,812 

12,432 

AISC(1)(3) ($/ oz)

$

775 

$

766 

$

548 

Unlevered Free Cash Flow(2)(3)(4) ($mm)

$

123 

$

786 

$

5,062 

Capital ($mm)

$

225 

$

491 

$

758 


Source: Hycroft Technical Report

(1)AISC includes total production cash costs to be incurred at the Company’s mining operation, plus sustaining capital expenditures (once the initial capital is spent) and reclamation costs, less revenue generated from silver sales. Additionally, the measure seeks to reflect the full cost of gold production from the Company’s operations, therefore initial expansionary capital is excluded. Certain other cash expenditures, including income tax payments and financing costs are also excluded.

The Company believes that this measure represents the total costs of producing gold from current operations and provides the Company and other stakeholders with additional information of the Company’s operational performance and ability to generate cash flows. AISC, as a key performance measure, allows the Company to assess its ability to support capital expenditures and to sustain future production from the generation of operating cash flows. This information provides management with the ability to more actively manage capital programs and to make more prudent capital investment decisions.

36


The Company calculates AISC on a gold ounces sold basis, where silver revenue is treated as a reduction in operating costs. This performance measure was adopted as a result of an initiative undertaken within the gold mining industry; however, this performance measure has no standardized meaning and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The Company follows the guidance note released by the World Gold Council, which became effective January 1, 2014, in calculating AISC. The World Gold Council is a non-regulatory market development organization for the gold industry whose members comprise global senior gold mining companies.

(2)Unlevered free cash flow is defined as after-tax cash flow provided by operating activities, plus changes in operating restricted funds, less capital expenditures. The non-GAAP financial measure of Free Cash Flow is presented as an indicator of liquidity to determine amounts that can be reinvested in the Company’s core business.
(3)Unlevered free cash flow and AISC are non-GAAP financial measures. The Company’s projections of AISC and free cash flow are not based on GAAP net income/loss or cash flow provided by operating activities, respectively, and are anticipated to be adjusted to exclude the effects of events or circumstances over the periods presented that are not representative or indicative of the Company’s results of operations and that are not currently determinable. Due to the recent restart of operations, continuing ramp up of operations and the uncertainty of the likelihood, amount and timing of any such adjusting items, the Company does not have information available, without undertaking unreasonable efforts, to provide a quantitative reconciliation of any projected non-GAAP financial measures at this time.
(4)Unlevered free cash flow is derived from an asset-level analysis of the Hycroft Mine, as provided in the Hycroft Technical Report. The unaudited projected financial information of the Company includes certain adjustments to the unlevered free cash flow analysis to account for corporate costs and the Sprott Royalty Agreement at the corporate level.

The base case economic analysis provided in the Hycroft Technical Report indicates that the Hycroft Mine project has an after-tax Internal Rate of Return (“IRR”) of 148.6%, with a payback period of 2.5 years and with an after-tax Net Present Value (“NPV”) of $2.1 billion at a 5% discount rate. The economics incorporate updated metallurgical test work and operating costs and are based on long-term prices of $1,300 per ounce of gold and $17.33 per ounce of silver. The project economics are sensitive to metal price fluctuations, as demonstrated below:

Case

    

Metal Prices ($/oz.)

NPV 
Cumulative 
Unlevered FCF

NPV@ 5%

NPV @ 10%

After Tax IRR

    

Au

    

Ag

    

$ Billions

    

$ Billions

    

$ Billions

    

1

$

1,200 

$

16.50 

$

4.2 

$

1.7 

$

0.8 

80 

%

2

$

1,300 

$

17.33 

$

5.1 

$

2.1 

$

1.1 

148 

%

3

$

1,400 

$

18.67 

$

6.1 

$

2.6 

$

1.3 

304 

%

4

$

1,500 

$

20.00 

$

7.1 

$

3.0 

$

1.6 

N/A 

1.Downside Price (Reserve Price)
2.Financial Base Case
3.Moderate Price
4.Upside Price

*

Unlevered free cash flow and NPV are derived from an asset-level analysis of the Hycroft Mine, as provided in the Hycroft Technical Report. The unaudited projected financial information of the Company included certain adjustments to the unlevered free cash flow and NPV analyses to account for corporate costs and the Sprott Royalty Agreement at the corporate level.

In addition to metal prices, the business is sensitive to capital and operating costs as shown below.

Operating and capital cost sensitivity of the LOM heap leach operations (after tax), NPV@5% using long-term prices of $1,300 per ounce of gold and $17.33 per ounce of silver:

20%
Decrease

10%
Decrease

Base 
Case

10% 
Increase

20% 
Increase

Mining Cost

$

2.41 billion

$

2.25 billion

$

1.91 billion

$

1.75 billion

Processing Cost

$

2.43 billion

$

2.26 billion

$

2.1 billion

$

1.90 billion

$

1.72 billion

CapEx

$

2.18 billion

$

2.13 billion

$

2.03 billion

$

1.98 billion


1.Mine plan economics are resilient to small changes in mining and processing costs, due to the lower operating leverage.
2.Low sensitivity to capital expenditure, due to the Company’s capital-light restart, which leverages existing infrastructure.
3.Unlevered free cash flow and NPV are derived from an asset level analysis of the Hycroft Mine, as provided in the Hycroft Technical Report.

We have prepared the following comparison of price to net asset value (“P/NAV”) multiples of the Company and other junior gold and silver producers. As reflected in the base economic case set forth in the Hycroft Technical Report, our NPV@5% is projected at $2.1 billion using long-term prices of $1,300 per ounce of gold and $17.33 per ounce of silver. When adjusted for the Subordinated Notes of $80 million, $70 million of debt drawn under the Sprott Credit Agreement, the impact on the NPV of the sale of the 1.5% net smelter royalty ($84 million), the NPV of corporate, general and administrative expenses ($121 million) which is not part of the Hycroft Technical Report, and cash on hand at the closing of the Recapitalization Transaction ($66 million), the Net Asset Value

37


(“NAV”) is estimated to be approximately $1.8 billion. With approximately 50 million shares outstanding, and an assumed Common Stock price of $10.00 per share, we calculate an implied P/NAV multiple of approximately 0.3x.

Graphic

The potential NPV@5% values set forth in the Hycroft Technical Report are highly sensitive to variations in the price of gold and sliver. As reflected and calculated in the Hycroft Technical Report, a $100 per ounce change in the price of gold results in an increase or decrease of the NPV@5% of approximately $300 million and every $1.00 per ounce change in the price of silver results in an increase or decrease of the NPV@5% of approximately $125 million. Extrapolating the NPV@5% set forth in the Hycroft Technical Report for recent changes in the spot price for gold and silver would produce NPV@5% values along the line set forth in the following chart below:

Graphic

38



Source: Hycroft Technical Report.

Note: Assumes a 75:1 silver to gold ratio.
As of August 28, 2020, the London Bullion Market Association afternoon p.m. fix price for gold was $1,957 per ounce and the London Bullion Market Association fixing price for silver was $27.35 per ounce.

The assumptions made in preparing the Hycroft Technical Report and the projections of value and unaudited projected financial information may not reflect actual future conditions. The estimates and assumptions underlying the projections of value and unaudited financial information involve judgments with respect to, among other things, future gold and silver prices, ore reserves, recovery rates for both gold and silver, future environmental expenditures, input commodity prices and labor costs and availability of labor, power, transportation, equipment and infrastructure, including, among others, risks and uncertainties described under “Risk Factors — Risks Related to Our Industry”, “— Risks Related to Our Business” and “Cautionary Note Regarding Forward-Looking Statements”, all of which are difficult to predict and many of which are beyond our control. The underlying assumptions and projected results may not be realized and actual results differ. Additionally, although presented with numerical specificity, the projections of value and financial information with respect to the Company and the Hycroft Mine have not been audited and reflects numerous assumptions and estimates as to future events made by the Company’s management and the qualified persons in preparing the Hycroft Technical Report that our management believes were reasonably prepared.

You are cautioned not to place undue reliance on the projections of value and unaudited financial information set forth above. No representation is made by the Company or any other person to any stockholders regarding the ultimate performance of the Company compared to the information included in the above projections of value and unaudited projected financial information. The inclusion of projections of value and unaudited financial information in this prospectus should not be regarded as an indication that this information will be necessarily predictive of actual future events, and this information should not be relied on as such. The projections of value and unaudited financial information does not take into account any circumstances or events occurring after the date they were prepared, and, except as may be required in order to comply with applicable securities laws, none of the Company or any of its representatives intend to update, or otherwise revise, the unaudited projected financial information, or the specific projections presented, to reflect circumstances existing after the date when they were made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error.

Processing

A significant portion of gold in the Hycroft Mine ore is refractory due to its association with pyrite, marcasite and other sulfides. About 94% of the ore contains enough refractory gold to economically justify pretreatment by pre-oxidation prior to cyanide leaching.

The heap leach operation is designed to treat three categories of ore, classified as described below, using the following methods:

·Ore Category 1 (ROM ore) — lower grade ore with high cyanide soluble gold is routed directly to the leach pad and cyanide leached to extract gold and silver. This accounts for 4% of the ore over the life of mine. The gold contents are highly soluble and the remaining refractory gold contents are not projected to justify the time and expense of a pre-oxidation step, therefore it will be stacked as run of mine, or ‘ROM’. The ore in this category is typically defined as ‘ROM oxide’ or ‘ROM transition’.


·Ore Category 2 (3/4” Crushed ore) — higher grade ore with high cyanide soluble gold is crushed to a P80 of 3/4” and cyanide leached to extract gold and silver. This accounts for 2% of the ore over the life of mine. The gold contents are highly soluble, but additional size reduction is expected to increase gold and silver recovery enough to justify the additional expense. The remaining refractory gold contents are not projected to justify the time and expense of a full pre-oxidation cycle. The ore in this category is typically defined as ‘3/4” crushed oxide’ or ‘3/4” crushed transition’.

·Ore Category 3 (1/2” Crushed ore) — low cyanide soluble ratio ores are crushed to a P80 of 1/2”. The crushed ore is mixed with soda ash to induce an alkaline ‘pre-oxidation’ process. After the oxidation process has been completed to the desired extent, the ore will be rinsed sequentially with water and saturated lime solution, and then leached with cyanide to extract gold and silver. This accounts for 94% of the ore over the life of mine. The ore in this category is typically defined as ‘1/2” crushed sulfide’ or ‘1/2” crushed transition’. This process is the subject of a pending patent application.

Crushing Plant

The crushing system is designed to run a nominal capacity of 65,750 tons per day ramping up to 98,630 tons per day with the addition of two more tertiary crushers. The existing crushing system includes one primary crusher, two secondary crushers, and two tertiary crushers. The existing facility will be sufficient during the ramp-up period, but will require the addition of two more tertiary crushers to attain the design capacity.

39


Category 2 and Category 3 ores will be transported to the primary crusher dump pocket via haul truck. Prior to the primary crusher, the ore that is being routed as Category 3 will pass under a soda ash silo where a pre-determined amount of soda ash will be added to the ore to begin the pre-oxidation process. The ore will proceed through three stages of crushing and exit the tertiary crushers routed as either 3/4” crushed or 1/2” crushed. It will then be hauled to and stacked on the leach pads.

Pre-Oxidation

Pre-oxidation of the Category 3 ore will begin at the crusher using in-situ moisture and solid soda ash. The amount of soda ash required for the ore is relative to the percent sulfide-sulfur content of the ore. We will regularly sample the mined ore for reagent addition control.

After placing Category 3 ore on the heap, additional soda ash solution will be applied to bring the ore to field capacity (8 – 10% moisture). The solution in the heap will be replenished on a regular basis using soda ash solution in order to offset evaporation and carbonate consumption.

The dissolved oxygen required for the reaction will be replenished through solution to air contact; the oxygen will be monitored inside the heap using embedded recoverable sensors. If required, air inflow can be aided by installing large perforated piping at the bottom of each panel, with ends protruding out of the heap.

Pre-oxidation duration will be determined by the characteristics of the ore and the measured extent of oxidation based upon sulfate production. The extent of oxidation will be determined by the target recoveries for each domain and the initial cyanide soluble gold, which is translated to degrees of oxidation already achieved. The number of days required to attain target oxidation is dependent upon the sulfide-sulfur content of the ore with, higher sulfide-sulfur corresponding to longer oxidation cycles. The majority of the ore is expected to take between 30 and 120 days to finish pre-oxidation. This is measured between the day that soda ash is introduced to the ore at the crusher and the day that the ‘rinse’ cycle begins for the panel.

Rinse Cycle

When the pre-oxidation cycle has been completed, the Category 3 ore will be rinsed first with water, then with a saturated lime solution prior to the commencement of cyanidation leach. This is necessary to remove bicarbonate from the heap and prevent cyanide loss during leaching. The alkalinity of the solution in the heap is monitored to ensure rinse completion prior to the start of cyanidation.


Heap Leach Cyanidation

The cyanidation conditions for all placed ore will be the same regardless of crush size or the use of pre-oxidation. The pH will be controlled using lime. Category 1 and Category 2 ores, those ores not going through pre-oxidation or rinse are expected to undergo a 200-day primary leach cycle. Category 3 ore, having already been oxidized and rinsed, is expected to undergo a nominal 60-day primary leach cycle.

Merrill-Crowe and Refinery

Due to the high silver content of the pregnant solution, gold and silver is recovered by zinc cementation. We have two existing Merrill-Crowe plants, which are used to process pregnant solution from the heap leach operation. The older plant has a capacity of 4,500 gallons per minute. The newer plant is considerably larger, with a present capacity of 21,500 gallons per minute.

The wet filter cakes from the Merrill-Crowe circuits are transferred to retort pans, which are then put into a retort furnace to remove water and mercury. Water and then mercury are sequentially volatilized from the precipitate by heating the precipitate under a partial vacuum. The dried filter cake is mixed with flux, a clarifying agent used to remove certain impurities and reduce the melting point of elements in the precipitate, and then transferred to an electric arc furnace where it is smelted to produce doré.

Project Infrastructure

The future infrastructure for the Hycroft Mine heap leach project includes the existing infrastructure and the requirements of the project. Currently on site are administrative buildings, mobile equipment maintenance shops, two Merrill-Crowe processing plants, a three-stage crushing system, a refinery and heap leach pads. The site also has a modern communications system provided by microwave facilities, including cellular communications. Major infrastructure categories to be constructed for the project include:

·Additional leach pad space and associated ponds, piping and other facilities;

·Conveying and stacking;

·Crushing system refurbishments; and

40


·Rail siding.

Fresh water will be obtained from existing active and inactive production wells in a field west of the mine, and from mine dewatering. Plant water requirements are projected to fall below the current permitted water rights.

A rail siding will be constructed that will access the nearby main east-west rail line, which is operated by Union Pacific. The rail siding will be used to receive large quantities of bulk commodities such as soda ash and lime at a reduced cost of transportation versus trucking, while reducing the potential environmental and safety hazards associated with truck transportation. M3 Engineering has provided the design for the rail unloading and materials handling facilities at the rail siding.

Currently the final crushed ore product is loaded to trucks and transported to the heap. A conveyor stacking system is planned for 2024in the future which will directly convey the ore to the heap and eliminate the need for the truck haul.

Principal Products and Market Overview

The principal products that the Hycroft Mine produces are unrefined gold bars (doré) and in-process inventories (metal-laden carbon), both of which are sent to third party refineries before being sold, generally at prevailing spot prices, to financial institutions or precious metals traders. Doré bars and metal-laden carbon are sent to refineries to produce bullion that meets the required market standards of 99.95% pure gold and 99.90% pure silver. Under the terms of our refining agreements, doré bars and metal-laden carbon are refined for a fee, and our share of the refined gold and the separately-recovered silver are credited to our account or delivered to our buyers. As noted above, due to the expected higher silver content, we anticipate producing doré and not relying on the carbon-in-columns to produce the metal-laden carbon except in limited circumstances.


Product Revenues and Customers

For the year ended December 31, 2018 and the portion of 2019 prior to the Seller resuming mining operations, the Seller did not record revenues, with any sales of gold and silver recovered from care and maintenance of the leach pads and not reflecting material production amounts. Accordingly, they were deemed to be a byproduct (and a net expense) of the care and maintenance activities. We expect gold and silver sales to be our only source of future revenues. Even at full production levels, however, we do not believe we have any dependencies on any customers of our gold and silver due to the liquidity of the metal markets and the availability of metal traders and financial institutions. For the year ended December 31, 2019, gold and silver sales of 8,593 ounces and 52,036 ounces, respectively, were reported as revenue as the Hycroft Mine was operating. All gold and silver sales during the year ended December 31, 2019 were to the same customer. However, Hycroft is not obligated to sell all of its gold and silver to one customer.

Gold Uses

Gold has two main categories of use: fabrication and investment. Fabricated gold has a variety of end uses, including jewelry, electronics, computers, dentistry, industrial and decorative uses, medals, medallions and coins. Gold investors that want to own physical gold generally buy gold bullion, coins and jewelry.

Gold Supply

The supply of gold consists of a combination of current production from mining and metal recycling and the draw-down of existing stocks of gold held by governments, financial institutions, industrial organizations and private individuals. Based on publicly available information, gold production from mines was flat for 2019 compared to 2018 totaling approximately 3.46 metric tons (or 111 million troy ounces) and represented approximately 73% of the 2019 global gold supply.

Gold and Silver Prices

The priceprices of gold isand silver are volatile and isare affected by many factors beyond our control, such as the sale or purchase of gold and silver by central banks and financial institutions, inflation or deflation and monetary policies, fluctuation in the value of the US dollar and foreign currencies, global and regional demand, and the political and economic conditions of major gold producing

41


countries throughout the world. The following table presents the London Bullion Market Association annual high, low, and average afternoon fixing prices for gold and silver over the past ten years on the London Bullion Market (in US dollars per ounce).

GOLD PRICES

SILVER PRICES

Year

    

High

    

Low

    

Average

    

High

    

Low

    

Average

 

2009

1,213 

810 

972 

19.18 

10.51 

14.67 

2010

1,421 

1,058 

1,225 

30.70 

15.14 

 

20.19 

2011

1,895 

1,319 

1,572 

48.70 

26.16 

35.12 

2012

1,792 

1,540 

1,669 

37.23 

26.67 

31.15 

2013

1,694 

1,192 

1,411 

32.23 

18.61 

23.79 

2014

1,385 

1,142 

1,266 

22.05 

 

15.28 

19.08 

2015

1,296 

1,049 

1,160 

18.23 

13.71 

15.68 

2016

1,366 

1,077 

1,251 

20.71 

13.58 

17.14 

2017

1,346 

1,151 

1,257 

18.56 

15.22 

17.04 

2018

1,355 

1,178 

1,268 

17.17 

13.97 

15.71 

2019

1,540 

1,270 

1,393 

19.30 

14.37 

16.21 

2020 (through August 28, 2020)

2,067 

1,474 

1,711 

28.33 

12.01 

18.38 

Year High  Low  Average 
2009  1,213   810   972 
2010  1,421   1,058   1,225 
2011  1,895   1,319   1,572 
2012  1,792   1,540   1,669 
2013  1,694   1,192   1,411 
2014  1,385   1,142   1,266 
2015  1,296   1,049   1,160 
2016  1,366   1,077   1,251 
2017  1,346   1,151   1,257 
2018  1,355   1,178   1,268 
2019  1,540   1,270   1,393 
2020 (through July 9, 2020)  1,812   1,474   1,653 

On July 9,August 28, 2020, the afternoon fixing price for gold on the London Bullion Market Association afternoon p.m. fix price for gold was $1,812$1,957 per ounce. On August 28, 2020, the London Bullion Market Association fixing price for silver London Bullion Market Association was $27.35 per ounce.


Employees

We have 202238 employees, of whom 195228 are currently employed at the Hycroft Mine. None of our employees are represented by unions.

Competition

We compete with other mining companies in connection with hiring and retaining qualified employees. There is substantial competition for qualified employees in the mining industry, some of which is with companies having substantially greater financial resources and a more stable history. As a result, we may have difficulty hiring and retaining qualified employees.

Our management believes that no single company has sufficient market power to affect the price or supply of gold or silver in the world market.

Please see “Risk Factors — Risks Related to Our Industry — We face intense competition in the mining industry”, for additional discussion related to our current and potential competition.

DESCRIPTION OF PROPERTY

Our sole property is the Hycroft Mine. The Hycroft Mine is an open-pit (surface) gold and silver mine with a long history of operations as discussed below. Beginning in July 2015, mining operations at the Hycroft Mine were suspended and the Hycroft Mine was operated solely in a care and maintenance mode through December 31, 2018. Commencing in January 2019, efforts to ramp up and restart mining operations began. During the first quarter of 2019, the Seller worked to bring our six haul trucks, two hydraulic shovels and one wheel loader back into operation. In addition, the Seller began the rehabilitation of our crushing system and the construction of leach pad space to enable mining operations to begin in the second quarter of 2019. Initial gold and silver production occurred in August 2019.

During the first half of 2020, Seller commissioned additional mobile fleet rentals, increased headcount, and commenced the construction of a new leach pad expansion and related infrastructure.

Historically, the Seller’s predecessors held as many as 75 mineral exploration properties, all of which were sold in 2015 as part of the Seller’s bankruptcy process.

Operating Properties

Hycroft Technical Report

The information that follows relating to the Hycroft Mine is derived, for the most part, from, and in some instances is an extract from, the Hycroft Technical Report prepared with respect to the heap leaching Feasibility Study in compliance with the SEC’s New Mining Rules. Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full

42


text of the Hycroft Technical Report, filed with the SEC as an exhibitExhibit 96.1 to the registration statement of which this prospectus.prospectus forms a part. The Hycroft Technical Report is incorporated herein by reference and made a part hereof.

Overview and Highlights

The Hycroft Mine is a senior-scale asset with an expected average annual production of approximately 366,000 ounces of gold equivalents, based on a 34 year mine life for mining and processing mineral reserves, and the following chart illustrates the current projected production schedule for the Hycroft Mine as outlined in the Hycroft Technical Report:


The Hycroft Technical Report sets forth a revised process for mining that significantly reduces capital expenditures when compared to the prior plans to build a mill to process sulfide ores. A summary of the estimated capital expenditures for the first five years of operations at the Hycroft Mine based upon the Hycroft Technical Report is set forth below:


($000's)

    

Years 1-5

    

Year 1

    

Year 2

    

Year 3

    

Year 4

    

Year 5

Leach Pad & Pond Construction

$

50,831

$

31,951

$

18,425

$

$

455

$

Mobile Equipment

$

312

$

$

312

$

$

$

M3 Capital:

General

$

4,397

$

$

$

4,397

$

$

Primary Crushing

$

383

$

$

$

383

$

$

Secondary & Tertiary Crushing

$

40,419

$

$

$

9,911

$

9,459

$

21,050

Conveying & Stacking

$

65,924

$

$

$

12,991

$

12,991

$

39,941

Reagents

$

18,146

$

$

$

$

$

18,146

Rail Unloading & Storage

$

32,340

$

$

$

$

10,792

$

21,548

De-watering

$

10,401

$

$

3,850

$

376

$

2,385

$

3,791

Owner's Team

$

5,148

$

4,548

$

600

$

$

$

Other Annual Sustaining

$

2,500

$

500

$

500

$

500

$

500

$

500

Total Capital Expenditures

 

$

230,802

$

36,999

$

23,687

$

28,558

$

36,582

$

104,976

43


Hycroft Open Pit Mine

The following shows where the Hycroft Mine is located.

Graphic

44



Additionally, the below map shows the current property and facilities layout.

Graphic


The Hycroft Mine and related facilities are located 54 miles west of Winnemucca, Nevada. Winnemucca, a city with a population of approximately 7,000, is a commercial community on Interstate 80, 164 miles northeast of Reno. The mine property straddles

45


Table of Contents

Townships 34, 35, 351351∕2 and 36 North and Ranges 28, 29 and 30 East (MDB&M) with an approximate latitude 40°52’ north and longitude 118°41’ west.

The town is served by a transcontinental railroad and has a municipal airport. Access to the mine from Winnemucca is by Jungo Road, formerly designated as State Route 49, a good-quality, unpaved road, and a short access road to the main entrance of the mine. Well-maintained mine and exploration roads provide access throughout the property. Access is also possible from Imlay, Gerlach and Lovelock by unpaved roads intersecting Interstate 80 and Nevada State Route 447. The majority of our employees live in the Winnemucca area. The site receives electrical power provided by NV Energy from the northwestern Nevada power grid. Initial surveys indicate that the town of Winnemucca has the required infrastructure (shopping, emergency services, schools, etc.) to support the maximum workforce and dependents. The Hycroft Mine currently has water rights which are adequate to support our planned future heap leach operations. The mine is situated on the eastern edge of the Black Rock Desert and on the western flank of the Kamma Mountains between Winnemucca and Gerlach, Nevada. There are no streams, rivers or major lakes in the general area. Elevations in the mine area range between 4,500 and 5,500 feet above sea level.

The climate of the region is arid, with precipitation averaging 7.7 inches per year. Average temperatures during the summer range from 50°F to 90°F and average winter temperatures range from 20°F to 40°F.

We hold 30 private patented claims and 3,247 unpatented mining claims that constitute our Hycroft Mine operating property. The total acreage covered by unpatented claims is approximately 68,759 acres and an additional 1,912 acres is covered by patented claims. Combining the patented and unpatented claims, total claims cover approximately 70,671 acres. Our Hycroft Mine patented claims occupy private lands and our unpatented claims occupy public lands, administered by the BLM. These claims are governed by the laws and regulations of the U.S. federal government and the state of Nevada. To maintain the patented claims in good standing, we must pay the annual property tax payments to the county in which the claims are held. To maintain the unpatented claims in good standing, we must file a notice of intent to maintain the claims within the county and pay the annual mineral claim filing fees to the BLM. Such filing fees amounted to $0.6 million in 2019.2020. As long as we file the annual notice and pay the claim filing fees, there is no expiration date for our unpatented claims.

A portion of the Hycroft Mine is subject to a mining lease requiring us to pay 4% net profit royalty to the owner of certain patented and unpatented mining claims, subject to a maximum of $7.6 million, of which $5.1$5.0 million remained payable as of December 31, 2019.June 30, 2020. There is no expiration date on the net profit royalty.

The Hycroft Mine was formerly known as the Crofoot-Lewis open pit mine, which was a small heap leaching operation that commenced in 1983. Vista Gold Corp., a corporation incorporated under the laws of the Yukon Territory (“Vista”), acquired the Crofoot-Lewis claims and mine in 1987 and 1988. During this first operating period the mine produced over 1.0 million ounces of gold and 2.5 million ounces of silver. The mine production continued until it was placed on a care and maintenance program in December 1998 due to low gold prices. The Seller acquired the Hycroft Mine in 2007 pursuant to an arrangement agreement where Vista transferred its Nevada mining properties to our predecessor . TheSeller’s predecessor. Seller restarted the Hycroft Mine in 2008 and suspended mining operations on July 8, 2015. During 2016, they wereSeller was actively processing and producing gold from the ore within the heap leach pads. On January 1, 2017, the Seller went into a care and maintenance mode when it stopped adding lime to the leach pads and continued to operate in a care and maintenance mode throughout 2017 and 2018. Prior to restarting operations, production of gold and silver was a byproduct of the Seller’s maintenance activities on the Hycroft Mine. In January 2019 the Seller began the restart of mining operations. During the first quarter of 2019 the Seller began operations again with six haul trucks, two hydraulic shovels and one wheel loader. In addition, the Seller began the rehabilitation of its crushing system and the construction of new leach pad space to enable mining operations to begin in the second quarter of 2019. Initial gold and silver production occurred in August 2019.

On site facilities include an administration buildings, mobile maintenance shop, light vehicle maintenance shop, warehouse, leach pads, crushing system, two Merrill-Crowe process plants and a refinery. The components for a second refinery are on-site and will be constructed as part of the expansion of mining activities. The crushing system is beingwas refurbished as part of the restart activities and all other facilities are operational.operational with the exception of the North Merrill-Crowe plant which is not required until 2021. The gross book value of property, plant and equipment associated with the Hycroft Mine as of December 31, 2019, was $68.4 million.


Geology

The Hycroft Mine is located on the western flank of the Kamma Mountains. The deposit is hosted in a volcanic eruptive breccia and conglomerates associated with the Tertiary Kamma Mountain volcanics. The volcanics are mainly acidic to intermediate tuffs, flows and coarse volcanoclastic rocks. Fragments of these units dominate the clasts in the eruptive breccia. The Central Fault and East Fault control the distribution of mineralization. A post-mineral range-front fault separates the ore-body from the adjacent Pleistocene Lahontan Lake sediments in the Black Rock Desert. The geological events have created a physical setting ideally suited to the open-pit, heap-leach mining operation at the Hycroft Mine. The heap leach method is widely used in the southwestern United States and allows the economical treatment of oxidized low-grade ore deposits in large volumes.

46


Table of Contents

The deposit is typically broken into six major zones based on geology, mineralization, and alteration. These zones include Brimstone, Vortex, Central, Bay, Boneyard, and Camel. Breaks between the zones are major faults.

Mineralization at Hycroft has been deposited through multiple phases. An early silica sulfide flooding event deposited relatively low-grade gold and silver mineralization, generally along bedding. This mineralization is cross cut by later, steeply dipping quartz alunite veins. Late stage silver bearing veins are found in the Vortex zone and at depth in the Central area. Late to present supergene oxidation along faults has liberated precious metals from sulfides and further enriched gold and silver mineralization, along water table levels.

The known gold mineralization extends for a distance of three miles in a north-south direction by 1.5 miles in an east-west direction. Mineralization extends to a depth of less than 330 feet in the outcropping to near-outcropping portion of the deposit on the northwest side to over 2,500 feet in the Vortex deposit in the east.

Proven and Probable Mineral Reserves

Our mineral reserve estimates are calculated in accordance with subpart 1300 of Regulation S-K under the New Mining Rules of the Exchange Act. Proven and probable reserves may not be comparable to similar information regarding mineral reserves disclosed in accordance with the guidance of other countries. We conduct ongoing studies of our ore bodies to optimize economic values and to manage risk. We revise our mine plans and estimates of proven and probable mineral reserves as required and in accordance with the latest available studies. Our estimates of proven and probable reserves are prepared by and are the responsibility of our employees.

Our estimated proven and probable reserves are as of June 30, 2019, using prices of $1,200 per ounce for gold and $16.50 per ounce for silver. The gold and silver prices used in estimating reserves are lower than the trailing 3-year average price of $1,272.66 per ounce for gold and $16.53 per ounce for silver. The average London Bullion Market spot metal prices for each of the years ended December 31, 2019, 2018 and 2017 was $1,393, $1,268 and $1,257 per ounce for gold, respectively, and $16.21, $15.71 and, $17.04 per ounce for silver, respectively. Below is a summary of our estimated proven and probable ore reserves as of June 30, 2019.

  Tons  Grades, oz/t  Contained Oz (000s) 
  (000s)  Au  Ag  Au  Ag 
Proven (Heap Leach)                    
Oxide ROM  12,476   0.009   0.230   205   5,211 
Transition ROM  4,095   0.008   0.190   32   759 
Oxide 3∕4” Crushed  15,252   0.012   0.720   184   10,926 
Transition 3∕4” Crushed  4,399   0.005   0.310   24   1,367 
Transition 1∕2” Crushed  90,206   0.011   0.450   948   40,365 
Sulfide 1∕2” Crushed  250,906   0.012   0.470   2,940   116,818 
Total Proven Heap Leach  387,334   0.011   0.450   4,333   175,446 
Probable (Heap Leach)                    
Oxide ROM  13,145   0.005   0.230   71   3,005 
Transition ROM  3,660   0.005   0.140   20   505 
Oxide 3∕4” Crushed  3,001   0.010   0.690   29   2,063 
Transition 3∕4” Crushed  1,304   0.004   0.490   5   644 
Transition 1∕2” Crushed  52,467   0.010   0.460   504   24,043 


Tons

Grades, oz/t

Contained Oz (000s)

 

    

(000s)

    

Au

    

Ag

    

Au

    

Ag

Proven (Heap Leach)

Oxide ROM

22,476 

0.009 

0.230 

205 

5,211 

Transition ROM

4,095 

0.008 

0.190 

32 

759 

Oxide 3∕4” Crushed

15,252 

0.012 

0.720 

184 

10,926 

Transition 3∕4” Crushed

4,399 

0.005 

0.310 

24 

1,367 

Transition 1∕2” Crushed

90,206 

0.011 

0.450 

948 

40,365 

Sulfide 1∕2” Crushed

250,906 

0.012 

0.470 

2,940 

116,818 

Total Proven Heap Leach

387,334 

0.011 

0.450 

4,333 

175,446 

Probable (Heap Leach)

Oxide ROM

13,145 

0.005 

0.230 

71 

3,005 

Transition ROM

3,660 

0.005 

0.140 

20 

505 

Oxide 3∕4” Crushed

3,001 

0.010 

0.690 

29 

2,063 

Transition 3∕4” Crushed

1,304 

0.004 

0.490 

644 

Transition 1∕2” Crushed

52,467 

0.010 

0.460 

504 

24,043 

Sulfide 1∕2” Crushed

663,071 

0.010 

0.410 

6,936 

272,271 

Total Probable Heap Leach

736,648 

0.010 

0.410 

7,565 

302,531 

Total Probable Sulfide Stockpile 1∕2” Crushed

9,079 

0.011 

0.380 

98 

3,422 

TOTAL PROVEN & PROBABLE MINERAL RESERVES

1,133,061 

0.011 

0.425 

11,996 

481,399 

Waste

1,321,853 

Total Tons

2,454,914 

Strip Ratio

1.17 

Sulfide 1∕2” Crushed  663,071   0.010   0.410   6,936   272,271 
Total Probable Heap Leach  736,648   0.010   0.410   7,565   302,531 
Total Probable Sulfide Stockpile 1∕2” Crushed  9,079   0.011   0.380   98   3,422 
TOTAL PROVEN & PROBABLE MINERAL RESERVES  1,133,061   0.011   0.425   11,996   481,399 
Waste  1,321,853                 
Total Tons  2,454,914                 
Strip Ratio  1.17                 


·Mineral Reserves estimated according to the New Mining Rules definitions.

·Mineral Reserves estimated at $1,200/oz Au and $16.50/oz Ag.

·Cut-off grades used a Net Smelter Return (NSR) calculation.

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·Numbers in the table have been rounded to reflect the accuracy of the estimate and may not sum due to rounding.

We did not use metal or equivalent metal cut-off grades in estimating proven and probable mineral reserves set forth in the table above and the complexity of the ore body resulted in the use of multiple metallurgical recovery factors by domain and process method, as reflected in the NSR calculations contained in Section 12 of the Hycroft Technical Report. NSR calculations were used as the basis of proven and probable mineral reserve estimations and for decisions influencing operating strategy, mine planning and design, because of differing mining and processing costs, recoveries, and the influence of both gold and silver. Factors including the variable ore types and mineralogy, different process streams and metallurgical recoveries, and related haulage distance can all cause variability in mining and processing costs and block value. Consequently, calculation of the breakeven NSR contained no profit assumptions and breakeven NSR cut-off as used in the mine plan has been determined to be US$0/t. Metallurgical recovery factors used to estimate proven and probable mineral reserves set forth in the table above are variable based upon the domain and processing method applied. Detailed domain specific metallurgical recoveries used to estimate proven and probable mineral reserves are set forth in Table 12-3 in Section 12 of the Hycroft Technical Report, including Au and Ag recoveries by domain for ROM Heap Leach Recovery, ¾” Crushed Heap Leach Recovery, and 121∕2” Crushed Heap Leach Recovery.

The reference point for mineral reserves is ore delivered to the leach pad and does not include reductions attributed to anticipated leach recoveries. In the case of the Hycroft Mine’s open pit, all costs are accounted for during the optimization phase of pit limit planning. Once the optimum pit extents have been determined, the decision to mine the material has been made and the cost incurred; the only task remaining then is to determine the optimal routing of the material. General and administrative expenses, as applied at Hycroft, are a fixed cost and do not vary by the tons mined or processed. As such, general and administrative costs are applied as an annual cost in the mine planning and not applied as a dollar to ton of ore processed. All material routing is based on optimal destination determination accounting for all applicable costs, recoveries, and limits (i.e., crushing capacity).

Typical break-even individual single metal cut-off grade listed for informational reference in the Hycroft Technical Report (Table 12-7) is as follows:

Process Method

    

Au (opt)

    

Ag (opt)

 

ROM Oxide Leach Recovery

0.006 

0.938 

ROM Transitional Leach Recovery

0.008 

1.115 

3/4” Crushed Oxide Leach Recovery

0.005 

0.793 

3/4” Crushed Transitional Leach Recovery

0.007 

0.835 

1/2” Crushed Transitional Leach Recovery

0.006 

0.420 

1/2” Crushed Sulfide Leach Recovery

0.007 

0.519 

Process Method Au (opt)  Ag (opt) 
ROM Oxide Leach Recovery  0.006   0.938 
ROM Transitional Leach Recovery  0.008   1.115 
3/4” Crushed Oxide Leach Recovery  0.005   0.793 
3/4” Crushed Transitional Leach Recovery  0.007   0.835 
1/2” Crushed Transitional Leach Recovery  0.006   0.420 
1/2” Crushed Sulfide Leach Recovery  0.007   0.519 

The NSR calculation incorporates more than the typical single metal cutoff grades shown above, and the cutoff grades above, while typical, are not utilized in the estimation or reporting of mineral reserves. The NSR calculation covers all fixed and variable costs including mining, processing, sustaining capital deemed to be directly proportional to ore tonnage, general and administration, gross royalties, transport and shipping costs, smelting and refining costs, limits to payable metals, and refining penalties for deleterious metals. The following is an example of the method used to calculate the NSR expressed in US dollars per ton (US$/t):


NSR (US$/t) is calculated from the following equation:

NSR = (((Au Price - Au Selling) * Au Grade * Recovery Au * Au Refine) + ((Ag Price - Ag Selling) * Ag Grade * Recovery Ag * Ag Refine)) * (1 - Royalty) - Mine Cost - Process Cost - Soda Ash Cost - Sustaining Cost - G&A Cost

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Where:

NSR
=

NSR

=

Net Smelter Return

Au Price

=

Au selling price in $ per troy ounce

Au Selling

=

bullion treatment and refining cost in $ per troy ounce

Au Grade

=

Au fire grade in troy ounces per ton

Recovery Au

=

% metallurgical recovery of Au by process route& domain

Au Refine

=

% payable for Au refining losses and deductions

Ag Price

=

Ag selling price in $ per troy ounce

Ag Selling

=

bullion treatment and refining cost in $ per troy ounce

Ag Grade

=

Ag fire grade in troy ounces per ton

Recovery Ag

=

% metallurgical recovery of Ag by process route& domain

Ag Refine

=

% payable for Ag refining losses and deductions

Royalty

=

% royalty (note(Note due to very limited royalty remaining, no royalty has been included)

Mine Cost

=

mining cost per ton by material type

Process Cost

=

process cost per ton by process type& domain

Soda Ash Cost

=

soda ash cost per ton

Sustaining Cost

=

sustaining cost per ton

G&A Costs

=

general and administrative cost per ton

In addition to the factors listed above, methods, material assumptions and criteria used for estimating mineral reserves, as set forth in Section 12 of the Hycroft Technical Report, are as follows:

·Costs were generated by Hycroft personnel, metallurgical recoveries were developed by M3 Engineering, and slope inputs supplied by Call and Nicholas and Golder Associates.

·An NSR was generated for each 40 ft x 40 ft x 40 ft block for each of the processing methods available at Hycroft, which are the following:

·Run-of-Mine (ROM) Heap Leaching of oxide and transitional material;

·343∕4” Crushed Heap Leaching of oxide and transitional material;

·121∕2” Crushed Heap Leaching of transitional and sulfide material; and

·Assumed gold and silver prices of $1,200 and $16.50 per ounce, respectively.

·Economic pit limits were determined with Geovia Whittle®Whittle® Strategic Planning software.

·Open pit designs were completed utilizing Maptek Vulcan 3D mine design software.

·Mine planning was completed using Minemax strategic and operational mine planning software and selected the processing method that returned the highest net value was selected. If all processing methods returned a negative value, the block was classified as waste.

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Soda ash assumptions set forth in Table 12-4 in Section 12 of the Hycroft Technical Report were as follows:


Soda Ash Cost

=

Cost of Soda Ash x Soda Ash Required

Cost of Soda Ash

=

$0.11 per pound

Soda Ash Required

=

% Oxidation x 2000 x%Sulfide Sulfur x 1.57

% Oxidation

=

(Target Oxidation — ratio_au) / Liberation Rate

Target Oxidation

:

Bay = 55%; All Others = 70%

ratio_au

=

aucn block grade / aufa block grade

Liberation Rate

if (ratio_au le 0.05) then = 1.77

if (ratio_au le 0.10) then = 1.89

if (ratio_au le 0.15) then = 1.99

if (ratio_au le 0.20) then = 2.09

if (ratio_au le 0.25) then = 2.18

if (ratio_au le 0.30) then = 2.27

if (ratio_au le 0.35) then = 2.36

if (ratio_au le 0.40) then = 2.44

if (ratio_au le 0.45) then = 2.53

if (ratio_au le 0.50) then = 2.60

if (ratio_au le 0.55) then = 2.68

if (ratio_au le 0.60) then = 2.70

if (ratio_au le 0.70) then = 2.78

Additional parameters used to calculate NSR included: (i) Whittle input parameters of the heap leach for oxide, transitional and sulfide ores and multiple cost and recovery factors by domain, as set forth in Table 12-2 of the Hycroft Technical Report; and (ii) heap leach metallurgical recoveries utilized in the Whittle optimization in mineral reserve determinations varying by redox, domain and process method, as set forth in Table 12-3 of the Hycroft Technical Report.

Measured, Indicated and Inferred Mineral Resources

Our mineral resource estimates are calculated in accordance with subpart 1300 of Regulation S-K under the New Mining Rules of the Exchange Act and are exclusive of mineral reserves. Measured, indicated and inferred mineral resources may not be comparable to similar information regarding mineral resources disclosed in accordance with the guidance of other countries. The estimates of Mineral Resources may be materially affected if mining, metallurgical, or infrastructure factors change from those currently anticipated at the Hycroft Mine. Estimates of inferred mineral resources have significant geological uncertainty and it should not be assumed that all or any part of an inferred mineral resource will be converted to the measured or indicated categories. Mineral resources that are not mineral reserves do not meet the threshold for reserve modifying factors, such as estimated economic viability, that would allow for conversion to mineral reserves.

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Our most recent resource estimated measured, indicated and inferred mineral resources, as reflected in the Hycroft Technical Report as prepared by SRK as of June 30, 2019, used prices of $1,400 per ounce for gold and $18.00 per ounce for silver. Below is a summary of our estimated measured, indicated and inferred resources as of June 30, 2019.

Contained Grade

Contained Metal

 

Classification

    

Material

    

Tons (kt)

    

AuFa OPT

    

AuCn OPT

    

AgFa OPT

    

S%

    

Au (koz)

    

Ag (koz)

Measured

Oxide

5,650 

0.011 

0.008 

0.224 

1.79 

60 

1,267 

Mineral

Transition

21,746 

0.011 

0.005 

0.186 

1.80 

232 

4,038 

Resources

Sulfide

37,512 

0.010 

0.002 

0.273 

1.85 

356 

10,248 

64,908 

0.010 

0.004 

0.240 

1.83 

649 

15,554 

Indicated

Oxide

2,619 

0.006 

0.005 

0.229 

1.89 

17 

599 

Mineral

Transition

16,293 

0.007 

0.003 

0.329 

1.79 

117 

5,369 

Resources

Sulfide

310,102 

0.009 

0.002 

0.282 

1.81 

2,916 

87,470 

329,014 

0.009 

0.002 

0.284 

1.81 

3,050 

93,438 

Measured and

Oxide

8,268 

0.009 

0.007 

0.226 

1.82 

77 

1,867 

Indicated Mineral

Transition

38,039 

0.009 

0.004 

0.247 

1.80 

349 

9,407 

Resources

Sulfide

347,614 

0.009 

0.002 

0.281 

1.81 

3,272 

97,718 

393,922 

0.009 

0.002 

0.277 

1.81 

3,699 

108,992 

Inferred

Oxide

6,191 

0.007 

0.005 

0.267 

1.72 

44 

1,651 

Mineral

Transition

20,148 

0.008 

0.004 

0.276 

1.74 

156 

5,570 

Resources

Sulfide

568,704 

0.010 

0.002 

0.214 

1.76 

5,516 

121,930 

Fill

4,018 

0.013 

0.008 

0.150 

0.63 

53 

603 

599,062 

0.010 

0.002 

0.217 

1.76 

5,769 

129,754 


       Contained Grade  Contained Metal 
Classification Material Tons (kt)  AuFa OPT  AuCn OPT  AgFa OPT  S%  Au (koz)  Ag (koz) 
Measured Oxide  5,650   0.011   0.008   0.224   1.79   60   1,267 
Mineral Transition  21,746   0.011   0.005   0.186   1.80   232   4,038 
Resources Sulfide  37,512   0.010   0.002   0.273   1.85   356   10,248 
     64,908   0.010   0.004   0.240   1.83   649   15,554 
Indicated Oxide  2,619   0.006   0.005   0.229   1.89   17   599 
Mineral Transition  16,293   0.007   0.003   0.329   1.79   117   5,369 
Resources Sulfide  310,102   0.009   0.002   0.282   1.81   2,916   87,470 
     329,014   0.009   0.002   0.284   1.81   3,050   93,438 
Measured and Oxide  8,268   0.009   0.007   0.226   1.82   77   1,867 
Indicated Mineral Transition  38,039   0.009   0.004   0.247   1.80   349   9,407 
Resources Sulfide  347,614   0.009   0.002   0.281   1.81   3,272   97,718 
     393,922   0.009   0.002   0.277   1.81   3,699   108,992 
Inferred Oxide  6,191   0.007   0.005   0.267   1.72   44   1,651 
Mineral Transition  20,148   0.008   0.004   0.276   1.74   156   5,570 
Resources Sulfide  568,704   0.010   0.002   0.214   1.76   5,516   121,930 
  Fill  4,018   0.013   0.008   0.150   0.63   53   603 
     599,062   0.010   0.002   0.217   1.76   5,769   129,754 

·Mineral Resources are not Mineral Reserves and do not meet the threshold for reserve modifying factors, such as estimated economic viability, that would allow for conversion to mineral reserves. There is no certainty that any part of the Mineral Resources estimated will be converted into Mineral Reserves and no Mineral Resources are assumed to be converted into Mineral Reserves in the Hycroft Technical Report.

·Open pit mineral resources stated as contained within a potentially economically minable open pit; pit optimization was based on assumed prices for gold of $1,400/oz, and for silver of $18/oz, variable Au and Ag Recoveries based on geo-metallurgical domains, a mining cost of $1.45/ton, variable ore processing costs based on geo-metallurgical domains, and G&A cost of $0.65/ton, and a pit slope of 45 degrees;

·Open pit mineral resources are reported based on calculated NSR block values and the cutoff therefore varies from block to block. The NSR incorporates Au and Ag sales costs of $0.75/oz beyond the costs used for pit optimization;

·Numbers in the table have been rounded to reflect the accuracy of the estimate and may not sum due to rounding.

·Mineral Resources are reported exclusive of Mineral Reserves.

We did not use metal or equivalent metal cut-off grades in estimating measured, indicated or inferred mineral resources set forth in the table above, as no mining of mineral resources has been incorporated into the Hycroft Mine plan, and the complexity of the ore body resulted in the use of multiple metallurgical recovery factors by ore body, as reflected in the NSR calculations contained in Section 11 of the Hycroft Technical Report. NSR block calculations were used as the basis for measured, indicated and inferred mineral resources estimations and open pit mineral resources are reported based on calculated NSR block values and the cutoff therefore varies from block to block. SRK worked with our predecessor to construct updated three dimensionalthree-dimensional wireframes for alteration and oxidation zones uses geo software. Estimation of gold, silver, sulfur and rock hardness in a three dimensionalthree-dimensional block model was completed by Tim Carew, P. Geo. of SRK and is reflected in Section 11 of the Hycroft Technical Report.

Metallurgical recovery factors used to estimate measured, indicated or inferred mineral resources set forth in the table above, are variable based upon the domain and processing method applied. Detailed domain specific metallurgical recoveries used to estimate measured, indicated or inferred mineral resources are set forth in Table 11-21 in Section 11 of the Hycroft Technical Report, including Au and Ag recoveries by domain for ROM Heap Leach Recovery, 3∕4” Crushed Heap Leach Recovery, and 1∕2” Crushed Heap Leach Recovery.

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Measured, indicated and inferred mineral resources were estimated based upon an open pit optimization utilizing the following assumptions:

·assumed prices for gold of $1,400/oz and for silver of $18/oz;

·variable Au and Ag Recoveries based on geo-metallurgical domains;

·mining cost of $1.45/ton;


·variable ore processing costs based on geo-metallurgical domains;

·G&A cost of $0.65/ton;

·pit slope of 45 degrees; and

·NSR incorporates Au and Ag sales costs of  $0.75/oz beyond the costs used for pit optimization.

Please see Table 11-21 in Section 11 of the Hycroft Technical Report for a more detailed tabular presentation of the resource pit optimization parameters for oxide, transitional and sulfide ores and multiple cost and metallurgical recovery factors by domain that were also used in the calculation of block NSR values for reporting purposes.

Cautionary Note to Investors

Information concerning our mineral properties in the Hycroft Technical Report and in this prospectus includes information that has been prepared in accordance with the requirements of the New Mining Rules set forth in subpart 1300 of Regulation S-K which we have elected to early adopted.adopt early. These disclosures differ in material respects from the requirements set forth in Industry Guide 7, which remains applicable to U.S. companies subject to the reporting and disclosure requirements of the SEC that have not early adopted the New Mining Rules. These standards differ significantly from the disclosure requirements of Industry Guide 7 in that mineral resource information contained herein may not be comparable to similar information disclosed by U.S. companies that have not early adopted the New Mining Rules promulgated by the SEC.

Under SEC standards, mineralization, such as mineral resources, may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time of the reserve determination. The term “economically,” as used in the SEC’s Industry Guide 7 definition of reserves, means that profitable extraction or production has been established or analytically demonstrated in a Feasibility Studyfeasibility study to be viable and justifiable under reasonable investment and market assumptions. The term “legally” as used in the SEC’s Industry Guide 7 definition of reserves, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, we must have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with our current mine plans. As used in this prospectus, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined and used in accordance with the New Mining Rules set forth in subpart 1300 of Regulation S-K, even though such terms are not recognized under Industry Guide 7 which the New Mining Rules will replace beginning January 1, 2021 for companies that do not early adopt the New Mining Rules. You are specifically cautioned not to assume that any part or all of the mineral deposits (including any mineral resources) in these categories will ever be converted into mineral reserves, as defined by the SEC.

You are cautioned that, except for that portion of mineral resources classified as mineral reserves, mineral resources do not have demonstrated economic value. Inferred mineral resources have a high degree of uncertainty as to their existence as to whether they can be economically or legally mined. Under the New Mining Rules, estimates of inferred mineral resources may not form the basis of an economic analysis. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. A significant amount of exploration must be completed in order to determine whether an inferred mineral resource may be upgraded to a higher category. Therefore, you are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally mined, or that it will ever be upgraded to a higher category. Likewise, you are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be upgraded to mineral reserves.

For the above reasons, certain of the information contained in this prospectus may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under Industry Guide 7 of and that have not early adopted the New Mining Rules.

Internal Controls and Material Assumptions

The HMCSeller’s drill hole database has been validated by the HycroftSeller’s exploration group. A review and validation of the Hycroft collar coordinate, down-hole survey, and geology data was completed in the third quarter of 2014 by the Seller’s predecessor’s geologists.

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SRK completed data verification and validation in advance of geological modeling and resource estimation, first between May and July 2017, for gold, silver, sulfide sulfur, and total sulfur analytical results, and for logged geological data. During this review, the analytical databases were found to be incomplete. SRK worked with ourSeller’s predecessor to extract all available analytical data from the acQuire database. This resulted in a 58% increase in the sulfide sulfur dataset. The compilation of gold and silver assay values in parts per million (PPM) units resulted in more intervals with valid Au CN:FA values for oxide modeling, and greater precision for grade estimation. SRK completed data verification for the new analytical database in September 2017.

Model validation was approached through visual and statistical methods. Visual comparison was done on sections and in plan for each area of the deposit. Statistical comparison was achieved using comparative population statistics and swath plots. Reconciliation of the model, excluding fill, to available production data was completed. Material mined by Seller’s predecessor between 2008 and 2015 was compared to blocks in the mined volume. Model and production data are summarized in the Hycroft Technical Report. The model compared well to historical production records for total gold ounces. The model has about 5% more tonnage, and about 4% lower gold grade, than the reported production. Reported silver grade was about 7% lower than what was predicted by the model and resulted in silver ounces produced about 12% less than what was predicted from the block model.

A visual inspection of the model in plan and section confirmed that grades were well correlated between the blocks and the composite data in each area.

Statistics by interpolation domain (grade shell) were used to compare the Au and Ag NN (polygonal) and OK and IDW, where applicable, grades against each other. The NN interpolation method provides a declustered representation of the sample grades and therefore, the resulting mean grades of any other method should be similar to the mean grade of the NN estimate at a zero-cutoff grade. For Au, the OK estimates were within acceptable tolerances of the NN; approximately ±3% for each domain. The global mean estimated OK grade at zero cut-off was within ~1% of the NN estimate. For Ag, the OK and IDW estimates were within acceptable tolerances of the NN; approximately ±5% for each domain, with the higher variances corresponding to the poorly sampled Bay and Lewis domains. The global mean estimated grade at zero cut-off was within ~1.2% of the NN estimate.

A swath plot is a graphical display of the grade distribution derived from a series of bands, or swaths, generated in several directions through the deposit. Using the swath plot, grade variations from the OK and IDW (where applicable) model are compared to the distribution derived from the NN grade model.

On a local scale, the NN model does not provide reliable estimations of grade, but on a much larger scale it represents an unbiased estimation of the grade distribution based on the underlying data. Therefore, if the OK/IDW model is unbiased, the grade trends may show local fluctuations on a swath plot, but the overall trend of the OK/IDW data should be similar to the NN distribution of grade.

Swath plots were generated along east-west and north-south directions, and also for elevation. Swath widths were 200 feet wide for both east-west and north-south orientations, and 80 feet wide in the vertical. Au grades were plotted by OK/IDW (red traces) and NN (blue traces) for all estimated blocks.

Based on the swath plots, it was concluded that there is a reasonable correlation between the modeling methods. The degree of smoothing in the OK/IDW model is evident in the peaks and valleys shown in some swath plots; however, this comparison shows close agreement between the OK/IDW and NN models in terms of overall grade distribution as a function of easting, northing, and elevation; especially where there are high tonnages (as shown by the vertical bars on the plots).

Given that process recoveries and costs in the resource model are grade and/or domain dependent, the application of standard cut-off grades for resource reporting purposes is not feasible. The resources are, therefore, reported with respect to a block NSR value which is calculated on a block-by-block basis. The resource is also constrained by an optimized (Whittle) resource pit, in order to demonstrate that the defined resources have reasonable prospects of eventual economic extraction, a part of the New Mining Rules criteria. All classification categories were considered in the resource pit optimization. The estimation of the NSR values and development of the Whittle resource pit requires assumptions around technical and economic parameters such as process recoveries, mining methods and operating costs.


Drilling

Our exploration model includes data from 1981 to December 2018 and includes 5,501 holes, representing 2.5 million feet of drilling. Exploration drilling was started in 1974 by Duval Corporation, and continued through various owners. Our predecessorsSeller’s predecessor commenced systematic exploration and resource development drilling starting in late 2006. Drilling has been focused on oxide reserve delineation, sulfide resource definition, sulfide exploration, condemnation drilling for facilities, silver data and both geotechnical and metallurgical core samples. A combination of rotary, reverse circulation and core drilling techniques has been utilized to verify the nature and extent of mineralization. From late-2006 to August 31, 2016, the Seller and its predecessor completed 1,970 exploration holes, totaling approximately 1.45 million feet.

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Seller drilled an additional 54 holes, totaling 4,6444,706 feet starting in December 2018 through April 2019 confirming the grades of the previously mined sulfide ore stockpiles, which we have been using as the initial ore feed for the Seller’s restart operations.


Drill hole collar locations are shown in the figure below.

Graphic


Consistent with the Seller’s suspension of mining operations and conducting only care and maintenance activities on the Hycroft Mine, during 2017 and through December 2018, they did not conduct additional drilling activities, other than to obtain ore for testing purposes. In December 2018, the Seller began confirmation drilling of certain sulfide ore stockpiles that we planned to mine.

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Any expansion of the Hycroft Mine necessary to exploit any additional reserves that may be established through our exploration drilling program that are not located within our current mine plan, will require us to obtain all permits, approvals and consents of regulatory agencies responsible for the use and development of mines in Nevada.

Government Regulation of Mining-Related Activities

Government Regulation

Mining operations and exploration activities are subject to various federal, state and local laws and regulations in the United States, which govern prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances and other matters. We have obtained or have pending applications for those licenses, permits or other authorizations currently required to conduct our mining, exploration and other programs. We believe that we are in compliance in all material respects with applicable mining, health, safety and environmental statutes and the regulations passed thereunder in Nevada and the United States. Although we are not aware of any current claims, orders or directions relating to our business with respect to the foregoing laws and regulations, changes to, or more stringent application or interpretation of, such laws and regulations in Nevada, or in jurisdictions where we may operate in the future, could require additional capital expenditures and increased operating and/or reclamation costs, which could adversely impact the profitability levels of our projects.

Environmental Regulation

Our mining projects are subject to various federal and state laws and regulations governing protection of the environment. These laws and regulations are continually changing and, in general, are becoming more restrictive. They, among other things:

·impose strict, joint and several liability on current and former owners and operators of sites and on persons who disposed of or arranged for the disposal of hazardous substances found at such sites (the Comprehensive Environmental Response, Compensation, and Liability Act);

·govern the generation, treatment, storage and disposal of solid waste and hazardous waste (the Federal Resource Conservation and Recovery Act);

·restrict the emission of air pollutants from many sources, including mining and processing activities (the Clean Air Act);

·require federal agencies to integrate environmental considerations into their decision-making processes by evaluating the environmental impacts of their proposed actions, including the issuance of permits to mining facilities and assessing alternatives to these actions (the National Environmental Policy Act);

·regulate the use of federal public lands to prevent undue and unnecessary degradation of the public lands (the Federal Land Policy and Management Act of 1976 );

·restrict and control the discharge of pollutants and dredged and fill materials into waters of the United States (the Clean Water Act); and

·regulate the drilling of subsurface injection wells (the Safe Drinking Water Act and the Underground Injection Control program promulgated thereunder).

At the state level, mining operations in Nevada are regulated by the Nevada Department of Conservation and Natural Resources, Division of Environmental Protection, which has the authority to implement and enforce many of the federal regulatory programs described above as well as state environmental laws and regulations. Compliance with these and other federal and state laws and regulations could result in delays 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.

It is our policy to conduct business in a way that safeguards public health and the environment. We believe that our operations are, and will be, conducted in material compliance with applicable laws and regulations. However, our past and future activities in the United States may cause us to be subject to liability under such laws and regulations noted above. For information about the risks to our business related to environmental regulation, see “Risk Factors — Risks Related to Our Industry.”

During the years ended December 31, 2019 and 2018, there were no material environmental incidents or non-compliance with any applicable environmental regulations on the properties now held by us, except as follows: On March 19, 2019, the Seller’s predecessorSeller executed an Administrative Order of Consent and agreed to a payment of $11,521 to the State of Nevada acting by and through the Division to settle a Finding of Alleged Violation and Order issued November 7, 2018 for non-compliance with the Resource Conservation and Recovery Act requirements to remove hazardous waste within 90 days of accumulation of such waste. The Seller did not incur material

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capital expenditures for environmental control facilities during 2018 and 2019. Additionally, on December 11, 2019, the Division held an enforcement conference with our management (then employed by our predecessor)Seller) to determine whether the issuance of Notices of Alleged Air Quality Violation Order No 2701 was or was not warranted. The Division issued a formal warning and has indicated that it does not intend to take any further action.

Reclamation

We are required to mitigate long-term environmental impacts by stabilizing, contouring, re-sloping and re-vegetating various portions of a site after mining and mineral processing operations are completed. These reclamation efforts will be conducted in accordance with detailed plans, which must be reviewed and approved by the appropriate regulatory agencies. Our reclamation liability is related to the Hycroft Mine and is fully secured by surface management surety bonds that meet the financial bonding requirements of the BLM. Our most recent reclamation cost estimate was approved by the BLM in a May 2017 decision letter and totaled $58.3 million.letter. At December 31, 2019,June 30, 2020, our surface management surety bonds totaled $59.9 million, which were partially collateralized by restricted cash of $39.5$39.6 million. Based on the December 31, 2019 estimate, no significant reclamation expenditures will be incurred until 2047 and the reclamation work will be completed by 2065. If we were to carry out unanticipated reclamation work in the future, our financial position could be adversely affected or our posted bonds may be insufficient.

Mine Safety and Health Administration Regulations

Safety and health is our highest priority which is why we have mandatory mine safety and health programs that include employee and contractor training, risk management, workplace inspection, emergency response, accident investigation and program auditing. We consider these programs to be essential at all levels to ensure that our employees, contractors, and visitors only operate in the safest and healthiest environment possible.

Our operations and exploration properties are subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”), under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), issuers are required to disclose specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities in periodic reports. MSHA inspects our Hycroft Mine on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. The number of citations and orders charged against mining operations, and the dollar penalties assessed for such citations, have generally increased in recent years. When the MSHA issues a citation or order, it generally proposes a civil penalty, or fine, as a result of the alleged violation, that the operator is ordered to pay. Citations and orders can be contested and appealed, and as part of that process, are often reduced in severity and amount, and are sometimes dismissed. With respect to the Hycroft Mine, the Seller received aggregate fines of $26,129 during the first six months of 2020 and aggregate fines of $3,000 and less than $2,000 during the years ended December 31, 2019 and 2018. The Company received aggregate fines of $6,528 during the second quarter of 2020.


Property Interests and Mining Claims

Our development activities are conducted in the State of Nevada. Mineral interests may be owned in Nevada by the United States, Nevada or private parties. Where prospective mineral properties are held by the United States, mineral rights may be acquired through the location of unpatented mineral claims upon unappropriated federal land. Where prospective mineral properties are owned by Nevada or private parties, some type of property acquisition agreement is necessary in order for us to explore or develop such property. Mining claims are subject to the same risk of defective title that is common to all real property interests. Additionally, mining claims are self-initiated and self-maintained and, therefore, possess some unique vulnerabilities not associated with other types of property interests. It is impossible to ascertain the validity of unpatented mining claims solely from an examination of the public real estate records and, therefore, it can be difficult or impossible to confirm that all of the requisite steps have been followed for location and maintenance of a claim. For information about the risks to our business related to our property interests and mining claims, see “Risk Factors — Risks Related to Our Industry.”

LEGAL PROCEEDINGS

On February 7, 2020, a purportedFrom time to time we are involved in various legal actions related to our business, some of which are class action complaint was filed bylawsuits. We do not believe, based on currently available information, that contingencies related to any pending or threatened legal matter will have a purported holdermaterial adverse effect on our financial statements, although a contingency could be material to our results of Seller warrants, in the Courtoperations or cash flows for a particular period depending on our results of Chanceryoperations and cash flows for such period. Regardless of the Stateoutcome, litigation can have an adverse impact on us because of Delaware against the Companydefense and the Seller. The complaint seeks a declaratory judgment that the transactions consummated by the Purchase Agreement constituted “Fundamental Change” under the termssettlement costs, diversion of the Seller Warrant Agreementmanagement resources, and thereby requiring that the Seller warrants be assumed by us as partother factors.

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Table of the transactions, in addition to asserting claims for (i) breach or anticipatory breach of contract against the Seller, (ii) breach or anticipatory breach of the implied covenant of good faith and fair dealing against the Seller, and (iii) tortious interference with contractual relations against us. The complaint sought unspecified money damages and also sought an injunction enjoining the Seller and us from consummating the transactions. On February 26, 2020, the Company and the Seller entered into an Amendment to the Purchase Agreement whereby the Seller's liabilities and obligations under the Seller Warrant Agreement were included as an assumed liability under the Purchase Agreement. On March 27, 2020, the Company and the Seller filed a motions to dismiss the complaint. On May 15, 2020, a hearing was held and the complaint was dismissed. On May 21, 2020, Plaintiff filed a motion to alter or amend the Court’s order so that the Court would retain jurisdiction to hear an application for a mootness fee, to which the Company and the Seller, while disputing factual assertions and characterizations, did not oppose. On June 30, 2020, the motion was granted and the Court retained jurisdiction over the action to hear any mootness fee application.Contents


MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK

AND RELATED STOCKHOLDER MATTERS

Prior to the completion of the business combinationRecapitalization Transaction on May 29, 2020, Mudrick Capital Acquisition Corporation’s publicly-traded units, Class A common stock and warrants were listed on NASDAQthe Nasdaq Capital Market under the symbols “MUDSU”, “MUDS” and “MUDSW”, respectively. The Company listed its publicly-traded Common Stock and warrants effective upon the consummation of the business combinationRecapitalization Transaction on NASDAQthe Nasdaq Capital Market under the symbols “HYMC” and “HYMCW”, respectively. The Company is registering the shares of our Common Stock underlying the Seller warrants have been approved for listing on this registration statementthe Nasdaq Capital Market under the symbol “HYMCZ” and will use its commercially reasonable best efforts to apply to list the Seller warrants forcommence trading on NASDAQ, as soon as reasonably practicable, subject to applicable listing requirements.

September 1, 2020.

The Company has not paid any cash dividends on its Common Stock to date. The payment of cash dividends in the future will be dependent upon the Company’s revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends subsequent to the business combination will be within the discretion of the Company’s board of directors at such time, but is subject to restriction imposed by the Sprott Credit Agreement. In addition, the Company is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future as it is currently expected that available cash resources will be utilized in connection with our ongoing operations, evaluation programs and development projects.

As of July 10,August 28, 2020, there were 6256 record holders of our Common Stock.

The Company has no equity compensation plans currently in effect that were in effect as of December 31, 2019. The information in the table below reflect the issuance of replacement equity incentive awards under the Incentive Plan in the form of an equivalent value of restricted stock units convertible into shares of Common Stock to holders of the Seller’s equity awards granted in 2019.

  (a)  (b)   (c)
      Number of securities
      remaining available for
  Number of securities to be Weighted-average  future issuance under
  issued upon exercise of  exercise price of  equity compensation  plans
  outstanding options,  outstanding options,  (excluding securities
Plan category                warrants and rights   warrants and rights  reflected in column (a))
Equity compensation plans approved by security holders(1) 196,841  N/A  2,311,161
Equity compensation plans not approved by security holders   --  --   --

(1)Includes the Incentive Plan and is based on the closing stock price on the date of the transaction of $12.65 to determine the number of shares to be issued. While the value of  the shares to be issued has been determined, the actual number of shares to be issued will be determined on the vesting dates using the closing prices on those dates.


MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As a result of the completion of the business combination,Recapitalization Transaction, the financial statements of the Seller are now the financial statements of the Company. Prior to the business combination,Recapitalization Transaction, the Company had no operating assets but, upon consummation of the business combination,Recapitalization Transaction, the business and operating assets of the Seller sold to the Company became the sole business and operating assets of the Company. Accordingly, the financial statements of the Seller and its subsidiaries as they existed prior to the business combinationRecapitalization Transaction and reflecting the sole business and operating assets of the Company going forward, are now the financial statements of the Company. Thus, the following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes of the Seller set forth under the heading “Index to Financial Statements” elsewhere in this filing. The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes of Seller as well as our interim unaudited condensed consolidated financial statements for the Seller.three and six months ended June 30, 2020. This discussion contains forward-looking statements reflecting the Company’s current expectations, estimates, plans and assumptions concerning events and financial trends that involve risks and may affect the Company’s future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors,” beginning on pages 1 and 87 of this prospectus, respectively.

General

Introduction to the Company

Hycroft Mining Holding Corporation (formerly known as Mudrick Capital Acquisition Corporation (“MUDS”)) and its subsidiaries is a U.S.-based development stage gold mining companyproducer that mines oxide, transitionis focused on operating and sulfide heap ore at our sole property, the Hycroft Mine. Thedeveloping its wholly owned Hycroft Mine is an open-pit heap leach operation located in Nevada.a safe, environmentally responsible, and cost-effective manner. Gold and silver sales represent 100% of our operating revenues and the market prices of gold and silver significantly impact our financial position, operating results, and cash flows.

The Hycroft Mine restarted mining operations duringis located in the first halfstate of 2019 after being in a care and maintenance mode for more than two years. From the beginning of 2017 through the first three months of 2019, the Hycroft Mine was in a care and maintenance mode, which it entered when it was determined that it could no longer economically recover metal. While in care and maintenance, gold and silver production was a byproduct of maintenance activities.

Effective July 31, 2019, M3 Engineering in conjunction with SRKNevada and the Seller, completed the Hycroft Technical Report Summary, Heap Leaching Feasibility Study prepared for the Seller with an effective date of July 1, 2019, preparedcorporate office is located in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K, which is filed as Exhibit 96.1 to the registration statement of which this prospectus forms a part, for a two-stage, heap oxidation and subsequent leaching of transition and sulfide ores. As of June 30, 2019, based onDenver, Colorado. Based upon the Hycroft Technical Report, the Hycroft Mine had proven and probable mineral reserves of 12.0 million ounces of gold and 481.4 million ounces of silver.

Operations restart

During the second quarter of 2019, Seller restarted open pit mining operations at the Hycroft Mine, and, since August 2019, we have produced and sold gold and silver which are contained in oxide,on an approximate weekly basis. As part of the 2019 restart of mining operations, existing equipment was re-commissioned, including haul trucks, shovels and a loader, our crushing system was upgraded and commissioned with our manufacturer, and new leach pad space was added to the existing leach pads. During the first half of 2020, we continued to increase our operations by mining more tons, procuring additional mobile equipment rentals, and increasing our total headcount. During the first six months of 2020, the Hycroft Mine produced 12,342 ounces of gold and 73,717 ounces of silver and sold 10,797 ounces of gold and 70,703 ounces of silver.

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Strategy and goals

Our strategy is to increase stockholder value through the successful execution of a two-stage, heap oxidation and subsequent leaching of transition and sulfide ores. Pursuant to the current 34-year life of mine planores, as presented in the Hycroft Technical Report, once fully operational,Report. To accomplish this strategy, we must first achieve our most critical near-term internal targets and performance metrics, including within key operating areas, such as mining, will range from approximately 85 – 100 million tons per year. As set forth incrushing, and processing, as well as the Hycroft Technical Report, we expect mining will be performed by a contract mining company or that we will primarily use a short-term equipment rental fleet during the initial five-year ramp-up using customary truckrelated costs and shovel open pit mining methods. After the initial ramp-up, we expect to self-perform miningoperating expenses associated with our own equipment fleet.

The Hycroft Technical Report classifies the ore into three categories based on how the ore will be processed. Category 1 ore, which is comprised of low-grade ore with high cyanide soluble gold, will not go through a pre-oxidation step nor will it be crushed due to its low-grade. Category 1 ore accounts for 4% of the ore over the current life of the mine. Category 2 ore, which is comprised of high-grade ore with high cyanide soluble gold, will be crushed, but will not go through a pre-oxidation step. Category 2 ore accounts for 2% of the ore over the current life of the mine. Category 3 ore, which is comprised of low cyanide soluble gold, will be crushed and go through a pre-oxidation step. Category 3 ore accounts for 94% of the ore over the current life of the mine. Categories 2 and 3 ore will each be crushed to increase surface area and will follow a slightly different process once crushed. As part of the crushing process, Category 3 ore will be mixed with soda ash to induce a pre-oxidation process, rinsed with fresh water and a saturated lime solution and then leached with lime and cyanide. The pre-oxidation period will vary based on the character of the ore. Once crushed, Category 2 ore will be leached using lime and cyanide. Category 1 ore will be stacked as run- of-mine (not crushed) and then leached using lime and cyanide. The focus of the Hycroft


Technical Report was the test work done on the two-stage pre-oxidation and cyanide leaching of the Category 3 ores, which was determined to be economically effective.

Pregnant solution from the heap leach pads, which will include solution from each of the three ore types, will be processed at our two existing Merrill-Crowe zinc-cementation facilities. Theproducing gold and silver doré produced at the mine site will be further refined by a third party to meetHycroft Mine. We must also successfully construct, commission, and operate our ongoing leach pad expansion project, which provides the required market standardspad areas for future ore placement expected to commence in the fourth quarter of 99.95% pure gold2020. Due to the technical nature of the two-stage, heap oxidation and 99.90% pure silver, which will thenleaching process, we must also be soldsuccessful at current spotattracting and retaining highly-skilled and experienced employees to manage the metallurgical and process departments. At such future time when we believe our near-term goals are achieved, we plan to ramp-up the Hycroft Mine by increasing the amount of ore tons mined and crushed, the amount of ore tons processed, and ultimately the number of gold and silver prices.ounces produced.

As discussed throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, including within “– Hycroft Mine” below, during the first six months of 2020 we have been unable to fully achieve our internal operating, processing, sales, and production cost targets, which has created substantial doubt about our ability to continue as a going concern. Refer to “– Recent Developments – Going concern” below for additional details.

Executive Summary

Health and Safety – During the second quarter of 2020, we reported two lost time accidents.
Recapitalization Transaction – On May 29, 2020, we completed the Recapitalization Transaction, which as of the closing date, among other things, resulted in a cash balance of $68.9 million and 50,160,042 shares of Common Stock issued and outstanding. In addition, the Company had 34,289,999 outstanding warrants to purchase an equal number of shares of Common Stock at $11.50 per share and 12,721,623 Seller warrants to purchase 3,210,213 shares of Common Stock at a price of $44.82 per share.
Ounces and realized prices - During the first six months of 2020, the Hycroft Mine produced 12,342 ounces of gold and 73,717 ounces of silver and sold 10,797 ounces of gold (average realized price of $1,631) and 70,703 ounces of silver (average realized price of $16.24).
Leach pad construction – During the second quarter and first six months of 2020, we spent $8.6 million and $9.7 million, respectively, on the leach pad expansion project.
Cash flows and liquidity – Our ending cash balance as of June 30, 2020, was $47.3 million, following year-to-date 2020 operating cash flows of ($57.6) million, investing activities of ($11.7) million, and financing activities of $107.3 million.
Going concern – As of June 30, 2020, substantial doubt existed about our ability to continue as a going concern due to our need for additional capital.

Health and Safety

No matter the level of our health and safety performance, whether high or low, our philosophy is one of “continuous improvement” combined with a belief that “the miner is the most important thing to come out of a mine.” We have mandatory mine safety and health programs that include employee and contractor training, risk management, workplace inspection, emergency response, accident investigation and program auditing. We consider these programs to be essential at all levels to ensure that our employees, contractors, and visitors operate safely.

During the second quarter of 2020, we reported two lost time accidents, which brought the year-to-date total to three. When included with other reportable incidents, the Hycroft Mine’s total reportable incident frequency rate (“TRIFR”), which is one of the metrics we use to assess safety performance, was above industry averages and historical levels experienced at the Hycroft Mine. As a result, we have allocated additional personnel, resources, workforce time, and communications to mine safety which we believe should contribute to a reduction in future lost time accidents and our TRIFR to reach the level of safety we expect and need to keep our workforce, contractors, and visitors safe.

For health and safety actions specific to COVID-19, refer to “– Recent Developments –COVID-19” below.

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Recent Developments

Recapitalization Transaction

OnAs discussed in Note 1 - Company Overview and Note 3 - Recapitalization Transaction to the Notes to Unaudited Consolidated Financial Statements, on May 29, 2020, we, completedformerly known as Mudrick Capital Acquisition Corporation, consummated a business combination transaction (the “Recapitalization Transaction”) as contemplated by a purchase agreement dated January 13, 2020, as amended on February 26, 2020 (the “Purchase Agreement”), by and among us, MUDS Acquisition Sub, Inc. (“Acquisition Sub”) and Hycroft Mining Corporation (“Seller”). Pursuant to the Purchase Agreement, Acquisition Sub acquired all of the issued and outstanding equity interests of the direct subsidiaries of Seller and substantially all of the other assets of Seller and assumed substantially all of the liabilities of Seller. In conjunction with the Recapitalization Transaction, Seller’s indebtedness existing prior to the Recapitalization Transaction was either repaid, exchanged for indebtedness of the Company, exchanged for shares of Common Stock or converted into shares of Seller common stock, and our post-Recapitalization Transaction indebtedness included amounts drawn under the Sprott Credit Agreement and the assumption of the newly issued Subordinated Notes. Upon closing of the Recapitalization Transaction, our unrestricted cash available for use totaled $68.9 million and the number of shares of Common Stock issued and outstanding totaled 50,160,042. In addition, we had 34,289,999 outstanding warrants to purchase an equal number of shares of Common Stock at $11.50 per share and 12,721,623 Seller warrants to purchase 3,210,213 shares of Common Stock at a price of $44.82 per share (see Note 12 – Stockholders’ Equity to the Notes to Unaudited Consolidated Financial Statements for additional information). Upon closing of the Recapitalization Transaction and after giving effect to the terms of the business combination, described abovethe former holders of Seller’s indebtedness and common stock, including affiliated entities of such former holders, owned approximately 96.5% of the issued and outstanding Common Stock.

Going concern

As discussed in Note 2 – Summary of Significant Accounting Policies to the Notes to Unaudited Consolidated Financial Statements, events and conditions exist that, when considered individually or in the Section entitled “aggregate, raise substantial doubt about our ability to continue as a going concern because it is probable that, without additional capital injections, we will be unable to meet our obligations as they become due within one year after the date that second quarter 2020 financial statements were issued. Although we recently completed the Recapitalization Transaction, using our internal forecasts and cash flow projection models, we currently project there will be insufficient cash to meet our future obligations as they become due or ramp up the Hycroft Mine’s operations from current levels or to levels that are contemplated by the Hycroft Technical Report.

DescriptionProduction inventory write-downs

Consistent with our financial reporting and accounting policies, and as part of Businessthe preparation of the second quarter 2020 financial statements, we performed routine quarter-end metallurgical balancing analysis, which is a process that estimates the remaining recoverable gold and silver ounces on the leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, crushed ore sampling, leach pad and solution sampling, estimated recovery percentages based on ore type, domain, and oxidation levels achieved, and quantities of gold and silver actually recovered. During the second quarter of 2020, based on metallurgical balancing results, we determined that 6,512 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off such ounces. The write-down of these ounces significantly reduced our projected revenues for the second half of 2020. See Note 4 – Inventories ”.to the Notes to Unaudited Consolidated Financial Statements for additional information.

Cost of sales

COVID-19We have been unsuccessful in achieving our operating and production costs targets at the Hycroft Mine. During the second quarter of 2020, our production costs, mine site period costs, and the cash portion of the write-down of production inventories totaled $29.7 million, which exceeded second quarter 2020 revenues of $7.6 million by $22.1 million. Higher than planned operating and production costs were the result of: (1) increased contractor support for technical and manpower shortages in crusher operations, mobile maintenance, and leach pad operation; (2) overuse of processing reagents used in the leach pad operations due to poor planning, monitoring, and execution; (3) higher operating costs in the crusher, due to higher than planned belt failures; and (4) higher maintenance costs for the owned mining fleet, due to unexpected timing of component failures. As a result of actual second quarter 2020 operating and production costs incurred, we have revised our future forecasts of production and operating cost estimates for the second half of 2020, which has reduced our estimated future cash flows.

Current status

Our ability to continue as a going concern is contingent upon achieving our sales, production, cost, and other operating targets, as well as the success of this offering to provide additional capital financing for working capital and construction of the leach pad.

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COVID-19

In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China. On January 30,March 2020, the World Health Organization declared the outbreak to constituteof COVID-19 as a “Public Health Emergency of International Concern”. In February 2020, the first death duepandemic, which continues to the virus was reported in the United States. Subsequently, the virus has spread throughout the United States with a significant number of deaths reported. On March 13, 2020, President Trump declared aStates. Efforts implemented by local and national state of emergencygovernments, as well as businesses, including temporary closures, are expected to have adverse impacts on local, national and issuedthe global economies. We have implemented health and safety policies for employees, contractors, and visitors that follow guidelines including working from home whenever possible, avoiding social gatheringspublished by the Center for Disease Control (“CDC”) and discretionary travelthe Mine Safety and other protective measures of socially distancing to reduce the spread of COVID-19. The COVID-19 outbreak has disrupted and continues to disrupt supply chains and affect production and sales across a range of industries.Health Administration (“MSHA”). The extent of the impact of the COVID-19 outbreak on our operational and financial performance will depend on certain developments, including the duration and continued spread of the outbreak, and the direct and indirect impacts on our employees, vendors and customers, all of which are uncertain and cannot be fully anticipated or predicted. AsSince the Hycroft Mine represents the entirety of our operations, any COVID-19 outbreak at the mine site could result in an entire shutdown of the date of this prospectus the extent toHycroft Mine itself which COVID-19 maywould negatively impact our financial condition orposition, operating results, and cash flows.

As a result of operationsthe ongoing COVID-19 pandemic, we have implemented numerous policies and initiatives, including, but not limited to:

General travel and site access restricted to business-critical needs; discretionary travel strongly discouraged;
Health and temperature checks required prior to boarding mine site transportation buses;
Increased cleaning and disinfecting of common areas, including mobile mining equipment cabs;
Social distancing, including limiting meetings to essential people with increased use of conference calls and webinars;
Communications informing employees of their ability to take paid-leave for COVID-19-related matters;
Employees who can have been permitted to work remotely; and
Regularly monitoring local, state, and national publications and guidance for routine discussion amongst executives and management.

To date, we have not experienced any material disruptions to our supply chain because of the COVID-19 pandemic.

CEO Transition

On July 1, 2020, Randy Buffington, our former Chairman, President, and CEO departed the Company. Mr. Buffington is uncertain, but could be materialassisting us during this transition period and adverse.has entered into a consulting agreement for 24 months, through July 1, 2022. See Note 22  — Subsequent Events to the Notes to Unaudited Consolidated Financial Statements.

On August 31, 2020, the Company announced that it will appoint Diane R. Garrett, Ph.D, as the Company’s President and Chief Executive Officer and as a director, effective as of September 8, 2020. For more information about Dr. Garrett’s biography and compensation arrangements, see “Management” and “Executive Compensation — Compensation Arrangements with Diane R. Garrett,” respectively.

Recently Issued Director Compensation

The Compensation Committee and Board of Directors approved annual director compensation arrangements. See “Executive Compensation – Director Compensation” for more information.

Accounting Pronouncements

Developments

For a discussion of Recently Issued Accounting Pronouncements,any recently issued and/or recently adopted accounting pronouncements, see Note 2 — Summary of Significant Accounting Policies to the Seller’s Notes to Unaudited Consolidated Financial Statements.

Critical Accounting Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on our and Seller’s condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these statements requires us to make assumptions estimates, and judgmentsestimates that affect the reported amountsamounts. The more significant areas requiring the use of assets, liabilities, revenues,management estimates and expenses.assumptions relate to; ore on leach pads; proven and probable mineral reserves; impairment of long-lived assets; and our reclamation liability. We base our assumptions estimates, and judgmentsestimates on historical experience current trends and other factorsvarious assumptions that we believe to be relevant at the time our consolidated financialestimates are made. Actual results may differ from amounts estimated in these statements, are prepared. On a regular basis, we review our accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, becausesuch difference could be material. As such, future events and their effects cannot be determined with certainty, actual results could differ, and such differences could be material.certainty.

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We consider an accounting estimate to be critical if it requires significant management judgmentjudgments and assumptions about matters that are highly uncertain at the time the estimate is made and if changes in the estimate that are reasonably possible could materially impact our consolidated financial statements. Although other estimates are used in preparing our consolidatedand Seller’s financial statements, we believe that the following accounting estimates are the most critical to understanding and evaluating our reported financial results. For information on all of our significant accounting policies, see Note 2 — Summary of Significant Accounting Policies”Policies to ourthe Notes to Unaudited Consolidated Financial Statements.


Ore on Leach Pads

Estimate Required

Required:

The recovery of gold and silver at the Hycroft Mine has beenis accomplished through a two-stage, heap oxidation and subsequent leaching process, the nature of which limits our ability to precisely determine the recoverable gold and silver ounces in ore on leach pads. We estimate the quantity of recoverable gold and silver ounces in ore on leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, and estimated recovery rates based on ore type and domain and level of oxidation actually achieved or expected to be achieved prior to leaching. The quantity of recoverable gold ounces and recovery rates varies based on ore mineralogy, ore grade, ore particle sizes and the percentage of cyanide soluble gold. The estimated recoverable gold and silver ounces placed on the leach pads and recovery rates are periodically reconciled by comparing the related ore processed to the actual gold and silver ounces recovered (metallurgical balancing) from such ore.. The ultimate recoverable gold and silver ounces over the life-of- mineor life-of-mine recovery rate is unknown until mining operations cease. A change in the recovery rate or the quantity of recoverable gold and silver ounces in our stockpiles or ore on leach pads could materially impact our consolidated financial statements.

Impact of Change in Estimate

Estimate:

Changes in recovery rate estimates or estimated recoverable gold and silver ounces that do not result in write-downs are accounted for on a prospective basis; however, ifbasis. If a write-down is required, ore on leach pads would be adjusted to market values before prospectively accounting for the remaining costs and revised estimated recoverable gold ounces.

During the three months ended March 31, 2020, the Seller recognized a $6.9 million write-down of ore on leach pads as a result of metallurgical balancing. Cash production costs written-off were $6.4 million and capitalized depreciation and amortization costs written-off were $0.5 million. Based on metallurgical balancing results, the Seller determined that 3,980 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. The write-off of these ounces was primarily due to poor execution of maintaining the critical variables necessary for oxidation and ultimately recovery of a specific cell of the leach pads. As a result, the Seller determined that it would recover 20% less than planned of the mismanaged section of the leach pads.

During the year ended December 31, 2019, the Seller recognized a $16.4 million write-down of ore on leach pads as a result of metallurgical balancing. Cash production costs written-off were $15.1 million and capitalized depreciation and amortization costs written-off were $1.3 million. Based on metallurgical balancing results, the Seller determined that 11,680 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. The write-off of these ounces was primarily a result of mismanagement of solution flows. The lost gold and silver ounces were leached and captured in solution. However, prior to the solution being processed through the Merrill-Crowe plant, it was inadvertently commingled with barren solution and pumped to older leach pads, keeping it from being recovered in the future.

In addition toDuring the write-off related tothree and six months ended June 30, 2020, based on our metallurgical balancing during 2019,results, we performed our lowerdetermined that 6,512 and 10,492 ounces of cost or net realizable value test forgold, respectively, that had been placed on the Ore on leach pads at December 31, 2019, which resulted in a $2.2 million write-offwere no longer recoverable and wrote-off these ounces. For the three and six months ended June 30, 2020, we recognized write-downs of production inventories. Cashinventories, which included production costs written-off were $2.0of $10.2 million and $16.7 million, respectively, and capitalized depreciation and amortization costs written-off were $0.2 million.of $0.7 million and $1.3 million, respectively. The write-off of these ounces was primarily driven by an increasedue to mismanagement of the oxidation process and not properly adjusting variables in cost perthe oxidation process for changes in the ore type based on domain. As a result, we determined that we would recover fewer ounces than planned of the mismanaged sections of the leach pads.

At June 30, 2020, if our estimate of recoverable gold ounce placedounces on the leach pads, particularly during the fourth quarter of 2019. The increasepad decreased by 2.5% or 5.0%, recoverable gold ounces in cost was mainly due to higher maintenance costs as there were more mechanical issues than expected and higher contractor costs to supplement our workforce. The recognition of the write-off was based on the Seller’s application of the lower of cost or net realizable value accounting policy.

As of March 31, 2020, the balance of ore on leach pads was $26.1would decrease by approximately 446 ounces or 891 ounces, respectively, which would require a write-down of $0.7 million and asor $1.4 million, respectively, of December 31, 2019 and 2018,our ore on leach pad costs before prospectively accounting for the balanceremaining costs. A 2.5% or 5.0% increase to our estimate of recoverable gold ounces in ore on leach pads was $22.1 millionwould increase the estimated recoverable ounces by the aforementioned amounts and $0, respectively. Duringreduce our weighted average cost per ounce by approximately $39 per ounce or $75 per ounce, respectively, which would be accounted for on a prospective basis.

Proven and Probable Mineral Reserves

Estimate required:

Proven and probable mineral reserves are the year ended December 31, 2019,part of a mineral deposit that can be economically and legally extracted or produced at the Seller resumedtime of the reserve determination. Our mineral reserve estimates are calculated in accordance with subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Estimated recoverable gold ounces in our proven and probable reserves at the Hycroft Mine are used in units-of-production amortization calculations and are the basis for future cash flow estimates utilized in impairment calculations. When determining proven and probable reserves, we must make assumptions and estimates of future commodity prices and demand, the mining methods we use and as a result,intend to use in the future, and the related costs incurred to develop, mine, and process our reserves. Our

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estimates of recoverable gold ounces in proven and probable reserves are prepared by and are the responsibility of our employees. Any change in estimate or assumption used to determine our proven and probable ore reserves could change our estimated recoverable gold ounces in such reserves, which may have a balancematerial impact on our financial statements.

Impact of Change in Estimate:

Our proven and probable mineral reserves are periodically updated, usually on an annual basis. Estimated recoverable gold ounces used in our units-of-production amortization and impairment calculations are based on proven and probable ore reserves that were determined as of June 30, 2019 using gold and silver selling prices of $1,200 per ounce and $16.50 per ounce, respectively. Resulting changes in estimates of recoverable gold ounces are used in our units-of-production calculations and impairment calculations on leach pads.a prospective basis.


Impairment of Long-Lived Assets

Estimate Required

Required:

Our long-lived assets which consist of plant, equipment and equipment, are evaluatedmine development. We review and evaluate our long-lived assets for recoverability annually and at interim periods if triggeringimpairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that may trigger a test for recoverability include, but are not limited to, significant adverse changes to projected revenues, costs, or future expansion plans or changes to federal and state regulations (with which we must comply) that may adversely impact our current or future operations. An impairment is determined to exist if the total projected future cash flows on an undiscounted basis are less than the carrying amount of a long-lived asset group. An impairment loss is measured and recorded based on the excess carrying value of the impaired long-lived asset group over fair value.

To determine fair value, we use a discounted cash flow model based on quantities of estimated recoverable minerals and incorporate projections and probabilities involving metal prices (considering current and historical prices, price trends, and related factors), production levels, operating and production costs, and the timing and capital costs of expansion and sustaining projects, all of which are based on life-of- minelife-of-mine plans. The term “recoverable minerals” refers to the estimated amount of gold and silver that will be sold after taking into account losses during ore processing and treatment. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The assumptions, projections and probabilities used to determineOur estimates of future cash flows are based on numerous assumptions, which are consistent or reasonable in relation to internal budgets and projections. Any change inprojections, and actual future cash flows may be significantly different than the assumptions, projections, or probabilities used in our impairment calculations could materially impact our consolidated financial statements.estimates, as actual future quantities of recoverable gold and silver, metal prices, operating and production costs, and the timing and capital costs of expansion and sustaining projects are each subject to significant risks and uncertainties.

Impact of Change in EstimateEstimate:

There were no such impairments during the three months ended March 31, 2020 or 2019. During the year ended December 31, 2019, the Seller recorded impairments of long-lived assets of $0.1 million. The impairment recorded during 2019 related to a leach-pad expansion project that the Seller determined it would not utilize and, therefore, did not complete. There were no such impairments during the year ended December 31, 2018.

The estimates and assumptions used in our impairment test as of June 30, 2020 were based on the Hycroft Technical Report. The Hycroft Technical Report was prepared using prices of $1,200 per ounce for gold and $16.50 per ounce for silver, which when using sales prices of $1,300 per ounce for gold and $17.33 per ounce for silver, resulted in an after tax net present value of $2.1 billion. We compared the estimated after tax net present value of $2.1 billion to the carrying value of our plant, equipment, and mine development of $42.3 million, and given the large surplus between the estimated after tax net present value of the Hycroft Mine and the carrying value of our plant, equipment, and mine development a change in the estimates used in the Hycroft Technical Report would be unlikely to result in an impairment as of June 30, 2020.

Reclamation Liability

Estimate Required

Required:

We will be required to perform reclamation activity at the Hycroft Mine in the future. As a result of this requirement, a reclamation liability has been recorded on our consolidated balance sheets that is based on itsour 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. Reclamation liabilities are accrued when they become known, are probable and can be reasonably estimated. Whenever a previously unrecognized reclamation liability becomes known, or a previously estimated reclamation cost is increased, the amount of that liability and additional cost will be recorded at that time and could materially reduce our consolidated net income attributable to stockholders.

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Impact of Change in Estimate

Estimate:

Whenever a previously unrecognized reclamation liability becomes known, or a previously estimated reclamation cost is increased, the amount of that liability and additional cost will be recorded at that time and could materially reduce our consolidated net income attributable to stockholders. There were no such increases during the threesix months ended March 31,June 30, 2020 or 2019. For the years ended December 31, 2019 and 2018, the Seller recorded reductions in asset retirement obligation of $1.9 million and $17.0 million, respectively. The 2019 reduction was driven by an increase in the Seller’s credit-adjusted risk-free rate, which is used to discount the future estimated reclamation activity, but was partially offset by an increase in projected equipment and diesel costs. The reduction recorded in 2018 was primarily due to an increase of the estimated life of mine to 34 years. As a result of extending the life of mine, reclamation expenditures were delayed by approximately 25 years from the prior estimated schedule.

As of March 31, 2020, the Seller estimated thatBased on our current mine plan, no significant reclamation expendituresactivity will be made until 20472047. However, if the significant reclamation activity were to begin in 2042 or 2045 our reclamation liability would increase by approximately $1.3 million and approximately $0.4 million, respectively.

2020 Outlook

While we expect second half of 2020 crushing and production levels to be consistent with or above first half of 2020 levels, we believe that reclamation work2021 and beyond will be completed bysee material increases in mining, crushing and production as we continue to ramp up infrastructure, including the end of 2065.


Proven and Probable Ore Reserves

Estimate Required

Proven and probable ore reserves arelarge new leach pad currently under construction on the part of a mineral deposit that can be economically and legally extracted or produced at the timenorth of the reserve determination. Our provenproperty. We continue to believe that the production levels (or greater) referenced in the Hycroft Technical Report are ultimately achievable once infrastructure is ramped up and probable reserves are periodically updated, usually on an annual basis. Estimated recoverable gold ounceswe can execute successfully.

Hycroft Mine

Operations

The following table provides a summary of operating results for our Hycroft Mine, which was restarted in our proven and probable reservesApril 2019:

Three months ended June 30,

Six months ended June 30,

    

    

2020

    

2019

    

2020

    

2019

Ore mined - crusher feed

(ktons)

1,550 

837 

2,507 

850 

Ore mined - run of mine

(ktons)

196 

--- 

501 

--- 

Total ore mined

(ktons)

1,746 

837 

3,008 

850 

Waste mined

(ktons)

1,272 

87 

1,437 

310 

Crushed ore rehandled to leach pads

(ktons)

1,350 

678 

2,334 

842 

Total mined and rehandled

(ktons)

4,368 

1,601 

6,779 

2,002 

Waste tons to ore tons strip ratio

(#)

0.73 

0.10 

0.48 

0.36 

Ore crushed

(ktons)

1,378 

752 

2,393 

850 

Ore grade mined - gold

(oz/ton)

0.011 

0.022 

0.014 

0.022 

Ore grade mined - silver

(oz/ton)

0.245 

0.311 

0.205 

0.311 

Production - gold

(oz)

5,370 

— 

12,342 

— 

Production - silver

(oz)

31,806 

— 

73,717 

— 

Sales - gold

(oz)

4,237 

— 

10,797 

— 

Sales - silver

(oz)

21,331 

— 

70,703 

— 

Average realized sales price - gold

($/oz)

$

1,719 

$

— 

$

1,631 

$

— 

Average realized sales price - silver

($/oz)

$

16.49 

$

— 

$

16.24 

$

— 

During the second quarter of 2019, we restarted open pit mining operations at the Hycroft Mine, are used in units-of-production amortization calculations and, areduring the basis for future cash flow estimates utilized in impairment calculations. When determining proventhird quarter of 2019, produced and probable reserves, we must make assumptions and estimates of future commodity prices, the mining methods we use and intend to use in the future, and the related costs incurred to develop, mine, and process our reserves. Our estimates of recoverablesold gold and silver ounceswhich we have continued to do on an approximate weekly basis since restarting. Each quarter since restarting, we have generally increased tons mined, crushed, and placed on the leach pads, most notably in proventhe second quarter of 2020 following the arrival and probable reserves are prepared bycommissioning of mobile mining equipment rentals (seven haul trucks and one loader). Ore tons mined and crushed require rehandling from the crusher fine ore stockpile to the leach pads for processing, that is, crushed tons require a

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second cycle of loading and hauling beyond the initial mining cycle which occurs in the open pit. Run of mine ore tons can be placed directly on the leach pads and are not required to be rehandled.

During the responsibilityfirst quarter of 2020, ore tons crushed averaged approximately 338,000 tons per month and increased to approximately 459,000 tons per month in the second quarter of 2020. During the second half of 2020, we expect to crush levels consistent with or above first half levels which will allow us to continue our focus on improving crusher operations, planned maintenance scheduling, operator training, and automation enhancements.

As discussed in Note 2 – Summary of Significant Accounting Policies to the Notes to Unaudited Consolidated Financial Statements and in “– Recent Developments – Going Concern” above, during the first half of 2020 we were unable to achieve many of our employees. Any changetargets, including with respect to leach pad processing activities which resulted in estimate or assumption used to determine our proven and probable reserves could change our estimated recoverable gold and silver ounces in such reserves, which may have a material impact on our consolidated financial statements and/or our calculations of units-of-production amortization and impairment charges (if any).

Impact of Change in Estimate

Future changes in estimatesthe write-off of recoverable gold ounces will be used in our units-of-production calculations and impairment calculations on a prospective basis.

Income Taxes

Estimate Required

We account for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of our liabilities and assets and the related income tax basis for such liabilities and assets. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. In evaluating our abilitythrough metallurgical balancing reconciliations. Since restarting, we have (1) been unable to recover our deferred tax assets, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future income, we make estimates about future gold and silver sales, metals prices and future production costs. Additionally, significant judgment must be used in determining how much weight to give each piece of evidence considered in determining realizability. Changes to any of these estimates or assumptions could change our conclusions regarding the realizability of deferred tax assets and corresponding income tax, which may have a material impact on our consolidated financial statements.

Impact of Change in Estimate

As of March 31, 2020 and December 31, 2019, based on the weight of available evidence, the Seller determined that it was more likely than not that the benefit of its net deferred tax assets would not be realized and recorded full valuation allowances against such assets. In considering the evidence, the Seller gave significant weight to recent operating results and future projections.

Hycroft Mine

Restart of Mining Activities

On July 8, 2015, the Seller suspended mining operations, but continued to operate the processing facilitiesconsistently maintain leach pad conditions required to produce gold and silver fromall of the ore that had been previouslyestimated recoverable ounces placed on the leach pads. Atpads, and (2) have experienced instances of solution mismanagement in which pregnant metal-bearing solutions have been circulated to areas of leach pads not currently in operation, thus making such ounces unrecoverable in our current plans. Our operating plans for the beginningsecond half of 2017,2020 contemplate our estimates of ore tonnage (and related solution flows) that we believe can be successfully processed to mitigate potential future write-offs of recoverable gold ounces due to metallurgical balancing reconciliations, poor leach pad conditions, or solution mismanagement. Early in the third quarter of 2020, additional technical process and metallurgical staff were hired which is expected to mitigate further instances of solution mismanagement and poor process practices.

The gold and silver grades of ore mined in the first half of 2020 were as planned and decreased from the comparable period of 2019 in which existing higher grade stockpile ore was mined prior to any drilling and blasting starting. During the second quarter of 2020, we commenced in-pit contractor drilling and blasting activities to provide fresh ore feed for the crusher, run of mine hauling, and waste removal in support of the full year plan.

Gold and silver ounces produced and related ounces sold was lower than production levels referenced in the Hycroft Technical Report due to our inability to properly execute our processing plans, resulting in recurring write-offs of recoverable gold ounces due to metallurgical balancing reconciliations. Average realized gold prices per ounce increased during the first half of 2020 and resulted in revenue of $7.6 million and $18.8 million during the three and six months ended June 30, 2020.

Leach pad expansion project

During the second quarter of 2020, we commenced a leach pad expansion project on the north side of the Hycroft Mine entered a care and maintenance modeproperty to minimize expenditures and conserve cash. As partprovide us with leach pad space required for future operations. The initial stage of the careleach pad project is being constructed in two phases by a contractor, with the first phase consisting of approximately 4.0 million square feet of pad space and maintenance modeinfrastructure for ponds, pipes, and electrical controls, and the Seller stoppedsecond phase consisting of approximately 4.6 million square feet, which we expect to construct in 2021. With respect to the usefirst phase, we expect the earthworks and leach pad construction to be completed in the fourth quarter of cyanide2020 with the infrastructure completed and limeinitially commissioned shortly thereafter later in the fourth quarter of 2020.

During the second quarter and first six months of 2020, we spent $8.6 million and $9.7 million, respectively, on the leach pads.pad expansion project, and expect total phase one leach pad project spending to approximate $36.0 million, including any final payments made in the first quarter of 2021. The leach pad expansion project represented approximately 82.9% of our total capital spending during the first six months of 2020 and is expected to represent a similar percentage of capital spending for the remainder of 2020.

2019 Hycroft Technical Report Summary

In late 2018,M3 Engineering and Technology Corporation (“M3 Engineering”), in conjunction with SRK Consulting (U.S.), Inc. (“SRK”) and us, completed the Seller beganHycroft Technical Report Summary, Heap Leaching Feasibility Study, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants, with an effective date of July 31, 2019 (the “Hycroft Technical Report”), for a two-stage, heap oxidation and subsequent leaching of transition and sulfide ores. The Hycroft Technical Report projects the economic viability and potential future cash flows for the Hycroft Mine when mining operations expand to levels presented in the Hycroft Technical Report.

The Hycroft Technical Report provides the results of the Hycroft Mine heap leach feasibility study that evaluated the possibility of oxidizing and leaching transitional and sulfidic material in a heap leach application. The feasibility analyzes a full-scale operation including construction of new leach pads to demonstrate its recently developedand expanded mining activities. Key components of the process that currently exist onsite include heap oxidationleach pads, a crushing facility consisting of primary, secondary, and leach process, as discussed in thetertiary crushing, two Merrill-Crowe plants having a total capacity of 26,000 gpm, and associated support facilities.

The Hycroft Technical Report inpresents reflects a commercial setting. Additionally, the Seller began preparing the mine, including its facilities and mining equipment for a restart. The Seller began mining in Aprilmineral reserve estimate as of June 30, 2019, with a focus on transition and sulfide ores, but supplemented with oxide ores to improve near-term


cash flow and support crusher and equipment commissioning. Ore has been placed on the new leach pads and is in the active oxidation and leaching phase.

For the three months ended March 31, 2020, the Seller recovered and sold 6,560of 12.0 million ounces of gold and 49,373481.4 million ounces of silver at average realized prices of $1,574 per ounce of gold and $16 per ounce of silver. During the three months ended March 31, 2019 there were no sales of gold or silver.

For the years ended December 31, 2019 and 2018 the Seller recovered and sold 8,593 and 145 ounces of gold and 52,036 and 124 ounces of silver, respectively, at average realized prices of $1,490 and $1,228 per ounce of gold and $17 and $16 per ounce of silver, respectively.

The Hycroft Mine’s proven and probable reserves are contained in oxide, transition and sulfide ores. The Seller has previously recovered metals contained in oxide and transition ores, through our heap leach operations. Based on the Hycroft Technical Report, we intendwhich is projected to focus on heap leach oxidationbe mined over 34 years using

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Table of our transition and sulfide ores using soda ash to manage pH and alkalinity during the oxidation process and then subsequent cyanidation of the oxidized ores. The following simplified schematic outlines the process that is outlined in the Hycroft Technical Report.Contents

Mining

We mine using typical truck and shovel open pit mining methods. The mine plan developed for the Hycroft Technical Report requires a range of approximately 85 to 100 million tons per year to be mined (both ore and waste) throughoutthrough the 34-year mine life. Production will ramp up gradually from 10 millionOverall, 1.1 billion tons in year two (2020) to 85 million tons in year six. Another ramp-up in productionof ore is projected to occur in year 10 to 100 million tons. We currently havemined with a small existing fleetstrip ratio of mine equipment that we own and began using again during 2019 alongside a small fleet of leased equipment. We plan on using contract mining or leasing equipment during the ramp up through year six. After year six, we expect to begin to transition back to our own fleet, which we will need to purchase.


Processing

1.17.

The ore is being processedHycroft Technical Report outlines the test work done to demonstrate the viability of the two-stage, heap oxidation and will continue to be processed usingsubsequent leaching of transition and sulfide ores. As outlined in the following methods:

Ore Category 1 — low-grade ore with high cyanide soluble gold will be cyanide leached to extract the gold and silver. This ore will not be pre-oxidized and will be stacked on the leach pads as run-of-mine ore. We expect this ore to account for 4%Hycroft Technical Report, 94% of the ore over the current life of the mine.

Ore Category 2 — high-grade ore with high cyanide soluble gold will beis crushed to a P80 of 3∕4”½” and cyanide leached to extract the gold and silver. This ore will not be pre-oxidized. We expect this ore to account for 2% of the ore over the current life of the mine.

Ore Category 3 — low cyanide soluble ratio ores will be crushed to a P80 of 1∕2”. The crushed ore will bethen mixed with soda ash to induce an alkaline pre-oxidation process. After thisthe ore has been oxidized to the desired extent, we will rinse the ore with fresh water and a saturated lime solution and then cyanide leach the ore to extract the gold and silver. We expect this ore to account for 94% of the ore over the current life of the mine. This process is the subject of a pending patent application.

Crushing Plant

The crushing system is initially designed to run aat nominal capacity of 65,7502.0 million tons per daymonth ramping up to 98,6303.0 million tons per daymonth with the addition of two moreadditional tertiary crushers. Category 2 and Category 3 ores are transportedSoda ash is added prior to the trucks unloading into the primary crusher dump pocket via haul truck. Prior to the primary crusher, the ore that is being routed as Category 3 passes under a soda ash silo where a pre-determined amount of soda ash is added to the ore to begin the pre-oxidation process. The ore proceeds through three stages of crushing and exitsexists into the tertiary crushers routed as either 3∕4” crushed or 1∕2” crushed. Itfine ore stockpile, which is then hauled to the leach pads.

Pre-Oxidation

We begin the pre-oxidationThe pH and alkalinity of the Category 3 ore at the crusher using in-situ moisture and solid soda ash. The amount of soda ash required for the ore is relative to the percent sulfide-sulfur content of the ore. We regularly sample the mined ore for reagent addition control.

Once we have placed Category 3 oremanaged on the heap, additionalleach pad using a soda ash solution that is applied to bring the ore to field capacity (8 – 10%(8-10% moisture). The ore is regularly sampled for reagent addition control and the soda ash solution in the heap is replenished on a regular basis using soda ash solution in order to offset evaporation and carbonate consumption.

We determine The duration of the pre-oxidation durationis expected to take between 30 and 120 days which is determined by the characteristics of the ore and the measured extent of oxidation basedbaes upon sulfate production. The extent of the oxidation will be determined by the target recoveries for each domain and the initial cyanide soluble gold, which is translated to degrees of oxidation already achieved. The number of days required to attain target oxidation is dependent upon the sulfide-sulfur content of the ore, with higher sulfide-sulfur corresponding to longer oxidations cycles. The majority of the Category 3 ore is expected to take between 30 and 120 days to complete pre-oxidation.

Rinse Cycle

When the pre-oxidation cycle has been completed, we rinse the Category 3 ore first with fresh water and then with a saturated lime solution prior to the commencement of cyanidation leach. This is necessary to remove sulfate and bicarbonate from the heap and reduce cyanide loss during leaching. The alkalinity of the solution in the heap is monitored to ensure rinse completion prior to the start of cyanidation.

Heap Leach Cyanidation

The cyanidation conditions for all placed ore is the same regardless of crush size or the use of pre- oxidation. The pH is controlled during cyanidation using lime. Category 1 and Category 2 ores, those ores not going through pre- oxidation or rinse, undergo a 200-day primary leach cycle. Category 3As the ore havinghas already been oxidized and rinsed, undergoit undergoes a nominal 60-day primary leach cycle.


Merrill-Crowe and Refinery

Due to the high silver content of the pregnant solution, gold and silver are recovered by zinc cementation. We have two existing Merrill-Crowe plants, which are used to process pregnant solution from the heap leach operation. The older plant has a capacity of 4,500 gallons per minute. The newer plant is considerably larger, with a present capacity of 21,500 gallons per minute.

The wet filter cakes fromOverall, the Merrill-Crowe circuits will be transferred to retort pans, which are then put into a retort furnace to remove waterHycroft Technical Report shows 7.8 million ounces of payable gold and mercury. Water344.1 million ounces of payable silver produced and then mercury are sequentially volatilized from the precipitate by heating the precipitate under a partial vacuum. The dried filter cake is mixed with flux, a clarifying agent used to remove certain impurities and reduce the melting point of elements in the precipitate, and then transferred to an electric arc furnace where it is smelted to produce doré.

sold.

Results of Operations

ThreeSix Months Ended March 31,June 30, 2020 Compared to the ThreeSix Months Ended March 31,June 30, 2019

Metal sales

Gold salesRevenues

Gold revenue

The table below summarizes changes in gold sales, ounces sold and average realized prices for the following periods:periods (dollars in thousands, except ounce amounts):

Three Months Ended

Six Months Ended

 

June 30,

June 30,

2020

2019

2020

2019

Gold revenue

    

$

7,284 

    

$

— 

    

$

17,612 

    

$

— 

Gold ounces sold

4,237 

— 

10,797 

— 

Average realized price (per ounce)

$

1,719 

$

— 

$

1,631 

$

— 

  Three months ended March 31, 
  2020  2019 
  (dollars in thousands, except 
  ounce amounts)
Gold sales $10,328  $- 
Gold ounces sold  6,560  $- 
Average realized price (per ounce) $1,574  $- 
The change in gold revenue was attributable to: 2020 vs 2019        
Increase in ounces sold $10,328     

During the three and six months ended June 30, 2020, our gold revenue was $7.3 million and $17.6 million, respectively, compared to no revenues in the prior year periods as mining operations were restarted during April 2019 and there was no production during the first six months of 2019. As discussed in “– Hycroft Mine – Operations” above, gold revenues were less than expected for both the three and six months ended June 30, 2020 due to lower production resulting from our inability to achieve processing targets. Because of the lower production for the reasons discussed in “– Hycroft Mine – Operations” above, gold revenues during the three months ended June 30, 2020 decreased from three months ended March 31, 2020,2020. However, we benefited from favorable gold spot prices as the Seller’s gold sales were $10.3 million, which was included as Revenues on its consolidated statements of operations compared to $0average realized price increased from $1,574 per ounce sold in gold sales during the same period in the prior year. The Seller did not restart mining operations until April 2019 and, accordingly, no gold ounces were sold during the first quarter 2020 compared to $1,719 per ounce sold for the second quarter 2020.

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Table of 2019.Contents

Silver sales

revenue

The table below summarizes changes in silver sales, ounces sold and average realized prices for the following periods:periods (dollars in thousands, except ounce amounts):

Three Months Ended

Six Months Ended

 

June 30,

June 30,

2020

2019

2020

2019

Silver revenue

    

$

352 

    

$

— 

    

$

1,148 

    

$

— 

Silver ounces sold

21,331 

— 

70,703 

— 

Average realized price (per ounce)

$

16.49 

$

— 

$

16.24 

$

— 

  Three months ended March 31, 
  2020  2019 
  (dollars in thousands, except 
  ounce amounts) 
Silver sales $796  $- 
Silver ounces sold  49,373  $- 
Average realized price (per ounce) $16  $- 
The change in silver revenue was attributable to: 2020 vs 2019        
Increase in ounces sold $796     

During the three and six months ended March 31,June 30, 2020, the Seller’sour silver sales were $0.8revenue was $0.4 million which was included as Revenues on its consolidated statements of operationsand $1.1 million, respectively, compared to $0no revenues in silver sales during the same period in the


prior year. The Seller did not restartyear periods as mining operations untilwere restarted during April 2019 and accordingly,there was no silver ounces were soldproduction during the first quartersix months of 2019. Silver revenue was similarly impacted negatively from our inability to achieve processing targets.

Total cost of sales

Total cost of sales consists of Production costs, Mine site period costs, Depreciation and amortization mine site period costs, Depreciation and amortization, and Write-down of production costs and depreciation and amortization.inventories. The table below summarizes changes in total cost of sales for the following periods:periods (dollars in thousands):

Three Months Ended

Six Months Ended

 

June 30,

June 30,

2020

2019

2020

2019

Production costs

    

$

7,486 

    

$

— 

    

$

16,421 

    

$

— 

Mine site period costs

11,996 

— 

18,630 

— 

Depreciation and amortization mine site period costs

874 

— 

1,432 

— 

Depreciation and amortization

548 

— 

1,324 

— 

Write-down of production inventories

10,959 

— 

17,924 

— 

Total cost of sales

$

31,863 

$

— 

$

55,731 

$

— 

  Three months ended March 31,
  2020  2019 
  (dollars in thousands, except 
  ounce amounts)
Production costs $15,569  $- 
Depreciation and amortization  1,334  $- 
Write-down of production inventories  6,965  $- 
Total cost of sales $23,868  $- 
The change in cost of sales was attributable to: 2020 vs 2019        
Increase in ounces sold $10,003     
Write-down of production inventories due to metallurgical balancing  6,965     
Period costs directly expensed to cost of sales  6,900     
Total change in cost of sales, excluding write-down of production inventories $23,868     

Production costs

For the three and six months ended March 31,June 30, 2020, the Sellerwe recognized $15.6$7.5 million and $16.4 million, respectively, in production costs, or $2,373$1,767 per ounce of gold sold. The costand $1,521 per ounce of gold sold, was significantly higher than is expectedrespectively, compared to no production costs in futurethe prior year periods primarily driven by (1) $5.3as mining operations were restarted during April 2019.

Mine site period costs

During the three and six months ended June 30, 2020, inclusive of depreciation and amortization, we recorded $12.9 million in contractorsand $20.1 million, respectively, of mine site period costs which did not qualify for allocation to supplement areas where manpower was lacking, (2) $3.8 million in maintenanceour production-related inventories and, therefore, were expensed as incurred. Such period costs primarily as aare generally the result of unplanned maintenance,recurring or significant downtime or delays, unusually high levels of repairs, inefficient operations, overuse of processing reagents, or other unusual costs and (3) $7.8 millionactivities. There were no comparable costs in reagents, whichthe prior year periods as mining operations were restarted during April 2019 and there was higher than expected primarily due to consuming more soda ash and lime than planned. The Seller madeno production during the decision to expense $6.4 million of these costs immediately. Excluding the $6.4 million of period costs, the production costs per ounce of gold sold decreased to $1,404, which was still higher than is expected in future periods and was primarily a result of (1) the use of contractors to supplement maintenance employees and (2) higher than anticipated consumption of reagents. Replacing contractors with full time employees has been a focus for us for more thanfirst six months and it is expected it to continue to be a focus for us during 2020 as it has proven challenging to hire qualified employees given the low unemployment levels across Northern Nevada and competition from other nearby mining companies.

of 2019.

Depreciation and amortization

Depreciation and amortization expense was $1.3$0.5 million, or $203$129 per ounce of gold sold for the three months ended March 31,June 30, 2020 and $1.3 million, or $123 per ounce of gold sold for the six months ended June 30, 2020. Depreciation and amortization expense mostly related to buildings, processing equipment and the leach pad.

Write-down of production inventories

As discussed above in CriticalNote 2 – Significant Accounting EstimatesPolicies , the estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related gold ore contentsand Note 4 – Inventories to the actual gold ounces recovered (metallurgical balancing). BasedNotes to Unaudited Consolidated Financial Statements, based on metallurgical balancing results, for the Sellerthree and six months ended June 30, 2020 we determined that 3,9806,512 and 10,492 ounces of gold, that had been placed on the leach padsrespectively, were no longer recoverable and wrote-off thesesuch ounces. As a result of the write-off the Sellerwrite-offs, we recognized a Write-down$10.2 million and $16.7 million in write-downs of production inventories on the consolidated statements of operations of $6.9 million. Cashcash production costs written-off were $6.4during the three and six months ended June 30, 2020, respectively and $0.7 million and capitalized$1.3 million, respectively, in depreciation and amortizationamortization. See “– Hycroft Mine – Operations” above for additional information.

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General and administrative

General and administrative costs written-offtotaled $10.4 million and $1.2 million during the second quarters of 2020 and 2019, respectively, and $12.4 million and $3.2 million during the first six months of 2020 and 2019, respectively. Increases of $9.2 million and $9.3 million during the second quarter and first six months of 2020, respectively, compared to the same periods of 2019 were $0.5 million. The write-off of these ounces was primarily due to poor execution$4.8 million of maintaining the critical variables necessary for oxidation and ultimately recovery of a specific celladditional bonus expense which became payable upon completion of the leach pads. AsRecapitalization Transaction, $2.1 million of insurance costs related to a directors and officers run-off policy for Seller as a result the Seller determined that it would recover 20% less than planned of the mismanaged sectionRecapitalization Transaction, and $1.1 million of the leach pads.


Operating expenses

additional legal and professional service fees associated with general corporate matters and obligations as a public company.

Care and maintenance, netAccretion

Care and maintenance, net decreased from $3.8We recorded $0.1 million of accretion expense for both the three months ended March 31,June 30, 2020 and 2019 to $0and $0.2 million of accretion expense for both the six months ended June 30, 2020 period. The decrease in Care and maintenance, net was primarily driven by the restart of mining operations at2019. Accretion expense relates to the Hycroft Mine. Upon restarting in April 2019, the Seller no longer recorded any costs to care and maintenance, net.

Mine’s asset retirement obligation.

Project and development

ProjectFor the three and six months ended June 30, 2019, project and development costs decreased from $2.2were $4.6 million forand $6.8 million, respectively, while no such costs were incurred during the three months ended March 31, 2019 to $0 for the 2020 first quarter.same periods of 2020. In late 2018, the CompanySeller began the process of restatingrestarting mining operations and as noted above, restarted active mining at the Hycroft Mine in April 2019. During the 2019 the Seller completed allperiods, project and development of the mine and have not incurred any costs in 2020 that were classified as project and development now that the mine is in operation. During the 2019 first quarter, costs were incurred related to the restart of the Hycroft Mine, such as maintenance and repair of mobile mining equipment and processing equipment (crusher, Merrill-Crowe facility), to prepare for use after sitting idle for several years. During 2019, project and development costs also related to the Seller also incurred costs to preparepreparation of feasibility studies,study and metallurgical test work, including for the Hycroft Technical Report.

Pre-production depreciation and amortization

Pre-production depreciation and amortization represents expense recognized prior to the restart of mining operations at the Hycroft Mine. For first quarter of 2019, pre-production depreciationMine and amortization was $0.8 million compared to $0 for the three and six months ended March 31, 2020. The decrease in pre-production depreciationJune 30, 2019 was $0.2 million and amortization was due to restarting mining operations and, therefore, recording$1.1 million, respectively. Upon the April 2019 restart of the Hycroft Mine, we began capitalizing depreciation and amortization to ore on the leach pads (beginningpads.

Care and maintenance

Care and maintenance totaled $3.8 million for the first six months 2019 and were incurred from January to March of 2019 prior to the Hycroft Mine’s April 2019),2019 restart, after which was recognized onwe no longer recorded such costs.

Interest expense, net

As discussed and detailed in Note 9 – Debt, net to the Notes to Unaudited Consolidated Financial Statements, of Operations as part of Total cost of sales as ounces of gold are sold.

Accretion

For each ofinterest expense totaled $15.1 million and $15.6 million during the three months ended March 31,second quarters of 2020 and 2019, respectively, and $35.0 million and $30.0 million during the Seller recognized $0.1 million in accretion expense.

General and administrative

General and administrative costs for the threefirst six months ended March 31,of 2020 and 2019, were $2.0respectively. Interest expense decreased by $0.5 million and $1.9 million, respectively. The increase in general and administrative costs was primarily driven by a $0.2 million increase in stock-based compensation costs, due to restricted stock units being granted in February 2019 and, therefore,during the Seller only recognized expense for part of the quarter in 2019, whereas in 2020 the Seller recognized a fullsecond quarter of expense. Additionally, the cost of certain of the Seller’s insurance policies increased by $0.2 million2020 from the prior year. The increases weresame period of 2019 as the Recapitalization Transaction was completed on May 29, 2020, and lowered recorded interest expense on Seller’s pre-transaction indebtedness by approximately one month, which was partially offset by a $0.3 million decrease ininterest expense recognition relatedrecorded for our new post-Recapitalization Transaction indebtedness. Interest expense increased during the first six months of 2020 from the comparable period of 2019 as Seller’s weighted average debt balance prior to the Sellers phantom shares as a resultclosing of granting fewer shares in 2020.the Recapitalization Transaction increased by $131.1 million to $591.4 million, and we recorded $1.5 million interest expense for our new post-Recapitalization Transaction indebtedness.

Interest expenseincome

ForInterest income totaled $35,000 and $110,000 during the three months ended March 31,second quarters of 2020 and 2019, interest expense was $19.9 millionrespectively, and $14.4 million, respectively, an increase of $5.5 million, or 38%. The increase was primarily due to an increase in the average debt balance from $442.2 million for the 2019 first quarter to $574.7 million for the 2020 first quarter. The average debt balance increased due to PIK interest on the Seller’s Second Lien Notes, the 1.5 Lien Notes$147,000 and the 1.25 Lien Notes. Additionally, the Seller issued 1.25 Lien Notes$226,000 during 2019 and the first quartersix months of 2020, which were issued to fund the restart of mining operations and pay operating costs that were in excess of the Seller’s sales proceeds. The increase in the interest rate on the First Lien Credit Agreement also contributed to the increase in interest expense. Interest expense for the three months ended March 31, 2020 and 2019, respectively. Interest income was reduced by less than $0.1 millionlower in the second quarter and $0.1 million, respectively, forfirst six months of 2020 due to decreases in interest that was capitalized to projects during each period.rate yields from the comparable periods of 2019.


Reorganization items net

On March 10, 2015, the Seller’s predecessor to Seller filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) in an effort to recapitalize the Seller’s balance sheet by reducing its debt balances while concurrently providing additional liquidity. Expenses directly associated with finalizing the chapter 11 cases before the Bankruptcy Court were reported as Reorganization items, net in the Consolidated Statements of Operations. The Seller”) and incurred legal and professional fees of $0$0.3 million and $0.3$0.6 million for the three and six months ended March 31, 2020 andJune 30, 2019, respectively. The decrease was a resultrespectively, related to such matters.

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Table of the final claims being settled during the third quarter of 2019 and no additional costs being incurred after the settlements. On October 3, 2019, the Bankruptcy Court finalized the proceedings and closed the case.Contents

Income tax expense and benefittaxes

There was no income tax expense or benefit, net, recognized during any of the three monthsthree- or six-month periods ended March 31,June 30, 2020 or 2019. Seller’s gain from the Recapitalization Transaction was fully offset by the use of Seller’s deferred tax assets. For additional details, refer to Note 15 – Income Taxes to the Notes to Unaudited Consolidated Financial Statements.

Net loss

Due toFor the activityreasons discussed above, the Seller realizedwe recorded net losses of $34.6$49.8 million and $23.4$84.4 million for the first quartersthree and six months ended June 30, 2020, respectively, compared to net losses of 2020$21.9 million and $45.4 million for the three and six months ended June 30, 2019, respectively.

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Metal salesRevenue

As a result of the suspension of mining operations in 2015 and entering a care and maintenance mode January 1, 2017, the Seller had nominal sales from the recovery of gold and silver in 2017, which further declined in 2018. While in care and maintenance, gold and silver production were considered a byproduct of maintaining the Hycroft Mine. Thus, beginning January 1, 2017, the Seller recorded all metal sales as a reduction to care and maintenance, net in the consolidated statements of operations. Due to not having any revenue, the Seller did not record any costs as cost of sales or production costs. Additionally, all depreciation and amortization were related to the Hycroft Mine being in care and maintenance.

During the year ended December 31, 2019, the Hycroft Mine restarted operating activities and, as a result, reported metal sales as revenue. Additionally, the Seller recorded production costs and depreciation and amortization related to the production of metal as costs of sales. Depreciation and amortization expense that were incurred during 2019, but prior to the restart of mining operations was included as Pre-production depreciation and amortization in the Consolidated Statements of Operations.

Gold sales

revenue

The table below summarizes changes in gold sales, ounces sold and average realized prices for the following periods:

Year Ended

 

December 31,

2019

    

2018

(dollars in thousands

except ounce amounts)

Gold sales

    

$

12,803 

    

$

— 

Gold ounces sold

8,593 

— 

Average realized price (per ounce)

$

1,490 

$

— 

  Year Ended 
  December 31, 
  2019  2018 
  (dollars in thousands 
  except ounce amounts) 
Gold sales $12,803  $178 
Gold ounces sold  8,593   145 
Average realized price (per ounce) $1,490  $1,228 
The change in gold sales was attributable to: 2019 vs. 2018        
Increase in ounces sold $10,371     
Increase in average realized price  38     
Effect of average realized price increase on ounces sold increase  2,216     
Total change in gold sales $12,625     


During the year ended December 31, 2019, the Seller’s gold sales were $12.8 million, which was included as Revenues on its consolidated statements of operations, an increase of more than $12.6 million over the prior year. The increase was mostly driven by selling an additional 8,448 ouncegold following the restart of gold and, to a lesser extent, a 21% increase in the average realized price per ounce. As discussed above in Metal sales, operations were restarted during the 2019 period which drove the increase in gold ounces sold.mine (discussed above).

Silver sales

revenue

The table below summarizes changes in silver sales, ounces sold and average realized prices for the following periods:

Year Ended

 

December 31,

2019

    

2018

(dollars in thousands

except ounce amounts)

Silver sales

    

$

906 

    

$

— 

Silver ounces sold

52,036 

— 

Average realized price (per ounce)

$

17 

$

— 

  Year Ended 
  December 31, 
  2019  2018 
  (dollars in thousands 
  except ounce amounts) 
Silver sales $906  $2 
Silver ounces sold  52,036   124 
Average realized price (per ounce) $17  $16 
The change in Silver sales was attributable to: 2019 vs. 2018        
Increase in ounces sold $837     
Increase in average realized price  -     
Effect of average realized price increase on ounces sold increase  67     
Total change in gold sales $904     

During the year ended December 31, 2019, the Seller’s silver sales were $0.9 million, which was included as Revenues on its consolidated statements of operations, compared to practically no sales during 2018. The increase was due todriven by selling an additional 51,912 ouncessilver following the restart of silver sold and, to a lesser extent, a 6% increase in the average realized price per ounce. As discussed above in Metal Sales, operations were restarted during the 2019 period which resulted in the increase in silver ounces sold.mine (discussed above).

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Total costCost of sales

Total cost of sales consists of production costs, and depreciation and amortization.amortization and write-down of production inventories. The table below summarizes changes in total cost of sales for the following periods:

Year Ended

 

December 31,

2019

    

2018

(dollars in thousands)

Production costs

    

$

11,041 

    

$

— 

Depreciation and amortization

1,011 

— 

Write-down of production inventories

18,617 

— 

Total cost of sales

$

30,669 

$

— 

  Year Ended 
  December 31, 
  2019  2018 
  (dollars in thousands) 
Production costs $11,041  $- 
Depreciation and amortization  1,011   - 
Write-down of production inventories  18,617   - 
Total cost of sales $30,669  $- 
The change in cost of sales was attributable to: 2019 vs. 2018        
Increase in ounces sold $12,052     
Write-down of production inventories due to metallurgical balancing  16,443     
Write-down of production inventories due to net realizable value  2,174     
Total change in cost of sales, excluding write-down of production inventories $30,669     

As discussed above in Metal Sales,Revenue, operations were restarted during 2019 and, as a result, the Seller began to record Production costs and Depreciation and amortization as Cost of sales in the Consolidated Statements of Operations.Operations.


Production costs

For the year ended December 31, 2019, the Seller recognized $11.0 million in production costs, or $1,285 per ounce of gold sold. The cost per ounce of gold sold was higher than expected in future periods and was driven by, (1) the use of contractors to supplement the mobile mine maintenance employees and crusher maintenance employees and (2) additional repair costs for the crushing and conveying system. Beginning in the third quarter of 2019, the Seller increased its focus on replacing contractors with full time employees and expects this to have a positive impact in future periods. However, given the low unemployment levels for mine workers in or near Nevada, limited availability of foreign workers and competition from other nearby mining companies, we anticipate that this will continue to be an area of focus and challenge for us in 2020. Unplanned crushing and conveying system repair resulted in unexpected downtime, inefficiencies in the Seller’s mining process, changes to its mining plan and additional expenditures. Due to unplanned crushing and conveying system repair, ounces produced was less than the Seller had budgeted and resulted in an increase in cost per ounce. With the assistance of the crusher manufacturer, a planned maintenance schedule was created for the crushing and conveying system which is expected to decrease the unplanned repairs and decrease expenditures in the future. However, we continue to expect that maintenance will continue to challenge us in 2020.

Depreciation and amortization

Depreciation and amortization expense was $1.0 million, or $118 per ounce of gold sold for the year ended December 31, 2019. Depreciation and amortization expense mostly relatesrelated to buildings, processing equipment and the leach pad. Construction on the leach pad for the initial restart began late in 2018 and was completed during 2019.

Write-down of production inventories

As discussed in Note 2 — Summary of Significant Accounting Policies into the notesNotes to theSeller’s consolidated financial statements, the estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related gold ore contents to the actual gold ounces recovered (metallurgical balancing). Based on metallurgical balancing results, theduring 2019, Seller determined that 11,680 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result of the write-off, theduring 2019 Seller recognized a write-down of production inventories on the consolidated statements of operations of $16.4 million. Cash production costs written-off were $15.1 million and capitalized depreciation and amortization costs written-off were $1.3 million. The write-off of these ounces was primarily a result of mismanagement of solution flows. The lost gold and silver ounces were leached and captured in solution. However, prior to the solution being processed through the Merrill-Crowe plant, it was inadvertently commingled with barren solution and pumped to older leach pads, keeping it from being recovered in the future.

As discussed in Note 2 — Summary of Significant Accounting Policies into the notesNotes to theSeller’s consolidated financial statements, production-related inventories are carried at the lower of cost or net realizable value. As discussed above, the Seller incurred increased production costs due to various operating issues, which resulted in a $2.2 million net realizable value write-down of ore on leach pads.

Operating expenses

Project and development

Project and development costs increased by $2.8 million from $4.9 million for the year ended December 31, 2018 to $7.7 million for the year ended December 31, 2019. The increase was primarily driven by costs incurred in 2019 related to the restart of the

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Hycroft Mine, such as maintenance and repair of mobile mining equipment and processing equipment (crusher, Merrill-Crowe facility and refinery), to prepare for use after sitting idle for several years. Additionally, during both 2018 and 2019, the Seller incurred costs to prepare feasibility studies, including the Hycroft Technical Report, which were a large portion of the cost for each period.


Care and maintenance, net

Care and maintenance, net decreased from $9.0 million for the year ended December 31, 2018 to $3.5 million for 2019. The decrease in Care and maintenance, net on the consolidated statements of operations was primarily driven by the restart of mining operations at the Hycroft Mine. Upon restarting in April 2019, the Seller no longer recorded any costs to care and maintenance, net. The Hycroft Mine was in care and maintenance during all of 2018.

Pre-production depreciation and amortization

Pre-production depreciation and amortization represents expense recognized prior to the restart of mining operations at the Hycroft Mine. For the year ended December 31, 2019 pre-production depreciation and amortization was $1.1 million compared to $3.5 million for the prior year. The decrease in pre- production depreciation and amortization was due to restarting mining operation and, therefore, recording depreciation and amortization to ore on the leach pads (beginning April 2019), which was recognized on the Consolidated Statements of Operations as part of total cost of sales as ounces of gold are sold.

Accretion

For the years ended December 31, 2019 and 2018, the Seller recognized $0.4 million and $1.3 million, respectively, in accretion expense. The amount of accretion expense for 2019 was reduced as a result of the expectation of a longer mine life.

General and administrative

General and administrative costs for the years ended December 31, 2019 and 2018 were $6.1 million and $5.3 million, respectively. For 2019, the Seller incurred stock-based compensation expense of $1.1 million related to restricted stock units granted during 2019, while for 2018 there was no stock-based compensation expense. Also during 2019, the Seller’s expense recognition for phantom shares increased $0.5 million due to an increase in the fair value of the 2015 and 2016 grants, whereas during 2018 there was a decrease in the fair value of the phantom shares. The stock-based compensation and phantom share increases were partially offset by a $0.4 million decrease in legal fees and a $0.6 million decrease in compensation and benefits. During 2018, in order to comply with one of the Seller’s debt covenants, the Seller incurred legal fees related to confidential regulatory filings which resulted in increased legal fees. During 2019, compensation and benefits decreased because certain corporate employees were assisting with the restart of the mine rather than corporate matters, and their salaries were allocated accordingly.

Reduction in asset retirement obligation

The Seller recognized reductions in asset retirement obligations of $1.9 million and $17.0 million during the years ended December 31, 2019 and 2018. The 2019 reduction was primarily driven by an increase in the Seller’s credit-adjusted risk-free rate, which is used to discount its estimated future reclamation expenditures, but was partially offset by an increase in equipment and diesel costs. The Seller’s reduction recorded in 2018 was primarily due to its increase in the estimated life of the mine to 34 years. As a result of extending the life of mine, reclamation expenditures were delayed by approximately 25 years from the prior estimated schedule.

Impairment of long-lived assets

During the year ended December 31, 2019, the Seller recorded impairments of long-lived assets of $0.1 million. The impairments recorded during 2019 related to a leach pad expansion project that it determined would not be utilized and, therefore, did not complete.

Interest expense, net

For the years ended December 31, 2019 and 2018, interest expense was $64.8 million and $50.9 million, respectively, an increase of $13.9 million, or 27%. The increase was primarily due to an increase in the average debt balance from $397.8 million for 2018 to $492.3 million for 2019, an increase of 24%. The average debt balance increased due to PIK interest on the Seller’s Second Lien Notes and 1.5 Lien Notes and the issuance of 1.25 Lien Notes in 2019. The 1.25 Lien Notes were issued to fund the restart of mining operations. Interest expense for 2019 was reduced by $0.6 million for interest that was capitalized to projects during the year.


Gain on retirement of debt

During the year ended December 31, 2018, the Seller paid $0.1 million to retire $3.4 million of Second Lien Notes resulting in a $3.3 million gain.

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Reorganization items, net

Expenses directly associated with finalizing the chapter 11 cases before the bankruptcy court were reported as Reorganization items, net in the Consolidated Statements of Operations. The Seller incurred legal and professional fees of $0.9 million and $0.4 million for the years ended December 31, 2019 and 2018, respectively. The increase was driven by payments to the U.S. Trustee that were calculated based on a percentage of total disbursements, which increased as a result of restarting mining operations.

Income tax expense and benefit

For the year ended December 31, 2018, the Seller recorded an income tax expense of $0.1 million as a result of attribute reduction which eliminated a previously recorded income tax receivable. There was no income tax expense or benefit recognized during 2019.

Net loss

Due to the activity discussed above, the Seller realized net losses of $98.9 million and $55.8 million for the years ended December 31, 2019 and 2018, respectively.

Liquidity and Capital Resources

General

InPrior to the absenceclosing of profitable operations following the Seller’s emergence from chapter 11 bankruptcy proceedings, theRecapitalization Transaction, Seller’s primary source of liquidity beginning in 2016 and through the end of 2018 was proceeds received from the issuance of 1.5 Lien Notes to the Initial Subscribers. the Seller’s primary continuing liquidity needs prior to restarting operationsrelated-party debt instruments, which were used to finance its operational needs for care and maintenance of the leach pads, to continue to conduct test work related to the two-stage oxidation and subsequent leaching of its sulfide and transition ores, preparation of the Hycroft Technical Report, its general and administrative costs, and debt service, primarily interest payments pursuant to the First Lien Credit Agreement.

The Seller began the2019 restart of mining operations in 2019. The Seller financedat the restart withHycroft Mine and all working capital and capital expenditures thereafter. During the issuancesecond half of 1.25 Lien Notes to the holders of the 1.5 Lien Notes. In connection with the business combination, we recapitalized our business with both debt and equity which will be used to finance the remaining cash requirements of the restart as operations and related gold and silver production and sales are ramped up.

During 2019, the Seller began to produce and sell gold from mining performed during 2019. Despite gold and silver sales in 2019at the Hycroft Mine which provided a source of revenue and related cash flow. On May 29, 2020, we completed the Seller continued to incur losses dueRecapitalization Transaction which provided cash available for use of $68.9 million. As part of the Recapitalization Transaction, Seller’s indebtedness existing prior to the costs expended on the restart in conjunction with operational missteps and inefficiencies. The Seller did not generate sufficient cash flow from its operations duringRecapitalization Transaction was either 2019 or the first quarter of 2020 to cover its operating costs, general and administrative costs, and capital project costs and the Seller was reliant upon additional debt funding to continue operations. The Seller was reliant on debt issuances to fund operations in 2019 through the closingrepaid, exchanged for indebtedness of the business combination.

Upon closing the business combination, we received net cash proceeds of approximately $212.7 million, of which we will utilize approximately $39.0 millionCompany, exchanged for capital expenditures through the remainder of 2020. This includes $30.0 million to $35.0 million to construct a new leach pad, $2.0 million to $3.0 million of capital expenditures associated with our cone crushers, and approximately $2.5 million of miscellaneous sustaining capital expenditures. Assuming we are able to ramp up operations and produce and sell the forecasted volumes, we believe that we will be able to meet our funding needs for at least the next twelve months.


Sprott Credit Agreement

On October 4, 2019, the Seller, as borrower, and certain of its subsidiaries, as guarantors, entered into the Initial Sprott Credit Agreement with Lender for a secured multi-advance term credit facility with an original aggregate principal amount not in excess of $110.0 million. In connection with the consummation of the business combination, the Company assumed the Initial Sprott Credit Agreement pursuant to the terms of the Purchase Agreement, entered into an amended and restated credit agreement, (the “Sprott Credit Agreement”), with us becoming a party thereto, borrowed $70.0 million under such facility and issued to Lender 496,634 shares of Common Stock. As a result, we are the borrower under the Sprott Credit Agreement.

The obligationsStock or converted into shares of the borrowerSeller common stock, and our post-Recapitalization Transaction indebtedness included amounts drawn under the Sprott Credit Agreement are guaranteed by (i) HRD and Allied VGH and their respective successors and permitted assigns and (ii) any existing or future subsidiarythe assumption of the guarantors ornewly issued Subordinated Notes.

Of the borrower (collectively,$68.9 million of cash available for use upon closing the Credit Parties”), other thanRecapitalization Transaction, we expect to spend approximately $40.0 million on capital expenditures at the guarantors, that acquires or holds any assets with a book value greater than $1.0 million other than certain equity interests disclosed to Lender. The obligations underHycroft Mine, including for the Sprott Credit Agreement are secured by a lien on all properties and assets now owned, leased or hereafter acquired or leased by any Credit Party including a security interest to Lender of all membership interest in HRD and Allied VGH.

The Sprott Credit Agreement is accessible by the borrower through one or more advances. The initial two advances were in the principal amounts of $55.0 million and $15.0 million, respectively,leach pad expansion project and the Lender may make a subsequent advance, assuming satisfaction of applicable conditions and production milestones, for up$2.7 million final crusher payment to an additional $40.0 million in aggregate principal amount. The Sprott Credit Agreement will be made available at an original issue discount of 2%. The Sprott Credit Agreement has been, and willthe vendor, with the remainder to be used for (i) repayment of indebtednessoperations and liabilities under the existing first lien secured facility with Scotia Bank, as administrator, and other payoff amounts, (ii) payment of costs and expenses to putworking capital purposes at the Hycroft Mine into commercial production and/orand corporate charges and expenses. We have yet to maintain or increase commercial production,generate cash flow from operations and (iii) paymentare not forecasting that we will do so in the second half of Lender’s fees2020.

As discussed under “– Recent Developments – Going concern” above, we have insufficient liquidity and expenses incurred in connection with the Sprott Credit Agreement.

Advances under the Sprott Credit Agreement bear interest monthly atavailable capital resources that raises substantial doubt about our ability to continue as a floating rate equal to seven percent (7%) plus the greater of (i) US Dollar three month LIBOR and (ii) one and one-half percent (1.50%), per annum, accruing daily and compounded monthly. For a period of twelve (12) months following the initial advance, no cash payments of interest or principalgoing concern because it is probable that, without additional capital injections, we will be unable to meet our obligations as they become due with 100% of interest accruing being capitalized on a monthly basis and added to the outstanding principal balance of the Sprott Credit Agreement.

For each calendar quarter commencing on March 1, 2021 and ending on the maturity date, the borrower shall pay Lender additional interest on the last business day of such calendar quarter, calculated according to a formula set forth in the Sprott Credit Agreement. Upon the prepayment of the entire Sprott Credit Agreement, all remaining additional interest payments and all remaining and yet unpaid additional interest must be prepaid as well.

The borrower shall be required under the Sprott Credit Agreement to make principal repayments beginning on August 31, 2021 and on the last business day of each calendar quarter thereafter. The first four (4) principal repayments will be in an amount equal to two and one-half percent (2.50%) of the outstanding principal amount of the Sprott Credit Agreement on May 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due). All subsequent principal repayments shall be in an amount equal to seven and one-half (7.50%) of the outstanding principal amount of the Sprott Credit Agreement on May 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due). The entire outstanding balance of the Sprott Credit Agreement, together with all unpaid interest and fees (including all capitalized interest, if any), is due on the day that is five years from the last day of the month of the initial closing date, which shall be no later than May 31, 2025, the maturity date.

The Sprott Credit Agreement may be repaid in whole or in part, at any time prior to the maturity date. Each prepayment or cancellation of the Sprott Credit Agreement (including capitalized interest, if any), whether in whole or in part, voluntarily or mandatory, subject to certain exceptions, that occurs on or prior to the fourth anniversary of the date of the initial advance is subject to a prepayment premium, payable on the date of the prepayment or cancellation as follows:


Prepayment Date

Percentage of Principal

Amount Outstanding

Prior to 2nd anniversary of initial advance date5.0%
After 2nd anniversary but prior to 4th anniversary of initial advance date3.0%

In addition to the required quarterly repayment of principal beginning on August 31, 2021, the borrower will be required under the Sprott Credit Agreement to make a mandatory prepayment (A) if at any timewithin one year after the date that second quarter 2020 financial statements were issued. This offering is intended to address this going concern and provide sufficient capital to enable us to meet our obligations as they become due within one year.

We have undertaken efforts aimed at managing our liquidity and preserving our capital resources by, among other things: (1) monitoring metal prices and the impacts (near-term and future) they have on our business; (2) developing a second half of 2020 forecast which we expect may be achieved in terms of processing projected recoverable ounces placed on the initial advance, any Credit Party (i) sells or otherwise disposesleach pads; (3) controlling our working capital and managing discretionary spending; (4) planning the timing and amounts of certain assets other than those permitted by the Sprott Credit Agreement in one or more transactions, to the extent that cash proceeds of such sale or other disposal exceed $500,000 when aggregated with the proceeds of all other sales and disposals of the Credit Parties, or (ii) receives any insurance proceeds greater than $1.0 million which are not otherwise expended oncapital expenditures at the Hycroft Mine within one-hundred eighty (180) days, and (B) upondeferring such items that are not expected to impact our operating plans; and (5) evaluating new financing options which might be attainable and are permissible under our existing debt and royalty agreements. Our future liquidity and capital resources management strategy entails a disciplined approach to monitor the occurrence of a change of control (in certain circumstances) other than any change of control resulting from the business combination. In addition to thetiming and amount of any such mandatory prepayment, borrower shall pay to the Lender an amount equal to the applicable prepayment premium unless otherwise excused by the Sprott Credit Agreement.

Sprott Royalty Agreement

The Company, HRD and Sprott Private Resource Lending II (Co) Inc., as the Payee, an affiliateoperational tonnage ramp-up of the Lender, entered into a royalty agreement with respect to the Hycroft Mine while attempting to remain in a position that allows us to respond to changes in our business environment, such as a decrease in metal prices or the Sprott Royalty Agreement, at the closing of the business combination. Pursuant to the terms of the Sprott Royalty Agreement, at the closing of the business combination, Payee paid to HRDlower than forecast future cash considerationflows, and changes in the amount of $30.0 million, for which HRD granted to Payee a perpetual royalty equal to one and one-half percent (1.50%) of net smelter returns, payable monthly. Net smelter returns for any given month are calculated by monthly production multiplied by monthly average gold price or monthly average silver price, minus allowable deductions.other factors beyond our control.

HRD has the right to repurchase a portion of the royalty on each of the first and second anniversary of the effective date of the Sprott Royalty Agreement. For the first anniversary, the repurchase right is in respect of up to 33.3% of the initial royalty in consideration of a purchase price calculated pursuant to a formula described in the Sprott Royalty Agreement. For the second anniversary, the repurchase right is in respect of any remaining portion of the initial royalty that was not acquired on the first anniversary up to the ceiling of 33.3% of the initial royalty plus up to 33.3% of the increased amount of the royalty in consideration of a purchase price calculated pursuant to a formula described in the Sprott Royalty Agreement.

In addition to the terms generally described above, the Sprott Royalty Agreement contains other terms and conditions commonly contained in royalty agreements of this nature.

New Subordinated Notes

In connection with the business combination, the Company assumed $80.0 million in aggregate principal amount of the New Subordinated Notes. The New Subordinated Notes are secured and subordinate in priority to the senior debt obligations under the Sprott Credit Agreement. The New Subordinated Notes bear interest at a rate of 10% per annum, payable in kind on a quarterly basis. The principal on the New Subordinated Notes is due December 1, 2025.

Cash and liquid assetsliquidity

The SellerWe have placed substantially all of itsour cash in operating accounts with twoa well-capitalized financial institutions,institution, thereby ensuring balances remain readily available. Due to the nature of the Seller’sour operations and the composition of our current assets, the Seller’s cashour Cash, Accounts receivable, and metal inventoriesinventory balances representedrepresent substantially all of our liquid assets on hand. As of March 31,June 30, 2020, we had Cash of $47.3 million, Accounts receivableof $0.4 million, and metal inventories of $4.3 million. Additionally, we are provided with additional liquidity as ounces are recovered from the Seller had existing cashOre on leach pads, processed into finished goods, and sold at prevailing spot prices to our customers.

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Table of $6.2 million, an increase of $0.3 million from $6.5 million at December 31, 2019.Contents

Restricted cash

As of March 31, 2020, the Seller held $42.5 million in restricted cash accounts. The majority of the restricted cash, or $39.6 million, was held as collateral for the Seller’s surface management surety bonds while the remaining


$2.9 million was held in accordance with certain of its debt covenants. All the restricted cash was held by well-capitalized financial institutions.

Available sources of liquidity

The following table summarizes our availableprojected sources of liquidity:

  Mar. 31  Dec. 31  
  2020  2019  
  (dollars in thousands) 
Cash $6,566  $6,220 
Metal inventories(1)  2,098   1,894 
Ore on leach pads(2)  26,122   22,062 
Total liquidity sources $34,786   $30,176  

future liquidity, as recorded within our financial statements:

    

June 30,

    

December 31,

 

2020

2019

Cash

$

47,293 

$

6,220 

Accounts receivable

372 

97 

Metal inventories(1)

4,260 

1,894 

Ore on leach pads(2)

28,180 

22,062 

Total projected sources of future liquidity

$

80,105 

$

30,273 


(1)Metal inventories contained approximately 1,6042,508 recoverable ounces of gold which are expected to be sold within the next 12 months. Assuming a gold selling price of $1,608.95$1,768 per ounce (the March 31,June 30, 2020 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from the Seller’sour metal inventories would provide itus with $2.6$4.4 million of revenue.revenue. See Note 4 – Inventories to the Notes to Unaudited Consolidated Financial Statements for additional information.

(2)(2)Ore on leach pads contained approximately 18,92117,825 ounces of gold which are expected to be processed into finished goods and then sold within the next 12 months. Assuming a gold selling price of $1,608.95$1,768 per ounce (the March 31,June 30, 2020 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from the Seller’sour ore on leach pads would provide itus with $30.4$31.5 million of revenue. See Note 4 – Inventories to the Notes to Unaudited Consolidated Financial Statements for additional information.

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

SourcesThe following table summarizes our sources and uses of cash for the following periods:

Six Months Ended June 30,

2020

    

2019

(dollars in thousands)

Net loss

    

$

(84,408)

    

$

(45,387)

Net non-cash adjustments

52,057 

27,298 

Net change in operating assets and liabilities

(25,291)

(6,046)

Net cash used in operating activities

(57,642)

(24,135)

Net cash used in investing activities

(11,704)

(9,725)

Net cash provided by financing activities

107,303 

35,046 

Net increase in cash

37,957 

1,186 

Cash, beginning of period

48,967 

52,861 

Cash, end of period

$

86,924 

$

54,047 

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

  Three Months Ended 
  March 31, 
  2020  2019  
  (dollars in thousands) 
Net loss $(34,618) $(23,440)
Net non-cash adjustments  26,040   13,503 
Net change in operating assets and liabilities  (10,867)  864 
Net cash used in operating activities  (19,445)  (9,073)  
Net cash used in investing activities  (2,090)  (4,498)
Net cash provided by financing activities  21,658   17,154  
Net decrease in cash  123   3,583 
Cash, beginning of period  48,967   52,861 
Cash, end of period $49,090  $56,444  

Cash used in and provided by operating activities

For the threesix months ended March 31,June 30, 2020, the Sellerwe used $19.4$57.6 million ofin cash for operating activities primarily attributable to a net loss of $34.6$84.4 million and increases in the following operating assets; production-relatedproduction related inventories ($10.4 million), prepaid and other ($1.5 million) and accounts receivable ($0.8 million), and a decrease in interest payable ($0.4 million). The cash outflows driven by the items described aboveof $24.8 million, which were partially offset by certain non-cash expenses, including a $17.0items, in particular, write-downs of production inventories of $17.9 million, which is discussed in Note 4 – Inventories to the Notes to Unaudited Consolidated Financial Statements, the non-cash portion of interest expense $7.0of $30.4 million write-down of production inventories, $1.3 million depreciation and amortization and $0.4 million stock-based compensation. There was also an increase in accounts payable ($2.4 million) that partially offset the cash outflows.

of $7.8 million.

For the threesix months ended March 31,June 30, 2019, the Sellerwe used $9.1$24.1 million of cash forin operating activities primarily attributable to a net loss of $23.4$45.4 million and a decreaseincreases in interest payable ($0.4 million). The negative impact on cash flow from operationsproduction-related inventories of the net loss and decrease in interest payable$7.6 million, which were partially offset by certain


non-cash expenses, including a $11.9 millionitems, in particular, the non-cash portion of interest expense $0.8of $25.0 million depreciation and amortization and $0.5 million of phantom share compensation. Additionally, there were increasesan increase in accounts payable ($1.6 million) that offset the negative impact on cash flow from operations of the net loss and interest payable.$1.7 million.

Cash used in investing activities

For the threesix months ended March 31,June 30, 2020 and 2019, the Sellerwe used $2.1$11.7 million and $4.5$9.7 million, respectively, in investing activities. For 2020, the costsexpenditures primarily related to (1) construction of a new leach pad space of $1.1$9.7 million, and (2) construction or purchases of processing equipment of $0.6$1.5 million. For the 2019 period, the spend wasexpenditures were mostly driven by (1) construction of new leach pad space for the restart of $2.2$5.3 million, and (2) the purchase and installation of four new cone crushers for $1.9$3.4 million.

Cash used in and provided by financing activities

Cash generated by financing activities was $21.7 million forFor the threesix months ended March 31,June 30, 2020, which was mostly driven by net issuances of $24.9Seller issued $44.8 million in aggregate principal amount of 1.25 Lien Notes (net of issuance costs). The 1.25 Lien Notes which were used to fund operational coststhe operations and capital expenditures due to not generating enough cash from sales. The Seller spent $2.6 million for legal and consulting feesneeds through May 29, 2020. The remainder of the financing

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activities related to the business combinationRecapitalization Transaction, which provided $210.0 million in net cash flows and $0.6was used to repay Seller’s $125.5 million for extending the maturity of the First Lien Credit Agreement, partially offsetting$6.9 million Promissory Note, and transaction costs and other issuance costs. See Note 3 – Recapitalization Transaction to the net cash received from the issuance of 1.25 Lien Notes.Notes to Unaudited Consolidated Financial Statements for further discussion.

The amount of cash generatedprovided by financing activities was $17.2$35.0 million for the threesix months ended March 31,June 30, 2019, which was mostly driven by net issuances of $18.0due to $36.9 million in aggregate principal amount of 1.25 Lien Notes (net of issuance costs). The 1.25 Lien Notes were used issued to fund the restart of mining operations. The Seller spent $0.7$1.2 million for legal and consulting fees related to the business combinationRecapitalization Transaction and the review of its other strategic alternatives and $0.1$0.7 million for extendingto extend the maturity of the First Lien Credit Agreement.

Future capital and cash requirements

The following table provides our gross contractual cash obligations as of June 30, 2020, which are grouped in the same manner as they were classified in the cash flows in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information. We believe the following provides the most meaningful presentation of near-term obligations expected to be satisfied using current and available sources of liquidity

Payments Due by Period

 

Less than

1 - 3

3 - 5

More than

Total

1 Year

Years

Years

5 Years

(dollars in thousands)

Operating activities

    

    

    

    

    

Operating lease requirements(1)

$

10,112 

$

10,042 

$

70 

$

— 

$

— 

Consignment inventory purchase obligation(2)

1,770 

885 

885 

— 

— 

Interest payments(3)

25,296 

1,090 

15,687 

8,519 

— 

Crofoot royalty obligation(4)

4,990 

240 

4,554 

196 

— 

Net smelter royalty(5)

209,815 

2,213 

9,295 

10,905 

187,402 

Remediation and reclamation expenditures(6)

62,213 

— 

— 

— 

62,213 

Financing activities

Repayments of debt principal(7)

214,135 

— 

30,511 

45,766 

137,858 

$

528,331 

$

14,470 

$

61,002 

$

65,386 

$

387,473 


(1)As noted below in “– Off-balance sheet arrangements,” we have operating leases for mine equipment.
(2)As noted below in “– Off-balance sheet arrangements,” and as discussed in Note 5 – Prepaids and Other to the Notes to Unaudited Consolidated Financial Statements, we have a future purchase obligation for consignment inventory.
(3)Under the Sprott Credit Agreement, we must pay interest beginning in the 13th month after the initial advance to the Lender and also pay additional interest payments commencing February 28, 2021 and ending on the maturity date. See Note 9 – Debt, Net to the Notes to Unaudited Consolidated Financial Statements for additional information.
(4)We are required to pay a 4% net profits royalty, including advance royalty payments of $120,000 in any year where mining occurs on the Crofoot claims. See Note 20 – Commitments and Contingencies to the Notes to Unaudited Consolidated Financial Statements for additional information.
(5)Under the Sprott Royalty Agreement, we are required to pay a perpetual royalty equal to 1.50% of the net smelter returns from our Hycroft Mine, payable monthly. Amounts presented above incorporate estimates of our current life-of-mine plans. See Note 10 – Royalty Obligation to the Notes to Unaudited Consolidated Financial Statements for additional information.
(6)Mining operations are subject to extensive environmental regulations in the jurisdictions in which they are conducted and we are required, upon cessation of operations, to reclaim and remediate the lands that our operations have disturbed. The estimated undiscounted cash outflows of these remediation and reclamation obligations are reflected here.
(7)Repayments of principal on debt consists of amounts due under the Sprott Credit Agreement and the Subordinated Notes. Included in the repayment of the Subordinated Notes principal is interest that has been capitalized as payable in kind on a quarterly basis, and on a monthly basis for the Sprott Credit Agreement for the first 12 months after the initial advance. See Note 9 – Debt, Net to the Notes to Unaudited Consolidated Financial Statements for additional information.

Debt covenants

Our debt agreements contain representations and warranties, events of default, restrictions and limitations, reporting requirements, and covenants that are customary for agreements of these types.

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The Sprott Credit Agreement partially offsettingcontains covenants that, among other things, restrict or limit our ability to enter into encumbrances (other than Permitted Encumbrances), incur indebtedness (other than Permitted Indebtedness), dispose of our assets (other than Permitted Disposals), pay dividends, and purchase or redeem shares, as such terms are defined in the net cash receivedSprott Credit Agreement. The Sprott Credit Agreement requires us to report, at all times, that both Working Capital and Unrestricted Cash is at least $10.0 million, and that at least every six months from May 29, 2020 (or earlier as required per the issuanceterms of 1.25 Lien Notes.the Sprott Credit Agreement) we demonstrate our ability to repay and meet all present and future obligations as they become due with a financial Model that uses consensus gold and silver prices discounted by 5.0%, as such terms are defined in the Sprott Credit Agreement. The Subordinated Notes include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non-compliance with security documents.

As of June 30, 2020, the Company was in compliance with all covenants.

As discussed in Note 2 – Summary of Significant Accounting Policies to the Notes to Unaudited Consolidated Financial Statements, our ability to continue as a going concern is contingent upon achieving our sales, production, cost, and other operating targets, as well as the success of a future financing transaction to provide additional capital financing for working capital and construction of its leach pad. Additionally, if we are unable to achieve our targets and obtain financing in the future then we may no longer be able to stay in compliance with all covenants discussed above. See the section of this prospectus entitled “Risk Factors.”

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

    

Year Ended

 

December 31,

2019

    

2018

(dollars in thousands)

Net loss

    

$

(98,895)

    

$

(55,803)

Net non-cash adjustments

75,393 

26,059 

Net change in operating assets and liabilities

(36,269)

2,819 

Net cash used in operating activities

(59,771)

(26,925)

Net cash used in investing activities

(12,296)

(1,146)

Net cash provided by financing activities

68,173 

27,595 

Net decrease in cash

(3,894)

(476)

Cash, beginning of period

52,861 

53,337 

Cash, end of period

$

48,967 

$

52,861 

  Year Ended 
  December 31, 
  2019  2018  
  (dollars in thousands) 
Net loss $(98,895) $(55,803)
Net non-cash adjustments  75,393   26,059 
Net change in operating assets and liabilities  (36,269)  2,819 
Net cash used in operating activities  (59,771)  (26,925)  
Net cash used in investing activities  (12,296)  (1,146)
Net cash provided by financing activities  68,173   27,595  
Net decrease in cash  (3,894)  (476)
Cash, beginning of period  52,861   53,337 
Cash, end of period $48,967  $52,861  

Cash used in and provided by operating activities

For the year ended December 31, 2019, the Seller used $59.8 million of cash for operating activities primarily attributable to a net loss of $98.9 million, a reduction in the asset retirement obligations of $1.9 million and increases in the following operating assets; production-related inventories ($38.6 million), materials and supplies inventories ($1.0 million) and prepaid and other ($0.4 million). The cash outflows driven by the items described above were partially offset by certain non-cash expenses such as $54.8 million non-cash portion of interest expense, $18.6 million write-down of production inventories, $2.1 million depreciation and amortization, $1.1 million stock-based compensation and $0.4 million of accretion. There were also increases in accounts payable ($3.4 million) and other liabilities ($0.8 million) that partially offset the cash outflows.


For the year ended December 31, 2018, the Seller used $26.9 million of cash for operating activities primarily attributable to a net loss of $55.8 million and non-cash income or gains such as the reduction of our asset retirement obligation ($17.0 million) and the gain on retirement of debt ($3.3 million). The negative impact on cash flow from operations of the net loss, reduction in asset retirement obligation and gain on retirement of debt were partially offset by certain non-cash expenses, including a $40.8 million non-cash portion of interest expense, $3.5 million depreciation and amortization, $1.3 million accretion and $1.0 million write- downwrite-down of mineral property. There were also several significant changes in assets and liabilities that offset the negative impact on cash flow from operations of the net loss, reduction in asset retirement obligation and gain on retirement of debt, such as the following, a $1.2 million increase in other liabilities, a $0.9 million decrease in prepaids and other, and a $0.5 million increase in interest payable.

Cash used in investing activities

For the years ended December 31, 2019 and 2018, the Seller used $12.3 million and $1.1 million, respectively, in investing activities. For 2019, the vast majority of the costs related to (1) construction of new leach pad space for the restart of $6.2 million, (2) the purchase and installation of four new cone crushers for $4.0 million and (3) replacement and significant repairs of existing processing equipment for $0.8 million. For the 2018 period the spend was mostly in the last quarter of the year as the Seller was beginning its restart preparations.

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Cash used in and provided by financing activities

Cash generated by financing activities was $68.2 million for the year ended December 31, 2019, which was mostly driven by net issuances of $71.8 million in aggregate principal amount of 1.25 Lien Notes (net of issuance costs). The 1.25 Lien Notes were used to fund the restart of mining operations. The Seller spent $2.9 million for legal and consulting fees related to the business combinationRecapitalization Transaction and the review of our other strategic alternatives and $0.8 million for extending the maturity of the First Lien Credit Agreement, partially offsetting the net cash received from the issuance of 1.25 Lien Notes.

The amount of cash generated by financing activities was $27.6 million for the year ended December 31, 2018, which was mostly driven by net issuances of $27.9 million in aggregate principal amount of 1.5 Lien Notes (net of issuance costs). The proceeds from the issuance of 1.5 Lien Notes was partially offset by cash outflows of $0.1 million each from refinancing issuance costs and retirement of convertible notes.

Future capital and cash requirements

The following table provides our gross contractual cash obligations as of March 31, 2020, which are grouped in the same manner as they were classified in the Condensed Consolidated Statements of Cash Flows in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information. We believe the following provides the most meaningful presentation of our near-term obligations expected to be satisfied using our current and available sources of liquidity:

       Payments Due by Period
��      Less Than           More Than
   Total    1 Year   1-3 Years   3-5 Years   5 Years
   (dollars in thousands)
Operating activities   
Interest related to debt(1) $13,287  $13,287  $-  $-  $-
Operating lease requirements(2)  12,213   11,660   553   -   -
Remediation and reclamation expenditures(3)  62,213   -   -   -   62,213
Financing activities                   
Repayments of debt principal(4)  596,335   596,335   -   -   -
Repayment of pay-in-kind interest(5)  16,578   16,578   -   -   -
  $700,626  $637,860  $553  $        -  $$62,213

(1)Interest payments were calculated based on the debt outstanding as of March 31, 2020 and includes interest that will be paid at maturity, but not added to the principal balance as pay-in-kind interest.

(2)As noted below in Off-balance sheet arrangements the Company has two operating leases which are included.


(3)Mining operations are subject to extensive environmental regulations in the jurisdictions in which they are conducted and we are required, upon cessation of operations, to reclaim and remediate the lands that our operations have disturbed. The estimated undiscounted cash outflows of these remediation and reclamation obligations are reflected here.

(4)Repayments of principal on debt consists of amounts due under term obligations.

(5)Repayments of pay-in-kind interest will occur at debt maturity and only includes interest that will be added to the principal during 2020.

Off-balance sheet arrangements

As of March 31,June 30, 2020, and December 31, 2019, the Seller’sour off-balance sheet arrangements consisted of an operating lease agreementagreements (see Note 20 – Commitment and royalty agreements. During the first quarter of 2020, the Seller also signed a lease for mining equipment.

The operating lease for the Company’s office space in Denver, Colorado is $0.1 million annually and expires in January 2022. The one-year operating lease for mobile mining equipment will be used to supplement the Company’s own fleet. As of March 31, 2020, none of the equipment had been placed into service, but certain equipment was placed into service subsequentContingencies to the quarter end and before the date of this filing. Once all equipment is placed into service, the equipment lease is for $12.6 million, part of which was prepaid as of March 31, 2020.

As the Company has electedNotes to take advantage of the extended transition period for complying with new or revised accounting standards, the liability for the Company’s operating leases will remain off of our balance sheet until the new lease accounting rules apply to privately-held companies in accordance with the JOBS Act or we are no longer an emerging growth company.

A portion of the Hycroft Mine is subject toUnaudited Consolidated Financial Statements), a mining lease that requires a 4% net profit royalty be paidarrangement (see Note 20 – Commitment and Contingencies to the owner of patentedNotes to Unaudited Consolidated Financial Statements), and unpatented mining claims relatinga future purchase obligation for consignment inventory (see Note 5 – Prepaids and Other to the Hycroft Mine. The mining lease also requires an annual advance paymentNotes to Unaudited Consolidated Financial Statements).

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Table of $120,000 every year mining occurs on the leased claims. An additional advance payment is required in any year in which five million tons or more are mined from the property, subject to the 4% net profit royalty. This lease is classified as an off-balance sheet arrangement because the royalty payments are contingent upon mining activity and other events. All advance payments are credited against the future payments due under the 4% net profit royalty. The total payments due under the mining lease are capped at $7.6 million. Through March 31, 2020 and December 31, 2019, the Seller had paid $2.6 million and $2.5 million, respectively.Contents

The Seller entered into a bonus plan which, upon the consummation of the business combination required it to pay certain senior level employees a total of $5.9 million, based upon the value of the transaction.


MANAGEMENTMANAGEMENT

Management and Board of Directors

The below is a list of our executive officers and directors and their respective ages and a brief account of each of their business experience:

Name
Age
Position(s)

Name

Age

Position(s)

Stephen M. Jones

61

Interim President and Chief Executive Officer

Diane R. Garrett

60

President, Chief Executive Officer and Director, as of July 1,September 8, 2020

Jeffrey Stieber

36

Vice President and Interim Chief Financial Officer

Randy Buffington

David Kirsch

60

40

Former

Chairman of the Board President and Chief Executive Officer, as of July 1, 2020

David Kirsch

Eugene Davis

40

65

Chairman of the Board

Director

Eugene Davis

John Ellis

65

84

Director

John Ellis

Michael Harrison

84

48

Director

Michael Harrison

Thomas Weng

48

52

Director

Thomas Weng51Director

Marni Wieshofer

57

Director

Upon the consummation of the business combination,Recapitalization Transaction, the size of the our board was increased from five directors to seven directors, and each of the above directors, other than Diane R. Garrett, was elected by our stockholders at the special meeting of our stockholders held on May 29, 2020 to approve the business combination.Recapitalization Transaction. Prior to being elected to our Board on May 29, 2020, Messrs. Buffington, Ellis, Kirsch and Harrison served on the Seller’s board of directors for the terms set forth in their bibliography below and Mr. Kirsch has served on our Board since February of 2018. We have determined that each of Messrs. Davis, , Ellis, Harrison, Kirsch, and Weng and Ms. Wieshofer are “independent directors” under NASDAQNasdaq listing standards. Randy Buffington resigned from his roles of Chairman of the Board, President and Chief Executive Officer effective as of July 1, 2020 and our board was decreased to six directors. The Board of Directors authorized the increase in the size of our board from six to seven and appointed Diane R. Garrett to the Board of Directors to serve as a director contemporaneous with her appointment as President and Chief Executive Officer, effective as of September 8, 2020.

Diane R. Garrett, Ph.D, will be our President and Chief Executive Officer and a director, effective as of September 8, 2020. From June 2016 until her appointment with the Company, Dr. Garrett was the President and Chief Executive Officer of Nickel Creek Platinum Corp. (“NCP”), a mining exploration and development company listed on the Toronto Stock Exchange and the OTC-QB Market. She has more than 20 years of senior management and financial expertise in the field of natural resources. Prior to joining NCP, she held the position of President and Chief Executive Officer and a director of Romarco Minerals Inc. (“Romarco”) from November 2002 until October 2015, taking the multi-million-ounce Haile Gold Mine project from discovery to construction. Romarco was acquired by OceanaGold in 2015, at which time Dr. Garrett became a director and consultant to OceanaGold before joining NCP in June 2016. Prior to that, she held numerous senior positions in public mining companies including VP of Corporate Development at Dayton Mining Corporation and VP of Corporate Development at Beartooth Platinum Corporation. Early in her career, Dr. Garrett was the Senior Mining Analyst and Portfolio Manager in the precious metals sector with US Global Investors. Dr. Garrett received her Ph.D. in Engineering and her Masters in Mineral Economics from the University of Texas at Austin. The Board has determined that Dr. Garrett should serve as a director due to her technical expertise and background as a senior executive in mining companies as well as her significant experience with permitting, developing and constructing gold mines and moving a precious-metals mining company from the development stage to the successful producer stage, Dr. Garrett is also a director of Novagold Resources Inc., a mineral exploration company operating in the gold mining industry and listed on the NYSE American and Toronto Stock Exchange.

Stephen M. Jones since July 1, 2020, is serving as our interim President and Chief Executive Officer. Previously, Mr. Jones served as our Executive Vice President and Chief Financial Officer and Secretary since the consummation of the business combinationRecapitalization Transaction and previously having been appointed in the position by the SellerSeller’s predecessor in March 2012. On March 10, 2015, Seller's predecessor filed voluntary petitions for relief under the Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware and on October 22, 2015, Seller emerged from the chapter 11 process. Mr. Jones was formerly with EPM Mining Ventures, Inc., as the Chief Financial Officer from May 2011 to August 2011, the President and Secretary from March 2010 to May 2011, and a director from March 2010 to April 2012. Mr. Jones also served as Katanga Mining Limited’s Senior Vice President and Chief Financial Officer from June 2006 until December 2008.

Upon Dr. Garrett’s assuming the position of President and Chief Executive Officer, Mr. Jones will no longer serve as the interim President and Chief Executive Officer or as an executive officer of the Company.

Jeffrey Stieber since July 1, 2020, is serving as our Vice President and interim Chief Financial Officer. Mr. Stieber joined the Company as its Vice President, Treasurer on May 29, 2020, whensince the Company and its subsidiaries acquired allconsummation of the assetsRecapitalization Transaction and employees of Hycroft Mining Corporation. Mr. Stieber had rejoined Hycroft Mining Corporationpreviously having been appointed in the position by Seller in August 2018, as its Vice President, Treasurer, having previously served in senior finance and accounting roles with that company

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from 2010 to 2015. From 2015 to 2018 Mr. Stieber held senior and executive positions at Tahoe Resources and Klondex Mines, until its acquisition by Hecla. Mr. Stieber has more than ten years of finance and accounting experience within the mining industry, is a CPA, and graduated from the University of Nevada.

Randy BuffingtonDavid Kirsch served asis the Executive Chairman of the Board President and Chief Executive Officer of the Company from consummation of the business combination until July 1, 2020 and prior to that for the Seller since November 5, 2015. Mr. Buffington was also a member of the Sellers’s board of directors Technical Committee. He was appointed President and Chief Executive Officer of the Seller on July 8, 2013. Prior to his appointment, Mr. Buffington served as the Seller’s Executive Vice President and Chief Operating Officer from February 2013 until July 2013. Prior to joining the Hycroft Mining Corporation, Mr. Buffington was Senior Vice President of Operations of Coeur Mining, Inc. (formerly Coeur d’Alene Mines Corporation) (a silver mining company) from January 2012 to January 2013. Mr. Buffington also held various positions with Barrick Gold Corporation (a global mining company), including: Managing Director of Zambia from September 2011 to January 2012; General Manager of North American Operations for Barrick Goldstrike Mines, Inc. from August 2009 to September 2011; and General Manager for Barrick Ruby Hill Mine from August 2006 to August 2009. From September 2014 to November 2016, Mr. Buffington was a director of Rye Patch Gold Corp. (a gold exploration company listed on the TSX Venture Exchange).

On July 1, 2020, the Company announced that the Board and Randy Buffington agreed that Mr. Buffington would depart from the Company and transition and resign from his roles of Chairman of the Board, President and Chief Executive Officer and any and all other positions held by him with any direct or indirect subsidiary of the Company, effective as of July 1, 2020.

Effective as of July 1, 2020 the Board appointed Stephen M. Jones, the Company’s current Executive Vice President, Chief Financial Officer and Secretary, who has served in those roles since 2012, as President and Chief Executive Officer on an interim basis, effective upon Mr. Buffington’s departure. It is expected that Mr. Jones will serve in such roles until the appointment by the Board of a permanent president and chief executive officer. In connection with his appointment as interim President and Chief Executive Officer, Mr. Jones stepped down from his position as Executive Vice President, Chief Financial Officer and Secretary of the Company. The Company has no agreement or arrangement with Mr. Jones regarding any right to receive additional compensation from the Company for serving as the interim President and Chief Executive Officer.


David Kirsch has been a member of our Board since February 2018. He also serves as Chairman of the Compensation Committee and a member of the Nominating and Governance Committee. Mr. Kirsch also served as a member of Seller’s board of directors since October 2015, and served as the Chair of the Audit Committee and a member of the Compensation and Nominating and Governance committees for the Seller’s board of directors. Mr. Kirsch was appointed as our Chairman of the Board effective upon Mr. Buffington’s resignation on July 1, 2020. 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, 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 to 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 NJOY Holdings, a privately- held producer of e-cigs and vaping products to help adult smokers make the switch from tobacco products, Proenza Schouler, Targus Holdings and Nelson Education, where he is the Chairman of the Board. Mr. Kirsch 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 include his extensive leadership and board experience, his experience as Managing Director and Senior Analyst of Mudrick, his current board experience, including as Chairman of the Board of Nelson Education, and his network of contacts in the distressed investing field.

Eugene Davis has been a member of our Board since the May 29, 2020 Recapitalization Transaction and is Chairman of the Nominating and Governance Committee and a member of the Audit Committee. Mr. Davis currently serves as the Chairman and Chief Executive Officer of PIRINATE Consulting Group, LLC (“PIRINATE”), a privately held consulting firm specializing in turnaround management, merger and acquisition consulting, hostile and friendly takeovers, proxy contests and strategic planning advisory services for domestic and international public and private business entities. Since forming PIRINATE in 1997, Mr. Davis has advised, managed, sold, liquidated and served as a chief executive officer, chief restructuring officer, director, chairman or committee chairman of a number of businesses operating in diverse sectors. He was the President, Vice Chairman and a director of Emerson Radio Corporation, a consumer electronics company, from 1990 to 1997 and was the Chief Executive Officer and Vice Chairman of Sport Supply Group, Inc., a direct-mail marketer of sports equipment, from 1996 to 1997. Mr. Davis began his career in 1980 as an attorney and international negotiator with Exxon Corporation and Standard Oil Company (Indiana) and was in private practice from 1984 to 1998. During the past five years, Mr. Davis has been a director of the following public or formerly public companies: Montage Resources Corp., Seadrill Limited, VICI Properties Inc., Verso Corporation, ALST Casino Holdco, LLC, Atlas Air Worldwide Holdings, Inc., Atlas Iron Limited, The Cash Store Financial Services, Inc., Dex One Corp., Genco Shipping & Trading Limited, Global Power Equipment Group, Inc., Goodrich Petroleum Corp., Great Elm Capital Corp., GSI Group, Inc., Hercules Offshore, Inc., HRG Group, Inc., Knology, Inc., SeraCare Life Sciences, Inc., Spansion, Inc., Spectrum Brands Holdings, Inc., Titan Energy LLC, Trump Entertainment Resorts, Inc., U.S. Concrete, Inc. and WMIH Corp. In addition, Mr. Davis is and has been a director of several private companies in various industries. Mr. Davis is well-qualified to serve as a member of our Board because of his substantial knowledge about strategic planning, mergers and acquisitions, finance, accounting, capital structure and board practices and his extensive experience serving as a director of public and private companies in various industries.

John Ellis has been a member of our Board since the May 29, 2020 Recapitalization Transaction and is Chairman of the Safety, Sustainability & Technical Committee and a member of the Compensation Committee. Mr. Ellis also served as a member of Seller’s board of directors since December 2017 and served as Chair of the Technical Committee of the Seller’s board of directors. Mr. Ellis is a seasoned mining professional with a more than 50-year history of large-scale mine development and operations globally and has provided consulting services to multiple mining companies for the past 18 years. Mr. Ellis began his career in operations with Kennecott Copper, where he progressed from operating roles to management roles before moving on to new opportunities. He has most recently held various senior management roles for CVRD-Inco, including Managing Director of Voisey Bay Nickel and VP Operations for PT Indonesia. Prior to that, he was Chairman and CEO of Anglo Gold North America, Independence Mining Company and Hudson Bay Mining and Smelting Company. He has also provided technical advice in a consulting capacity to major global producers such as CVRD-Inco, BHP (Australia), Queenstake Resources, AngloGold Ashanti and Anglo American. Mr. Ellis currently serves as a member of the board of directors of Jaguar Mining Inc. (JAG: TSX), a gold mining company. Mr. Ellis also served as a member of the board of directors of International Tower Hill Mines Ltd., a mineral exploration company (THM: NYSE American) from February 2014 to May 2019 and of Sunshine Silver Mines, a privately held silver mining company from September 2011 to November 2018 and of Jaguar Mines from June 2016 to present. Mr. Ellis is a graduate of the Haileybury School of Mines and holds a B.Sc. from Montana Tech University. Mr. Ellis brings extensive experience and knowledge of historic and current mining operations coupled with his leadership experience in the mining industry to the Board.

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Michael Harrison has been a member of our Board since the May 29, 2020 Recapitalization Transaction and is a member of the Safety, Sustainability & Technical Committee. Mr. Harrison also served as a member of Seller’s board of directors since December 2017 and iswas a member of the Audit and Technical Committees. Since January 2, 2020, Mr. Harrison has served as the CEO of Sprott Resource Streaming and Royalty Corp. From May 7, 2019 to June 23, 2020, Mr. Harrison served as the Interim President and Chief Executive Officer of Sprott Resource Holdings Inc. (“SRHI”) and prior to such date served as a Managing Director in the mining and metals group of SRHI since February 2017. Prior to joining SRHI, he held the position of President and CEO of Adriana Resources Inc. from October 2015 to February 2017, and Vice President, Corporate Development for Coeur Mining Inc. from February 2011 to August 2015. Mr. Harrison previously served on the Board of Directors of Corsa Coal Corp. (CSO: TSXV) from March 2011 to March 2017 and on the board of directors of Macusani Yellowcake (PLU:TSXV) from May 2011 to January 2013. He also previously worked for Cormark Securities Inc. and National Bank Financial in the mining investment banking groups raising funds and providing mergers and acquisition advice to listed and private mining companies, including the creation of Seller’s predecessor company. Previously, he worked internationally for BHP Billiton Exploration Division as a Project Geophysicist. Mr. Harrison holds a B.Sc.E (Honours) in Geophysics from Queen’s University, and an MBA (with Distinction) from the University of Western Ontario. Mr. Harrison brings over 25 years of executive, financial and technical knowledge in the mining industry to our Board and adds a valuable perspective.


Thomas Weng has been a member of our Board since the May 29, 2020 Recapitalization Transaction and is a member of the Audit Committee and Nominating and Governance Committee. Mr. Weng has more than 25 years of experience in the financial services sector and is a Co-Founding Partner with Alta Capital Partners, a provider of financial advisory services (since February 2011). From February 2007 to January 2011, Mr. Weng was a Managing Director at Deutsche Bank and Head of Equity Capital Markets for Metals and Mining throughout the Americas and across all industry segments for Latin America. Prior to 2007, he held various senior positions at Pacific Partners, an alternative investment firm, and Morgan Stanley and Bear Stearns. Mr. Weng currently sits on the board of International Tower Hill Mines and Jaguar Mining Inc. Mr. Weng graduated from Boston University with a Bachelor of Arts in Economics. Mr. Weng is well-qualified to serve as a member of our Board because of his extensive knowledge of strategic planning, mergers and acquisitions, finance, and mining.

Marni Wieshofer has been a member of our Board since the May 29, 2020 Recapitalization Transaction and is Chairwoman of the Audit Committee and a member of the Compensation Committee. Ms. Wieshofer has served as Head of Media and Managing Director in Houlihan Lokey’s TMT Corporate Finance Group, based out of Los Angeles, providing mergers and acquisitions, capital markets, financial advisory and financial restructuring services including the Weinstein Company and Relativity Media bankruptcies and subsequent sales. Before joining Houlihan Lokey, Ms. Wieshofer was Partner and Managing Director at MESA, a boutique advisory investment bank, where she spearheaded investment banking, strategy, and valuation engagements for companies throughout the media space. Her background also includes Chief Financial Officer and EVP of Corporate Development at Lionsgate Entertainment where she oversaw the company’s mergers, acquisitions, and other strategic financial initiatives including the acquisitions and integration of Trimark Pictures, Artisan Entertainment and Redbus Films Distribution U.K. to name a few, as well as the sale of Lionsgate Studios and the Canadian distribution business. Ms. Wieshofer’s experience also includes prominent roles at Media Rights Capital, Alliance Atlantis Communications and Coopers & Lybrand Chartered Accountants. Ms. Wieshofer is currently Lead Director at Thunderbird Entertainment Group Inc. (TSXV: TBRD, OTC: THBRF), a member of the Board of Directors of Film2Future, a member of the Dean’s Advisory Committee at the Rotman School of Management, Chair of the Women’s Volleyball Be Extraordinary Campaign at Western University (University of Toronto); and is a former Director and Chair of the Audit Committee of Takara Resources Inc. Ms. Wieshofer holds a BA from Western University, an MBA from the Rotman School of Management, is a Canadian Chartered Accountant and obtained the ICD.D designation in 2018. Ms. Wieshofer is well-qualified to serve as a member of our Board due to her expertise in mergers and acquisitions, capital markets, financial advisory and financial restructuring services across a range of industries.

Board of Directors

In accordance with our charter, as amended at the special meeting of stockholders on May 29, 2020, members of our Board serve one-year terms, or until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death.

Committees of the Board of Directors

We have four standing committees. An Audit Committee, a Compensation Committee, and a Nominating and Governance Committee, composed solely of independent directors. In addition, we established a Safety, Sustainability and Technical Committee on May 29, 2020 upon the consummation of the business combination,Recapitalization Transaction, currently composed of our President and two independent directors. Each of the committees reports to the Board as it deems appropriate and as the Board may request. The composition, duties and responsibilities of these committees are set forth below.

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Audit Committee

Eugene Davis, Thomas Weng and Marni Wieshofer (Chair) are the members of the Audit Committee. Under the NASDAQNasdaq listing standards and applicable SEC rules, the Audit Committee is required to have at least three members. Subject to phase-in rules and a limited exception, the rules of NASDAQNasdaq and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors. Mr. Davis, Mr. Weng and Ms. Wieshofer qualify as independent directors under applicable rules. Each member of the Audit Committee is financially literate and Ms. Wieshofer qualifies as an “audit committee financial expert” as defined under applicable SEC rules.

Under its charter, the functions of the Audit Committee will include:

·the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by the Company;

·the pre-approval of all non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by the Company;

·setting clear hiring policies for employees or former employees of the independent registered public accounting firm;

·obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

·reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC;

·discussing with management and the independent auditor, as appropriate, any audit problems or difficulties and management’s response, and our risk assessment and risk management policies, including our major financial risk exposure and steps taken by management to monitor and mitigate such exposure; and

·reviewing our financial reporting and accounting standards and principles, significant changes in such standards or principles or in their application and the key accounting decisions affecting our financial statements, including alternatives to, and the rationale for, the decisions made.

Compensation Committee

John Ellis, David Kirsch (Chair) and Marni Wieshofer are the members of the Compensation Committee. All of the members of the Compensation Committee are independent directors and considered to be a “non-employee director” under Rule 16b-3 of the Exchange Act. Under its charter, the functions of the Compensation Committee will include:

·reviewing and approving annually corporate goals and objectives relating to the compensation of the Chief Executive Officer (“CEO”), evaluating the performance of the CEO in light of those goals and reviewing and establishing the CEO’s annual compensation and Incentive Plan participation levels and bases of participation; and

·reviewing and approving annually the evaluation process and compensation structure for the Company’s or its subsidiaries’ other officers; to evaluate, review and recommend to the our Board any changes to, or additional, stock-based and other incentive compensation plans; and to recommend inclusion of the Compensation Discussion and Analysis in the annual proxy statement and annual report on Form 10-K to be filed with the SEC.

In addition, on an annual basis, the Compensation Committee will conduct an in-depth, broad scope and detailed review of succession planning efforts at multiple levels of the our management team.


The Compensation Committee charter also provides that the Compensation Committee shall have the sole authority to retain or obtain the advice of a compensation consultant, legal counsel or other 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 NASDAQNasdaq and the SEC.

Nominating and Governance Committee

Eugene Davis (Chair), David Kirsch and Thomas Weng are the members of the Nominating and Governance Committee. All of the members of the Nominating and Governance Committee are independent directors.

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Under its charter, the functions of the Compensation Committee will include:

·identifying individuals qualified to become Board member and recommending to the Board the director nominees for the next annual meeting of stockholders;

·recommending to the Board the corporate governance guidelines applicable to the Company ;Company;

·leading the Board in its annual review of the performance of (a) the Board; (b) its committees; and (c) management;

·recommending to the Board nominees for each Board committee; and

·reviewing and recommending annually for approval by the Board, the form and amount of non-management director compensation and benefits.

The Nominating and Governance Committee shall have the sole authority to retain and terminate any search firm to be used to identify director candidates and shall have sole authority to approve the search firm’s fees and other retention terms.

The Nominating and Governance Committee has not set specific minimum qualifications for director positions. Instead, the Nominating and Governance Committee will review nominations for election or re-election to the Board on the basis of a particular candidate’s merits and the Company’s needs after taking into account the current composition of the Board. When evaluating candidates annually for nomination for election, the Nominating and Governance Committee will consider an individual’s skills, diversity, independence, experience in areas that address the needs of the Board and ability to devote adequate time to Board duties. The Nominating and Governance Committee does not specifically define diversity, but values diversity of experience, perspective, education, race, gender and national origin as part of its overall annual evaluation of director nominees for election or re-election. Whenever a new seat or a vacated seat on the Board is being filled, candidates that appear to best fit the needs of the Board and the Company will be identified, interviewed and evaluated by the Nominating and Governance Committee. Candidates selected by the Nominating and Governance Committee will then be recommended to the full Board.

Safety, Sustainability and Technical Committee

John Ellis (Chair) and Michael Harrison are members of the Safety, Sustainability and Technical Committee.

Under its charter, the functions of the Safety, Sustainability and Technical Committee will include the authority to:

·investigate any activity of the Company or its subsidiaries relating to health, safety, loss prevention and operational security, sustainable development, environmental affairs, public policy and relations with communities and civil society, government relations, human rights and communication matters;

·review our developmental, construction and operational activities; and

·retain outside counsel, experts and other advisors as the Safety, Sustainability and Technical Committee may deem appropriate in its sole discretion to assist the Company in fulfilling its responsibilities.


Director Independence

The Board has determined that Messrs. Davis, Ellis, Harrison, Kirsch, Davis and Weng and Ms. Wieshofer are “independent directors” under Nasdaq Capital Market listing standards. The Board reviews independence on an annual basis and has also determined that each current member of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee is independent as defined under the applicable Nasdaq Stock Market listing standards and SEC rules. The Board further determined that Ms. Wieshofer qualifies as an audit committee financial expert in accordance with applicable rules and guidance. In making these determinations, the Board found that none of these directors had a material or other disqualifying relationship with the Company.

EXECUTIVE COMPENSATION

None of the individuals who were our executive officers and directors prior to the consummation of the business combinationRecapitalization Transaction received any cash compensation for services rendered to the Company.MUDS. There were no agreements or understandings, whether written or unwritten, with our executive officers concerning the information specified in Item 402(t)(2) or (3) (i.e., any type of compensation, whether present, deferred or contingent, that is based on or otherwise relates to the business combination)Recapitalization Transaction). We also have not, prior to the business combination,Recapitalization Transaction, granted any stock options or stock appreciation rights or any other awards under long-term incentive plans.

The following disclosure concerns the compensation arrangements of our current named executive officers and directors for the fiscal years ended December 31, 20182019 and 20192018 (i.e., pre-business combination)before the Recapitalization Transaction) while serving the Seller in a similar

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capacity. Such disclosure should be read together with the compensation tables and related disclosures provided below and in conjunction with the financial statements and related notes appearing elsewhere in this prospectus.

Seller Summary Compensation Table

The following table presents information regarding the compensation awarded to, earned by, or paid in the years ended December 31, 2019 and 2018 to Randy E. Buffington and Stephen M. Jones. These officers are referred to as our named executive officers, or “NEOs”. As an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies” as such term is defined in the rules promulgated under the Securities Act.

           Non-Equity       
        Stock  Incentive Plan  All Other    
        Awards(1)  Compensation(2)  Compensation(3)    
Name and Principal Position Year  Salary ($)  Bonus ($)  ($)  ($)  ($)  Total ($) 
Randy E. Buffington  2019  $525,000             –  $1,575,000   n/a(4)  $22,438  $2,122,438 
President and CEO  2018  $525,000        $150,000  $21,344  $696,344 
Stephen M. Jones  2019  $425,000     $1,062,500   n/a(4)  $23,628  $1,511,128 
EVP, CFO and Secretary  2018  $425,000        $100,000  $43,666  $568,666 

Non-Equity

 

Stock

Incentive Plan

All Other

Awards(1)

Compensation(2)

Compensation(3)

Name and Principal Position

    

Year

    

Salary ($)

    

Bonus ($)

    

($)

    

($)

    

($)

    

Total ($)

Randy E. Buffington

2019 

$

525,000 

— 

$

1,575,000 

n/a(4)

$

22,438 

$

2,122,438 

President and CEO

2018 

$

525,000 

— 

— 

$

150,000 

$

21,344 

$

696,344 

Stephen M. Jones

2019 

$

425,000 

— 

$

1,062,500 

n/a(4)

$

23,628 

$

1,511,128 

EVP, CFO and Secretary

2018 

$

425,000 

— 

— 

$

100,000 

$

43,666 

$

568,666 


(1)As a result of the Seller’s reorganization pursuant to the chapter 11 cases, all of the stock-based compensation plans were eliminated and all prior awards granted pursuant to the plans were cancelled. WeSeller did not grant any stock awards in 2017 or 2018. In February 2019, the Seller authorized and approved time-based and performance-based equity incentive awards in the aggregate amount of $1,575,000 and $1,062,500 to Messrs. Buffington and Jones, respectively, in the form of restricted stock units convertible following vesting into shares of the Seller’s common stock. Under the terms of those agreements and as provided in the Purchase Agreement, the obligations under such equity awards have been assumed by us in connection with the business combinationRecapitalization Transaction and mirror replacement equity awards in the form of substantially similar restricted stock units convertible into shares of our Common Stock have been issued in connection with the consummation of the business combination.Recapitalization Transaction.

(2)The Seller provided incentive compensation in the form of an annual cash bonus, the payout amounts of which are at-risk, consistent with the Seller’s emphasis on using a pay-for-performance philosophy. The 2018 and 2019 annual cash incentive payments were contingent upon the attainment of the


Seller’s goals and performance criteria, which were developed with the assistance of the Seller’s management and approved by the compensation committee of the Seller’s board of directors before being subsequently approved by the non-management members of the Seller’s board of directors.

(3)During 2018 and 2019, All Other Compensation consisted of the following:

     401K Plan  Life       
     Matching  Insurance  Moving    
Name Year  Contributions ($)  Premiums ($)  Expenses ($)  Total ($) 
Randy E. Buffington  2019  $16,800  $5,638   –   $22,438 
   2018  $16,500  $4,844   –   $21,344 
Stephen M. Jones  2019  $16,800  $6,828   –   $23,628 
   2018  $16,500  $4,844  $22,322  $43,666 

    

    

    

401K Plan

    

Life

    

    

    

    

 

Matching

Insurance

Moving

Name

Year

Contributions ($)

Premiums ($)

Expenses ($)

Total ($)

Randy E. Buffington

2019 

$

16,800 

$

5,638 

— 

$

22,438 

2018 

$

16,500 

$

4,844 

— 

$

21,344 

Stephen M. Jones

2019 

$

16,800 

$

6,828 

— 

$

23,628 

2018 

$

16,500 

$

4,844 

$

22,322 

$

43,666 


(4)As of March 15, 2020, the non-equity incentive bonus payments for 2019 performance had not been paid.

2019 Outstanding Equity Awards at Fiscal Year-End Table

Under the Seller’s predecessor’s reorganization plan and in connection with the Seller’s emergence from bankruptcy proceedings, on October 22, 2015, all of the Seller’s stock-based compensation plans were eliminated and all prior awards pursuant to the compensation plans were cancelled. The Seller did not grant any equity awards in 2018.

Under the terms of employment agreements entered into with Messrs. Buffington and Jones, they were each entitled to an equity incentive award. In February 2019, the Seller granted time-based and performance-based equity incentive awards in the aggregate amount of $1,575,000 and $1,062,500 to Messrs. Buffington and Jones, respectively, in the form of restricted stock units convertible following vesting into shares of the Seller common stock. Under the terms of those agreements and as provided in the Purchase Agreement, the obligations under such equity awards were assumed by us in connection with the business combinationRecapitalization Transaction and mirror replacement

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equity awards in the form of substantially similar restricted stock units convertible into shares of Common Stock were issued in connection with the consummation of the business combination.

    Stock Awards 
    Equity Incentive  Equity Incentive 
    Plan Award:  Plan Award: 
    Number of  Market of Payout 
    Unearned Shares,  Value of Unearned 
    Units, or Other  Shares, Units, or 
  Grant Rights That Have  Other Rights That 
Name Date Not Vested (#)  Have Not Vested (#) 
Randy E. Buffington February 20, 2019  (1) $1,575,000 
Stephen M. Jones February 20, 2019  (1) $1,062,500 

Recapitalization Transaction.

(1)            The number of shares into which the equity awards granted will vest is not currently determinable.

Stock Awards

Equity Incentive

Equity Incentive

Plan Award:

Plan Award:

Number of

Market of Payout

Unearned Shares,

Value of Unearned

Units, or Other

Shares, Units, or

Grant

Rights That Have

Other Rights That

Name

Date

Not Vested (#)

Have Not Vested (#)

Randy E. Buffington

    

February 20, 2019

— 

(1)  

$

1,575,000 

Stephen M. Jones

February 20, 2019

— 

(1)  

$

1,062,500 


(1)The number of shares into which the equity awards granted will vest was not currently determinable.

Retention Bonus Plan

In connection with the Seller’s emergence from bankruptcy proceedings, the Seller implemented a management incentive plan, which was subsequently superseded by the Seller’s Retention Bonus Plan (the “Retention Bonus Plan”), that provided for the payment of cash and/or the issuance of shares of the Seller’s common stock to management, including our NEOs. The Seller previously paid two cash retention bonus payments under the Retention Bonus Plan to participants, including the NEOs, who remained employed as of December 29, 2017 and required the delivery to the Seller’s board of directors of the heap leach Feasibility Studyfeasibility study for the profitable and feasible sulfide ore heap leach process, which was completed on June 29, 2018 and subsequently modified as of


August 6, 2018. The Retention Bonus Plan also providesprovided for a third retention bonus, equal to an aggregate amount of $250,000, plus an additional amount tied to a percentage share of an “award pool” (as described below), in the event of either of the following:

·a “sale transaction” defined generally as the consummation of a sale of all or substantially all of our consolidated assets; or at least a majority of our then issued and outstanding shares of common stock; or

·a “public offering” defined generally as an underwritten registered public offering pursuant to an effective registration statement covering a sale of shares of the Seller’s common stock to the public that results in the listing for trading of our Common Stock on a national securities exchange or quoted on the NASDAQ StockNasdaq Capital Market.

The amount of the award pool under the Retention Bonus Plan iswas to be determined by either the purchase price in a sale transaction or the enterprise value in connection with a public offering. The award pool shallwas to be equal to (i) 1% of the sale proceeds in a sale transaction or enterprise value in a public offering of up to, and including, $200.0 million, plus (ii) 2% of the sale proceeds in a sale transaction or enterprise value in a public offering, if any, above $200.0 million up to, and including, $300.0 million plus (iii) 3% of the sale proceeds in a sale transaction or enterprise value in a public offering, if any, above $300.0 million.

Sale proceeds arewere defined under the Retention Bonus Plan as:

(i)the total gross cash proceeds and the fair value of property other than cash actually received on the closing date of a sale transaction by our stockholders in consideration for the sale of their shares of our common stock or on account of the sale by the Company of its assets; plus

(ii)all indebtedness for borrowed money, guarantees and capitalized leases (but not any other liabilities) assumed, refinanced, retired or extinguished by the acquirer in connection with such sale transaction; plus

(iii)any contingent amounts, as defined in the Retention Bonus Plan; plus

(iv)in the case such sale transaction takes the form of a sale, exchange or purchase of shares, the value of any retained equity interest, if any, of our stockholders in the Company based on the value paid for or ascribed to the shares of our common stock transferred in such sale transaction.

The Retention Bonus Plan allowed participants to elect to receive payment in respect of the third retention bonus in either cash or a combination of cash and common stock. However, in connection with the business combination,Recapitalization Transaction, executed waivers were obtained from the participants to eliminate the payment election right, such that the third retention bonuses shall bewere payable in cash.

The business combinationRecapitalization Transaction constituted a “sale transaction” under the Retention Bonus Plan triggering both payment of the third retention bonus under the Retention Bonus Plan and an allocation under the award pool, as determined by the value of the sale transaction. The obligation to make the Retention Bonus Plan payments shall bewas assumed by us pursuant to the Purchase Agreement and shall be payablewas paid to the participants, including the NEO’s, upon consummation of the business combination,Recapitalization Transaction, subject to the participants’

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continued employment by the Seller from the date of grant of such award until the consummation of such sale transaction. Payments in the aggregate amount of approximately $5.9 million were made following consummation of the business combination.

Recapitalization Transaction.

Employment Arrangements

In March of 2019, in anticipation of the business combination, theRecapitalization Transaction, Seller entered into new employment agreements with Randy E. Buffington and Stephen M. Jones. These new employment agreements superseded and replaced their prior agreements entered into by the Seller upon emergence from federal bankruptcy proceedings. Upon consummation of the business combination,Recapitalization Transaction, pursuant to their terms and in accordance with the Purchase Agreement, the new employment agreements were assigned to and the obligations under such agreements assumed by the Company.


Common Defined Terms Used in the Employment Agreements

For purposes of the employment agreements with our NEOs, the terms “Cause”, “Change in Control”, “Disability”, and “Good Reason” have the following definitions:

The term “Cause”Cause shall mean that one or more of the following has occurred:

(i)the NEO is convicted of a felony or pleads guilty or nolo contendere to a felony (whether or not with respect to the Seller or any of its affiliates);

(ii)a failure of the NEO to substantially perform his responsibilities and duties to the Company which, to the extent curable, is not remedied within 10 days after the NEO’s receipt of written notice given by the appropriate senior officer or any member of the Board identifying the failure in reasonable detail and granting the NEO an opportunity to cure such failure within such 10 day period;

(iii)the failure of the NEO to carry out or comply with any lawful and reasonable directive of the Board (or any committee of the Board), which, to the extent curable, is not remedied within 10 days after the NEO’s receipt of written notice given by or on behalf of the Company identifying the failure in reasonable detail and granting the NEO an opportunity to cure such failure within such 10 day period;

(iv)the NEO engages in illegal conduct, any breach of fiduciary duty (if any), any act of material dishonesty or other misconduct, in each case in this clause (iv), against the Company or any of its affiliates;

(v)a material violation or willful breach by the NEO of any of the policies or procedures of the Company, including, without any limitation, any employee manual, handbook or code of conduct of the Company which, to the extent curable, is not remedied within 10 days after the NEO’s receipt of written notice given by or on behalf of the Company identifying the violation or breach in reasonable detail and granting the Executive an opportunity to cure such violation or breach within such 10 day period;

(vi)the NEO fails to meet any material obligation the NEO may have under any agreement entered into with the Company which, to the extent curable, is not remedied within 10 days after the NEO’s receipt of written notice given by any member of the Company identifying the failure in reasonable detail and granting the NEO an opportunity to cure such failure within such 10 day period;

(vii)the NEO’s failure to maintain any applicable license, permit or card required by the federal or state authorities or a political subdivision or agency thereof (or the suspension, revocation or denial of such license, permit or card); or

(viii)the NEO’s breach of any non-compete, non-solicit, confidentiality or other restrictive covenant to which the NEO may be subject, pursuant to an employment agreement or otherwise.

The term a “ChangeChange in Control”Control of the Company will be deemed to occur as of the first day that one or more of the following conditions is satisfied:

(i)The beneficial ownership“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (“Company Voting Securities”), is accumulated, held or acquired by a “Person” (as defined in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, holders of capital stock of the Company as of the date hereof or a subsidiary thereof, any corporation owned, directly or indirectly, by the Company’s stockholders in substantially the same proportions as their ownership of stock of the Company); provided, however,, that any acquisition from the Company or any acquisition pursuant to a transaction that complies with clauses (A), (B) and (C) of clause (iii) below will not be a


Change in Control; provided further,, that immediately prior to such

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accumulation, holding or acquisition, such Person was not a direct or indirect beneficial owner of 15% or more of Company Voting Securities as of the date of this Agreement; or

(ii)Individuals who, as of the date of the Agreement, constitute the Board, or “Incumbent Board”Incumbent Board, cease for any reason to constitute at least a majority of the Board; provided, however,, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board; or

(iii)Consummation by the Company of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another entity, or “Business Combination”Business Combination, in each case, unless immediately following such Business Combination: (A) more than 50% of the combined voting power of then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination, or “Surviving Corporation”Surviving Corporation, or (y) if applicable, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries, or “Parent Corporation”Parent Corporation, is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Company Voting Securities; (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 40% or more of the combined voting power of the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that (x) such ownership of the Company existed prior to the Business Combination or (y) that immediately prior to such Business Combination, such Person was a direct or indirect beneficial owner of 15% or more of the Company Voting Securities as of the date of the respective employment agreement, and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination.

Notwithstanding anything to the contrary in the foregoing, in no event will a Change in Control be deemed to have occurred with respect to the NEO (i) in connection with the initial public offering of the Parent Corporation’s Voting Securities; or (ii) if the NEO is part of a purchasing group that consummates the Change in Control transaction. The NEO will be deemed “part of a purchasing group” for purposes of the preceding sentence if the NEO is an equity participant in the purchasing company or group (except (i) passive ownership of less than two percent of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group that is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing directors; provided that, for purposes of the foregoing, participation as a management investor in such purchasing company will not be deemed to be within the exceptions provided for in these items (i) and (ii)); and/or (iii) in connection with the business combinationRecapitalization Transaction transaction.

The term “Disability”Disability means the NEO’s long-term disability as defined by and determined under the Company’s long-term disability plan, or if the NEO is not covered by a long-term disability plan sponsored by the Company, then the NEO’s inability (as determined by the Board or compensation committee thereof in its discretion) to engage in any substantial gainful activity by reason of any medically-determined physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration.

The term “Good Reason”Good Reason means the occurrence of any of the following without the NEO’s consent:


(i)a material reduction or a material adverse alteration in the nature of the NEO’s position, responsibilities or authorities or the assigning of duties to the NEO that are materially inconsistent with those of the position of such NEO of a company of comparable size in a comparable industry;

(ii)the NEO’s becoming the holder of a lesser office or title than that previously held;

(iii)any material breach of this Agreement by the Company that causes an adverse change to the terms and conditions of the NEO’s employment;

(iv)the Company requires the NEO to relocate his principal business office to a location not within 75 miles of the Company’s principal executive office located in Denver, Colorado or the Hycroft Mine;

(v)any reduction in the NEO’s salary, other than a reduction in salary generally applicable to executive employees; or

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(vi)failure of the Company to pay the NEO any amount otherwise vested and due under this Agreement or under any plan or policy of the Company following written notice by the NEO to the Seller identifying the failure and the basis for such payment and the Company’s failure to cure within 10 days following receipt of such written notice.

In no event will a resignation be deemed to occur for “Good Reason” unless the NEO provides notice to the Company, and such resignation occurs, within 90 days after the event or condition giving rise thereto. Upon receiving notice from the NEO, the Company shall have a period of 30 days during which it may remedy the event or condition.

Employment Agreement with Randy E. Buffington

The Seller entered into an employment agreement dated as of March 15, 2019 with Mr. Buffington, which was assumed by the Company, providing for a two-year term as President and Chief Executive Officer, following which he shall be deemed to be an at-will employee during the continuation of his employment by the Company. Under the terms of his employment agreement, Mr. Buffington is entitled to an annual base salary of $525,000, an annual cash incentive bonus initially set at 50% of his annual base salary at target, and long-term equity incentive awards initially awarded at 300% of his annual base salary at target. On February 20, 2019, the board of directors of the Seller authorized and approved the issuance of equity awards in the form of restricted stock units with a value of $1,575,000, which were also assumed by the Company. On July 1, 2020, the Company and Mr. Buffington agreed to terminate his employment with the Company and his service on the Board as described belowin more detail in “Departure of– Transition Agreements with Randy Buffington as Chairman, Chief Executive Officer and President.

below.

The initial performance metrics for the annual cash incentive bonus plan were based upon successful financing of the Hycroft Mine development costs, Hycroft Mine operational start up, safety and other metrics which were determined by the Seller’s board of directors. After commencement of mining operations, we anticipate establishing new performance metrics under the annual cash incentive bonus plan, including: (i) gold and gold equivalent production/sales, (ii) total cash costs of production per gold or gold equivalent ounce, (iii) health and safety, and/or (iv) such other metrics as are determined from time to time by the Board.

The long-term equity incentive awards are in the form of restricted stock units, subject to the terms and conditions set forth in the written award agreements. Fifty percent of such awards are performance-based equity awards with vesting tied to satisfaction of performance-based metrics which were determined by the Seller’s board of directors at the end of the performance period. The remaining 50% of such awards were in the form of time-based equity awards with vesting based upon continued employment. Fifty percent of the time-based equity awards vested upon the consummation of business combinationthe Recapitalization Transaction and the remaining 50% of such time-based equity awards vested on the second anniversary of the effective date or June 1, 2020. The number of units awarded were determined by an enterprise value of $350 million, reflecting the anticipated value of the business combination.Recapitalization Transaction. Under the terms of those equity award agreements and as provided in the Purchase Agreement, the obligations under such equity awards have been assumed by us in connection with the business combinationRecapitalization Transaction and mirror replacement equity awards in the form of substantially similar restricted stock units convertible into shares of Common Stock have been issued in connection with the consummation of the business combination.


Recapitalization Transaction.

The initial long-term equity incentive award agreements will also include “double trigger” accelerated vesting in the event of a Change in Control (which does not include the business combination)Recapitalization Transaction), in addition to two accelerated vesting events involving liquidity transactions that would be mutually exclusive with the consummation of the business combination.

Mr. Buffington will be subject to ongoing restrictive covenants of non-disclosure of confidential information, and non-competition and non-solicitation for a period of 18 months following the termination of his employment with the Company.

Recapitalization Transaction.

On July 1, 2020, the Company announced that the Board and Randy Buffington agreed that Mr. Buffington would depart from the Company and would resign and transition from his roles of Chairman of the Board, President and Chief Executive Officer and any and all other positions held by him with any direct or indirect subsidiary of the Company, effective as of July 1, 2020.

Transition Agreements with Randy Buffington

On July 1, 2020, the Company and Mr. Buffington entered into a Transition and Succession Agreement (the “Transition Agreement”) pursuant to which Mr. Buffington resigned as Chairman of the Board, President and Chief Executive Officer and any and all other positions held by him with any direct or indirect subsidiary of the Company, and that provides, among other things, forthat the payments and arrangements paid in accordance with the the Transition Agreement constitute full and complete satisfaction of any and all amounts due and owing to him as a result of his employment with the Company and that Mr. Buffington to receive a continuation of his salary for a period of 24 months and the value of his insurance coverage for a period of 2418 months following his departure, subject to the statutory revocation provisions set forth in the Transition Agreement. In recognition of Mr. Buffington’s successful efforts in developing a new process to economically and profitably recover gold from sulfide ores in a heap leach process and restarting mining operations at the Hycroft Mine and to reward and compensate him for transition assistance, the Company and Mr. Buffington also entered into a Restricted Stock Unit Agreement (Time-Vesting) (the “RSU Agreement”) pursuant to which the Company will grant a special discretionary equity bonus in the form of $1,300,000 in restricted stock units convertible into shares of common stock, vesting pro rata over a period of two years following expiration of the statutory revocation period set forth in the Transition Agreement. The

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Company also agreed to transfer title to the truck that Mr. Buffington used to travel to the Hycroft Mine. In addition and in order to facilitate the continued development and operation of the Hycroft Mine and the transition to his successor as President and Chief Executive Officer, the Company and Mr. Buffington have entered into a Consulting Agreement (the “Consulting Agreement”) pursuant to which the Company will pay Mr. Buffington $25,000 a month for 24 months for his performance of consulting services during that time.

Mr. Buffington will be subject to ongoing restrictive covenants of non-disclosure of confidential information, and non-competition and non-solicitation for a period of 24 months following the termination of his employment with the Company.

Mr. Buffington’s decision to resign did not involve any disagreement relating to the Company’s operations, policies or practices. The foregoing summary of the Transition Agreement, the RSU Agreement and the Consulting Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of those agreements, copies of which are attached as Exhibits 10.27, 10.2810.32, 10.33 and 10.29,10.34, respectively, to the Registration Statementregistration statement on Form S-1 of which this Prospectusprospectus forms a part and are incorporated by reference herein.

Employment Agreement with Stephen M. Jones

The Seller entered into an employment agreement dated as of March 15, 2019 with Mr. Jones, which was assumed by the Company, providing for a three-year term as Executive Vice President and Chief Financial Officer, following which he shall be deemed to be an at-will employee during the continuation of his employment by the Company. Under the terms of his employment agreement, Mr. Jones is entitled to an annual base salary of $425,000, an annual cash incentive bonus initially set at 50% of his annual base salary at target, and long-term equity incentive awards initially awarded at 250% of his annual base salary at target. On February 20, 2019, the Seller’s board of directors authorized and approved the issuance of equity awards in the form of restricted stock units with a value of $1,062,500, which were also assumed by the Company.

The initial performance metrics for the annual cash incentive bonus plan were based upon successful financing of the Hycroft Mine development costs, Hycroft Mine operational start up, safety and other metrics which were determined by the Seller’s board of directors. After commencement of mining operations, we anticipate establishing new performance metrics under the annual cash incentive bonus plan, including: (i) gold and gold equivalent production/sales, (ii) total cash costs of production per gold or gold equivalent ounce, (iii) health and safety, and/or (iv) such other metrics as are determined from time to time by the Board.

The long-term equity incentive awards are in the form of restricted stock units, subject to the terms and conditions set forth in the written award agreements. Fifty percent of such awards are performance-based equity awards with vesting tied to satisfaction of performance-based metrics which were determined by the Seller’s board of directors at the end of the performance period. The remaining 50% of such awards were in the form of time-based equity awards with vesting based upon continued employment. Fifty percent of the time-based equity awards vested upon the consummation of business combinationRecapitalization Transaction and the remaining 50% of such time-based equity awards vested on the second anniversary of the effective date or June 1 , 2020. The number of units awarded were determined by an enterprise value of $350 million, reflecting the anticipated value of the business combination.Recapitalization Transaction. Under the terms of those equity award agreements and as provided in the Purchase Agreement, the obligations under such equity awards have been assumed by us in connection with the business combinationRecapitalization Transaction and mirror replacement equity awards in the form of substantially similar restricted stock units convertible into shares of Common Stock have been issued in connection with the consummation of the business combination.

Recapitalization Transaction.

The initial long-term equity incentive award agreements will also include “double trigger” accelerated vesting in the event of a Change in Control (which does not include the business combination)Recapitalization Transaction), in addition to two accelerated vesting events involving liquidity transactions that would be mutually exclusive with the consummation of this offering.

Mr. Jones will be subject to ongoing restrictive covenants of non-disclosure of confidential information, and non-competition and non-solicitation for a period of 18 months following the termination of his employment by the Company without Cause, by him for Good Reason or due to his Disability, or in the event that he voluntarily terminates his employment without Good Reason prior to the expiration of the initial term of his employment agreement.

Payments Upon Termination

Each of the employment agreements with Messrs. Buffington and Jones contain provisions which entitle them to payments following termination of their employment in certain circumstances, as described below.


Termination of Employment for any Reason

Pursuant to the employment agreements that we entered into with each of Messrs. Buffington and Jones, in the event their employment with the Company is terminated for any lawful reason or no reason, they (or their estate, as applicable) will be entitled to

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receive any earned but unpaid base salary, any earned but unpaid annual cash incentive bonus, any amounts that may be payable under any applicable executive benefit plan, expense reimbursements and COBRA benefits provided that a timely election for COBRA continuation coverage is made and the applicable amounts are paid.

Termination of Employment other than for Cause or Voluntary Termination by Executive for Good Reason

In the event that the Company terminates either of Messrs. Buffington and Jones without Cause or either of them terminates their employment for Good Reason, they would be entitled to (i) a cash amount equal to 1.5 multiplied by their annual base salary, payable in equal installments over the 18 month period following the date of termination, (ii) 18 months of continued coverage under the Company’s medical, dental, life and disability plans, at the same cost to the individual as in effect on the date of termination, and (iii) outplacement services until the earlier of (A) $15,000 in the aggregate having been paid by the Company to the outplacement firm or (B) 12 months following the date of termination.

Termination of Employment in the Event of Death or Disability

In the event that the employment of either of Messrs. Buffington and Jones with the Company is terminated due to his death or Disability, he (or their estate, as applicable) will be entitled to receive, the pro rata portion of any bonus payable to them under the Company’s annual cash incentive plan and/or Retention Bonus Plan for the year in which such termination for death or Disability occurs determined based on the actual bonus attained for the fiscal year in which such termination occurs.

Termination of Employment after a Change in Control

If within 90 days prior to, or one year after, a Change in Control, the Company terminates the employment of either of Messrs. Buffington or Jones for reasons other than for Cause, either of them incurs a Disability or either of them voluntarily terminates his employment for Good Reason, he will be entitled to (i) a cash amount equal to 2.0 multiplied by his annual base salary, payable in a lump sum on the 60th day following the date of termination, (ii) a cash amount equal to 2.0 multiplied by the greater of (A) the actual bonus paid for the fiscal year immediately preceding the date of termination, (B) the actual bonus attained for the fiscal year in which the date of termination occurs prior to the first anniversary of the employment agreement, or (C) the target bonus for the fiscal year in which the date of termination occurs, payable in a lump sum on the 60th day following the date of termination, (iii) 24 months of continued coverage under the Seller’s medical, dental, life and disability plans, at the same cost to the individual as in effect on the date of the Change in Control (or, if lower, as in effect at any time thereafter) and (iv) outplacement services until the earlier of (A) $15,000 in the aggregate having been paid by the Company to the outplacement firm or (B) 12 months following the date of termination.

Director Compensation

During the years ended December 31, 2018 or 2019, we did not pay our directors for their service and as of December 31, 2019, none of the directors held any options or other equity in the Company.

We intend to reconsiderThe Compensation Committee and Board of Directors approved the following initial annual director compensation arrangements, for non-employee directors, in the form of (i) an annual cash retainer of $55,000; (ii) annual committee chair fees of $12,500 for the Audit Committee, $10,000 for the Safety, Sustainability and Technical Committee, and $7,500 for each of the Nominating and Governance and Compensation Committees; (iii) annual committee member fees of $5,000 for the Audit Committee, $4,000 for the Safety, Sustainability and Technical Committee, and $2,500 for each of the Nominating and Governance and Compensation Committees; and (iv) $75,000 in annual equity awards in the form of restricted stock units. In addition, an initial equity award in the amount and form of director compensation$50,000 will be granted to each non-employee director. Equity award will be paid following the consummationgranted at each annual stockholder meeting of the business combination.Company unless otherwise determined by the Compensation Committee.

Phantom Stock Award Agreements

Each of the non-executivenon-employee members of our Board who served on our predecessorsSeller’s board of directors received phantom shares pursuant to the Seller’s Non-Employee Director Phantom Stock Plan (the “Phantom Plan”). Non-employee members of the Seller’s board of directors received such phantom shares as part of their annual compensation pursuant to phantom stock award agreements. Under the Phantom Plan, a phantom share iswas an unfunded bookkeeping unit, entitling a participant to a cash payment equal to the fair market value of a share of the


Seller’s common stock determined upon the date of the applicable “Payment Event” (as set forth below). Under the award agreements, each phantom share iswas vested upon the date of grant and iswas subject to forfeiture if the participant is removed from the Seller’s board of directors for reasons constituting “Cause” (as defined below). Directors who are affiliated with our significant stockholders, which include Mr. Kirsch, were entitled to be awarded a number of phantom shares equal to the greater of (i) $125,000 or (ii) the value of 75,000 phantom shares (subject to equitable adjustment for changes in capital or corporate structure). Directors who were not affiliated with our significant stockholders, which includeincluded Messrs. Ellis and Harrison, were entitled to be awarded annually $50,000

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$50,000 in cash payable quarterly and a number of phantom shares equal to the greater of (i) $75,000 or (ii) the value of 45,000 phantom shares (subject to equitable adjustment for changes in capital or corporate structure).

For purposes of the Phantom Plan, “Payment Event”Payment Event means the first to occur of the following:

1)            the participant’s retirement from the Seller’s board of director;

2)            the participant’s resignation from the Seller’s board of directors;

3)            the participant’s failure to stand for re-election as a non-employee director of the Seller’s board of directors;

4)            the participant’s removal from the Seller’s board of directors for reasons other than “Cause” (as defined below);

5)            the participant’s death; or

6)            a Change of Control (as defined in the Phantom Plan).

1)the participant’s retirement from Seller’s board of director;
2)the participant’s resignation from Seller’s board of directors;
3)the participant’s failure to stand for re-election as a non-employee director of Seller’s board of directors;
4)the participant’s removal from Seller’s board of directors for reasons other than “Cause” (as defined below);
5)the participant’s death; or
6)a Change of Control (as defined in the Phantom Plan).

The cash payment described above to the participant in respect of his or her phantom shares shall be made within 30 days of the applicable Payment Event.

Cause”Cause is defined in each phantom stock award agreement as follows:

1)the conviction of the participant for committing, or entering into a plea of nolo contendere by the participant with respect to, a felony under federal or state law or a crime involving moral turpitude;

2)the commission of an act of personal dishonesty or fraud involving personal profit in connection with the participant’s service on the Seller’s board of directors; or

3)the willful misconduct, gross negligence or deliberate failure on the part of the participant to perform his or her duties with us in any material respect.

Director Compensation Table

The table below sets forth information regarding compensation earnedA Payment Event under the Phantom Plan was triggered by non-employee directors as compensation for their servicethe Recapitalization Transaction and cash payments in the aggregate amount of $1.8 million were made by Seller in connection with the closing of the Recapitalization Transaction to us during the year ended December 31, 2019.

 Fees Earned or  Phantom Stock    
Name Paid in Cash ($)  Awards ($)  Total ($) 
John Ellis $50,000  $75,000  $125,000 
Michael Harrison $50,000  $75,000  $125,000 
David Kirsch $--  $125,000  $125,000 

satisfy such phantom share awards.

Compensation Philosophy and Objectives

Our compensation policies and philosophies are designed to align compensation with our business objectives and the creation of stockholder value, while enabling us to attract, motivate and retain individuals who contribute to the long-term success of the Company.

The Compensation Committee believes that the executive compensation program must be competitive in order to attract and retain our executive officers. The Compensation Committee has implemented compensation policies


and philosophies that link a significant portion of our executive officers’ cash compensation to performance objectives and by providing a portion of their compensation as long-term incentive compensation in the form of equity awards. This was the approach taken by the compensation committee of our predecessorSeller and reflected in the compensation arrangements entered into with Messrs. Buffington and Jones, as well as other officers of the Seller who have continue in their current roles following the business combination.

Recapitalization Transaction.

Compensation for our executive officers will have three primary components: base salary, an annual cash incentive bonus and long-term equity-based incentive compensation.

Base Salary

Base Salaries are set to be fair to the executive officers, competitive within the industry and reasonable in light of our cost structure. The Compensation Committee will determine base salaries, subject to the terms of any employment agreements, and will review base salaries annually based upon advice and counsel from its advisors.

Annual Cash Incentive Bonuses

The Compensation Committee will use annual cash incentive bonuses for the NEOs to tie a portion of the NEOs compensation to financial and operational objectives achievable within the applicable fiscal year. The Compensation Committee at the beginning of each year will select the performance targets, target amounts, target award opportunities and other term and conditions of annual cash bonuses for the NEOs. Following the end of each year, the Compensation Committee will determine the extent to which the performance targets were achieved and the amount of the award that is payable to the named executive officers.NEOs.

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Equity-Based Awards

The Compensation Committee will use equity-based awards to reward long-term performance of the NEOs under the Incentive Plan. Providing a meaningful portion of the total compensation package in the form of equity-based awards is an essential element to compensation arrangements to align the incentives of its officers, including its NEOs, with the interests of its stockholders and serve to motivate and retain the individual NEOs.

Executive Agreements

The Seller has entered into compensation arrangements with its officers, including employment agreements and time-based and performance-based equity award agreements as part of its policy to pay and compensate key executives as appropriate to attract, retain and compensate executive talent following the business combination.Recapitalization Transaction. The obligations under those agreements have been assigned and assumed by us in connection with the business combination.Recapitalization Transaction. The Compensation Committee expects to continue such approach in the future.

Other Compensation

We will maintain the various employee benefit plans, including medical, dental, life insurance and 401(k) plans, offered by the Seller in which the NEOs will participate.

Deductibility of Executive Compensation

Section 162(m) of the U.S. Tax Code denies a federal income tax deduction for certain compensation in excess of $1.0 million per year paid to certain current and former executive officers of a publicly-traded corporation.

Compensation Committee Interlocks and Insider Participation

No member of the Seller’s compensation committee was, during the years ended December 31, 2018 or 2019, and no member of our Compensation Committee currently is or was, an officer or employee of the Seller or the Company, respectively, or any of their subsidiaries or affiliates. No executive officer of the Seller was, during the years ended December 31, 2018 or 2019, no executive officer of the Company currently is or was, a director or a member of the compensation committee of another entity having an executive officer who is a director or a member of our Compensation Committee or the Seller’s compensation committee, respectively.

Compensation Arrangements with Diane R. Garrett

The Company entered into an employment agreement dated as of August 31, 2020 (the “Garrett Employment Agreement”) with Diane R. Garrett, Ph.D, which provides for a three-year term as President and Chief Executive Officer, following which she shall be deemed to be an at-will employee during the continuation of her employment by the Company. Under the terms of the Garrett Employment Agreement, Dr. Garrett is entitled to an annual base salary of $550,000, an annual cash incentive bonus initially set at 70% of her annual base salary as target, and an initial long-term equity incentive award having a value of $1,000,000. The initial long-term equity incentive will be granted on the effective date of her employment, September 8, 2020, will be in the form of restricted stock units (RSUs”) and will consist of that number of RSUs determined by dividing $1,000,000 by the closing stock price of the Common Stock on the date of grant. Such RSUs will vest on the fourth anniversary of the date of grant, subject to Dr. Garrett’s continued employment by the Company through the vesting date and subject to any provisions of the grant relating to retirement, disability, change of control and other matters. Dr. Garrett will also be eligible to participate in equity-based compensation plans, initially targeted at 200% of her base salary, with 50% of such awards initially in the form of performance-based equity awards and 50% of such awards initially in the form of time-based equity awards. The foregoing description of the Garrett Employment Agreement and the RSUs do not purport to be complete and is qualified in its entirety by reference to the full text of the Garrett Employment Agreement and the initial Restricted Stock Unit Agreement (Time Vesting), which are attached as Exhibits 10.35 and 10.36, respectively, of the registration statement of which this prospectus forms a part.


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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Related Party Transactions relating to the Company

Interest in the Seller, the Business CombinationRecapitalization Transaction and Private Investment

Various funds managed by and affiliated with Mudrick Capital, a greater than 5% beneficial owner of our Common Stock and an affiliate of sponsor of which Jason Mudrick, our prior Chief Executive Officer and director, is the President and David Kirsch, the current Chairman of the Board and prior Vice President of the Company, is Managing Director, may be deemed to have beneficially owned: 646,421 shares of the Seller’s common stock (prior to the business combination)Recapitalization Transaction), in connection with which such funds received 72,131 shares of our Common Stock in connection with the consummation of the business combination;Recapitalization Transaction; and, as of May 29, 2020, an aggregate of $41.8 million in principal amount of Seller First Lien Notes, which was repaid in connection with the consummation of the business combination;Recapitalization Transaction; an aggregate of $58.1 million in principal amount of 1.5 Lien Notes, including accrued interest, which was subject to the Exchange Agreement and exchanged for shares of our Common Stock in the noteNote exchange; an aggregate of $85.9 million in principal amount of Second Lien Notes, including accrued interest, which were subject to the Second Lien Conversion Agreement and converted into shares of the Seller’s common stock in connection with the consummation of the business combinationRecapitalization Transaction and received a distribution of shares of our Common Stock upon dissolution of the Seller immediately following consummation of the business combination;Recapitalization Transaction; and an aggregate of $51.2 million in principal amount of 1.25 Lien Notes, including accrued interest, which was subject to the 1.25 Lien Exchange Agreement pursuant to which the 1.25 Lien Notes were exchanged for the $31.9 million Newin aggregate principal amount of Subordinated Notes, and the remainder for Excess Notes which were exchanged for shares of our Common Stock in the noteNote exchange. In addition, in connection with the private investment, funds managed by and affiliated with Mudrick Capital, entered into the Subscription/Backstop Agreements for the purchase of an aggregate of 3,028,924 shares of our Common Stock at a purchase price of $10.00 per share, and the issuance to such investors of an aggregate of 1,295,892 warrants exercisable at $11.50 per share, for an aggregate purchase price of $30.3 million.

In addition, various funds managed by and affiliated with Whitebox, Highbridge and Aristeia, each a greater than 5% beneficial owner of our Common Stock, as of May 29, 2020, held an aggregate of $15.4 million, $14.2 million and $5.9 million, respectively, in aggregate principal amount of Seller First Lien Notes, which was repaid in connection with the consummation of the business combination;Recapitalization Transaction; an aggregate of $40.9 million, $23.3 million and $15.7 million, respectively, in principal amount of 1.5 Lien Notes, including accrued interest, which was subject to the Exchange Agreement and exchanged for shares of our Common Stock in the noteNote exchange; an aggregate of $60.5 million, $34.5 million and $23.2 million, respectively, in principal amount of Second Lien Notes, including accrued interest, which were subject to the Second Lien Conversion Agreement and converted into shares of the Seller’s common stock in connection with the consummation of the business combinationRecapitalization Transaction and received a distribution of shares of our Common Stock upon dissolution of the Seller immediately following consummation of the business combination;Recapitalization Transaction; and an aggregate of $36.1 million, $20.6 million and $13.9 million, respectively, in principal amount of 1.25 Lien Notes, including accrued interest, which was subject to the 1.25 Lien Exchange Agreement pursuant to which the 1.25 Lien Notes were exchanged for $22.5 million, $12.8 million and $8.6 million, respectively, in aggregate principal amount of New Subordinated Notes and the remainder for Excess Notes which were exchanged for shares of our Common Stock in the noteNote exchange. In addition, in connection with the private investment, funds managed by and affiliated with Whitebox, Highbridge and Aristeia each entered into the Subscription/Backstop Agreements for the purchase of an aggregate of 2,134,018, 1,216,653 and 819,404 shares of our Common Stock at a purchase price of $10.00 per share, and the issuance to such investors of an aggregate of 913,017, 520,532 and 350,573 warrants exercisable at $11.50 per share, for an aggregate purchase prices of $21.3 million, $12.2 million and $8.2 million, respectively.

David Kirsch was a director of the Seller. Mr. Kirsch was the primary representative of the Company in respect of negotiating the business combinationRecapitalization Transaction and asked to be recused as a director from all the Seller’s board of directors meetings related to consideration of the business combination.Recapitalization Transaction. Throughout the period from May 2018 through January 2020, Mr. Kirsch did not participate as a director in meetings of the Seller’s board of directors related to consideration of a transaction with the Company unless specifically requested to do so after acknowledgment and disclosure of his potential conflicts of interest. In connection with the private investment, negotiations on behalf of the Initial Subscribers were led by Mr. Jonathan Segal, a member of the Seller’s board of directors acting on behalf of Highbridge, and Mr. Jacob Mercer, a member of the Seller’s board of directors acting on behalf of Whitebox, and Mr. Mudrick, on behalf of the funds managed by Mudrick Capital, who agreed that Mudrick Capital would participate on a pro rata basis with the other investors on the terms to which the other Initial Subscribers agreed.

Founder Shares

On September 25, 2017, sponsor purchased 5,750,000 founders shares for an aggregate price of $25,000. Holders of founder shares may also elect to convert their founder shares into an equal number of shares of our 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 so that the founder shares held by the initial stockholders would represent 20% of the outstanding shares of our Common Stock following the completion of the IPO. In connection with the Recapitalization Transaction, 3,511,820 founder

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shares in accordance with the terms of the Purchase Agreement and the Parent Sponsor Letter Agreement and the remaining founder shares are identical to thewere automatically converted into 1,688,180 shares of our Common Stock included in the units sold in the IPO, except that (i) the founder shares will automatically convert into shares of our Common Stock at the time of the business combination, or at any time prior thereto at the option of the holder, on a one-for-one-basis, subject to adjustment pursuant to certain anti-dilutions rights, (ii) the founder shares are subject to certain transfer restrictions described below and (iii) sponsor and the Company’s officers and directors at such time entered into a letter agreement with the Company pursuant to which they agreed to (a) waive their redemption rights with respect to founder shares and public shares owned in connection with the completion of the business combination andStock.


(b) waive their rights to liquidating distributions from the trust account with respect to their founder shares if we failed to complete an initial business combination by August 12, 2020.

The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of the business combination or (B) subsequent to the business combination, (x) if the last sale price of the our 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 180 days after the business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Private Placement Warrants

Concurrently with the closing of the IPO, sponsor and Cantor purchased an aggregate of 7,500,000 private placement warrants at a price of $1.00 per warrant (6,500,000 private placement warrants by sponsor and 1,000,000 private placement warrants by Cantor) for an aggregate purchase price of $7,500,000. On February 28, 2018, we consummated the sale of an additional 240,000 private placement warrants at a price of $1.00 per warrant, of which 200,000 warrants were purchased by sponsor and 40,000 warrants were purchased by Cantor, generating gross proceeds of $240,000. Each private placement warrant is exercisable for one share of our Common Stock at a price of $11.50 per share. The proceeds from the private placement warrants were added to the proceeds from the IPO and held in the trust account. The private placement warrants are non-redeemable and exercisable on a cashless basis so long as they are held by sponsor, Cantor or their permitted transferees. The private placement warrants will expire five years after the completion of the business combinationRecapitalization Transaction or earlier upon redemption or liquidation. In addition, for as long as the private placement warrants are held by sponsor, Cantor or its designees or affiliates, they may not be exercised after five years from the effective date of the registration statement for the IPO.

Sponsor, Cantor and our prior 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 business combination.Recapitalization Transaction.

Related Party Loans

On September 25, 2017, sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the IPO pursuant to a promissory note. The noteNote was non-interest bearing and was repaid in full to the sponsor at the time of the IPO.

On January 2, 2020, in order to finance transaction costs in connection with the business combination,Recapitalization Transaction, we issued an unsecured promissory noteNote to the sponsor in an amount up to $1,500,000. Such noteNote bore no interest and was repaid in full ($900,000) at the consummation of the business combination.Recapitalization Transaction.

Administrative Support Agreement

Commencing on February 8, 2018 through the earlier of the consummation of a business combination or its liquidation, we agreed to pay sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. For the years ended December 31, 2019 and December 31, 2018, the Company incurred $120,000 and $110,000 of administrative service fees, respectively.

Forward Purchase Contract

On January 24, 2018, we entered into the Forward Purchase Contract with sponsor, pursuant to which sponsor committed to purchase, in a private placement for gross proceeds of $25,000,000 to occur concurrently with the consummation of the business combination,Recapitalization Transaction, 3,125,000 shares of our Common Stock and 2,500,000 forward purchase warrants having substantially the same terms as the private placement warrants. The funds from the sale of the securities under the Forward Purchase Contract was used as part of the consideration in connection with the business combination.Recapitalization Transaction.


Sprott Credit Agreement

On October 4, 2019, the Seller, as borrower, and certain of its subsidiaries, as guarantors, entered into the Initial Sprott Credit Agreement with Lender for a secured multi-advance term credit facility with an original aggregate principal amount not in excess of $110.0 million. In connection with the consummation of the business combinationRecapitalization Transaction we assumed the Initial Sprott Credit Agreement pursuant to the terms of the Purchase Agreement, entered into the Sprott Credit Agreement, with us becoming a party thereto, borrowed $70.0 million under such facility and issued to Lender 496,634 shares of Common Stock on behalf of the Lender and the other participants in the Sprott Credit Agreement. As a result, we are the borrower under the Sprott Credit Agreement. Subsequent to the consummation of the business combinationRecapitalization Transaction the Lender transferred 45,149 shares of Common Stock to nonaffiliated participants in the Sprott Credit Agreement and 13,545 shares of Common Stock to Sprott Private Resource Streaming and Royalty (Collector), LP., an affiliated participant in the Sprott Credit Agreement. Michael Harrison, a member of our Board, has an indirect pecuniary interest in shares of our Common Stock beneficially owned by Sprott Private Resource Streaming and Royalty (Collector), LP. and the Lender as chief executive officer of Sprott Resource Streaming and Royalty Corp. and/or through his fiduciary role as Managing Partner of Sprott Private Resource Streaming & Royalty (Collector) LP. For a more complete discussion of the Sprott Credit Agreement, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources  — Sprott Credit Agreement” of this prospectus.

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Sprott Royalty Agreement

The Company, HRD and Sprott Private Resource Lending II (Co) Inc., as the Payee, an affiliate of the Lender, entered into the Sprott Royalty Agreement with respect to the Hycroft Mine at the closing of the business combination.Recapitalization Transaction. Pursuant to the terms of the Sprott Royalty Agreement, at the closing of the business combination,Recapitalization Transaction, Payee paid to HRD cash consideration in the amount of $30.0 million, for which HRD granted to Payee a perpetual royalty equal to one and one-half percent (1.50%) of net smelter returns, payable monthly. Michael Harrison, a member of our Board, has an indirect interest in the Sprott Private Resource Lending II (Co) Inc. as chief executive officer of Sprott Resource Streaming and Royalty Corp. and/or through his fiduciary role as Managing Partner of Sprott Private Resource Streaming and Royalty (Collector) LP. For a more complete discussion of the Sprott Royalty Agreement, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources  — Sprott Royalty Agreement” of this prospectus.

Amended and Restated Registration Rights Agreement

In connection with the consummation of the business combination,Recapitalization Transaction, the Company entered into an Amended and Restated Registration Rights Agreement with the restricted stockholders to register the shares of Common Stock and, to the extent applicable, warrants, currently held or subsequently acquired by such holders, whether through conversion, exchange or otherwise. The Amended and Restated Registration Rights Agreement provides the parties with demand and piggyback registration rights for underwritten offerings and shelf registration rights for underwritten and non-underwritten offerings, in each case with the costs associated with such preparation and registration to be borne by the Company other than any applicable underwriting fees for the sale of securities. The registration statement of which this prospectus forms a part is being filed to register registrable securities pursuant to the Amended and Restated Registration Rights Agreement. The restricted stockholders under the Amended and Restated Registration Rights Agreement have agreed not to sell, transfer, pledge or otherwise dispose of shares of Common Stock and warrants they hold or receive, subject to certain exceptions, for certain time periods specified therein. Pursuant to the Amended and Restated Registration Rights Agreement, a registration statement on Form S-1 was filed with the SEC and became effective on July 22, 2020, which registers for resale the Common Stock and certain warrants of the Company owned by the restricted stockholders.

Employment Arrangements

In contemplation of the business combination, theRecapitalization Transaction, Seller entered into employment agreements with its NEOs which were assumed by the Company upon the consummation of the business combination.Recapitalization Transaction. For more information regarding these agreements with the Seller’s named executive officers, please see “Executive Compensation — Employment Arrangements” of this prospectus.

Transition Agreements

On July 1, 2020, the Company and Mr. Buffington entered into the Transition Agreement, the Consulting Agreement and the RSU Agreement. For more information regarding these agreements, please see “Executive Compensation — Transition Agreements with Randy Buffington” of this prospectus.

Equity Award Grants to Executive Officers

We adopted and approved the Incentive Plan pursuant to which the Company issued to each holder of the Seller’s equity awards a replacement equity incentive awards upon the consummation of the business combinationRecapitalization Transaction in the form of an equivalent value of restricted stock units convertible into shares of Common Stock and upon substantially identical terms and vesting conditions. The Seller had granted equity awards to each of its officers, including its named executive officers who became the NEOs of the Company.

Under the terms of employment agreements entered into with Messrs. Buffington and Jones, they were each entitled to an equity incentive award. In February 2019, the Seller authorized time-based and performance-based


equity incentive awards to each of Messrs. Buffington and Jones. Under the terms of those agreements and as provided in the Purchase Agreement, the obligations under such equity awards were assumed by us in connection with the business combinationRecapitalization Transaction and mirror replacement equity awards in the form of substantially similar restricted stock units convertible into shares of Common Stock were issued in connection with the consummation of the business combination.Recapitalization Transaction. For more information regarding the equity awards granted to the Seller’s named executive officers please see “Executive Compensation — 2019 Outstanding Equity Awards at Fiscal Year-End Table” of this prospectus.

Indemnification Agreements

The Seller hasWe have entered into indemnification agreements with each of itsour directors and officers. The indemnification agreements and our amended and restated bylaws in effect upon the consummation of the business combinationRecapitalization Transaction require us to indemnify all directors and officers to the fullest extent permitted by Delaware law against any and all expenses, judgments, liabilities, fines,

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penalties, and amounts paid in settlement of any claims. The indemnification agreements will also provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to the Company if it is found that such indemnitee is not entitled to such indemnification under applicable law.

Related Party Policy

Our audit committee,Audit Committee, pursuant to its charter, is responsible for reviewing and approving related party transactions to the extent that we entersenter into such transactions. We also requiresrequire 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.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of our Common Stock, as of July 9,August 28, 2020, by (i) each person known by us to be the beneficial owner of more than 5% of our outstanding Common Stock, (ii) each of our NEOs and directors and (iii) all of our executive officers and directors, as a group.

The number of shares of Common Stock beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. The percentage ownership of our common stock in the “Percentage of Beneficial Ownership” column in the table is based on 50,160,143 shares of our common stock issued and outstanding as of August 28, 2020. Under such rules, beneficial ownership generally includes any shares of Common Stock over which the individual has sole or shared voting power or investment power as well as any shares of Common Stock that the individual has the right to acquire within 60 days of July 9,August 28, 2020, through the exercise of warrants or other rights. Unless otherwise indicated in the footnotes to this table, the Company believes each of the stockholders named in this table has sole voting and investment power with respect to the shares of Common Stock indicated as beneficially owned.

    

Shares

    

Percentage of

 

Beneficially

Beneficial

Name and Address of Beneficial Owner

Owned

Ownership

5% or Greater Stockholders

Mudrick Capital Management, L.P. and affiliated entities(1)

32,477,130

53.5

%

Whitebox Advisors and affiliated entities(2)

13,012,516

25.5

%

Highbridge Capital Management, LLC and affiliated entities(3)

7,427,412

14.7

%

Aristeia Capital, L.L.C. and affiliated entities(4)

4,989,085

9.9

%

Named Executive Officers and Directors(5)

Randy Buffington**

— 

— 

%

Stephen M. Jones

— 

— 

%

Jeffrey Stieber

— 

— 

%

Eugene Davis

— 

— 

%

John Ellis

— 

— 

%

Michael Harrison(6)

— 

— 

%

David Kirsch(7)

— 

— 

%

Thomas Weng

— 

— 

%

Marni Wieshofer

— 

— 

%

All current executive officers and directors as a group (9 individuals)

— 

— 

%


*     Represents less than 1% of the outstanding shares of common stock.

  Shares  Percentage of 
  Beneficially  Beneficial 
Name and Address of Beneficial Owner Owned  Ownership 
5% or Greater Stockholders        
Mudrick Capital Management, L.P. and affiliated entities(1)  32,477,130   53.5%
Whitebox Advisors and affiliated entities(2)  13,012,516   25.5%
Highbridge Capital Management, LLC and affiliated entities(3)  7,427,412   14.7%
Aristeia Capital, L.L.C. and affiliated entities(4)  4,989,085   9.9%
Named Executive Officers and Directors(5)        
Randy Buffington**  --   --%
Stephen M. Jones  --   --%
Jeffrey Stieber  

--

   

--

%
Eugene Davis  

--

   

--

%
John Ellis  --   --%
Michael Harrison(6)  --   --%

David Kirsch(7)

  --   --%
Thomas Weng  --   --%

Marni Wieshofer

  --   --%
All current executive officers and directors as a group (9 individuals)  --   --%

**   Mr. Buffington resigned from his positions as Chairman of the Board, President and Chief Executive Officer effective on July 1, 2020.

*Represents less than 1% of the outstanding shares of common stock.

**Mr. Buffington resigned from his positions as Chairman of the Board, President and Chief Executive Officer effective on July 1, 2020.

(1)IncludesBased on a Schedule 13D filed with the SEC on June 8, 2020, this includes 10,495,892 shares of Common Stock underlying warrants held by the Mudrick Funds (as defined below). Mudrick Capital Management, L.P. is the investment manager of Mudrick Distressed Opportunity Drawdown Fund, L.P., Mudrick Distressed Opportunity Fund Global L.P., Mudrick Distressed Opportunity Specialty Fund, LP, Mudrick Distressed Senior Secured Fund Global, L.P., Mudrick Distressed Opportunity Drawdown Fund II, L.P. and certain funds managed by Mudrick Capital Management, L.P., and the managing member of Mudrick Capital Acquisition Holdings, LLC (collectively, the “Mudrick Funds”) and holds voting and dispositive power over the shares of Common Stock held by the Mudrick Funds. Mudrick Capital Management, LLC is the general partner of Mudrick Capital Management, L.P., and Jason Mudrick is the sole member of Mudrick Capital Management, LLC. As such, Mudrick Capital Management, L.P., Mudrick Capital Management, LLC and Jason Mudrick may be deemed to have beneficial ownership of the shares of Common Stock held by the Mudrick Funds. Each such entity or person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. The business address of such holders is 527 Madison Avenue, 6th6th Floor, New York, New York 10022.

David Kirsch, the Chairman of our Board, has no pecuniary interest in shares of our Common Stock and disclaims any beneficial ownership of the shares of our Common Stock beneficially owned by Mudrick Capital Management, L.P. and its affiliates.

David Kirsch, the Chairman of our Board, has no pecuniary interest in shares of our Common Stock and disclaims any beneficial ownership of the shares of our Common Stock beneficially owned by Mudrick Capital Management, L.P. and its affiliates.

(2)IncludesBased on a Schedule 13D filed on June 9, 2020, this include 913,017 shares of Common Stock underlying warrants. Whitebox Advisors LLC is the investment manager of Whitebox Institutional Partners, LP, Whitebox Asymmetric Partners, LP, Whitebox Credit Partners, LP, Whitebox Multi-Strategy Partners, LP (the “Whitebox Funds”) and holds voting and disposable power over the shares of the Company held by the Whitebox Funds. Whitebox Advisors LLC is owned by Robert Vogel, Paul Twitchell,

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Table of Contents

Jacob Mercer, Paul Roos, and Mark Strefling and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in Whitebox Advisors LLC or such Whitebox Funds. The address of these persons is 3033 Excelsior Blvd., Suite 500, Minneapolis, Minnesota 55416.

(3)IncludesBased on a Schedule 13G filed on June 8, 2020, this includes 520,532 shares of Common Stock underlying warrants. Highbridge Capital Management, LLC (“HCM”), the trading manager of Highbridge MSF International Ltd. (“MSF”) and Highbridge Tactical Credit Master Fund, L.P. L.P. (“(“TCF” and, together with MSF, the Highbridge Funds“Highbridge Funds”), may be deemed to be the beneficial owner of the shares held by the Highbridge Funds. Mark Vanacore is responsible for the investment and voting decisions made by HCM with respect to the shares held by MSF, and Jonathan Segal and Jason Hempel are responsible for the investment and voting decisions made by HCM with respect to the shares held by TCF. The Highbridge Funds and the foregoing individuals disclaim any beneficial ownership of these shares. The business address of HCM is 277 Park Avenue, 23rd Floor, New York, NY 10172 and the business address of the Highbridge Funds is c/o HedgeServ (Cayman) Ltd., Cricket Square, Floor 6, George Town, Grand Cayman KY1-1104, Cayman Islands.

(4)IncludesBased on information provided to the Company by Aristeia Capital, L.L.C. (“Aristeia”) as a selling stockholder under the Form S-1 filed with the SEC on July 13 and effective on July 22, 2020, this includes 350,573 shares of Common Stock underlying warrants. Aristeia Capital, L.L.C. (“Aristeia”) may be deemed the beneficial owner of the securities described herein in its capacity as the investment manager of APSV, LLC, ALSV Limited and Windermere Ireland Fund PLC (collectively, the “Aristeia Funds”), which are the holders of such securities. As investment manager of each Aristeia Fund, Aristeia has voting and investment control with respect to the securities held by each Aristeia Fund. Anthony M. Frascella and William R. Techar are the Co-Chief Investment Officers of Aristeia. Each of Aristeia and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in the Aristeia Funds. The business address of such holders is One Greenwich Plaza, Third Floor, Greenwich, Connecticut 06830.

(5)The business address of each of the listed individuals is 8181 E. Tufts Avenue, Suite 510, Denver, Colorado 80237.

(6)Michael Harrison has an indirect pecuniary interest in shares of our Common Stock beneficially owned by Sprott Private Resource Streaming and Royalty (Collector), LP and Sprott Private Resource Lending II (Collector), LP as chief executive officer of Sprott Resource Streaming and Royalty Corp. and/or through his fiduciary role as a Managing Partner of Sprott Private Resource Streaming and Royalty (Collector) LP. Mr. Harrison disclaims any beneficial ownership of the shares of our Common Stock beneficially owned by Sprott Private Resource Streaming and Royalty (Collector), LP. and Sprott Private Resource Lending II (Collector), LP.

(7)David Kirsch, the Chairman of our Board, has no pecuniary interest in shares of our Common Stock and disclaims any beneficial ownership of the shares of our Common Stock beneficially owned by Mudrick Capital Management, L.P and its affiliates.

We are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions of Item 403 of Regulation S-K.

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PLAN OF DISTRIBUTION

We are registering the issuance by usTable of up to 37,500,212 shares of our Common Stock that may be issued upon exercise of the warrants to purchase Common Stock, including the public warrants, private placement warrants, forward purchase warrants, PIPE warrants, and Seller warrants.Contents

We are also registering the resale by the Selling Securityholders or their permitted transferees of up to 60,867,645 shares of Common stock consisting of the following:

·1,688,180 shares of Common Stock converted from founder shares;

·20,871,236 shares of Common Stock issued to the 1.5 Lien Note Holders and the Excess Note Holders pursuant to the terms of the Exchange Agreement upon the consummation of the business combination;

·14,595,892 shares of Common Stock issued to the Seller in the business combination and immediately distributed to the Initial Subscribers by the Seller as part of a pro rata distribution under its plan of dissolution of the shares of our Common Stock received by the Seller in the business combination;

·7,596,309 shares of Common Stock issues pursuant to the Subscription/Backstop Agreements upon the consummation of the business combination;

·3,125,000 forward purchase shares issued pursuant to the terms of the Forward Purchase Contract upon consummation of the business combination;

·44,395 shares of Common Stock issued to Cantor pursuant to the Underwriting Agreement, dated as of February 7, 2018, among the Company and Cantor, as amended;

·437,940 shares of Common Stock issued to Lender pursuant to the Sprott Credit Agreement;

·31,604 shares of Common Stock issued to Lender pursuant to the Sprott Credit Agreement and transferred to Prisma Pelican Fund as a participating lender in the Sprott Credit Agreement;

·4,515 shares of Common Stock issued to Lender pursuant to the Sprott Credit Agreement and transferred to Ninepoint Credit Opportunities Fund as a participating lender in the Sprott Credit Agreement;

·9,030 shares of Common Stock issued to Lender pursuant to the Sprott Credit Agreement and transferred to Natural Resource Income Investing Limited Partnership, a Limited Partnership, as a participating lender in the Sprott Credit Agreement;

·13,545 shares of Common Stock issued to Lender pursuant to the Sprott Credit Agreement and transferred to Sprott Private Resource Streaming and Royalty (Collector), LP. as a participating lender in the Sprott Credit Agreement;

·6,700,000 shares of Common Stock issuable upon exercise of the sponsor private placement warrants to purchase Common Stock;

·2,500,000 shares of Common Stock issuable upon exercise of the forward purchase warrants to purchase Common Stock; and

·3,249,999 shares of Common Stock issuable upon exercise of the PIPE warrants to purchase Common Stock.

We are also registering the resale by the Selling Securityholders or their permitted transferees of up to 13,489,999 warrants to purchase Common Stock, consisting of the following:

·6,700,000 sponsor private placement warrants;

·2,500,000 forward purchase warrants;

·1,040,000 Cantor private placement warrants; and

·3,249,999 PIPE warrants.

The Selling Securityholders may offer and sell, from time to time, their respective shares of Common Stock and warrants covered by this prospectus. The Selling Securityholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and under terms then prevailing or at prices related to the then current market price or in negotiated transactions. The Selling Securityholders may sell their securities by one or more of, or a combination of, the following methods:

·on NASDAQ, in the over-the-counter market or on any other national securities exchange on which our securities are listed or traded;

·in privately negotiated transactions;

·in underwritten transactions;


·in a block trade in which a broker-dealer will attempt to sell the offered securities as agent but may purchase and resell a portion of the block as principal to facilitate the transaction;

·through purchases by a broker-dealer as principal and resale by the broker-dealer for its account pursuant to this prospectus;

·in ordinary brokerage transactions and transactions in which the broker solicits purchasers;

·through the writing of options (including put or call options), whether the options are listed on an options exchange or otherwise;

·through the distribution of the securities by any Selling Securityholder to its partners, members or stockholders;

·in short sales entered into after the effective date of the registration statement of which this prospectus forms a part;

·by pledge to secured debts and other obligations;

·to or through underwriters or agents;

·“at the market” or through market makers or into an existing market for the securities; and

·any other method permitted pursuant to applicable law.

The Selling Securityholders may sell the securities at prices then prevailing, related to the then prevailing market price or at negotiated prices. The offering price of the securities from time to time will be determined by the Selling Securityholders and, at the time of the determination, may be higher or lower than the market price of our securities on NASDAQ or any other exchange or market. The Selling Securityholders may also sell our securities short and deliver the securities to close out their short positions or loan or pledge the securities to broker-dealers or other financial institutions that in turn may sell the securities. The shares may be sold directly or through broker-dealers or other financial institutions acting as principal or agent or pursuant to a distribution by one or more underwriters on a firm commitment or best-efforts basis. The Selling Securityholders may also enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of our securities in the course of hedging the positions they assume with the Selling Securityholders. The Selling Securityholders may also enter into options or other transactions with broker-dealers or other financial institutions, which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). In connection with an underwritten offering, underwriters or agents may receive compensation in the form of discounts, concessions or commissions from the Selling Securityholders or from purchasers of the offered securities for whom they may act as agents. In addition, underwriters may sell the securities to or through dealers, and those dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. The Selling Securityholders and any underwriters, dealers or agents participating in a distribution of the securities may be deemed to be “underwriters” within the meaning of the Securities Act, and any profit on the sale of the securities by the Selling Securityholders and any commissions received by broker-dealers may be deemed to be underwriting commissions under the Securities Act.

The Selling Securityholders party to the Amended and Restated Registration Rights Agreement have agreed, and the other Selling Securityholders may agree, to indemnify an underwriter, broker-dealer or agent against certain liabilities related to the sale of the securities, including liabilities under the Securities Act.

In order to comply with the securities laws of certain states, if applicable, the securities must be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the securities may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

The Selling Securityholders are subject to the applicable provisions of the Exchange Act, including Regulation M. This regulation, if applicable to sales hereunder, may limit the timing of purchases and sales of any of the securities offered in this prospectus by the Selling Securityholders. The anti-manipulation rules under the Exchange Act may apply to sales of the securities in the market and to the activities of the Selling Securityholders and their affiliates. Furthermore,


Regulation M may restrict the ability of any person engaged in the distribution of the securities to engage in market-making activities for the particular securities being distributed for a period of up to five business days before the distribution. The restrictions may affect the marketability of the securities and the ability of any person or entity to engage in market-making activities for the securities.

At the time a particular offer of securities is made, if required, a prospectus supplement will be distributed that will set forth the number of securities being offered and the terms of the offering, including the name of any underwriter, dealer or agent, the purchase price paid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or concession allowed or reallowed or paid to any dealer, and the proposed selling price to the public.

To the extent required, this prospectus may be amended and/or supplemented from time to time to describe a specific plan of distribution. Instead of selling the securities under this prospectus, the Selling Securityholders may sell the securities in compliance with the provisions of Rule 144 under the Securities Act, if available, or pursuant to other available exemptions from the registration requirements of the Securities Act.

Restrictions to Sell

Pursuant to the Amended and Restated Registration Rights Agreement the restricted stockholders agreed not to sell, transfer, pledge or otherwise dispose of certain securities they hold or receive for certain time periods, ranging from between 30 days after the consummation of the business combination for warrants purchased in the private investment to six months for shares received in the note exchange, to one year after the consummation of the business combination for converted founder shares, subject to certain exceptions.


UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a summary of the U.S. federal income tax considerations generally applicable to the ownership and disposition of our Common Stock and warrants, which we refer to collectively as our securities.Stock. This summary is based upon U.S. federal income tax law as of the date of this prospectus, which is subject to change or differing interpretations, possibly with retroactive effect. This summary does not discuss all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, tax-exempt organizations (including private foundations), taxpayers that have elected mark-to-market accounting, S corporations, regulated investment companies, real estate investment trusts, passive foreign investment companies, controlled foreign corporations, investors that will hold Common Stock or warrants as part of a straddle, hedge, conversion, or other integrated transaction for U.S. federal income tax purposes or investors that have a functional currency other than the U.S. dollar), all of whom may be subject to tax rules that differ materially from those summarized below. In addition, this summary does not discuss other U.S. federal tax consequences (e.g., estate or gift tax), any state, local, or non-U.S. tax considerations, the Medicare tax or any alternative minimum tax.tax consideration. In addition, this summary is limited to investors that will hold our securitiesCommon Stock as a “capital assets”asset,” as defined under the U.S. Tax Code (generally, property held for investment) under the U.S. Tax Code.. No ruling from the Internal Revenue Service, (the “IRS”) has been or will be sought regarding any matter discussed herein. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects set forth below.

A “non-U.S. Holder” is a beneficial holder of securitiesCommon Stock who or that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our securities,Common Stock, the tax treatment of a partner, member or other beneficial owner of such partnership will generally depend upon the status of the partner, member or other beneficial owner, the activities of the partnership, and certain determinations made at the partner, member or other beneficial owner level. If you are a partner, member or other beneficial owner of a partnership holding our securities,Common Stock, you are urged to consult your tax advisor regarding the tax consequences of the ownership and disposition of our securities.

Common Stock.

THIS DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE HOLDERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF OWNING AND DISPOSING OF OUR SECURITIES,COMMON STOCK, AS WELL AS THE APPLICATION OF ANY, STATE, LOCAL, AND NON-U.S. INCOME, ESTATE AND OTHER TAX CONSIDERATIONS.

U.S. Holders

Taxation of Distributions

We do not intend to pay cash dividends for the foreseeable future. If we pay distributions to U.S. Holders of shares of our Common Stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in our Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the Common Stock and will be treated as described under “U.S. Holders—Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock” below.

Dividends we pay to a U.S. Holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. Holder will generally constitute “qualified dividends” that will be subject to tax at the maximum tax rate accorded to long-term capital gains.


Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock

A U.S. Holder will recognize gain or loss on the sale, taxable exchange or other taxable disposition of our Common Stock. Any such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder’s holding period for such Common Stock exceeds one year. The amount of gain or loss recognized will generally be equal to the difference between (1) the sum of the amount of cash and the fair market value of any property received in such disposition and (2) the U.S. Holder’s adjusted tax basis in such Common Stock. A U.S. Holder’s adjusted tax basis in its Common Stock will generally equal the U.S. Holder’s acquisition cost (i.e., the amount paid for the Common Stock or, as discussed below, an amount equal to the sum of the U.S. Holder’s initial investment in a warrant and the exercise price of such warrant)Stock) less any prior distributions treated as a return of capital. The deductibility of capital losses is subject to limitations.

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ExerciseTable of a WarrantContents

Except as discussed below with respect to the cashless exercise of a warrant, a U.S. Holder will not recognize gain or loss upon the exercise of a warrant. The U.S. Holder’s tax basis in the share of our Common Stock received upon exercise of the warrant will generally be an amount equal to the sum of the U.S. Holder’s initial investment in the warrant and the exercise price of such warrant. It is unclear whether a U.S. Holder’s holding period for the Common Stock received upon exercise of the warrant would commence on the date of exercise of the warrant or the day following the date of exercise of the warrant; however, in either case the holding period will not include the period during which the U.S. Holder held the warrants.

The tax consequences of a cashless exercise of a warrant are not clear under current tax law. A cashless exercise may be nontaxable, either because the exercise is not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either situation, a U.S. Holder’s tax basis in the Common Stock received would generally equal such U.S. Holder’s tax basis in the warrant. If the cashless exercise were treated as not being a realization event, it is unclear whether a U.S. Holder’s holding period for the Common Stock would commence on the date of exercise of the warrant or the day following the date of exercise of the warrant. If, however, the cashless exercise were treated as a recapitalization, the holding period of the Common Stock would include the holding period of the warrant. It is also possible that a cashless exercise could be treated as a taxable exchange in which gain or loss is recognized. In such event, a U.S. Holder would be deemed to have surrendered a number of warrants having a value equal to the exercise price. The U.S. Holder would recognize capital gain or loss in an amount equal to the difference between the fair market value of the Common Stock represented by the warrants deemed surrendered and the U.S. Holder’s tax basis in the warrants deemed surrendered. In this case, a U.S. Holder’s tax basis in the Common Stock received would equal the sum of the U.S. Holder’s initial investment in the warrants exercised and the exercise price of such warrants. It is unclear whether a U.S. Holder’s holding period for the Common Stock would commence on the date of exercise of the warrant or the day following the date of exercise of the warrant.

Due to the absence of authority on the U.S. federal income tax treatment of a cashless exercise, including when a U.S. Holder’s holding period would commence with respect to the Common Stock received, there can be no assurance which, if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, U.S. Holders are urged to consult their tax advisors regarding the tax consequences of a cashless exercise.

Sale, Exchange, Redemption or Expiration of a Warrant

Upon a sale, exchange (other than by exercise), redemption (other than a redemption for Common Stock) or expiration of a warrant, a U.S. Holder will recognize taxable gain or loss in an amount equal to the difference between (1) the amount realized upon such disposition or expiration and (2) the U.S. Holder’s tax basis in the warrant. Such gain or loss will generally be treated as long-term capital gain or loss if the warrant is held by the U.S. Holder for more than one year at the time of such disposition or expiration. If a warrant is allowed to lapse unexercised, a U.S. Holder generally will recognize a capital loss equal to such U.S. Holder’s tax basis in the warrant. The deductibility of capital losses is subject to certain limitations.

A redemption of warrants for Common Stock described in this prospectus under “Description of Securities To Be Registered—Warrants—Public Warrants” should be treated as a “recapitalization” within the meaning of Section


368(a)(1)(E) of the U.S. Tax Code. Accordingly, you should not recognize any gain or loss on the redemption of warrants for shares of our Common Stock. Your aggregate tax basis in the shares of Common Stock received in the redemption should equal your aggregate tax basis in your warrants redeemed and your holding period for the shares of Common Stock received in redemption of your warrants should include your holding period for your surrendered warrants.

Possible Constructive Distributions

The terms of each warrant provide for an adjustment to the number of shares of Common Stock for which the warrant may be exercised or to the exercise price of the warrant in certain events, as discussed in the section of this prospectus captioned “Description of Securities To Be Registered—Warrants—Public Warrants.” An adjustment that has the effect of preventing dilution is generally not a taxable event. Nevertheless, a U.S. Holder of warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases such U.S. Holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of Common Stock that would be obtained upon exercise) as a result of a distribution of cash to the U.S. Holders of shares of our Common Stock that is taxable to such U.S. Holders as a distribution. Such a constructive distribution would be subject to tax as described under “U.S. Holders—Taxation of Distributions” above in the same manner as if such U.S. Holder received a cash distribution from us equal to the fair market value of such increased interest.

Non-U.S. Holders

Taxation of Distributions

As discussed above, we do not intend to pay cash dividends for the foreseeable future. In general, any distributions (including constructive distributions) we make to a non-U.S. Holder of shares of our Common Stock, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the non-U.S. Holder’s conduct of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate of 30%, unless such non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually(generally on an IRS Form W-8BEN or W-8BEN-E, as applicable). In the case of any constructive dividend, it is possible that this tax would be withheld from any amount owed to a non-U.S. Holder by the applicable withholding agent, including cash distributions on other property or sale proceeds from warrants or other property subsequently paid or credited to such non-U.S. Holder. Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the non-U.S. Holder’s adjusted tax basis in its shares of our Common Stock and, to the extent such distribution exceeds the non-U.S. Holder’s adjusted tax basis, as gain realized from the sale or other disposition of the Common Stock, which will be treated as described under “Non-U.S. Holders—Gain on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock and Warrants” below. In addition, if we determine that we are classified as a “United States real property holding corporation” (see “Non-U.S. Holders—Gain on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock and Warrants” below), we will withhold 15% of the fair market value of any property distributed that exceeds our current and accumulated earnings and profits.

Dividends we pay to a non-U.S. Holder that are effectively connected with such non-U.S. Holder’s conduct of a trade or business within the United States (or, if an applicable tax treaty so requires, are attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. Holder) will generally not be subject to U.S. withholding tax, provided such non-U.S. Holder complies with certain certification and disclosure requirements (usually(generally by providing an IRS Form W-8ECI). Instead, such dividends will generally be subject to U.S. federal income tax, net of certain deductions, at the same graduated individual rates or corporate ratesrate applicable to U.S. Holders. If the non-U.S. Holder is a corporation, dividends that are effectively connected income may also be subject to a “branch profits tax” at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty).

Exercise of a Warrant

The U.S. federal income tax treatment of a non-U.S. Holder’s exercise of a warrant generally will correspond to the U.S. federal income tax treatment of the exercise of a warrant by a U.S. Holder, as described under “U.S. Holders—Exercise of a Warrant” above, although to the extent a cashless exercise results in a taxable exchange, the


U.S. federal income tax consequences to the non-U.S. Holder would be the same as those described below in “Non-U.S. Holders—Gain on Sale, Exchange or Other Taxable Disposition of Common Stock and Warrants.”

Redemption of Warrants for Common Stock

A redemption of warrants for Common Stock described in this prospectus under “Description of Securities To Be Registered—Warrants—Public Warrants” should be treated as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the U.S. Tax Code. Accordingly, you should not recognize any gain or loss on the redemption of warrants for shares of our Common Stock. Your aggregate tax basis in the shares of Common Stock received in the redemption should equal your aggregate tax basis in your warrants redeemed and your holding period for the shares of Common Stock received in redemption of your warrants should include your holding period for your surrendered warrants.

Possible Constructive Distributions

The terms of each warrant provide for an adjustment to the number of shares of Common Stock for which the warrant may be exercised or to the exercise price of the warrant in certain events, as discussed in the section of this prospectus captioned “Description of Securities To Be Registered—Warrants—Public Warrants.” An adjustment that has the effect of preventing dilution is generally not a taxable event. Nevertheless, a non-U.S. Holder of warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases such non-U.S. Holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of Common Stock that would be obtained upon exercise) as a result of a distribution of cash to the non-U.S. Holders of shares of our Common Stock that is taxable to such non-U.S. Holders as a distribution. A non-U.S. Holder would be subject to U.S. federal income tax withholding as described in “Taxation of Distributions” above in the same manner as if such non-U.S. Holder received a cash distribution from us equal to the fair market value of such increased interest, but without any corresponding receipt of cash.

Gain on Sale, Exchange or Other Taxable Disposition of Common Stock and Warrants

A non-U.S. Holder will generally not be subject to U.S. federal income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of our Common Stock, or an expiration or redemption of our warrants, unless:

·the gain is effectively connected with the conduct of a trade or business by the non-U.S. Holder within the United States (or, if an applicable tax treaty so requires, is attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. Holder);

·the non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or

·(i) we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. Holder held our Common Stock, and (ii) shares of our Common Stock (A) are not regularly traded on an established securities market or (B) are regularly traded on an established securities market, but the non-U.S. Holder has owned, directly or constructively, more than 5% of our Common Stock or warrants at any time within the shorter of the five-year period preceding the disposition or such non-U.S. Holder’s holding period for the shares of our Common Stock. There can be no assurance that our Common Stock will be treated as regularly traded on an established securities market for this purpose.

Gain described in the first bullet point above will be subject to tax at generally applicable U.S. federal income tax rates. Any gains described in the first bullet point above of a non-U.S. Holder that is a foreign corporation may also be subject to an additional “branch profits tax” at a 30% rate (or lower applicable treaty rate). Gain described in the second bullet point above will generally be subject to a 30% U.S. federal income tax. Non-U.S. Holders are urged to consult their tax advisors regarding possible eligibility for benefits under income tax treaties.


If the third bullet point above applies to a non-U.S. Holder, gain recognized by such non-U.S. holder on the sale, exchange or other disposition of our Common Stock or warrants will be subject to tax at generally applicable U.S. federal income tax rates. In addition, if our stock isdoes not continue to be regularly traded on an established securities market for this purpose, a buyer of our Common Stock or warrants from such non-U.S. Holder may be required to withhold U.S. income tax at a rate of 15% of the amount realized upon such disposition. We will be classified as a United States real property holding corporation if the fair market value of our “United States real property interests” equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests plus our other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. We believe that we currently are, and expect to remain for the foreseeable future, a United States real property holding corporation. Non-U.S. Holders are urged to consult their tax advisors regarding the application of these rules.

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Additional U.S. Federal Tax Considerations

Additional Tax on Net Investment Income

In addition to regular U.S. federal income tax, certain U.S. Holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their ‘‘net investment income,’’ which may include all or a portion of their net gain from the sale, exchange or other disposition of, or dividends with respect to, Common Stock. Each U.S. Holder is urged to consult its own tax advisor regarding the application of this tax.

Backup Withholding and Additional Information Reporting

In general, information returns may be filed with the IRS in connection with dividends paid to a U.S. Holder in respect of Common Stock and the proceeds received by a U.S. Holder from the sale, exchange or other disposition of Common Stock within the United States or through certain U.S.-related financial intermediaries will be subject to U.S. information reporting rules, unless a U.S. Holder is a corporation or other exempt recipient and properly establishes its rights to an exemption. Backup withholding at a rate of 24% may apply to such payments if a U.S. Holder does not establish an exemption from backup withholding or fails to provide a correct taxpayer identification number and make any other required certifications.

In general, information returns may be filed with the IRS in connection with dividends paid to non-U.S. Holders and the proceeds received by a non-U.S. Holder from the sale, exchange or other disposition of Common Stock. Copies of the information returns reporting dividends and any withholding may also be made available to the tax authorities in the country in which the non-U.S. Holder resides under the provisions of a treaty or agreement. A non-U.S. Holder may be subject to backup withholding (currently at a rate of 24%) in connection with dividends received with respect to Common Stock and the proceeds from the sales, exchange or other disposition of our Common Stock unless the non-U.S. Holder provides to the applicable withholding agent a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying under penalties of perjury that the non-U.S. Holder is not a United States person, or otherwise qualifies for an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. Each U.S. Holder isHolders are urged to consult itstheir own tax advisor regarding the information reporting and backup withholding rules.

Foreign Account Tax Compliance Act

Sections 1471 through 1474 of the U.S. Tax Code and the Treasury Regulations and administrative guidance promulgated thereunder (commonly referred as the “Foreign Account Tax Compliance Act” or “FATCA”) generally impose withholding at a rate of 30% in certain circumstances on dividends in respect of our securitiesCommon Stock which are held by or through certain foreign financial institutions (including investment funds), unless any such institution (1) enters into, and complies with, an agreement with the IRS to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments, or (2) if required under an intergovernmental agreement between the United States and an applicable foreign country, reports such information to its local tax authority, which will exchange such information with the U.S. Department of Treasury. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Accordingly, the entity through which our securities areCommon Stock is held will affect the determination of whether such withholding is required. Similarly, dividends in respect of our securitiesCommon Stock held by an investor that is a non-financial non-U.S. entity that does not qualify under certain exceptions will generally be subject to withholding at a rate of 30%, unless such entity either (1) certifies to us or the applicable withholding agent that such entity does not have any “substantial United States owners” or (2) provides certain information regarding the entity’s “substantial United States owners,” which will in turn be provided to the U.S. Department of Treasury. Prospective investors should consult their tax advisors regarding the possible implications of FATCA on their investment in our securities.Common Stock.


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DESCRIPTION OF SECURITIES TO BE REGISTERED

General

These summaries are not intended to be a complete discussion of the rights of Company stockholders and are qualified in their entirety by reference to the Delaware General Corporation Law and the various documents of the Company that are referred to in the summaries, as well as reference to the Second Amended and Restated Charter and Amended and Restated Bylaws, copies of which are included as Exhibits 3.1 and 3.2, respectively, to the registration statement of which this prospectus forms a part.

Authorized Capital Stock

The Second Amended and Restated Charter authorizes the issuance of up to 400,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock.

Class A Common Stock

Voting Power

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, under the Second Amended and Restated Charter, the holders of our Common Stock possess all voting power for the election of directors and all other matters requiring stockholder action and are entitled to one vote per share on matters to be voted on by stockholders. The holders of Common Stock will at all times vote together as one class on all matters submitted to a vote of the Company’s common stockholders under the Second Amended and Restated Charter.

Preferred Shares

The Second Amended and Restated Charter provides that shares of preferred stock may be issued from time to time in one or more series. The Board is authorized to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The Board is able, without stockholder approval, to issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the Common Stock and could have anti-takeover effects. The ability of the Board to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control or the removal of existing management. The Company has no preferred stock outstanding at the date hereof. Although the Company does not currently intend to issue any shares of preferred stock, it cannot assure you that it will not do so in the future.

Dividends

Subject to the rights, if any, of holders of any outstanding shares of preferred stock, the Second Amended and Restated Charter provides that holders of Common Stock are entitled to receive such dividends and other distributions, if any, as may be declared from time to time by the Board in its discretion out of legally available funds and shall share equally on a per share basis in such dividends and distributions.

Number and Election of Directors

The Second Amended and Restated Charter and the Company’s Amended and Restated Bylaws provide that the Board will be elected at each annual meeting of stockholders. The term of all directors shall be for one year and will expire at the next annual meeting of stockholders or until their respective successors are duly elected and qualified. With the approval of the stockholders at the special meeting of the stockholders on May 29, 2020, the Board was declassified and the seven directors nominated were elected to the Board upon the completion of the business combination.Recapitalization Transaction. The directors and executive officers of the Company following the business combinationRecapitalization Transaction are described in the Section entitled “Management” of this prospectus.


Under the Second Amended and Restated Charter, there is no cumulative voting with respect to the election of directors, with the result that directors will be elected by a plurality of the votes cast at a meeting of stockholders by the holders of Common Stock.

Liquidation Preference

The Second Amended and Restated Charter provides that in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of the Common Stock will be entitled to receive all of the remaining assets of the Company available for distribution to stockholders, ratably in proportion to the number of shares of Common Stock held by them, after the rights of creditors and the holders of the preferred stock have been satisfied.

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Business Combinations

The Second Amended and Restated Charter provides that the Company will not be governed by Section 203 of the DGCL and includes a provision that is substantially similar to Section 203 of the DGCL, but excludes the investment funds affiliated with sponsor and their respective successors and affiliates and the investment funds affiliated with or managed by Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine and their respective successors and affiliates from the definition of “interested stockholder.”

Pre-emption Rights

The holders of the Common Stock will not have preemptive or other subscription rights and there will be no sinking fund or redemption provisions applicable to the Common Stock.

Removal of Directors; Vacancies on the Board of Directors

The Second Amended and Restated Charter and the Company’s Amended and Restated Bylaws provide that, subject to the rights of the holders of any series of the Company preferred stock, directors may be removed only by the affirmative vote of the holders of a majority of the voting power of all shares then entitled to vote at an election of directors. Furthermore, subject to the rights of the holders of any series of the Company preferred stock, any vacancy on the Company’s Board, however occurring, including a vacancy resulting from an increase in the size of the Board, may only be filled by the affirmative vote of a majority of the Company’s directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by a vote of the stockholders.

Corporate Opportunity

The Second Amended and Restated Charter provides that, to the extent allowed by applicable law, the doctrine of corporate opportunity, or any other analogous doctrine, does not apply with respect to the Company or any of its officers or directors in circumstances where the application of such corporate opportunity doctrine would conflict with any fiduciary duties or contractual obligations they may have. Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine and the investment funds affiliated with them, including their respective partners, principals, directors, officers, members, managers, equity holders and/or employees (including any of the foregoing who serve as officers or directors of the Company) do not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Company or any of its subsidiaries, except as may otherwise be provided in separate agreement between such person or entity and the Company.

Exclusive Forum Provision

The Second Amended and Restated Charter provides that the Court of Chancery of the State of Delaware is the exclusive forum for stockholder litigation, other than any stockholder action to enforce any liability or duty under the Securities Act or the Exchange Act for which there is exclusive federal or concurrent federal and state jurisdiction.

Amendment of Certificate of Incorporation or Bylaws

As required by the DGCL, any amendment of the Second Amended and Restated Charter must first be approved by a majority of the directors then in office and, if required by law or the Second Amended and Restated Charter, thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment, and a majority of the outstanding shares of each class entitled to vote on the amendment as a class.

The Company’s Amended and Restated Bylaws may be amended, altered or repealed by the affirmative vote of a majority of the Company directors then in office, and may also be amended, altered or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote generally in the election of directors.

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WarrantsUNDERWRITING

Public Warrants

Each public warrantWe and the underwriters named below have entered into an underwriting agreement, dated the date of this prospectus, with respect to the Company issued in the IPO consummated on February 12, 2018 entitles the registered holdershares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase one share of Common Stock at an exercise price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of the business combination. Pursuant to the Warrant Agreement, a public warrant holder may exercise its public warrants only for a wholerespective number of shares of Common Stock. Stock shown opposite its name in the following table. BMO Capital Markets Corp., Stifel, Nicolaus & Company, Incorporated and Canaccord Genuity LLC are the representatives of the underwriters.

Underwriters

Number of Shares

BMO Capital Markets Corp.

[ ]

Stifel, Nicolaus & Company, Incorporated

[ ]

Canaccord Genuity LLC

[ ]

Total

[ ]

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until that option is exercised. If an underwriter fails or refuses to purchase any of its committed shares, the purchase commitments of the non-defaulting underwriters may be increased or the offering may be terminated.

We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act and to contribute to payments that the underwriters may be required to make for these liabilities.

The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

Option to Purchase Additional Shares

The underwriters have an option to buy up to an additional [ ] shares from us at the public offering price less the underwriting discount to cover sales by the underwriters of a greater number of shares than the total number set forth in the table above. They may exercise this option for 30 days from the date of this prospectus solely to cover any overallotments. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above, and the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

Commissions and Discounts

The underwriters propose to offer the shares of our Common Stock directly to the public at the initial public offering price set forth on the cover of this prospectus and to certain dealers at such offering price less a concession not in excess of $[ ] per share. After the initial public offering of the shares, the offering price and the selling concession may be changed by the underwriters.

The following table shows the per share and total underwriting discounts and commissions to be paid by us to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

No Exercise

Full Exercise

Per Share

$

$

Total

$

$

We estimate that the total expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions, will be approximately $[ ], all of which will be paid by us. We have agreed to reimburse the underwriters for certain of their expenses incurred in connection with the clearance of this offering with the Financial Industry Regulatory Authority, Inc.

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No Sales of Similar Securities

We and our officers and directors and certain holders of our capital stock and warrants will expire five yearshave agreed with the underwriters that, for a period of 90 days after the completiondate of this prospectus, subject to certain exceptions we and they will not (1) offer, sell, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the business combination, at 5:00 p.m.disposition), New York City time, or earlier upon redemption or liquidation.

Therequire the Company is not obligated to deliver any shares of its Common Stock pursuant tofile with the exercise of a public warrant and will have no obligation to settle such public warrant exercise unlessSEC a registration statement under the Securities Act, to register, any shares of our Common Stock or any securities convertible into or exercisable or exchangeable for our Common Stock or warrants or other rights to acquire shares of our Common Stock of which such officer, director or holder is now, or may in the future become, the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, directly or indirectly, any of the economic benefits or risks of ownership of such securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or other securities, in cash or otherwise, or (3) publicly disclose the intention to enter into any transaction described in clause (1) or (2) above except with respectthe prior written consent of BMO Capital Markets Corp.

The restrictions above do not apply to the following, subject to certain limitations set forth in the lock-up agreements:

transfers of securities as a bona fide gift;
transfers or dispositions of securities to any trust for the direct or indirect benefit of the lock-up signatory or any member of the immediate family of the lock-up signatory;
transfers of securities to affiliates, limited partners, general partners, limited liability company members or stockholders;
transfers of securities by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of the lock-up signatory;
transfers or dispositions of shares of our Common Stock acquired in open market purchases after the completion of this offering;
transfers to the Company in connection with the “net” or “cashless” exercise of options or other rights to purchase Common Stock granted pursuant to an equity incentive plan, stock purchase plan or other similar arrangement currently in effect in satisfaction of any tax withholding obligations through cashless surrender or otherwise, other than a “broker-assisted” exercise, provided that any shares of Common Stock issued upon exercise of such option or other rights would remain subject to the terms of the lock-up agreement;
dispositions by employees of the Company to sell a sufficient number of shares of Common Stock to cover tax obligations arising from the conversion of outstanding vested restricted stock units; or
entry into any trading plan established pursuant to Rule 10b5-1 under the Exchange Act.

For the purposes of this section, “immediate family” shall mean any relationship by blood, marriage, domestic partnership or adoption, not more remote than first cousin.

Listing

Our Common Stock and warrants are listed on the Nasdaq Capital Market under the symbols “HYMC” and “HYMCW,” respectively. The Seller warrants have been approved for listing on the Nasdaq Capital Market under the symbol “HYMCZ” and will commence trading on September 1, 2020.

Price Stabilization, Short Positions, Penalty Bids and Market Making

In connection with the offering, the underwriters may purchase and sell shares of our Common Stock underlyingin the warrants is then effectiveopen market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering, and a prospectus relating theretoshort position represents the amount of such sales that have not been covered by subsequent purchases.

A “covered short position” is current, subjecta short position that is not greater than the amount of additional shares for which the underwriters’ option described above may be exercised. The underwriters may cover any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the Company satisfyingprice at which they may purchase additional shares pursuant to the option described above.

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“Naked” short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of our Common Stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. These transactions may be effected on the Nasdaq Capital Market, in the over-the- counter market or otherwise.

In connection with this offering, the underwriters may engage in passive market making transactions in the Common Stock on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act during a period before the commencement of offers or sales of common stock and extending through the completion of distribution. A passive market maker must display its obligations describedbid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, that bid must then be lowered when specified purchase limits are exceeded. Passive market making may cause the price of our Common Stock to be higher than the price that otherwise would exist in the open market in the absence of those transactions. The underwriters are not required to engage in passive market making and may end passive market making activities at any time.

Electronic Distribution

In connection with respectthis offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, a prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. Other than the prospectus in electronic format, the information on such websites is not part of this prospectus. The representatives may agree to registration. No public warrantallocate a number of shares of our Common Stock to underwriters for sale to their online brokerage account holders. Internet distributions will be exercisable,allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.

Other Relationships

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non- financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to us and to persons and entities with relationships with us, for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to our assets, securities and/or instruments (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with us. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

Offer Restrictions Outside the United States

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose

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possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the Companydistribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Australia

No prospectus or other disclosure document, as defined in the Corporations Act 2001 (Cth) of Australia, or Corporations Act, in relation to our securities has been or will be lodged with the Australian Securities & Investments Commission, or ASIC. This document has not been lodged with ASIC and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:

(a)you confirm and warrant that you are either:

(i)

a “sophisticated investor” under section 708(8)(a) or (b) of the Corporations Act;

(ii)

a “sophisticated investor” under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to us which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;

(iii)

a person associated with the company under section 708(12) of the Corporations Act; or

(iv)

a “professional investor” within the meaning of section 708(11)(a) or (b) of the Corporations Act, and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act, any offer made to you under this document is void and incapable of acceptance; and

(b)you warrant and agree that you will not offer any of our securities for resale in Australia within 12 months of that security being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.

Canada

The common stock may be obligatedsold in Canada only to issue any shares to holders seeking to exercise their public warrants, unless the shares of Common Stock issuable upon such warrant exercise have been registered, qualifiedpurchasers purchasing, or deemed to be exempt underpurchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities lawslegislation of the state of residencepurchaser’s province or territory. The purchaser should refer to any applicable provisions of the registered holdersecurities legislation of the public warrants. In the event that the conditions in the two immediately preceding sentences are not satisfiedpurchaser’s province or territory for particulars of these rights or consult with respect to an public warrant, the holder of such public warrant will not be entitled to exercise such public warrant and such public warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any public warrant.

a legal advisor.

Pursuant to its obligations undersection 3A.3 (or, in the Amended and Restated Registration Rights Agreement,case of securities issued or guaranteed by the Company is filinggovernment of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”), the registration statementunderwriters are not required to comply with the disclosure requirements of whichNI 33-105 regarding underwriter conflicts of interest in connection with this prospectus forms a part for the registration, under the Securities Act,offering.

European Economic Area

In relation to each member state of the shares of Common Stock issuable upon exercise ofEuropean Economic Area that has implemented the public warrants. The Company will use its best efforts to cause the same to become effectiveProspectus Directive (each, a “relevant member state”), with effect from 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. If a registration statement covering the shares of Common Stock issuable upon exercise of the public warrants is not effective by the sixtieth (60th) day after the closing of the business combination, public warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.

Once the public warrants become exercisable, the Company may call the public warrants for redemption:

·in whole and not in part;

·at a price of $0.01 per public warrant;

·upon not less than 30 days’ prior written notice of redemption to each public warrant holder; and

·if, and only if, the last reported sale price of the Common Stock equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading day period ending three business days prior to the date the Company sends the notice of redemption to the public warrant holders.

If and when the public warrants become redeemable, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

If the foregoing conditions are satisfied and the Company issues a notice of redemption of the public warrants, each public warrant holder will be entitled to exercise his, her or its public warrant prior to the scheduled redemption date. However, the price of the Common Stock may fall below the $18.00 redemption trigger price (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) as well as the $11.50 per share warrant exercise price after the redemption notice is issued.


If the Company calls the public warrants for redemption as described above, the Company’s management will have the option to require any holder that wishes to exercise his, her or its public warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their public warrants on a “cashless basis,” the Company’s management will consider, among other factors, the Company’s cash position, the number of public warrants that are outstanding and the dilutive effect on stockholders of issuing the maximum number of shares of Common Stock issuable upon the exercise of its public warrants. If the Board takes advantage of this option, all holders of public warrants would pay the exercise price by surrendering their public warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the public warrants, multiplied by the difference between the exercise price of the public warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported closing price of the Common Stock for the ten trading days ending on the third trading day prior toincluding the date on which the noticeProspectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of redemption is sentsecurities described in this prospectus may not be made to the holderspublic in that relevant member state other than:

to any legal entity which is a qualified investor as defined in the Prospectus Directive;
to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by us for any such offer; or
in any other circumstances falling within Article 3(2) of the Prospectus Directive;

provided that no such offer of public warrants. Ifsecurities shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Company’s management takes advantageProspectus Directive.

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For purposes of this option,provision, the noticeexpression an “offer of redemption will containsecurities to the public” in any relevant member state means the communication in any form and by any means of sufficient information necessary to calculateon the numberterms of shares of Common Stockthe offer and the securities to be received upon exercise ofoffered so as to enable an investor to decide to purchase or subscribe for the public warrants,securities, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a public warrant redemption. If the Company’s management does not take advantage of this option, sponsor and its permitted transferees would still be entitled to exercise their private placement warrants described in “ – Private Placement Warrants” below for cash or on a cashless basis using the same formula described above that other public warrant holders would have been required to use had all public warrant holders been required to exercise their public warrants on a cashless basis, as described in more detail below.

A holder of a public warrant may notify the Company in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such public warrant,2010 PD Amending Directive, to the extent that after giving effectimplemented in the relevant member state) and includes any relevant implementing measure in the relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU.

The sellers of the securities have not authorized and do not authorize the making of any offer of securities through any financial intermediary on their behalf, other than offers made by the underwriters with a view to such exercise, such person (together with such person’s affiliates),the final placement of the securities as contemplated in this prospectus. Accordingly, no purchaser of the securities, other than the underwriters, is authorized to make any further offer of the securities on behalf of the sellers or the underwriters.

Hong Kong

The securities may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public warrant agent’s actual knowledge, would beneficially ownwithin the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in excessother circumstances which do not result in the document being a “prospectus” within the meaning of 4.9%the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or 9.8% (or such other amount as specifieddocument relating to the securities may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the holder)public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to the securities which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Israel

The common stock offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the “ISA”), nor have such common stock been registered for sale in Israel. The shares of Common Stock outstanding immediately after giving effectand warrants may not be offered or sold, directly or indirectly, to such exercise.

If the number of outstanding shares of Common Stock is increased by a stock dividend payablepublic in shares of Common Stock, or by a stock split-up of Common Stock or other similar event, then, onIsrael, absent the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each public warrant will be increased in proportion to such increase in outstanding Common Stock. A rights offering to holders of shares of Common Stock entitling holders to purchase shares of Common Stock at a price less than the fair market value will be deemed a stock dividendpublication of a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible intoprospectus. The ISA has not issued permits, approvals or exercisable for Common Stock) and (ii) the quotient of (x) the price per share of Common Stock paid in such rights offering and (y) the fair market value. For these purposes, (i) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable for the Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of the Common Stock as reported during the ten trading day period ending on the trading day prior to the first date on which the Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

In addition, if the Company, at any time while the public warrants are outstanding and unexpired, pays a dividend or makes a distribution in cash, securities or other assets to the holders of shares of Common Stock on account of such Common Stock (or other shares of our share capital into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of shares of Common Stocklicenses in connection with the business combination, (d)offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to satisfy the redemption rightsquality of the holderscommon stock being offered. Any resale in Israel, directly or indirectly, to the public of Common Stockthe common stock offered by this prospectus is subject to restrictions on transferability and must be effected only in connectioncompliance with a stockholder votethe Israeli securities laws and regulations.

Japan

The securities offered in this prospectus have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The securities have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to amendor for the existing charteraccount of any resident of Japan (including any corporation or other entity organized under the laws of Japan), except (i) pursuant to modify the substance or timing of our obligation to redeem 100% of Common Stock if we do not complete our initial business combination within 24 monthsan exemption from the closingregistration requirements of IPO orthe Financial Instruments and Exchange Law and (ii) in compliance with respect to any other provision relating to stockholders’ rightsapplicable requirements of Japanese law.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or pre-initial business combination activity, or (e)material in connection with the redemption of our public shares upon our failure to complete our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/offer or the fair market value of any securitiessale, or other assets paid on each share of Common Stock in respect of such event.


If the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse share splitinvitation for subscription or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse share split, reclassification or similar event, the number of Common Stock issuable on exercise of each public warrant will be decreased in proportion to such decrease in outstanding share of Common Stock.

Whenever the number of shares of Common Stock purchasable upon the exercisepurchase, of the public warrants is adjusted, as described above,securities may not be circulated or distributed, nor may the public warrant exercise price willsecurities be adjusted by multiplyingoffered or sold, or be made the public warrant exercise price immediately priorsubject of an invitation for subscription or purchase, whether directly or indirectly, to such adjustment by a fraction (x) the numerator of which will be the number of shares of Common Stock purchasable upon the exercisepersons in Singapore other than (i) to an institutional investor under Section 274 of the public warrants immediately priorSecurities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to such adjustment and (y) the denominator of which will be the number of shares of Common Stock so purchasable immediately thereafter.

In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than those described above or that solely affects the par value of such Common Stock)a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in the case of any merger or consolidation of the Companyaccordance with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the Company’s assets or other property as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the public warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in Section 275 of the public warrantsSFA or (iii) otherwise pursuant to, and in lieuaccordance with the conditions of, any other applicable provision of the shares of Common Stock immediately theretofore purchasable and receivable uponSFA, in each case subject to compliance with conditions set forth in the exerciseSFA.

Where the securities are subscribed or purchased under Section 275 of the SFA by a relevant party which is:

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

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a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities of that corporation or the beneficiaries’ rights represented thereby,and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the kind and amount of shares or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holderpursuant to an offer made under Section 275 of the public warrants would have received if such holder had exercised his, herSFA except:

-to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such securities of that corporation or such rights and interest in that trust are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;
-where no consideration is or will be given for the transfer; or
-where the transfer is by operation of law.

Sweden

This document has not been, and will not be, registered with or its warrants immediately priorapproved by Finansinspektionen (the “Swedish Financial Supervisory Authority”). Accordingly, this document may not be made available, nor may the common stock be offered for sale in Sweden, other than under circumstances that are deemed not to such event. If less than 70% ofrequire a prospectus under the consideration receivable by the holders of shares of Common Stock in such transaction is payable in the form of sharesSwedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of common stock in the successor entity thatSweden is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or islimited to be so listed for trading or quoted immediately following such event, and if the registered holder of the public warrant properly exercises the public warrant within 30 days following public disclosure of such transaction, the public warrant exercise price will be reduced as specified in the Warrant Agreement based on the Black-Scholes valuepersons who are “qualified investors” (as defined in the Warrant Agreement) ofFinancial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the public warrant. The purpose of such exercise price reduction isinformation contained in it to provide additional value to holders of the public warrants when an extraordinary transaction occurs during the exercise period of the public warrants pursuant to which the holders of the public warrants otherwise do not receive the full potential value of the public warrants.any other person.

Switzerland

The public warrants have been issuedcommon stock may not be publicly offered in registered form under the Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent,Switzerland and the Company. The Warrant Agreement provides that the terms of the public 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 issued and outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants, including any modification or amendment to increase the exercise price or shorten the exercise period.

The public warrants may be exercised upon surrender of the public warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the public warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to the Company, for the number of public warrants being exercised. The public warrant holders do not have the rights or privileges of holders of shares of Common Stock and any voting rights until they exercise their public warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the public warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

No fractional shares will be issued upon exercise of the public warrants. If, upon exercise of the public warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the public warrant holder.


The foregoing description of the public warrants do not purport to be complete and are subject to and qualified in their entirety by reference to the Warrant Agreement, a copy of which is included as Exhibit 4.2 to the registration statement of which this prospectus forms a part.

Private Placement Warrants

The (a) 6,700,000 warrants to purchase one share of Common Stock issued to the sponsor pursuant to the Private Placement Warrant Purchase Agreement, dated as of January 15, 2018, by and between the Company and the sponsor, (b) 1,040,000 warrants to purchase one share of Common Stock issued to Cantor pursuant to the Private Placement Warrant Purchase Agreement, dated as of January 15, 2018, by and between the Company and Cantor, including the shares of Common Stock issuable upon exercise of the private placement warrants, are not transferable, assignable or salable until 30 days after the completion of the business combination (except, among other limited exceptions, to the Company’s officers and directors and other persons or entities affiliated with the sponsor or Cantor) and they will not be redeemable so long as they are heldlisted on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the common stock may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering material relating to the common stock has been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of common stock will not be supervised by, the sponsor, CantorSwiss Financial Market Supervisory Authority (FINMA).

This document is personal to the recipient only and not for general circulation in Switzerland.

United Arab Emirates

Neither this document nor the common stock have been approved, disapproved or their permitted transferees. The sponsor, Cantor or their permitted transferees, havepassed on in any way by the option to exercise the private placement warrants on a cashless basis. Except as described below, the private placement warrants have terms and provisions that are identical to thoseCentral Bank of the public warrants described above. IfUnited Arab Emirates or any other governmental authority in the private placement warrants are held by holdersUnited Arab Emirates, nor have we received authorization or licensing from the Central Bank of the United Arab Emirates or any other thangovernmental authority in the sponsor, CantorUnited Arab Emirates to market or their permitted transferees,sell the private placement warrants will be redeemable bycommon stock within the CompanyUnited Arab Emirates. This document does not constitute and exercisable by the holders on the same basis as the public warrants. For as long as the private placement warrants are held by Cantor or its designees or affiliates, they may not be exercised after February 7, 2023, whichused for the purpose of an offer or invitation. No services relating to the common stock, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by us.

No offer or invitation to subscribe for common stock is five years fromvalid or permitted in the effective dateDubai International Financial Centre.

United Kingdom

Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of Section 85 of the registration statement filedFinancial Services and Markets Act 2000, as amended (the “FSMA”)) has been published or is intended to be published in respect of the common stock. This document is issued on a confidential basis to “qualified investors” (within the meaning of Section 86(7) of FSMA) in the United Kingdom, and the common stock may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances that do not require the publication of a prospectus pursuant to Section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.

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Any invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA) received in connection with the IPO.

If holdersissue or sale of the private placement warrants electcommon stock has only been communicated or caused to exercise them on a cashless basis, they would paybe communicated and will only be communicated or caused to be communicated in the exercise price by surrendering their warrants for that numberUnited Kingdom in circumstances in which Section 21(1) of shares of Common Stock equalFSMA does not apply to us.

In the quotient obtained by dividing (x) the productUnited Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the numberFinancial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the “FPO”), (ii) who fall within the categories of shares of Common Stock underlying the warrants, multiplied by the difference between the exercise pricepersons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the private placement warrants and the “fair market value” (defined below) by (y) the fair market value.FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The “fair market value” shall mean the average reported closing price of the Common Stock for the ten trading days ending on the third trading day priorinvestments to the date on which the notice of private placement warrant exercise is sent to the warrant agent.

The foregoing description of the private placement warrants does not purport to be complete andthis document relates are subjectavailable only to, and qualified in their entirety by reference to the Warrant Agreement, a copy of which is included as Exhibit 4.2 to the registration statement of which this prospectus forms a part.

Forward Purchase Warrants

On May 29, 2020, in connection with the closing of the business combination, the Company issued 2,500,000 warrantsany invitation, offer or agreement to purchase one share of Common Stock at a price of $11.50 per share issued to sponsor pursuant to the Forward Purchase Contract. The forward purchase warrants have substantially the same terms as the private placement warrants.

The foregoing description of the forward purchase warrants does not purport to be complete and are subject to and qualified in their entirety by reference to the Warrant Agreement, a copy of which is included as Exhibit 4.2 to the registration statement of which this prospectus forms a part.

PIPE Warrants Issued in Private Investment

On May 29, 2020, in connection with the closing of the business combination, the Company issued 7,596,309 shares of Common Stock pursuant to the Subscription Agreements and issued 3,249,999 PIPE warrants to the Initial Subscribers in the private investment. The PIPE warrants have substantially the same terms as the private placement warrants.

The foregoing description of the PIPE warrants does not purport to be complete and are subject to and qualified in their entirety by reference to the Warrant Agreement, a copy of which is included as Exhibit 4.3 to the registration statement of which this prospectus forms a part.


Assumed Warrants of the Seller

Stockholders of the Seller’s predecessor received warrants pursuant to the Seller Warrant Agreement with a 7-year term that represented 17.5% of the outstanding common stock of the Seller, which we refer to as the Seller warrants. Pursuant to the Purchase Agreement, the liabilities and obligations under the Seller Warrant Agreement were assumed by the Company upon consummation of the transactions contemplated under the Purchase Agreement. The Seller and the Company elected to treat the business combination as if it constituted a Fundamental Change under the Seller Warrant Agreement and each Seller warrant outstanding and unexercised immediately prior to the effective time is now exercisable to purchase shares of Common Stock.

The initial number of shares of the Seller’s common stock issuable upon exercise of the Seller warrants was determined by the Bankruptcy Court pursuant to Seller’s predecessor’s plan of reorganization. Pursuant to the Seller Warrant Agreement, the number of shares of the Seller’s common stock for which a Seller warrant is exercisable, and the exercise price per share, are subject to adjustment from time to time upon the occurrence of certain events, including (i) any issuance of a dividend on the Seller’s common stock, payable in cash or additional shares of the Seller’s common stock, (ii) any subdivision, split, reclassification or recapitalization of outstanding Seller’s common stock into a greater number of shares, or (iii) any combination, reclassification or recapitalization of outstanding Seller’s common stock into a smaller number of shares. As set forth in the Seller Warrant Agreement, the exercise price of the Seller warrants on any exercise date will be equal to the product of (x) the amount obtained by dividing (A) the Seller’s adjusted equity value, as definedengaged in the Seller Warrant Agreement, as of such exercise date by (B) the total share number, as defined in the Seller Warrant Agreement, as of such date multiplied by (y) the cheap stock factor, as defined in the Seller Warrant Agreement, as of such date. Additionally, in the case of any reclassification or capital reorganization of the Seller’s capital stock, the holder of each Seller warrant outstanding immediately prior to the occurrence of such reclassification or reorganization shall have the right to receive upon exercise of the applicable Seller warrant, the kind and amount of stock, other securities, cash or other property that such holder would have received if such Seller warrant had been exercised. As of July 1, 2020, there were 12,721,623 Seller warrants outstanding that were exercisable to purchase an aggregate of 3,210,213 shares of our Common Stock. As of July 1, 2020, the exercise price of each Seller warrant was equal to $44.82 per share and each Seller warrant is exercisable into approximately 0.2523 shares of Common Stock.

Under certain circumstances, such as a liquidity event, as defined in the Seller Warrant Agreement, the Seller warrants may be exercised on a cashless basis to the extent that, as of the exercise date, the fair market value, as defined in the Seller Warrant Agreement, of a share of Common Stock exceeds the exercise price, which cashless exercise would reduce the number of shares of Common Stock issuable. In the event of a liquidity event in which the fair market value, as defined in the Seller Warrant Agreement, of a share of Common Stock, as of the exercise date, exceeds the exercise price, no cashless exercise would be available. If any exercise of a Seller warrant would result in a fraction of a share of Common Stock, in lieu of issuing such fractional share, the Company may elect to make a cash payment in respect of such fractional share, in an amount equal to the product of such fraction multiplied by the fair market value, as defined in the Seller Warrant Agreement, of a share of Common Stock, as of the exercise date.

In addition, if the Company issues (or, as provided in the Seller Warrant Agreement, is deemed to issue), after the effective date of the Seller warrants, any additional shares, as defined in the Seller Warrant Agreement, of Common Stock, without consideration or for consideration per share less than the fair market value of Common Stock immediately prior to such issuance or, if such additional shares are issued (or deemed to be issued) to any restricted person, as defined in the Seller Warrant Agreement, then the cheap stock factor, as defined in the Seller Warrant Agreement, shall be reduced, thereby increasing the number of shares of Common Stock for which a Seller warrant is exercisable and reducing the per share exercise price of the Seller warrants.

Pursuant to the Seller Warrant Agreement, no Seller warrants may be transferred if such transfer would result in any violation of the Securities Act or any state securities laws or regulations, or any other applicable federal or state laws or order, unless the Company is then already subject to the reporting obligations under Sections 13 or 15(d) of the Exchange Act.

Pursuant to the Seller Warrant Agreement, holders of Seller warrants are not entitled to any of the rights of a stockholder or a holder of any other securities of the Company. Holders of Seller warrants have no right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for


the election of directors of the Company or of any other matter, or any rights whatsoever as stockholders of the Company (including appraisal rights, dissenters rights, subscription rights or otherwise), or be deemed the holder of capital stock of the Company.

Pursuant to the Seller Warrant Agreement, if the Company issues or sells equity securities to anyonly with, relevant persons. Any person who wasis not a stockholder of Seller’s predecessorUnited Kingdom relevant person should not act or rely on the effective date of the Seller warrants for consideration per share that is greater than the then exercise price of the Seller warrants, then each registered holder (or in the case of Seller warrants evidenced by global warrant certificates, each beneficial holder) that is an accredited investor would have the right for a period of 20 days after the Company delivers notice of such issuance or sale to such eligible holder, to participate in such issuance or sale on a pro rata basis (based on such eligible holder’s percentage ownership of shares of Common Stock) and all other outstanding options, warrants, or convertible securities that also have a pro rata right to participate in such issuance or sale.

Following the business combination, eligible holders are not entitled to participate in any of the following exempted issuances: (i) issuances of equity securities in connection with the refinancing or repayment of any indebtedness or debt securities of the Companythis document or any of its subsidiaries, (ii) issuances of equity securities to employees, directors, consultants and other service providers pursuant to an equity compensation plan approved by the Board, (iii) issuances of equity securities by means of a pro rata distribution to all holders of Common Stock, (iv) issuances of equity securities in a public offering, and (v) issuances of equity securities upon exercise, conversion or exchange of any equity securities that were issued in any issuance described in any of the foregoing exempted issuances. Pursuant to the Seller Warrant Agreement, if the Common Stock is listed for trading on a national securities exchange, the Company must use commercially reasonable efforts to list the Seller warrants for trading on such national securities exchange (subject to applicable listing requirements). In addition, if any holder of shares of Common Stock is granted piggy-back registration rights, the holders of Common Stock issued upon exercise of the Seller warrants would also be granted piggyback registration rights on substantially the same terms as such other holder.contents.

Pursuant to the Seller Warrant Agreement, in the event of a merger of the Company into, or a consolidation of the Company with, or a sale of all or substantially all of the Company’s assets to, any other person, or any merger of another person into the Company, in each case, in which the previously outstanding shares of Common Stock are cancelled, reclassified or converted or changed into or exchanged for securities of the Company and/or other property (including cash), and such transaction is not a liquidity event, as defined in the Seller Warrant Agreement, the holder of each Seller warrant would have the right upon any subsequent exercise (and payment of the applicable exercise price) to receive (out of legally available funds) the kind and amount of stock, other securities, cash and assets that such holder would have received if such Seller warrant had been exercised immediately prior to such transaction.

Pursuant to the Seller Warrant Agreement, if the Company shall be a party to or otherwise engage in any transaction or series of related transactions constituting (x) a merger of the Company into, a consolidation of the Company with, or a sale of all or substantially all of the Company’s assets to, any other person, or (y) any merger of another person into the Company in which, in the case of clause (x) or clause (y), the previously outstanding shares of Common Stock shall be cancelled, reclassified or converted or changed into or exchanged for securities of the Company or other property (including cash) or any combination of the foregoing; and (ii) such transaction or series of related transactions is not a liquidity event (as defined in the Seller Warrant Agreement) (any such transaction or series of related transactions, is referred to as a “Fundamental Change” under the Seller Warrant Agreement), the holder of each Seller warrant outstanding immediately prior to the occurrence of such Fundamental Change will have the right upon any subsequent exercise (and payment of the applicable exercise price) to receive the kind and amount of stock, other securities, cash and assets that such holder of a Seller warrant would have received if such Seller warrant had been exercised pursuant to the terms provided in the Seller Warrant Agreement immediately prior to such Fundamental Change (assuming such holder of a Seller warrant failed to exercise his, her or its rights of election, if any, as to the kind or amount of stock, securities, cash or other property receivable upon such Fundamental Change); provided, however, that the amount of such stock, other securities, cash and assets that would be received upon exercise of a Seller warrant following the consummation of such Fundamental Change shall be calculated on the applicable exercise date in a manner consistent with, and on terms as nearly as equivalent as practicable to, the provisions of the Seller Warrant Agreement regarding (i) the number of securities into which the Seller warrant shall be exercisable and (ii) the exercise price for the purchase of such securities under the Seller


warrant, with respect to the aggregate consideration received by the Company stockholders in such Fundamental Change. The Seller Warrant Agreement further provides that upon each Fundamental Change, appropriate adjustment shall be deemed to be made, including, without limitation, with respect to the kind and amount of stock, securities, cash or assets thereafter acquirable upon exercise of each Seller warrant, such that the provisions of the Seller Warrant Agreement shall thereafter be applicable, as nearly as possible, to any shares of stock, securities, cash or assets thereafter acquirable upon exercise of each Seller warrant. If the Company is not the surviving or resulting person from such Fundamental Change, the Company may not consummate a Fundamental Change transaction unless the surviving or resulting person assumes, by written instrument substantially similar in form and substance to this Agreement, the obligation to deliver to the holders of Seller warrants such shares of stock, securities, cash or assets which such holder would be entitled to receive upon exercise of each Seller warrant.

The foregoing description of the Seller warrants does not purport to be complete and are subject to and qualified in their entirety by reference to the Seller Warrant Agreement, a copy of which is included as Exhibit 4.1 to the registration statement of which this prospectus forms a part.

INTEREST OF NAMED EXPERTS AND COUNSEL

The consolidated financial statements of Hycroft Mining Corporation as of December 31, 2019 and 2018 and for each of the years in the two-year period ended December 31, 2019 have been audited by Plante & Moran, PLLC, an independent registered public accounting firm, as stated in their report thereon and have been included in the registration statement of which this prospectus forms a part in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

The balance sheets of Mudrick Capital Acquisition Corporation as of December 31, 2019 and December 31, 2018 and the related statements of operations, changes in stockholders’ equity and cash flows for the years ended December 31, 2019 and December 31, 2018, have been included in the registration statement of which this prospectus forms a part in reliance upon the report of WithumSmith+Brown, PC, an independent registered public accounting firm, appearing elsewhere herein, and upon authority of said firm as experts in accounting and auditing.

M3 Engineering & Technology Corporation, Steven Newman (RM-SME), Brooke Miller Clarkson (CPG), Tim Carew (P.Geo), Matt Hartmann (Member MAusIMM, RM-SME), and Richard F. DeLong (P.Geo) have prepared the Hycroft Technical Report and each is a qualified person as defined in subpart 1300 of Regulation S-K. Steven Newman is the Director of Feasibility Studies at the Company and is an employee of the Company. Brooke Miller Clarkson, Tim Carew, and Matt Hartmann are employees of SRK Consulting (U.S.), Inc. and Richard F. DeLong is an employee of EM Strategies, Inc. Other than Steven Newman, none of the qualified persons, or the employers of any of the qualified persons, is an affiliate of Company.

As at the date hereof, none of the above named experts has received, or is to receive, in connection with the offering, an interest, direct or indirect, in our Company.

LEGAL MATTERS

Neal, Gerber & Eisenberg LLP, Chicago, Illinois, which has acted as our counsel in connection with this offering, will pass upon the validity of the Common Stock and warrants covered by this prospectus. AnyThe underwriters or agents will be advised about other issues relating to the offeringhave been represented by counsel to be named in the applicable prospectus supplement.Mayer Brown LLP, New York, New York.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities offered by this prospectus. This prospectus, which forms a part of such registration statement, does not contain all of the information included in the registration statement. For further information pertaining to us and our securities, you should refer to the registration statement and to its exhibits. The registration statement has been filed electronically and may be obtained in any manner listed below. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement or a report we file under the Exchange Act, you should refer to the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit to a registration statement or report is qualified in all respects by the filed exhibit.

We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the internet at the SEC’s website at www.sec.gov and on our website at www.hycroftmining.com. The information found on, or that can be accessed from or that is hyperlinked to, our website is not part of this prospectus. You may inspect a copy of the registration statement through the SEC’s website, as provided herein.

107


Table of Contents

CHANGE IN AUDITOR

On July 8, 2020, the Audit Committee approved the dismissal of WithumSmith+Brown, PC (“Withum”) as the Company’s independent registered public accounting firm. The reports of Withum on the financial statements as of and for the years ended December 31, 2019 and 2018 of the Company did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainties, audit scope or accounting principles, except that Withum’s report for the fiscal years ended December 31, 2019 and 2018 included an explanatory paragraph indicating that the date for mandatory liquidation and subsequent dissolution raised a substantial doubt about the ability of the Company to continue as a going concern.

During the years ended December 31, 2019 and 2018 and the subsequent interim period through July 8, 2020, there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K) between the Company and Withum on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Withum, would have caused it to make reference to the subject matter of the disagreements in its report on the Company’s financial statements for such years. During the years ended December 31, 2019 and 2018 and the subsequent interim period through July 8, 2020, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).

We have provided Withum with a copy of the foregoing disclosures and have requested that Withum furnish us with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements made by us set forth above. A copy of Withum’s letter, will behas been filed as an exhibitExhibit 16.1 to the registration statement of which this prospectus forms a part by amendment.

part.

On July 8, 2020, the Audit Committee approved the engagement of Plante & Moran PLLC (“Plante Moran”) as our independent registered public accounting firm for the fiscal year ending December 31, 2020. Plante Moran was the independent registered public accounting firm for Hycroft Mining CorporationSeller prior to the acquisition of substantially all of its assets by the Company in a business combination that was consummated on May 29, 2020 and in which the Seller Hycroft Mining Corporation, was treated for accounting purposes as the acquiror in the transaction and the financial statements of Hycroft Mining CorporationSeller became the financial statements of the Company. During the years ended December 31, 2019 and 2018 and the subsequent period through July 8, 2020, neither we, nor anyone on our behalf consulted with Plante Moran on any matter that was either the subject of a “disagreement,” as defined in Item 304(a)(1)(iv) of Regulation S-K, or a “reportable event,” as defined in Item 304(a)(1)(v) of Regulation S-K.


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Table of Contents

INDEX TO FINANCIAL STATEMENTS

HYCROFT MINING CORPORATION

HYCROFT MINING CORPORATION

AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 2019 AND 2018

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Balance Sheets as of December 31, 2019 and 2018

F-3

Consolidated Statements of Operations for the Years Ended December 31, 2019 and 2018

F-4

Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018

F-5

Consolidated Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2019 and 2018

F-6

Notes to Audited Consolidated Financial Statements

F-7

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019F-31
Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019F-32
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019F-33
Consolidated Statements of Stockholders’ (Deficit) Equity for the Three Months Ended March 31, 2019 and 2018F-34
Notes to Unaudited Consolidated Financial StatementsF-35

MUDRICK CAPITAL ACQUISITION CORPORATION

AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED 2019 AND 2018

Report of Independent Registered Public Accounting Firm

F-58

F-27

Balance Sheets as of December 31, 2019 and 2018

F-59

F-28

Statements of Operations for the Fiscal Years Ended December 31, 2019 and 2018

F-60

F-29

Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2019 and 2018

F-61

F-30

Statements of Cash Flows for the Years Ended December 31, 2019 and 2018

F-62

F-31

Notes to Audited Financial Statements

F-63

F-32

HYCROFT MINING HOLDING CORPORATION

UNAUDITED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED MARCH 31,JUNE 30, 2020 AND 2019

Condensed Consolidated Balance Sheets as of March 31,June 30, 2020 and December  31, 2019

F-77

F-44

Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31,June 30, 2020 and 2019

F-78

F-45

Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2020 and 2019

F-46

Condensed Consolidated Statements of Change in Stockholders’ Equity for the Three and Six Months Ended March 31,June 30, 2019 and 2018

F-79

F-47

Condensed Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019F-80

Notes to Unaudited Condensed Consolidated Financial Statements

F-81

F-48

PRO FORMA FINANCIAL STATEMENTS

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2019

F-93

F-71

UPDATED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

F-83

EXPLANATORY NOTE REGARDING PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION AS OF MARCH 31,AND FOR THE SIX MONTHS ENDED JUNE 30, 2020

F-107

F-97


F-1


Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Hycroft Mining Corporation

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Hycroft Mining Corporation (the “Company”) as of December 31, 2019 and 2018, the related statements of operations, stockholders’ equity, and cash flows for each year in the two year period ended December 31, 2019 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the the two year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company’s significant recurring operating losses, lack of liquidity and capital, and significant capital needed to expand operations raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Plante & Moran, PLLC

Denver, Colorado

February 21, 2020

We have served as the Company’s auditor since 2017.


F-2


HYCROFT MINING CORPORATION

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except per share amounts)

  December 31, 
  2019  2018 
Assets:        
Cash $6,220  $9,138 
Restricted cash – Note 5  3,270   5,030 
Accounts receivable  97    
Inventories – Note 3  4,453   2,060 
Ore on leach pads – Note 3  22,062    
Prepaids and other – Note 4  2,648   2,261 
Current assets  38,750   18,489 
Restricted cash – Note 5  39,477   38,693 
Plant, equipment and mine development, net – Note 6  51,207   41,404 
Other assets, non-current – Note 4    5,203   1,158 
Total assets $134,637  $99,744 
Liabilities:        
Accounts payable   $10,746  $3,824 
Interest payable    846   1,049 
Other liabilities, current – Note 8  3,939   1,790 
Debt, current – Notes 9 and 20  553,965   131,386 
Current liabilities  569,496   138,049 
Other liabilities, non-current – Note 8  18   18 
Debt, non-current – Notes 9 and 20     296,201 
Asset retirement obligation, non-current – Note 10    4,374   5,832 
Total liabilities  573,888   440,100 
Commitments and contingencies – Note 19        
Stockholders’ (Deficit) Equity: – Note 11        
Common stock, $0.001 par value; 400,000,000 shares authorized for both periods; 3,095,650 and 2,758,689 issued; and 2,897,568 and 2,598,035 outstanding at December 31, 2019 and 2018, respectively  3   3 
Additional paid-in capital  5,184   5,184 
Accumulated deficit  (444,438)  (345,543)
Total stockholders’ (deficit)  (439,251)  (340,356)
Total liabilities and stockholders’ (deficit) $134,637  $99,744 

The accompanying notes are an integral part of these statements. 


December 31,

    

2019

    

2018

Assets:

 

  

 

  

Cash

$

6,220

$

9,138

Restricted cash – Note 5

 

3,270

 

5,030

Accounts receivable

 

97

 

Inventories – Note 3

 

4,453

 

2,060

Ore on leach pads – Note 3

 

22,062

 

Prepaids and other – Note 4

 

2,648

 

2,261

Current assets

 

38,750

 

18,489

Restricted cash – Note 5

 

39,477

 

38,693

Plant, equipment and mine development, net – Note 6

 

51,207

 

41,404

Other assets, non-current – Note 4

 

5,203

 

1,158

Total assets

$

134,637

$

99,744

Liabilities:

 

  

 

  

Accounts payable

$

10,746

$

3,824

Interest payable

 

846

 

1,049

Other liabilities, current – Note 8

 

3,939

 

1,790

Debt, current – Notes 9 and 20

 

553,965

 

131,386

Current liabilities

 

569,496

 

138,049

Other liabilities, non-current – Note 8

 

18

 

18

Debt, non-current – Notes 9 and 20

 

 

296,201

Asset retirement obligation, non-current – Note 10

 

4,374

 

5,832

Total liabilities

 

573,888

 

440,100

Commitments and contingencies – Note 19

 

  

 

  

Stockholders’ (Deficit) Equity: – Note 11

 

  

 

  

Common stock, $0.001 par value; 400,000,000 shares authorized for both periods; 3,095,650 and 2,758,689 issued; and 2,897,568 and 2,598,035 outstanding at December 31, 2019 and 2018, respectively

 

3

 

3

Additional paid-in capital

 

5,184

 

5,184

Accumulated deficit

 

(444,438)

 

(345,543)

Total stockholders’ (deficit)

 

(439,251)

 

(340,356)

Total liabilities and stockholders’ (deficit)

$

134,637

$

99,744

HYCROFT MINING CORPORATION 

CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands)

  Year Ended December 31, 
  2019  2018 
Revenues – Note 12 $13,709  $ 
Cost of sales:        
Production costs  11,041    
Depreciation and amortization  1,011    
Write-down of production inventories – Note 3  18,617    
Total cost of sales  30,669    
Operating expenses:        
Project and development  7,708   4,916 
Care and maintenance  3,529   8,961 
Pre-production depreciation and amortization    1,067   3,472 
Accretion – Note 10    422   1,271 
General and administrative    6,072   5,342 
Reduction in asset retirement obligation    (1,880)  (16,987)
Impairment of long-lived assets – Note 6  63    
Write-down of supplies inventories     144 
Write-down of mineral properties – Note 7       1,032 
Loss from operations  (33,941)  (8,151)
Other income (expense):        
Interest expense, net of capitalized interest of $551 and $0, respectively – Notes 9 and 20     (64,844)  (50,893)
Interest income  795   464 
Gain on retirement of debt – Note 9     3,321 
Loss before reorganization items, net and income taxes  (97,990)  (55,259)
Reorganization items, net  (905)  (399)
Loss before income taxes    (98,895)  (55,658)
Income tax – Note 14       (145)
Net loss $(98,895) $(55,803)
Loss per share:        
Basic – Note 15    $(36.10) $(21.10)
Diluted – Note 15 $(36.10) $(21.10)
Weighted average shares outstanding:
Basic – Note 15    2,739,505   2,645,194 
Diluted – Note 15  2,739,505   2,645,194 

The accompanying notes are an integral part of these statements.

F-4

F-3


HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWSOPERATIONS

(U.S. dollars in thousands)

Year Ended December 31,

    

2019

    

2018

Revenues – Note 12

$

13,709

$

Cost of sales:

 

  

 

  

Production costs

 

11,041

 

Depreciation and amortization

 

1,011

 

Write-down of production inventories – Note 3

 

18,617

 

Total cost of sales

 

30,669

 

Operating expenses:

 

  

 

  

Project and development

 

7,708

 

4,916

Care and maintenance

 

3,529

 

8,961

Pre-production depreciation and amortization

 

1,067

 

3,472

Accretion – Note 10

 

422

 

1,271

General and administrative

 

6,072

 

5,342

Reduction in asset retirement obligation

 

(1,880)

 

(16,987)

Impairment of long-lived assets – Note 6

 

63

 

Write-down of supplies inventories

 

 

144

Write-down of mineral properties – Note 7

 

 

1,032

Loss from operations

 

(33,941)

 

(8,151)

Other income (expense):

 

  

 

  

Interest expense, net of capitalized interest of $551 and $0, respectively – Notes 9 and 20

 

(64,844)

 

(50,893)

Interest income

 

795

 

464

Gain on retirement of debt – Note 9

 

 

3,321

Loss before reorganization items, net and income taxes

 

(97,990)

 

(55,259)

Reorganization items, net

 

(905)

 

(399)

Loss before income taxes

 

(98,895)

 

(55,658)

Income tax – Note 14

 

 

(145)

Net loss

$

(98,895)

$

(55,803)

Loss per share:

 

  

 

  

Basic – Note 15

$

(36.10)

$

(21.10)

Diluted – Note 15

$

(36.10)

$

(21.10)

Weighted average shares outstanding:

 

  

 

  

Basic – Note 15

 

2,739,505

 

2,645,194

Diluted – Note 15

 

2,739,505

 

2,645,194

  Year Ended December 31, 
  2019  2018 
Cash flows from operating activities:        
Net loss $(98,895) $(55,803)
Adjustments to reconcile net loss for the period to net cash used in operating activities:        
Depreciation and amortization     2,078   3,472 
Accretion – Note 10  422   1,271 
Stock-based compensation – Note 13  1,102    
Non-cash portion of interest expense – Note 9     54,810   40,839 
Write-down of production inventories – Note 3  18,617    
Reduction in asset retirement obligation – Note 10    (1,880)  (16,987)
Change in value of phantom shares – Note 16  181   (391)
Impairment of long-lived assets – Note 6  63    
Write-down of supplies inventories – Note 3     144 
Write-down of mineral property – Note 7     1,032 
Gain on retirement of debt – Note 9       (3,321)
Changes in operating assets and liabilities:        
Accounts receivable  (97)   
Materials and supplies inventories  (977)  (182)
Production-related inventories   (38,627)  (138)
Prepaids and other    (387)  947 
Income tax receivable      145 
Other assets, non-current  (120)   
Accounts payable    3,384   271 
Interest payable   (203)  548 
Other liabilities  758   1,228 
Net cash used in operating activities  (59,771)  (26,925)
Cash flows from investing activities:        
Additions to plant and equipment  (12,296)  (1,146)
Net cash used in investing activities     (12,296)  (1,146)
Cash flows from financing activities:        
Proceeds from debt issuances, net  71,831   27,881 
Refinancing of First Lien  (762)   
Refinancing issuance costs  (2,896)  (133)
Repayments of principal on capital lease obligations     (47)
Retirement of convertible notes – Note 11     (106)
Net cash provided by financing activities  68,173   27,595 
Net decrease in cash    (3,894)  (476)
Cash, beginning of period   52,861   53,337 
Cash, end of period   $48,967  $52,861 
Reconciliation of cash, cash equivalents and restricted cash:        
Cash and cash equivalents  $6,220  $9,138 
Restricted cash – current  3,270   5,030 
Restricted cash – non-current  39,477   38,693 
Total cash, cash equivalents and restricted cash $48,967  $52,861 

The accompanying notes are an integral part of these statements.


F-4


HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITYCASH FLOWS

(U.S. dollars in thousands, except share amounts)

  Common Stock Treasury Shares Additional
Paid-in
 Accumulated Total
Stockholders’
(Deficit)
 
  Shares Amount Shares Amount Capital Deficit Equity 
Balance at January 1, 2018  2,668,689 $3  65,572 $ $5,184 $(289,740)$(284,553)
Net loss            (55,803) (55,803)
Shares issued    90,000             
Shares repurchased        95,082         
Balance at December 31, 2018     2,758,689  3  160,654    5,184  (345,543) (340,356)
Net loss            (98,895) (98,895)
Shares issued(1)  336,961             
Shares repurchased       37,428         
Balance at December 31, 2019   3,095,650 $3  198,082 $ $5,184 $(444,438)$(439,251)

thousands)

Year Ended December 31,

    

2019

    

2018

Cash flows from operating activities:

 

  

 

  

Net loss

$

(98,895)

$

(55,803)

Adjustments to reconcile net loss for the period to net cash used in operating activities:

 

  

 

  

Depreciation and amortization

 

2,078

 

3,472

Accretion – Note 10

 

422

 

1,271

Stock-based compensation – Note 13

 

1,102

 

Non-cash portion of interest expense – Note 9

 

54,810

 

40,839

Write-down of production inventories – Note 3

 

18,617

 

Reduction in asset retirement obligation – Note 10

 

(1,880)

 

(16,987)

Change in value of phantom shares – Note 16

 

181

 

(391)

Impairment of long-lived assets – Note 6

 

63

 

Write-down of supplies inventories – Note 3

 

 

144

Write-down of mineral property – Note 7

 

 

1,032

Gain on retirement of debt – Note 9

 

 

(3,321)

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable

 

(97)

 

Materials and supplies inventories

 

(977)

 

(182)

Production-related inventories

 

(38,627)

 

(138)

Prepaids and other

 

(387)

 

947

Income tax receivable

 

 

145

Other assets, non-current

 

(120)

 

Accounts payable

 

3,384

 

271

Interest payable

 

(203)

 

548

Other liabilities

 

758

 

1,228

Net cash used in operating activities

 

(59,771)

 

(26,925)

Cash flows from investing activities:

 

  

 

  

Additions to plant and equipment

 

(12,296)

 

(1,146)

Net cash used in investing activities

 

(12,296)

 

(1,146)

Cash flows from financing activities:

 

  

 

  

Proceeds from debt issuances, net

 

71,831

 

27,881

Refinancing of First Lien

 

(762)

 

Refinancing issuance costs

 

(2,896)

 

(133)

Repayments of principal on capital lease obligations

 

 

(47)

Retirement of convertible notes – Note 11

 

 

(106)

Net cash provided by financing activities

 

68,173

 

27,595

Net decrease in cash

 

(3,894)

 

(476)

Cash, beginning of period

 

52,861

 

53,337

Cash, end of period

$

48,967

$

52,861

Reconciliation of cash, cash equivalents and restricted cash:

 

  

 

  

Cash and cash equivalents

$

6,220

$

9,138

Restricted cash – current

 

3,270

 

5,030

Restricted cash – non-current

 

39,477

 

38,693

Total cash, cash equivalents and restricted cash

$

48,967

$

52,861

(1)   Shares issued during the twelve months ended December 31, 2019 were related to settling the remaining bankruptcy claims.

The accompanying notes are an integral part of these statements.


F-5


HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(U.S. dollars in thousands, except share amounts)

Total

Additional

Stockholders’

Common Stock

Treasury Shares

Paid-in

Accumulated

 

(Deficit)

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance at January 1, 2018

 

2,668,689

$

3

 

65,572

$

$

5,184

$

(289,740)

$

(284,553)

Net loss

 

 

 

 

 

 

(55,803)

 

(55,803)

Shares issued

 

90,000

 

 

 

 

 

 

Shares repurchased

 

 

 

95,082

 

 

 

 

Balance at December 31, 2018

 

2,758,689

 

3

 

160,654

 

 

5,184

 

(345,543)

 

(340,356)

Net loss

 

 

 

 

 

 

(98,895)

 

(98,895)

Shares issued(1)

 

336,961

 

 

 

 

 

 

Shares repurchased

 

 

 

37,428

 

 

 

 

Balance at December 31, 2019

 

3,095,650

$

3

 

198,082

$

$

5,184

$

(444,438)

$

(439,251)


(1)Shares issued during the twelve months ended December 31, 2019 were related to settling the remaining bankruptcy claims.

The accompanying notes are an integral part of these statements.

F-6


Table of Contents

HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

1.    Company Overview

Hycroft Mining Corporation (formerly known as Allied Nevada Gold Corp.) and its subsidiaries (collectively, “HMC”, the “Company”, “we”, “us”, “our”, etc.) is a U.S.-based gold producer that is focused on mining, developing, and exploring properties in the state of Nevada in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales represent 100% of the Company’s operating revenues and, when operating, the market prices of gold and silver significantly impact the Company’s financial position, operating results, and cash flows. The Hycroft Mine is located in the state of Nevada and the corporate office is located in Denver, Colorado.

2.    Summary of Significant Accounting Policies

Basis of presentation

The Consolidated Financial Statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain amounts in the 2018 Consolidated Financial Statements have been reclassified to conform to the 2019 presentation. References to “$” refers to United States dollars.

Going concern

The Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is probable that, without additional capital injections, the Company will be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.

On March 10, 2015, the Company filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) in an effort to recapitalize the Company’s balance sheet by reducing its debt balances while concurrently providing additional liquidity. The Company continued to operate and produce gold and silver at its Hycroft Mine during the bankruptcy process. However, on July 8, 2015, the Company announced that it had suspended mining operations to maximize cash flow and minimize spending through the remainder of the Chapter 11 process. Effective October 22, 2015 (the “Effective Date”), the Company completed its financial restructuring process and emerged from bankruptcy.

From July 2015 through December 31, 2016, the Company produced gold and silver from its leach pads, actively running its processing facilities. The operation went into a care and maintenance mode as of January 1, 2017 when the Company stopped adding lime to the leach pads and wrote-down the remaining gold and silver on the leach pads to $0 due to the inability to economically recover the metal. As a result of going into care and maintenance, gold and silver production became a byproduct of maintaining the Hycroft Mine. Beginning January 1, 2017, the Company recorded all metal sales as a reduction to Care and maintenance, net in the consolidated statements of operations (see Note 12 — Gold and Silver Sales). The Company did not generate sufficient cash flow from its operations during 2018 to cover its operating costs, general and administrative costs, and the development costs related to the feasibility of its sulfide expansion project and was reliant upon additional debt funding to continue operations.

During 2019, the Company restarted open pit mining at the Hycroft Mine, and produced and sold gold and silver. However, based on the financial results for the year ended December 31, 2019, the significant debt burden and the need for additional cash to expand the operations, the Company believes its operations cannot currently generate enough cash to make scheduled principal and interest payments required by its debt obligations and/or cover operating and general and administrative costs necessary to operate the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern, since the Company is reliant on receiving future cash flows from financing activities to meet its obligations. While the Company has entered into a purchase agreement with MUDS, (the “MUDS transaction”) (as discussed in Note 21 — Subsequent Events) the MUDS transaction has yet to close and is subject to customary and other closing conditions, including regulatory approvals and receipt of approvals from MUDS and Hycroft stockholders.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

The ability to continue as a going concern is contingent upon the Company’s ability to expand mining operations to an economic level and to refinance its existing debt obligations, which the MUDS transaction is designed to support. During August 2019, M3 Engineering and Technology Corp. in association with SRK Consulting US and the Company completed a feasibility study (the “2019 Hycroft Technical Report”). The 2019 Hycroft Technical Report projects the economic viability and potential future cash flows for the Hycroft Mine when mining operations expand.

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

As part of the 2019 restart of mining operations, existing equipment was re-commissioned, including haul trucks, shovels and a loader, upgrades were made to the crushing system and new leach pad space was added to the existing leach pads. The 2019 restart of mining operations through December 31, 2019 was funded by the issuance of $72.0 million in Senior Secured Notes due June 30, 2020 (the “1.25 Lien Notes”), discussed below. Additional short-term funding continues to be required. See Note 21 — Subsequent Events for more information. The Company plans to refinance its existing debt obligations and obtain the funds necessary to expand its mining operations with the proceeds from the MUDS transaction.

These Consolidated Financial Statements do not include any adjustments related to the recoverability and classification of recorded assets or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

Use of estimates

The preparation of the Company’s Consolidated 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 use of management estimates and assumptions relate to recoverable gold and silver on the leach pads and in-process inventories; the useful lives of long-lived assets; probabilities of future expansion projects; environmental reclamation and closure costs; deferred taxes and related valuation allowances; and estimates of fair value for asset impairments and financial instruments. The Company bases its estimates on historical experience

and various 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.

Principles of consolidation

The Consolidated Financial Statements include the accounts of HMC and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Cash

Cash and cash equivalents have historically consisted of cash balances and highly liquid investments with an original maturity of three months or less. The Company has not experienced any losses on cash balances and believes that no significant risk of loss exists with respect to its cash. As of December 31, 2019 and 2018, the Company held no cash equivalents. Restricted cash is excluded from cash and is listed separately on the consolidated balance sheets. See Note 5 — Restricted Cash for additional information.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Ore on leach pads and inventories

The Company’s production-related inventories include: ore on leach pads; in-process inventories; and doré finished goods. Production-related inventories are carried at the lower of average cost or net realizable value. Cost includes mining (ore and waste); processing; refining costs incurred during production stages, and mine site overhead and depreciation and amortization relating to mining and processing operations. Net realizable value represents the estimated future sales price of production-related inventory quantities computed using the London Bullion Market Association’s (“LBMA”) quoted period-end metal prices, less any further estimated processing, refining, and selling costs. Losses that result from the application of the lower of cost or net realizable value accounting policy are recorded as a component of Cost of sales in the consolidated statements of operations. See Note 3 — Inventories for additional information.

The recovery of gold and silver at the Hycroft Mine is accomplished through a heap leaching process, the nature of which limits the Company’s ability to precisely determine the recoverable gold ounces in ore on leach pads. The Company estimates the quantity of recoverable gold ounces in ore on leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, crushed ore sampling, solution sampling, and estimated recovery percentages based on ore type and domain. The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore gold contents to the actual gold ounces recovered (metallurgical balancing). Changes in recovery rate estimates from metallurgical balancing that do not result in write-downs are accounted for on a prospective basis. If a write-down is required, production-related inventories would be adjusted to net realizable value and recorded as a component of Cost of sales in the consolidated statements of operations. See Note 3 — Inventories for additional information.

Ore on leach pads

Ore on leach pads represents ore that is being treated with a chemical solution to dissolve the contained gold. Costs are added to ore on leach pads based on current mining costs, including applicable depreciation and amortization relating to mining operations. As

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

gold-bearing materials are further processed, costs are transferred from ore on leach pads at an average cost per estimated recoverable ounce of gold to in-process inventories.

In-process inventories

In-process inventories represent gold-bearing concentrated materials that are in the process of being converted to a saleable product using a Merrill-Crowe or carbon in column processing method. As gold ounces are recovered using the Merrill-Crowe process, costs are transferred from in-process inventories at an average cost per ounce of gold to doré finished goods inventory. In-process inventories are valued at the average cost of the material fed into the process, plus the in-process conversion costs, including applicable depreciation and amortization relating to the process facilities incurred to that point in the process.

Precious metals inventory

Precious metals inventory consists of doré containing both gold and silver. While operations are actively producing gold and silver, and as the Company sells its in-process inventories, costs are recognized in Production costs in the consolidated statements of operations at an average cost per gold ounce sold. While the Hycroft Mine is in care and maintenance, costs to maintain the mine are recognized in Care and maintenance, net in the consolidated statements of operations as incurred.

Materials and supplies

Materials and supplies are valued at the lower of average cost or net realizable value. Cost includes applicable taxes and freight.

Fair value measurements

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements, defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis;

Level 2 — Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Certain financial instruments, including cash, prepaids and other, accounts payable, and other liabilities are carried at cost, which approximates their fair value due to the short-term nature of these instruments.

Plant, equipment, and mine development

Expenditures for new facilities and equipment, and expenditures that extend the useful lives or increase the capacity of existing facilities or equipment are capitalized and recorded at cost. Such costs are depreciated using either the straight-line method over the estimated productive lives of such assets or using the units-of- production method (when actively operating) at rates sufficient to depreciate such costs over the estimated proven and probable reserves as gold ounces are recovered. See Note 6 — Plant, Equipment, and Mine Development, Net for additional information.

Mine development

Mine development costs include the cost of engineering and metallurgical studies, drilling and assaying costs to delineate an ore body, environmental costs and the building of infrastructure. Additionally, interest is capitalized to mine development until such assets are ready for their intended use. Any of the above costs incurred before mineralization is classified as proven and probable reserves are expensed. During the second half of 2019, the Company established proven and probable reserves.

Drilling, engineering, metallurgical, and other related costs are capitalized for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body, converting non-reserve mineralization to

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

proven and probable reserves, infrastructure planning, or supporting the environmental impact statement. All other drilling costs are expensed as incurred. Drilling costs incurred during the production phase for operational ore control are allocated to inventory costs to be included as a component of Total cost of sales on the consolidated statements of operations.

Mine development costs are amortized using the units-of-production method based upon estimated recoverable ounces in proven and probable reserves. To the extent such capitalized costs benefit an entire ore body, they are amortized over the estimated life of that ore body. Capitalized costs that benefit specific ore blocks or areas are amortized over the estimated life of that specific ore block or area. Recoverable ounces are determined by the Company based upon its proven and probable reserves and estimated metal recoveries associated with those reserves.

Impairment of long-lived assets

The Company’s long-lived assets consist of plant, equipment and mine development. The Company reviews and evaluates its long-lived assets for recoverability annually and at interim periods if triggering events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that may trigger a test for recoverability include, but are not limited to, significant adverse changes to projected revenues, costs, or future expansion plans or changes to federal and state regulations (with which the Company must comply) that may adversely impact the Company’s current or future operations. An impairment is determined to exist if the total projected future cash flows on an undiscounted basis are less than the carrying amount of a long-lived asset group. An impairment loss is measured and recorded based on the excess carrying value of the impaired long-lived asset group over fair value.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

To determine fair value, the Company uses a discounted cash flow model based on quantities of estimated recoverable minerals and incorporates projections and probabilities involving metal prices (considering current and historical prices, price trends, and related factors), production levels, operating and production costs, and the timing and capital costs of expansion and sustaining projects, all of which are based on life-of-mine plans. The term “recoverable minerals” refers to the estimated amount of gold and silver that will be sold after taking into account losses during ore processing and treatment. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimates of future cash flows are based on numerous assumptions, which are consistent or reasonable in relation to internal budgets and projections, and actual future cash flows may be significantly different than the estimates, as actual future quantities of recoverable gold and silver, metal prices, operating and production costs, and the timing and capital costs of expansion and sustaining projects are each subject to significant risks and uncertainties. See Note 6 — Plant, Equipment, and Mine Development, Net for additional information.

Mineral properties

Mineral properties are tangible assets recorded at cost and include royalty interests, asset retirement costs, and land and mineral rights to explore and extract minerals from properties. Once a property is in the production phase, mineral property costs are amortized using the units-of-production method based upon the estimated recoverable gold ounces in proven and probable reserves at such properties. Costs to maintain mineral properties are expensed in the period they are incurred. As of December 31, 2019 and 2018, there was no value assigned to mineral properties as the value had been written-down to $0 in previous periods.

Asset retirement obligation

The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. The Company’s asset retirement obligation (“ARO”), consisting of estimated future mine reclamation and closure costs, may increase or decrease significantly in the future as a result of changes in regulations, mine plans, estimates, or other factors. The Company’s ARO relates to its operating property, the Hycroft Mine, and was recognized as a liability at fair value in the period incurred. An ARO, which is initially estimated based on discounted cash flow estimates, is accreted to full value over time through charges to Accretion expense in the consolidated statements of operations. Resultant ARO cost assets (recorded in Mineral properties, net on the consolidated balance sheets) are depreciated on a straight-line method over the related long-lived asset’s useful life. The Company’s ARO is adjusted annually, or more frequently if necessary, to reflect changes in the estimated present value resulting from revisions to the timing or amount of reclamation and closure costs.

Derivative instruments

The fair value of the Company’s derivative instruments is reflected as liabilities on the consolidated balance sheets. The Company does not hold derivative instruments for trading purposes.

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Derivative Instruments Not Designated as Hedges

Previous equity stockholders of the Company received warrants with a seven-year term that represent 17.5% of the outstanding new common shares. These warrants were accounted for as a derivative instrument and included in Other liabilities, non-current on the consolidated balance sheets at fair value with periodic changes in fair value included in Other, net in the consolidated statements of operations. During the years ended December 31, 2019 and 2018 there were no adjustments recorded as a result of no change in the fair value.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

See Note 11 — Stockholders’ Equity and Note 16 — Fair Value Measurements for additional information on the Company’s derivative instruments.

Treasury Stock

The Company records repurchases of common shares as Treasury stock at cost.

Revenue recognition

When actively operating, the Company recognizes revenue on gold and silver sales. During the year ended December 31, 2019, the Company began actively operating the Hycroft Mine and, as such, recorded gold and silver sales as Revenue. When in care and maintenance, gold and silver sales are recorded as a reduction to Care and maintenance, net on the consolidated statements of operations. During 2018, the Hycroft Mine was in care and maintenance and, as a result, all gold and silver sales were recorded as a reduction to Care and maintenance, net. For 2019 and 2018, 93% and 99%, respectively, of the Company’s gold and silver sales were attributable to gold sales.

The Company recognizes revenue for gold and silver production when it satisfies the performance obligation of transferring gold inventory to the customer, which generally occurs when the refiner notifies the customer that gold has been credited or irrevocably pledged to their account at which point the customer obtains the ability to direct the use and obtain substantially all of the remaining benefits of ownership of the asset. The transaction amount is determined based on the agreed upon market price and the number of ounces delivered. Concurrently, the payment date is agreed upon, which is usually within one week. All sales are final.

Stock-Based Compensation

Stock-based compensation costs for eligible employees are measured at fair value on the date of grant and charged to expense over the requisite service period. The fair value of awards is determined using the stock price on either the date of grant (if subject only to service conditions) or the date that the Compensation Committee of the Board of Directors establishes applicable performance targets (if subject to performance conditions). The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods through the final vesting date. See Note 13 — Stock-Based Compensation for additional information.

Phantom shares

Non-employee members of the Company’s board of directors receive phantom shares of stock pursuant to a Non-Employee Director Phantom Stock Plan. For grants issued during the years ended 2015 and 2016, the cash payment is equal to the fair market value of one share of common stock of the Company at the date of payment. Under the grant agreements, each phantom share vests on the date of grant and entitles the participant to a cash payment. For grants issued during 2019 and 2018, the cash payment is equal to the greater of the (1) grant date value and (2) the fair market value of one share of common stock of the Company at the date of payment. The fair market value at date of grant of the phantom shares was based upon the valuation of the Company determined in the bankruptcy process. During the twelve months ended December 31, 2019, the Company recorded a $0.2 million increase in the value of phantom shares granted in 2015 and 2016, which is included in General and administrative on the consolidated statements of operations and increased the compensation expense in 2019. During the twelve months ended December 31, 2018, the Company recorded a $0.4 million decrease in the value of phantom shares granted in 2015 and 2016, which is included in General and administrative on the consolidated statements of operations and decreased the compensation expense in 2018. For the twelve months ended December 31, 2019 and 2018 the Company recognized $0.5 million in each period in compensation expense related to the vesting of the phantom shares granted during each respective period, which are included in General and administrative on the consolidated statements of operations. See Note 16 — Fair Value Measurements for additional information.

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Reorganization items, net

Expenses directly associated with finalizing the Chapter 11 cases before the Bankruptcy Court are reported as Reorganization items, net in the consolidated statements of operations. The Company incurred legal and professional fees of $0.9 million and $0.4 million for the years ended December 31, 2019 and 2018, respectively.

Income taxes

The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect at the anticipated time of reversal. The Company derives its deferred income tax provision or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. See Note 14 — Income Taxes for additional information.

The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. Evidence evaluated includes past operating results, forecasted earnings, estimated future taxable income, and prudent and feasible tax planning strategies. The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates used to manage the underlying business.

As necessary, the Company also provides reserves against the benefits of uncertain tax positions taken on its tax filings. The necessity for and amount of a reserve is established by determining, based on the weight of available evidence, the amount of benefit which is more likely than not to be sustained upon audit 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 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.

Recently issued accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes current revenue recognition requirements and industry-specific guidance. The codification was amended through additional ASUs and, as amended, requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company’s only revenue stream is from the sale of precious metals, which is scoped into ASU 2014-09.

The Company adopted ASU 2014-09 on January 1, 2019 using a modified retrospective approach. As there were no unfulfilled contracts outstanding as of December 31, 2018, there was no cumulative effect adjustment required to be recognized at January 1, 2019.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard establishes a right-of- use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2020, including interim periods within the year. A modified retrospective transition approach is required to either the beginning of the earliest period presented or the beginning of the year of adoption. The Company is evaluating the potential impact on its Consolidated Financial Statements.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires companies to include restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 was adopted on January 1, 2019 on a retrospective basis. The adoption of ASU 2016-18 eliminated the activity related to transfers between cash and restricted cash for the twelve months ended December 31, 2018. The adoption of ASU 2016-18 did not have a material impact on our statements of cash flows for the periods presented.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”), which amends the disclosure requirements for fair value measurements in Topic 820 based on the considerations of costs and benefits. Under ASU 2018-13, certain disclosures were

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

eliminated, while others were modified and there were some additions. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019. The Company will adopt ASU 2018-13 in 2020, but will not have a material effect on the financial statement disclosures.

3.    Inventories

The following table provides the components of inventories and the estimated recoverable gold ounces therein (in thousands, except ounces):

December 31, 2019

December 31, 2018

    

Amount

    

Gold Ounces

    

Amount

    

Gold Ounces

Materials and supplies

$

2,559

 

$

1,582

 

Merrill-Crowe in process

 

1,004

 

691

 

 

Carbon column in-process

 

478

 

474

 

478

 

482

Doré finished goods

 

412

 

278

 

 

Total

$

4,453

 

1,443

$

2,060

 

482

  December 31, 2019  December 31, 2018 
  Amount  Gold Ounces  Amount  Gold Ounces 
Materials and supplies $2,559     $1,582    
Merrill-Crowe in process    1,004   691       
Carbon column in-process    478   474   478   482 
Doré finished goods  412   278       
Total $4,453   1,443  $2,060   482 

As of December 31, 2019 and 2018, in-process Inventories included $0.1 million and $0, respectively, of capitalized depreciation and amortization costs.

The following table summarizes ore on leach pads and the estimated recoverable gold ounces therein (in thousands, except ounces):

December 31, 2019

December 31, 2018

    

Amount

    

Gold Ounces

    

Amount

    

Gold Ounces

Ore on leach pads

$

22,062

 

17,019

$

 

  December 31, 2019  December 31, 2018 
  Amount  Gold Ounces  Amount  Gold Ounces 
Ore on leach pads $22,062   17,019  $    

As of December 31, 2019 (including the both write-downs discussed below) and 2018, Ore on leach pads included $1.8 million and $0, respectively, of capitalized depreciation and amortization costs.

Write-down of production inventories

As discussed in Note 2 — Summary of Significant Accounting Policies, the estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore gold contents to the actual gold ounces recovered (metallurgical balancing). During the 2019 fourth quarter, based on metallurgical balancing results, the Company determined that 11,680 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result of the write-off the Company recognized a Write-down of production inventories on the consolidated statements of operations of $16.4 million. Cash production costs written-off were $15.1 million and capitalized depreciation and amortization costs written-off were $1.3 million. The write-off of these ounces was primarily a result of mismanagement of solution flows. The lost gold and silver ounces were leached and captured in solution. However, prior to the solution being processed through the Merrill-Crowe plant, it was inadvertently commingled with barren solution and pumped to leach pads no longer in use, which will prevent it from being recovered in the future.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

In addition to the write-down related to metallurgical balancing during 2019, the Company performed its lower of cost or net realizable value test for the Ore on leach pads at December 31, 2019 and that resulted in a $2.2 million write-down of production inventories. The $2.2 million write-down includes $2.0 million of cash production costs and $0.2 million of capitalized depreciation and amortization which is included in Write-down of production inventories on the consolidated statements of operations. The recognition of the write-down is based on the Company’s application of the lower of cost or net realizable value accounting policy.

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

4.    Prepaids and Other Assets

The following table provides the components of prepaids and other assets (in thousands):

December 31,

    

2019

    

2018

Prepaids and other

 

  

 

  

Prepaids

$

2,109

$

1,722

Deposits

 

539

 

539

Total

$

2,648

$

2,261

Other assets, non-current

 

  

 

  

Deferred future financing costs

 

5,083

 

1,158

Royalty – advance payment

 

120

 

Total

$

5,203

$

1,158

  December 31, 
  2019  2018 
Prepaids and other      
Prepaids $2,109  $1,722 
Deposits  539   539 
Total $2,648  $2,261 
         
Other assets, non-current        
Deferred future financing costs  5,083   1,158 
Royalty – advance payment  120    
Total $5,203  $1,158 

5.    Restricted Cash

The following table provides the components of restricted cash (in thousands):

December 31,

    

2019

    

2018

First Lien agreement restricted cash – Note 9

 

3,270

 

5,030

Asset retirement obligation surety bonds (collateralized obligation)

 

39,477

 

38,693

Total

$

42,747

$

43,723

  December 31, 
  2019  2018 
First Lien agreement restricted cash – Note 9  3,270   5,030 
Asset retirement obligation surety bonds (collateralized obligation)  39,477   38,693 
Total $42,747  $43,723 


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

6.    Plant, Equipment, and Mine Development, Net

The following table provides the components of plant, equipment, and mine development, net (in thousands):

Depreciation Life

December 31,

    

of Method

    

2019

    

2018

Process equipment

 

5 – 13 years

$

14,770

$

6,759

Leach pads

 

Units-of-production

 

11,190

 

11,190

Buildings and leasehold improvements

 

10 years

 

10,507

 

10,507

Restart leach pads

 

18 months

 

6,229

 

Mine equipment

 

5 – 7 years

 

4,716

 

3,905

Vehicles

 

3 – 5 years

 

136

 

41

Furniture and office equipment

 

7 years

 

129

 

22

Mine development

 

Units-of-production

 

119

 

Construction in progress and other

 

 

20,619

 

20,750

$

68,415

$

53,174

Less: accumulated depreciation and amortization

 

(17,208)

 

(11,770)

Total

$

51,207

$

41,404

  Depreciation Life December 31, 
  of Method 2019  2018 
Process equipment 5 – 13 years $14,770  $6,759 
Leach pads Units-of-production  11,190   11,190 
Buildings and leasehold improvements 10 years  10,507   10,507 
Restart leach pads 18 months  6,229    
Mine equipment 5 – 7 years  4,716   3,905 
Vehicles 3 – 5 years  136   41 
Furniture and office equipment 7 years  129   22 
Mine development Units-of-production  119    
Construction in progress and other    20,619   20,750 
    $68,415  $53,174 
Less: accumulated depreciation and amortization    (17,208)  (11,770)
Total   $51,207  $41,404 

During the year ended December 31, 2019, leach pads were constructed and used for the restart of mining operations. New processing equipment was also placed into service. For the years ended December 31, 2019 and 2018, the Company recorded depreciation and amortization related to plant, equipment and mine development of $5.4 million and $3.4 million, respectively. The Company capitalized $4.3 million of depreciation and amortization during 2019 to Ore on leach pads on the consolidated balance sheets.

Impairment of long-lived assets

During the years ended December 31, 2019, the Company recorded impairments of long-lived assets of $0.1 million. The impairment recorded during 2019 related to a leach pad expansion project that the Company determined it would not utilize and, therefore, did not complete.

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Table of Contents

HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

7.    Mineral Properties, Net

The following table summarizes changes in the Company’s mineral properties, net (in thousands):

December 31,

    

2019

    

2018

Balance, beginning of year

$

$

1,093

Amortization of asset retirement cost asset

 

 

(61)

Write-down of mineral property

 

 

(1,032)

Balance, end of year

$

$

  December 31, 
  2019  2018 
Balance, beginning of year $  $1,093 
Amortization of asset retirement cost asset     (61)
Write-down of mineral property     (1,032)
Balance, end of year $  $ 

During the year ended December 31, 2018, the Company wrote-down the asset retirement cost asset to $0 based on a decrease in the ARO.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

8.    Other Liabilities

The following table summarizes the components of other liabilities, current and non-current (in thousands):

December 31,

    

2019

    

2018

Other liabilities, current

 

  

 

  

Accrued compensation for phantom shares – Note 16

$

1,590

$

884

Restricted stock units – Note 13

 

1,210

 

Other accrued compensation

 

1,139

 

892

Other

 

 

14

Total

$

3,939

$

1,790

Other liabilities, non-current

 

  

 

  

Warrant liability – Notes 11 and 16

$

18

$

18

  December 31,
  2019  2018 
Other liabilities, current      
Accrued compensation for phantom shares – Note 16 $1,590  $884 
Restricted stock units – Note 13  1,210    
Other accrued compensation  1,139   892 
Other     14 
Total $3,939  $1,790 
       
Other liabilities, non-current      
Warrant liability – Notes 11 and 16 $18  $18 

9.    Debt

Debt covenants

The Company’s debt agreements contain representations and warranties, events of default, and covenants that are customary for agreements of these types. The Company’s First Lien Term Loan Credit Agreement (the “First Lien Agreement”) contains financial covenants that, among other things, restrict or limit the ability of the Company to enter into liens, dispose of its assets, enter into hedging arrangements, pay dividends, purchase or redeem shares, incur or guarantee additional indebtedness, and make capital expenditures. The Second Lien Convertible Notes (the “Convertible Notes”), the Senior Secured Notes due June 30, 2020 (the “1.5 Lien Notes”) and the 1.25 Lien Notes contain provisions that, among other things, restrict or limit the ability of the Company to incur or guarantee additional debt, pay dividends, enter into liens, or dispose of its assets.

The Company’s First Lien Agreement, the Convertible Notes, the 1.5 Lien Notes and the 1.25 Lien Notes include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non-compliance with security documents.

As of December 31, 2019, we believe we were in compliance with all covenants related to the debt obligations.


F-15


Table of Contents

HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Debt balances

The following table summarizes the components of debt (in thousands):

December 31,

    

2019

    

2018

Debt, current:

 

  

 

  

Convertible Notes

$

208,411

$

1.5 Lien Notes

 

137,050

 

First Lien Agreement

 

125,468

 

125,468

1.25 Lien Notes

 

77,212

 

Other Note payable

 

6,773

 

5,989

Less debt issuance costs

 

(949)

 

(71)

Total

$

553,965

$

131,386

Debt, non-current:

 

  

 

  

Convertible Notes

$

$

179,874

1.5 Lien Notes

 

 

118,270

Less debt issuance costs

 

 

(1,943)

Total

$

$

296,201

  December 31,
 2019  2018 
Debt, current:      
Convertible Notes $208,411  $ 
1.5 Lien Notes  137,050    
First Lien Agreement  125,468   125,468 
1.25 Lien Notes  77,212    
Other note payable  6,773   5,989 
Less debt issuance costs  (949)  (71)
Total $553,965  $131,386 
         
Debt, non-current:        
Convertible Notes $  $179,874 
1.5 Lien Notes     118,270 
Less debt issuance costs     (1,943)
Total $  $296,201 

Debt issued at the Effective Date

First lien term loan agreement

The Company entered into the First Lien Agreement on the Effective Date for an aggregate principal amount of $126.7 million. The First Lien Agreement originally matured March 31, 2017 and now matures on May 31, 2020. For the period from December 13, 2019 through January 31, 2020 the First Lien Agreement bore interest at either LIBOR plus 7.0% or an Alternate Base Rate Canada, as defined in the First Lien Agreement, plus 7.0% and thereafter increased to either LIBOR plus 7.5% or an Alternate Base Rate Canada plus 7.5%. Prior to December 13, 2019, the First Lien Agreement bore interest at either LIBOR plus 5.5% or an Alternate Base Rate Canada plus 4.5%. Fifty percent of the monthly Excess Cash Flow, as defined in the First Lien Agreement and subject to minimum cash balance restrictions, is required to be paid to reduce the outstanding amount under the First Lien Agreement. The maximum outstanding amount under the First Lien Agreement was initially determined by a Borrowing Base (as defined in the First Lien Agreement) that is based upon 80% of the net realizable value of the gold and silver in the Company’s ore on leach pads, in- process and finished goods inventories less estimated selling and processing costs. The repayment of the First Lien Agreement and other obligations under the First Lien Agreement are guaranteed by all of the direct and indirect domestic subsidiaries of the Company. The First Lien Agreement, the guarantees by the guarantors in respect thereof and all obligations under the First Lien Agreement, and such guarantees are secured by liens on substantially all of the assets of the Company and its subsidiaries.

After a series of short-term maturity extensions through July 14, 2017, the Company amended the First Lien Agreement to provide for a maturity of January 31, 2019. After several short-term maturity extensions through February 22, 2019, the First Lien Agreement maturity was extended to December 13, 2019 (the “February 2019 Extension”). The extended amendment requires that the Company will maintain at all times a cash balance of $5.0 million, including a balance in a segregated account sufficient to pay projected First Lien Agreement interest payments for the succeeding three months. In conjunction with the close of the February 2019 Extension, the Company issued $18.0 million of 1.25 Lien Notes (discussed below). Pursuant to the February 2019 Extension, the Company obtained commitments from the holders of the 1.5 Lien Notes to purchase an additional $9.0 million of 1.25 Lien Notes during 2019, which was fulfilled in May 2019. Additionally, pursuant to the February 2019 Extension, the maximum outstanding amount under the First Lien Agreement is no longer determined by the Borrowing Base, however, the Company is to maintain at all times at least 175,000 recoverable gold equivalent ounces on the leach pads. The Company has agreed to certain operational and reporting milestones during the remaining life of the First Lien Agreement. Also, the Company agreed that it will ensure that the holders of the 1.5 Lien Notes or other parties acceptable to the Administrative Agent (as defined in the First Lien Agreement) will reduce the Bank of Nova Scotia’s holdings under the First Lien Agreement by $5.0 million within two banking days of each of June 30, 2019, if a certain milestone is not met, and October 28, 2019. Both buy-down obligations were met by the holders of the 1.5 Lien Notes.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

The Company completed two additional maturity amendments in December 2019 and January 2020. As stated above, the First Lien Agreement now matures May 31, 2020. In connection with these two amendments, the Company has agreed to certain operational and reporting milestones during the remaining life of the First Lien Agreement.

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Table of Contents

HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Second lien convertible notes

The Company issued $95.0 million of Convertible Notes on the Effective Date pursuant to the Indenture. Of the initial $95.0 million in Convertible Notes issued, $90.0 million was received by the Company in cash. The remaining $5.0 million in Convertible Notes were issued in satisfaction of a backstop put option payment. Certain lenders provided a backstop to the commitments in respect of the Convertible Notes to the extent there was a shortfall (in such capacity, collectively, the “Backstop Note Lenders”) in exchange for a backstop put option payment. Each of the Backstop Note Lenders received a portion of the backstop put option payment of $5.0 million.

Since the initial issuance of the $95.0 million in Convertible Notes, the Company issued, pursuant to the Indenture, an additional $20.0 million in aggregate principal amount of Convertible Notes upon substantially the same terms and conditions as those issued on October 22, 2015. In August 2018, the Company paid $0.1 million to retire $3.4 million of Convertible Notes resulting in a gain of $3.3 million.

The Convertible Notes mature on October 22, 2020 and bear interest at a rate of 15% per annum, payable in-kind on a quarterly basis. The issuance of an additional $96.8 million in Convertible Notes has been made through December 2019, representing interest payments on the outstanding Convertible Notes, including $0.3 million that was prepaid upon issuance of additional notes.

The Convertible Notes are convertible at an initial conversion price of $1.67 per share, subject to anti- dilution protection. There was no beneficial conversion feature as it was determined that the conversion price was equal to the commitment date value of the common stock. The obligations under the Convertible Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations under the First Lien Agreement, the 1.25 Lien Notes and the 1.5 Lien Notes. In connection with the issuance of the Convertible Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the trustee under the Indenture.

Additional debt issued

1.5 Lien Notes

In May, 2016, the Company issued $10.0 million of the 1.5 Lien Notes, pursuant to a Note Purchase Agreement (the “Note Purchase Agreement”). The 1.5 Lien Notes bear interest at a rate of 15% per annum, which is payable in-kind on a quarterly basis, and mature June 30, 2020. The obligations under the 1.5 Lien Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations of the First Lien Agreement and the 1.25 Lien Notes but superior in priority to the liens that secure the obligations of the Convertible Notes and the unsecured obligations of the Company. In connection with the issuance of the 1.5 Lien Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the collateral agent under the Note Purchase Agreement. Additionally, an Intercreditor Agreement was entered into by and among the collateral agent under the Note Purchase Agreement and the trustee under the Indenture.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

The following table summarizes the issuance of 1.5 Lien Notes bifurcated by noteNote issuances and interest in-kind during the years ended December 31, 2019, 2018, 2017 and 2016 (in thousands):

Transaction Period

    

Note Issuances

    

Interest In-Kind

    

Total

Year ended December 31, 2016

$

26,200

$

1,535

$

27,735

Year ended December 31, 2017

 

41,000

 

7,512

 

48,512

Year ended December 31, 2018

 

28,000

 

14,023

 

42,023

Year ended December 31, 2019

 

 

18,780

 

18,780

Total

$

95,200

$

41,850

$

137,050

Transaction Period Note Issuances  Interest In-Kind  Total 
Year ended December 31, 2016   $26,200  $1,535  $27,735 
Year ended December 31, 2017    41,000   7,512   48,512 
Year ended December 31, 2018    28,000   14,023   42,023 
Year ended December 31, 2019       18,780   18,780 
Total    $95,200  $41,850  $137,050 

While each 1.5 Lien Notes issuance is pursuant to a new noteNote purchase agreement, all the 1.5 Lien Notes have the same terms and security priority as the original issuance in May 2016.

The 1.5 Lien Notes provide the holders the right upon a change of control, as defined in the Note Purchase Agreement, to require the Company to repurchase all of the holder’s notes for 110% of the outstanding principal balance, plus accrued and unpaid interest. Furthermore, the 1.5 Lien Notes give the Company the right upon a change of control, as defined in the Note Purchase Agreement, to redeem the notes for 110% of the outstanding principal balance, plus accrued and unpaid interest.

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Table of Contents

HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

1.25 Lien Notes

On February 22, 2019, the Company issued $18.0 million of the 1.25 Lien Notes, pursuant to a Note Purchase Agreement (the “1.25 Note Purchase Agreement”). The 1.25 Lien Notes bear interest at a rate of 15% per annum, which is payable in-kind on a quarterly basis, and mature June 30, 2020. The obligations under the 1.25 Lien Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations of the First Lien Agreement but superior in priority to the liens that secure the obligations of the 1.5 Lien Notes, the Convertible Notes and the unsecured obligations of the Company. In connection with the issuance of the 1.25 Lien Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the collateral agent under the 1.25 Note Purchase Agreement, and an Intercreditor Agreement was entered into by and among the collateral agent under the Note Purchase Agreement and the collateral agent under the 1.25 Note Purchase Agreement. Additionally, an Intercreditor Agreement was entered into by and among the collateral agent under the 1.25 Note Purchase Agreement and the trustee under the Indenture.

Additional 1.25 Lien Notes were issued in 2019 pursuant to new noteNote purchase agreements. All of the 1.25 Lien Notes have the same terms and security priority as the original issuance in February 2019. A total of $77.2 million of 1.25 Lien Notes were issued during 2019, including $5.2 million of interest in-kind notes.

Other notes payable

On October 15, 2014, the Company entered into a Release and Settlement Agreement (the “Settlement Agreement”) and a Promissory Note (the “Promissory Note”) resolving and settling any and all disputes between Jacobs Field Services North America and the Company. A First Amendment to the Settlement Agreement was executed on April 5, 2016, a Second Amendment was executed on October 6, 2016, a Third Amendment was executed on December 21, 2017 (the “Third Amendment”), a Fourth Amendment was executed on December 31, 2018 (the “Fourth Amendment”) and a Fifth Amendment was executed on June 27, 2019 (the “Fifth Amendment”). The Fourth Amendment amended the Promissory Note to begin accruing interest January 1, 2019, at the rate of 5% per annum, to be added to the principal of the Promissory Note. Interest for 2018 was prepaid coincident with the execution of the Third Amendment. Pursuant to the Fourth Amendment, a delayed payment fee of 5.5% of the principal balance as of June 30, 2019, including accrued interest, was added to the principal balance of the Promissory Note. The due date of the Promissory Note was extended to December 31, 2019, pursuant to the Fifth Amendment. A Sixth Amendment was executed on December 19, 2019 (the “Sixth Amendment”), which extended the Promissory Note due date to June 30, 2020.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

On each of December 31, 2019 and 2018, coincident with the execution of the Sixth Amendment and Fourth Amendment, delayed payment fees of 2% of the principal balance at each date, or $0.1 million and $0.1 million, respectively, were added to the principal balance of the Promissory Note.

Interest expense

The following table summarizes the components of recorded interest expense (in thousands):

Year Ended December 31,

    

2019

    

2018

Second Lien Convertible Notes

$

28,537

$

24,923

1.5 Lien Notes

 

18,763

 

14,012

First Lien Agreement

 

10,022

 

9,589

1.25 Lien Notes

 

5,241

 

Amortization of debt issuance costs

 

2,047

 

1,802

Promissory Note

 

785

 

567

Capitalized interest

 

(551)

 

Total interest expense

$

64,844

$

50,893

  Year Ended December 31,
  2019  2018 
Second Lien Convertible Notes $28,537  $24,923 
1.5 Lien Notes  18,763   14,012 
First Lien Agreement  10,022   9,589 
1.25 Lien Notes  5,241    
Amortization of debt issuance costs  2,047   1,802 
Promissory Note  785   567 
Capitalized interest  (551)   
Total interest expense $64,844  $50,893 

We capitalize interest to Property and equipment, net on the consolidated balance sheets for construction projects in accordance with ASC Topic 835, Interest.

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Table of Contents

HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

10.  Asset Retirement Obligation

The following table summarizes changes in the Company’s ARO (in thousands):

December 31,

    

2019

    

2018

Balance, beginning of year

$

5,832

$

21,548

Accretion expense

 

422

 

1,271

Changes in estimates

 

(1,880)

 

(16,987)

Balance, end of year

$

4,374

$

5,832

  December 31, 
  2019  2018 
Balance, beginning of year $5,832  $21,548 
Accretion expense  422   1,271 
Changes in estimates  (1,880)  (16,987)
Balance, end of year $4,374  $5,832 

Changes in estimates during the year ended December 31, 2019 were driven by increased equipment and diesel costs but were more than offset by an increase in our credit-adjusted risk free rate, which is used to discount the future reclamation costs. Changes in estimate during 2018 were primarily a result of the Company extending the life-of-mine estimate to 30 years. Due to the extended life of mine, reclamation expenditures are delayed by approximately 25 years from the prior estimated schedule. As of December 31, 2019, the Company estimated that no significant reclamation expenditures will be made until 2047 and that reclamation work will be completed by the end of 2065.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

11.  Stockholders’ Equity

Common stock

In connection with the Company’s emergence from bankruptcy and as detailed in the plan of reorganization, the Company’s then-existing unsecured notes and general unsecured claims were canceled and holders of such claims received equity in the reorganized Company or received cash in amounts negotiated by the major creditor groups. The Company was required to issue 3.0 million new common shares to its creditors, but has not listed the new common shares for public trading and is not a reporting company with the United States Securities and Exchange Commission. Previous equity stockholders of the Company received warrants with a seven-year term that represent 17.5% of the outstanding new common shares.

As of December 31, 2019, all bankruptcy claims had been settled and all 3.0 million shares had been issued. For additional information see Note 16 — Fair Value Measurements. As of December 31, 2019, the Company had 400.0 million shares of common stock authorized at $.001 par value per share.

Preferred stock

In addition to common stock, the authorized share capital of the Company includes 10,000,000 shares of undesignated preferred stock with a par value of $0.001 per share, none of which has been issued.

Treasury stock

During the year ended December 31, 2019, the Company repurchased 37,428 shares of its common stock outstanding for a total purchase price of $1 (one dollar). During the year ended December 31, 2018, the Company repurchased 95,082 shares of its common stock outstanding for a total purchase price of $1 (one dollar).

Dividend policy

The Company has never paid dividends and currently has no intention to do so. The Company’s Convertible Notes, 1.5 Lien Notes, 1.25 Lien Notes and First Lien Agreement contain provisions that restrict its ability to pay dividends. For additional information see Note 9 — Debt.

Warrant issuance at effective date:

As discussed above, the previous equity stockholders of the Company were issued 12.7 million warrants with a seven-year term that represent 17.5% of the outstanding new common shares on the Effective Date. At issuance, each warrant was convertible into one share of the Company’s common stock. As the number of shares of common stock issuable upon conversion of the Convertible Notes increases, the conversion ratio of the warrants increases such that the warrants continue to represent 17.5% of the shares of common stock outstanding, assuming that all Convertible Notes have been converted to common shares. As of December 31, 2019, each warrant was convertible into 2.13 shares of common stock for a total of 27.2 million shares. The exercise price per share was $5.20

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Table of Contents

HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

$5.20 as of December 31, 2019. The warrants were accounted for as a derivative instrument and included as of December 31, 2019 and 2018 in Other liabilities, non-current on the consolidated balance sheets at fair value.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

12.  Gold and Silver Sales

The table below is a summary of the Company’s gold and silver sales (in thousands, except ounces sold):

Year Ended December 31,

2019

2018

Ounces

Ounces

    

Amount

    

Sold

    

Amount

    

Sold

Gold sales

$

12,803

 

8,593

$

178

 

145

Silver sales

 

906

 

52,036

 

2

 

124

Total gold and silver sales

$

13,709

$

180

 

  

  Year Ended December 31,
  2019  2018 
  Amount   

Ounces
Sold

  Amount   

Ounces
Sold

 
Gold sales $12,803   8,593  $178   145 
Silver sales  906   52,036   2   124 
Total gold and silver sales $13,709    $180     

For the year ended December 31, 2019, gold and silver sales of $13.7 million were reported as Revenue as the Hycroft Mine was operating. Nearly all gold and silver sales during 2019 were to the same customer. However, the Company is not obligated to sell all of its gold and silver to one customer. As discussed in Note 2 — Summary of Significant Accounting Policies, as of January 1, 2017 the Hycroft Mine went into a care and maintenance mode. While in care and maintenance, gold and silver sales are considered a byproduct of maintaining the Hycroft Mine and reported as a reduction to Care and maintenance, net on the consolidated statements of operations. Gold and silver sales of $0.2 million for the year ended December 31,

2018, were included as a reduction to Care and maintenance, net on the consolidated statements of operations.

13.  Stock-Based Compensation

The Company has a stock-based compensation plan, the Performance and Incentive Pay Plan (the “PIPP”), to attract, retain and motivate employees while directly linking incentives to increases in stockholder value. Terms and conditions (including performance-based vesting criteria) of awards granted under the PIPP are established by the Board of Directors or the Compensation Committee of the Board of Directors, who administer the plan.

On February 20, 2019, the Board of Directors of the Company approved the PIPP, which makes available up to 4,277,000 shares of common stock for award. The awards may be granted in a variety of forms, including restricted stock, restricted stock units, stock options, stock appreciation rights, performance awards, and other stock-based awards. As of December 31, 2019, all awards granted under the PIPP were

in the form of restricted stock units.

Restricted stock units granted under the PIPP without performance-based vesting criteria typically vest in equal annual installments over two or three years. Awards granted with performance-based vesting criteria typically vest in annual installments over two or three years subject to achievement of certain financial and operating results of the Company.

For the restricted stock units granted in 2019, a price per share was not determined as of the grant date. The number of shares of common stock of the Company to be issued upon vesting will be calculated on the vesting date based on the grant date value. The first tranche of restricted stock units will vest upon the closing of the MUDS transaction, which the Company expects to close in the first half of 2020. Restricted stock units set to vest during 2020 are convertible into shares of MUDS common stock as of December 31, 2020, if the MUDS transaction closes. The remainder of the restricted stock unites vest through March 2022. The restricted stock units are included in Other liabilities, current on the consolidated balance sheets.

The fair value of restricted stock units is recognized as expense over the vesting period. During the year ended December 31, 2019, the Company recognized $1.2 million in stock-based compensation cost related to the issuance of the restricted stock units of which $0.1 million was capitalized to ore on leach pads.


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Table of Contents

HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

14.

14.  Income Taxes

The Company’s loss before income taxes was attributable solely to domestic operations in the United States. The components of the Company’s income tax expense (benefit) were as follows (in thousands):

Year Ended December 31,

    

2019

    

2018

Current:

 

  

 

  

Federal

$

$

145

Deferred:

 

  

 

  

Federal

 

(24,609)

 

(18,842)

Change in valuation allowance

 

24,609

 

18,842

Income tax benefit

$

$

145

  Year Ended December 31, 
  2019  2018 
Current:        
Federal $  $145 
Deferred:        
Federal  (24,609)  (18,842)
Change in valuation allowance  24,609   18,842 
Income tax benefit $  $145 

The following table provides a reconciliation of income taxes computed at the United States federal statutory tax rate of 21% in 2019 and 2018 to the income tax provision (in thousands):

Year Ended December 31,

 

    

2019

    

2018

 

Loss before income taxes

$

(98,895)

$

(55,658)

United States statutory income tax rate

 

21

%  

 

21

%

Income tax (benefit) at United States statutory income tax rate

$

(20,768)

$

(11,688)

Change in valuation allowance

 

24,609

 

18,842

Return to provision adjustment

 

(2,624)

 

(7,029)

Tax rate changes

 

(1,028)

 

State tax benefit

 

(195)

 

Other

 

6

 

20

Income tax benefit

$

$

145

  Year Ended December 31, 
  2019  2018 
Loss before income taxes $(98,895) $(55,658)
United States statutory income tax rate  21%  21%
Income tax (benefit) at United States statutory income tax rate $(20,768) $(11,688)
Change in valuation allowance  24,609   18,842 
Return to provision adjustment  (2,624)  (7,029)
Tax rate changes  (1,028)   
State tax benefit  (195)   
Other  6   20 
Income tax benefit $  $145 

For the year ended December 31, 2019, the effective tax rate was driven by an increase in the valuation allowance of $24.6 million that was partially offset by adjustments related to the apportionment of taxable loss to the state of Colorado. The apportionment of taxable loss caused return to provision adjustments of$2.6of $2.6 million, rate change adjustments of $1.0 million and state tax benefits of $0.2 million.

For the year ended December 31, 2018, the effective tax rate was driven by return to provision adjustments of $7.0 million. The largest adjustment was related to the deferred tax asset for reorganization costs, which was not previously recorded. Additionally, the income tax receivable that was recorded during the year ended December 31, 2017 was eliminated during 2018 as a result of attribute reduction, which caused an income tax expense of $0.1 million for the year ended December 31, 2018.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

The components of the Company’s deferred tax assets are as follows (in thousands):

December 31,

    

2019

    

2018

Net operating loss

$

146,382

$

126,143

Plant, equipment, and mine development

 

60,840

 

65,760

Interest expense carryforward

 

24,369

 

10,590

Inventories

 

12,289

 

17,163

Reorganization costs

 

7,701

 

7,437

Assets held-for-sale

 

3,149

 

3,106

Asset retirement obligation

 

927

 

1,225

Other liabilities

 

609

 

490

Stock-based compensation

 

257

 

Credits and other

 

(6)

 

(6)

Valuation allowance

 

(256,517)

 

(231,908)

Total net deferred tax assets

$

$

  December 31, 
  2019  2018 
Net operating loss $146,382  $126,143 
Plant, equipment, and mine development  60,840   65,760 
Interest expense carryforward  24,369   10,590 
Inventories  12,289   17,163 
Reorganization costs  7,701   7,437 
Assets held-for-sale  3,149   3,106 
Asset retirement obligation  927   1,225 
Other liabilities  609   490 
Stock-based compensation  257    
Credits and other  (6)  (6)
Valuation allowance  (256,517)  (231,908)
Total net deferred tax assets $  $ 

Based on the weight of evidence available as of both December 31, 2019, and 2018, which included recent operating results, future projections, and historical inability to generate operating cash flow, the Company concluded that it was more likely than not

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

that the benefit of its net deferred tax assets would not be realized and, as such, recorded a full valuation allowance of $256.5 million and $231.9 million, respectively, against its net deferred tax assets.

The Company had net operating loss carryovers as of December 31, 2019 of $683.7 million for federal income tax and financial statement purposes. The Company also had net operating loss carryovers as of December 31, 2019 of $76.3 million for state income tax and financial statement purposes. Historical differences between the federal income tax purposes and financial statement purposes amounts were eliminated through fresh start accounting. Substantially all of the Company’s net operating loss carryovers expire in years 2036 through 2039. Additional analysis of the Internal Revenue Code (“IRC”) section 382 limitations will be done upon the release of the valuation allowance and could result in a change to the value of the

net operating losses.

The Company believes that the benefits of uncertain tax positions recorded in the calculation of the current year income tax benefit and on prior year tax returns did not exceed benefits calculated using the more likely than not threshold. As a result, the Company has not recorded any income tax reserves or related interest or penalties for the year ended December 31, 2019. With limited exception, the Company is no longer subject to U.S. federal income tax audits by taxing authorities for tax years 2015 and prior; however, net operating loss and credit carryforwards from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

15.15.  Earnings (Loss) Per Share

The table below shows our basic and diluted earnings (loss) per share calculations (in thousands, except share and per share amounts):

Year Ended December 31,

    

2019

    

2018

Net loss

$

(98,895)

$

(55,803)

Weighted average shares outstanding

 

  

 

  

Basic

 

2,739,505

 

2,645,194

Diluted

 

2,739,505

 

2,645,194

Basic earnings per common share

$

(36.10)

$

(21.10)

Diluted earnings per common share

$

(36.10)

$

(21.10)

  Year Ended December 31, 
  2019  2018 
Net loss $(98,895) $(55,803)
Weighted average shares outstanding        
Basic  2,739,505   2,645,194 
Diluted  2,739,505   2,645,194 
Basic earnings per common share $(36.10) $(21.10)
Diluted earnings per common share $(36.10) $(21.10)

There was no dilutive effect of common stock equivalents for the twelve months ended December 31,2019 or 2018 because the effect of their inclusion would have been anti-dilutive.

There was no dilutive effect of common stock equivalents for the years ended December 31, 2019 and 2018 because the effect of their inclusion would have been anti-dilutive. Using the treasury stock method, the weighted-average common stock equivalents excluded from diluted EPS were 152.2 million shares and 131.5 million shares for the years ended December 31, 2019 and 2018, respectively. The restricted stock units are not included in the common stock equivalents because the number of shares used to settle them in not known.

16.16.  Fair Value Measurements

Recurring fair value measurements

The following table sets forth by level within the fair value hierarchy, the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands).

December 31,

    

Hierarchy Level

    

2019

    

2018

Liabilities

 

  

 

  

 

  

Accrued compensation for phantom shares

 

3

$

1,590

$

884

Derivative instruments:

 

  

 

  

 

  

Warrant liability – Note 11

 

2

$

18

$

18

  

Hierarchy

  December 31, 
  Level  2019  2018 
Liabilities           
Accrued compensation for phantom shares 3  $1,590  $884 
Derivative instruments:           
Warrant liability – Note 11 2  $18  $18 

Accrued compensation

During each of the years ended December 31, 2019 and 2018, non-executive members of the Company’s board of directors were granted a total of 315,000 phantom shares of stock, which vested upon grant, pursuant to a Non-Employee Director Phantom Stock

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Plan. Under the grant agreements, the phantom shares entitle the participant to a cash payment equal to the greater of the (1) grant date fair value and (2) the fair market value of one share of common stock of the Company at the date of payment. The cash payments are to be made to a participant upon the first of the following to occur: (i) retirement from the Board; (ii) resignation from the Board; (iii) failure to stand for re-election as a non-employee director of the Board; (iv) removal from the board for reasons other than cause; (v) death of the participant; or (vi) a change of control.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

During 2017, the grant agreements with one of the non-executive members of the board of directors were amended to provide for the participant to receive one share of common stock of the Company for each phantom share at the date of payment instead of a cash payment. The non-executive member of the board of directors received 90,000 shares of the common stock of the Company upon resigning in January 2018.

During 2019 and 2018, the Company performed fair value analyses of the phantom shares. A valuation of the Company based on negotiated financing arrangements with several unrelated parties was used to determine the value at both December 31, 2019 and December 31, 2018. The phantom shares issued during 2018 and 2019 were recorded at the grant date fair value and, pursuant to the grant agreements, cannot be written-down below the grant date fair value. During 2019, the fair market value of the 2015 and 2016 phantom shares issuances were increased by $0.2 million, which was recorded to General and administrative on the consolidated statements of operations. During 2018, the fair market value of the 2015 and 2016 phantom shares issuances were decreased by $0.4 million, which was recorded to General and administrative on the consolidated statements of operations.

The fair market value at date of grant of the phantom shares was based upon the valuation of the Company determined in the bankruptcy process. The liability will be marked-to-market on a recurring basis using a quoted price if the Company’s common stock is actively traded on a national securities market exchange or in the over the counter market. Since the common stock is not quoted, a reasonable valuation method in accordance with treasury regulations was used.

Derivative instruments

The fair values (as prescribed by GAAP) of the warrants, the Company’s only derivative instrument, were computed by independent third-party consultants (and validated by the Company) using models that require a variety of inputs, including contractual terms, market prices, exercise prices, and correlations of such inputs. In general, model inputs that are significant to the fair value measurements of the Company’s derivative instruments trade in active markets or are observable in markets that are not active, and, as such, derivative instruments are classified within Level 2 of the fair value hierarchy.

The fair value of the Company’s warrant liability as of December 31, 2019 and 2018, for the warrants issued at the Effective Date, was determined using a Monte Carlo simulation-based valuation model. The warrants have a seven-year term and an initial exercise price of $8.40 per share. The assumptions used include a risk-free interest rate of 1.74%, an expected volatility of 70%, and a dividend rate of 0%.

Items disclosed at fair value

The carrying amount and fair value of the debt as of December 31, 2019 and 2018 are disclosed in the following table (in thousands):

December 31, 2019

December 31, 2018

    

Carrying

    

    

Carrying

    

Amount

Fair Value

Amount

Fair Value

Total current and non-current debt

$

553,965

$

471,890

$

427,587

$

350,000

  December 31, 2019  December 31, 2018
  Carrying
Amount
  Fair Value  Carrying
Amount
  Fair Value
Total current and non-current debt $553,965  $471,890  $427,587  $350,000

As of December 31, 2019 and 2018, the fair value of the Company’s debt was determined using level 3 inputs and the phantom shares were marked to market based on level 3 inputs. There were no changes to the Company’s valuation techniques, and no transfers in or out of Levels 1, 2, or 3.

During 2018, the Company considered various financing alternatives to finance the restart of the Hycroft Mine. In considering the financing alternatives the Company determined that as of December 31,2018 the fair value of the debt no longer approximated the carrying value. The Company determined the fair value of the debt at December 31, 2019 and 2018 using potential financing options that have been presented to the Company, which are considered level 3 inputs.

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

17.

17.  Supplemental Cash Flow Information

The following table provides supplemental cash flow information (in thousands):

Year Ended December 31,

    

2019

    

2018

Cash paid for interest

$

10,239

$

9,409

Significant non-cash financing and investing activities:

 

  

 

  

Increase in Second Lien convertible notes from in-kind interest

$

28,537

$

24,869

Increase in 1.5 Lien Notes from in-kind interest

$

18,780

$

14,023

Increase in 1.25 Lien Notes from in-kind interest

$

5,212

$

Increase in the Promissory Note from in-kind interest

$

785

$

117

Accrual of deferred future financing costs

$

1,029

$

1,025

Plant and equipment additions

$

2,458

$

  Year Ended December 31, 
  2019  2018 
Cash paid for interest  $10,239  $9,409 
Significant non-cash financing and investing activities:        
Increase in Second Lien convertible notes from in-kind interest $28,537  $24,869 
Increase in 1.5 Lien Notes from in-kind interest $18,780  $14,023 
Increase in 1.25 Lien Notes from in-kind interest $5,212  $ 
Increase in the Promissory Note from in-kind interest $785  $117 
Accrual of deferred future financing costs $1,029  $1,025 
Plant and equipment additions $2,458  $ 

18.

18.  Employee Benefit Plans

401(k) Plan

The Hycroft Mining Corporation 401(k) Plan (the “401(k) Plan”) is a defined contribution plan that is available to all employees of the Company upon their date of hire and is sponsored by the Company. The 401(k) Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, and Section 401(k) of the IRC. Administrative fees of the 401(k) Plan are paid by the Company.

Participants in the 401(k) Plan exercise control and direct the investment of their contributions and account balances among various investment alternatives. The Company matches a percentage of employee deferrals to the 401(k) Plan up to certain limits. For the year ended December 31, 2019 and 2018, the Company’s matching contributions totaled $0.5 million and $0.2 million, respectively.

19.19.  Commitments and Contingencies

From time to time, the Company is involved in various legal actions related to its business, some of which are class actions lawsuits. Management does not believe, based on currently available information,that contingencies related to any pending or threatened legal matter will have a material adverse effect on the Company’s Consolidated Financial Statements, although a contingency could be material to the Company’s results of operations or cash flows for a particular period depending on the results of operations and cash flows for such period. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

Financial commitments not recorded in the Consolidated Financial Statements

Net profit royalty

A portion of the Hycroft Mine is subject to a mining lease that requires a 4% net profit royalty be paid to the owner of certain patented and unpatented mining claims. The mining lease also requires an annual advance payment of $120,000 every year mining occurs on the leased claims. All advance annual payments are credited against the future payments due under the 4% net profit royalty. The total payments due under the mining lease are capped at $7.6 million, of which the Company has paid $2.5 million through December 31,2019.

Transaction bonus plan

The Company has entered into a bonus plan whereby, upon the consummation of a sale transaction or certain other transformative transactions as defined in the plan, the Company will be obligated to pay certain senior level employees a total of $5.8 million to $7.3 million, depending on the value of the transaction.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

20.20.  Related Party Transactions

As disclosed in Note 9 — Debt, the Company has issued numerous tranches of debt since emerging from bankruptcy primarily to five financial institutions. These financial institutions, Aristeia Capital LLC (“Aristeia”), Highbridge Capital Management, LLC (“Highbridge”), Mudrick Capital Management, L.P (“Mudrick”) Whitebox Advisors, LLC (“Whitebox”) and Wolverine Asset

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Management, LLC (“Wolverine”), each hold beneficial ownership (assuming conversion of the Convertible Notes) of 5% or more of the Company’s common stock. Additionally, Highbridge, Mudrick and Whitebox, as long as they remain holders of 10% or more of the Company’s common stock, have the right to nominate and designate one director pursuant to the Company’s stockholder agreement. As a result of their owning 5% or more of the Company’s common stock, Aristeia, Highbridge, Mudrick, Whitebox, and Wolverine are each considered a related party (the “Related Parties”) in accordance with ASC 850, Related Party Disclosures.

The following table provides the recorded interest expense by Related Party (in thousands):

Year Ended December 31,

    

2019

    

2018

Aristeia

$

5,993

$

4,394

Highbridge

 

9,325

 

6,934

Mudrick

 

23,743

 

17,766

Whitebox

15,607

 

11,444

Wolverine

 

2,906

 

2,130

Total related party interest expense

$

57,574

$

42,668

  Year Ended December 31, 
  2019  2018 
Aristeia $5,993  $4,394 
Highbridge  9,325   6,934 
Mudrick  23,743   17,766 
Whitebox  15,607   11,444 
Wolverine  2,906   2,130 
Total related party interest expense $57,574  $42,668 

The following table provides debt balances by Related Party (in thousands):

December 31,

    

2019

    

2018

Aristeia

$

50,905

$

35,939

Highbridge

 

80,930

 

58,709

Mudrick

 

208,078

 

152,757

Whitebox

 

132,559

 

93,583

Wolverine

 

24,683

 

23,998

Total related party debt

$

497,155

$

364,986

  December 31, 
  2019  2018 
Aristeia $50,905  $35,939 
Highbridge  80,930   58,709 
Mudrick  208,078   152,757 
Whitebox  132,559   93,583 
Wolverine  24,683   23,998 
Total related party debt $497,155  $364,986 

21.  Subsequent Events

Issuance of Additional 1.25 Lien Notes

On January 17, 2020 and February 7, 2020 additional 1.25 Lien Notes of $5.0 million and $10.0 million, respectively, were issued. The 1.25 Lien Notes issued in January and February have the same terms and security priority as the original issuance of 1.25 Lien Notes in February 2019.

Extension of First Lien Agreement

On January 31, 2020, the First Lien Agreement maturity was extended to May 31, 2020, as stated in Note 9 — Debt.

Purchase Agreement Signed

On January 13, 2020, — Mudrick Capital Acquisition Corporation (“MUDS”), a publicly traded blank check company, and Hycroft entered into a definitive purchase agreement (the “Purchase Agreement”), under which Hycroft will sell substantially all of its assets to MUDS, and MUDS will discharge and pay or assume certain of Hycroft’s liabilities. Following the closing of the transaction, Hycroft will be listed on the Nasdaq Stock Exchange under the ticker symbol “HYMC”.


HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

Pursuant to the terms of the transaction MUDS will have at least $50.0 million of unrestricted and available cash on hand at closing. Cash sources for the transaction include (a)(A) a $110.0 million multi- tranche credit agreement arranged by Sprott Resource Lending Corp. (the “Sprott Credit Agreement”), of which $70.0 million is expected to be drawn at closing, (b)(B) a $30.0 million 1.5% net smelter royalty agreement arranged by Sprott Resource Lending Corp. and (c)(C) consummation of the $25 million forward purchase of MUDS units and shares by Mudrick Capital Acquisition Holdings LLC, (d) a $65 million backstop agreement to purchase MUDS shares by certain existing stockholders of Hycroft and (e) the net cash remaining in MUDS’ trust account following any stockholder redemptions.

MUDS post-transaction indebtedness will include amounts drawn from the Sprott Credit Agreement plus newly issued subordinated notes not to exceed $80.0 million. All other indebtedness of Hycroft will be retired, exchanged for MUDS shares, converted into Hycroft shares or assumed by MUDS in the transaction.

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HYCROFT MINING CORPORATION

Notes to Consolidated Financial Statements

The transaction will be funded through a combination of stock consideration payable to Hycroft (which Hycroft will promptly distribute to is stockholders), cash and stock to repay certain Hycroft indebtedness and the assumption of certain Hycroft obligations. The boards of directors of MUDS and Hycroft have approved the transaction and recommend that their respective stockholders approve the transaction. Stockholders of Hycroft holding a majority of the outstanding stock of Hycroft have agreed to support approval of the transaction at any meeting of Hycroft stockholders, subject to customary exceptions.

Completion of the proposed transaction, which is expected in the first half of 2020, is subject to customary and other closing conditions, including regulatory approvals and receipt of approvals from MUDS and Hycroft stockholders.

On February 7, 2020, the Company became aware that a purported class action complaint was filed by Travus Pope, a purported holder of Company warrants, in the Court of Chancery of the State of Delaware against the Company and Mudrick Capital Acquisition Corporation (“MUDS”). As filed, the complaint seeks a declaratory judgment that the transactions contemplated under the Purchase Agreement constitute a “Fundamental Change” under the terms of that certain Warrant Agreement dated as of October 22, 2015 and thereby require that the warrants issued thereunder be assumed by MUDS as part of the transactions, in addition to asserting claims for (i) breach or anticipatory breach of contract against the Company, (ii) breach or anticipatory breach of the implied covenant of good faith and fair dealing against the Company, and (iii) tortious interference with contractual relations against MUDS. The complaint seeks unspecified money damages and also seeks an injunction enjoining the Company and MUDS from consummating the transactions.

Other

The Company has evaluated all subsequent events through February, 21, 2020, which is the date these Consolidated Financial Statements were available to be issued. There were no additional material subsequent events that required recognition or additional disclosure in these Consolidated Financial Statements.


HYCROFT MINING CORPORATION

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Table of Contents

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except per share amounts)

  March 31,  December 31, 
  2020  2019 
  (unaudited)    
Assets:        
Cash $6,566  $6,220 
Restricted cash - Note 5  2,929   3,270 
Accounts receivable  851   97 
Inventories - Note 3  4,989   4,453 
Ore on leach pads - Note 3  26,122   22,062 
Prepaids and other - Note 4  4,131   2,648 
Current assets  45,588   38,750 
Restricted cash - Note 5  39,595   39,477 
Plant, equipment and mine development, net - Note 6  51,573   51,207 
Other assets, non-current - Note 4  7,551   5,203 
Total assets $144,307  $134,637 
         
Liabilities:        
Accounts payable $13,086  $10,746 
Interest payable  371   846 
Other liabilities, current - Note 7  4,858   3,939 
Debt, current - net - Notes 8 and 18  595,376   553,965 
Current liabilities  613,691   569,496 
Other liabilities, non-current - Note 7  18   18 
Asset retirement obligation, non-current - Note 9  4,467   4,374 
Total liabilities  618,176   573,888 
Commitments and contingencies - Note 17        
Stockholders' (Deficit) Equity: - Note 10        
Common stock, $0.001 par value; 400,000,000 shares authorized for both periods;        
3,095,650 and 3,095,650 issued; and 2,897,568 and 2,897,568 outstanding at        
March 31, 2020 and December 31, 2019, respectively  3   3 
Additional paid-in capital  5,184   5,184 
Accumulated deficit  (479,056)  (444,438)
Total stockholders' (deficit) equity  (473,869)  (439,251)
Total liabilities and stockholders' (deficit) equity $144,307  $134,637 

The accompanying notes are an integral part of these statements.


HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, unaudited)

  Three months ended March 31, 
  2020  2019 
Revenues - Note 11 $11,124  $- 
Cost of sales:        
Production costs  15,569   - 
Depreciation and amortization  1,334   - 
Write-down of production inventories - Note 3  6,965   - 
Total cost of sales  23,868   - 
Operating expenses:        
Care and maintenance  -   3,770 
Project and development  -   2,216 
Pre-production depreciation and amortization  -   827 
Accretion - Note 9  93   106 
General and administrative  2,006   1,947 
Loss from operations  (14,843)  (8,866)
Other income (expense):        
Interest expense, net of capitalized interest of $44 and $145, respectively - Note 8  (19,887)  (14,398)
Interest income  112   116 
Loss before reorganization items, net and income taxes  (34,618)  (23,148)
Reorganization items, net  -   (292)
Loss before income taxes  (34,618)  (23,440)
Income tax - Note 13  -   - 
Net loss $(34,618) $(23,440)
         
Loss per share:        
Basic - Note 14 $(11.95) $(8.77)
Diluted - Note 14 $(11.95) $(8.77)
Weighted average shares outstanding:        
Basic - Note 14  2,897,568   2,672,502 
Diluted - Note 14  2,897,568   2,672,502 
         

The accompanying notes are an integral part of these statements.


HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands, unaudited)

  Three months ended March 31, 
  2020  2019 
Cash flows from operating activities:        
Net loss $(34,618) $(23,440)
Adjustments to reconcile net loss for the period to net cash used in operating activities:        
Depreciation and amortization  1,334   827 
Accretion  93   106 
Stock-based compensation - Note 12  365   161 
Phantom share compensation  263   525 
Non-cash portion of interest expense  17,020   11,884 
Write-down of production inventories  6,965   - 
Changes in operating assets and liabilities:        
Accounts receivable  (754)  - 
Materials and supplies inventories  (332)  (209)
Production-related inventories  (10,393)  - 
Prepaids and other  (1,484)  12 
Other assets, non-current  (120)  - 
Accounts payable  2,409   1,594 
Interest payable  (447)  (434)
Other liabilities  254   (99)
Net cash used in operating activities  (19,445)  (9,073)
Cash flows used in investing activities:        
Additions to plant and equipment  (2,090)  (4,498)
Net cash used in investing activities  (2,090)  (4,498)
Cash flows from financing activities:        
Proceeds from debt issuances, net  24,900   17,957 
Refinancing of First Lien  (632)  (702)
Refinancing issuance costs  (2,610)  (101)
Net cash provided by financing activities  21,658   17,154 
Net increase in cash  123   3,583 
Cash, beginning of period  48,967   52,861 
Cash, end of period $49,090  $56,444 
         
Reconciliation of cash, cash equivalents and restricted cash:        
Cash $6,566  $15,025 
Restricted cash - current  2,929   2,611 
Restricted cash - non-current  39,595   38,808 
Total cash, cash equivalents and restricted cash $49,090  $56,444 

The accompanying notes are an integral part of these statements.


HYCROFT MINING CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(U.S. dollars in thousands, except share amounts, unaudited)

                    Total 
              Additional     Stockholders’ 
  Common Stock  Treasury Stock  Paid-in  Accumulated  (Deficit) 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance at January 1, 2019  2,758,689  $3   160,654  $-  $5,184  $(345,543) $(340,356)
Net loss  -   -   -   -   -   (23,440)  (23,440)
Shares issued (1)  90,560   -   -   -   -   -   - 
Balance at March 31, 2019  2,849,249  $3   160,654  $-  $5,184  $(368,983) $(363,796)
                             

                    Total 
              Additional     Stockholders' 
  Common Stock  Treasury Stock  Paid-in  Accumulated  (Deficit) 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance at January 1, 2020  3,095,650  $3   198,082  $-  $5,184  $(444,438) $(439,251)
Net loss  -   -   -   -   -   (34,618)  (34,618)
Balance at March 31, 2020  3,095,650  $3   198,082  $-  $5,184  $(479,056) $(473,869)

(1)Shares issued during the three months ended March 31, 2019 were related to settling the remaining bankruptcy claims.

The accompanying notes are an integral part of these statements.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

1. Company Overview

Hycroft Mining Corporation (formerly known as Allied Nevada Gold Corp.) and its subsidiaries (collectively, “Hycroft”, the “Company”, “we”, “us”, “our”, etc.) is a U.S.-based gold producer that is focused on mining, developing, and exploring properties in the state of Nevada in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales represent 100% of the Company’s operating revenues and, when operating, the market prices of gold and silver significantly impact the Company’s financial position, operating results, and cash flows. The Hycroft Mine is located in the state of Nevada and the corporate office is located in Denver, Colorado.

On January 13, 2020, – Mudrick Capital Acquisition Corporation (“MUDS”), a publicly traded blank check company, and Hycroft entered into a definitive purchase agreement under which Hycroft will sell substantially all of its assets to MUDS, and MUDS will discharge and pay or assume certain of Hycroft’s liabilities (the “MUDS transaction”) and amended on February 26, 2020 (as amended, the “Purchase Agreement”). Following the closing of the MUDS transaction, MUDS will be renamed as Hycroft Mining Holding Corporation and its shares of common stock will be listed on the Nasdaq Stock Market under the ticker symbol “HYMC”.

Pursuant to the terms of the MUDS transaction, MUDS will have at least $50.0 million of unrestricted and available cash on hand at closing. Cash sources for the MUDS transaction include (a) a $110.0 million multi-tranche credit agreement arranged by Sprott Resource Lending Corp. (the “Sprott Credit Agreement”), of which $70.0 million is expected to be drawn at closing, (b) a $30.0 million 1.5% net smelter royalty agreement arranged by Sprott Resource Lending Corp., (c) consummation of the $25 million forward purchase of MUDS units and shares by Mudrick Capital Acquisition Holdings LLC, (d) a $65 million backstop agreement to purchase MUDS shares by certain existing stockholders of Hycroft, (e) $20 million of incremental private investment, and (f) the net cash remaining in MUDS’ trust account following any stockholder redemptions.

MUDS post-transaction indebtedness will include amounts drawn from the Sprott Credit Agreement plus the assumption of $80.0 million in aggregate principal amount of newly issued subordinated notes. All other indebtedness of Hycroft will be retired, exchanged for MUDS shares, converted into Hycroft shares.

The MUDS transaction will be funded through a combination of stock consideration payable to Hycroft (which Hycroft will promptly distribute to is stockholders), cash and stock to repay certain Hycroft indebtedness and the assumption of certain Hycroft obligations. The MUDS transaction is designed to support the Company’s expansion of mining operations to an economic level and to refinance its existing debt obligations. The boards of directors of MUDS and Hycroft have approved the transaction and recommended that their respective stockholders approve the transaction. Stockholders of Hycroft holding a majority of the outstanding stock of Hycroft have agreed to support approval of the transaction at any meeting of Hycroft stockholders, subject to customary exceptions.

The MUDS transaction was completed on May 29, 2020 upon receiving regulatory approvals and approvals from MUDS and Hycroft stockholders. With the closing of the MUDS transaction, the Company has in excess of $50.0 million of unrestricted cash. Additionally, all existing debt of the Company was retired, exchanged for $80.0 million of new notes which mature on December 1, 2025 and were assumed by MUDS, exchanged for MUDS shares or converted into shares of the Company. For more information on the consummation of the MUDS transaction, see Note 19 – Subsequent Events. Assuming the Company is able to ramp up operations and produce and sell the forecasted volumes, the Company believes it has adequate liquidity to meet its obligations for the next twelve months.

Operational Restart

During the 2019 second quarter, the Company restarted open pit mining at the Hycroft Mine, and, during the 2019 third quarter, produced and sold gold and silver. As part of the 2019 restart of mining operations, existing equipment was re-commissioned, including haul trucks, shovels and a loader, upgrades were made to the crushing system and new leach pad space was added to the existing leach pads. The 2019 restart of mining operations through March 31, 2020 was funded by the issuance of $97.0 million of Senior Secured Notes due June 30, 2020 (the “1.25 Lien Notes”), discussed below.

During August 2019, M3 Engineering and Technology Corp. in association with SRK Consulting US and the Company completed a feasibility study (the “2019 Hycroft Technical Report”). The 2019 Hycroft Technical Report projects the economic viability and potential future cash flows for the Hycroft Mine when mining operations expand.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of the Company have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments and disclosures necessary to fairly present the interim financial information set forth herein have been included.

References to “$” refers to United States currency.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Use of estimates

The preparation of the Company’s Consolidated 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 use of management estimates and assumptions relate to recoverable gold and silver on the leach pads and in-process inventories; the useful lives of long-lived assets; probabilities of future expansion projects; environmental reclamation and closure costs; deferred taxes and related valuation allowances; and estimates of fair value for asset impairments and financial instruments. The Company bases its estimates on historical experience and various 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.

Principles of consolidation

The Consolidated Financial Statements include the accounts of Hycroft Mining Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Cash

Cash and cash equivalents have historically consisted of cash balances and highly liquid investments with an original maturity of three months or less. The Company has not experienced any losses on cash balances and believes that no significant risk of loss exists with respect to its cash. As of March 31, 2020 and December 31, 2019, the Company held no cash equivalents. Restricted cash is excluded from cash and is listed separately on the consolidated balance sheets. See Note 5 – Restricted Cash for additional information.

Ore on leach pads and inventories

The Company’s production-related inventories include: ore on leach pads; in-process inventories; and doré finished goods. Production-related inventories are carried at the lower of average cost or net realizable value. Cost includes mining (ore and waste); processing; refining costs incurred during production stages, and mine site overhead and depreciation and amortization relating to mining and processing operations. Net realizable value represents the estimated future sales price of production-related inventory quantities computed using the London Bullion Market Association’s (“LBMA”) quoted period-end metal prices, less any further estimated processing, refining, and selling costs.

The recovery of gold and silver at the Hycroft Mine is accomplished through a heap leaching process, the nature of which limits the Company’s ability to precisely determine the recoverable gold ounces in ore on leach pads. The Company estimates the quantity of recoverable gold ounces in ore on leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, crushed ore sampling, solution sampling, and estimated recovery percentages based on ore type and domain. The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore gold contents to the actual gold ounces recovered (metallurgical balancing). Changes in recovery rate estimates from metallurgical balancing that do not result in write-downs are accounted for on a prospective basis. If a write-down is required, production-related inventories would be adjusted to net realizable value and recorded as a component of Cost of sales in the consolidated statements of operations. See Note 3 – Inventories for additional information.

Ore on leach pads

Ore on leach pads represents ore that is being treated with a chemical solution to dissolve the contained gold. Costs are added to ore on leach pads based on current mining costs, including applicable depreciation and amortization relating to mining operations. As gold-bearing materials are further processed, costs are transferred from ore on leach pads at an average cost per estimated recoverable ounce of gold to in-process inventories. 


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

In-process inventories

In-process inventories represent gold-bearing concentrated materials that are in the process of being converted to a saleable product using a Merrill-Crowe or carbon in column processing method. As gold ounces are recovered using the Merrill-Crowe process, costs are transferred from in-process inventories at an average cost per ounce of gold to doré finished goods inventory. In-process inventories are valued at the average cost of the material fed into the process, plus the in-process conversion costs, including applicable depreciation and amortization relating to the process facilities incurred to that point in the process.

Precious metals inventory

Precious metals inventory consists of doré containing both gold and silver. While operations are actively producing gold and silver, and as the Company sells its in-process inventories, costs are recognized in Production costs in the consolidated statements of operations at an average cost per gold ounce sold.

Materials and supplies

Materials and supplies are valued at the lower of average cost or net realizable value. Cost includes applicable taxes and freight.

Fair value measurements

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements, defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis;

Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Certain financial instruments, including cash, prepaids and other, accounts payable, and other liabilities are carried at cost, which approximates their fair value due to the short-term nature of these instruments.

Plant, equipment, and mine development

Expenditures for new facilities and equipment, and expenditures that extend the useful lives or increase the capacity of existing facilities or equipment are capitalized and recorded at cost. Such costs are depreciated using either the straight-line method over the estimated productive lives of such assets or using the units-of-production method (when actively operating) at rates sufficient to depreciate such costs over the estimated proven and probable reserves as gold ounces are recovered. See Note 6 – Plant, Equipment, and Mine Development, Net for additional information.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Mine development

Mine development costs include the cost of engineering and metallurgical studies, drilling and assaying costs to delineate an ore body, environmental costs and the building of infrastructure. Additionally, interest is capitalized to mine development until such assets are ready for their intended use. Any of the above costs incurred before mineralization is classified as proven and probable reserves are expensed. During the second half of 2019, the Company established proven and probable mineral reserves.

Drilling, engineering, metallurgical, and other related costs are capitalized for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body, converting non-reserve mineralization to proven and probable mineral reserves, infrastructure planning, or supporting the environmental impact statement. All other drilling costs are expensed as incurred. Drilling costs incurred during the production phase for operational ore control are allocated to inventory costs to be included as a component of Total cost of sales on the consolidated statements of operations.

Mine development costs are amortized using the units-of-production method based upon estimated recoverable ounces in proven and probable mineral reserves. To the extent such capitalized costs benefit an entire ore body, they are amortized over the estimated life of that ore body. Capitalized costs that benefit specific ore blocks or areas are amortized over the estimated life of that specific ore block or area. Recoverable ounces are determined by the Company based upon its proven and probable mineral reserves and estimated metal recoveries associated with those mineral reserves.

Impairment of long-lived assets

The Company’s long-lived assets consist of plant, equipment and mine development. The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that may trigger a test for recoverability include, but are not limited to, significant adverse changes to projected revenues, costs, or future expansion plans or changes to federal and state regulations (with which the Company must comply) that may adversely impact the Company’s current or future operations. An impairment is determined to exist if the total projected future cash flows on an undiscounted basis are less than the carrying amount of a long-lived asset group. An impairment loss is measured and recorded based on the excess carrying value of the impaired long-lived asset group over fair value.

To determine fair value, the Company uses a discounted cash flow model based on quantities of estimated recoverable minerals and incorporates projections and probabilities involving metal prices (considering current and historical prices, price trends, and related factors), production levels, operating and production costs, and the timing and capital costs of expansion and sustaining projects, all of which are based on life-of-mine plans. The term “recoverable minerals” refers to the estimated amount of gold and silver that will be sold after taking into account losses during ore processing and treatment. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimates of future cash flows are based on numerous assumptions, which are consistent or reasonable in relation to internal budgets and projections, and actual future cash flows may be significantly different than the estimates, as actual future quantities of recoverable gold and silver, metal prices, operating and production costs, and the timing and capital costs of expansion and sustaining projects are each subject to significant risks and uncertainties. See Note 6 – Plant, Equipment, and Mine Development, Net for additional information.

Mineral properties

Mineral properties are tangible assets recorded at cost and include royalty interests, asset retirement costs, and land and mineral rights to explore and extract minerals from properties. Once a property is in the production phase, mineral property costs are amortized using the units-of-production method based upon the estimated recoverable gold ounces in proven and probable reserves at such properties. Costs to maintain mineral properties are expensed in the period they are incurred. As of March 31, 2020 and December 31, 2019, there was no value assigned to mineral properties as the value had been written-down to $0 in previous periods.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Asset retirement obligation

The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. The Company’s asset retirement obligation (“ARO”), consisting of estimated future mine reclamation and closure costs, may increase or decrease significantly in the future as a result of changes in regulations, mine plans, estimates, or other factors. The Company’s ARO relates to its operating property, the Hycroft Mine, and was recognized as a liability at fair value in the period incurred. An ARO, which is initially estimated based on discounted cash flow estimates, is accreted to full value over time through charges to Accretion expense in the consolidated statements of operations. Resultant ARO cost assets (recorded in Mineral properties, net on the consolidated balance sheets) are depreciated on a straight-line method over the related long-lived asset’s useful life. The Company’s ARO is adjusted annually, or more frequently if necessary, to reflect changes in the estimated present value resulting from revisions to the timing or amount of reclamation and closure costs.

Derivative instruments

The fair value of the Company’s derivative instruments is reflected as liabilities on the consolidated balance sheets. The Company does not hold derivative instruments for trading purposes.

Derivative Instruments Not Designated as Hedges

Previous equity stockholders of the Company received warrants with a seven-year term that represent 17.5% of the outstanding new common shares. These warrants were accounted for as a derivative instrument and included in Other liabilities, non-current on the consolidated balance sheets at fair value with periodic changes in fair value included in Other, net in the consolidated statements of operations. During the three months ended March 31, 2020 and 2019 there were no adjustments recorded as a result of no change in the fair value.

See Note 10 - Stockholders' Equity and Note 15 – Fair Value Measurements for additional information on the Company’s derivative instruments.

Treasury Stock

The Company records repurchases of common shares as Treasury stock at cost.

Revenue recognition

When actively operating, the Company recognizes revenue on gold and silver sales. During the year ended December 31, 2019, the Company began actively operating the Hycroft Mine and, as such, gold and silver sales in 2020 and 2019 were recorded as Revenue. For the three months ended March 31, 2020, 93% of the Company’s gold and silver sales were attributable to gold sales. There were no gold or silver sales during the three months ended March 31, 2019.

The Company recognizes revenue for gold and silver production when it satisfies the performance obligation of transferring gold inventory to the customer, which generally occurs when the refiner notifies the customer that gold has been credited or irrevocably pledged to their account at which point the customer obtains the ability to direct the use and obtain substantially all of the remaining benefits of ownership of the asset. The transaction amount is determined based on the agreed upon market price and the number of ounces delivered. Concurrently, the payment date is agreed upon, which is usually within one week. All sales are final.

Stock-Based Compensation

Stock-based compensation costs for eligible employees are measured at fair value on the date of grant and charged to expense over the requisite service period. The fair value of awards is determined using the stock price on either the date of grant (if subject only to service conditions) or the date that the Compensation Committee of the Board of Directors establishes applicable performance targets (if subject to performance conditions). The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods through the final vesting date. See Note 12 - Stock-Based Compensation for additional information.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Phantom shares

Non-employee members of the Company’s board of directors receive phantom shares of stock pursuant to a Non-Employee Director Phantom Stock Plan. For grants issued during the years ended 2015 and 2016, the cash payment is equal to the fair market value of one share of common stock of the Company at the date of payment. Under the grant agreements, each phantom share vests on the date of grant and entitles the participant to a cash payment. For grants issued during 2020, 2019 and 2018, the cash payment is equal to the greater of the (1) grant date value and (2) the fair market value of one share of common stock of the Company at the date of payment. The fair market value at date of grant of the phantom shares was based upon the valuation of the Company determined in the bankruptcy process. During the three months ended March 31, 2020 and 2019, the Company recorded $0.3 million and $0.5 million, respectively, in compensation expense related to the vesting of the phantom shares granted during each respective period, which are included in General and administrative on the consolidated statements of operations. See Note 15 – Fair Value Measurements for additional information.

Reorganization items, net

On March 10, 2015, the Company filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) in an effort to recapitalize the Company’s balance sheet by reducing its debt balances while concurrently providing additional liquidity. Expenses directly associated with finalizing the Chapter 11 cases before the Bankruptcy Court are reported as Reorganization items, net in the consolidated statements of operations. The Company incurred legal and professional fees of $0 and $0.3 million for the three months ended March 31, 2020 and 2019, respectively. On October 3, 2019, the Bankruptcy Court finalized the proceedings and closed the case.

Income taxes

The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect at the anticipated time of reversal. The Company derives its deferred income tax provision or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. See Note 13 – Income Taxes for additional information.

The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. Evidence evaluated includes past operating results, forecasted earnings, estimated future taxable income, and prudent and feasible tax planning strategies. The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates used to manage the underlying business.

As necessary, the Company also provides reserves against the benefits of uncertain tax positions taken on its tax filings. The necessity for and amount of a reserve is established by determining, based on the weight of available evidence, the amount of benefit which is more likely than not to be sustained upon audit 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 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.

Recently issued accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes current revenue recognition requirements and industry-specific guidance. The codification was amended through additional ASUs and, as amended, requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company’s only revenue stream is from the sale of precious metals, which is scoped into ASU 2014-09.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

The Company adopted ASU 2014-09 on January 1, 2019 using a modified retrospective approach. As there were no unfulfilled contracts outstanding as of December 31, 2018, there was no cumulative effect adjustment required to be recognized at January 1, 2019.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2020, including interim periods within the year. A modified retrospective transition approach is required to either the beginning of the earliest period presented or the beginning of the year of adoption. The Company is evaluating the potential impact on its Consolidated Financial Statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires companies to include restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 was adopted on January 1, 2019 on a retrospective basis. The adoption of ASU 2016-18 did not have a material impact on our statements of cash flows for the periods presented.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”), which amends the disclosure requirements for fair value measurements in Topic 820 based on the considerations of costs and benefits. Under ASU 2018-13, certain disclosures were eliminated, while others were modified and there were some additions. The Company adopted ASU 2018-13 on January 1, 2020, but it did not affect the financial statement disclosures.

3. Inventories

The following table provides the components of inventories and the estimated recoverable gold ounces therein (in thousands, except ounces):

  March 31, 2020  December 31, 2019 
  Amount  Gold Ounces  Amount  Gold Ounces 
Materials and supplies $2,891   -  $2,559   - 
Merrill-Crowe in process  679   536   1,004   691 
Carbon column in-process  478   474   478   474 
Doré finished goods  941   594   412   278 
Total $4,989   1,604  $4,453   1,443 

As of both March 31, 2020 and December 31, 2019, in-process Inventories included $0.1 million of capitalized depreciation and amortization costs.

The following table summarizes ore on leach pads and the estimated recoverable gold ounces therein (in thousands, except ounces):

  March 31, 2020  December 31, 2019 
  Amount  Gold Ounces  Amount  Gold Ounces 
Ore on leach pads $26,122   18,921  $22,062   17,019 

As of March 31, 2020 and December 31, 2019 (including write-downs discussed below), Ore on leach pads included $2.0 million and $1.8 million, respectively, of capitalized depreciation and amortization costs.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Write-down of production inventories

The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore gold contents to the actual gold ounces recovered (metallurgical balancing). During the three months ended March 31, 2020, based on metallurgical balancing results, the Company determined that 3,980 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result of the write-off the Company recognized a Write-down of production inventories on the consolidated statements of operations, which included production costs of $6.4 million and capitalized depreciation and amortization costs of $0.5 million. The write-off of these ounces was primarily due to poor execution of maintaining the critical variables necessary for oxidation and ultimately recovery of a specific cell of the leach pads. As a result, the Company determined that we would recover 20% less than planned of the mismanaged section of the leach pads.

4. Prepaids and Other Assets

The following table provides the components of prepaids and other assets (in thousands):

  March 31,  December 31, 
  2020  2019 
Prepaids and other        
Prepaids $3,592  $2,109 
Deposits  539   539 
Total $4,131  $2,648 
         
Other assets, non-current        
Deferred future financing costs $7,311  $5,083 
Royalty - advance payment  240   120 
Total $7,551  $5,203 

5. Restricted Cash

The following table provides the components of restricted cash (in thousands):

  March 31,  December 31, 
  2020  2019 
First Lien agreement restricted cash - Note 8 $2,929  $3,270 
Asset retirement obligation surety bonds (collateralized obligation)  39,595   39,477 
Total $42,524  $42,747 


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

6. Plant, Equipment, and Mine Development, Net

The following table provides the components of plant, equipment, and mine development, net (in thousands):

  Depreciation Life March 31,  December 31, 
  of Method 2020  2019 
Process equipment 5 - 13 years $15,144  $14,770 
Leach pads Units-of-production  11,190   11,190 
Buildings and leashold improvements 10 years  10,507   10,507 
Restart leach pads 18 months  6,241   6,229 
Mine equipment 5 - 7 years  4,847   4,716 
Vehicles 3 - 5 years  184   136 
Furniture and office equipment 7 years  264   129 
Mine development Units-of-production  476   119 
Construction in progress and other    22,062   20,619 
    $70,915  $68,415 
Less: accumulated depreciation and amortization    (19,342)  (17,208)
Total   $51,573  $51,207 

During the 2020 first quarter, new processing equipment was placed into service, construction of the restart leach pads was completed and various mine development projects were ongoing. During the three months ended March 31, 2020 and 2019, the Company recorded depreciation and amortization related to plant, equipment and mine development of $2.1 million and $0.8 million, respectively. The Company capitalized $2.1 million and $0 of depreciation and amortization during the three months ended March 31, 2020 and 2019, respectively, to Ore on leach pads on the consolidated balance sheets. During the three months ended March 31, 2020, as a result of ounces sold, the Company recognized $1.3 million in depreciation and amortization in the consolidated statements of operations.

7. Other Liabilities

The following table summarizes the components of other liabilities, current and non-current (in thousands):

  March 31,  December 31, 
  2020  2019 
Other liabilities, current        
Accrued compensation for phantom shares - Note 15 $1,853  $1,590 
Other accrued compensation  1,392   1,139 
Restricted stock units - Note 12  1,613   1,210 
Total $4,858  $3,939 
         
Other liabilities, non-current        
Warrant liability - Notes 10 and 15 $18  $18 


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

8. Debt

Debt covenants

The Company’s debt agreements contain representations and warranties, events of default, and covenants that are customary for agreements of these types. The Company’s First Lien Term Loan Credit Agreement (the “First Lien Agreement”) contains financial covenants that, among other things, restrict or limit the ability of the Company to enter into liens, dispose of its assets, enter into hedging arrangements, pay dividends, purchase or redeem shares, incur or guarantee additional indebtedness, and make capital expenditures. The Second Lien Convertible Notes (the “Convertible Notes”), the Secured Notes due June 30, 2020 (the “1.5 Lien Notes”) and the 1.25 Lien Notes contain provisions that, among other things, restrict or limit the ability of the Company to incur or guarantee additional debt, pay dividends, enter into liens, or dispose of its assets.

The Company’s First Lien Agreement, the Convertible Notes, the 1.5 Lien Notes and the 1.25 Lien Notes include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non-compliance with security documents.

As of March 31, 2020, we were in compliance with all covenants related to the debt obligations.

Debt balances

The following table summarizes the components of debt (in thousands):

  March 31,  December 31, 
  2020  2019 
Debt, current:        
Convertible Notes $216,227  $208,411 
1.5 Lien Notes  142,189   137,050 
1.25 Lien Notes  105,593   77,212 
First Lien Agreement  125,468   125,468 
Other note payable  6,858   6,773 
Less, debt issuance costs  (959)  (949)
Total $595,376  $553,965 

First lien term loan agreement

For the period from December 13, 2019 through January 31, 2020 the First Lien Agreement bore interest at either LIBOR plus 7.0% or an Alternate Base Rate Canada, as defined in the First Lien Agreement, plus 7.0% and thereafter increased to either LIBOR plus 7.5% or an Alternate Base Rate Canada plus 7.5%. Prior to December 13, 2019, the First Lien Agreement bore interest at either LIBOR plus 5.5% or an Alternate Base Rate Canada plus 4.5%. Fifty percent of the monthly Excess Cash Flow, as defined in the First Lien Agreement and subject to minimum cash balance restrictions, is required to be paid to reduce the outstanding amount under the First Lien Agreement. The maximum outstanding amount under the First Lien Agreement was initially determined by a Borrowing Base (as defined in the First Lien Agreement) that is based upon 80% of the net realizable value of the gold and silver in the Company’s ore on leach pads, in-process and finished goods inventories less estimated selling and processing costs. The repayment of the First Lien Agreement and other obligations under the First Lien Agreement are guaranteed by all of the direct and indirect domestic subsidiaries of the Company. The First Lien Agreement, the guarantees by the guarantors in respect thereof and all obligations under the First Lien Agreement, and such guarantees are secured by liens on substantially all of the assets of the Company and its subsidiaries. The First Lien Agreement matures on May 31, 2020. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the First Lien Agreement.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

After a series of short-term maturity extensions through July 14, 2017, the Company amended the First Lien Agreement to provide for a maturity of January 31, 2019. After several short-term maturity extensions through February 22, 2019, the First Lien Agreement maturity was extended to December 13, 2019 (the “February 2019 Extension”). The extended amendment requires that the Company will maintain at all times a cash balance of $5.0 million, including a balance in a segregated account sufficient to pay projected First Lien Agreement interest payments for the succeeding three months. In conjunction with the close of the February 2019 Extension, the Company issued $18.0 million of 1.25 Lien Notes (discussed below). Pursuant to the February 2019 Extension, the Company obtained commitments from the holders of the 1.5 Lien Notes to purchase an additional $9.0 million of 1.25 Lien Notes during 2019, which was fulfilled in May 2019. Additionally, pursuant to the February 2019 Extension, the maximum outstanding amount under the First Lien Agreement was no longer determined by the Borrowing Base, however, the Company is to maintain at all times at least 175,000 recoverable gold equivalent ounces on the leach pads. The Company has agreed to certain operational and reporting milestones during the remaining life of the First Lien Agreement. Also, the Company agreed that it will ensure that the holders of the 1.5 Lien Notes or other parties acceptable to the Administrative Agent (as defined in the First Lien Agreement) will reduce the Bank of Nova Scotia’s holdings under the First Lien Agreement by $5.0 million within two banking days of each of June 30, 2019, if a certain milestone is not met, and October 28, 2019. Both buy-down obligations were met by the holders of the 1.5 Lien Notes.

The Company completed two additional maturity amendments in December 2019 and January 2020. The First Lien Agreement now matures May 31, 2020. In connection with these two amendments, the Company has agreed to certain operational and reporting milestones during the remaining life of the First Lien Agreement. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the First Lien Agreement.

Second Lien Convertible Notes

The Convertible Notes mature on October 22, 2020 and bear interest at a rate of 15% per annum, payable in-kind on a quarterly basis. During the three months ended March 31, 2020 and 2019 the Company issued an additional $7.8 million and $6.7 million, respectively, in Convertible Notes, representing interest payments on the outstanding Convertible Notes. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the Convertible Notes.

The Convertible Notes are convertible at an initial conversion price of $1.67 per share, subject to anti-dilution protection. There was no beneficial conversion feature as it was determined that the conversion price was equal to the commitment date value of the common stock. The obligations under the Convertible Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations under the First Lien Agreement, the 1.25 Lien Notes and the 1.5 Lien Notes. In connection with the issuance of the Convertible Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the trustee under the indenture.

1.5 Lien Notes

In May, 2016, the Company issued $10.0 million of the 1.5 Lien Notes, pursuant to a Note Purchase Agreement (the “Note Purchase Agreement”). The 1.5 Lien Notes bear interest at a rate of 15% per annum, which is payable in-kind on a quarterly basis, and mature June 30, 2020. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the 1.5 Lien Notes. The obligations under the 1.5 Lien Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations of the First Lien Agreement and the 1.25 Lien Notes but superior in priority to the liens that secure the obligations of the Convertible Notes and the unsecured obligations of the Company. In connection with the issuance of the 1.5 Lien Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the collateral agent under the Note Purchase Agreement. Additionally, an Intercreditor Agreement was entered into by and among the collateral agent under the Note Purchase Agreement and the trustee under the Indenture.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

During the three months ended March 31, 2020 and 2019 the Company issued an additional $5.1 million and $4.5 million, respectively, in 1.5 Lien Notes, representing interest payments on the outstanding 1.5 Lien Notes. While each 1.5 Lien Notes issuance is pursuant to a new note purchase agreement, all the 1.5 Lien Notes have the same terms and security priority as the original issuance in May 2016.

The 1.5 Lien Notes provide the holders the right upon a change of control, as defined in the Note Purchase Agreement, to require the Company to repurchase all of the holder’s notes for 110% of the outstanding principal balance, plus accrued and unpaid interest. Furthermore, the 1.5 Lien Notes give the Company the right upon a change of control, as defined in the Note Purchase Agreement, to redeem the notes for 110% of the outstanding principal balance, plus accrued and unpaid interest.

1.25 Lien Notes

On February 22, 2019, the Company issued $18.0 million of the 1.25 Lien Notes, pursuant to a Note Purchase Agreement (the “1.25 Note Purchase Agreement”). The 1.25 Lien Notes bear interest at a rate of 15% per annum, which is payable in-kind on a quarterly basis, and mature June 30, 2020. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the 1.25 Lien Notes. The obligations under the 1.25 Lien Notes and the guarantees by the guarantors in respect thereof are secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secure the obligations of the First Lien Agreement but superior in priority to the liens that secure the obligations of the 1.5 Lien Notes, the Convertible Notes and the unsecured obligations of the Company. In connection with the issuance of the 1.25 Lien Notes, an Intercreditor Agreement was entered into by and among the agent under the First Lien Agreement and the collateral agent under the 1.25 Note Purchase Agreement, and an Intercreditor Agreement was entered into by and among the collateral agent under the Note Purchase Agreement and the collateral agent under the 1.25 Note Purchase Agreement. Additionally, an Intercreditor Agreement was entered into by and among the collateral agent under the 1.25 Note Purchase Agreement and the trustee under the Indenture.

Additional 1.25 Lien Notes were issued in 2019 and 2020 pursuant to new note purchase agreements. All of the 1.25 Lien Notes have the same terms and security priority as the original issuance in February 2019. During the three months ended March 31, 2020 a total of a total of $33.4 million of 1.25 Lien Notes were issued, including $3.4 million of interest in-kind notes. During the three months ended March 31, 2019, in addition to the initial issuance of 1.25 Lien Notes, $0.3 million of interest in-kind notes were issued.

Other notes payable

On October 15, 2014, the Company entered into a Release and Settlement Agreement (the “Settlement Agreement”) and a Promissory Note (the “Promissory Note”) resolving and settling any and all disputes between Jacobs Field Services North America and the Company. A First Amendment to the Settlement Agreement was executed on April 5, 2016, a Second Amendment was executed on October 6, 2016, a Third Amendment was executed on December 21, 2017 (the “Third Amendment”), a Fourth Amendment was executed on December 31, 2018 (the “Fourth Amendment”) and a Fifth Amendment was executed on June 27, 2019 (the “Fifth Amendment”). The Fourth Amendment amended the Promissory Note to begin accruing interest January 1, 2019, at the rate of 5% per annum, to be added to the principal of the Promissory Note. Interest for 2018 was prepaid coincident with the execution of the Third Amendment. Pursuant to the Fourth Amendment, a delayed payment fee of 5.5% of the principal balance as of June 30, 2019, including accrued interest, was added to the principal balance of the Promissory Note. The due date of the Promissory Note was extended to December 31, 2019, pursuant to the Fifth Amendment. A Sixth Amendment was executed on December 19, 2019 (the “Sixth Amendment”), which extended the Promissory Note due date to June 30, 2020. See Note 19 – Subsequent Events for information about the impact of the MUDS transaction on the Promissory Note.

On each of December 31, 2019 and 2018, coincident with the execution of the Sixth Amendment and Fourth Amendment, delayed payment fees of 2% of the principal balance at each date, or $0.1 million and $0.1 million, respectively, were added to the principal balance of the Promissory Note.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

During each of the three months ended March 31, 2020 and 2019 the Company recognized $0.1 million of interest-in kind.

Interest expense

The following table summarizes the components of recorded interest expense (in thousands):

  Three months ended March 31, 
  2020  2019 
Second Lien Convertible Notes $7,816  $6,746 
1.5 Lien Notes  5,139   4,433 
1.25 Lien Notes  3,352   278 
First Lien Agreement  2,867   2,511 
Amortization of debt issuance costs  672   499 
Promissory Note  85   76 
Capitalized interest  (44)  (145)
Total interest expense $19,887  $14,398 

We capitalize interest to Property and equipment, net on the consolidated balance sheets for construction projects in accordance with ASC Topic 835, Interest.

9. Asset Retirement Obligation

The following table summarizes changes in the Company’s ARO (in thousands):

   2020   2019 
Balance at January 1, $4,374  $5,832 
Accretion expense  93   106 
Balance at March 31, $4,467  $5,938 

10. Stockholders' Equity

Common stock

In connection with the Company’s emergence from bankruptcy and as detailed in the plan of reorganization, the Company’s then-existing unsecured notes and general unsecured claims were canceled and holders of such claims received equity in the reorganized Company or received cash in amounts negotiated by the major creditor groups. The Company was required to issue 3.0 million new common shares to its creditors, but has not listed the new common shares for public trading and is not a reporting company with the Securities and Exchange Commission (“SEC”). Previous equity stockholders of the Company received warrants with a seven-year term that represent the right to purchase up to 17.5% of the outstanding new common shares.

As of March 31, 2020, all 3.0 million shares had been issued. For additional information see Note 15 – Fair Value Measurements. As of March 31, 2020, the Company had 400.0 million shares of common stock authorized at $.001 par value per share.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Preferred stock

In addition to common stock, the authorized share capital of the Company includes 10,000,000 shares of undesignated preferred stock with a par value of $0.001 per share, none of which has been issued.

Treasury stock

As of March 31, 2020, the Company held 198,082 shares of its common stock outstanding that it had repurchased in previous years.

Dividend policy

The Company has never paid dividends and currently has no intention to do so. The Company’s Convertible Notes, 1.5 Lien Notes, 1.25 Lien Notes and First Lien Agreement contain provisions that restrict its ability to pay dividends. For additional information see Note 8 - Debt.

Warrants

As of March 31, 2020, the Company had previously issued 12.7 million warrants with a seven-year term that represented the right to purchase up to 17.5% of the outstanding common shares on the date of issuance. At issuance, each warrant was exercisable into one share of the Company’s common stock. As the number of shares of common stock issuable upon conversion of the Convertible Notes increased, the conversion ratio of the warrants increased such that the warrants continue to represent the right to purchase up to 17.5% of the shares of common stock outstanding, assuming that all Convertible Notes have been converted to common shares. As of March 31, 2020, each warrant was convertible into 2.21 shares of common stock for a total of 28.2 million shares. The exercise price per share was $5.07 as of March 31, 2020. The warrants were accounted for as a derivative instrument and included in Other liabilities, non-current on the consolidated balance sheets at fair value as of March 31, 2020 and December 31, 2019.

11. Gold and Silver Sales

The table below is a summary of the Company’s gold and silver sales (in thousands, except ounces sold):

  Three months ended March 31, 
  2020  2019 
     Ounces     Ounces 
  Amount  Sold  Amount  Sold 
Gold sales $10,328   6,560  $-   - 
Silver sales  796   49,373           -            - 
Total gold and silver sales $11,124      $-     

For the three months ended March 31, 2020, gold and silver sales of $11.1 million were reported as Revenue as the Hycroft Mine was operating. Nearly all gold and silver sales during 2020 were to the same customer. However, the Company is not obligated to sell all of its gold and silver to one customer.

12. Stock-Based Compensation

The Company has a stock-based compensation plan, the Performance and Incentive Pay Plan (the “PIPP”), to attract, retain and motivate employees while directly linking incentives to increases in stockholder value. Terms and conditions (including performance-based vesting criteria) of awards granted under the PIPP are established by the Board of Directors or the Compensation Committee of the Board of Directors, who administer the plan.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

On February 20, 2019, the Board of Directors of the Company approved the PIPP, which makes available up to 4,277,000 shares of common stock for award. The awards may be granted in a variety of forms, including restricted stock, restricted stock units, stock options, stock appreciation rights, performance awards, and other stock-based awards. As of December 31, 2019, all awards granted under the PIPP were in the form of restricted stock units.

Restricted stock units granted under the PIPP without performance-based vesting criteria typically vest in equal annual installments over two or three years. Awards granted with performance-based vesting criteria typically vest in annual installments over two or three years subject to achievement of certain financial and operating results of the Company.

For the restricted stock units granted in the 2019 first quarter, a price per share was not determined as of the grant date. The number of shares of common stock of the Company to be issued upon vesting will be calculated on the vesting date based on the grant date value. The first tranche of restricted stock units will vest upon the closing of the MUDS transaction, which the Company expects to close during the second quarter of 2020. Restricted stock units set to vest during 2020 are convertible into shares of MUDS common stock as of December 31, 2020, if the MUDS transaction closes. The remainder of the restricted stock units vest through March 2022. The restricted stock units are included in Other liabilities, current on the consolidated balance sheets.

The fair value of restricted stock units is recognized as expense over the vesting period. During the three months ended March 31, 2020 and 2019, the Company recognized $0.4 and $0.2 million, respectively, in stock-based compensation cost related to the issuance of the restricted stock units of which less than $0.1 million was capitalized to ore on leach pads during each period.

13. Income Taxes

For both the three months ended March 31, 2020 and 2019, the Company recorded no income tax benefit or expense as the estimated annual effective tax rate was 0.0% for both the three-month periods. The estimated annual effective tax rate for each period was driven by net losses year-to-date for both periods along with the expectation of continued losses for the remainder of the year.

The Company is not subject to state income tax in Nevada, which does not impose a state income tax, nor is the Company subject to foreign income taxes as all of the Company’s operations and properties are located within the United States. The Company is subject to state income tax in Colorado, the location of the corporate office, but did not incur any income tax expense related to Colorado.

As necessary, the Company provides a reserve against the benefits of uncertain tax positions taken in its tax filings that are not more likely than not to be sustained upon examination. Based on the weight of available evidence, the Company does not believe it has taken any uncertain tax positions that require the establishment of a reserve. The Company has not recorded any interest or penalties related to income tax liabilities as of March 31, 2020.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

14. Earnings (Loss) Per Share

The table below shows our basic and diluted earnings (loss) per share calculations (in thousands, except share and per share amounts):

  Three months ended March 31, 
  2020  2019 
Net loss $(34,618) $(23,440)
         
Weighted average shares outstanding        
Basic  2,897,568   2,672,502 
Diluted  2,897,568   2,672,502 
         
Basic earnings per common share $(11.95) $(8.77)
Diluted earnings per common share $(11.95) $(8.77)

There was no dilutive effect of common stock equivalents for the three months ended March 31, 2020 or 2019 because the effect of their inclusion would have been anti-dilutive.

There was no dilutive effect of common stock equivalents for the years ended March 31, 2020 and 2019 because the effect of their inclusion would have been anti-dilutive. Using the treasury stock method, the weighted-average common stock equivalents excluded from diluted EPS were 157.9 million shares and 136.4 million shares for the three months ended March 31, 2020 and 2019, respectively. The restricted stock units are not included in the common stock equivalents because the number of shares used to settle them is not known.

15. Fair Value Measurements

Recurring fair value measurements

The following table sets forth by level within the fair value hierarchy, the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands).

  Hierarchy  March 31,  December 31, 
  Level  2020  2019 
Liabilities            
Accrued compensation for phantom shares  3  $1,853  $1,590 
Derivative instruments:            
Warrant liability - Notes 7 and 10  2  $18  $18 

Accrued compensation

The fair market value at date of grant of the phantom shares was based upon the valuation of the Company determined in the bankruptcy process. The liability will be marked-to-market on a recurring basis using a quoted price if the Company’s common stock is actively traded on a national securities market exchange or in the over the counter market. Since the common stock is not quoted, a reasonable valuation method in accordance with treasury regulations was used.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

During the three months ended March 31, 2020 and 2019, non-employee members of the Company’s board of directors were granted a total of 157,500 and 315,000 phantom shares of stock, respectively, which vested upon grant, pursuant to a Non-Employee Director Phantom Stock Plan. Under the grant agreements, the phantom shares entitle the participant to a cash payment equal to the greater of the (1) grant date fair value and (2) the fair market value of one share of common stock of the Company at the date of payment. The cash payments are to be made to a participant upon the first of the following to occur: (i) retirement from the Board; (ii) resignation from the Board; (iii) failure to stand for re-election as a non-employee director of the Board; (iv) removal from the board for reasons other than cause; (v) death of the participant; or (vi) a change of control.

As of March 31, 2020 and December 31, 2019, the Company performed fair value analyses of the phantom shares. A valuation of the Company based on negotiated financing arrangements with several unrelated parties was used to determine the value at both March 31, 2020 and December 31, 2019. The phantom shares issued during 2020, 2019 and 2018 were recorded at the grant date fair value and, pursuant to the grant agreements, cannot be written-down below the grant date fair value. During the three months ended March 31, 2020 and 2019, there was no change in the fair market value of the 2015 and 2016 phantom shares issuances.

Derivative instruments

The fair values (as prescribed by GAAP) of the warrants, the Company’s only derivative instrument, were computed by independent third-party consultants (and validated by the Company) using models that require a variety of inputs, including contractual terms, market prices, exercise prices, and correlations of such inputs. In general, model inputs that are significant to the fair value measurements of the Company’s derivative instruments trade in active markets or are observable in markets that are not active, and, as such, derivative instruments are classified within Level 2 of the fair value hierarchy.

The fair value of the Company’s warrant liability was approximately $18,000 as of both March 31, 2020 and December 31, 2019 and was determined using a Monte Carlo simulation-based valuation model. The warrants have a seven-year term and an initial exercise price of $8.40 per share. The assumptions used include a risk-free interest rate of 1.74%, an expected volatility of 70%, and a dividend rate of 0%.

Items disclosed at fair value

The carrying amount and fair value of the debt as of March 31, 2020 and December 31, 2019 are disclosed in the following table (in thousands):

  March 31, 2020  December 31, 2019 
  Carrying
Amount
  Fair Value  Carrying
Amount
  Fair Value 
Total current and non-current debt $595,376  $539,631  $553,965  $471,890 

As of March 31, 2020 and December 31, 2019, the fair value of the Company’s debt was determined using level 3 inputs and the phantom shares were marked to market based on level 3 inputs. There were no changes to the Company’s valuation techniques, and no transfers in or out of Levels 1, 2, or 3.

The Company determined the fair value of the debt at March 31, 2020 and December 31, 2019 based upon assumptions used in the Purchase Agreement, which are considered level 3 inputs.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

16. Supplemental Cash Flow Information

The following table provides supplemental cash flow information (in thousands):

  Three months ended March 31, 
  2020  2019 
Cash paid for interest $3,313  $2,945 
         
Significant non-cash financing and investing activities:        
Increase in Second Lien convertible notes from in-kind interest  7,815   6,746 
Increase in 1.5 Lien Notes from in-kind interest  5,139   4,450 
Increase in 1.25 Lien Notes from in-kind interest  3,381   278 
Increase in the Promissory Note from in-kind interest  85   76 
Accrual of deferred future financing costs  382   986 
Plant and equipment additions included in accounts payable  364   - 

17. Commitments and Contingencies

From time to time, the Company is involved in various legal actions related to its business, some of which are class actions lawsuits. Management does not believe, based on currently available information, that contingencies related to any pending or threatened legal matter will have a material adverse effect on the Company’s Consolidated Financial Statements, although a contingency could be material to the Company’s results of operations or cash flows for a particular period depending on the results of operations and cash flows for such period. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

On February 7, 2020, a purported class action complaint was filed by a purported holder of the Company’s warrants, in the Court of Chancery of the State of Delaware against the Company and MUDS. The complaint seeks a declaratory judgment that the MUDS transaction constitutes a “Fundamental Change” under the terms of the Hycroft Warrant Agreement and thereby requiring that the Company warrants be assumed by MUDS as part of the MUDS transactions, in addition to asserting claims for (i) breach or anticipatory breach of contract against the Company, (ii) breach or anticipatory breach of the implied covenant of good faith and fair dealing against the Company, and (iii) tortious interference with contractual relations against MUDS. The complaint seeks unspecified money damages and also seeks an injunction enjoining the Company and MUDS from consummating the MUDS transactions. On February 26, 2020, MUDS and Hycroft entered into an amendment to the Purchase Agreement whereby the Company’s liabilities and obligations under the Hycroft Warrant Agreement shall be included as a Parent Assumed Liability under the Purchase Agreement. On March 27, 2020, MUDS and Hycroft filed motions to dismiss the complaint. On May 15, 2020, a hearing was held and the complaint was dismissed with prejudice. On May 21, 2020, Plaintiff filed a motion to alter or amend the Court’s order in order to retain jurisdiction in order to file application for a mootness fee, to which MUDS and Hycroft, while disputing factual assertions and characterizations, did not oppose.

Financial commitments not recorded in the Consolidated Financial Statements

Net profit royalty

A portion of the Hycroft Mine is subject to a mining lease that requires a 4% net profit royalty be paid to the owner of certain patented and unpatented mining claims. The mining lease also requires an annual advance payment of $120,000 every year mining occurs on the leased claims. All advance annual payments are credited against the future payments due under the 4% net profit royalty. The total payments due under the mining lease are capped at $7.6 million, of which the Company has paid $2.6 million through March 31, 2020.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Transaction bonus plan

The Company has entered into a bonus plan whereby, upon completion of the MUDS transaction or certain other transformative transactions as defined in the plan, the Company will be obligated to pay certain senior level employees a total of $5.9 million.

18. Related Party Transactions

As disclosed in Note 8Debt, the Company has issued numerous tranches of debt primarily to five financial institutions. These financial institutions, Aristeia Capital LLC (“Aristeia”), Highbridge Capital Management, LLC (“Highbridge”), Mudrick Capital Management, L.P (“Mudrick”) Whitebox Advisors, LLC (“Whitebox”) and Wolverine Asset Management, LLC (“Wolverine”), each hold beneficial ownership (assuming conversion of the Convertible Notes) of 5% or more of the Company’s common stock. Additionally, Highbridge, Mudrick and Whitebox, as long as they remain holders of 10% or more of the Company’s common stock, have the right to nominate and designate one director pursuant to the Company’s stockholder agreement. As a result of their owning 5% or more of the Company’s common stock, Aristeia, Highbridge, Mudrick, Whitebox, and Wolverine are each considered a related party (the “Related Parties”) in accordance with ASC 850, Related Party Disclosures.

The following table provides the recorded interest expense by Related Party (in thousands):

  Three months ended March 31, 
  2020  2019 
Aristeia $1,871  $1,307 
Highbridge  2,901   2,047 
Mudrick  7,372   5,228 
Whitebox  4,873   3,403 
Wolverine  907   633 
Total related party interest expense $17,924  $12,618 

The following table provides debt balances by Related Party (in thousands):

  March 31,  December 31, 
  2020  2019 
Aristeia $55,340  $50,905 
Highbridge  87,516   80,930 
Mudrick  224,474   208,078 
Whitebox  144,111   132,559 
Wolverine  26,833   24,683 
Total related party debt $538,274  $497,155 

19. Subsequent Events

Issuance of Additional 1.25 Lien Notes

On each of April 16, 2020 and May 7, 2020, the Company issued additional tranches of 1.25 Lien Notes in the aggregate principal amount of $10.0 million. The 1.25 Lien Notes issued in April and May have the same terms and security priority as the original issuance of 1.25 Lien Notes in February 2019.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Tax Impact of MUDS Transaction

The Company estimates that as a result of the MUDS transaction discussed above, that the Company will record a taxable gain of approximately $140.0 million. The Company has deferred tax assets (net operating loss carryforwards), which have a full valuation allowance recorded against them, in excess of the estimated taxable gains.

Consummation of the MUDS Transaction

On May 29, 2020, Hycroft Mining Holding Corporation, formerly known as Mudrick Capital Acquisition Corporation (“HYMC”), consummated the MUDS transaction by and among the HYMC, MUDS Acquisition Sub, Inc. (“Acquisition Sub”) and Hycroft, as set forth in the Purchase Agreement. Pursuant to the Purchase Agreement, Acquisition Sub acquired all of the issued and outstanding equity interests of the direct subsidiaries of the Company and substantially all of the other assets and assumed substantially all of the liabilities of the Company.

The value of the aggregate consideration was $615.0 million, which amount was inclusive of the value of HYMC’s shares of common stock issued as consideration in the MUDS transaction, the value of the Company’s debt assumed by HYMC at the closing of the MUDS transaction, the value of the Company’s debt paid off or converted into shares of the Company’s common stock in connection with or at the closing of the MUDS transaction and the value of the Company’s debt exchanged for HYMC’s shares of common stock and cancelled by the Company.

In connection with the consummation of the MUDS Transaction, the parties undertook the following transactions, among others:

·$80 million of the 1.25 Lien Notes were exchanged for new subordinated notes of the Company and $80.0 million in aggregate principal amount of such New Subordinated Notes (the “Assumed New Subordinated Notes”) were assumed by HYMC.

·The Company and the Second Lien Noteholders consummated the conversion of the Second Lien Notes into shares of the Company’s common stock.

·HYMC and the Company repaid in full all outstanding obligations of the Company under certain existing third-party indebtedness, including indebtedness under the First Lien Agreement and the Promissory Note.

·The consideration paid to the Company was comprised of 15.1 million shares of HYMC’s Class A common stock, par value $0.0001 per share (“HYMC Common Stock”), including 3,511,820 surrendered shares, valued at $10.00 per share, issued to the Company and promptly distributed pro rata pursuant to a plan of dissolution to the Company’s stockholders, plus $145.7 million of 1.5 Lien Notes that were exchanged by the holders for approximately 16.03 million shares of HYMC common stock and cancelled by the Company and $48.5 million of 1.25 Lien Notes that were exchanged by the holders for approximately 4.85 million shares of HYMC common stock and cancelled by the Company.

·MUDS had $12.4 million in trust that was transferred to the Company after giving effect to the stock that was redeemed by the public stockholders prior to closing.

On May 29, 2020, immediately prior to the consummation of the MUDS transaction, HYMC issued, in a private placement transaction (the “PIPE Financing”), an aggregate of approximately $7.6 million shares of HYMC Common Stock for an aggregate purchase price of approximately $76.0 million and 3,250,000 warrants to purchase HYMC Common Stock at a price of $11.50 per share (the “PIPE warrants”), to certain accredited investors (the “Initial Subscribers”) pursuant to the terms of separate Subscription/Backstop Agreements, dated January 13, 2020 as amended as of May 28, 2020.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

At the consummation of the MUDS transaction, HYMC, Mudrick Capital Acquisition Holdings LLC (“sponsor”), Cantor Fitzgerald & Co. (“Cantor”), holders of 1.25 Lien Notes and 1.5 Lien Notes that received shares of the HYMC Common Stock upon exchange of such 1.25 Lien Notes and 1.5 Lien Notes, certain stockholders of the Company that received shares of HYMC Common Stock in the MUDS transaction and may be affiliates of HYMC after consummation of the MUDS transaction (collectively, the “Exchanging Noteholders”), the Initial Subscribers and Sprott Private Resource Lending II (Collector), LP. (“Lender”) (Cantor, the Exchanging Noteholders, certain stockholders of the Company, the Initial Subscribers, Lender and sponsor, collectively, the “restricted stockholders”) entered into the Second Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the restricted stockholders are entitled to, among other things, customary registration rights, including demand, piggy-back and shelf registration rights, subject to cut-back provisions. The restricted stockholders have agreed in the Registration Rights Agreement not to sell, transfer, pledge or otherwise dispose of shares of HYMC Common Stock they hold or receive for certain time periods, ranging from between 30 days after the consummation of the MUDS transaction for shares purchased in the PIPE Financing to six months for shares received in the exchange, to one year after the consummation of the MUDS transaction for founder shares, subject to certain exceptions. Pursuant to the terms of the Registration Rights Agreement, HYMC is obligated to file a shelf registration statement on Form S-3, or Form S-1 if unavailable, and may be required to register up to approximately 63 million shares of HYMC Common Stock, in addition to warrants and units. Concurrently with the consummation of the MUDS transaction, sponsor also purchased 2,500,000 forward purchase units, each such unit comprised of one share of HYMC Common Stock and one warrant to purchase one share of HYMC Common Stock for $11.50 per share, in accordance with the terms of the Forward Purchase Contract, dated January 24, 2018, between HYMC and sponsor (the “Forward Purchase Contract”). Following the completion of the PIPE Financing, the MUDS transaction and related debt and warrant assumption, there were 50,160,042 shares of HYMC Common Stock outstanding.

Concurrently with the consummation of the MUDS transaction, sponsor also purchased 2,500,000 forward purchase units, each such unit comprised of one share of HYMC Common Stock and one warrant to purchase one share of HYMC Common Stock for $11.50 per share, in accordance with the terms of the Forward Purchase Contract, dated January 24, 2018, between HYMC and sponsor (the “Forward Purchase Contract”).

On October 4, 2019, the Company, as borrower, certain subsidiaries of the Company, as guarantors, Lender, and Sprott Resource Lending Corp., as arranger, executed a secured multi-advance term credit facility pursuant to which Lender committed to make, subject to certain conditions set forth therein, term loans in an aggregate principal amount up to $110.0 million. On May 29, 2020, the Company and certain of its subsidiaries, as guarantors, entered into the Amended and Restated Credit Agreement (the “Sprott Credit Agreement”) to update the conditions precedent and effect certain other changes to conform to the details of the business combination. At the consummation of the business combination, the Company assumed the initial Sprott credit agreement and entered into the Sprott Credit Agreement and borrowed $70.0 million under such facility and issued to Lender 496,634 shares of HYMC Common Stock, equal to 1% of HYMC’s post-closing shares of HYMC Common Stock outstanding. Advances under the Sprott Credit Agreement are made available at an original issue discount of 2% and bear interest monthly at a floating rate equal to 7% plus the greater of (i) US Dollar three month LIBOR and (ii) 1.50%, per annum, accruing daily and compounded monthly. For a period of twelve (12) months following the initial advance, no cash payments of interest or principal will be due, with 100% of interest accruing being capitalized on a monthly basis and added to the outstanding principal balance of the Sprott Credit Agreement. For each calendar quarter commencing on March 1, 2021 and ending on the maturity date, the borrower shall pay Lender additional interest on the last business day of such calendar quarter, calculated according to a formula set forth in the Sprott Credit Agreement. Upon the prepayment of the entire Sprott Credit Agreement, all remaining additional interest payments and all remaining and yet unpaid additional interest must be prepaid as well.

In addition to the Sprott Credit Agreement, concurrently with the consummation of the MUDS transaction, HYMC and Hycroft Resources & Development, LLC, a Delaware limited liability company (“HRD”) and an indirect wholly-owned subsidiary of the Company acquired by HYMC in the MUDS transaction entered into a Royalty Agreement with Sprott Private Resource Lending II (CO) Inc. (the “Sprott Royalty Agreement” and, together with the Sprott Credit Agreement, the “Sprott Agreements”), pursuant to which, among other things, HRD received $30.0 million and incurred a 1.5% net smelter royalty payment obligation relating to the Hycroft mine, the principal asset of HRD acquired in the MUDS transaction.

Upon consummation of the MUDS transaction, HYMC assumed the Company’s liabilities and obligations under the warrant agreement, dated as of October 22, 2015, by and between the Company and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company, collectively as warrant agent (the “Hycroft Warrant Agreement”). Following the MUDS transaction and the assumption of the liabilities and obligations under the Hycroft Warrant Agreement, each warrant of the Company outstanding and unexercised immediately prior to the effective time of the MUDS transaction is exercisable to purchase 0.2523 shares of HYMC Common Stock at an exercise price of $44.82 per share of common stock.

Upon completion of the MUDS transaction, in addition to the warrants related to Hycroft Warrant Agreement, HYMC had the following warrants outstanding to purchase one share of HYMC Common Stock for $11.50 per share: (A) 20,800,000 issued in connection with the initial offer of MUDS stock, (B) 2,500,000  issued to sponsor in connection with the Forward Purchase Contract (as discussed above), (C) 6,700,000 issued to sponsor for $1.00 each in January 2018, (D) 1,040,000 issued to Cantor, the underwriter for the SPAC for $1.00 each in January 2018, by and between MUDS and Cantor, and (E) 3,250,000 issued pursuant to the Subscription/Backstop Agreements.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

The issuance of the shares of HYMC Common Stock to the Company for prompt distribution to its stockholders pursuant to a plan of dissolution was registered with the SEC on the Registration Statement on Form S-4 (File No. 333-236460) dated May 7, 2020 (the “Registration Statement”). The issuance of the shares of HYMC Common Stock to holders of stock options and restricted stock units issued under the HYMC 2020 Performance and Incentive Pay Plan (the “Incentive Plan”) will be registered with the SEC on a Proxy Statement/Prospectus on Form S-8. HYMC has agreed in the Registration Rights Agreement to file a registration statement in respect of shares of HYMC Common Stock, forward purchase units, and warrants, held by the parties to the Registration Rights Agreement, including the shares of HYMC Common Stock underlying such units and warrants, with the SEC on a registration statement on Form S-3, or Form S-1 if Form S-3 is not available, as soon as practicable but in no event later than fifteen (15) business days following the completion of the MUDS transaction.

Plan of Dissolution

Promptly following the consummation of the MUDS transaction, the Company filed a certificate of dissolution with the Secretary of State of Delaware to effect a complete plan of dissolution and liquidation of the Company as approved upon the recommendation of the Company’s Board of Directors at a special meeting of the Company’s stockholders held on May 29, 2020.


HYCROFT MINING CORPORATION

Notes to Unaudited Consolidated Financial Statements

Other

The Company has evaluated all subsequent events through June 3, 2020, which is the date these Consolidated Financial Statements were available to be issued. There were no additional material subsequent events that required recognition or additional disclosure in these Consolidated 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, 2019 and 2018, and the related statements of operations, changes in stockholders’ equity and cash flows, for the years ended December 31, 2019 and 2018, 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, 2019 and 2018, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, 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 August 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

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ WithumSmith+Brown, PC

/s/ WithumSmith+Brown, PC

We have served as the Company’s auditor since 2017.

New York, New York

March 11, 2020

F-58

F-27


MUDRICK CAPITAL ACQUISITION CORPORATION

BALANCE SHEETS

  December 31, 2019  December 31, 2018 
ASSETS      
Current Assets        
Cash $208,536  $535,946 
Prepaid income taxes  95,275    
Prepaid expenses  3,966   52,295 
Total Current Assets  307,777   588,241 
Investments held in Trust Account  215,385,757   212,916,691 
TOTAL ASSETS $215,693,534  $213,504,932 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable and accrued expenses $334,619  $201,392 
Income taxes payable     555,449 
Total Current Liabilities  334,619   756,841 
         
Deferred underwriting fees  7,280,000   7,280,000 
Total Liabilities  7,614,619   8,036,841 
         
Commitments and Contingencies        
         
Common stock subject to possible redemption, $0.0001 par value; 20,106,823 and 19,848,325 shares as of December 31, 2019 and 2018, respectively (at redemption value of $10.10 per share)  203,078,914   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, 2019 and 2018      
Class A Common stock, $0.0001 par value; 100,000,000 shares authorized; 693,177 and 951,675 shares issued and outstanding (excluding 20,106,823 and 19,848,325 shares subject to possible redemption) as of December 31, 2019 and 2018, respectively  69   95 
Class B Common stock, $0.0001 par value; 10,000,000 shares authorized; 5,200,000 shares issued and outstanding as of December 31, 2019 and 2018, respectively  520   520 
Additional paid-in capital  711,409   3,322,214 
Retained earnings  4,288,003   1,677,179 
Total Stockholders’ Equity  5,000,001   5,000,008 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $215,693,534  $213,504,932 

The accompanying notes are an integral part of the unaudited financial statements. 

F-59

    

December 31, 

    

December 31, 

2019

2018

ASSETS

 

  

 

  

Current Assets

 

  

 

  

Cash

$

208,536

$

535,946

Prepaid income taxes

95,275

Prepaid expenses

 

3,966

 

52,295

Total Current Assets

 

307,777

 

588,241

 

  

 

  

Investments held in Trust Account

 

215,385,757

 

212,916,691

TOTAL ASSETS

$

215,693,534

$

213,504,932

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current Liabilities

 

  

 

  

Accounts payable and accrued expenses

$

334,619

$

201,392

Income taxes payable

 

 

555,449

Total Current Liabilities

 

334,619

 

756,841

 

  

 

  

Deferred underwriting fees

 

7,280,000

 

7,280,000

Total Liabilities

 

7,614,619

 

8,036,841

 

  

 

  

Commitments and Contingencies

 

  

 

  

 

  

 

  

Common stock subject to possible redemption, $0.0001 par value; 20,106,823 and 19,848,325 shares as of December 31, 2019 and 2018, respectively (at redemption value of $10.10 per share)

 

203,078,914

 

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, 2019 and 2018

 

 

Class A Common stock, $0.0001 par value; 100,000,000 shares authorized; 693,177 and 951,675 shares issued and outstanding (excluding 20,106,823 and 19,848,325 shares subject to possible redemption) as of December 31, 2019 and 2018, respectively

 

69

 

95

Class B Common stock, $0.0001 par value; 10,000,000 shares authorized; 5,200,000 shares issued and outstanding as of December 31, 2019 and 2018, respectively

 

520

 

520

Additional paid-in capital

 

711,409

 

3,322,214

Retained earnings

 

4,288,003

 

1,677,179

Total Stockholders’ Equity

 

5,000,001

 

5,000,008

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

215,693,534

$

213,504,932

MUDRICK CAPITAL ACQUISITION CORPORATION
STATEMENTS OF OPERATIONS

  Year Ended December 31, 
  2019  2018 
General and administrative expenses $875,900  $609,581 
Loss from operations  (875,900)  (609,581)
         
Other income:        
Interest income  6,634   8,302 
Interest earned on marketable securities held in Trust Account  4,379,894   2,836,691 
Other income  4,386,528   2,844,993 
         
Income before provision for income taxes  3,510,628   2,235,412 
Provision for income taxes  (899,804)  (555,449)
Net income $2,610,824  $1,679,963 
         
Weighted average shares outstanding of Class A common stock  20,800,000   20,800,000 
         
Basic and diluted income per common share, Class A $0.16  $0.10 
         
Weighted average shares outstanding of Class B common stock  5,200,000   5,200,000 
         
Basic and diluted loss per common share, Class B $(0.13) $(0.08)

The accompanying notes are an integral part of the unaudited financial statements.

F-60

F-28


MUDRICK CAPITAL ACQUISITION CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYOPERATIONS

Year Ended

December 31, 

    

2019

   ��

2018

General and administrative expenses

$

875,900

$

609,581

Loss from operations

 

(875,900)

 

(609,581)

 

  

 

  

Other income:

 

  

 

  

Interest income

 

6,634

 

8,302

Interest earned on marketable securities held in Trust Account

 

4,379,894

 

2,836,691

Other income

 

4,386,528

 

2,844,993

 

  

 

  

Income before provision for income taxes

 

3,510,628

 

2,235,412

Provision for income taxes

 

(899,804)

 

(555,449)

Net income

$

2,610,824

$

1,679,963

 

  

 

  

Weighted average shares outstanding of Class A common stock

 

20,800,000

 

20,800,000

 

  

 

  

Basic and diluted income per common share, Class A

$

0.16

$

0.10

 

  

 

  

Weighted average shares outstanding of Class B common stock

 

5,200,000

 

5,200,000

 

  

 

  

Basic and diluted loss per common share, Class B

$

(0.13)

$

(0.08)

  Class A
Common Stock
  Class B
Common Stock
  Additional
Paid-in
  Retained  Total
Stockholders’
 
  Shares  Amount  Shares  Amount  Capital  Earnings  Equity 
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 possible 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 
Change in value of common stock subject to possible redemption  (258,498)  (26)        (2,610,805)     (2,610,831)
Net income                 2,610,824   2,610,824 
Balance – December 31, 2019  693,177  $69   5,200,000  $520  $711,409  $4,288,003  $5,000,001 

The accompanying notes are an integral part of the unaudited financial statements.

F-61

F-29


MUDRICK CAPITAL ACQUISITION CORPORATION

STATEMENTS OF CASH FLOWSCHANGES IN STOCKHOLDERS’ EQUITY

Class A

Class B

Additional

Total

Common Stock

Common Stock

Paid-in

Retained

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Earnings

    

Equity

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 possible 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

Change in value of common stock subject to possible redemption

(258,498)

(26)

(2,610,805)

(2,610,831)

Net income

2,610,824

2,610,824

Balance – December 31, 2019

 

693,177

$

69

 

5,200,000

$

520

$

711,409

$

4,288,003

$

5,000,001

  Year Ended December 31, 
  2019  2018 
Cash Flows from Operating Activities:        
Net income $2,610,824  $1,679,963 
Adjustments to reconcile net income to net cash used in operating activities:        
Interest earned on marketable securities held in Trust Account  (4,379,894  (2,836,691
Changes in operating assets and liabilities:        
Prepaid income taxes  (95,275   
Prepaid expenses  48,329   (52,295
Accounts payable and accrued expenses  133,227   200,859 
Income taxes payable  (555,449  555,449 
Net cash used in operating activities  (2,238,238)  (452,715)
         
Cash Flows from Investing Activities:        
Cash withdrawn  from Trust Account to pay franchise and income taxes  1,910,828    
Investment of cash in Trust Account     (210,080,000)
Net cash provided by (used in) investing activities  1,910,828   (210,080,000)
         
Cash Flows from Financing Activities:        
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 
         
Net Change in Cash  (327,410)  511,001 
Cash – Beginning of period  535,946   24,945 
Cash – End of period $208,536  $535,946 
         
Supplementary cash flow information:        
Cash paid for income taxes $1,550,528  $ 
         
Non-Cash investing and financing activities:        
Initial classification of common stock subject to possible redemption $  $198,787,536 
         
Change in value of common stock subject to possible redemption $2,610,831  $1,680,547 
         
Deferred underwriting fees charged to additional paid in capital $  $7,280,000 
         
Payment of deferred offering costs and expenses by Sponsor $  $240,135 

The accompanying notes are an integral part of the unaudited financial statements.

F-62

F-30


MUDRICK CAPITAL ACQUISITION CORPORATION

STATEMENTS OF CASH FLOWS

Year Ended December 31, 

    

2019

    

2018

Cash Flows from Operating Activities:

 

  

 

  

Net income

$

2,610,824

$

1,679,963

Adjustments to reconcile net income to net cash used in operating activities:

 

 

  

Interest earned on marketable securities held in Trust Account

 

(4,379,894)

 

(2,836,691)

Changes in operating assets and liabilities:

 

 

  

Prepaid income taxes

 

(95,275)

 

Prepaid expenses

48,329

(52,295)

Accounts payable and accrued expenses

 

133,227

 

200,859

Income taxes payable

 

(555,449)

 

555,449

Net cash used in operating activities

 

(2,238,238)

 

(452,715)

 

  

 

  

Cash Flows from Investing Activities:

 

  

 

  

Cash withdrawn from Trust Account to pay franchise and income taxes

1,910,828

Investment of cash in Trust Account

 

 

(210,080,000)

Net cash provided by (used in) investing activities

 

1,910,828

 

(210,080,000)

 

  

 

  

Cash Flows from Financing Activities:

 

  

 

  

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

 

  

 

  

Net Change in Cash

 

(327,410)

 

511,001

Cash – Beginning of period

 

535,946

 

24,945

Cash – End of period

$

208,536

$

535,946

Supplementary cash flow information:

Cash paid for income taxes

$

1,550,528

$

Non-Cash investing and financing activities:

 

 

  

Initial classification of common stock subject to possible redemption

$

$

198,787,536

Change in value of common stock subject to possible redemption

$

2,610,831

$

1,680,547

Deferred underwriting fees charged to additional paid in capital

$

$

7,280,000

Payment of deferred offering costs and expenses by Sponsor

$

$

240,135

The accompanying notes are an integral part of the unaudited financial statements.

F-31


1.    DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Mudrick Capital Acquisition Corporation (the “Company”) was incorporated in Delaware on August 28, 2017. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on companies that have recently emerged from bankruptcy court protection. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of December 31, 2019, the Company had not commenced any operations. All activity through December 31, 2019 relates to the Company’s formation, its Initial Public Offering, which is described below, identifying a target company for a Business Combination and activities in connection with the potential acquisition of Hycroft Mining Corporation, a Delaware corporation (“Hycroft”) (see Note 5). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and marketable securities from the proceeds derived from the Initial Public Offering, as defined below.

The registration statement for the Company’s initial public offering (“Initial Public Offering”) 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, 2019, cash of $208,536 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.

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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 that 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.

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.

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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 $10.10 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, as amended (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 timing 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.

The Company initially had until February 12, 2020 to complete a Business Combination. If the Company is unable to complete a Business Combination by the Extended Termination Date (as defined below), 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 to the Company to pay 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 the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

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On February 10, 2020, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation (the “Extension Amendment”) to extend the period of time for which the Company was required to consummate a Business Combination from February 12, 2020 to August 12, 2020 (the “Extended Termination Date”). In connection with the Extension Amendment, stockholders elected to redeem an aggregate of 13,890,713 shares of the Company’s Class A common stock. As a result, an aggregate of approximately $144,218,760 (or approximately $10.38 per share) was removed from the Trust Account to pay such stockholders.

The initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by the Extended Termination Date. 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 by the Extended Termination Date. 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 by the Extended Termination Date 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

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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.

Liquidity and Going Concern

As of December 31, 2019, the Company had a cash balance of approximately $209,000, which excludes interest income of approximately $5,306,000 from the Company’s investments in the Trust Account which is available to the Company for tax obligations. Subsequent to the redemption of common stock by the Company’s stockholders in connection with the Extension Amendment, there was approximately $71.7 million remaining in the Trust Account. During the year ended December 31, 2019, the Company withdrew approximately $1,911,000 of interest income from the Trust Account to pay its franchise and income 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).

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If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing either to complete a Business Combination or because it becomes obligated to redeem a significant number of its Public Shares upon completion of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination.

The liquidity condition and date for mandatory liquidation unless there is a Business Combination, the consummation of which is uncertain, raise substantial doubt about the Company’s ability to continue as a going concern through August 12, 2020, the scheduled liquidation date of the Company. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

In connection with the Company’s assessment of going concern considerations 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 August 12, 2020.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.

Emerging growth company

The Company is an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes- Oxley Act, reduced disclosure obligations regarding executive compensation in its 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.

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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 election to opt out is irrevocable. The Company has 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, the Company, 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 the Company’s 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 accounting standards used.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

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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, 2019 and 2018.

Marketable securities held in Trust Account

At December 31, 2019 and 2018, substantially all of the assets held in the Trust Account were held in money market funds.

Common stock subject to possible redemption

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2019 and 2018, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.

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.

Income taxes

The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

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FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of and December 31, 2019 and 2018. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

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Net income (loss) per common share

Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and Private Placement to purchase 28,540,000 shares of Class A common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

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 redeemable common stock is calculated by dividing the interest income earned on the Trust Account (net of applicable franchise and income taxes of approximately $1,099,900 and $755,400 for the year ended December 31, 2019 and December 31, 2018, respectively, by the weighted average number of Class A redeemable common stock outstanding during the period. Net loss per common share, basic and diluted for Class A and Class B non-redeemable common stock is calculated by dividing the net income (loss), less income attributable to Class A redeemable common stock, by the weighted average number of Class A and Class B non-redeemable common stock outstanding for the period. Class A and Class B non-redeemable common stock includes the Founder Shares and the Placement Units as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.

The following table reflects the calculation of basic and diluted net income (loss) per common share:

Redeemable Common Stock

Numerator: Earnings allocable to Redeemable Common Stock

    

Year Ended

    

Year Ended

December 31,

December 31,

2019

2018

Redeemable Common Stock

 

  

 

  

Numerator: Earnings allocable to Redeemable Common Stock

 

  

 

  

Interest Income

$

4,379,894

$

2,836,691

Income and Franchise Tax

$

(1,099,904)

$

(744,449)

Net Earnings

$

3,279,990

$

2,081,242

Denominator: Weighted Average Redeemable Common Stock

 

  

 

  

Redeemable Common Stock, Basic and Diluted

 

20,800,000

 

20,800,000

Earnings/Basic and Diluted Redeemable Common Stock

$

0.16

$

0.10

Non-Redeemable Common Stock

 

  

 

  

Numerator: Net Loss minus Redeemable Net Earnings

 

  

 

  

Net Income

$

2,610,824

$

1,679,963

Redeemable Net Earnings

$

(3,279,990)

$

(2,081,242)

Non-Redeemable Net Loss

$

(669,166)

$

(401,279)

Denominator: Weighted Average Non-Redeemable Common Stock

 

  

 

  

Non-Redeemable Common Stock, Basic and Diluted (1)

 

5,200,000

 

5,200,000

Loss/Basic and Diluted Non-Redeemable Common Stock

$

(0.13)

$

(0.08)

  Year Ended  Year Ended 
  December 31,  December 31, 
  2019  2018 
Redeemable Common Stock        
Numerator: Earnings allocable to Redeemable Common Stock
Interest Income
 $4,379,894  $2,836,691 
Income and Franchise Tax $(1,099,904) $(744,449)
Net Earnings $3,279,990  $2,081,242 
Denominator: Weighted Average Redeemable Common Stock
Redeemable Common Stock, Basic and Diluted
  20,800,000   20,800,000 
Earnings/Basic and Diluted Redeemable Common Stock $0.16  $0.10 
Non-Redeemable Common Stock        
Numerator: Net Loss minus Redeemable Net Earnings
Net Income  
 $2,610,824  $1,679,963 
Redeemable Net Earnings    $(3,279,990) $(2,081,242)
Non-Redeemable Net Loss $(669,166) $(401,279)
Denominator: Weighted Average Non-Redeemable Common  Stock
Non-Redeemable Common Stock, Basic and Diluted (1) 
  5,200,000   5,200,000 
Loss/Basic and Diluted Non-Redeemable Common Stock $(0.13) $(0.08)

Note: As of December 31, 2019 and 2018, basic and diluted shares are the same as there are no securities that are dilutive to the Company’s common stockholders

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal Depository Insurance Coverage of $250,000. At December 31, 2019 and 2018, the

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Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

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Fair value of financial instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.

Recent accounting pronouncements

Management does not believe that any 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

Pursuant to the Initial Public Offering, the Company sold 20,800,000 units at a price of $10.00 per Unit, inclusive of 800,000 Units sold on February 28, 2018 upon the underwriters’ election to partially exercise their over-allotment option. Each Unit consists of one share of Class A common stock (such shares of Class A common stock included in the Units being offered, the “Public Shares”), 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).

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 $0.0001 (“Class B common stock”) for an aggregate price of$25,000. $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 Shares 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) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Private Placement Warrants

Concurrently with the closing of the Initial Public Offering, the Sponsor and Cantor purchased an aggregate of 7,500,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant (6,500,000 Private Placement Warrants by the Sponsor and 1,000,000 Private Placement Warrants by Cantor) for an aggregate purchase price of $7,500,000. On February 28, 2018, the Company consummated the sale of an additional 240,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, of which 200,000 Private Placement Warrants were purchased by the Sponsor and 40,000 Private Placement Warrants were purchased by Cantor, generating gross proceeds of $240,000. Each Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. The proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination by the Extended Termination Date, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non- redeemable and exercisable on a cashless basis so long as they are held by the Sponsor, Cantor or their permitted transferees. The warrants will expire five years after the completion of the Company’s Business Combination or earlier upon redemption or liquidation. In addition, for as long as the Private Placement Warrants are held by Cantor or its designees or affiliates, they may not be exercised after five years from the effective date of the registration statement for the Initial Public Offering.

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The Private Placement Warrants have been deemed compensation by Financial Industry Regulatory Authority, or FINRA and are therefore subject to a 180-day lock-up pursuant 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

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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 and the bona fide officers or partners of the underwriter and any such participating selected dealer.

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

On September 25, 2017, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Proposed Public Offering pursuant to a promissory noteNote (the “Note”). The Note was non-interest bearing and payable on the earlier of March 31, 2018 or the completion of the Initial Public Offering. The Note was repaid upon the consummation of the Initial Public Offering.

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 officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released 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. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital 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.

On January 2, 2020, the Company issued an unsecured promissory noteNote (the “Promissory Note”) to the Sponsor in the aggregate amount of $1,500,000 in order to finance transaction costs in connection with a Business Combination. The Promissory Note is non-interest bearing and repayable by the Company to the Sponsor upon the consummation of a Business Combination. The Promissory Note will be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account. The Promissory Note may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant, other than in connection with the Hycroft Business Combination. The warrants would be identical to the Private Placement Warrants.

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, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. For the years ended December 31, 2019 and 2018, the Company incurred $120,000 and $110,000 of administrative service fees, respectively. At December 31, 2019 and 2018, $10,000 and $-0- of such fees are included in accounts payable and accrued expenses in the accompanying balance sheets.

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5.    COMMITMENTS AND CONTINGENCIES

Registration Rights

Pursuant to a registration rights agreement entered into on February 7, 2018, the holders of Founder Shares, Private Placement Warrants, securities issuable pursuant to the Forward Purchase Contract (see below), and warrants that may be issued upon conversion of Working Capital Loans are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock). These holders have certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $4,160,000 in the aggregate. 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 of the underwriting agreement.

On February 12, 2020, the Company entered into an amendment (the “UA Amendment”) to its underwriting agreement with Cantor, pursuant to which the deferred underwriting fees provided for by the underwriting agreement, which were originally payable

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by the Company to the underwriters in cash upon completion of an initial Business Combination, shall be payable upon completion of the Hycroft Business Combination (as defined below) through a combination of (i) $2,500,000, payable in cash and directly from the Trust Account, (ii) $2,000,000, payable in shares of Class A common stock, valued for these purposes at $10.00 per share and (iii) an amount up to $2,780,000, determined as follows: (A) if Third Party Equity Value (as defined in the UA Amendment) is less than or equal to $75,000,000, an amount payable in Class A common stock, valued for these purposes at $10.00 per share, equal to the product of (x) 2,780,000 and (y) a fraction, the numerator of which is the Third Party Equity Value and the denominator of which is $75,000,000 or (B) if Third Party Equity Value is greater than $75,000,000, $2,780,000 payable in cash and directly from the Trust Account (collectively, the “Deferred Underwriting Commission”); provided, however, to the extent Cantor continues to beneficially own and hold for its own account the Specified Shares (as defined in the UA Amendment) on the date of the consummation of the Hycroft Business Combination (the “Acquisition Closing Date”), (1) the Deferred Underwriting Commission payable in Class A common stock pursuant to clauses (ii) and (iii) above shall be reduced by an amount equal to the product of (x) $10.00 and (y) the number of Specified Shares beneficially owned and held by Cantor for its own account on the Acquisition Closing Date, and (2) the Deferred Underwriting Commission payable in cash and directly from the Trust Account pursuant to this sentence shall be increased by such same and equal amount. As of the opinion date the trust value was approximately $72,000,000 which is below the threshold for situation (A) as described above. Therefore, the amount payable for (iii) as of the opinion date would be approximately $2,670,000. The UA Amendment does not amend, modify or supplement any other terms of the underwriting agreement.

Forward Purchase Contract

On January 24, 2018, the Company entered into a forward purchase contract (the “Forward Purchase Contract”) with the Sponsor, pursuant to which the Sponsor committed to purchase, in a private placement for gross proceeds of $25,000,000 to occur concurrently with the consummation of a Business Combination, 2,500,000 Units (the “Forward 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 of Forward Units will be used as part of the consideration to the sellers in a Business Combination; any excess funds from this private placement will be used for working capital purposes in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their Public Shares and provides the Company with a minimum funding level for a Business Combination.

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Purchase Agreement

On January 13, 2020, the Company entered into a Purchase Agreement (as amended on February 26, 2020, and as may be further amended from time to time, the “Purchase Agreement”) with MUDS Acquisition Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Acquisition Sub”), and Hycroft, pursuant to which the parties thereto intend to consummate a business combination transaction (the “Hycroft Business Combination”) pursuant to which Hycroft will sell to Acquisition Sub, and Acquisition Sub will purchase from Hycroft, all of the issued and outstanding equity interests of Hycroft’s subsidiaries and substantially all of Hycroft’s other assets (collectively, the “Transferred Assets”).

In consideration for the Transferred Assets and in connection with the consummation of the Hycroft Business Combination, Acquisition Sub will deliver, or cause to be delivered on its behalf, to Hycroft (a)(A) a number of shares of the Company’s Class A common stock equal to (i) (A) $325,000,000, plus (B) the Surrendered Shares Value (as defined in the Purchase Agreement), minus (C) the 1.5 Lien Share Payment Value (as defined in the Purchase Agreement), minus (D) the 1.5 Lien Cash Payment Amount (as defined in the Purchase Agreement), minus (E) the Excess Notes Share Payment Amount (as defined in the Purchase Agreement), minus (F) the Excess Notes Cash Payment Amount (as defined in the Purchase Agreement), divided by (ii) $10.00, which Hycroft will promptly distribute to its stockholders and (b)(B) the Excess Notes (as defined in the Purchase Agreement) and Hycroft’s 1.5 lien notes acquired by Acquisition Sub in connection with the consummation of the Hycroft Business Combination and pursuant to the transactions described in the Purchase Agreement. In addition, (x) the Company and Acquisition Sub will assume certain of Hycroft’s liabilities, including the Company’s assumption of certain debt obligations of Hycroft and Hycroft’s liabilities and obligations under its existing warrant agreement, and (y) Acquisition Sub will pay off, or

cause to be paid off, Hycroft’s other outstanding indebtedness for borrowed money, on Hycroft’s behalf, including under Hycroft’s first lien debt and promissory note.

The Hycroft Business Combination will be consummated subject to the deliverables and provisions as further described in the Purchase Agreement.

6.    STOCKHOLDERS’ EQUITY

Common Stock

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. As of December 31, 2019 and 2018, there were 693,177 and

951,675 shares of Class A common stock issued and outstanding (excluding 20,106,823 and 19,848,325 shares of common stock subject to possible redemption), respectively.

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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, 2019 and 2018, there were 5,200,000 shares 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 will 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, as is the case with the Hycroft Business Combination) 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.

F-72

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, 2019 and 2018, 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)(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 to 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 Public 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 Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company may redeem the Public Warrants (except with respect to the Private Placement Warrants):

in whole and not in part;
at a price of $0.01 per warrant;
at any time during the exercise period;
upon a minimum of 30 days’ prior written notice of redemption; and
if, and only if, the last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
If, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants.

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If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination by the Extended Termination Date and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

7. INCOME TAX

The Company’s net deferred tax assets are as follows:

  December 31,  December 31, 
  2019  2018 
Deferred tax asset        
Organizational costs/Startup expenses $227,930  $86,012 
Total deferred tax assets  227,930   86,012 
Valuation allowance  (227,930)  (86,012)
Deferred tax asset, net of allowance $  $ 

The income tax provision consists of the following:

  Year Ended  Year Ended 
  December 31,  December 31, 
  2019  2018 
Federal      
Current $899,804  $555,449 
Deferred  (141,918)  (86,012)
State        
Current      
Deferred      
Change in valuation allowance  141,918   86,012 
Income tax provision $899,804  $555,449 

As of December 31, 2019, the Company had no U.S. federal and state net operating loss carryovers (“NOLs”) available to offset future taxable income. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control as defined under the regulations.

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended December 31, 2019 and 2018, the change in the valuation allowance was $141,918 and $86,012, respectively.

F-74

A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2019 sand 2018 is as follows:

  Year Ended  Year Ended 
  December 31,  December 31, 
  2018  2019 
Statutory federal income tax rate  21.0%  21.0%
State taxes, net of federal tax benefit  0.0%  0.0%
True-ups  0.6%  0.0%
Change in valuation allowance  4.0%  3.8%
Income tax provision  25.6%  24.8%

The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions and is subject to examination by the various taxing authorities. The Company considers New York to be a significant state tax jurisdiction.

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 fair value at each reporting period, and non-financial assets and liabilities that are re- measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1:Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2019 and 2018, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

     December 31,  December 31, 
Description Level  2019  2018 
Assets:            
Trust Account – U.S. Treasury Securities Money Market Fund  1  $215,385,757  $212,916,691 

See Note 1 for details on the subsequent redemptions and adjustment to the Trust Account.

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9. SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

On February 7, 2020, a purported class action complaint was filed by a purported holder of warrants, of Hycroft Mining Corporation (“Seller”), in the Court of Chancery of the State of Delaware against the Company and Seller. The complaint seeks a declaratory judgment that the transactions contemplated under the Purchase Agreement constitute a “Fundamental Change” under the terms of the Seller warrant agreement and thereby requiring that the Seller warrants be assumed by the Company as part of the business combination, in addition to asserting claims for (i) breach or anticipatory breach of contract against Seller, (ii) breach or anticipatory breach of the implied covenant of good faith and fair dealing against Seller, and (iii) tortious interference with contractual relations against the Company. The complaint seeks unspecified money damages and also seeks an injunction enjoining Seller and the Company from consummating the business combination. On February 26, 2020, the Company and Seller entered into an Amendment to the Purchase Agreement whereby Seller’s liabilities and obligations under the Seller warrant agreement shall be included as Parent Assumed Liability under the Purchase Agreement.

F-76

MUDRICK CAPITAL ACQUISITION CORPORATION

CONDENSED BALANCE SHEETS

  

March 31,

2020

  December 31,
2019
 
   (unaudited)     
ASSETS        
Current Assets        
Cash $12,639  $208,536 
Prepaid income taxes     95,275 
Prepaid expenses  54,375   3,966 
Total Current Assets  67,014   307,777 
         
Investments held in Trust Account  71,786,097   215,385,757 
TOTAL ASSETS $71,853,111  $215,693,534 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable and accrued expenses $2,671,103  $334,619 
Income taxes payable  32,732    
Convertible promissory note – related party  600,000    
Total Current Liabilities  3,303,835   334,619 
         
Deferred underwriting fees  7,280,000   7,280,000 
Total Liabilities  10,583,835   7,614,619 
         
Commitments and Contingencies        
         
Class A common stock subject to possible redemption, $0.0001 par value; 5,571,215 and 20,106,823 shares as of March 31, 2020 and December 31, 2019, respectively (at redemption value of $10.10 per share)  56,269,272   203,078,914 
         
Stockholders’ Equity:        
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of March 31, 2020 and December 31, 2019      
Class A Common stock, $0.0001 par value; 100,000,000 shares authorized; 1,338,072 and 693,177 shares issued and outstanding (excluding 5,571,215 and 20,106,823 shares subject to possible redemption) as of March 31, 2020 and December 31, 2019, respectively  134   69 
Class B Common stock, $0.0001 par value; 10,000,000 shares authorized; 5,200,000 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively  520   520 
Additional paid-in capital  3,302,226   711,409 
Retained earnings  1,697,124   4,288,003 
Total Stockholders’ Equity  5,000,004   5,000,001 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $71,853,111  $215,693,534 

The accompanying notes are an integral part of the unaudited condensed financial statements.

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MUDRICK CAPITAL ACQUISITION CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

  

Three Months Ended

March 31,

 
  2020  2019 
       
General and administrative expenses $3,122,431  $158,655 
Loss from operations  (3,122,431)  (158,655)
         
Other income:        
Interest income  409   2,404 
Interest earned on investments held in Trust Account  659,150   1,152,202 
Other income  659,559   1,154,606 
         
(Loss) Income before provision for income taxes  (2,462,872)  995,951 
Provision for income taxes  (128,007)  (252,611)
Net (loss) income $(2,590,879) $743,340 
         
Weighted average shares outstanding of Class A common stock  13,167,740   20,800,000 
         
Basic and diluted income per common share, Class A $0.04  $0.04 
         
Weighted average shares outstanding of Class B common stock  5,200,000   5,200,000 
         
Basic and diluted loss per common share, Class B $(0.59) $(0.02)

The accompanying notes are an integral part of the unaudited condensed financial statements.

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MUDRICK CAPITAL ACQUISITION CORPORATION

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

THREE MONTHS ENDED MARCH 31, 2019

  

Class A

Common Stock

  

Class B

Common Stock

  Additional Paid-in  Retained  Total Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Earnings  Equity 
Balance – January 1, 2019  951,675  $95   5,200,000  $520  $3,322,214  $1,677,179  $5,000,008 
                             
Change in value of common stock subject to possible redemption  (73,598)  (7)        (743,332)     (743,339)
                             
Net income                 743,340   743,340 
Balance – March 31, 2019  878,077  $88   5,200,000  $520  $2,578,882  $2,420,519  $5,000,009 

THREE MONTHS ENDED MARCH 31, 2020

  

Class A

Common Stock

  

Class B

Common Stock

  Additional
Paid-in
  Retained  Total
Stockholders’
 
  Shares  Amount  Shares  Amount  Capital  Earnings  Equity 
Balance – January 1, 2020  693,177  $69   5,200,000  $520  $711,409  $4,288,003  $5,000,001 
                             
Change in value of common stock subject to possible redemption  644,895   65         2,590,817      2,590,882 
                             
Net loss                 (2,590,879)  (2,590,879)
                             
Balance – March 31, 2020  1,338,072  $134   5,200,000  $520  $3,302,226  $1,697,124  $5,000,004 

The accompanying notes are an integral part of the unaudited condensed financial statements.

F-79

MUDRICK CAPITAL ACQUISITION CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

  Three Months Ended March 31, 
  2020  2019 
Cash Flows from Operating Activities:        
Net (loss) income $(2,590,879) $743,340 
Adjustments to reconcile net (loss) income to net cash used in operating activities:        
Interest earned on marketable securities held in Trust Account  (659,150)  (1,152,202)
Changes in operating assets and liabilities:        
Prepaid income taxes  95,275    
Prepaid expenses  (50,409)  (28,543)
Accounts payable and accrued expenses  2,336,484   (131,785)
Income taxes payable  32,732   252,611 
Net cash used in operating activities  (835,947)  (316,579)
         
Cash Flows from Investing Activities:        
Cash withdrawn from Trust Account to pay franchise taxes  40,050   200,300 
Cash withdrawn from Trust Account for redemption of common stock  144,218,760    
Net cash provided by investing activities  144,258,810   200,300 
         
Cash Flows from Financing Activities:        
Proceeds from convertible promissory note – related party  600,000    
Redemption of common stock  (144,218,760)   
Net cash used in financing activities  (143,618,760)   
         
Net Change in Cash  (195,897)  (116,279)
Cash – Beginning of period  208,536   535,946 
Cash – End of period $12,639  $419,667 
         
Non-Cash investing and financing activities:        
Change in value of common stock subject to possible redemption $(2,590,882) $743,339 

The accompanying notes are an integral part of the unaudited condensed financial statements. 

F-80

MUDRICK CAPITAL ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2020

(Unaudited)

1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Mudrick Capital Acquisition Corporation (the “Company”) was incorporated in Delaware on August 28, 2017. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on companies that have recently emerged from bankruptcy court protection. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of March 31, 2020, the Company had not commenced any operations. All activity through March 31, 2020 relates to the Company’s formation, its Initial Public Offering, which is described below, identifying a target company for a Business Combination and activities in connection with the potential acquisition of Hycroft Mining Corporation, a Delaware corporation (“Hycroft”) (see Note 5). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and marketable securities from the proceeds derived from the Initial Public Offering, as defined below.

The registration statement for the Company’s initial public offering (“Initial Public Offering”) 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 March 31, 2020, cash of $12,639 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.

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 that 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.

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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 $10.10 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, as amended (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 timing 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.

The Company initially had until February 12, 2020 to complete a Business Combination. If the Company is unable to complete a Business Combination by the Extended Termination Date (as defined below), 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 to the Company to pay 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 the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

On February 10, 2020, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation (the “Extension Amendment”) to extend the period of time for which the Company was required to consummate a Business Combination from February 12, 2020 to August 12, 2020 (the “Extended Termination Date”). In connection with the Extension Amendment, stockholders elected to redeem an aggregate of 13,890,713 shares of the Company’s Class A common stock. As a result, an aggregate of approximately $144,218,760 (or approximately $10.38 per share) was removed from the Trust Account to pay such stockholders.

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The initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by the Extended Termination Date. 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 by the Extended Termination Date. 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 by the Extended Termination Date 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.

Liquidity and Going Concern

As of March 31, 2020, the Company had a cash balance of approximately $12,600, which excludes interest income of approximately $2,002,000 from the Company’s investments in the Trust Account which is available to the Company for tax obligations. As of March 31, 2020, there was approximately $71.8 million held in the Trust Account. During the three months ended March 31, 2020, the Company withdrew approximately $40,000 of interest income from the Trust Account to pay its franchise 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.

On January 2, 2020, the Company issued an unsecured convertible promissory note (the “Promissory Note”) to the Sponsor in the aggregate amount of $1,500,000 in order to finance transaction costs in connection with a Business Combination. As of March 31, 2020, there was $600,000 outstanding under the Promissory Note. The Promissory Note is non-interest bearing and repayable by the Company to the Sponsor upon the consummation of a Business Combination. The Promissory Note may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant, other than in connection with the Hycroft Business Combination. The warrants would be identical to the Private Placement Warrants (see Note 4).

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. Other than as described above, 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).

If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing either to complete a Business Combination or because it becomes obligated to redeem a significant number of its Public Shares upon completion of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination.

The liquidity condition and date for mandatory liquidation unless there is a Business Combination, the consummation of which is uncertain, raise substantial doubt about the Company’s ability to continue as a going concern through August 12, 2020, the scheduled liquidation date of the Company. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

F-83

In connection with the Company’s assessment of going concern considerations 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 liquidity condition, 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 August 12, 2020.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 12, 2020, which contains the audited financial statements and notes thereto. The interim results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future interim periods.

Emerging growth company

The Company is an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its 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.

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 election to opt out is irrevocable. The Company has 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, the Company, 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 the Company’s 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 accounting standards used.

Use of estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting 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 condensed 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.

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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 March 31, 2020 and December 31, 2019.

Marketable securities held in Trust Account  

At March 31, 2020 and December 31, 2019, substantially all of the assets held in the Trust Account were held in money market funds.  

Common stock subject to possible redemption

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2020 and December 31, 2019, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.

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.

Income taxes

The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of and March 31, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

Net income (loss) per common share

Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and Private Placement to purchase 28,540,000 shares of Class A common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

F-85

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 redeemable common stock is calculated by dividing the interest income earned on the Trust Account (net of applicable franchise and income taxes of approximately $178,000 and $303,000 for the three months ended March 31, 2020 and 2019, respectively) by the weighted average number of Class A redeemable common stock outstanding during the period. Net loss per common share, basic and diluted for Class A and Class B non-redeemable common stock is calculated by dividing the net income (loss), less income attributable to Class A redeemable common stock, by the weighted average number of Class A and Class B non-redeemable common stock outstanding for the period. Class A and Class B non-redeemable common stock includes the Founder Shares and the Placement Units as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.

The following table reflects the calculation of basic and diluted net income (loss) per common share:

  

Three Months Ended

March 31,
2020

  

Three Months Ended

March 31,
2019

 
Redeemable Common Stock        
Numerator: Earnings allocable to Redeemable Common Stock        
Interest Income $659,150  $1,152,202 
Income and Franchise Tax  (178,007)  (302,661)
Net Earnings $481,143  $849,541 
Denominator: Weighted Average Redeemable Common Stock        
Redeemable Common Stock, Basic and Diluted  13,167,740   20,800,000 
 Earnings/Basic and Diluted Redeemable Common Stock $0.04  $0.04 
         
Non-Redeemable Common Stock        
Numerator: Net (Loss) Income minus Redeemable Net Earnings        
Net (Loss) Income $(2,590,879) $743,340 
Redeemable Net Earnings  (481,143)  (849,541)
Non-Redeemable Net Loss $(3,072,022) $(106,201)
Denominator: Weighted Average Non-Redeemable Common Stock        
Non-Redeemable Common Stock, Basic and Diluted (1)  5,200,000   5,200,000 
Loss/Basic and Diluted Non-Redeemable Common Stock $(0.59) $(0.02)

Note: As of March 31, 2020 and 2019, basic and diluted shares are the same as there are no securities that are dilutive to the Company’s common stockholders.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal Depository Insurance Coverage of $250,000. At March 31, 2020 and December 31, 2019, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

Fair value of financial instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.

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3. INITIAL PUBLIC OFFERING

Pursuant to the Initial Public Offering, the Company sold 20,800,000 units at a price of $10.00 per Unit, inclusive of 800,000 Units sold on February 28, 2018 upon the underwriters’ election to partially exercise their over-allotment option. Each Unit consists of one share of Class A common stock (such shares of Class A common stock included in the Units being offered, the “Public Shares”), 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).

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 $0.0001 (“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 Shares 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) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Private Placement Warrants

Concurrently with the closing of the Initial Public Offering, the Sponsor and Cantor purchased an aggregate of 7,500,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant (6,500,000 Private Placement Warrants by the Sponsor and 1,000,000 Private Placement Warrants by Cantor) for an aggregate purchase price of $7,500,000. On February 28, 2018, the Company consummated the sale of an additional 240,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, of which 200,000 Private Placement Warrants were purchased by the Sponsor and 40,000 Private Placement Warrants were purchased by Cantor, generating gross proceeds of $240,000. Each Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. The proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination by the Extended Termination Date, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor, Cantor or their permitted transferees. The warrants will expire five years after the completion of the Company’s Business Combination or earlier upon redemption or liquidation. In addition, for as long as the Private Placement Warrants are held by Cantor or its designees or affiliates, they may not be exercised after five years from the effective date of the registration statement for the Initial Public Offering. 

The Private Placement Warrants have been deemed compensation by Financial Industry Regulatory Authority, or FINRA and are therefore subject to a 180-day lock-up pursuant 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 and the bona fide officers or partners of the underwriter and any such participating selected dealer.

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.

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Related Party Loans

On September 25, 2017, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Proposed Public Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and payable on the earlier of March 31, 2018 or the completion of the Initial Public Offering. The Note was repaid upon the consummation of the Initial Public Offering.

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 officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released 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. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital 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.

On January 2, 2020, the Company issued an unsecured convertible promissory note (the “Promissory Note”) to the Sponsor in the aggregate amount of $1,500,000 in order to finance transaction costs in connection with a Business Combination. The Promissory Note is non-interest bearing and repayable by the Company to the Sponsor upon the consummation of a Business Combination. The Promissory Note will be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account. The Promissory Note may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant, other than in connection with the Hycroft Business Combination. The warrants would be identical to the Private Placement Warrants. As of March 31, 2020, there was $600,000 outstanding under the Promissory Note. In April 2020, the Company withdrew an additional $100,000 under the Promissory Note.

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, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. For each of the three months ended March 31, 2020 and 2019, the Company incurred $30,000 of administrative service fees. At December 31, 2019, $10,000 of such fees are included in accounts payable and accrued expenses in the accompanying condensed balance sheets.

5. COMMITMENTS AND CONTINGENCIES

Risks and Uncertainties

Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Registration Rights

Pursuant to a registration rights agreement entered into on February 7, 2018, the holders of Founder Shares, Private Placement Warrants, securities issuable pursuant to the Forward Purchase Contract (see below), and warrants that may be issued upon conversion of Working Capital Loans are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock). These holders have certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $4,160,000 in the aggregate. 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 of the underwriting agreement.

F-88

On February 12, 2020, the Company entered into an amendment (the “UA Amendment”) to its underwriting agreement with Cantor, pursuant to which the deferred underwriting fees provided for by the underwriting agreement, which were originally payable by the Company to the underwriters in cash upon completion of an initial Business Combination, shall be payable upon completion of the Hycroft Business Combination (as defined below) through a combination of (i) $2,500,000, payable in cash and directly from the Trust Account, (ii) $2,000,000, payable in shares of Class A common stock, valued for these purposes at $10.00 per share and (iii) an amount up to $2,780,000, determined as follows: (A) if Third Party Equity Value (as defined in the UA Amendment) is less than or equal to $75,000,000, an amount payable in Class A common stock, valued for these purposes at $10.00 per share, equal to the product of (x) 2,780,000 and (y) a fraction, the numerator of which is the Third Party Equity Value and the denominator of which is $75,000,000 or (B) if Third Party Equity Value is greater than $75,000,000, $2,780,000 payable in cash and directly from the Trust Account (collectively, the “Deferred Underwriting Commission”); provided, however, to the extent Cantor continues to beneficially own and hold for its own account the Specified Shares (as defined in the UA Amendment) on the date of the consummation of the Hycroft Business Combination (the “Acquisition Closing Date”), (1) the Deferred Underwriting Commission payable in Class A common stock pursuant to clauses (ii) and (iii) above shall be reduced by an amount equal to the product of (x) $10.00 and (y) the number of Specified Shares beneficially owned and held by Cantor for its own account on the Acquisition Closing Date, and (2) the Deferred Underwriting Commission payable in cash and directly from the Trust Account pursuant to this sentence shall be increased by such same and equal amount. As of March 31, 2020, the trust value was approximately $72,000,000 which is below the threshold for situation (A) as described above. Therefore, the amount payable for (iii) as of March 31, 2020 would be approximately $2,670,000. The UA Amendment does not amend, modify or supplement any other terms of the underwriting agreement.

Forward Purchase Contract

On January 24, 2018, the Company entered into a forward purchase contract (the “Forward Purchase Contract”) with the Sponsor, pursuant to which the Sponsor committed to purchase, in a private placement for gross proceeds of $25,000,000 to occur concurrently with the consummation of a Business Combination, 2,500,000 Units (the “Forward 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 of Forward Units will be used as part of the consideration to the sellers in a Business Combination; any excess funds from this private placement will be used for working capital purposes in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their Public Shares and provides the Company with a minimum funding level for a Business Combination.

Purchase Agreement

On January 13, 2020, the Company entered into a Purchase Agreement (as amended on February 26, 2020, and as may be further amended from time to time, the “Purchase Agreement”) with MUDS Acquisition Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Acquisition Sub”), and Hycroft, pursuant to which the parties thereto intend to consummate a business combination transaction (the “Hycroft Business Combination”) pursuant to which Hycroft will sell to Acquisition Sub, and Acquisition Sub will purchase from Hycroft, all of the issued and outstanding equity interests of Hycroft’s subsidiaries and substantially all of Hycroft’s other assets (collectively, the “Transferred Assets”).

In consideration for the Transferred Assets and in connection with the consummation of the Hycroft Business Combination, Acquisition Sub will deliver, or cause to be delivered on its behalf, to Hycroft (a) a number of shares of the Company’s Class A common stock equal to (i) (A) $325,000,000, plus (B) the Surrendered Shares Value (as defined in the Purchase Agreement), minus (C) the 1.5 Lien Share Payment Value (as defined in the Purchase Agreement), minus (D) the 1.5 Lien Cash Payment Amount (as defined in the Purchase Agreement), minus (E) the Excess Notes Share Payment Amount (as defined in the Purchase Agreement), minus (F) the Excess Notes Cash Payment Amount (as defined in the Purchase Agreement), divided by (ii) $10.00, which Hycroft will promptly distribute to its stockholders and (b) the Excess Notes (as defined in the Purchase Agreement) and Hycroft’s 1.5 lien notes acquired by Acquisition Sub in connection with the consummation of the Hycroft Business Combination and pursuant to the transactions described in the Purchase Agreement. In addition, (x) the Company and Acquisition Sub will assume certain of Hycroft’s liabilities, including the Company’s assumption of certain debt obligations of Hycroft and Hycroft’s liabilities and obligations under its existing warrant agreement, and (y) Acquisition Sub will pay off, or cause to be paid off, Hycroft’s other outstanding indebtedness for borrowed money, on Hycroft’s behalf, including under Hycroft’s first lien debt and promissory note.

The Hycroft Business Combination will be consummated subject to the deliverables and provisions as further described in the Purchase Agreement.

F-89

On February 7, 2020, a purported class action complaint was filed by a purported holder of warrants of Hycroft in the Court of Chancery of the State of Delaware against the Company and Hycroft. The complaint seeks a declaratory judgment that the transactions contemplated under the Purchase Agreement constitute a “Fundamental Change” under the terms of the Hycroft warrant agreement and thereby requiring that the Hycroft warrants be assumed by the Company as part of the Hycroft Business Combination, in addition to asserting claims for (i) breach or anticipatory breach of contract against Hycroft, (ii) breach or anticipatory breach of the implied covenant of good faith and fair dealing against Hycroft, and (iii) tortious interference with contractual relations against the Company. The complaint seeks unspecified money damages and also seeks an injunction enjoining Hycroft and the Company from consummating the Hycroft Business Combination. On February 26, 2020, the Company and Hycroft entered into an Amendment to the Purchase Agreement whereby Hycroft's liabilities and obligations under the Hycroft warrant agreement shall be included as a Parent Assumed Liability under the Purchase Agreement. On March 27, 2020, the Company and Hycroft filed motions to dismiss the complaint.

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. As of March 31, 2020 and December 31, 2019, there were 1,338,072 and 693,177 shares of Class A common stock issued and outstanding (excluding 5,571,215 and 20,106,823 shares of common stock subject to possible redemption), respectively.

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 March 31, 2020 and December 31, 2019, there were 5,200,000 shares 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 will 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, as is the case with the Hycroft Business Combination) 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.

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 March 31, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding.

F-90

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 to 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 Public 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 Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company may redeem the Public Warrants (except with respect to the Private Placement Warrants):

·in whole and not in part;
·at a price of $0.01 per warrant;
·at any time during the exercise period;
·upon a minimum of 30 days’ prior written notice of redemption; and

F-40


·if, and only if, the last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
·If, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination by the Extended Termination Date and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

7.    INCOME TAX

The Company’s net deferred tax assets are as follows:

    

December 31, 

    

December 31, 

2019

2018

Deferred tax asset

 

  

Organizational costs/Startup expenses

$

227,930

$

86,012

Total deferred tax assets

 

227,930

86,012

Valuation allowance

 

(227,930)

(86,012)

Deferred tax asset, net of allowance

$

$

F-91

The income tax provision consists of the following:

    

Year Ended

    

Year Ended

December 31, 

December 31, 

2019

2018

Federal

 

  

Current

$

899,804

$

555,449

Deferred

 

(141,918)

(86,012)

 

  

State

 

  

Current

 

Deferred

 

Change in valuation allowance

 

141,918

86,012

Income tax provision

$

899,804

$

555,449

As of December 31, 2019, the Company had no U.S. federal and state net operating loss carryovers (“NOLs”) available to offset future taxable income. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control as defined under the regulations.

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended December 31, 2019 and 2018, the change in the valuation allowance was $141,918 and $86,012, respectively.

F-41


A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2019 sand 2018 is as follows:

Year Ended

Year Ended

 

December 31, 

December 31, 

 

    

2019

    

2018

 

Statutory federal income tax rate

21.0

%

21.0

%

State taxes, net of federal tax benefit

0.0

%

0.0

%

True-ups

0.6

%

0.0

%

Change in valuation allowance

4.0

%

3.8

%

Income tax provision

25.6

%

24.8

%

7.The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions and is subject to examination by the various taxing authorities. The Company considers New York to be a significant state tax jurisdiction.

8.    FAIR VALUE MEASUREMENTS

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measuredre- measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measuredre- measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1:

Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:

Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3:

Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019 and 2018, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

    

    

December 31, 

    

December 31, 

Description

Level

2019

2018

Assets:

 

  

 

  

 

  

Trust Account – U.S. Treasury Securities Money Market Fund

 

1

$

215,385,757

$

212,916,691

Description Level  

March 31,

2020

  December 31,
2019
 
Assets:            
Trust Account – U.S. Treasury Securities Money Market Fund  1  $71,786,097  $215,385,757 

8.See Note 1 for details on the subsequent redemptions and adjustment to the Trust Account.

F-42


9.    SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

In AprilOn February 7, 2020, a purported class action complaint was filed by a purported holder of warrants, of Hycroft Mining Corporation (“Seller”), in the Court of Chancery of the State of Delaware against the Company and Seller. The complaint seeks a declaratory judgment that the transactions contemplated under the Purchase Agreement constitute a “Fundamental Change” under the terms of Seller warrant agreement and thereby requiring that Seller warrants be assumed by the Company as part of the Recapitalization Transaction, in addition to asserting claims for (i) breach or anticipatory breach of contract against Seller, (ii) breach or anticipatory breach of the implied covenant of good faith and fair dealing against Seller, and (iii) tortious interference with contractual relations against the Company. The complaint seeks unspecified money damages and also seeks an injunction enjoining Seller and the Company from consummating the Recapitalization Transaction. On February 26, 2020, the Company withdrewand Seller entered into an additional $100,000Amendment to the Purchase Agreement whereby Seller’s liabilities and obligations under Seller warrant agreement shall be included as Parent Assumed Liability under the Promissory Note.Purchase Agreement.

F-92

F-43


HYCROFT MINING HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share amounts)

June 30,

December 31,

2020

2019

    

(unaudited)

    

Assets:

 

  

 

  

Cash

$

47,293

$

6,220

Accounts receivable

 

372

 

97

Inventories - Note 4

 

9,303

 

4,453

Ore on leach pads - Note 4

 

28,180

 

22,062

Prepaids and other - Note 5

 

4,822

 

2,648

Restricted cash - Note 6

 

 

3,270

Current assets

 

89,970

 

38,750

Other assets, non-current - Note 5

 

20,808

 

24,886

Plant, equipment, and mine development, net - Note 7

 

42,272

 

31,524

Restricted cash - Note 6

 

39,631

 

39,477

Total assets

$

192,681

$

134,637

Liabilities:

 

  

 

  

Accounts payable

$

19,817

$

10,746

Other liabilities, current - Note 8

 

1,834

 

3,939

Royalty obligation, current - Note 10

 

296

 

Interest payable

 

 

846

Debt, net, current - Note 9

 

 

553,965

Current liabilities

 

21,947

 

569,496

Other liabilities, non-current - Note 8

 

153

 

18

Debt, net, non-current - Note 9

 

139,044

 

Royalty obligation, non-current - Note 10

 

29,699

 

Asset retirement obligation, non-current - Note 11

 

4,561

 

4,374

Total liabilities

 

195,404

 

573,888

Commitments and contingencies - Note 20

 

  

 

  

Stockholders’ (deficit) equity:(1) - Note 12

 

  

 

  

Common stock, $0.0001 par value; 400,000,000 shares authorized; 50,160,042 issued and outstanding at June 30, 2020; and 345,431 issued and 323,328 outstanding at December 31, 2019

 

5

 

Additional paid-in capital

 

466,047

 

5,187

Accumulated deficit

 

(468,775)

 

(444,438)

Total stockholders’ (deficit)

 

(2,723)

 

(439,251)

Total liabilities and stockholders’ equity

$

192,681

$

134,637


(1)Retroactively restated for the reverse recapitalization as described in Note 2 - Summary of Significant Accounting Policies.

The accompanying notes are an integral part of these unaudited interim financial statements.

F-44


HYCROFT MINING HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(U.S. dollars in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

    

2020

    

2019

    

2020

    

2019

Revenues - Note 13

$

7,636

$

$

18,760

$

Cost of sales:

 

  

 

  

 

  

 

  

Production costs

 

7,486

 

 

16,421

 

Mine site period costs - Note 4

 

11,996

 

 

18,630

 

  

Depreciation and amortization mine site period costs

 

874

 

 

1,432

 

Depreciation and amortization

 

548

 

 

1,324

 

Write-down of production inventories - Note 4

 

10,959

 

 

17,924

 

Total cost of sales

 

31,863

 

 

55,731

 

Operating expenses:

 

  

 

  

 

  

 

  

General and administrative

 

10,432

 

1,214

 

12,438

 

3,161

Accretion - Note 11

 

94

 

105

 

187

 

211

Project and development

 

 

4,574

 

 

6,790

Pre-production depreciation and amortization

 

 

238

 

 

1,065

Care and maintenance

 

 

 

 

3,770

Loss from operations

 

(34,753)

 

(6,131)

 

(49,596)

 

(14,997)

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense, net of capitalized interest of $290, $272, $334, and $417 respectively - Note 9

 

(15,072)

 

(15,641)

 

(34,959)

 

(30,039)

Interest income

 

35

 

110

 

147

 

226

Loss before reorganization items and income taxes

 

(49,790)

 

(21,662)

 

(84,408)

 

(44,810)

Reorganization items

 

 

(285)

 

 

(577)

Loss before income taxes

 

(49,790)

 

(21,947)

 

(84,408)

 

(45,387)

Income taxes - Note 15

 

 

 

 

Net loss

$

(49,790)

$

(21,947)

$

(84,408)

$

(45,387)

Loss per share:

 

  

 

  

 

  

 

  

Basic - Note 16

$

(2.71)

$

(73.21)

$

(9.02)

$

(151.80)

Diluted - Note 16

$

(2.71)

$

(73.21)

$

(9.02)

$

(151.80)

Weighted average shares outstanding(1):

 

  

 

  

 

  

 

  

Basic - Note 16

 

18,395,983

 

299,780

 

9,359,655

 

299,001

Diluted - Note 16

 

18,395,983

 

299,780

 

9,359,655

 

299,001


(1)Retroactively restated for the reverse recapitalization. Refer to Note 2 - Summary of Significant Accounting Policies and Note 16 - Loss Per Share for further information.

The accompanying notes are an integral part of these unaudited interim financial statements.

F-45


HYCROFT MINING HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollars in thousands)

Six Months Ended June 30,

    

2020

    

2019

Cash flows from operating activities:

 

  

 

  

Net loss

$

(84,408)

$

(45,387)

Adjustments to reconcile net loss for the period to net cash used in operating activities:

 

  

 

  

Non-cash portion of interest expense - Note 9

 

30,376

 

24,981

Write-down of production inventories - Note 4

 

17,924

 

Depreciation and amortization

 

2,758

 

1,065

Stock-based compensation - Note 14

 

592

 

516

Accretion - Note 11

 

187

 

211

Phantom share compensation

 

225

 

525

Amortization of royalty obligation - Note 10

 

(5)

 

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable

 

(275)

 

Production-related inventories

 

(24,787)

 

(7,613)

Materials and supplies inventories

 

(2,484)

 

(425)

Prepaids and other

 

(3,761)

 

535

Other assets, non-current

 

(1,005)

 

(120)

Accounts payable

 

7,807

 

1,720

Other liabilities

 

(103)

 

93

Interest payable

 

(818)

 

(236)

Other liabilities, non-current

 

135

 

Net cash used in operating activities

 

(57,642)

 

(24,135)

Cash flows used in investing activities:

 

  

 

  

Additions to plant, equipment, and mine development

 

(11,704)

 

(9,725)

Net cash used in investing activities

 

(11,704)

 

(9,725)

Cash flows from financing activities:

 

  

 

  

Proceeds from private placement - Note 3

 

75,963

 

Proceeds from Sprott Credit Agreement - Note 3 and 9

 

68,600

 

Proceeds from royalty obligation - Note 3 and 10

 

30,000

 

Proceeds from forward purchase contract - Note 3

 

25,000

 

Proceeds from Recapitalization Transaction - Note 3

 

10,419

 

Proceeds from 1.25 Lien Note Issuances

 

44,841

 

36,927

Repayment of First Lien Agreement - Note 9

 

(125,468)

 

Transaction and issuance costs - Note 19

 

(15,138)

 

(1,881)

Repayment of Promissory Note - Note 3

 

(6,914)

 

Net cash provided by financing activities

 

107,303

 

35,046

Net increase in cash and restricted cash

 

37,957

 

1,186

Cash and restricted cash, beginning of period

 

48,967

 

52,861

Cash, end of period

$

86,924

$

54,047

Reconciliation of cash and restricted cash:

 

  

 

  

Cash

$

47,293

$

12,576

Restricted cash - current

 

 

2,547

Restricted cash - non-current

 

39,631

 

38,924

Total cash and restricted cash

$

86,924

$

54,047

See Note 19 - Supplemental Cash Flow Information for additional details.

The accompanying notes are an integral part of these unaudited interim financial statements.

F-46


HYCROFT MINING HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY (UNAUDITED)

(U.S. dollars in thousands, except share amounts)

Total

Additional

Stockholders’

Common Stock(1)

Treasury Stock(1)

Paid-in

Accumulated

(Deficit)

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital(1)

    

Deficit

    

Equity

Balance at January 1, 2019

 

307,831

$

 

17,927

$

$

5,187

$

(345,543)

$

(340,356)

Shares issued

 

10,105

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

(23,440)

 

(23,440)

Balance at March 31, 2019

 

317,936

 

 

17,927

 

 

5,187

 

(368,983)

 

(363,796)

Share repurchased

 

 

 

4,176

 

 

 

 

Net loss

 

 

 

 

 

 

(21,947)

 

(21,947)

Balance at June 30, 2019

 

317,936

$

 

22,103

$

$

5,187

$

(390,930)

$

(385,743)

Total

Additional

Stockholders’

Common Stock(1)

Treasury Stock(1)

Paid-in

Accumulated

(Deficit)

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital(1)

    

Deficit

    

Equity

Balance at January 1, 2020

 

345,431

$

 

22,103

$

$

5,187

$

(444,438)

$

(439,251)

Net loss

 

 

 

 

 

 

(34,618)

 

(34,618)

Balance at March 31, 2020

 

345,431

$

 

22,103

$

$

5,187

$

(479,056)

$

(473,869)

Conversion of Seller’s 2.0 Lien Notes to common shares of Seller and distribution of HYMC common stock(2)

 

14,795,153

 

2

 

(22,103)

 

 

146,217

 

74,640

 

220,859

Exchange of Seller’s 1.5 Lien Notes for HYMC common stock

 

16,025,316

 

2

 

 

 

160,252

 

(14,569)

 

145,685

Common shares issued in private placement

 

7,596,309

 

1

 

 

 

75,962

 

 

75,963

Exchange of Seller’s 1.25 Lien Notes for HYMC common stock

 

4,845,920

 

 

 

 

48,459

 

 

48,459

Shares issued pursuant to forward purchase agreement with SPAC sponsor, including conversion of Class B shares

 

4,813,180

 

 

 

 

25,000

 

 

25,000

Unredeemed SPAC shares of MUDS public stockholders

 

1,197,704

 

 

 

 

3,723

 

 

3,723

Common shares issued pursuant to Sprott Credit Agreement

 

496,634

 

 

 

 

6,282

 

 

6,282

Common shares issued to underwriter

 

44,395

 

 

 

 

444

 

 

444

Vesting of restricted stock(3)

 

 

 

 

 

1,802

 

 

1,802

Equity issuance costs

 

 

 

 

 

(7,281)

 

 

(7,281)

Net loss

 

 

 

 

 

 

(49,790)

 

(49,790)

Balance at June 30, 2020

 

50,160,042

$

5

 

$

$

466,047

$

(468,775)

$

(2,723)


(1)Retroactively restated for the reverse recapitalization as described in Note 2 - Summary of Significant Accounting Policies.
(2)Includes 3,511,820 shares of HYMC common stock received by Seller which were surrendered by the Company (formerly known as Mudrick Capital Acquisition Corporation).
(3)As of June 30, 2020 there were 148,803 unissued shares underlying restricted stock units which had vested.

The accompanying notes are an integral part of these unaudited interim financial statements.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

1. Company Overview

Hycroft Mining Holding Corporation (formerly known as Mudrick Capital Acquisition Corporation (“MUDS”)) and its subsidiaries (collectively, “Hycroft”, the “Company”, “we”, “us”, “our”, “it”, “HYMC”, etc.) is a U.S.-based gold producer that is focused on operating and developing its wholly-owned Hycroft Mine in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales represent 100% of the Company’s operating revenues and the market prices of gold and silver significantly impact the Company’s financial position, operating results, and cash flows. The Hycroft Mine is located in the state of Nevada and the corporate office is located in Denver, Colorado.

During the second quarter of 2019, the Company restarted open pit mining operations at the Hycroft Mine, and, during the third quarter of 2019, produced and sold gold and silver which it has continued to do on an approximate weekly basis since restarting. As part of the 2019 restart of mining operations, existing equipment was re-commissioned, including haul trucks, shovels and a loader, upgrades were made to the crushing system and new leach pad space was added to the existing leach pads. During 2020, the Company continued to increase its operations by mining more tons, procuring additional mobile equipment rentals, and increasing its total headcount. Through May 29, 2020, the Company obtained all of its financing from related party debt issuances (see Note 21 - Related Party Transactions), which were extinguished in connection with the Recapitalization Transaction with MUDS (discussed below).

M3 Engineering and Technology Corporation (“M3 Engineering”), in conjunction with SRK Consulting (U.S.), Inc. (“SRK”) and the Company, completed the Hycroft Technical Report Summary, Heap Leaching Feasibility Study, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants, with an effective date of July 31, 2019 (the “Hycroft Technical Report”), for a two-stage, heap oxidation and subsequent leaching of transition and sulfide ores. The 2019 Hycroft Technical Report projects the economic viability and potential future cash flows for the Hycroft Mine when mining operations expand to levels presented in the 2019 Hycroft Technical Report.

Recapitalization Transaction with MUDS

As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, pursuant to the Purchase Agreement, the Company completed a business combination Recapitalization Transaction with MUDS, a publicly-traded blank check special purpose acquisition corporation or “SPAC,” Acquisition Sub, and Seller (as each of such terms are defined herein). The Recapitalization Transaction was completed upon receiving regulatory approvals and stockholder approvals from each of MUDS and Seller. Following the close of the Recapitalization Transaction, MUDS and the entities purchased from Seller were consolidated under Hycroft Mining Holding Corporation, by amending and restating the Company’s certificate of incorporation to reflect the Company’s change in name. Pursuant to the consummation of the Recapitalization Transaction, the shares of common stock of Hycroft Mining Holding Corporation were listed on the Nasdaq Stock Market under the ticker symbol “HYMC”. Upon closing of the Recapitalization Transaction, the Company’s unrestricted cash available for use totaled $68.9 million, the number of shares of HYMC common stock issued and outstanding totaled 50,160,042. In addition, the Company had 34,289,999 outstanding warrants to purchase an equal number of shares of HYMC common stock at $11.50 per share and 12,721,623 warrants to purchase 3,210,213 shares of HYMC common stock at a price of $44.82 per share.

For more information on the consummation of the Recapitalization Transaction with MUDS, see Note 3 – Recapitalization Transaction.

Recent developments

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States of America. Efforts implemented by local and national governments, as well as businesses, including temporary closures, are expected to have adverse impacts on local, national and the global economies. The Company has implemented health and safety policies for employees that follow guidelines published by the Center for Disease Control (CDC) and the Mine Safety and Health Administration (MSHA). The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and continued spread of the outbreak, and the direct and indirect impacts on our employees, vendors and customers, all of which are uncertain and cannot be fully anticipated or predicted. Since the Company’s Hycroft Mine represents the entirety of its operations, any COVID-19 outbreak at the mine site could result in an entire shutdown of the Hycroft Mine itself which would negatively impact the Company’s financial position, operating results, and cash flows. As of the date of these financial statements, the extent to which COVID-19 may impact our financial condition. results of operations or cash flows is uncertain, but could be material and adverse.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

2. Summary of Significant Accounting Policies

Basis of presentation

These condensed consolidated interim financial statements have been prepared, without audit, in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, these financial statements do not include all information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying condensed consolidated unaudited interim financial statements include all adjustments which are necessary for a fair presentation of the interim financial position, operating results and cash flows for the periods presented.

Certain reclassifications have been made to the prior periods presented in these financial statements to conform to the current period presentation, which had no effect on previously reported total assets, liabilities, cash flows, or net loss.

References to “$” refers to United States currency.

Recapitalization Transaction with MUDS

The Recapitalization Transaction (see Note 3 - Recapitalization Transaction) was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, for financial reporting purposes, MUDS has been treated as the “acquired” company and Hycroft Mining Corporation (“Seller”) has been treated as the “acquirer”. This determination was primarily based on (1) stockholders of Seller immediately prior to the Recapitalization Transaction with MUDS having a relative majority of the voting power of the combined entity; (2) the operations of Seller prior to the Recapitalization Transaction with MUDS comprising the only ongoing operations of the combined entity; (3) four of the seven members of the board of directors immediately following the Recapitalization Transaction with MUDS were directors of Seller immediately prior to the Recapitalization Transaction; and (4) executive and senior management of Seller comprises the same for the Company.

Based on Seller being the accounting acquirer, the financial statements of the combined entity represent a continuation of the financial statements of Seller, with the acquisition treated as the equivalent of Seller issuing stock for the net assets of MUDS, accompanied by a recapitalization. The net assets of MUDS were recognized at historical cost as of the date of the Recapitalization Transaction, with no goodwill or other intangible assets recorded. Comparative information prior to the Recapitalization Transaction in these financial statements are those of Seller and the accumulated deficit of Seller has been carried forward after the Recapitalization Transaction. The shares and net loss per common share prior to the Recapitalization Transaction, have been retroactively restated as shares reflecting the exchange ratio established in the Recapitalization Transaction to effect the reverse recapitalization (1 Seller share for 0.112 HYMC share). See Note 3 – Recapitalization Transaction for additional information.

Going concern

The financial statements of the Company have been prepared on a “going concern” basis, which contemplates the presumed continuation of the Company even though events and conditions exist that, when considered individually or in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is probable that, without additional capital injections, the Company will be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.

For the six months ended June 30, 2020, the Company incurred a net loss of $84.4 million and the net cash used in operating activities was $57.6 million. As of June 30, 2020, the Company had available cash on hand of $47.3 million, working capital of $68.0 million, total liabilities of $195.4 million, and an accumulated deficit of $468.8 million. Although the Company recently completed the Recapitalization Transaction with MUDS, using its internal forecasts and cash flow projection models, it currently projects there will be insufficient cash to meet its future obligations as they become due as the Company continues to ramp up the Hycroft Mine’s operations from current levels or to levels which are contemplated by the 2019 Hycroft Technical Report.

Consistent with our financial reporting and accounting policies, and as part of the preparation of the second quarter 2020 financial statements, the Company performed routine quarter-end metallurgical balancing analysis, which is a process that estimates the remaining recoverable gold and silver ounces on the leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, crushed ore sampling, leach pad and solution sampling, estimated recovery percentages based on ore type, domain, and oxidation levels achieved, and quantities of gold and silver actually recovered. During the second quarter of

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

2020, based on metallurgical balancing results, the Company determined that 6,512 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off such ounces. The write-down of these ounces significantly reduced the Company’s projected revenues for the second half of 2020.

The Company has been unsuccessful in achieving its operating and production costs targets at the Hycroft Mine. During the second quarter of 2020, the Company’s production costs, mine site period costs, and the cash portion of the write-down of production inventories totaled $29.7 million, which exceeded second quarter 2020 revenues of $7.6 million by $22.1 million. Higher than planned operating and production costs were the result of: (1) increased contractor support for technical and manpower shortages in crusher operations, mobile maintenance, and leach pad operations; (2) overuse of processing reagents used in the leach pad operations due to poor planning, monitoring, and execution; (3) higher operating costs in the crusher, due to higher than planned belt failures; and (4) higher maintenance costs for the owned mining fleet, due to unexpected timing of component failures. As a result of actual second quarter 2020 operating and production costs incurred, the Company has revised its future forecasts of production and operating cost estimates for the second half of 2020 which has reduced its estimated future cash flows.

The Company’s ability to continue as a going concern is contingent upon achieving its sales, production, cost, and other operating targets, as well as the success of a future financing transaction to provide additional capital financing for working capital and construction of its leach pad. The Company has begun the process of speaking with its financial advisors and stakeholders about options and timing related to securing additional financing or capital that may permit it to complete the construction of its leach pad and continue to ramp up its operations. While the Company has received a non-binding letter of support from its two largest stakeholders, the Board of Directors of the Company intends to evaluate its options to ensure the necessary capital is raised on terms favorable to and in the best interests of all of its shareholders. The Company has no commitment from any party to provide additional financing, and there can be no assurance that any funding will be available, or if available, that its terms will be favorable or acceptable to the Company. At this time, the Company does not have an expected time frame for, or an expectation with respect to, securing additional financial capital, if at all.

These financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of any liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern. As such, recorded amounts in these financial statements (including without limitation, stockholders’ equity) have been prepared in accordance with GAAP on a historical-cost basis, as required, which do not reflect or approximate the current fair value of the Company’s assets or management’s assessment of the Company’s overall enterprise or equity value.

Use of estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in these financial statements and accompanying notes. The more significant areas requiring the use of management estimates and assumptions relate to: recoverable gold and silver on the leach pads and in-process inventories; the useful lives of long-lived assets; probabilities of future expansion projects; estimates of mineral reserves; estimates of life-of-mine production timing and volumes; current and future mining and processing plans; environmental reclamation and closure costs; deferred taxes and related valuation allowances; and estimates of fair value for asset impairments and financial instruments. The Company bases its estimates on historical experience and various assumptions that are believed to be reasonable at the time the estimate is made. Actual results may differ from amounts estimated in these financial statements, and such differences could be material. Accordingly, amounts presented in these financial statements are not indicative of results that may be expected for future periods.

Cash

Cash has historically consisted of cash balances and highly liquid investments with an original maturity of three months or less. The Company has not experienced any losses on cash balances and believes that no significant risk of loss exists with respect to its cash. As of June 30, 2020 and December 31, 2019, the Company held no cash equivalents.

Restricted cash is excluded from cash and is listed separately on the condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, the Company held $39.6 million and $42.7 million in restricted cash, respectively. See Note 6 – Restricted Cash for additional information.

Accounts receivable

Accounts receivable consists of amounts due from customers for gold and silver sales. The Company has evaluated the customers’ credit risk, payment history and financial condition and determined that no allowance for doubtful accounts is necessary. The entire accounts receivable balance is expected to be collected during the next 12 months.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Ore on leach pads and inventories

The Company’s production-related inventories include: ore on leach pads; in-process inventories; and doré finished goods. Production-related inventories are carried at the lower of average cost or net realizable value. Cost includes mining (ore and waste); processing; refining costs incurred during production stages; and mine site overhead and depreciation and amortization relating to mining and processing operations. Net realizable value represents the estimated future sales price of production-related inventories computed using the London Bullion Market Association’s (“LBMA”) quoted period-end metal prices, less any further estimated processing, refining, and selling costs.

Write-downs of production inventories

The recovery of gold and silver at the Hycroft Mine is accomplished through a heap leaching process, the nature of which limits the Company’s ability to precisely determine the recoverable gold ounces in ore on leach pads. The Company estimates the quantity of recoverable gold ounces in ore on leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, crushed ore sampling, solution sampling, and estimated recovery percentages based on ore type and domain. The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore gold contents to the actual gold ounces recovered (metallurgical balancing). Changes in recovery rate estimates from metallurgical balancing that do not result in write-downs are accounted for on a prospective basis. When a write-down is required, production-related inventories are adjusted to net realizable value with adjustments recorded as Write-down of production inventories, which is a component of Cost of sales in the condensed consolidated statements of operations. See Note 4 – Inventories for additional information on the Company’s write-downs.

Mine site period costs

The Company evaluates its mine site costs incurred, which are normally recorded to the carrying value of production-related inventories, to determine if any such costs are a result of recurring or significant downtime or delays, unusually high levels of repairs, inefficient operations, overuse of processing reagents, or other costs or activities which significantly increase the cost per ounce of production-related inventories and are considered unusual. If costs are determined to meet the criteria and, therefore, cannot be recorded to the carrying value of production-related inventories, then the Company recognizes such costs in the period incurred as Mine site period costs or Depreciation and amortization mine site period costs, which are components of Cost of sales on the condensed consolidated statements of operations.

Ore on leach pads

Ore on leach pads represents ore that is being treated with a chemical solution to dissolve the contained gold. Costs are added to ore on leach pads based on current mining costs, including applicable depreciation and amortization relating to mining operations. As gold-bearing materials are further processed, costs are transferred from ore on leach pads at an average cost per estimated recoverable ounce of gold to in-process inventories.

In-process inventories

In-process inventories represent gold-bearing concentrated materials that are in the process of being converted to a saleable product using a Merrill-Crowe plant or carbon in column processing method. As gold ounces are recovered from in-process inventories, costs are transferred at an average cost per ounce of gold to precious metals inventory.

Precious metals inventory

Precious metals inventory consists of doré and loaded carbon containing both gold and silver, which is ready for offsite shipment and sale to a third party. As gold ounces are sold, costs are recognized in Production costs and Depreciation and amortization in the condensed consolidated statements of operations at an average cost per gold ounce sold.

Materials and supplies

Materials and supplies are valued at the lower of average cost or net realizable value. Cost includes applicable taxes and freight.

Fair value measurements

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements, defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis;

Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Certain financial instruments, including Cash, Restricted cash, Accounts receivable, Prepaids and other, Accounts payable, and Other liabilities, current are carried at cost, which approximates their fair value due to the short-term nature of these instruments. See Note 18 - Fair Value Measurements for additional information.

Plant, equipment, and mine development, net

Expenditures for new facilities and equipment, and expenditures that extend the useful lives or increase the capacity of existing facilities or equipment are capitalized and recorded at cost. Such costs are depreciated using either the straight-line method over the estimated productive lives of such assets or the units-of-production method (when actively operating) at rates sufficient to depreciate such costs over the estimated proven and probable reserves as gold ounces are recovered. See Note 7 – Plant, Equipment, and Mine Development, Net for additional information.

Mine development

Mine development costs include the cost of engineering and metallurgical studies, drilling and assaying costs to delineate an ore body, environmental costs, and the building of infrastructure. Additionally, interest is capitalized to mine development until such assets are ready for their intended use. Any of the above costs incurred before mineralization is classified as proven and probable reserves are expensed. During the second half of 2019, the Company established proven and probable mineral reserves.

Drilling, engineering, metallurgical, and other related costs are capitalized for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body, converting non-reserve mineralization to proven and probable mineral reserves, infrastructure planning, or supporting the environmental impact statement. All other drilling costs are expensed as incurred. Drilling costs incurred during the production phase for operational ore control are allocated to production-related inventories to be included as a component of Total cost of sales on the condensed consolidated statements of operations.

Mine development costs are amortized using the units-of-production method based upon estimated recoverable ounces in proven and probable mineral reserves. To the extent such capitalized costs benefit an entire ore body, they are amortized over the estimated life of that ore body. Capitalized costs that benefit specific ore blocks or areas are amortized over the estimated life of that specific ore block or area. Recoverable ounces are determined by the Company based upon its proven and probable mineral reserves and estimated metal recoveries associated with those mineral reserves.

Equipment not in use

From time to time the Company may determine that certain of its property and equipment no longer fit into its strategic operating plans and commence activities to sell such identified assets. The Company evaluates equipment not in use for held-for-sale classification in accordance with ASC Topic 360 Property, Plant, and Equipment (“ASC 360”). If property and equipment do not meet the held-for-sale criteria in ASC 360, but have been taken out of service for sale or were never placed into service, the costs of such assets are included in Other assets, non-current. In accordance with its impairment policy, the Company reviews and evaluates its equipment not in use for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. For comparative purposes, prior year amounts related to equipment not in use have been reclassified to conform with the current year presentation.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Impairment of long-lived assets

The Company’s long-lived assets consist of plant, equipment, and mine development. The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that may trigger a test for recoverability include, but are not limited to, significant adverse changes to projected revenues, costs, or future expansion plans or changes to federal and state regulations (with which the Company must comply) that may adversely impact the Company’s current or future operations. An impairment is determined to exist if the total projected future cash flows on an undiscounted basis are less than the carrying amount of a long-lived asset group. An impairment loss is measured and recorded based on the excess carrying value of the impaired long-lived asset group over fair value.

To determine fair value, the Company uses a discounted cash flow model based on quantities of estimated recoverable minerals and incorporates projections and probabilities involving metal prices (considering current and historical prices, price trends, and related factors), production levels, operating and production costs, and the timing and capital costs of expansion and sustaining projects, all of which are based on life-of-mine plans. The term “recoverable minerals” refers to the estimated amount of gold and silver that will be sold after taking into account losses during ore processing and treatment. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimates of future cash flows are based on numerous assumptions, which are consistent or reasonable in relation to internal budgets and projections, and actual future cash flows may be significantly different than the estimates, as actual future quantities of recoverable gold and silver, metal prices, operating and production costs, and the timing and capital costs of expansion and sustaining projects are each subject to significant risks and uncertainties. See Note 7 – Plant, Equipment, and Mine Development, Net for additional information.

During the three months ended June 30, 2020, the Company determined a triggering event had occurred, as it has been unsuccessful in achieving its operating and production costs targets. As a result, the Company performed a recoverability test at June 30, 2020, and no impairments were recorded.

Mineral properties

Mineral properties are tangible assets recorded at cost and include royalty interests, asset retirement costs, and land and mineral rights to explore and extract minerals from properties. Once a property is in the production phase, mineral property costs are amortized using the units-of-production method based upon the estimated recoverable gold ounces in proven and probable reserves at such properties. Costs to maintain mineral properties are expensed in the period they are incurred. As of June 30, 2020 and December 31, 2019, there was no recorded amounts for mineral properties as such values had been written-down to $0 in previous periods.

Asset retirement obligation

The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. The Company’s asset retirement obligation (“ARO”), consisting of estimated future mine reclamation and closure costs, may increase or decrease significantly in the future as a result of changes in regulations, mine plans, estimates, or other factors. The Company’s ARO relates to its operating property, the Hycroft Mine, and was recognized as a liability at fair value in the period incurred. An ARO, which is initially estimated based on discounted cash flow estimates, is accreted to full value over time through charges to Accretion in the condensed consolidated statements of operations. Resultant ARO cost assets (recorded in Mineral properties on the condensed consolidated balance sheets) are depreciated on a straight-line method over the related long-lived asset’s useful life. The Company’s ARO is adjusted annually, or more frequently if necessary, to reflect changes in the estimated present value resulting from revisions to the timing or amount of reclamation and closure costs.

Royalty obligation

The Company’s royalty obligation is carried at amortized cost with reductions calculated by dividing actual gold and silver production by the estimated total life-of-mine production from proven and probable mineral reserves. Any updates to proven and probable mineral reserves or the estimated life-of-mine production profile would result in prospective adjustments to the amortization calculation used to reduce the carrying value of the royalty obligation. Amortization reductions to the royalty obligation are recorded to Production costs which is a component of Cost of sales. A portion of the Company’s royalty obligation is classified as current based upon the estimated gold and silver expected to be produced over the next 12 months, using the current mine plan, and current proven and probable mineral reserves. The royalty obligation and its embedded features do not meet the requirements for derivative accounting.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Derivative instruments

The Company recognizes all derivatives as either assets or liabilities and measures those instruments at fair value. Changes in the fair value of derivative instruments, together with any gains or losses on derivative settlements and transactions, are recorded in earnings to Fair value adjustments in the period in which they occur. In estimating the fair value of derivative instruments, the Company is required to apply judgments and make assumptions that impact the amount recorded for such derivative instruments. The Company does not hold derivative instruments for trading purposes.

As of June 30, 2020, the Company’s only recorded derivative was for warrants (see Note 18 - Fair Value Measurements for additional detail).

Revenue recognition

The Company recognizes revenue for gold and silver sales when it satisfies the performance obligation of transferring inventory to the customer, which generally occurs when the refiner notifies the customer that gold has been credited or irrevocably pledged to their account at which point the customer obtains the ability to direct the use and obtain substantially all of the remaining benefits of ownership of the asset. The transaction amount is determined based on the agreed upon sales prices and the number of ounces delivered. Concurrently, the payment date is agreed upon, which is usually within one week. The majority of sales are in the form of doré bars, but the Company also sells loaded carbon and slag, a by-product. All sales are final.

Stock-based compensation

Stock-based compensation costs for eligible employees are measured at fair value on the date of grant. Stock-based compensation costs are charged to General and administrative on the condensed consolidated statements of operations over the requisite service period. The fair value of awards is determined using the stock price on either the date of grant (if subject only to service conditions) or the date that the Compensation Committee of the Board of Directors establishes applicable performance targets (if subject to performance conditions). The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods through the final vesting date. See Note 14 - Stock-Based Compensation for additional information.

Phantom shares

Non-employee members of Seller’s board of directors received phantom shares of stock pursuant to a Non-Employee Director Phantom Stock Plan. For grants issued during the years ended 2015 and 2016, the cash payment was equal to the fair market value of one share of common stock of Seller at the date of payment. Under the grant agreements, each phantom share vested on the date of grant and entitled the participant to a cash payment. For grants issued during 2020, 2019 and 2018, the cash payment was equal to the greater of the (1) grant date value, and (2) the fair market value of one share of common stock of Seller at the date of payment. All phantom shares issued by Seller were terminated and paid in connection with the Recapitalization Transaction. See Note 14 - Stock-Based Compensation and Note 18 – Fair Value Measurements for additional information.

Reorganization items

On March 10, 2015, a predecessor of the Company filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). Expenses directly associated with finalizing the Chapter 11 cases before the Bankruptcy Court are reported as Reorganization items in the condensed consolidated statements of operations.

Income taxes

The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect at the anticipated time of reversal. The Company derives its deferred income tax provision or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. See Note 15 – Income Taxes for additional information.

The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. Evidence evaluated includes past operating results, forecasted earnings, estimated future taxable income, and prudent and feasible tax planning strategies. The assumptions

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates used to manage the underlying business.

As necessary, the Company also provides reserves against the benefits of uncertain tax positions taken on its tax filings. The necessity for and amount of a reserve is established by determining, based on the weight of available evidence, the amount of benefit which is more likely than not to be sustained upon audit 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 condensed consolidated balance sheets unless the additional tax expense that would result from the disallowance of the tax position can be offset by 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.

Recently issued accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. In October 2019, the FASB issued ASU No. 2019-10 that amended the effective date of this ASU for non-public entities such that the new standard is effective for fiscal years and interim periods beginning after December 15, 2020. As the Company qualifies as an emerging growth company, the Company plans to take advantage of the deferred effective date afforded to non-public entities. A modified retrospective transition approach is required to either the beginning of the earliest period presented or the beginning of the year of adoption. We have compiled our leases and are in the process of estimating the impact of adopting this ASU.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”), which amends the disclosure requirements for fair value measurements in Topic 820 based on the considerations of costs and benefits. Under ASU 2018-13, certain disclosures were eliminated, while others were modified and there were some additions. The Company’s adoption of ASU 2018-13 on January 1, 2020 did not materially affect its financial statement disclosures.

3. Recapitalization Transaction

Recapitalization Transaction

On May 29, 2020, the Company, formerly known as Mudrick Capital Acquisition Corporation (“MUDS”) and now known and referred to herein as HYMC, consummated a business combination transaction (the “Recapitalization Transaction”) as contemplated by a purchase agreement dated January 13, 2020, as amended on February 26, 2020 (the “Purchase Agreement”), by and among the Company, MUDS Acquisition Sub, Inc. (“Acquisition Sub”) and Hycroft Mining Corporation (“Seller”). Pursuant to the Purchase Agreement, Acquisition Sub acquired all of the issued and outstanding equity interests of the direct subsidiaries of Seller and substantially all of the other assets of Seller and assumed substantially all of the liabilities of Seller. In conjunction with the Recapitalization Transaction, Seller’s indebtedness existing prior to the Recapitalization Transaction was either repaid, exchanged for indebtedness of HYMC, exchanged for shares of HYMC common stock or converted into shares of Seller common stock, and the Company’s post-Recapitalization Transaction indebtedness included amounts drawn under the Sprott Credit Agreement and the assumption of the newly issued Subordinated Notes (as such are defined herein). Upon closing of the Recapitalization Transaction, the Company’s unrestricted cash available for use totaled $68.9 million, the number of shares of HYMC common stock issued and outstanding totaled 50,160,042. In addition, the Company had 34,289,999 outstanding warrants to purchase an equal number of shares of HYMC common stock at $11.50 per share and 12,721,623 warrants to purchase 3,210,213 shares of HYMC common stock at a price of $44.82 per share.

Prior to the Recapitalization Transaction, MUDS was a blank check special purpose acquisition corporation (“SPAC”) with no business operations and prior to the Recapitalization Transaction on May 29, 2020 had assets and liabilities consisting primarily of $10.4 million of cash and $8.9 million of liabilities for accounts payable, accrued expenses, and deferred underwriting fees. As described in Note 2 - Summary of Significant Accounting Policies, the Company accounted for the Recapitalization Transaction as a reverse recapitalization in which the Company’s financial statements reflect a continuation of Seller.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

The material financial effects and actions arising from the Recapitalization Transaction, which are described in detail elsewhere in these financial statements, were as follows (the defined terms that follow are included elsewhere in these financial statements):

Common stock and warrant transactions

a.The Company issued, in a private placement transaction, an aggregate of 7.6 million shares of HYMC common stock and 3.25 million warrants to purchase shares of HYMC common stock at a price of $10.00 per share for aggregate gross cash proceeds of $76.0 million.
b.Pursuant to a forward purchase contract, the Company issued 3.125 million shares of HYMC common stock and 2.5 million warrants to purchase shares of HYMC common stock having substantially the same terms as the private placement warrants for gross cash proceeds of $25.0 million. The Company also converted 5.2 million shares of MUDS Class B common stock into the same number of shares of HYMC common stock, of which 3.5 million shares were surrendered to Seller as transaction consideration.
c.The Company received $10.4 million of cash proceeds from the SPAC trust associated with the 1.2 million shares of MUDS Class A common stock which were not redeemed by MUDS public stockholders. Additionally, the Company has 28.5 million warrants to purchase shares of HYMC common stock at a price of $11.50 per share which were issued to MUDS public stockholders at the time of the SPAC’s initial public offering (see Note 12 – Stockholders’ Equity).
d.The Company assumed the obligations with respect to 12.7 million Seller Warrants (as defined herein), which Seller Warrants became exercisable to purchase shares of HYMC common stock at an exercise price as of July 1, 2020, of $44.82 per share (see Note 12 – Stockholders’ Equity). As of July 1, 2020, each Seller Warrant was exercisable into approximately 0.2523 shares of HYMC common stock for a total of 3,210,213 shares of HYMC Common Stock.

Seller’s pre-Recapitalization Transaction indebtedness

a.Seller’s $125.5 million First Lien Agreement with the Bank of Nova Scotia, as agent, and $6.9 million Promissory Note plus accrued and unpaid interest were repaid with cash (see Note 9 - Debt, Net).
b.$48.5 million of Seller’s 1.25 Lien Notes were exchanged, and subsequently cancelled, for 4.85 million shares of HYMC common stock and the remaining $80.0 million of Seller’s 1.25 Lien Notes were exchanged for $80.0 million in aggregate principal of new Subordinated Notes of the Company (see Note 9 - Debt, Net).
c.After giving effect to the 1.5 Lien Notes’ 110% repurchase feature, $145.7 million of Seller’s 1.5 Lien Notes plus accrued and unpaid interest were exchanged, and subsequently cancelled, for 16.0 million shares of HYMC common stock (see Note 9 - Debt, Net).
d.Prior to close, a total of $221.3 million of Seller’s 2.0 Lien Notes were converted into 132.8 million shares of Seller common stock and, together with the existing 2.9 million shares of Seller’s common stock issued and outstanding, received transaction consideration of 15.1 million shares of HYMC common stock distributed by Seller, including 3.5 million surrendered shares received by Seller from MUDS (see Note 9 - Debt, Net). The consideration initially received by Seller was promptly distributed to the its stockholders on a pro rata basis pursuant to Hycroft Mining Corporation’s plan of dissolution.

Sprott entity transactions

a.The Company assumed the amended Sprott Credit Agreement and was advanced $70.0 million of cash, subject to an original issue discount of 2.0% (see Note 9 - Debt, Net). Pursuant to the Sprott Credit Agreement, the Company issued 0.5 million shares of HYMC common stock to the Lender, which was equal to 1.0% of the Company’s post-closing shares of HYMC common stock issued and outstanding.
b.The Company entered into the Sprott Royalty Agreement, pursuant to which the Company received $30.0 million of cash proceeds and incurred a 1.5% net smelter royalty payment obligation, payable monthly, relating to the Hycroft Mine’s monthly production (see Note 10 – Royalty Obligation).

Other items

a.Seller retained a reserve of $2.3 million in cash for use in the dissolution of Hycroft Mining Corporation.
b.A $2.5 million cash payment was made and 0.04 million shares of HYMC common stock were issued to the Company’s underwriter, Cantor Fitzgerald & Co. (“Cantor”), pursuant to an underwriting agreement. Additionally, a $2.0 million payment

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

was made to Cantor at closing in connection with shares of HYMC common stock held by Cantor which were not redeemed from the SPAC trust balance prior to closing.
c.The Company remitted $1.8 million of cash to holders of Seller’s deferred phantom units (see Note 18 – Fair Value Measurements) and paid $7.4 million of cash for additional transaction costs.

Upon closing of the Recapitalization Transaction and after giving effect to the terms of the business combination, the former holders of Seller’s indebtedness and common stock, including affiliated entities of such former holders, owned approximately 96.5% of the issued and outstanding HYMC common stock. The following table summarizes the ownership of the Company’s common stock issued and outstanding upon closing of the Recapitalization Transaction:

    

Shares

    

Ownership %

Former Seller stockholders and affiliated entities

 

48,421,309

 

96.5

%

Former MUDS public stockholders(1)

 

1,197,704

 

2.4

%

Lender to Sprott Credit Agreement

 

496,634

 

1.0

%

Cantor Fitzgerald & Co.

 

44,395

 

0.1

%

Total shares issued and outstanding

 

50,160,042

 

100.0

%


(1)Includes 200,000 shares held by Cantor.

4. Inventories

The following table provides the components of inventories and the estimated recoverable gold ounces therein (in thousands, except ounces):

June 30, 2020

December 31, 2019

    

Amount

    

Gold Ounces

    

Amount

    

Gold Ounces

Materials and supplies

$

5,043

 

$

2,559

 

Merrill-Crowe in process

 

410

 

226

 

1,004

 

691

Carbon column in-process

 

2,209

 

1,397

 

478

 

474

Doré finished goods

 

1,641

 

885

 

412

 

278

Total

$

9,303

 

2,508

$

4,453

 

1,443

As of June 30, 2020 and December 31, 2019, in-process Inventories included $0.2 million and $0.1 million, respectively, of capitalized depreciation and amortization costs.

The following table summarizes Ore on leach pads and the estimated recoverable gold ounces therein (in thousands, except ounces):

June 30, 2020

December 31, 2019

    

Amount

    

Gold Ounces

    

Amount

    

Gold Ounces

Ore on leach pads

$

28,180

 

17,825

$

22,062

 

17,019

As of June 30, 2020 and December 31, 2019 (including write-downs discussed below), Ore on leach pads included $1.9 million and $1.8 million, respectively, of capitalized depreciation and amortization costs.

Write-down of production inventories

The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore contents to the actual gold ounces recovered (metallurgical balancing). During the three and six months ended June 30, 2020, based on metallurgical balancing results, the Company determined that 6,512 and 10,492 ounces of gold, respectively, that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result, the Company recognized a Write-down of production inventories on the condensed consolidated statements of operations, which included production costs of $10.2 million and $16.7 million, respectively, and capitalized depreciation and amortization costs of $0.7 million and $1.3 million, respectively. The write-off of these ounces was primarily due to mismanagement of the oxidation process and not properly adjusting variables in the oxidation process for changes in the ore type based on domain. As a result, we determined that we would recover less than planned of the mismanaged sections of the leach pads.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Mine site period costs

During the three and six months ended June 30, 2020, the Company incurred $12.9 million and $20.1 million, respectively, of Mine site period costs (inclusive of depreciation and amortization expenses) which did not qualify for allocation to the Company’s production-related inventories and, therefore, were expensed as incurred. Such period costs are generally the result of recurring or significant downtime or delays, unusually high levels of repairs, inefficient operations, overuse of processing reagents, or other unusual costs and activities.

5. Prepaids and Other

The following table provides the components of prepaids and other (in thousands):

June 30,

December 31,

    

2020

    

2019

Prepaids and other

 

  

 

  

Prepaids

$

4,283

$

2,109

Deposits

 

539

 

539

Total

$

4,822

$

2,648

Other assets, non-current

 

  

 

  

Equipment not in use

$

19,683

$

19,683

Prepaid supplies inventory

 

885

 

Royalty - advance payment

 

240

 

120

Deferred future financing costs

 

 

5,083

Total

$

20,808

$

24,886

As of June 30, 2020 and December 31, 2019, equipment not in use in Other assets, non-current included ball mills, SAG mills, and related motors and components, which were purchased some time ago by Company predecessor. During the six months ended June 30, 2020, the Company engaged an international equipment broker to advertise equipment not in use for potential sale. There is a limited market for the Company’s equipment not in use and any potential purchase would likely be subject to technical and commercial due diligence by the purchaser. The equipment not in use is not classified as held-for-sale as it is uncertain if the Company will sell any of the equipment within one year and, as a result, equipment not in use is included in Other assets, non-current.

The Company has an inventory consignment agreement with a supplier of crusher parts, requiring the supplier to maintain a specified inventory of replacement parts and components that are exclusively for purchase and use at the Hycroft Mine. As part of the agreement, the Company is required to make certain payments in advance of receiving such consignment inventory at the mine site. The Company records advance payments as prepaid supplies inventory within Other assets, non-current until such inventory is received and amounts are reclassified to Inventories.

6. Restricted Cash

The following table provides the components of restricted cash (in thousands):

June 30,

December 31,

    

2020

    

2019

Asset retirement obligation surety bonds (collateralized obligation)

$

39,631

 

39,477

First Lien Agreement restricted cash - Note 9

 

 

3,270

Total

$

39,631

$

42,747

As of June 30, 2020, the Company’s asset retirement obligation was secured with surety bonds totaling $59.9 million, which were partially collateralized by the restricted cash shown above. Restricted cash from the Company’s First Lien Agreement was released on May 29, 2020 when such indebtedness was repaid in conjunction with the Recapitalization Transaction (see Note 3 - Recapitalization Transaction).

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

7. Plant, Equipment, and Mine Development, Net

The following table provides the components of plant, equipment, and mine development, net (in thousands):

Depreciation Life

June 30,

December 31,

    

of Method

    

2020

    

2019

Process equipment

 

5 - 13 years

$

15,809

$

14,770

Leach pads

 

Units-of-production

 

17,431

 

17,419

Buildings and leasehold improvements

 

10 years

 

10,507

 

10,507

Mine equipment

 

5 - 7 years

 

4,898

 

4,716

Vehicles

 

3 - 5 years

 

730

 

136

Furniture and office equipment

 

7 years

 

290

 

129

Mine development

 

Units-of-production

 

408

 

119

Construction in progress and other

 

13,736

 

936

$

63,809

$

48,732

Less: accumulated depreciation and amortization

 

(21,537)

 

(17,208)

Total

$

42,272

$

31,524

During the six months ended June 30, 2020, new processing equipment was placed into service, construction of the restart leach pads was completed, and construction of a new larger leach pad began, which comprised substantially all of the construction in progress as of June 30, 2020.

8. Other Liabilities

The following table summarizes the components of other liabilities, current and non-current (in thousands):

June 30,

December 31,

    

2020

    

2019

Other liabilities, current

Other accrued compensation

$

1,784

$

1,139

Restricted stock units - Note 14

 

50

 

1,210

Accrued compensation for phantom shares - Note 18

 

 

1,590

Total

$

1,834

$

3,939

Other liabilities, non-current

Seller Warrant liability - Notes 12 and 18

$

18

$

18

Payroll Tax Liability

 

135

 

Total

$

153

$

18

9. Debt, Net

Debt covenants

The Company’s debt agreements contain representations and warranties, events of default, restrictions and limitations, reporting requirements, and covenants that are customary for agreements of these types.

The Sprott Credit Agreement (as defined herein) contains covenants that, among other things, restrict or limit the ability of the Company to enter into encumbrances (other than Permitted Encumbrances), incur indebtedness (other than Permitted Indebtedness), dispose of its assets (other than Permitted Disposals), pay dividends, and purchase or redeem shares, as such terms are defined in the Sprott Credit Agreement. The Sprott Credit Agreement requires the Company to ensure that, at all times, both its Working Capital and Unrestricted Cash is at least $10.0 million, and that at least every six months from May 29, 2020 (or earlier as required per the terms of the Sprott Credit Agreement) it demonstrates its ability to repay and meet all present and future obligations as they become due with a financial Model that uses consensus gold and silver prices discounted by 5.0%, as such terms are defined in the Sprott Credit Agreement. The Subordinated Notes (as defined herein) include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non-compliance with security documents.

As of June 30, 2020, the Company was in compliance with all covenants.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Debt balances

The following table summarizes the components of debt (in thousands):

June 30,

December 31,

    

2020

    

2019

Debt, net, current:

2.0 Lien Notes

$

$

208,411

1.5 Lien Notes

 

 

137,050

First Lien Agreement

 

 

125,468

1.25 Lien Notes

 

 

77,212

Promissory Note

 

 

6,773

Less, debt issuance costs

 

 

(949)

$

$

553,965

Debt, net, non-current:

Subordinated Notes

$

80,711

$

Sprott Credit Agreement

 

63,114

 

Less, debt issuance costs

 

(4,781)

 

$

139,044

$

As it relates to the $62.3 million initially recorded for the Sprott Credit Agreement on the May 29, 2020 closing of the Recapitalization Transaction, the Company recorded $70.0 million for the stated amount of the borrowing itself, $9.3 million for the additional interest payment obligation, and a $17.0 million discount (inclusive of the $1.4 million original issuance discount) which will be amortized to Interest expense, net using the effective interest method over the term of the Sprott Credit Agreement. As of June 30, 2020, the interest rate charged on the outstanding principal balance of the Sprott Credit Agreement was 8.5%. Using the closing price of $12.65 per share of common stock on the Recapitalization Transaction date, the Company also recorded $6.3 million to Additional paid-in capital for the 496,634 shares of HYMC common stock issued to the Lender.

Sprott Credit Agreement

On October 4, 2019, the Company, as borrower, certain subsidiaries of the Company, as guarantors, and Sprott Private Resource Lending II (Collector), LP. (“Lender”), as arranger, executed a secured multi-advance term credit facility pursuant to which Lender committed to make, subject to certain conditions set forth therein, term loans in an aggregate principal amount up to $110.0 million. On May 29, 2020, the Company entered into the Amended and Restated Credit Agreement (the “Sprott Credit Agreement”) to update the conditions precedent and effect certain other changes to conform to the details of the business combination. On May 29, 2020, at the consummation of the business combination, the Company borrowed $70.0 million under the Sprott Credit Agreement, which was equal to the amount available under the first and second tranches, and issued to Lender 496,634 shares of HYMC common stock, which was equal to 1.0% of the 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 amount borrowed. The Company does not believe it is currently able to borrow under the third and final $40.0 million tranche of the Sprott Credit Agreement due to its inability to satisfy applicable conditions and production milestones required by certain conditions precedent to borrowing.

Advances under the Sprott Credit Agreement bear interest monthly at a floating rate equal to 7.0% plus the greater of (i) US Dollar three-month LIBOR and (ii) 1.5%, per annum, accruing daily and compounded monthly. For a period of twelve (12) months following the May 29, 2020 initial advance date, no cash payments of interest or principal will be due, with 100% of interest accruing and being capitalized on a monthly basis to the outstanding principal balance of the Sprott Credit Agreement. Additionally, for each three-month period commencing on February 28, 2021 and ending on the maturity date, the Company shall pay Lender additional interest on the last business day of such three-month period, calculated according to a formula set forth in the Sprott Credit Agreement and currently equal to $0.5 million per quarter ($9.3 million in total over the life of the Sprott Credit Agreement). Upon the prepayment of the entire Sprott Credit Agreement, all remaining additional interest payments and all remaining and yet unpaid additional interest must be prepaid as well.

The Company is required to make principal repayments beginning on August 31, 2021 and on the last business day of each calendar quarter thereafter. The first four (4) principal repayments are equal to two and one-half percent (2.5%) of the outstanding principal amount of the Sprott Credit Agreement on May 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due). All subsequent principal repayments are equal to seven and one-half (7.5%) of the outstanding principal amount of the Sprott Credit Agreement on May 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due). The entire outstanding balance of the Sprott Credit Agreement, together with all unpaid interest and

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

fees (including all capitalized interest, if any), is due on the day that is five years from the last day of the month of the initial closing date, which shall be no later than May 31, 2025, the maturity date. The Company reviewed the features of the Sprott Credit Agreement for embedded derivatives, and determined no such instruments exist.

The Sprott Credit Agreement may be repaid in whole or in part, at any time prior to the maturity date. Each prepayment or cancellation of the Sprott Credit Agreement (including capitalized interest, if any), whether in whole or in part, voluntarily or mandatory, subject to certain exceptions, that occurs on or prior to the fourth anniversary of the date of the initial advance is subject to a prepayment premium between 3.0% and 5.0%. The obligations of the Company under the Sprott Credit Agreement are guaranteed by Credit Parties and secured by a lien on all properties and assets now owned, leased or hereafter acquired or leased by any Credit Party, as such terms are defined and further detailed in the Sprott Credit Agreement.

Subordinated Notes

In connection with the business combination and pursuant to a 1.25 Lien Exchange Agreement, on May 29, 2020, the Company assumed $80.0 million in aggregate principal amount of Seller’s 1.25 Lien Notes that were exchanged as part of the Recapitalization Transaction (the Subordinated Notes”). The Subordinated Notes are secured and subordinate in priority to the obligations under the Sprott Credit Agreement. The Subordinated Notes bear interest at a rate of 10.0% per annum, payable in kind on a quarterly basis. The principal on the New Subordinated Notes is due December 1, 2025.

2.0 Lien Notes

As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, $221.3 million of 2.0 Lien Notes were converted into shares of Seller common stock which, along with all of Seller’s other stockholders, as part of Sellers’s plan of dissolution, received a pro rata distribution of HYMC common stock from Seller that was received by Seller as consideration from MUDS. The Company recorded a $74.6 million gain recorded directly to retained earnings upon Seller’s distribution of 14,817,256 shares of HYMC common stock to Seller’s former 2.0 Lien Note holders, which represented the difference between the carrying value of the 2.0 Lien Notes and the value of the HYMC common stock received as consideration by Seller’s former 2.0 Lien Note holders. The 2.0 Lien Notes bore interest at a rate of 15.0% per annum, payable in-kind on a quarterly basis, through the issuance of additional 2.0 Lien Notes. The 2.0 Lien Notes were converted into Seller common stock at a conversion price of $1.67 per share. While outstanding, the obligations under the 2.0 Lien Notes and the guarantees by the guarantors in respect thereof were secured by liens on substantially all assets of the Company and the guarantors, subject to the priority of the liens that secured the obligations under the First Lien Agreement, the 1.25 Lien Notes and the 1.5 Lien Notes.

1.5 Lien Notes

As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, after giving effect to the 1.5 Lien Notes’ 110.0% repurchase feature, $145.7 million of Seller’s 1.5 Lien Notes plus accrued and unpaid interest were exchanged, and subsequently cancelled, for 16,025,316 shares of HYMC common stock. The Company recorded a $14.6 million loss directly to retained earnings upon such exchange, which represented 10.0% of the $145.7 million aggregate principal amount of 1.5 Lien Notes balance at the time of exchange. While outstanding, the 1.5 Lien Notes bore interest at a rate of 15.0% per annum, which was payable in-kind on a quarterly basis, through the issuance of additional 1.5 Lien Notes. While outstanding, the obligations under the 1.5 Lien Notes and the guarantees by the guarantors in respect thereof were secured by liens on substantially all assets of Seller and the guarantors, subject to the priority of the liens that secured the obligations of the First Lien Agreement and the 1.25 Lien Notes but superior in priority to the liens that secured the obligations of the 2.0 Lien Notes and the unsecured obligations of Seller.

1.25 Lien Notes

As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, $48.5 million in aggregate principal amount of Seller’s 1.25 Lien Notes, which bore interest at 15.0% per annum, payable in-kind, were exchanged, and subsequently cancelled, for 4,845,920 shares of HYMC common stock and the remaining $80.0 million aggregate principal amount of Seller’s 1.25 Lien Notes were exchanged for $80.0 million in aggregate principal amount of new Subordinated Notes that were assumed in the Recapitalization Transaction by the Company bearing interest at a rate of 10.0% per annum, payable-in-kind. The 1.25 Lien Notes bore interest at a rate of 15.0% per annum, which was payable in-kind on a quarterly basis, through the issuance of additional 1.25 Lien Notes. While outstanding, the obligations under the 1.25 Lien Notes and the guarantees by the guarantors in respect thereof were secured by liens on substantially all assets of Seller and the guarantors, subject to the priority of the liens that secured the obligations of the First Lien Agreement but superior in priority to the liens that secured the obligations of the 1.5 Lien Notes, the 2.0 Lien Notes and the unsecured obligations of Seller.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

First Lien Agreement

As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, $125.5 million of outstanding principal under the First Lien Agreement with the Bank of Nova Scotia as agent, plus accrued interest, was repaid. Most recently, from January 31, 2020 through the repayment date, the First Lien Agreement bore interest at either LIBOR plus 7.5% or an Alternate Base Rate Canada plus 7.5%, as such terms were defined in the First Lien Agreement. The repayment of the First Lien Agreement and other obligations under the First Lien Agreement were guaranteed by all of the direct and indirect domestic subsidiaries of Seller. While outstanding, the obligations under the First Lien Agreement, the guarantees by the guarantors in respect thereof were secured by liens on substantially all of the assets of the Company and its subsidiaries. Upon repayment of the First Lien Agreement, $3.3 million of restricted cash was released to the Company (see Note 6 - Restricted Cash).

Promissory Note

As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, a $6.9 million Promissory Note was repaid, the obligation of which related to a 2014 settlement with vendor of a predecessor of Seller.

Interest expense, net

The following table summarizes the components of recorded interest expense (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

    

2020

    

2019

    

2020

    

2019

2.0 Lien Notes

$

5,085

$

6,997

$

12,901

$

13,743

1.5 Lien Notes

 

3,496

 

4,601

 

8,635

 

9,034

1.25 Lien Notes

 

2,866

 

852

 

6,218

 

1,130

First Lien Agreement

 

1,708

 

2,547

 

4,575

 

5,058

Sprott Credit Agreement

 

796

 

 

796

 

Subordinated Notes

 

711

 

 

711

 

Amortization of debt issuance costs

 

635

 

503

 

1,307

 

1,002

Promissory Note

 

57

 

413

 

142

 

489

Capitalized interest

 

(290)

 

(272)

 

(334)

 

(417)

Other interest expense

 

8

 

 

8

 

$

15,072

$

15,641

$

34,959

$

30,039

The Company capitalizes interest to Plant, equipment, and mine development, net on the condensed consolidated balance sheets for construction projects in accordance with ASC Topic 835, Interest. Except for the First Lien Agreement and other interest expense, amounts shown in the table above represent non-cash interest expense charges.

10. Royalty Obligation

On May 29, 2020, the closing date of the Recapitalization Transaction, the Company and Sprott Private Resource Lending II (Co) Inc. (the “Payee”) entered into a royalty agreement with respect to the Hycroft Mine (the “Sprott Royalty Agreement”) in which Payee paid to the Company cash consideration in the amount of $30.0 million, for which the Company granted to Payee a perpetual royalty equal to 1.5% of the net smelter returns from its Hycroft Mine, payable monthly. Net Smelter Returns for any given month are calculated as Monthly Production multiplied by the Monthly Average Gold Price and the Monthly Average Silver Price, minus Allowable Deductions, as such terms are defined in the Sprott Royalty Agreement.

The Company has the right to repurchase up to 33.3% (0.5% of the 1.5% royalty) of the royalty on each of the first and second anniversaries from May 29, 2020. The Sprott Royalty Agreement is secured by a first priority lien on certain property of the Hycroft Mine, including (1) all land and mineral claims, leases, interests, and rights; (2) water rights, wells, and related infrastructure; and (3) stockpiles, buildings, structures, and facilities affixed to, or situated on, the Hycroft Mine, which ranks senior to security interests and liens granted pursuant to the Sprott Credit Agreement. In addition to the terms generally described above, the Sprott Royalty Agreement contains other terms and conditions commonly contained in royalty agreements of this nature.

During both the three and six months ended June 30, 2020, the Company recorded amortization of the royalty obligation of  approximately $5,300. As of June 30, 2020, $0.3 million of the royalty obligation was recorded as a current liability based upon the estimated gold and silver expected to be produced over the next 12 months, using the current mine plan, and current proven and probable mineral reserves.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

11. Asset Retirement Obligation

The following table summarizes changes in the Company’s ARO (in thousands):

    

2020

    

2019

Balance at January 1,

$

4,374

$

5,832

Accretion expense

 

187

 

211

Balance at June 30,

$

4,561

$

6,043

12. Stockholders’ Equity

Following the May 29, 2020 Recapitalization Transaction, as of June 30, 2020, the total number of shares of all classes of capital stock which we have authority to issue is 410,000,000, of which 400,000,000 are common stock, par value $0.0001 per share, and 10,000,000 are preferred stock par value $0.0001 per share. The designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect to each of our class of capital stock are discussed below.

Common stock

As of June 30, 2020, there were 50,160,042 shares of common stock issued and outstanding. Each holder of common stock is entitled to one vote for each share of common stock held by such holder. The holders of common stock are entitled to the payment of dividends and other distributions as may be declared from time to time by the Board in accordance with applicable law and to receive other distributions from the Company. Subject to the terms of the Recapitalization Transaction and as of May 29, 2020, certain new and existing holders of common stock of the Company, are subject to a lock-up periods, which ranged from six to twelve months or were dependent on the Company’s filing of a registration statement, deemed effective by the SEC.

Preferred stock

As of June 30, 2020, there were no shares of preferred stock issued and outstanding.

Dividend policy

The Company’s credit facility under the Sprott Credit Agreement contains provisions that restrict its ability to pay dividends. For additional information see Note 9 - Debt, Net.

Warrants

As described below, the Company had a total of 47,011,622 warrants outstanding as of June 30, 2020.

Five-year Public Warrants

The Company has 34,289,999 publicly-traded warrants outstanding which entitle holders to purchase one share of HYMC common stock at an exercise price of $11.50 per share for a period of five years from the May 29, 2020 Recapitalization Transaction. The Company has certain abilities to call such warrants if the last reported sale price of HYMC common stock equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading day period. See Note 3 - Recapitalization Transaction for additional details on transactions to which these warrants were issued.

Seller Warrants

As part of the Recapitalization Transaction, the Company assumed the obligations and liabilities under that certain warrant agreement, dated as of October 22, 2015, by and between Seller and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company, collectively as initial warrant agent; and Continental Stock Transfer & Trust Company, LLC was named as the successor warrant agent (the “Seller Warrant Agreement”). Pursuant to the assumption of the Seller Warrant Agreement, the warrants issued thereunder (the “Seller Warrants”) became exercisable into shares of HYMC common stock. As of the consummation of the Recapitalization Transaction, 3,210,213 shares of common stock may be issued upon exercise of Seller Warrants at an exercise price, determined as of July 1, 2020 pursuant to the Seller Warrant Agreement of $44.82 per share upon the exercise of 12,721,623 Seller Warrants, each currently exercisable into approximately 0.2523 shares of common stock, which exercise price and number of shares may fluctuate under the terms of the Seller Warrant Agreement. Seller Warrants have a seven-year term that expires in October 2022.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

13. Revenues

The table below is a summary of the Company’s gold and silver sales (in thousands, except ounces sold):

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Ounces

Ounces

Ounces

Ounces

    

Amount

    

Sold

    

Amount

    

Sold

    

Amount

    

Sold

    

Amount

    

Sold

Gold sales

$

7,284

 

4,237

$

 

$

17,612

 

10,797

$

 

Silver sales

 

352

 

21,331

 

 

 

1,148

 

70,703

 

 

Total

$

7,636

$

$

18,760

$

During the second quarter of 2019, the Company began actively operating the Hycroft Mine, but no ounces of gold or silver were sold. While the Company is not obligated to sell all of its gold and silver to one customer, the vast majority of gold and silver sales during 2020 were to the same customer. During the first six months of 2020, approximately 95.1% of revenue was attributable to sales to one customer.

14. Stock-Based Compensation

Performance and Incentive Pay Plan

The Company’s Performance and Incentive Pay Plan (the “PIPP”), which was approved on February 20, 2019 and amended on May 29, 2020 in connection with the Recapitalization Transaction, is a stock-based compensation plan to attract, retain and motivate employees and directors while directly linking incentives to increases in stockholder value. Terms and conditions (including performance-based vesting criteria) of awards granted under the PIPP are established by the Board of Directors or the Compensation Committee of the Board of Directors, who administer the PIPP. Awards may be granted in a variety of forms, including restricted stock, restricted stock units, stock options, stock appreciation rights, performance awards, and other stock-based awards. The number of shares of common stock made available for award under the PIPP is equal to 5.0% of the issued and outstanding shares of HYMC common stock immediately after the close of the Recapitalization Transaction, or 2,508,002 shares.

As of June 30, 2020, all awards granted under the PIPP were in the form of restricted stock units to employees of the Company. Restricted stock units granted under the PIPP without performance-based vesting criteria typically vest in equal annual installments over two or three years. Awards granted with performance-based vesting criteria typically vest in annual installments over two or three years subject to the achievement of certain financial and operating results of the Company.

For restricted stock units granted in the first quarter of 2019, a price per share was not determined as of the grant date. The number of shares of common stock of the Company to be granted and issued upon vesting is to be calculated on the vesting date, which can be the closing date of the Recapitalization Transaction, June 1, 2020, or the second and third anniversary of the date of the grant or the annual date the compensation committee determines the achievement of the corporate performance targets. In connection with the closing of the Recapitalization Transaction on May 29, 2020, 78,565 restricted stock units, which were granted in 2019, vested at an average price of $12.65 per share, the closing price of HYMC common stock on the date of the Recapitalization Transaction, for a total fair value of $1.0 million. Additionally, on June 1, 2020, 70,238 restricted stock units vested at an average price of $11.50 per share, the closing price of HYMC common stock on such vesting date, for a total fair value of $0.8 million. During the three months ended June 30, 2020, the Company reclassified $1.8 million from Other liabilities, current to Additional paid-in capital for the restricted stock units that vested; however, shares of common stock for such awards have not yet been issued but will be upon the Conversion Date, as defined in the grant agreements. As of June 30, 2020, all outstanding and unvested restricted stock vests through March 2022 and is included in Other liabilities, current on the condensed consolidated balance sheets.

The fair value of restricted stock units is recognized as expense over the vesting period. During the three and six months ended June 30, 2020, the Company recognized $0.2 million and $0.6 million, respectively, in stock-based compensation cost related to previously granted restricted stock units. During the three and six months ended June 30, 2019, the Company recognized $0.3 million and $0.5 million, respectively, in stock-based compensation cost related to the issuance of the restricted stock units.

Non-Employee Director Phantom Stock Plan

Non-executive members of Seller’s Board of Director’s received phantom shares pursuant to the Hycroft Mining Corporation Non-Employee Director Phantom Stock Plan (the “Phantom Plan”) as part of their annual compensation pursuant to phantom stock award agreements. For grants issued during the years ended 2015 and 2016, the cash payment was equal to the fair market value of

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

one share of common stock of Seller at the date of payment. Under the grant agreements, each phantom share vested on the date of grant and entitled the participant to a cash payment. For grants issued during 2020, 2019 and 2018, the cash payment was equal to the greater of the (1) grant date value, and (2) the fair market value of one share of common stock of Seller at the date of payment. The cash payments were to be made to participants upon certain Payment Events, as such term is defined in the Phantom Plan, which was triggered by the closing of the Recapitalization Transaction. In connection with the closing of the Recapitalization Transaction, a $1.8 million cash payment was made to the participants to satisfy the 1,237,500 phantom shares that were vested and outstanding.

During the six months ended June 30, 2020 and 2019, non-employee members of Seller’s board of directors were granted a total of 157,500 and 315,000 phantom shares of stock, respectively, which vested upon grant. During the six months ended June 30, 2020 and 2019, the Company recorded $0.2 million and $0.5 million, respectively, in compensation expense related to the vesting of the phantom shares granted during each respective period, which are included in General and administrative on the condensed consolidated statements of operations. Historically, the Company included amounts for outstanding phantom awards at fair value within Other liabilities, current (see Note 18 – Fair Value Measurements for additional information).

15. Income Taxes

For the three and six months ended June 30, 2020 and 2019, the Company recorded no income tax benefit or expense based upon the estimated annual effective tax rate of 0.0% for each period. The estimated annual effective tax rate for each period was driven by year-to-date net losses for each period along with the expectation of continued losses for the remainder of the years. The gain related to the Recapitalization Transaction was excluded from the estimated annual effective tax rate calculation for the 2020 period as it is considered a discrete item. The Company reversed a portion of the valuation allowance based on the net operating loss expected to be used, in order to offset Seller’s taxable gain related to the Recapitalization Transaction.

The Company is subject to state income tax in Colorado, which is the location of its corporate office, but did not incur any income tax expense related to Colorado due to continued net operating losses. The Company is subject to mining taxes in Nevada, which are classified as income taxes as such taxes are based on a percentage of mining profits, but did not incur any mining tax expense due to continued mining losses. The Company is not subject to foreign income taxes as all of the Company’s operations and properties are located within the United States.

As of December 31, 2019, the Company had $256.5 million of net deferred tax assets, which were primarily comprised of net operating losses and disallowed interest expense under IRC Sec. 163(j). The Company recorded a full valuation allowance of $256.5 million against its net deferred tax assets.

Immediately prior to the Recapitalization Transaction, Seller had estimated net deferred tax assets of approximately $267.8 million, which were primarily comprised of net operating losses and offset by a full valuation allowance. As a result of the Recapitalization Transaction, Seller, which sold all of its issued and outstanding equity interests of its direct subsidiaries and substantially all of its other assets, to Acquisition Sub, which also assumed substantially all of the liabilities of Seller, had a taxable gain and cancellation of indebtedness of approximately $95.0 million before considering Seller’s net operating loss carryforwards. In connection with the Recapitalization Transaction, Seller used approximately $19.9 million of its deferred tax assets to offset the taxable gain in full, resulting in remaining net deferred tax assets of approximately $247.9 million immediately after the Recapitalization Transaction. The remaining net deferred tax assets balance of Seller did not transfer to the Company as a result of the Recapitalization Transaction. For U.S. tax purposes, the sale of Seller’s disregarded subsidiaries interests and other assets was considered a sale of assets. The acquired assets have a carryover basis for US GAAP purposes and the Company has stepped up the fair market value basis in the assets acquired for tax purposes, resulting in the Company having estimated net deferred tax assets of $94.2 million at June 30, 2020. The Company recorded a full valuation allowance of approximately $94.2 million as of June 30, 2020 against the net deferred tax assets, which were determined more likely than not to not be realized.

As necessary, the Company provides a reserve against the benefits of uncertain tax positions taken in its tax filings that are more likely than not to not be sustained upon examination. Based on the weight of available evidence, the Company does not believe it has taken any uncertain tax positions that require the establishment of a reserve. The Company has not recorded any interest or penalties related to income tax liabilities as of June 30, 2020.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

16. Loss Per Share

The table below shows our basic and diluted loss per share calculations (in thousands, except share and per share amounts):

Three Months Ended June 30,

Six Months Ended June 30,

    

2020

    

2019

    

2020

    

2019

Net loss

$

(49,790)

$

(21,947)

$

(84,408)

$

(45,387)

Weighted average shares outstanding

Basic

 

18,395,983

 

299,780

 

9,359,655

 

299,001

Diluted

 

18,395,983

 

299,780

 

9,359,655

 

299,001

Basic loss per common share

$

(2.71)

$

(73.21)

$

(9.02)

$

(151.80)

Diluted loss per common share

$

(2.71)

$

(73.21)

$

(9.02)

$

(151.80)

The weighted-average shares of common stock outstanding for the three and six months ended June 30, 2019 have been retroactively restated as shares reflecting the exchange ratio established in the Recapitalization Transaction to effect the reverse recapitalization (1 Seller share for 0.112 HYMC share). Basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Loss per share amounts in the 2019 periods exclude the common share effects from certain of Seller’s debt instruments which are reflected in the 2020 periods.

Due to the Company’s net loss during the three and six months ended June 30, 2020 and 2019, there was no dilutive effect of common stock equivalents because the effects of such would have been anti-dilutive. Using the treasury stock method, the weighted-average common stock equivalents excluded from diluted loss per share calculations were 37.6 million shares (37.5 million shares related to warrants, and 0.1 million shares related to restricted stock units), for both the three and six months ended June 30, 2020. For the three and six months ended June 30, 2019, the weighted-average common stock equivalents excluded from diluted loss per share calculations using the treasury stock method were 37.5 million shares related to warrants. Unvested restricted stock units were excluded from common stock equivalent calculations because the number of shares required to settle such stock-based compensation awards is not known until the future vesting date.

17. Segment Information

The Company’s reportable segments are comprised of operating units which have revenues, earnings or losses, or assets exceeding 10% of the respective consolidated totals, each of which is reviewed by the executive decision-making group to make

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

decisions about resources to be allocated to the segments and to assess their performance. The tables below summarize segment information:

Three months ended June 30,

Six months ended June 30,

Hycroft 

Corporate

Hycroft 

Corporate 

    

Mine

    

 and Other

    

Total

    

Mine

    

and Other

    

Total

2020

 

  

 

  

 

  

 

  

 

  

 

  

Revenue - Note 13

$

7,636

$

$

7,636

$

18,760

$

$

18,760

Cost of sales

 

31,863

 

 

31,863

 

55,731

 

 

55,731

Other operating costs

 

94

 

10,432

 

10,526

 

187

 

12,438

 

12,625

Loss from operations

 

24,321

 

10,432

 

34,753

 

37,158

 

12,438

 

49,596

Interest expense - Note 9

 

56

 

15,016

 

15,072

 

141

 

34,818

 

34,959

Interest income

 

(35)

 

 

(35)

 

(147)

 

 

(147)

Loss before reorganization items and income taxes

 

24,342

 

25,448

 

49,790

 

37,152

 

47,256

 

84,408

Reorganization items

 

 

 

 

 

 

Loss before income taxes

$

24,342

$

25,448

$

49,790

$

37,152

$

47,256

$

84,408

2019

Revenue - Note 13

$

$

$

$

$

$

Cost of sales

 

 

 

 

 

 

Other operating costs

 

4,917

 

1,214

 

6,131

 

11,836

 

3,161

 

14,997

Loss from operations

 

4,917

 

1,214

 

6,131

 

11,836

 

3,161

 

14,997

Interest expense - Note 9

 

414

 

15,227

 

15,641

 

489

 

29,550

 

30,039

Interest income

 

(110)

 

 

(110)

 

(226)

 

 

(226)

Loss before reorganization items and income taxes

 

5,221

 

16,441

 

21,662

 

12,099

 

32,711

 

44,810

Reorganization items

 

 

285

 

285

 

 

577

 

577

Loss before income taxes

$

5,221

$

16,726

$

21,947

$

12,099

$

33,288

$

45,387

18. Fair Value Measurements

Recurring fair value measurements

The following table sets forth by level within the fair value hierarchy, the Company’s liabilities measured at fair value on a recurring basis (in thousands).

Hierarchy

June 30,

December 31,

Liabilities:

    

Level

    

2020

    

2019

Other liabilities, current

 

  

 

  

 

  

Accrued compensation for phantom shares

 

3

$

$

1,590

Other liabilities, non-current

 

  

 

  

 

  

Warrant liability - Note 12

 

3

$

18

$

18

Accrued compensation for phantom shares

Certain of Seller’s phantom shares, which were satisfied in full upon closing of the Recapitalization Transaction, were carried at fair value due to holders of such awards being entitled to variable cash payments based upon valuations of the Company’s common stock. The historical fair value of such obligation was computed using inputs and assumptions which were significant and unobservable as Seller was a privately held entity and, as such, were classified within Level 3 of the fair value hierarchy. The inputs and assumptions included estimates of consideration to be received by holders of phantom shares based on the estimated fair value of the consideration which may be allocated to such holders from the various financing transactions Seller was considering at such time based on the implied equity value.

Warrant liability

As part of the Recapitalization Transaction, the Company assumed Seller’s obligations under the Seller Warrant Agreement and the 12.7 million Seller Warrants outstanding became exercisable into shares of HYMC common stock. The Seller Warrant Agreement also contains certain terms and features to reduce the exercise price and increase the number of shares of common stock each warrant

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

is exercisable into. As a result, Seller Warrants are considered derivative financial instruments and carried at fair value. The fair value of Seller Warrants was  computed by an independent third-party consultant (and validated by the Company) using a Monte Carlo simulation model that requires a variety of inputs, including contractual terms, market prices, exercise prices, equity volatility and discount rates. As of June 30, 2020, Seller Warrants were carried at $18,000, which represents the historically computed fair value. The Company plans to update the fair value calculation on at least an annual basis or more frequently if changes in circumstances and assumptions indicate a change from the existing carrying value. Since equity volatility is a significant unobservable input to the valuation, the derivative instruments are classified within Level 3 of the fair value hierarchy. Seller Warrants have a seven-year term which expires in October 2022, an exercise price of $44.82 as of July 1, 2020, and are exercisable into approximately 0.2523 shares of HYMC common stock.

Items disclosed at fair value

Debt

As of June 30, 2020, the fair value of the Company’s total current and non-current debt approximated its carrying value due to the short time period between the May 29, 2020 close of the Recapitalization Transaction and the end of the second quarter of 2020. As of December 31, 2019, Seller determined that certain of its debt instruments’ carrying value exceeded the estimated fair value, which was based on the estimated fair value of the consideration which may be allocated to such debt instruments from the various financing transactions Seller was considering at such time. Accordingly, as of December 31, 2019, Seller estimated that the fair value of the 2.0 Lien Notes and 1.5 Lien Notes was approximately $262.4 million, compared to the carrying value of $345.5 million.

Royalty obligation

As of June 30, 2020, the estimated net present value of the Company’s royalty obligation $99.9 million, compared to the carrying value of $30.0 million. The net present value of the Company’s royalty obligation was modeled using the following level 3 inputs: (1) market consensus inputs for future gold and silver prices; (2) a precious metal industry consensus discount rate of 5.0%; and (3) estimates of the Hycroft Mine’s life-of-mine gold and silver production volumes and timing.

19. Supplemental Cash Flow Information

The following table provides supplemental cash flow information (in thousands):

Six Months Ended June 30,

    

2020

    

2019

Cash paid for interest

$

5,366

$

5,271

Significant non-cash financing and investing activities:

Exchange of Seller’s 1.5 Lien Notes for HYMC common stock

 

160,254

 

Exchange of Seller’s 1.25 Lien Notes for Subordinated Notes

 

80,000

 

Exchange of Seller’s 1.25 Lien Notes for HYMC common stock

 

48,459

 

Allocate and write-off of Seller’s debt issuance costs

 

8,202

 

Plant, equipment, and mine development additions included in accounts payable

 

3,038

 

2,592

In addition to the supplemental cash flow information shown above, Note - 3. Recapitalization Transaction and Note 9 - Debt, Net provide additional details on non-cash transactions that were part of the Recapitalization Transaction, as well as information on non-cash interest charges.

20. Commitments and Contingencies

From time to time, the Company is involved in various legal actions related to its business, some of which are class actions lawsuits. Management does not believe, based on currently available information, that contingencies related to any pending or threatened legal matter will have a material adverse effect on the Company’s financial statements, although a contingency could be material to the Company’s results of operations or cash flows for a particular period depending on the results of operations and cash flows for such period. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

On February 7, 2020, a purported class action complaint was filed by a purported holder of the Company’s warrants, in the Court of Chancery of the State of Delaware against the Company and MUDS. The complaint sought a declaratory judgment that the Recapitalization Transaction constitutes a “Fundamental Change” under the terms of the Seller Warrant Agreement and thereby

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

requiring that Seller Warrants be assumed by MUDS as part of the Recapitalization Transaction, in addition to asserting claims for (1) breach or anticipatory breach of contract against Seller; (2) breach or anticipatory breach of the implied covenant of good faith and fair dealing against Seller; and (3) tortious interference with contractual relations against MUDS. The complaint sought unspecified money damages and also seeks an injunction enjoining the Company and MUDS from consummating the Recapitalization Transaction. On February 26, 2020, MUDS and Seller entered into an amendment to the Purchase Agreement whereby the Company’s liabilities and obligations under the Seller Warrant Agreement were included as a Parent Assumed Liability under the Purchase Agreement. On March 27, 2020, MUDS and Seller filed motions to dismiss the complaint. On May 15, 2020, a hearing was held and the complaint was dismissed. On May 21, 2020, Plaintiff filed a motion to alter or amend the Court’s order in order to retain jurisdiction in order to file application for a mootness fee, to which MUDS and Seller, while disputing factual assertions and characterizations, did not oppose. On June 30, 2020, the motion was granted and the Court retained jurisdiction over the action to hear any mootness fee application.

Financial commitments not recorded in the financial statements

As of June 30, 2020 and December 31, 2019, Seller’s off-balance sheet arrangements consisted of operating lease agreements, a net profit royalty arrangement, and a future purchase obligation for consignment inventory.

Operating Leases

During the first quarter of 2020, the Company signed a lease for mining equipment. The one-year operating lease for mobile mining equipment is used to supplement the Company’s own fleet. The lease term began during the second quarter of 2020 as all equipment was placed into service and has less than a year remaining as of June 30, 2020. The total remaining minimum lease payments was approximately $10.1 million as of June 30, 2020.

The Company also holds an operating lease for the Company’s office space in Denver, Colorado. Rent expense for this office space is $0.1 million annually and expires in January 2022. The total remaining lease payments were $0.2 million as of June 30, 2020.

As the Company has elected to take advantage of the extended transition period for complying with new or revised accounting standards, the liability for the Company’s operating leases will not be considered on the balance sheets until the new lease accounting rules apply to publicly traded emerging growth companies in accordance with the JOBS Act, or we no longer qualify as an emerging growth company.

Net profit royalty

A portion of the Hycroft Mine is subject to a mining lease that requires a 4% net profit royalty be paid to the owner of certain patented and unpatented mining claims. The mining lease also requires an annual advance payment of $120,000 every year mining occurs on the leased claims. All advance annual payments are credited against the future payments due under the 4% net profit royalty. The total payments due under the mining lease are capped at $7.6 million, of which the Company has paid $2.6 million through June 30, 2020, which is included in Prepaids and other in the condensed consolidated balance sheets. See Note 5 - Prepaids and Other for additional detail.

Consignment Inventory

During the first quarter of 2020, Hycroft entered into an agreement with a spare parts supplier that requires the supplier to maintain a specified inventory of replacement parts and components that are exclusively for purchase by Hycroft. Pursuant to the agreement, the Company is required to purchase all of the un-replenished consignment stock inventory, totaling $2.5 million, over the two-year life of the Inventory Consignment agreement. As of June 30, 2020, the Company had prepaid $0.9 million towards the un-replenished consignment stock inventory, which is included in Prepaids and other in the condensed consolidated balance sheets. See Note 2 - Summary of Significant Accounting Policies and Note 5 - Prepaids and Other for additional detail.

21. Related Party Transactions

Certain amounts of the Company’s indebtedness disclosed in Note 9 – Debt, Net have historically, and with regard to the $80.0 million of Subordinated Notes, are currently, held by five financial institutions. As of June 30, 2020, three of the financial institutions, Highbridge Capital Management, LLC (“Highbridge”), Mudrick Capital Management, L.P (“Mudrick”) and, Whitebox Advisors, LLC (“Whitebox”), held more than 10% of the common stock of the Company and, as a result, each are considered a related party (the “Related Parties”) in accordance with ASC 850, Related Party Disclosures. For the three and six months ended June 30, 2020, Interest expense, net of capitalized interest included $12.7 million and $27.8 million, respectively, for the debt held by Related Parties. For the three and six months ended June 30, 2019, Interest expense, net of capitalized interest included $11.0 million and

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

$21.7 million, respectively, for the debt held by Related Parties. As of June 30, 2020 and December 31, 2019, the Related Parties held a total $67.8 million and $421.6 million, respectively, of debt.

22. Subsequent Events

On July 1, 2020, the Company’s Board of Directors and Randy Buffington agreed that Mr. Buffington would depart from the Company effective July 1, 2020. In connection with Mr. Buffington’s departure and in recognition of his successful efforts in developing a new process to economically and profitably recover gold from sulfide ores in a heap leach process and in restarting mining operations at the Hycroft Mine and to reward and compensate him for transition assistance, Mr. Buffington will receive continuation payments for a period of 24 months following his departure at an amount equal to his previous salary. Additionally, the Company and Mr. Buffington entered into a restricted stock unit agreement (time-vesting) pursuant to which the Company granted a special discretionary equity bonus in the form of $1.3 million in restricted stock units convertible into shares of common stock, in which 50.0% vests on the first anniversary of the date of grant, and 50.0% vests on the second anniversary of the date of grant. The liability for the restricted stock units will be included in Other liabilities, current on the condensed consolidated balance sheets as the number of shares of common stock will not be known until the applicable vesting date. Finally, the Company and Mr. Buffington entered into a consulting agreement pursuant to which the Company will pay Mr. Buffington $25,000 per month for 24 months for his performance of consulting services during that time.

The Compensation Committee and Board of Directors approved the following initial annual Director compensation arrangements for non-employee directors, in the form of: (i) an annual cash retainer of $55,000; (ii) annual committee chair fees of $12,500 for the Audit Committee, $10,000 for the Safety, Sustainability and Technical Committee, and $7,500 for each of the Nominating and Governance and Compensation Committees; (iii) annual committee member fees of $5,000 for the Audit Committee, $4,000 for the Safety, Sustainability and Technical Committee, and $2,500 for each of the Nominating and Governance and Compensation Committees; and (iv) $75,000 in annual equity awards in the form of restricted stock units. In addition, an initial equity award in the amount of $50,000 in form of restricted stock units will be granted to each director. Equity awards will be granted at each annual stockholder meeting of the Company unless otherwise determined by the Compensation Committee.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction

We are providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the business combination.Recapitalization Transaction. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to such statements. The information used to prepare the unaudited pro forma condensed combined financial statements was derived from, and should be read in conjunction with, the following historical financial statements and the accompanying notes, which are included elsewhere in this prospectus.

The historical audited financial statements as of and for the year ended December 31, 2019 of Hycroft Mining Corporation (“Seller”); and
The historical audited financial statements as of and for the year ended December 31, 2019 of Mudrick Capital Acquisition Corporation (“MUDS”).
The historical audited financial statements as of and for the year ended December 31, 2019 of Hycroft Mining Corporation (“Seller”); and

The historical audited financial statements as of and for the year ended December 31, 2019 of Mudrick Capital Acquisition Corporation (“MUDS”).

The foregoing historical financial statements have been prepared in accordance with GAAP.

The unaudited pro forma condensed combined financial statements are based on MUDS’ historical financial statements and Seller’s historical consolidated financial statements as adjusted to give effect to the business combinationRecapitalization Transaction assuming that the minimum cash condition under the Purchase Agreement is satisfied with no additional cash. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 gives effect to the business combination,Recapitalization Transaction, the exchange, the debt and warrant assumption, the 1.25 Lien Exchange, the conversion and the private investment as if they had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of December 31, 2019 gives effect to the business combinationRecapitalization Transaction as if such transactions had occurred on December 31, 2019.

The historical financial information has been adjusted to give pro forma effect to the following events that are related and/or directly attributable to the business combination:Recapitalization Transaction: (i) the exchange, (ii) the debt and warrant assumption, (iii) the 1.25 Lien Exchange, (iv) the conversion, (v) the PIPE Investment (as defined below), (vi) the forward purchase, (vii) the underwriting commission issuance of MUDS Class A common stock and (viii) the lender issuance of MUDS Class A common stock, each of which are factually supportable and, with respect to the pro forma statement of operations, are expected to have a continuing impact on the results of the combined company. For purposes of the unaudited pro forma financial information contained in this prospectus, the “PIPE Investment” consists of the private investment plus an incremental private placement equity investment, if needed. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the business combinationRecapitalization Transaction and related transactions.

The unaudited pro forma condensed combined financial information is for illustrative purposes only and preliminary in nature. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. MUDS and Seller have not had any historical commercial relationship prior to the business combination.Recapitalization Transaction. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

This information should be read together with MUDS’ and Seller’s financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information included elsewhere in this prospectus.

For more information about the business combination, please see the sections entitled “The Business Combination” and “The Purchase Agreement and Related Agreements”, beginning on pages 100 and 159, respectively, of the joint proxy statement/prospectus forming a part of the registration statement on Form S-4 (Registration No. 333-236460) dated May 7, 2020 (the “Joint Proxy Statement/Prospectus”). A copy of the Purchase Agreement is attached to the Joint Proxy Statement/Prospectus as Annex A.

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PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2019

(UNAUDITED)

(in thousands)

No Redemption Scenario

Maximum Redemption Scenario

    

    

    

    

    

Pro Forma

    

  

Pro Forma

    

Pro Forma

    

  

Pro Forma

 

(a)

Adjustments

Combined

Adjustments

Combined

Seller

(b)

(No

(No

(Max

(Max

Subsidiaries

MUDS

Redemptions)

Redemptions)

Redemptions)

Redemptions)

Assets:

Cash

$

6,220 

$

209 

1,270 

c

1,270 

c

(1,590)

c

(1,590)

c

25,000 

d

25,000 

d

71,735 

d

— 

d

98,600 

e

98,600 

e

10,000 

f

20,000 

f

(133,087)

g

(133,087)

g

(13,589)

h

(12,014)

h

3,265 

i

$

68,033 

65,000 

i

$

69,608 

Restricted cash

3,270 

(3,270)

c

— 

(3,270)

c

— 

Accounts receivable

97 

97 

$

97 

Inventories

4,453 

4,453 

4,453 

Ore on leach pads

22,062 

22,062 

22,062 

Prepaids and other

2,648 

99 

2,747 

2,747 

Current assets

38,750 

308 

58,334 

97,392 

59,909 

98,967 

Investments held in Trust account

215,386 

(215,386)

d

— 

(215,386)

d

— 

Restricted cash

39,477 

39,477 

39,477 

Plant and equipment, net

51,207 

51,207 

51,207 

Deferred tax asset, net

— 

k

— 

— 

k

— 

Other assets, non-current

5,203 

(5,083)

j

120 

(5,083)

j

120 

Total assets

$

134,637 

$

215,694 

$

(162,135)

$

188,196 

$

(160,560)

$

189,771 

Liabilities:

Accounts payable

$

10,746 

$

335 

(1,025)

h

$

10,056 

(1,025)

h

$

10,056 

Interest payable

846 

(846)

g

— 

(846)

g

— 

Other liabilities, current

3,939 

(1,590)

c

2,349 

(1,590)

c

2,349 

Debt, current

553,965 

(553,965)

g

— 

(553,965)

g

— 

Current liabilities

569,496 

335 

(557,426)

12,405 

(557,426)

12,405 

Deferred underwriting fees

7,280 

(7,280)

h

— 

(7,280)

h

— 

Other liabilities, non-current

18 

18 

18 

Debt, non-current

64,350 

e

64,350 

e

77,212 

g

77,212 

g

(5,083)

j

136,479 

(5,083)

j

136,479 

Royalty agreement

30,000 

e

30,000 

30,000 

e

30,000 

Asset retirement obligation, non-current

4,374 

4,374 

4,374 

Total liabilities

573,888 

7,615 

(398,227)

183,276 

(398,227)

183,276 

        No Redemption Scenario  Maximum Redemption Scenario 
        Pro Forma    Pro Forma  Pro Forma    Pro Forma 
  (a)     Adjustments    Combined  Adjustments    Combined 
  Seller  (b)  (No    (No  (Max    (Max 
  Subsidiaries  MUDS  Redemptions)    Redemptions)  Redemptions)    Redemptions) 
Assets:                            
Cash $6,220  $209   1,270 c       1,270 c     
           (1,590)c       (1,590)c     
           25,000 d       25,000 d     
           71,735 d        d     
           98,600 e       98,600 e     
           10,000 f       20,000 f     
           (133,087)g       (133,087)g     
           (13,589)h       (12,014)h     
           3,265 i  $68,033   65,000 i  $69,608 
Restricted cash  3,270       (3,270)c      (3,270)c    
Accounts receivable  97             97  $0     97 
Inventories  4,453             4,453         4,453 
Ore on leach pads  22,062             22,062         22,062 
Prepaids and other   2,648   99         2,747         2,747 
Current assets  38,750   308   58,334     97,392   59,909     98,967 
Investments held in Trust account      215,386   (215,386)d      (215,386)d    
Restricted cash  39,477             39,477         39,477 
Plant and equipment, net  51,207             51,207         51,207 
Deferred tax asset, net            k       k    
Other assets, non-current  5,203       (5,083)j   120   (5,083)j   120 
Total assets $134,637  $215,694  $(162,135)   $188,196  $(160,560)   $189,771 
Liabilities:                            
Accounts payable $10,746  $335   (1,025)h  $10,056   (1,025)h  $10,056 
Interest payable  846       (846)g      (846)g    
Other liabilities, current  3,939       (1,590)c   2,349   (1,590)c   2,349 
Debt, current  553,965       (553,965)g      (553,965)g    
Current liabilities   569,496   335   (557,426)    12,405   (557,426)    12,405 
Deferred underwriting fees       7,280   (7,280)h      (7,280)h    
Other liabilities, non-current  18             18         18 
Debt, non-current          64,350 e       64,350 e     
           77,212 g       77,212 g     
           (5,083)j   136,479   (5,083)j   136,479 
Royalty agreement          30,000 e   30,000   30,000 e   30,000 
Asset retirement obligation, non-current  4,374             4,374         4,374 
Total liabilities  573,888   7,615   (398,227)    183,276   (398,227)    183,276 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

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Table of Contents

           No Redemption Scenario    Maximum Redemption Scenario 
           Pro Forma     Pro Forma   Pro Forma     Pro Forma 
   (a)       Adjustments     Combined   Adjustments     Combined 
   Seller   (b)   (No     (No   (Max     (Max 
   Subsidiaries   MUDS   Redemptions)     Redemptions)   Redemptions)     Redemptions) 
Stockholders’ (Deficit) Equity:                            
Common stock subject to possible redemption      203,079   (203,079)d      (203,079)d    
Preferred stock                         
Class A Common stock                           
           2 d       1 d     
           4 g       4 g     
            i   6   1 i   6 
Class B Common stock       1   (1)d      (1)d    
Common stock  3   0   (3)c      (3)c    
Additional paid-in capital  5,184   711   (1,235)c       (1,235)c     
           88,715 d       16,981 d     
           4,250 e       4,250 e     
           10,000 f       20,000 f     
           321,047 g       321,047 g     
           4,561 h       2,371 h     
           3,265 i   436,498   64,999 i   434,308 
Retained earnings (accumulated deficit)  (444,438)  4,288   23,461 g       23,461 g     
           (762)c       (762)c     
           (4,288)d       (4,288)d     
           (9,845)h   (431,584)  (6,080)h   (427,819
Total stockholders’ (deficit) equity    (439,251)  208,079   236,092     4,920   237,667     6,495 
Total liabilities and stockholders’ (deficit) equity $134,637  $215,694  $(162,135)   $188,196  $(160,560)   $189,771 

No Redemption Scenario

Maximum Redemption Scenario

    

    

    

    

    

Pro Forma

    

  

Pro Forma

    

Pro Forma

    

  

Pro Forma

 

(a)

Adjustments

Combined

Adjustments

Combined

Seller

(b)

(No

(No

(Max

(Max

Subsidiaries

MUDS

Redemptions)

Redemptions)

Redemptions)

Redemptions)

Stockholders’ (Deficit) Equity:

Common stock subject to possible redemption

203,079 

(203,079)

d

— 

(203,079)

d

— 

Preferred stock

— 

— 

— 

Class A Common stock

— 

— 

d

d

g

g

— 

i

i

Class B Common stock

(1)

d

— 

(1)

d

— 

Common stock

(3)

c

— 

(3)

c

— 

Additional paid-in capital

5,184 

711 

(1,235)

c

(1,235)

c

88,715 

d

16,981 

d

4,250 

e

4,250 

e

10,000 

f

20,000 

f

321,047 

g

321,047 

g

4,561 

h

2,371 

h

3,265 

i

436,498 

64,999 

i

434,308 

Retained earnings (accumulated deficit)

(444,438)

4,288 

23,461 

g

23,461 

g

(762)

c

(762)

c

(4,288)

d

(4,288)

d

(9,845)

h

(431,584)

(6,080)

h

(427,819)

Total stockholders’ (deficit) equity

(439,251)

208,079 

236,092 

4,920 

237,667 

6,495 

Total liabilities and stockholders’ (deficit) equity

$

134,637 

$

215,694 

$

(162,135)

$

188,196 

$

(160,560)

$

189,771 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

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PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2019 (UNAUDITED)

(in thousands, except share and per share amounts)

      No Redemption Scenario Maximum Redemption Scenario 

No Redemption Scenario

Maximum Redemption Scenario

      Pro Forma   Pro Forma Pro Forma   Pro Forma 

    

    

    

    

    

Pro Forma

    

Pro Forma

    

Pro Forma

    

Pro Forma

 

 (a)     Adjustments   Combined Adjustments   Combined 

(a)

Adjustments

Combined

Adjustments

Combined

 Seller (b) (No   (No (Max   (Max 

Seller

(b)

(No

(No

(Max

(Max

 Subsidiaries MUDS Redemptions)    Redemptions) Redemptions)    Redemptions) 

Subsidiaries

MUDS

Redemptions)

Redemptions)

Redemptions)

Redemptions)

Revenues  $13,709            $13,709        $13,709 

$

13,709 

$

13,709 

$

13,709 

Cost of sales:                            

Production costs   11,041       206 c   11,247   206 c   11,247

11,041 

206 

c

11,247 

206 

c

11,247 

Depreciation and amortization   1,011             1,011         1,011 

1,011 

1,011 

1,011 

Write-down of production inventories .  18,617             18,617         18,617 

18,617 

18,617 

18,617 

Total cost of sales  30,669      206     30,875   206     30,875 

30,669 

— 

206 

30,875 

206 

30,875 

Operating expenses:                            

Project and development   7,708             7,708         7,708 

7,708 

7,708 

7,708 

Care and maintenance  3,529             3,529         3,529 

3,529 

3,529 

3,529 

Pre-production depreciation and amortization   1,067             1,067         1,067 

1,067 

1,067 

1,067 

Accretion  422             422         422 

422 

422 

422 

General and administrative  6,072   876   (1,582)d  5,366   (1,582)d  5,366 

6,072 

876 

(1,582)

d

5,366 

(1,582)

d

5,366 

Reduction in asset retirement obligation  (1,880)            (1,880)        (1,880)

(1,880)

(1,880)

(1,880)

Impairment of long-lived assets  63             63         63 

63 

63 

63 

Lossfromoperations  (33,941)  (876)  1,376     (33,441)  1,376     (33,441)

Loss from operations

(33,941)

(876)

1,376 

(33,441)

1,376 

(33,441)

Other income (expense):                            

Interest income   795   4,387   (4,387)e  795   (4,387)e  795 

795 

4,387 

(4,387)

e

795 

(4,387)

e

795 

Interest expense  (64,844)      51,521 f  (13,323)  51,521 f  (13,323)

(64,844)

51,521 

f

(13,323)

51,521 

f

(13,323)

Loss before reorganization items, net and income taxes  (97,990)  3,511   48,510     (45,969)  48,510     (45,969)

(97,990)

3,511 

48,510 

(45,969)

48,510 

(45,969)

Reorganization items, net  (905)            (905)        (905)

(905)

(905)

(905)

Lossbeforeincometaxes  (98,895)  3,511   48,510     (46,874)  48,510     (46,874)

Loss before income taxes

(98,895)

3,511 

48,510 

(46,874)

48,510 

(46,874)

Income tax     (900)  900 g     900 g   

— 

(900)

900 

g

— 

900 

g

— 

Net loss $(98,895) $2,611  $49,410     (46,874) $49,410    $(46,874)

$

(98,895)

$

2,611 

$

49,410 

(46,874)

$

49,410 

$

(46,874)

Loss per share:                            

Basic and diluted $(36.10)           $(0.94)       $(0.94)

$

(36.10)

$

(0.94)

$

(0.94)

Weighted average shares outstanding:                            

Basic and diluted  2,739,505       47,272,555     50,012,060   47,318,182     50,057,687 

2,739,505 

47,272,555 

50,012,060 

47,318,182 

50,057,687 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

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Table of Contents

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

Description of the Transactions

MUDS, a publicly traded blank check company, and Seller, a US-based, gold and silver producer operating the Hycroft mine located in the world-class mining region of Northern Nevada, have entered into a definitive purchase agreement, under which Seller will sell all of the equity interests of Seller’s subsidiaries to MUDS Acquisition Sub, Inc., a Delaware corporation and an indirect, wholly-ownedwholly owned subsidiary of MUDS (“Acquisition Sub”), and MUDS or Acquisition Sub will acquire substantially all of Seller’s other assets and discharge and pay or assume substantially all of Seller’s liabilities.

Pursuant to the terms of the business combination,Recapitalization Transaction, Seller will have, after raising gross cash proceeds of $210.0 million, the minimum cash condition under the Purchase Agreement, at least $50.0 million of unrestricted and available cash on hand at closing. Cash and financing sources for the transaction include

(a) a $110.0 million multi-tranche credit agreement arranged by Sprott Resource Lending Corp. (the “Sprott Credit Agreement”), of which $70.0 million is expected to be drawn at closing, (b) a $30.0 million 1.5% net smelter royalty agreement arranged by Sprott Private Resource Lending II (Co.) Inc. (the “Sprott Royalty Agreement”), (c) consummation of a $25.0 million forward purchase of MUDS units and shares by sponsor, (d) Assumed New Subordinated Notes not to exceed $80.0 million, (e) the net cash remaining in MUDS’ trust account following any MUDS stockholder redemptions, (f) proceeds generated from the PIPE Investment, which are expected to be at least $13.3 million and (g) the exchange of the Excess Notes and the 1.5 Lien Notes into shares of MUDS Class A common stock and conversion of the Second Lien Notes into shares of Seller common stock immediately prior to the consummation of the business combination.

(a)a $110.0 million multi-tranche credit agreement arranged by Sprott Resource Lending Corp. (the “Sprott Credit Agreement”), of which $70.0 million is expected to be drawn at closing, (B) a $30.0 million 1.5% net smelter royalty agreement arranged by Sprott Private Resource Lending II (Co.) Inc. (the “Sprott Royalty Agreement”), (C) consummation of a $25.0 million forward purchase of MUDS units and shares by sponsor, (d) Assumed New Subordinated Notes not to exceed $80.0 million, (e) the net cash remaining in MUDS’ trust account following any MUDS stockholder redemptions, (f) proceeds generated from the PIPE Investment, which are expected to be at least $13.3 million and (g) the exchange of the Excess Notes and the 1.5 Lien Notes into shares of MUDS Class A common stock and conversion of the Second Lien Notes into shares of Seller common stock immediately prior to the consummation of the Recapitalization Transaction.

Seller’s post-transaction indebtedness will include amounts drawn from the Sprott Credit Agreement plus the Assumed New Subordinated Notes not to exceed $80.0 million. All other indebtedness of Seller will be repaid and retired, exchanged for shares of MUDS Class A common stock, converted into shares of Seller common stock or assumed by MUDS in the transaction.

For more information about the business combination, please see the sections entitled “The Business Combination” and “The Purchase Agreement and Related Agreements” to the Joint Proxy Statement/Prospectus. A copy of the Purchase Agreement is attached to the Joint Proxy Statement/Prospectus as Annex A.

Accounting for the Business Combination

The business combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, for financial reporting purposes, MUDS has been treated as the “acquired” company and Seller has been treated as the “acquirer”. This determination was primarily based on current stockholders of Seller having a relative majority of the voting power of the combined entity, the operations of Seller prior to the acquisition comprising the only ongoing operations of the combined entity, the fact that four of the seven director nominees to the HYMC board of directors are current directors of Seller (and such nominees are therefore expected to comprise a majority of the HYMC board of directors following the business combination)Recapitalization Transaction), and senior management of Seller comprising the majority of the senior management of the combined entity. At any redemption level, including the maximum, the Seller’s common stockholders prior to the consummation of the business combinationRecapitalization Transaction (and after issuance of additional shares of Seller common stock pursuant to the conversion of the Second Lien Notes) and the holders of the Excess Notes and 1.5 Lien Notes receiving shares of MUDS Class A common stock in exchange for their notes, will hold more than 50% at a minimum, and up to approximately 94% at a maximum, of the total shares of MUDS Class A common stock which will be issued and outstanding upon consummation of the business combination.

Recapitalization Transaction.

Accordingly, for accounting purposes, the financial statements of the combined entity will represent a continuation of the financial statements of Seller. The net assets of Seller will be stated at historical cost, with no goodwill or other intangible assets recorded.

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Basis of Pro Forma Presentation

The historical financial information has been adjusted to give pro forma effect to the following events that are related and/or directly attributable to the business combination:Recapitalization Transaction: (i) the exchange, (ii) the debt and warrant assumption, (iii) the 1.25 Lien Exchange, (iv) the conversion, (v) the PIPE Investment, (vi) the forward purchase, (vii) the underwriting commission issuance of MUDS Class A common stock and (viii) the lender issuance of MUDS Class A common stock, each of which are factually supportable and, with respect to the pro forma statement of operations, are expected to have a continuing impact on the results of the combined company. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the business combination,Recapitalization Transaction, and the foregoing transactions attributable to the business combinationRecapitalization Transaction listed above.

The unaudited pro forma condensed combined financial information is for illustrative purposes only and preliminary in nature. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro

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forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. MUDS and Seller have not had any historical commercial relationship prior to the business combination.Recapitalization Transaction. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

This information should be read together with MUDS’ and Seller’s financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information included elsewhere in this prospectus. Additionally, for more information about the business combination,Recapitalization Transaction, please see the sections entitled “The Business Combination” and “The Purchase Agreement and Related Agreements” to the Joint Proxy Statement/Prospectus.

Redemption Scenarios

The unaudited pro forma condensed combined financial information has been prepared using two redemption scenarios, which give effect to the range of minimum and maximum redemptions that may occur in addition to the effects of other financing agreements and exchanges outlined in the Description of Business Combination section above.

a)  No Redemption Scenario — The no redemption scenario assumes that, after giving effect to the stock redeemed by public stockholders in connection with the Extension Meeting, no additional shares of MUDS Class A common stock are redeemed, resulting in aggregate cash available for transaction consideration, before any costs and fees, of $71.7 million for the benefit of the continuing combined entity. At the Extension Meeting, 13,890,713 shares of MUDS Class A common stock (approximately 67%) were redeemed, which, when applied to the February 10, 2020 trust balance of $216.0 million of Investments held in trust, results in $71.7 million remaining for presentation in the no redemption scenario. Following the Extension Meeting a total of 6,909,287 shares of MUDS Class A common stock remained unredeemed.

b)  Maximum Redemption Scenario — The maximum redemption scenario assumes that 20,800,000 shares of MUDS Class A common stock, or 100% of the outstanding shares of MUDS Class A common stock, are redeemed, resulting in an aggregate payment before any costs and fees, of $216.0 million as of February 10, 2020 ($215.4 million as of December 31, 2019) out of the trust account to the holders of MUDS Class A common stock. In its historical audited financial statements as of and for the year ended December 31, 2019, to support its financial reporting presentation requirements for the Trust, the Sponsor has presented 693,177 shares of Class A Common Stock as issued and outstanding which is exclusive of the 20,106,823 shares of Class A Common Stock presented as subject to possible redemption in those same financial statements; however, the total of these two amounts, which equals 20,800,000 shares, is entirely subject to redemption.

a)No Redemption Scenario — The no redemption scenario assumes that, after giving effect to the stock redeemed by public stockholders in connection with the Extension Meeting, no additional shares of MUDS Class A common stock are redeemed, resulting in aggregate cash available for transaction consideration, before any costs and fees, of $71.7 million for the benefit of the continuing combined entity. At the Extension Meeting, 13,890,713 shares of MUDS Class A common stock (approximately 67%) were redeemed, which, when applied to the February 10, 2020 trust balance of $216.0 million of Investments held in trust, results in $71.7 million remaining for presentation in the no redemption scenario. Following the Extension Meeting a total of 6,909,287 shares of MUDS Class A common stock remained unredeemed.
b)Maximum Redemption Scenario — The maximum redemption scenario assumes that 20,800,000 shares of MUDS Class A common stock, or 100% of the outstanding shares of MUDS Class A common stock, are redeemed, resulting in an aggregate payment before any costs and fees, of $216.0 million as of February 10, 2020 ($215.4 million as of December 31, 2019) out of the trust account to the holders of MUDS Class A common stock. In its historical audited financial statements as of and for the year ended December 31, 2019, to support its financial reporting presentation requirements for the Trust, the Sponsor has presented 693,177 shares of Class A Common Stock as issued and outstanding which is exclusive of the 20,106,823 shares of Class A Common Stock presented as subject to possible redemption in those same financial statements; however, the total of these two amounts, which equals 20,800,000 shares, is entirely subject to redemption.

The following table summarizes the estimated transaction consideration and costs and fees under each redemption scenario. The amounts reflected below are preliminary in nature and subject to future adjustment

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as valuation models are revised using updated information and inputs, including transaction closing date balances and share price inputs. The preliminary amounts shown below are not indicative or representative of how such transactions may be reported in the future for financial reporting purposes upon the

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completion of all technical accounting analysis. See the Notes to the Unaudited Pro Forma Condensed Combined Financial Statements for additional details and pro forma adjustments related to the below instruments and transactions.

  (a)  (b) 
  No  Maximum 
Preliminary Estimated Consideration Redemptions  Redemptions 
Cash:        
Investments held in Trust account(1) $71,735  $ 
Sprott Credit Agreement(2)  68,600   68,600 
Royalty Agreement(3)  30,000   30,000 
Sponsor forward purchase (MUDS units and shares)(4)  25,000   25,000 
Proceeds from PIPE Investment (MUDS stock)(5)  10,000   20,000 
Backstop Agreement (MUDS stock and warrants)(6)  3,265   65,000 
Class A common stock:        
MUDS stock issued to holders of Seller’s 1.5 Lien Notes(7)  150,755   150,755 
MUDS stock issued to former holders of Seller’s Second Lien Notes(8)(9)  170,296   170,296 
MUDS stock issued to Seller’s common stockholders(8)(9)  3,949   3,949 
Assumed debt:        
New Subordinated Notes(10)  77,212   77,212 
Estimated Consideration, Gross  610,812   610,812 
Transaction fees and costs:        
Management incentive compensation(11)  (7,339)  (5,764)
Deferred underwriting fees(12)  (7,061)  (4,871)
Investment banking advisory services(13)  (3,750)  (3,750)
Estimated Fees and Costs  (18,150)  (14,385)
Estimated Consideration, Net $592,662  $596,427`

    

(a)

    

(b)

 

No

Maximum

Preliminary Estimated Consideration

Redemptions

Redemptions

Cash:

Investments held in Trust account(1)

$

71,735 

$

Sprott Credit Agreement(2)

68,600 

68,600 

Royalty Agreement(3)

30,000 

30,000 

Sponsor forward purchase (MUDS units and shares)(4)

25,000 

25,000 

Proceeds from PIPE Investment (MUDS stock)(5)

10,000 

20,000 

Backstop Agreement (MUDS stock and warrants)(6)

3,265 

65,000 

Class A common stock:

MUDS stock issued to holders of Seller’s 1.5 Lien Notes(7)

150,755 

150,755 

MUDS stock issued to former holders of Seller’s Second Lien Notes(8)(9)

170,296 

170,296 

MUDS stock issued to Seller’s common stockholders(8)(9)

3,949 

3,949 

Assumed debt:

New Subordinated Notes(10)

77,212 

77,212 

Estimated Consideration, Gross

610,812 

610,812 

Transaction fees and costs:

Management incentive compensation(11)

(7,339)

(5,764)

Deferred underwriting fees(12)

(7,061)

(4,871)

Investment banking advisory services(13)

(3,750)

(3,750)

Estimated Fees and Costs

(18,150)

(14,385)

Estimated Consideration, Net

$

592,662 

$

596,427 


(1)Represents estimated remaining gross proceeds from investments held in Trust account, using the February 10, 2020 trust balance of $216.0 million, after giving effect to the stock redeemed by public stockholders in connection with the Extension Meeting.

(2)Represents the gross proceeds expected to be advanced under the Sprott Credit Agreement on the closing date after giving effect to the 2% issuance discount of $1.4 million.

(3)Proceeds from the Sprott Royalty Agreement.

(4)Gross proceeds from the forward purchase of MUDS’ units and shares by sponsor at $10.00 per unit.

(5)Estimated gross proceeds from shares of MUDS Class A common stock purchased at $10.00 per share through the PIPE Investment (excluding the proceeds from the Subscription/Backstop Agreements but including incremental equity investment).

(6)Estimated gross proceeds from shares of MUDS Class A common stock issued at $10.00 per share under the Subscription/Backstop Agreements; the counterparties to the Subscription/Backstop Agreements are investment funds affiliated with Seller and will receive 0.5 warrants per share (3.25 million warrants) regardless of whether or not such parties are required to purchase any shares pursuant to the Subscription/Backstop Agreements.

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(3.25 million warrants) regardless of whether or not such parties are required to purchase any shares pursuant to the Subscription/Backstop Agreements.

(7)Represents the estimated value of shares of MUDS Class A common stock issued at $10.00 per share to holders of the 1.5 Lien Notes to satisfy any remaining and unpaid balance following any cash repayments of the 1.5 Lien Notes (based on the cash available for such repayments, if any).

(8)Represents the estimated value of shares of MUDS Class A common stock distributed, on a pro rata basis, to holders of Seller common stock, including the former holders of the Second Lien Notes, at $10.00 per share following the conversion of the Second Lien Notes into shares of Seller common stock.

(9)Does not reflect distribution of Surrendered Shares to holders of Seller common stock, including the former holders of the Second Lien Notes, as Surrendered Shares, while received by Seller as consideration in transaction for distribution to holders of Seller common stock, including the former holders of the Second Lien Notes, are an allocation of MUDS Class A common shares and do not result in specific or additional transaction consideration requiring pro forma adjustment in these unaudited pro forma condensed combined financial statements.

(10)Represents the New Subordinated Notes issued in exchange for the 1.25 Lien Notes.

(11)Represents cash payments for management incentive bonuses pursuant to Seller’s Retention Bonus Plan.

(12)Represents amounts due to MUDS’ underwriter which were deferred until the completion of a business combination. The fees will be paid with (a)(A) $2.5 million cash, (b)(B) $2.0 million of MUDS’ Class A common stock, and (c)(C) $2.78 million of MUDS Class A common stock to be paid dependent on the level of redemptions and PIPE investment proceeds and a sliding scale using a price of $10.00 per share and a $75.0 million threshold.

(13)Represents amounts due for investment banking advisory services to Seller.

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Note 2. Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2019

The unaudited pro forma condensed combined balance sheet as of December 31, 2019 reflects the following adjustments:

(a)Represents the historical audited balance sheet of Hycroft Mining Corporation, Seller, as of December 31, 2019. For financial reporting purposes under US GAAP, Seller is the acquirer.

(b)Represents the historical audited balance sheet of MUDS, as of December 31, 2019. For financial reporting purposes under US GAAP, MUDS is the acquiree.

(c)

Represents adjustments to the Seller’s balances for certain assets and liabilities that will either remain with Seller or be settled as part of the transaction, including, (1) $2.0 million of cash (post reclassification of $3.3 million of restricted cash to available cash) to be retained by Seller,

(2) $1.6 million of cash paid at closing of the business combinationRecapitalization Transaction to settle the deferred phantom unit liability, and (3) related stockholders’ equity adjustments based on the $3.9 million of value for 394,857 shares of MUDS Class A common stock, at $10.00 per share, representing the portion of the 32,500,000 shares of MUDS Class A common stock issued by MUDS that is distributed to the existing owners of Seller’s common stock. Based on the terms of the business combinationRecapitalization Transaction and allocation hierarchy of transaction consideration, the value of the 394,857 shares of MUDS Class A common stock received by Seller’s stockholders exceeds Seller’s December 31, 2019 paid-in capital balance of $5.2 million, less the $2.0 million of cash retained by Seller, by approximately $0.8 million.

The allocation of the 32,500,000 shares of MUDS Class A common stock issued by MUDS is determined using the balances of Seller’s paid-in capital and the Excess Notes, the 1.5 Lien Notes and the Second Lien Notes (collectively referred to as the “Seller Stockholder Funded Debt”, which,

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based on the terms of the business combinationRecapitalization Transaction and allocation hierarchy of transaction consideration results in the Excess Notes and 1.5 Lien Notes (at 110% of face value) being satisfied in full, after which the remaining consideration is distributed on a pro rata basis to Seller’s common stockholders, which includes the former holders of the Second Lien Notes. Accordingly, as the balances of the Seller Stockholder Funded Debt has increased after December 31, 2019 for additional 1.25 Lien Note issuances, which increases the balance of the Excess Notes, and for payment-in-kind interest added to the Seller Stockholder Funded Debt balances, the future/actual allocation of the 32,500,000 shares of MUDS Class A common stock at the transaction closing date will not match the presentation of such herein or included elsewhere in this prospectus as a higher number of shares will be allocated to the holders of the Excess Notes and 1.50 Lien Notes with corresponding decreases to the number of shares of MUDS Class A common stock distributed on a pro rata basis to Seller’s common stockholders, which includes the former holders of the Second Lien Notes. The following table provides a summary of the pro forma adjustments related to the $325.0 million (representing 32,500,000 shares of MUDS Class A common stock) of consideration paid to Seller and distributed to Seller’s stockholders, including the former Second Lien Noteholders, using Seller’s December 31, 2019 recorded balances:

     Pro Forma Adjustments     
     1.5 Lien Notes  Cash    Total Pro   
  Seller  Exchanged  Retained by Pro Rata  Forma  Pro Forma
  Subsidiaries  at 110%  Seller Adjustments  Adjustments  Combined(1)
Additional paid-in capital $5,184      $(2,000)$765 $(1,235)$3,949
Debt, current:                  
1.5 Lien Notes  137,050   13,705         13,705    150,755 
Second Lien Notes  208,411          (38,115) (38,115)  170,296 
  $350,645  $13,705  $(2,000)$(37,350)$(25,645)$325,000 

Pro Forma Adjustments

    

    

    

1.5 Lien Notes

    

Cash

    

    

    

Total Pro

    

    

 

Seller

Exchanged

Retained by

Pro Rata

Forma

Pro Forma

Subsidiaries

at 110%

Seller

Adjustments

Adjustments

Combined(1)

Additional paid-in capital

$

5,184 

$

(2,000)

$

765 

$

(1,235)

$

3,949 

Debt, current:

1.5 Lien Notes

137,050 

13,705 

13,705 

150,755 

Second Lien Notes

208,411 

(38,115)

(38,115)

170,296 

$

350,645 

$

13,705 

$

(2,000)

$

(37,350)

$

(25,645)

$

325,000 


(1)$325.0 million of consideration issued by MUDS is allocated among the exchange of Seller’s existing Excess Notes (which had a balance of $nil as of December 31, 2019) and conversion of Second Lien Notes balances into shares of Seller common stock and the exchange of the 1.5 Lien Notes for shares of MUDS Class A common stock.

See Note 4. Pro Forma Loss Per Share to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(d)Under both the no redemption and maximum redemption scenarios, a $4.3 million adjustment is made to remove the retained earnings balance of MUDS.

No Redemption  Represents (1) the reclassification of $71.7 million (representing 6,909,287 shares of MUDS Class A common stock) of investments held in Trust account to cash available for the benefit of the continuing combined entity and $143.7 million (representing 13,890,713 shares of MUDS Class A common stock) disbursed for redemptions, (2) $25.0 million of proceeds received pursuant to the Sponsor’s forward purchase agreement for 2,500,000 MUDS units and 625,000 of shares of MUDS Class A common stock, and (3) related stockholders’ equity adjustments to (i) reclassify 6,216,110 shares of MUDS Class A common stock subject to redemption to HYMC Class A common stock and additional paid-in capital, (ii) record the units and

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shares of MUDS Class A common stock purchased by the Sponsor under the forward purchase, and (iii) record the conversion and reclassification of 5,200,000 shares of MUDS Class B common stock into shares of MUDS Class A common stock, of which 1,941,667 are surrendered to Seller for pro rata distribution to Seller’s stockholders, which includes the former Second Lien Noteholders following conversion of the Second Lien Notes into Seller common stock. See Note 4. Pro Forma

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Loss Per Shareto the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

Maximum Redemption  Represents (1) the distribution of $215.4 million (representing 20,106,823 shares of MUDS Class A common stock) of investments held in Trust account to common stockholders of MUDS to disburse the funds for redemptions, (2) $25.0 million of proceeds received pursuant to the Sponsor’s forward purchase agreement for 2,500,000 MUDS units and 625,000 of shares of MUDS Class A common stock, and (3) related stockholders’ equity adjustments to (i) record the distribution of MUDS Class A common stock subject to redemption, (ii) record the units and shares of MUDS Class A common stock purchased by the Sponsor under the forward purchase agreement and (iii) record the conversion and reclassification of 5,200,000 shares of MUDS Class B common stock into shares of MUDS Class A common stock, of which 3,584,616 are surrendered to Seller for pro rata distribution to Seller’s stockholders, which includes the former Second Lien Noteholders following conversion of the Second Lien Notes into Seller common stock. See Note 4. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(e)Represents the $98.6 million of proceeds from transactions with the Sprott entities, which include (1) $68.6 million of net proceeds received from the Sprott Credit Agreement ($70.0 million gross reduced for a 2% issuance discount), of which $4.3 million was recorded to additional paid-in capital for the partner alignment shares (495,169 shares of MUDS Class A common stock under the No Redemption scenario and 495,621 shares of MUDS Class A common stock under the Maximum Redemption scenario), and (2) $30.0 million of proceeds received from the Sprott Royalty Agreement arranged by Sprott Resource Lending Corp. See Note 4. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(f)No Redemption  Represents $10.0 million of proceeds received from the 1,000,000 shares of MUDS’ stock sold to investors in the PIPE Investment at $10.00 per share. See Note 4. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

Maximum Redemption  Represents $20.0 million of proceeds received from the 2,000,000 shares of MUDS Class A common stock sold to investors in the PIPE Investment (excluding the proceeds from the Subscription/Backstop Agreements but including the incremental equity investment) at $10.00 per share to satisfy the minimum cash requirement of $210.0 million of gross cash raised in the transactions. See Note 4. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(g)Represents the repayment, exchange, or conversion of Seller’s existing debt and interest balances.

Under both the no redemption and maximum redemption scenarios (1) the $125.5 million First Lien Credit Agreement, $6.8 million Jacobs Note, and $0.8 million of interest payable are repaid with cash, (2) the $77.2 million of outstanding 1.25 Lien Notes are exchanged for Assumed New Subordinated Notes, (3) the 1.5 Lien Notes are entitled to receive an amount equal to 110% of the principal balance, which was $13.7 million more than the $137.1 million recorded balance as of December 31, 2019, and are repaid with 15,075,500 shares of MUDS Class A common stock, and (4) the Second Lien Notes are converted into shares of Seller common stock and then 17,424,500 shares of MUDS Class A common stock is distributed pro rata to all holders of Seller common stock (including former holders of Seller common stock following the conversion of the Second Lien Notes which represents 17,029,643 shares of MUDS Class A common stock distributed on a pro rata basis) and the Second Lien Notes will realize a $38.1 million adjustment below the December 31, 2019 recorded balance of $208.4 million based on the terms of the business

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combinationRecapitalization Transaction and allocation hierarchy of transaction consideration. See “2(c)” above for additional detail on the methodology and adjustments to the Seller’s 1.5 Lien Notes and 2.0 Lien Notes balances.

    

Seller

    

    

    

    

    

Issuance of

    

Equity

    

    

 

Subsidiaries

Cash

New Subord.

Conversions /

Pro Forma

Balance

Adjustments

Repayments

Notes

Exchanges

Combined

Debt, current

First Lien Agreement

$

125,468 

$

(125,468)

$

— 

1.25 Lien Notes

77,212 

(77,212)

— 

1.5 Lien Notes

137,050 

13,705 

— 

(150,755)

— 

Second Lien Notes

208,411 

(38,115)

(170,296)

Jacobs Note

6,773 

(6,773)

— 

Less, debt issuance costs

(949)

949 

— 

$

553,965 

$

— 

Interest payable

First Lien Agreement

$

846 

(846)

$

— 

$

(23,461)

$

(133,087)

$

(77,212)

$

(321,051)

  Seller        Issuance of  Equity   
  Subsidiaries     Cash  New Subord.  Conversions /  Pro Forma 
  Balance  Adjustments  Repayments  Notes  Exchanges  Combined 
Debt, current                       
First Lien Agreement $125,468      $(125,468)        $ 
1.25 Lien Notes  77,212           (77,212)      
1.5 Lien Notes  137,050   13,705          (150,755)  
Second Lien Notes    208,411   (38,115)          (170,296)   
Jacobs Note  6,773       (6,773)          
Less, debt issuance costs  (949)  949               
  $553,965                 $ 
Interest payable                       
First Lien Agreement $846       (846)        $ 
      $(23,461) $(133,087) $(77,212) $(321,051)   

See Note 4. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(h)No Redemption  Represents the payments of underwriting fees and transaction costs, including (1) $13.6 million of cash for (i) a $7.3 million management incentive plan payment, (ii) $2.5 million paid for deferred underwriting fees, and (iii) $3.8 million for investment banking advisory services for Seller and (2) $4.6 million for 456,104 shares of MUDS Class A common stock issued for deferred underwriting fees. As of December 31, 2019, $1.0 million was accrued in accounts payable for the investment banking advisory services for Seller and $7.3 million was accrued as deferred underwriting fees.

Maximum Redemption  Represents the same pro forma adjustments as the no redemption scenario except that (1) cash underwriting fees and transaction costs total $12.0 million, which includes (i) a $5.8 million management incentive plan payment, (ii) $2.5 million paid for deferred underwriting fees, and (iii) $3.8 million for investment banking advisory services for Seller, and (2) only $2.4 million, representing 237,067 shares of MUDS Class A common stock, are issued for deferred underwriting fees.

See Note 4. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(i)No Redemption  Represents $3.3 million (representing 326,500 shares of MUDS Class A common stock) of cash proceeds received pursuant to the Subscription/Backstop Agreements, to satisfy the minimum cash requirement of $210.0 million of gross cash raised in the transactions, and related stockholders’ equity adjustments. See Note 4. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

Maximum Redemption  Represents $65.0 million (representing 6,500,000 shares of MUDS Class A common stock) of cash proceeds received pursuant to the Subscription/Backstop Agreements and related stockholders’ equity adjustments. See Note 4. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

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(j)Represents the reclassification of Seller’s deferred future financing costs related to the debt financing to debt, resulting in $5.1 million of such deferred costs presented as a contra-liability.

(k)The business combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, for financial reporting purposes, MUDS has been treated as the “acquired” company and Seller has been treated as the “acquirer.” For tax purposes, MUDS will be treated as the acquirer and is expected to establish a new tax basis in the purchased assets which may result in the recognition of a net deferred tax asset; however, these pro forma adjustments do not include any adjustments for increases in deferred tax assets as it uncertain as to the ultimate realization of any future tax benefits.

Note 3. Adjustments to the Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 2019

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 reflects the following adjustments:

(a)Represents the historical audited statement of operations of Seller for the year ended December 31, 2019. For financial reporting purposes under GAAP, Seller is the acquirer.

F-80


Table of Contents

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

(b)Represents the historical audited statement of operations of MUDS for the year ended December 31, 2019. For financial reporting purposes under GAAP, MUDS is the acquiree.

(c)Represents the effect of the Sprott Royalty Agreement cost, calculated as a percentage of revenue.

(d)Represents adjustments of(1) $0.9 million for MUDS’ general and administrative costs and (2) $0.7 million of deferred phantom unit costs of Seller, both of which are not expected to have a continuing impact on the combined company.

(e)Represents an adjustment of $4.4 million for interest income from investments held in the Trust account as such funds would be used as transaction consideration or classified as available cash in the combined company.

(f)Represents adjustments to interest expense to (1) remove effects of Seller’s obligations, which will not have a continuing effect on the combined company, and (2) add the effects of the obligations of the combined company, namely (i) $70.0 million expected to be advanced under the Sprott Credit Agreement on the closing date of the business combinationRecapitalization Transaction and (ii) $77.2 million of Assumed New Subordinated Notes in exchange for the 1.25 Lien Notes. The pro forma adjustments do not include the effects of any issuance discounts which may be calculated in the future as valuation models are revised using updated information and inputs, including transaction closing date balances and share price inputs.

  Seller       
  Subsidiaries  Pro Forma  Pro Forma 
  Balance  Adjustments  Combined 
First Lien Agreement $10,022  $(10,022) $ 
1.25 Lien Notes  5,241   (5,241)   
1.5 Lien Notes  18,763   (18,763)   
Second Lien Notes  28,537   (28,537)   
Jacobs Note  785   (785)   
Amortization of debt issuance costs  2,047   (2,047)   
Less: capitalized interest   (551)      (551)
Assumed New Subordinated Notes      7,721   7,721 
Sprott Credit Agreement      6,153   6,153 
  $64,844  $(51,521) $13,323 

F-104

    

Seller

    

    

    

    

 

Subsidiaries

Pro Forma

Pro Forma

Balance

Adjustments

Combined

First Lien Agreement

$

10,022 

$

(10,022)

$

1.25 Lien Notes

5,241 

(5,241)

— 

1.5 Lien Notes

18,763 

(18,763)

— 

Second Lien Notes

28,537 

(28,537)

— 

Jacobs Note

785 

(785)

— 

Amortization of debt issuance costs

2,047 

(2,047)

— 

Less: capitalized interest

(551)

(551)

Assumed New Subordinated Notes

7,721 

7,721 

Sprott Credit Agreement

6,153 

6,153 

$

64,844 

$

(51,521)

$

13,323 

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS


(g)Represents adjustments to reverse income tax expense recorded by MUDS as the combined company has a loss before income taxes.

Note 4. Pro Forma Loss Per Share

The tables below summarize the estimated pro forma shares of HYMC Class A common stock issued and outstanding as a result of the transactions using December 31, 2019 recorded balances and the no redemption and maximum redemptions scenarios and assumptions described in Note 1. Basis of Presentation to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements. Since the balances of the Seller Stockholder Funded Debt have increased after December 31, 2019 for additional issuance of 1.25 Lien Notes, which increases the balance of Excess Notes, and for payment-in-kind interest added to the Seller Stockholder Funded Debt balances, the future/actual allocation of 32,500,000 shares of MUDS Class A common stock at the transaction closing date between the Seller Stockholder Funded Debt holders and Seller’s common stockholders (including holders of Seller common stock following the conversion of the Second Lien Notes) will not match the presentation of such herein or included elsewhere in this prospectus as a higher number of shares will be allocated to the holders of the Excess Notes and 1.50 Lien Notes with corresponding

F-81


Table of Contents

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

decreases to the number of shares allocated to Seller’s common stockholders (including holders of Seller common stock following the conversion of the Second Lien Notes).

Pro Forma Adjustments — No Redemption Scenario

    

    

    

Mudrick

    

See

    

See

    

See

    

See

    

See

    

See

    

See

    

Pro Forma

Capital

Note 2(c)

Note 2(d)

Note 2(e)

Note 2(f)

Note 2(g)

Note 2(h)

Note 2(i)

Combined

Seller

Acquisition

for further

for further

for further

for further

for further

for further

for further

(No

Description

Subsidiaries

Corporation

detail

detail

detail

detail

detail

detail

detail

Redemptions)

Seller’s common stockholders

    

2,897,568 

    

    

    

(2,502,711)

    

    

    

    

    

    

    

    

    

    

    

    

    

394,857 

 

MUDS’ stockholders:

Common Stock subject to redemption

20,106,823 

(20,106,823)

— 

Class A Common Stock:

Existing stockholders

693,177 

6,216,110 

6,909,287 

Sponsor forward purchase

3,125,000 

3,125,000 

Shares retained by Sponsor from Class B conversions

3,258,333 

3,258,333 

Surrendered Shares to Seller’s stockholders and Second Lien Noteholders

1,941,667 

1,941,667 

Class B Common Stock

5,200,000 

(5,200,000)

— 

PIPE Investment

1,000,000 

1,000,000 

Exchange and conversions of Seller’s debt:

1.25 Lien Notes

— 

1.5 Lien Notes

15,075,500 

15,075,500 

Former holders of Second Lien Notes

17,029,643 

17,029,643 

Deferred underwriting fees (Cantor)

456,104 

456,104 

Sprott Credit Agreement

495,169 

495,169 

Backstop Agreement with Initial Subscribers

326,500 

326,500 

2,897,568 

26,000,000 

(2,502,711)

(10,765,713)

495,169 

1,000,000 

32,105,143 

456,104 

326,500 

50,012,060 

        Pro Forma Adjustments — No Redemption Scenario    
     Mudrick  See  See  See  See  See  See  See  Pro Forma 
     Capital  Note 2(c)  Note 2(d)  Note 2(e)  Note 2(f)  Note 2(g)  Note 2(h)  Note 2(i)  Combined 
  Seller  Acquisition  for further  for further  for further  for further  for further  for further  for further  (No 
Description Subsidiaries  Corporation  detail  detail  detail  detail  detail  detail  detail  Redemptions) 
Seller’s common stockholders  2,897,568       (2,502,711)                          394,857 
MUDS’ stockholders:                                        
Common Stock subject to
redemption  
 
 
 
 
 
 
 
 
 
 
 
 
 
20,106,823
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(20,106,823
 
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A Common Stock:                                        
Existing stockholders      693,177       6,216,110                       6,909,287 
Sponsor forward purchase              3,125,000                       3,125,000 
Shares retained by Sponsor
from Class B conversions  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,258,333
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,258,333
 
 
Surrendered Shares to Seller’s
stockholders and Second Lien
Noteholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,941,667
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,941,667
 
 
 
Class B Common Stock      5,200,000       (5,200,000)                       
PIPE Investment                      1,000,000               1,000,000 
Exchange and conversions of Seller’s
debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.25 Lien Notes                                        
1.5 Lien Notes                          15,075,500           15,075,500 
Former holders of Second Lien
Notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,029,643
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,029,643
 
 
Deferred underwriting fees (Cantor)                               456,104       456,104 
Sprott Credit Agreement                  495,169                   495,169 
Backstop Agreement with Initial
Subscribers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
326,500
 
 
 
 
 
 
 
326,500
 
 
   2,897,568   26,000,000   (2,502,711)  (10,765,713)  495,169   1,000,000   32,105,143   456,104   326,500   50,012,060 

F-105

Pro Forma Adjustments — Maximum Redemption Scenario

    

    

    

Mudrick

    

See

    

See

    

See

    

See

    

See

    

See

    

See

    

Pro Forma

 

Capital

Note 2(c)

Note 2(d)

Note 2(e)

Note 2(f)

Note 2(g)

Note 2(h)

Note 2(i)

Combined

Seller

Acquisition

for further

for further

for further

for further

for further

for further

for further

(Max

Description

Subsidiaries

Corporation

detail

detail

detail

detail

detail

detail

detail

Redemptions)

Seller’s common stockholders

2,897,568 

(2,502,711)

394,857 

MUDS’ stockholders:

Common Stock subject to redemption

20,106,823 

(20,106,823)

— 

Class A Common Stock:

Existing stockholders

693,177 

(693,177)

— 

Sponsor forward purchase

3,125,000 

3,125,000 

Shares retained by Sponsor from Class B conversions

1,615,384 

1,615,384 

Surrendered Shares to Seller’s stockholders and Second Lien Noteholders

3,584,616 

3,584,616 

Class B Common Stock

5,200,000 

(5,200,000)

— 

PIPE Investment

2,000,000 

2,000,000 

Exchange and conversions of Seller’s debt:

1.25 Lien Notes

— 

1.5 Lien Notes

15,075,500 

15,075,500 

Former holders of Second Lien Notes

17,029,643 

17,029,643 

Deferred underwriting fees (Cantor)

237,067 

237,067 

Sprott Credit Agreement

495,621 

495,621 

Backstop Agreement with Initial Subscribers

6,500,000 

6,500,000 

2,897,568 

26,000,000 

(2,502,711)

(17,675,000)

495,621 

2,000,000 

32,105,143 

237,067 

6,500,000 

50,057,687 

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

        Pro Forma Adjustments — Maximum Redemption Scenario    
     Mudrick  See  See  See  See  See  See  See  Pro Forma 
     Capital  Note 2(c)  Note 2(d)  Note 2(e)  Note 2(f)  Note 2(g)  Note 2(h)  Note 2(i)  Combined 
  Seller  Acquisition  for further  for further  for further  for further  for further  for further  for further  (Max 
Description Subsidiaries  Corporation  detail  detail  detail  detail  detail  detail  detail  Redemptions) 
Seller’s common stockholders  2,897,568       (2,502,711)                          394,857 
MUDS’ stockholders:                                        
Common Stock subject to
redemption  
 
 
 
 
 
 
 
 
 
 
 
 
 
20,106,823
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(20,106,823
 
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A Common Stock:                                        
Existing stockholders        693,177       (693,177)                       
Sponsor forward purchase              3,125,000                       3,125,000 
Shares retained by Sponsor
from Class B conversions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,615,384
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,615,384
 
 
Surrendered Shares to Seller’s
stockholders and Second Lien
Noteholders  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,584,616
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,584,616
 
 
 
Class B Common Stock        5,200,000       (5,200,000)                       
PIPE Investment                      2,000,000               2,000,000 
Exchange and conversions of Seller’s
debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.25 Lien Notes                                       
1.5 Lien Notes                          15,075,500           15,075,500 
Former holders of Second Lien
Notes  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,029,643
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,029,643
 
 
Deferred underwriting fees (Cantor)                              237,067       237,067 
Sprott Credit Agreement                    495,621                   495,621 
Backstop Agreement with Initial
Subscribers  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,500,000
 
 
 
 
 
 
 
6,500,000
 
 
   2,897,568   26,000,000   (2,502,711  (17,675,000   495,621   2,000,000   32,105,143   237,067   6,500,000   50,057,687 

The table below summarizes the estimated pro forma loss per share as a result of the transactions had such transactions occurred on January 1, 2019. After the transaction, there will be (1) 34.3 million warrants to purchase shares of MUDS common stock outstanding at an exercise price of $11.50 per share and (2) an additional number of warrants to purchase shares of MUDS common stock pursuant to the assumption of the outstanding Seller warrants, the quantity and exercise price of which will be determined pursuant to the terms of the Seller Warrant Agreement to be assumed by MUDS upon consummation of the business combination;Recapitalization Transaction; however, since all warrant instruments would be anti-dilutive, they were excluded from the below calculations.

Year ended December 31, 2019

    

No

    

Max

 

Redemptions

Redemptions

Net loss

$

(46,874)

$

(46,874)

Basic and diluted shares outstanding

50,012,060 

50,057,687 

Basic and diluted loss per share

$

(0.94)

$

(0.94)

  Year ended December 31, 2019 
  No  Max 
  Redemptions  Redemptions 
Net loss $(46,874) $(46,874)
Basic and diluted shares outstanding  50,012,060   50,057,687 
Basic and diluted loss per share $(0.94) $(0.94)

F-106

F-82


UPDATED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction

We are providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the business combination.Recapitalization Transaction. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to such statements. The information used to prepare the unaudited pro forma condensed combined financial statements was derived from, and should be read in conjunction with, the following historical financial statements and the accompanying notes, which are included in this prospectus.

• The historical unaudited condensed financial statements as of and for the three months ended March 31, 2020 and the historical audited financial statements as of and for the year ended December 31, 2019 of Hycroft Mining Corporation (“Seller”); and

• The historical unaudited condensed financial statements as of and for the three months ended March 31, 2020 and the historical audited financial statements as of and for the year ended December 31, 2019 of Mudrick Capital Acquisition Corporation (“MUDS”).

The historical unaudited condensed financial statements as of and for the three months ended March 31, 2020 and the historical audited financial statements as of and for the year ended December 31, 2019 of Hycroft Mining Corporation (“Seller”); and
The historical unaudited condensed financial statements as of and for the three months ended March 31, 2020 and the historical audited financial statements as of and for the year ended December 31, 2019 of Mudrick Capital Acquisition Corporation (“MUDS”).

The foregoing historical financial statements have been prepared in accordance with GAAP.

The unaudited pro forma condensed combined financial statements are based on MUDS’ historical financial statements and Seller’s historical consolidated financial statements as adjusted to give effect to the business combinationRecapitalization Transaction assuming that the minimum cash condition under the Purchase Agreement is satisfied with no additional cash. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2020 and the year ended December 31, 2019 gives effect to the business combination,Recapitalization Transaction, the exchange, the debt and warrant assumption, the 1.25 Lien Exchange, the conversion and the private investment as if they had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of March 31, 2020 gives effect to the business combinationRecapitalization Transaction as if such transactions had occurred on March 31, 2020.

The historical financial information has been adjusted to give pro forma effect to the following events that are related and/or directly attributable to the business combination:Recapitalization Transaction: (i) the exchange, (ii) the debt and warrant assumption, (iii) the 1.25 Lien Exchange, (iv) the conversion, (v) the PIPE Investment (as defined below), (vi) the forward purchase, (vii) the underwriting commission issuance of MUDS Class A common stock and (viii) the lender issuance of MUDS Class A common stock, each of which are factually supportable and, with respect to the pro forma statement of operations, are expected to have a continuing impact on the results of the combined company. For purposes of the unaudited pro forma financial information contained in this prospectus, the “PIPE Investment” consists of the private investment plus an incremental private placement equity investment, if needed. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the business combinationRecapitalization Transaction and related transactions.

The unaudited pro forma condensed combined financial information is for illustrative purposes only and preliminary in nature. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. MUDS and Seller have not had any historical commercial relationship prior to the business combination.Recapitalization Transaction. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

This information should be read together with MUDS’ and Seller’s financial statements and related notes, Unaudited Pro Forma Condensed Combined Financial Information,Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations,,” and other financial information included in this prospectus.

For more information about the business combination, please see the sections entitled “The Business Combination” and “The Purchase Agreement and Related Agreements” in the Joint Proxy Statement/Prospectus.

F-107

F-83


PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF MARCH 31, 2020

(UNAUDITED)

(in thousands)

        No Redemption Scenario  Maximum Redemption Scenario 

  (a)
Seller
Subsidiaries
  (b)
MUDS
  Pro Forma
Adjustments
(No
Redemptions)
  Pro Forma
Combined
(No
Redemptions)
  Pro Forma
Adjustments
(Max
Redemptions)
  Pro Forma
Combined
(Max
Redemptions)
 

    

    

    

    

No Redemption Scenario

    

Maximum Redemption Scenario

 

(a)
Seller
Subsidiaries

(b)
MUDS

Pro Forma
Adjustments
(No
Redemptions)

Pro Forma
Combined
(No
Redemptions)

Pro Forma
Adjustments
(Max
Redemptions)

Pro Forma
Combined
(Max
Redemptions)

Assets:                 

Cash $6,566 $13 679 c   679 c   

$

6,566 

$

13 

679 

c

679 

c

     (1,853)c   (1,853)c   
     25,000 d   25,000 d   
     71,786 d    d   
     98,600 e   98,600 e   
     10,000 f   20,000 f   
     (132,697)g   (132,697)g   
     (13,589)h   (12,014)h   
     3,214 i $67,719 65,000 i $69,294 

(1,853)

c

(1,853)

c

25,000 

d

25,000 

d

71,786 

d

— 

d

98,600 

e

98,600 

e

10,000 

f

20,000 

f

(132,697)

g

(132,697)

g

(13,589)

h

(12,014)

h

3,214 

i

$

67,719 

65,000 

i

$

69,294 

Restricted cash 2,929   (2,929)c  (2,929)c  

2,929 

(2,929)

c

— 

(2,929)

c

— 

Accounts receivable 851       851     851 

851 

851 

851 

Inventories 4,989       4,989     4,989 

4,989 

4,989 

4,989 

Ore on leach pads 26,122       26,122     26,122 

26,122 

26,122 

26,122 

Prepaids and other  4,131  54       4,185       4,185 

4,131 

54 

4,185 

4,185 

Current assets 45,588 67 58,211   103,866 59,786   105,441 

45,588 

67 

58,211 

103,866 

59,786 

105,441 

Investments held in Trust account   71,786 (71,786)d  (71,786)d  

71,786 

(71,786)

d

— 

(71,786)

d

— 

Restricted cash 39,595       39,595     39,595 

39,595 

39,595 

39,595 

Plant and equipment, net 51,573       51,573     51,573 

51,573 

51,573 

51,573 

Deferred tax asset, net      k   k  

— 

k

— 

— 

k

— 

Other assets, non-current  7,551     (7,311)j  240  (7,311)j  240 

7,551 

(7,311)

j

240 

(7,311)

j

240 

Total assets $144,307 $71,853 $(20,886)  $195,274 $(19,311)  $196,849 

$

144,307 

$

71,853 

$

(20,886)

$

195,274 

$

(19,311)

$

196,849 

Liabilities:                 

Accounts payable $13,086 $2,671 (1,025)h $14,732 (1,025)h $14,732 

$

13,086 

$

2,671 

(1,025)

h

$

14,732 

(1,025)

h

$

14,732 

Interest payable 371   (371)g  (371)g  

371 

(371)

g

— 

(371)

g

— 

Other liabilities, current 4,858 33 (1,853)c 3,038 (1,853)c 3,038 

4,858 

33 

(1,853)

c

3,038 

(1,853)

c

3,038 

Debt, current  595,376  600  (595,376)g  600  (595,376)g  600 

595,376 

600 

(595,376)

g

600 

(595,376)

g

600 

Current liabilities 613,691 3,304 (598,625)  18,370 (598,625)  18370 

613,691 

3,304 

(598,625)

18,370 

(598,625)

18,370 

Deferred underwriting fees   7,280 (7,280)h  (7,280)h  

7,280 

(7,280)

h

— 

(7,280)

h

— 

Other liabilities, non-current 18       18     18 

18 

18 

18 

Debt, non-current     64,350 e   64,350 e   

64,350 

e

64,350 

e

     80,000 g   80,000 g   
     (7,311)j 137,039 (7,311)j 137,039 

80,000 

g

80,000 

g

(7,311)

j

137,039 

(7,311)

j

137,039 

Royalty agreement     30,000 e 30,000 30,000 e 30,000 

30,000 

e

30,000 

30,000 

e

30,000 

Asset retirement obligation, non-current  4,467          4,467       4,467 

4,467 

4,467 

4,467 

Total liabilities  618,176  10,584  (438,866)   189,894  (438,866)   189,894 

618,176 

10,584 

(438,866)

189,894 

(438,866)

189,894 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

F-108

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Table of Contents

      No Redemption Scenario Maximum Redemption Scenario 
  (a)
Seller
Subsidiaries
 (b)
MUDS
 Pro Forma
Adjustments
(No
Redemptions)
   Pro Forma
Combined
(No
Redemptions)
 Pro Forma
Adjustments
(Max
Redemptions)
   Pro Forma
Combined
(Max
Redemptions)
 
Stockholders’ (Deficit) Equity:                 
Common stock subject to possible redemption     56,269  (56,269)d    (56,269)d   
Preferred stock                    
Class A common stock       2 d     1 d    
         3 g     3 g    
          i  5  1 i  5 
Class B common stock     1  (1)d    (1)d   
Common stock  3     (3)c    (3)c   
Additional paid-in capital  5,184  3,302  (2,058)c     (2,058)c    
         82,965 d     11,180 d    
         4,250 e     4,250 e    
         10,000 f     20,000 f    
         321,914 g     321,914 g    
         4,561 h     2,371 h    
         3,214 i  433,332  64,999 i  431,141 
Retained earnings (accumulated deficit)  (479,056) 1,697  61,133 g     61,133 g    
         (189)c     (189)c    
         (1,697)d     (1,697)d    
         (9,845)h  (427,957) (6,080)h  (424,191)
Total stockholders’ (deficit) equity  (473,869) 61,269  417,980    5,380  419,555    6,955 
Total liabilities and stockholders’ (deficit) equity $144,307 $71,853 $(20,886)  $195,274 $(19,311)  $196,849 

No Redemption Scenario

Maximum Redemption
Scenario

    

(a)
Seller 
Subsidiaries

    

(b)
MUDS

    

Pro Forma 
Adjustments 
(No 
Redemptions)

    

Pro Forma 
Combined 
(No 
Redemptions)

    

Pro Forma 
Adjustments 
(Max 
Redemptions)

    

Pro Forma 
Combined 
(Max 
Redemptions)

 

Stockholders’ (Deficit) Equity:

Common stock subject to possible redemption

56,269 

(56,269)

— 

(56,269)

— 

Preferred stock

— 

— 

— 

Class A common stock

— 

d

d

g

g

— 

i

i

Class B common stock

(1)

d

— 

(1)

d

— 

Common stock

(3)

c

— 

(3)

c

— 

Additional paid-in capital

5,184 

3,302 

(2,058)

c

(2,058)

c

82,965 

d

11,180 

d

4,250 

e

4,250 

e

10,000 

f

20,000 

f

321,914 

g

321,914 

g

4,561 

h

2,371 

h

3,214 

i

433,332 

64,999 

i

431,141 

Retained earnings (accumulated deficit)

(479,056)

1,697 

61,133 

g

61,133 

g

(189)

c

(189)

c

(1,697)

d

(1,697)

d

(9,845)

h

(427,957)

(6,080)

h

(424,191)

Total stockholders’ (deficit) equity

(473,869)

61,269 

417,980 

5,380 

419,555 

6,955 

Total liabilities and stockholders’ (deficit) equity

$

144,307 

$

71,853 

$

(20,886)

$

195,274 

$

(19,311)

$

196,849 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

F-109

F-85


PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2020

(UNAUDITED)

(in thousands, except share and per share amounts)

No Redemption Scenario

Maximum Redemption Scenario

    

(a)
Seller Subsidiaries

    

(b)
MUDS

    

Pro Forma
Adjustments (No Redemptions)

    

Pro Forma
Combined (No Redemptions)

    

Pro Forma
Adjustments (Max Redemptions)

    

Pro Forma
Combined (Max Redemptions)

    

Revenues

$

11,124 

$

11,124 

$

11,124 

Cost of sales:

Production costs

15,569 

167 

c

15,736 

167 

c

15,736 

Depreciation and amortization

1,334 

1,334 

1,334 

Write-down of production inventories

6,965 

6,965 

6,965 

Total cost of sales

23,868 

— 

167 

24,035 

167 

24,035

Operating expenses:

Accretion

93 

93 

93 

General and administrative

2,006 

3,122 

(3,385)

d

1,743 

(3,385)

d

1,743 

Loss from operations

(14,843)

(3,122)

3,218 

(14,747)

3,218 

(14,747)

Other income (expense):

Interest income

112 

660 

(660)

e

112 

(660)

e

112

Interest expense

(19,887)

16,443 

f

(3,444)

16,443 

f

(3,444)

Loss before income taxes

(34,618)

(2,462)

19,001 

(18,079)

19,001 

(18,079)

Income tax

— 

(128)

128 

g

128 

g

— 

Net loss

$

(34,618)

$

(2,590)

$

19,129 

$

(18,079)

$

19,129 

$

(18,079)

Loss per share:

Basic and diluted

$

(11.95)

$

(0.36)

$

(0.36)

Weighted average shares outstanding:

Basic and diluted

2,897,568 

47,109,341 

50,006,909 

47,160,119 

50,057,687 

      No Redemption Scenario Maximum Redemption Scenario 
  (a)
Seller
Subsidiaries
 (b)
MUDS
 Pro Forma
Adjustments
(No
Redemptions)
   Pro Forma
Combined
(No
Redemptions)
 Pro Forma
Adjustments
(Max
Redemptions)
   Pro Forma
Combined
(Max
Redemptions)
 
Revenues $11,124         $11,124      $11,124 
Cost of sales:                       
Production costs  15,569     167 c  15,736  167 c  15,736 
Depreciation and amortization  1,334          1,334       1,334 
Write-down of production inventories  6,965          6,965       6,965 
Total cost of sales  23,868    167    24,035  167    24,035 
Operating expenses:                       
Accretion  93          93       93 
General and administrative  2,006  3,122  (3,385)d  1,743  (3,385)d  1,743 
Loss from operations  (14,843) (3,122) 3,218    (14,747) 3,218    (14,747)
Other income (expense):                       
Interest income  112  660  (660)e  112  (660)e  112 
Interest expense  (19,887)    16,443 f  (3,444) 16,443 f  (3,444)
Loss before income taxes  (34,618) (2,462) 19,001    (18,079) 19,001    (18,079)
Income tax    (128) 128 g    128 g   
Net loss $(34,618)$(2,590)$19,129   $(18,079)$19,129   $(18,079)
Loss per share:                       
Basic and diluted $(11.95)        $(0.36)     $(0.36)
Weighted average shares outstanding:                       
Basic and diluted  2,897,568     47,109,341    50,006,909  47,160,119    50,057,687 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

F-110

F-86


PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2019

(UNAUDITED)

(in thousands, except share and per share amounts)

No Redemption Scenario

Maximum Redemption Scenario

 

    

(a)
Seller Subsidiaries

    

(b)
MUDS

    

Pro Forma
Adjustments
(No Redemptions)

    

Pro Forma
Combined
(No Redemptions)

    

Pro Forma
Adjustments
(Max Redemptions)

    

Pro Forma
Combined
(Max Redemptions)

    

Revenues

$

13,709 

$

13,709 

$

13,709 

Cost of sales:

Production costs

11,041 

206 

c  

11,247 

206 

c  

11,247

Depreciation and amortization

1,011 

1,011 

1,011 

Write-down of production inventories

18,617 

18,617 

18,617 

Total cost of sales

30,669 

— 

206 

30,875 

206 

30,875 

Operating expenses:

Project and development

7,708 

7,708 

7,708 

Care and maintenance

3,529 

3,529 

3,529 

Pre-production depreciation and amortization

1,067 

1,067 

1,067 

Accretion

422 

422 

422 

General and administrative

6,072 

876 

(1,582)

d  

5,366 

(1,582)

d  

5,366

Reduction in asset retirement obligation

(1,880)

(1,880)

(1,880)

Impairment of long-lived assets

63 

 

63 

63

Loss from operations

(33,941)

(876)

1,376 

(33,441)

1,376 

(33,441)

Other income (expense):

Interest income

795 

4,387 

(4,387)

e  

795

(4,387)

e  

795

Interest expense

(64,844)

51,521 

f  

(13,323)

51,521 

f  

(13,323)

Loss before reorganization items, net and income taxes

(97,990)

3,511 

48,510 

(45,969)

48,510 

(45,969)

Reorganization items, net

(905)

(905)

(905)

Loss before income taxes

(98,895)

3,511 

48,510 

(46,874)

48,510 

(46,874)

Income tax

— 

(900)

900 

g  

— 

900 

g  

Net loss

$

(98,895)

$

2,611 

$

49,410 

$

(46,874)

$

49,410 

$

(46,874)

Loss per share:

Basic and diluted

$

(36.10)

$

(0.94)

$

(0.94)

Weighted average shares outstanding:

Basic and diluted

2,739,505 

47,272,555 

50,012,060 

47,318,182 

50,057,687 

      No Redemption Scenario Maximum Redemption Scenario 
  (a)
Seller
Subsidiaries
 (b)
MUDS
 Pro Forma
Adjustments
(No
Redemptions)
   Pro Forma
Combined
(No
Redemptions)
 Pro Forma
Adjustments
(Max
Redemptions)
   Pro Forma
Combined
(Max
Redemptions)
 
Revenues $13,709         $13,709      $13,709 
Cost of sales:                       
Production costs  11,041     206 c  11,247  206 c  11,247 
Depreciation and amortization  1,011          1,011       1,011 
Write-down of production inventories  18,617          18,617       18,617 
Total cost of sales  30,669    206    30,875  206    30,875 
Operating expenses:                       
Project and development  7,708          7,708       7,708 
Care and maintenance  3,529          3,529       3,529 
Pre-production depreciation and amortization  1,067          1,067       1,067 
Accretion  422          422       422 
General and administrative  6,072  876  (1,582)d  5,366  (1,582)d  5,366 
Reduction in asset retirement obligation  (1,880)         (1,880)      (1,880)
Impairment of long-lived assets  63          63       63 
Loss from operations  (33,941) (876) 1,376    (33,441) 1,376    (33,441)
Other income (expense):                       
Interest income  795  4,387  (4,387)e  795  (4,387)e  795 
Interest expense  (64,844)    51,521 f  (13,323) 51,521 f  (13,323)
Loss before reorganization items, net and income taxes  (97,990) 3,511  48,510    (45,969) 48,510    (45,969)
Reorganization items, net  (905)         (905)      (905)
Loss before income taxes  (98,895) 3,511  48,510    (46,874) 48,510    (46,874)
Income tax    (900) 900 g    900 g   
Net loss $(98,895)$2,611 $49,410   $(46,874)$49,410   $(46,874)
Loss per share:                       
Basic and diluted $(36.10)        $(0.94)     $(0.94)
Weighted average shares outstanding:                       
Basic and diluted  2,739,505     47,272,555    50,012,060  47,318,182    50,057,687 

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

F-111

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Table of Contents

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1.Basis of Presentation

Description of the Transactions

MUDS, a publicly traded blank check company, and Seller, a US-based, gold and silver producer operating the Hycroft mine located in the world-class mining region of Northern Nevada, have entered into a definitive purchase agreement, under which Seller will sell all of the equity interests of Seller’s subsidiaries to MUDS Acquisition Sub, Inc., a Delaware corporation and an indirect, wholly-ownedwholly owned subsidiary of MUDS (“Acquisition Sub”), and MUDS or Acquisition Sub will acquire substantially all of Seller’s other assets and discharge and pay or assume substantially all of Seller’s liabilities.

Pursuant to the terms of the business combination,Recapitalization Transaction, Seller will have, after raising gross cash proceeds of $210.0 million, the minimum cash condition under the Purchase Agreement, at least $50.0 million of unrestricted and available cash on hand at closing. Cash and financing sources for the transaction include (a)(A) a $110.0 million multi-tranche credit agreement arranged by Sprott Resource Lending Corp. (the “Sprott Credit Agreement”), of which $70.0 million is expected to be drawn at closing, (b)(B) a $30.0 million 1.5% net smelter royalty agreement arranged by Sprott Private Resource Lending II (Co.) Inc. (the “Sprott Royalty Agreement”), (c)(C) consummation of a $25.0 million forward purchase of MUDS units and shares by sponsor, (d) Assumed New Subordinated Notes not to exceed $80.0 million, (e) the net cash remaining in MUDS’ trust account following any MUDS stockholder redemptions, (f) proceeds generated from the PIPE Investment, which are expected to be at least $10.0 million and (g) the exchange of the Excess Notes and the 1.5 Lien Notes into shares of MUDS Class A common stock and conversion of the Second Lien Notes into shares of Seller common stock immediately prior to the consummation of the business combination.

Recapitalization Transaction.

Seller’s post-transaction indebtedness will include amounts drawn from the Sprott Credit Agreement plus the Assumed New Subordinated Notes not to exceed $80.0 million. All other indebtedness of Seller will be repaid and retired, exchanged for shares of MUDS Class A common stock, converted into shares of Seller common stock or assumed by MUDS in the transaction.

Accounting for the Business Combination

The business combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, for financial reporting purposes, MUDS has been treated as the “acquired” company and Seller has been treated as the “acquirer”. This determination was primarily based on current stockholders of Seller having a relative majority of the voting power of the combined entity, the operations of Seller prior to the acquisition comprising the only ongoing operations of the combined entity, the fact that four of the seven director nominees to the HYMC board of directors are current directors of Seller (and such nominees are therefore expected to comprise a majority of the HYMC board of directors following the business combination)Recapitalization Transaction), and senior management of Seller comprising the majority of the senior management of the combined entity. At any redemption level, including the maximum, the Seller’s common stockholders prior to the consummation of the business combinationRecapitalization Transaction (and after issuance of additional shares of Seller common stock pursuant to the conversion of the Second Lien Notes) and the holders of the Excess Notes and 1.5 Lien Notes receiving shares of MUDS Class A common stock in exchange for their notes, will hold more than 50% at a minimum, and up to approximately 94% at a maximum, of the total shares of MUDS Class A common stock which will be issued and outstanding upon consummation of the business combination.

Recapitalization Transaction.

Accordingly, for accounting purposes, the financial statements of the combined entity will represent a continuation of the financial statements of Seller. The net assets of Seller will be stated at historical cost, with no goodwill or other intangible assets recorded.

F-112

Basis of Pro Forma Presentation

The historical financial information has been adjusted to give pro forma effect to the following events that are related and/or directly attributable to the business combination:Recapitalization Transaction: (i) the exchange, (ii) the debt and warrant assumption, (iii) the 1.25 Lien Exchange, (iv) the conversion, (v) the PIPE Investment, (vi) the forward purchase, (vii) the underwriting commission issuance of MUDS Class A common stock and (viii) the lender issuance of MUDS Class A common stock, each of which are factually supportable and, with respect to the pro forma statement of operations, are expected to have a continuing impact on the results of the combined company. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the business combination,Recapitalization Transaction, and the foregoing transactions attributable to the business combinationRecapitalization Transaction listed above.

The unaudited pro forma condensed combined financial information is for illustrative purposes only and preliminary in nature. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. MUDS and Seller have not had

F-88


Table of Contents

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

any historical commercial relationship prior to the business combination.Recapitalization Transaction. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

This information should be read together with MUDS’ and Seller’s financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information included in this prospectus.

Redemption Scenarios

The unaudited pro forma condensed combined financial information has been prepared using two redemption scenarios, which give effect to the range of minimum and maximum redemptions that may occur in addition to the effects of other financing agreements and exchanges outlined in the Description of Business Combination section above.

a) No Redemption Scenario — The no redemption scenario assumes that, after giving effect to the stock redeemed by public stockholders in connection with the Extension Meeting, no additional shares of MUDS Class A common stock are redeemed, resulting in aggregate cash available for transaction consideration, before any costs and fees, of $71.8 million for the benefit of the continuing combined entity. At the Extension Meeting, 13,890,713 shares of MUDS Class A common stock (approximately 67%) were redeemed leaving a total of 6,909,287 shares of MUDS Class A common stock unredeemed as of March 31, 2020.

b) Maximum Redemption Scenario — The maximum redemption scenario assumes that 6,909,287 shares of MUDS Class A common stock are redeemed, resulting in an aggregate payment before any costs and fees, of $71.8 million as of March 31, 2020 out of the trust account to the holders of MUDS Class A common stock. In its unaudited condensed interim financial statements as of and for the three months ended March 31, 2020, to support its financial reporting presentation requirements for the Trust, the Sponsor has presented 1,338,072 shares of Class A Common Stock as issued and outstanding which is exclusive of the 5,571,215 shares of Class A Common Stock presented as subject to possible redemption in those same financial statements; however, the total of these two amounts, which equals 6,909,287 shares, is entirely subject to redemption.

a)No Redemption Scenario — The no redemption scenario assumes that, after giving effect to the stock redeemed by public stockholders in connection with the Extension Meeting, no additional shares of MUDS Class A common stock are redeemed, resulting in aggregate cash available for transaction consideration, before any costs and fees, of $71.8 million for the benefit of the continuing combined entity. At the Extension Meeting, 13,890,713 shares of MUDS Class A common stock (approximately 67%) were redeemed leaving a total of 6,909,287 shares of MUDS Class A common stock unredeemed as of March 31, 2020.
b)Maximum Redemption Scenario — The maximum redemption scenario assumes that 6,909,287 shares of MUDS Class A common stock are redeemed, resulting in an aggregate payment before any costs and fees, of $71.8 million as of March 31, 2020 out of the trust account to the holders of MUDS Class A common stock. In its unaudited condensed interim financial statements as of and for the three months ended March 31, 2020, to support its financial reporting presentation requirements for the Trust, the Sponsor has presented 1,338,072 shares of Class A Common Stock as issued and outstanding which is exclusive of the 5,571,215 shares of Class A Common Stock presented as subject to possible redemption in those same financial statements; however, the total of these two amounts, which equals 6,909,287 shares, is entirely subject to redemption.

The following table summarizes the estimated transaction consideration and costs and fees under each redemption scenario. The amounts reflected below are preliminary in nature and subject to future adjustment as valuation models are revised using updated information and inputs, including transaction closing date balances and share price inputs. The preliminary amounts shown below are not indicative or representative of how such transactions may be reported in the future for financial reporting purposes upon the completion of all technical accounting analysis. See the Notes to the Unaudited Pro Forma Condensed Combined Financial Statements for additional details and pro forma adjustments related to the below instruments and transactions.

Preliminary Estimated Consideration

    

(a)
No 
Redemptions

    

(b)
Maximum 
Redemptions

 

Cash:

Investments held in Trust account(1)

$

71,786 

$

Sprott Credit Agreement(2)

68,600 

68,600 

Royalty Agreement(3)

30,000 

30,000 

Sponsor forward purchase (MUDS units and shares)(4)

25,000 

25,000 

Proceeds from PIPE Investment (MUDS stock)(5)

10,000 

20,000 

Backstop Agreement (MUDS stock and warrants)(6)

3,214 

65,000 

Class A common stock:

MUDS stock issued to holders of Seller’s 1.25 and 1.5 Lien Notes(7)

182,001 

182,001 

MUDS stock issued to former holders of Seller’s Second Lien Notes(8)(9)

139,873 

139,873 

MUDS stock issued to Seller’s common stockholders(8)(9)

3,126 

3,126 

Assumed debt:

New Subordinated Notes(10)

80,000 

80,000 

Estimated Consideration, Gross

613,600 

613,600 

Transaction fees and costs:

Management incentive compensation(11)

(7,339)

(5,764)

Deferred underwriting fees(12)

(7,061)

(4,871)

Investment banking advisory services(13)

(3,750)

(3,750)

Estimated Fees and Costs

(18,150)

(14,385)

Estimated Consideration, Net

$

595,450 

$

599,215 


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Table of Contents

NOTES TO THE UNAUDITED PRO FORMA

F-113CONDENSED COMBINED FINANCIAL STATEMENTS

Preliminary Estimated Consideration (a)
No
Redemptions
  (b)
Maximum
Redemptions
 
Cash:        
Investments held in Trust account(1) $71,786  $ 
Sprott Credit Agreement(2)  68,600   68,600 
Royalty Agreement(3)  30,000   30,000 
Sponsor forward purchase (MUDS units and shares)(4)  25,000   25,000 
Proceeds from PIPE Investment (MUDS stock)(5)  10,000   20,000 
Backstop Agreement (MUDS stock and warrants)(6)  3,214   65,000 
Class A common stock:        
MUDS stock issued to holders of Seller’s 1.25 and 1.5 Lien Notes(7)  182,001   182,001 
MUDS stock issued to former holders of Seller’s Second Lien Notes(8)(9)  139,873   139,873 
MUDS stock issued to Seller’s common stockholders(8)(9)  3,126   3,126 
Assumed debt:        
New Subordinated Notes(10)  80,000   80,000 
Estimated Consideration, Gross  613,600   613,600 
Transaction fees and costs:        
Management incentive compensation(11)  (7,339)  (5,764)
Deferred underwriting fees(12)  (7,061)  (4,871)
Investment banking advisory services(13)  (3,750)  (3,750)
Estimated Fees and Costs  (18,150)  (14,385)
Estimated Consideration, Net $595,450  $599,215 

(1)Represents estimated remaining gross proceeds from investments held in Trust account, using the March 31, 2020 trust balance.

F-114

(2)Represents the gross proceeds expected to be advanced under the Sprott Credit Agreement on the closing date after giving effect to the 2% issuance discount of $1.4 million.
(3)Proceeds from the Sprott Royalty Agreement.
(4)Gross proceeds from the forward purchase of MUDS’ units and shares by sponsor at $10.00 per unit.
(5)Estimated gross proceeds from shares of MUDS Class A common stock purchased at $10.00 per share through the PIPE Investment (excluding the proceeds from the Subscription/Backstop Agreements but including incremental equity investment).
(6)Estimated gross proceeds from shares of MUDS Class A common stock issued at $10.00 per share under the Subscription/Backstop Agreements; the counterparties to the Subscription/Backstop Agreements are investment funds affiliated with Seller and will receive 0.5 warrants per share (3.25 million warrants) regardless of whether or not such parties are required to purchase any shares pursuant to the Subscription/Backstop Agreements.
(7)Represents the estimated value of shares of MUDS Class A common stock issued at $10.00 per share to former holders of Seller’s 1.25 Lien and 1.5 Lien Notes to satisfy any remaining and unpaid balance following any cash repayments of the such notes (based on the cash available for such repayments, if any).
(8)Represents the estimated value of shares of MUDS Class A common stock distributed, on a pro rata basis, to holders of Seller common stock, including the former holders of the Second Lien Notes, at $10.00 per share following the conversion of the Second Lien Notes into shares of Seller common stock.
(9)Does not reflect distribution of Surrendered Shares to holders of Seller common stock, including the former holders of the Second Lien Notes, as Surrendered Shares, while received by Seller as consideration in transaction for distribution to holders of Seller common stock, including the former holders of the Second Lien Notes, are an allocation of MUDS Class A common shares and do not result in specific or additional transaction consideration requiring pro forma adjustment in these unaudited pro forma condensed combined financial statements.
(10)Represents the New Subordinated Notes (not to exceed $80.0 million) issued in exchange for the 1.25 Lien Notes.
(11)Represents cash payments for management incentive bonuses pursuant to Seller’s Retention Bonus Plan.
(12)Represents amounts due to MUDS’ underwriter which were deferred until the completion of a business combination. The fees will be paid with (a)(A) $2.5 million cash, (b)(B) $2.0 million of MUDS’ Class A common stock, and (c)(C) $2.78 million of MUDS Class A common stock to be paid dependent on the level of redemptions and PIPE investment proceeds and a sliding scale using a price of $10.00 per share and a $75.0 million threshold.
(13)Represents amounts due for investment banking advisory services to Seller.

F-115

Note 2. Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2020

The unaudited pro forma condensed combined balance sheet as of March 31, 2020 reflects the following adjustments:

(a)Represents the historical unaudited balance sheet of Hycroft Mining Corporation, Seller, as of March 31, 2020. For financial reporting purposes under US GAAP, Seller is the acquirer.

(b)Represents the historical unaudited balance sheet of MUDS, as of March 31, 2020. For financial reporting purposes under US GAAP, MUDS is the acquiree.

(c)Represents adjustments to the Seller’s balances for certain assets and liabilities that will either remain with Seller or be settled as part of the transaction, including, (1) $2.25 million of cash (post reclassification of $2.9 million of restricted cash to available cash) to be retained by Seller, (2) $1.8 million of cash paid at closing of the business combinationRecapitalization Transaction to settle the deferred phantom unit liability, and (3) related stockholders’ equity adjustments based on the $3.1 million of value for 312,595 shares of MUDS Class A common stock, at $10.00 per share, representing the portion of the 32,500,000 shares of MUDS Class A common stock issued by MUDS that is distributed to the existing owners of Seller’s common stock. Based on the terms of the business combinationRecapitalization Transaction and allocation hierarchy of transaction consideration, the value of the 312,595 shares of MUDS Class A common stock received by Seller’s stockholders is lower than Seller’s March 31, 2020 paid-in capital balance of $5.2 million, less the $2.25 million of cash retained by Seller, by approximately $0.1 million.

The allocation of the 32,500,000 shares of MUDS Class A common stock issued by MUDS is determined using the balances of Seller’s paid-in capital and the Excess Notes, the 1.5 Lien Notes and the Second Lien Notes (collectively referred to as the “Seller Stockholder Funded Debt”, which, based on the terms of the business combinationRecapitalization Transaction and allocation hierarchy of transaction consideration results in the Excess Notes and 1.5 Lien Notes (at 110% of face value) being satisfied in full, after which the remaining consideration is distributed on a pro rata basis to Seller’s common stockholders, which includes the former holders of the Second Lien Notes. Accordingly, as the balances of the Seller Stockholder Funded Debt has increased after March 31, 2020 for additional 1.25 Lien Note issuances, which increases the balance of the Excess Notes, and for payment-in-kind interest added to the Seller Stockholder Funded Debt balances, the future/actual allocation of the 32,500,000 shares of MUDS Class A common stock at the transaction closing date will not match the presentation of such herein or included elsewhere in this prospectus as a higher number of shares will be allocated to the holders of the Excess Notes and 1.50 Lien Notes with corresponding decreases to the number of shares of MUDS Class A common stock distributed on a pro rata basis to Seller’s common stockholders, which includes the former holders of the Second Lien Notes. The following table provides

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a summary of the pro forma adjustments related to the $325.0 million (representing 32,500,000 shares of MUDS Class A common stock) of consideration paid to Seller and distributed to Seller’s stockholders, including the former Second Lien Noteholders, using Seller’s March 31, 2020 recorded balances:

F-116

Pro Forma Adjustments

Seller
Subsidiaries

Issuance of New
Subordinated
Note

1.5 Lien Notes
Exchanged
at 110%

Cash
Retained by
Seller

Pro Rata
Adjustments

Total Pro
Forma
Adjustments

Pro Forma
Combined(1)

Additional paid-in capital

    

$

5,184 

    

    

    

    

    

$

(2,250)

    

$

192 

    

$

(2,058)

    

$

3,126 

 

Debt, current:

1.25 Lien Notes

105,593 

(80,000)

(80,000)

25,593 

1.5 Lien Notes

142,189 

14,219 

14,219 

156,408 

Second Lien Notes

216,227 

(76,354)

(76,354)

139,873 

$

469,193 

$

(80,000)

$

14,219 

$

(2,250)

$

(76,162)

$

(144,193)

$

325,000 


     Pro Forma Adjustments       
  Seller
Subsidiaries
  Issuance of New
Subordinated
Note
  1.5 Lien Notes
Exchanged
at 110%
  Cash
Retained by
Seller
  Pro Rata
Adjustments
  Total Pro
Forma
Adjustments
  Pro Forma
Combined(1)
 
Additional paid-in capital $5,184          $(2,250) $192  $(2,058) $3,126 
Debt, current:                            
1.25 Lien Notes  105,593   (80,000)              (80,000)  25,593 
1.5 Lien Notes  142,189       14,219           14,219   156,408 
Second Lien Notes  216,227               (76,354)  (76,354)  139,873 
  $469,193  $(80,000) $14,219  $(2,250) $(76,162) $(144,193) $325,000 

(1)$325.0 million of consideration issued by MUDS is allocated among the exchange of Seller’s existing Excess Notes and conversion of Second Lien Notes balances into shares of Seller common stock and the exchange of the 1.5 Lien Notes for shares of MUDS Class A common stock. See Note 5. Pro Forma Loss Per Share to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(d)Under both the no redemption and maximum redemption scenarios, a $1.7 million adjustment is made to remove the retained earnings balance of MUDS.

No Redemption — Represents (1) the reclassification of $71.8 million (representing 6,909,287 shares of MUDS Class A common stock) of investments held in Trust account to cash available for the benefit of the continuing combined entity, (2) $25.0 million of proceeds received pursuant to the Sponsor’s forward purchase agreement for 2,500,000 MUDS units and 625,000 of shares of MUDS Class A common stock, and (3) related stockholders’ equity adjustments to (i) reclassify 5,571,215 shares of MUDS Class A common stock subject to redemption to HYMC Class A common stock and additional paid-in capital, (ii) record the units and shares of MUDS Class A common stock purchased by the Sponsor under the forward purchase, and (iii) record the conversion and reclassification of 5,200,000 shares of MUDS Class B common stock into shares of MUDS Class A common stock, of which 1,941,667 are surrendered to Seller for pro rata distribution to Seller’s stockholders, which includes the former Second Lien Noteholders following conversion of the Second Lien Notes into Seller common stock. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

Maximum Redemption — Represents (1) the distribution of $71.8 million (representing 6,909,287 shares of MUDS Class A common stock) of investments held in Trust account to common stockholders of MUDS to disburse the funds for redemptions, (2) $25.0 million of proceeds received pursuant to the Sponsor’s forward purchase agreement for 2,500,000 MUDS units and 625,000 of shares of MUDS Class A common stock, and (3) related stockholders’ equity adjustments to (i) record the distribution of MUDS Class A common stock subject to redemption, (ii) record the units and shares of MUDS Class A common stock purchased by the Sponsor under the forward purchase agreement and (iii) record the conversion and reclassification of 5,200,000 shares of MUDS Class B common stock into shares of MUDS Class A common stock, of which 3,584,616 are surrendered to Seller for pro rata distribution to Seller’s stockholders, which includes the former Second Lien Noteholders following conversion of the Second Lien Notes into Seller common stock. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(e)Represents the $98.6 million of proceeds from transactions with the Sprott entities, which include (1) $68.6 million of net proceeds received from the Sprott Credit Agreement ($70.0 million gross reduced for a 2% issuance discount), of which $4.3 million was recorded to additional paid-in capital for the partner alignment shares (495,118 shares of MUDS Class A common stock under the No Redemption scenario and 495,621 shares of MUDS Class A common stock under the Maximum Redemption scenario), and (2) $30.0 million of proceeds received from the Sprott Royalty Agreement arranged by Sprott Resource Lending Corp. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(f)No Redemption — Represents $10.0 million of proceeds received from the 1,000,000 shares of MUDS’ stock sold to investors in the PIPE Investment at $10.00 per share. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

F-117

Maximum Redemption — Represents $20.0 million of proceeds received from the 2,000,000 shares of MUDS Class A common stock sold to investors in the PIPE Investment (excluding the proceeds from the Subscription/Backstop Agreements but including

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CONDENSED COMBINED FINANCIAL STATEMENTS

the incremental equity investment) at $10.00 per share to satisfy the minimum cash requirement of $210.0 million of gross cash raised in the transactions. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(g)Represents the repayment, exchange, or conversion of Seller’s existing debt and interest balances.

Under both the no redemption and maximum redemption scenarios (1) the $125.5 million First Lien Credit Agreement, $6.9 million Jacobs Note, and $0.4 million of interest payable are repaid with cash, (2) $80.0 million of outstanding 1.25 Lien Notes are exchanged for Assumed New Subordinated Notes and $25.6 million of outstanding 1.25L Notes are exchanged for 2,559,300 shares of MUDS Class A common stock, (3) the 1.5 Lien Notes are entitled to receive an amount equal to 110% of the principal balance, which was $14.2 million more than the $142.2 million recorded balance as of March 31, 2020, and are repaid with 15,640,790 shares of MUDS Class A common stock, and (4) the Second Lien Notes are converted into shares of Seller common stock and then 14,299,910 shares of MUDS Class A common stock is distributed pro rata to all holders of Seller common stock (including former holders of Seller common stock following the conversion of the Second Lien Notes which represents 13,987,315 shares of MUDS Class A common stock distributed on a pro rata basis) and the Second Lien Notes will realize a $76.4 million adjustment below the March 31, 2020 recorded balance of $216.2 million based on the terms of the business combinationRecapitalization Transaction and allocation hierarchy of transaction consideration. See “2(c)” above for additional detail on the methodology and adjustments to the Seller’s 1.25 Lien Notes, 1.5 Lien Notes and 2.0 Lien Notes balances.

  Seller
Subsidiaries
Balance
  Adjustments  Cash
Repayments
  Issuance of
New Subord.
Notes
  Equity
Conversions /
Exchanges
  Pro Forma
Combined
 
Debt, current                        
First Lien Agreement $125,468      $(125,468)         $ 
1.25 Lien Notes  105,593           (80,000)  (25,593)   
1.5 Lien Notes  142,189   14,219          (156,408)   
Second Lien Notes  216,227   (76,354)          (139,873)    
Jacobs Note  6,858       (6,858)           
Less, debt issuance costs  (959)  959                
  $595,376                  $ 
Interest payable                        
First Lien Agreement $371       (371)         $ 
      $(61,176) $(132,697) $(80,000) $(321,874)    

F-118

    

Seller
Subsidiaries
Balance

    

Adjustments

    

Cash
Repayments

    

Issuance of
New Subord.
Notes

    

Equity
Conversions /
Exchanges

    

Pro Forma
Combined

 

Debt, current

First Lien Agreement

$

125,468 

$

(125,468)

$

1.25 Lien Notes

105,593 

(80,000)

(25,593)

1.5 Lien Notes

142,189 

14,219 

(156,408)

Second Lien Notes

216,227 

(76,354)

(139,873)

Jacobs Note

6,858 

(6,858)

Less, debt issuance costs

(959)

959 

$

595,376 

$

Interest payable

First Lien Agreement

$

371 

(371)

$

$

(61,176)

$

(132,697)

$

(80,000)

$

(321,874)

See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(h)No Redemption — Represents the payments of underwriting fees and transaction costs, including (1) $13.6 million of cash for (i) a $7.3 million management incentive plan payment, (ii) $2.5 million paid for deferred underwriting fees, and (iii) $3.8 million for investment banking advisory services for Seller and (2) $4.6 million for 456,104 shares of MUDS Class A common stock issued for deferred underwriting fees. As of March 31, 2020, $1.0 million was accrued in accounts payable for the investment banking advisory services for Seller and $7.3 million was accrued as deferred underwriting fees.

Maximum Redemption — Represents the same pro forma adjustments as the no redemption scenario except that (1) cash underwriting fees and transaction costs total $12.0 million, which includes (i) a $5.8 million management incentive plan payment, (ii) $2.5 million paid for deferred underwriting fees, and (iii) $3.8 million for investment banking advisory services for Seller, and (2) only $2.4 million, representing 237,067 shares of MUDS Class A common stock, are issued for deferred underwriting fees.

See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(i)No Redemption — Represents $3.2 million (representing 321,400 shares of MUDS Class A common stock) of cash proceeds received pursuant to the Subscription/Backstop Agreements, to satisfy the minimum cash requirement of $210.0 million of gross cash raised in the transactions, and related stockholders’ equity adjustments. See Note 5. Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

Maximum Redemption — Represents $65.0 million (representing 6,500,000 shares of MUDS Class A common stock) of cash proceeds received pursuant to the Subscription/Backstop Agreements and related stockholders’ equity adjustments. See Note 5.

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Pro Forma Loss Per Share to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements for additional detail on common share transactions.

(j)Represents the reclassification of Seller’s deferred future financing costs related to the debt financing to debt, resulting in $7.3 million of such deferred costs presented as a contra-liability.

(k)The business combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, for financial reporting purposes, MUDS has been treated as the “acquired” company and Seller has been treated as the “acquirer.” For tax purposes, MUDS will be treated as the acquirer and is expected to establish a new tax basis in the purchased assets which may result in the recognition of a net deferred tax asset; however, these pro forma adjustments do not include any adjustments for increases in deferred tax assets as it uncertain as to the ultimate realization of any future tax benefits.

Note 3. Adjustments to the Unaudited Pro Forma Condensed Statement of Operations for the Three Months Ended March 31, 2020

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2020 reflects the following adjustments:

(a)Represents the historical unaudited statement of operations of Seller for the three months ended March 31, 2020. For financial reporting purposes under GAAP, Seller is the acquirer.

(b)Represents the historical unaudited statement of operations of MUDS for the three months ended March 31, 2020. For financial reporting purposes under GAAP, MUDS is the acquiree.

F-119

(c)Represents the effect of the Sprott Royalty Agreement cost, calculated as a percentage of revenue.

(d)Represents adjustments of (1) $3.1 million for MUDS’ general and administrative costs and (2) $0.3 million of deferred phantom unit costs of Seller, both of which are not expected to have a continuing impact on the combined company.

(e)Represents an adjustment of $0.7 million for interest income from investments held in the Trust account as such funds would be used as transaction consideration or classified as available cash in the combined company.

(f)Represents adjustments to interest expense to (1) remove effects of Seller’s obligations, which will not have a continuing effect on the combined company, and (2) add the effects of the obligations of the combined company, namely (i) $70.0 million expected to be advanced under the Sprott Credit Agreement on the closing date of the business combinationRecapitalization Transaction and (ii) $80.0 million of Assumed New Subordinated Notes in exchange for the 1.25 Lien Notes. The pro forma adjustments do not include the effects of any issuance discounts which may be calculated in the future as valuation models are revised using updated information and inputs, including transaction closing date balances and share price inputs.

  Seller
Subsidiaries
Balance
  Pro Forma
Adjustments
  Pro Forma
Combined
 
First Lien Agreement $2,867  $(2,867) $ 
1.25 Lien Notes  3,352   (3,352)   
1.5 Lien Notes  5,139   (5,139)   
Second Lien Notes  7,816   (7,816)   
Jacobs Note  85   (85)   
Amortization of debt issuance costs  672   (672)   
Less: capitalized interest  (44)      (44)
Assumed New Subordinated Notes      2,000   2,000 
Sprott Credit Agreement      1,488   1,488 
  $19,887  $(16,443) $3,444 

    

Seller
Subsidiaries
Balance

    

Pro Forma
Adjustments

    

Pro Forma
Combined

 

First Lien Agreement

$

2,867

$

(2,867)

$

1.25 Lien Notes

3,352

(3,352)

1.5 Lien Notes

5,139

(5,139)

Second Lien Notes

7,816

(7,816)

Jacobs Note

85

(85)

Amortization of debt issuance costs

672

(672)

Less: capitalized interest

(44)

(44)

Assumed New Subordinated Notes

2,000

2,000

Sprott Credit Agreement

1,488

1,488

$

19,887

$

(16,443)

$

3,444


(g)Represents adjustments to reverse income tax expense recorded by MUDS as the combined company has a loss before income taxes.

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Note 4. Adjustments to the Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 2019

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 reflects the following adjustments:

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(a)Represents the historical audited statement of operations of Seller for the year ended December 31, 2019. For financial reporting purposes under GAAP, Seller is the acquirer.

(b)Represents the historical audited statement of operations of MUDS for the year ended December 31, 2019. For financial reporting purposes under GAAP, MUDS is the acquiree.

(c)Represents the effect of the Sprott Royalty Agreement cost, calculated as a percentage of revenue.

(d)Represents adjustments of (1) $0.9 million for MUDS’ general and administrative costs and (2) $0.7 million of deferred phantom unit costs of Seller, both of which are not expected to have a continuing impact on the combined company.

(e)Represents an adjustment of $4.4 million for interest income from investments held in the Trust account as such funds would be used as transaction consideration or classified as available cash in the combined company.

(f)Represents adjustments to interest expense to (1) remove effects of Seller’s obligations, which will not have a continuing effect on the combined company, and (2) add the effects of the obligations of the combined company, namely (i) $70.0 million expected to be advanced under the Sprott Credit Agreement on the closing date of the business combinationRecapitalization Transaction and (ii) $77.2 million of Assumed New Subordinated Notes in exchange for the 1.25 Lien Notes. The pro forma adjustments do not include the effects of any issuance discounts which may be calculated in the future as valuation models are revised using updated information and inputs, including transaction closing date balances and share price inputs.

 ��Seller
Subsidiaries
Balance
  Pro Forma
Adjustments
  Pro Forma
Combined
 
First Lien Agreement $10,022  $(10,022) $ 
1.25 Lien Notes  5,241   (5,241)   
1.5 Lien Notes  18,763   (18,763)   
Second Lien Notes  28,537   (28,537)   
Jacobs Note  785   (785)   
Amortization of debt issuance costs  2,047   (2,047)   
Less: capitalized interest  (551)      (551)
Assumed New Subordinated Notes      7,721   7,721 
Sprott Credit Agreement      6,153   6,153 
  $64,844  $(51,521) $13,323 

    

Seller
Subsidiaries
Balance

    

Pro Forma
Adjustments

    

Pro Forma
Combined

 

First Lien Agreement

$

10,022

$

(10,022)

$

1.25 Lien Notes

5,241

(5,241)

1.5 Lien Notes

18,763

(18,763)

Second Lien Notes

28,537

(28,537)

Jacobs Note

785

(785)

Amortization of debt issuance costs

2,047

(2,047)

Less: capitalized interest

(551)

(551)

Assumed New Subordinated Notes

7,721

7,721

Sprott Credit Agreement

6,153

6,153

$

64,844

$

(51,521)

$

13,323


(g)Represents adjustments to reverse income tax expense recorded by MUDS as the combined company has a loss before income taxes.

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Note 5. Pro Forma Loss Per Share

The tables below summarize the estimated pro forma shares of HYMC Class A common stock issued and outstanding as a result of the transactions using March 31, 2020 recorded balances and the no redemption and maximum redemptions scenarios and assumptions described in Note 1. Basis of Presentation to the Notes to these Unaudited Pro Forma Condensed Combined Financial Statements. Since the balances of the Seller Stockholder Funded Debt have increased after March 31, 2020 for additional issuance of 1.25 Lien Notes and for payment-in-kind interest added to the Seller Stockholder Funded Debt balances, the future/actual allocation of 32,500,000 shares of MUDS Class A common stock at the transaction closing date between the Seller Stockholder Funded Debt holders and Seller’s common stockholders (including holders of Seller common stock following the conversion of the Second Lien Notes) will not match the presentation of such herein or included elsewhere in this prospectus as a higher number of shares will be allocated to the

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holders of the Excess Notes and 1.50 Lien Notes with corresponding decreases to the number of shares allocated to Seller’s common stockholders (including holders of Seller common stock following the conversion of the Second Lien Notes).

Pro Forma Adjustments — No Redemption Scenario

Description

Seller 
Subsidiaries

Mudrick 
Capital 
Acquisition 
Corporation

See 
Note 2(c)
for further 
detail

See 
Note 2(d)
for further 
detail

See 
Note 2(e)
for further 
detail

See 
Note 2(f)
for further 
detail

See 
Note 2(g)
for further 
detail

See 
Note 2(h)
for further 
detail

See 
Note 2(i)
for further 
detail

Pro Forma 
Combined 
(No 
Redemptions)

Seller’s common stockholders

    

2,897,568 

    

    

    

(2,584,973)

    

    

    

    

    

    

    

    

    

    

    

    

    

312,595 

 

MUDS’ stockholders:

Common Stock subject to redemption

5,571,215 

(5,571,215)

Class A Common Stock:

Existing stockholders

1,338,072 

5,571,215 

6,909,287 

Sponsor forward purchase

3,125,000 

3,125,000 

Shares retained by Sponsor from Class B conversions

3,258,333 

3,258,333 

Surrendered Shares to Seller’s stockholders and Second Lien Noteholders

1,941,667 

1,941,667 

Class B Common Stock

5,200,000 

(5,200,000)

PIPE Investment

1,000,000 

1,000,000 

Exchange and conversions of Seller’s debt:

1.25 Lien Notes

2,559,300 

2,559,300 

1.5 Lien Notes

15,640,790 

15,640,790 

Former holders of Second Lien Notes

13,987,315 

13,987,315 

Deferred underwriting fees (Cantor)

456,104 

456,104 

Sprott Credit Agreement

495,118 

495,118 

Backstop Agreement with Initial Subscribers

321,400 

321,400 

2,897,568 

12,109,287 

(2,584,973)

3,125,000 

495,118 

1,000,000 

32,187,405 

456,104 

321,400 

50,006,909 

        Pro Forma Adjustments — No Redemption Scenario    
Description Seller
Subsidiaries
  Mudrick
Capital
Acquisition
Corporation
  See
Note 2(c)
for further
detail
  See
Note 2(d)
for further
detail
  See
Note 2(e)
for further
detail
  See
Note 2(f)
for further
detail
  See
Note 2(g)
for further
detail
  See
Note 2(h)
for further
detail
  See
Note 2(i)
for further
detail
  Pro Forma
Combined
(No
Redemptions)
 
Seller’s common stockholders  2,897,568       (2,584,973)                          312,595 
MUDS’ stockholders:                                        
Common Stock subject to redemption      5,571,215       (5,571,215)                       
Class A Common Stock:                                        
Existing stockholders      1,338,072       5,571,215                       6,909,287 
Sponsor forward purchase              3,125,000                       3,125,000 
Shares retained by Sponsor from Class B conversions              3,258,333                       3,258,333 
Surrendered Shares to Seller’s stockholders and Second Lien Noteholders              1,941,667                       1,941,667 
Class B Common Stock      5,200,000       (5,200,000)                       
PIPE Investment                      1,000,000               1,000,000 
Exchange and conversions of Seller’s debt:                                        
1.25 Lien Notes                          2,559,300           2,559,300 
1.5 Lien Notes                          15,640,790           15,640,790 
Former holders of Second Lien Notes                          13,987,315           13,987,315 
Deferred underwriting fees (Cantor)                              456,104       456,104 
Sprott Credit Agreement                  495,118                   495,118 
Backstop Agreement with Initial Subscribers                                  321,400   321,400 
   2,897,568   12,109,287   (2,584,973)  3,125,000   495,118   1,000,000   32,187,405   456,104   321,400   50,006,909 

F-122

Pro Forma Adjustments — Maximum Redemption Scenario

Description

Seller 
Subsidiaries

Mudrick 
Capital 
Acquisition 
Corporation

See 
Note 2(c) 
for further 
detail

See 
Note 2(d) 
for further 
detail

See 
Note 2(e) 
for further 
detail

See 
Note 2(f) 
for further 
detail

See 
Note 2(g) 
for further 
detail

See 
Note 2(h) 
for further 
detail

See 
Note 2(i) 
for further 
detail

Pro Forma 
Combined 
(Max 
Redemptions)

Seller’s common stockholders

    

2,897,568 

    

    

    

(2,584,973)

    

    

    

    

    

    

    

    

    

    

    

    

    

312,595 

 

MUDS’ stockholders:

Common Stock subject to redemption

5,571,215 

(5,571,215)

Class A Common Stock:

Existing stockholders

1,338,072 

(1,338,072)

Sponsor forward purchase

3,125,000 

3,125,000 

Shares retained by Sponsor from Class B conversions

1,615,384 

1,615,384 

Surrendered Shares to Seller’s stockholders and Second Lien Noteholders

3,584,616 

3,584,616 

Class B Common Stock

5,200,000 

(5,200,000)

PIPE Investment

2,000,000 

2,000,000 

Exchange and conversions of Seller’s debt:

1.25 Lien Notes

2,559,300 

2,559,300 

1.5 Lien Notes

15,640,790 

15,640,790 

Former holders of Second Lien Notes

13,987,315 

13,987,315 

Deferred underwriting fees (Cantor)

237,067 

237,067 

Sprott Credit Agreement

495,621 

495,621 

Backstop Agreement with Initial Subscribers

6,500,000 

6,500,000 

2,897,568 

12,109,287 

(2,584,973)

(3,784,287)

495,621 

2,000,000 

32,187,405 

237,067 

6,500,000 

50,057,687 

        Pro Forma Adjustments — Maximum Redemption Scenario    
Description Seller
Subsidiaries
  Mudrick
Capital
Acquisition
Corporation
  See
Note 2(c) 
for further
detail
  See
Note 2(d) 
for further
detail
  See
Note 2(e) 
for further
detail
  See
Note 2(f) 
for further
detail
  See
Note 2(g) 
for further
detail
  See
Note 2(h) 
for further
detail
  See
Note 2(i) 
for further
detail
  Pro Forma
Combined
(Max
Redemptions)
 
Seller’s common stockholders  2,897,568       (2,584,973)                          312,595 
MUDS’ stockholders:                                        
Common Stock subject to redemption      5,571,215       (5,571,215)                       
Class A Common Stock:                                        
Existing stockholders      1,338,072       (1,338,072)                       
Sponsor forward purchase              3,125,000                       3,125,000 
Shares retained by Sponsor from Class B conversions              1,615,384                       1,615,384 
Surrendered Shares to Seller’s stockholders and Second Lien Noteholders              3,584,616                       3,584,616 
Class B Common Stock      5,200,000       (5,200,000)                       
PIPE Investment                      2,000,000               2,000,000 
Exchange and conversions of Seller’s debt:                                        
1.25 Lien Notes                          2,559,300           2,559,300 
1.5 Lien Notes                          15,640,790           15,640,790 
Former holders of Second Lien Notes                          13,987,315           13,987,315 
Deferred underwriting fees (Cantor)                              237,067       237,067 
Sprott Credit Agreement                  495,621                   495,621 
Backstop Agreement with Initial Subscribers                                  6,500,000   6,500,000 
   2,897,568   12,109,287   (2,584,973)  (3,784,287)  495,621   2,000,000   32,187,405   237,067   6,500,000   50,057,687 

F-123

The table below summarizes the estimated pro forma loss per share as a result of the transactions had such transactions occurred on January 1, 2019. After the transaction, there will be (1) 34.3 million warrants to purchase shares of MUDS common stock outstanding at an exercise price of $11.50 per share and (2) an additional number of warrants to purchase shares of MUDS common stock pursuant to the assumption of the outstanding Seller warrants, the quantity and exercise price of which will be determined

F-95


Table of Contents

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

pursuant to the terms of the Seller Warrant Agreement to be assumed by MUDS upon consummation of the business combination;Recapitalization Transaction; however, since all warrant instruments would be anti-dilutive, they were excluded from the below calculations.

Three Months Ended March 31, 2020

Year ended December 31, 2019

    

No
Redemptions

    

Max
Redemptions

    

No
Redemptions

    

Max
Redemptions

Net loss

$

(18,079)

$

(18,079)

$

(46,874)

$

(46,874)

Basic and diluted shares outstanding

50,006,909

50,057,687

50,012,060

50,057,687

Basic and diluted loss per share

$

(0.36)

$

(0.36)

$

(0.94)

$

(0.94)

  Three Months Ended March 31, 2020  Year ended December 31, 2019 
  No
Redemptions
  Max
Redemptions
  No
Redemptions
  Max
Redemptions
 
Net loss $(18,079) $(18,079) $(46,874) $(46,874)
Basic and diluted shares outstanding  50,006,909   50,057,687   50,012,060   50,057,687 
Basic and diluted loss per share $(0.36) $(0.36) $(0.94) $(0.94)

F-124

F-96


EXPLANATORY NOTE REGARDING PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2020

Adjustments to combine MUDS with the Company

As discussed in Note 3. Recapitalization Transaction to the Notes to Unaudited Condensed Consolidated Financial Statements as of and for the three and six months ended June 30, 2020, on May 29, 2020, the Company, formerly known as Mudrick Capital Acquisition Corporation (“MUDS”), consummated a business combination transaction (the “Recapitalization Transaction”) as contemplated by a purchase agreement dated January 13, 2020, as amended on February 26, 2020 (the “Purchase Agreement”), by and among the Company, MUDS Acquisition Sub, Inc. (“Acquisition Sub”) and Hycroft Mining Corporation (“Seller”). Pursuant to the Purchase Agreement, Acquisition Sub acquired all the issued and outstanding equity interests of the direct subsidiaries of Seller and substantially all of the other assets of Seller and assumed substantially all of the liabilities of Seller. In conjunction with the Recapitalization Transaction, Seller’s indebtedness existing prior to the Recapitalization Transaction was either repaid, exchanged for indebtedness of the Company, exchanged for shares of Company common stock or converted into shares of Seller common stock, and the Company’s post-Recapitalization Transaction indebtedness included amounts drawn under the Sprott Credit Agreement and the assumption of the newly issued New Subordinated Notes. Upon closing of the Recapitalization Transaction, the Company’s unrestricted cash available for use totaled $68.9 million and the number of shares of Company common stock issued and outstanding totaled 50,160,042. In addition, the Company had 34,289,999 outstanding warrants to purchase an equal number of shares of Company common stock at $11.50 per share and 12,721,623 warrants to purchase 3,210,213 shares of HYMC common stock at a price of $44.82 per share.

Prior to the Recapitalization Transaction, MUDS was a blank check special purpose acquisition corporation (“SPAC”) with no business operations. The Company accounted for the Recapitalization Transaction as a reverse recapitalization in which the Company’s financial statements reflect a continuation of Seller.

As the Recapitalization Transaction was completed on May 29, 2020, MUDS did not prepare financial statements as of and for the three and six months ended June 30, 2020, which precluded the Company from preparing updated unaudited pro forma condensed combined financial information for the second quarter of 2020; however, the Company has described the adjustments made to its financial statements on May 29, 2020 to combine the financial records of MUDS with the Company. For additional information on all the Company’s adjustments recorded as a result of the Recapitalization Transaction, refer to the Company’s Unaudited Condensed Consolidated Financial Statements as of and for the three and six months ended June 30, 2020

Condensed consolidated balance sheet

On May 29, 2020, MUDS had assets and liabilities consisting primarily of $10.4 million of cash and cash equivalents and $6.7 million of liabilities for accounts payable, accrued expenses, and deferred underwriting fees. Upon consummation of the Recapitalization Transaction, the Company recorded MUDS’ assets and liabilities in its financial records along with a $3.7 million increase to additional paid-in capital, which represents the net equity increase for the 1,197,704 shares of MUDS common stock not redeemed by MUDS public stockholders and Cantor Fitzgerald & Co., the SPAC underwriter. The 1,197,704 shares of MUDS common stock not redeemed by MUDS public stockholders represented approximately 2.4% of the Company’s common stock issued and outstanding upon closing of the Recapitalization Transaction.

Condensed consolidated statement of operations

Since the Company accounted for the Recapitalization Transaction as a reverse recapitalization, in which the Company’s financial statements reflect a continuation of Seller, the Company recorded no amounts in its financial records for income, expenses, and costs incurred and recorded by MUDS as of and through May 29, 2020. During the three months ended March 31, 2020, in connection with MUDS’ operating of a blank check SPAC, MUDS recorded general and administrative expenses of $3.4 million, interest income of $0.7 million, and income tax of $0.1 million, resulting in a net loss of $2.6 million. MUDS’ recorded administrative costs and expenses to administer the SPAC and interest income received from its trust balance deposits were just that, and no amounts for such similar items are expected to be recorded in the Company’s financial records after completing the Recapitalization Transaction.

Loss per share

As discussed in Note 16. Loss per Share to the Notes to Unaudited Condensed Consolidated Financial Statements as of and for the three and six months ended June 30, 2020, during the three and six months ended June 30, 2020, the Company recorded basic and diluted loss per share of ($2.71) and ($9.02), respectively. If the Company were to exclude the 1,197,704 shares of MUDS common stock not redeemed by MUDS public stockholders in its calculation of loss per share, the basic and diluted loss per share during the three and six months ended June 30, 2020 would equal ($2.77) and ($9.23), respectively. Due to the Company’s net loss during the three and six months ended June 30, 2020, no consideration was given to the dilutive effect of common stock equivalents because the effects of such would have been anti-dilutive.

F-97


Graphic

HYCROFT MINING HOLDING CORPORATION

Class A Common Stock


PROSPECTUS


[•], 2020


You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date other than the date of this prospectus. We are not making an offer of these securities in any state where the offer is not permitted.

BMO Capital Markets

Stifel

Canaccord Genuity


PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses and Issuance and Distribution

The following table sets forth the estimated fees and expenses payable by the registrant in connection with the offering and sale of our common stock and other securities:

SEC registration fee

    

$

9,735 

FINRA filing fee

11,750

Printing and engraving expenses

25,000

Legal fees and expenses

300,000

Accounting fees and expenses

25,000

Miscellaneous

5,000

Total

$

376,485

SEC registration fee $141,678 
Printing and engraving expenses   20,000 
Legal fees and expenses   225,000 
Accounting fees and expenses   23,000 
Miscellaneous   5,000 
Total $ 414,678 

We will bear all costs, expenses and fees in connection with the registration of the securities, including with regard to compliance with state securities or “blue sky” laws. The Selling Holders, however, will bear all underwriting commissions and discounts, if any, attributable to their sale of the securities. All amounts are estimates except the SEC registration fee and the FINRA filing fee.

Item 14. Indemnification of Directors and Officers

Section 145 of the DGCL, as amended, authorizes us to indemnify any director or officer under certain prescribed circumstances and subject to certain limitations against certain costs and expenses, including attorney’s fees actually and reasonably incurred in connection with any action, suit or proceeding, whether civil, criminal, administrative or investigative, to which a person is a party by reason of being one of our directors or officers if it is determined that such person acted in accordance with the applicable standard of conduct set forth in such statutory provisions. The Company’s Second Amended and Restated Charter provides that its officers and directors will be indemnified by the Company to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, the Second Amended and Restated Charter provides that the Company’s directors will not be personally liable for monetary damages to the Company or its stockholders for breaches of their fiduciary duty as directors, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL.

The Company has entered into agreements with its officers and directors to provide contractual indemnification in addition to the indemnification provided for in the charter. The Company’s Amended and Restated Bylaws also permit the Company to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. The Company has purchased a policy of directors’ and officers’ liability insurance that insures its officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures the Company against its obligations to indemnify our officers and directors.

These provisions may discourage stockholders from bringing a lawsuit against the Company’s directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against 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 officers and directors pursuant to these indemnification provisions.

The Company believes that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.

Item 15. Recent Sales of Unregistered Securities.

On September 25, 2017, Mudrick Capital Acquisition Holdings LLC, sponsor, purchased an aggregate of 5,750,000 founder shares, for an aggregate offering price of  $25,000 at an average purchase price of approximately $0.004 per share. The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the outstanding shares of common stock upon completion of the IPO.

On, February 12, 2018 sponsor and Cantor purchased an aggregate of 7,740,000 private placement warrants at a price of $1.00 per warrant (6,700,000 warrants by our sponsor and 1,040,000 warrants by Cantor for an aggregate purchase price of  $7,740,000) simultaneously with the completion of our IPO. Each private placement warrant is exercisable for one share of our Common Stock at a price of $11.50 per share.

On May 29, 2020;2020, pursuant to the terms of the Exchange Agreement, the 1.5 Lien Notesholders and the Excess Notesholders transferred and exchanged, $208,712,433after giving effect to the 110% conversion feature of the 1.5 Lien Notes, $194,143,960 million, in aggregate principal amount, of 1.5 Lien Notes and Excess Notes to Acquisition Sub in exchange for 20,871,236 shares of Common Stock valued at $10.00 per share.


On May 29, 2020, in connection with the closing of the business combination,Recapitalization Transaction, sponsor, pursuant to the Forward Purchase Contract, purchased, in a private placement for gross proceeds of $25,000,000, 3,125,000 of our shares of Common Stock and 2,500,000 warrants on substantially the same terms as our private placement warrants.

On May 29, 2020, in connection with the closing of the business combination,Recapitalization Transaction, we issued 7,596,309 shares of Common Stock pursuant to the Subscription/Backstop Agreements and issued 3,249,999 PIPE warrants to the Initial Subscribers in the private investment. The PIPE warrants have substantially the same terms as the private placement warrants.

On May 29, 2020, at the consummation of the business combination,Recapitalization Transaction, we assumed the Initial Sprott Credit Agreement pursuant to the terms of the Purchase Agreement, entered into the Sprott Credit Agreement, borrowed $70.0 million under such facility and issued to Lender 496,634 shares of Common Stock equal to approximately 1% of the Company’s post-closing shares of Common Stock outstanding.

On May 29, 2020, at the consummation of the business combination,Recapitalization Transaction, we issued 44,395 shares of Common Stock to Cantor pursuant to the Underwriting Agreement, dated as of February 7, 2018, as amended, as partial payment of Cantor’s deferred underwriting commission.

No underwriting discounts or commissions were paid with respect to such sales. All securities set forth above were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act and each purchaser was an accredited investor at the time of such purchase for purposes of Rule 501 of Regulation D.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits: The list of exhibits is set forth in the Exhibit Index below:

(b) Financial Statement Schedules: See Index to Financial Statements included on page F-1 for a list of the financial statements included in this registration statement.

(a)Exhibits: The list of exhibits is set forth in the Exhibit Index below:
(b)Financial Statement Schedules: See Index to Financial Statements included on page F-1 for a list of the financial statements included in this registration statement.

EXHIBIT INDEX

Exhibit
Number

    

Exhibit
Number

Description

2.1

1.1

Form of Underwriting Agreement *

2.1

Purchase Agreement, dated as of January 13, 2020, by and among Mudrick Capital Acquisition Corporation, MUDS Acquisition Sub, Inc. and Hycroft Mining Corporation (Incorporated by reference to Exhibit 2.1. to the Registrant’s Form 8-K, filed with the SEC on January 14, 2020).

2.2

2.2

Amendment to Purchase Agreement, dated as of February 26, 2020, by and among Mudrick Capital Acquisition Corporation, MUDS Acquisition Sub, Inc. and Hycroft Mining Corporation (incorporated(Incorporated by reference to Annex A-1A‑1 to the joint proxy

II-2

statement/prospectus on Form S-4/A of the Registrant, filed with the SEC on April 7, 2020).

3.1

3.1

Second Amended and Restated Certificate of Incorporation of Mudrick Capital Acquisition Corporation (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

3.2

3.2

Amended and Restated Bylaws of Mudrick Capital Acquisition Corporation (Incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

4.1

4.1

Warrant Agreement, dated as of October 22, 2015, by and between Hycroft Mining Corporation, Computershare Inc. and its wholly-ownedwholly owned subsidiary, Computershare Trust Company N.A., a federally chartered trust company, collectively as initial warrant agent; such warrant agreement was assumed by the Company pursuant to the Purchase Agreement and Continental Stock Transfer & Trust Company, LLC is the successor warrant agent (Incorporated by reference to Exhibit 10.11 to the joint proxy statement/prospectus on Form S-4/A of the Registrant, filed with the SEC on April 7, 2020).

4.2

4.2

Warrant Agreement, dated February 7, 2018, by and between and Mudrick Capital Acquisition Corporation and Continental Stock Transfer & Trust Company, LLC (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K, filed with the SEC on February 13, 2018).

4.3

4.3

Warrant Agreement, dated May 28, 2020, by and between Hycroft Mining Holding Corporation (f/k/a/a Mudrick Capital Acquisition Corporation) and Continental Stock Transfer & Trust Company, LLC (Incorporated by reference to Exhibit 4.3 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

5.1

5.1

Opinion of Neal, Gerber and Eisenberg LLP.*

II-2


10.1

10.1

Amended and Restated Credit Agreement, dated as of May 29, 2020, by and between Hycroft Mining Holding Corporation, as borrower, MUDS Acquisition Sub, Inc., MUDS Holdco, Inc., Hycroft Resources & Development, LLC and Allied VGH LLC, as guarantors, Sprott Private Resource Lending II (Collector), LP, as lender, and Sprott Resource Lending Corp., as arranger (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.2

10.2

Sprott Royalty Agreement, dated May 29, 2020, by and between the Registrant, Hycroft Resources & Development, LLC and Sprott Private Resource Lending II (Co) Inc. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.3

10.3

Form of Subscription/Backstop Agreement, dated January 13, 2020, entered into by Mudrick Capital Acquisition Corporation, and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC (Incorporated by reference to Exhibit 10.1 to the joint proxy statement/prospectus on Form S-4 of the Registrant, filed with the SEC on February 14, 2020).

10.4

10.4

Form of Amendment to Subscription Agreement, dated May 28,2020 entered into by Mudrick Capital Acquisition Corporation, and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.5

10.5

Amended and Restated Registration Rights Agreement, dated May 29, 2020, by and between Mudrick Capital Acquisition Corporation, Mudrick Capital Acquisition

II-3

Holdings LLC, Cantor Fitzgerald & Co. and the restricted stockholders (Incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.6

10.6

Form of Indemnification Agreement of the Registrant entered May 29, 2020 by each of Randy Buffington, John Ellis, Michael Harrison, David Kirsch, Eugene Davis, Marni Wieshofer, Thomas Weng or Stephen M. Jones (Incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.7

10.7

HYMC 2020 Performance and Incentive Pay Plan (Incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.8

10.8

Employment Agreement, dated March 15, 2019, by and between Hycroft Mining Corporation and Randy Buffington (Incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.9

10.9

Employment Agreement, dated March 15, 2019, by and between Hycroft Mining Corporation and Stephen M. Jones (Incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.10

10.10

Employment Agreement, dated March 25, 2019, by and between Hycroft Mining Corporation and Jeffrey Stieber.*Stieber (Incorporated by reference to Exhibit 10.10 to the Registrant’s Form S-1, filed with the SEC on July 13, 2020).

10.11

10.11

Seller Support Agreement, dated as of January 13, 2020, by and among Mudrick Capital Acquisition Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC (Incorporated by reference to Exhibit 10.2 to the joint proxy statement/prospectus on Form S-4 of the Registrant, filed with the SEC on February 14, 2020).

10.12

10.12

Exchange Agreement, dated as of January 13, 2020, by and among MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated by reference to Exhibit 10.3 to the joint proxy statement/prospectus on Form S-4 of the Registrant filed with the SEC on February 14, 2020).

10.13

10.13

Omnibus Amendment to Note Purchase Agreements and Exchange Agreement, dated May 28, 2020 by and between MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain of its direct and indirect subsidiaries and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated by reference to Exhibit 10.12 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

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10.14

10.14

Note Exchange Agreement, dated as of January 13, 2020, by and among Hycroft Mining Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated by reference to Exhibit 10.7 to the joint proxy statement/prospectus on Form S-4 of the Registrant, filed with the SEC on February 14, 2020).

10.15

10.15

Omnibus Amendment to Note Purchase Agreements and Note Exchange Agreement, dated May 28, 2020 by and between MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain of its direct and indirect subsidiaries and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated by reference to Exhibit 10.14 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

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10.16

Parent Sponsor Letter Agreement, dated as of January 13, 2020, by and among Mudrick Capital Acquisition Holdings LLC and Mudrick Capital Acquisition Corporation (Incorporated by reference to Exhibit 10.4 to the joint proxy statement/prospectus on Form S-4 of the Registrant filed with the SEC on February 14, 2020).

10.17

10.17

Forward Purchase Contract, dated January 24, 2018, between Mudrick Capital Acquisition Corporation and Mudrick Capital Acquisition Holdings LLC (Incorporated by reference to Exhibit 10.10 to the Registrant’s registration statement on Form S-1/A, filed with the SEC on January 26, 2018).

10.18

10.18

Underwriting Agreement, dated February 7, 2018, between the Registrant and Cantor Fitzgerald & Co. as representatives of the several underwriters (Incorporated by reference to Exhibit 1.1 to the Registrant’s Form 8-K, filed with the SEC on February 13, 2018).

10.19

10.19

Amendment to Underwriting Agreement, dated as of February 12, 2020, by and among the Registrant and Cantor Fitzgerald & Co., as representatives of the several underwriters (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the SEC on February 14, 2020).

10.20

10.20

Restricted Stock Unit Agreement (Performance) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Randy Buffington (Incorporated by reference to Exhibit 10.19 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.21

10.21

Restricted Stock Unit Agreement (Time) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Randy Buffington (Incorporated by reference to Exhibit 10.20 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.22

10.22

Restricted Stock Unit Agreement (Performance) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Stephen Jones (Incorporated by reference to Exhibit 10.21 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.23

10.23

Restricted Stock Unit Agreement (Time) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Stephen Jones (Incorporated by reference to Exhibit 10.22 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.24

10.24

Amendment to the Restricted Stock Unit Agreement (Performance) dated as of May 29, 2020 by and between Hycroft Mining Corporation and Randy Buffington (Incorporated by reference to Exhibit 10.23 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.25

10.25

Amendment to the Restricted Stock Unit Agreement (Time) dated as of May 29, 2020 by and between Hycroft Mining Corporation and Randy Buffington (Incorporated by reference to Exhibit 10.24 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.26

10.26

Amendment to the Restricted Stock Unit Agreement (Performance) dated as of May 29, 2020 by and between Hycroft Mining Corporation and Stephen Jones (Incorporated by reference to Exhibit 10.25 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

10.27

10.27

Amendment to the Restricted Stock Unit Agreement (Time) dated as of May 29, 2020 by and between Hycroft Mining Corporation and Stephen Jones (Incorporated by reference to Exhibit 10.26 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

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10.28

10.28

Restricted Stock Unit Agreement (Performance) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Jeffrey Stieber.*Stieber (Incorporated by reference to Exhibit 10.28 to the Registrant’s Form S-1, filed with the SEC on July 13, 2020).

10.29

10.29

Restricted Stock Unit Agreement (Time) dated as of February 20, 2019, by and between Hycroft Mining Corporation and Jeffrey Stieber.*Stieber (Incorporated by reference to Exhibit 10.29 to the Registrant’s Form S-1, filed with the SEC on July 13, 2020).

10.30

10.30

Amendment to the Restricted Stock Unit Agreement (Performance) dated as of May 29, 2020 by and between Hycroft Mining Corporation and Jeffrey Stieber.*Stieber (Incorporated by reference to Exhibit 10.30 to the Registrant’s Form S-1, filed with the SEC on July 13, 2020).

10.31

10.31

Amendment to the Restricted Stock Unit Agreement (Time) dated as of May 29, 2020 by and between Hycroft Mining Corporation and Jeffrey Stieber.*Stieber (Incorporated by reference to Exhibit 10.31 to the Registrant’s Form S-1, filed with the SEC on July 13, 2020).

10.32

10.32

Transition and Succession Agreement, dated July 1, 2020, between Randy Buffington and Hycroft Mining Holding Corporation and Autar Gold Corporation (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the SEC on July 2, 2020).

10.33

10.33

Restricted Stock Unit Agreement (Time-Vesting), dated July 1, 2020, between Randy Buffington and Hycroft Mining Holding Corporation (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K, filed with the SEC on July 2, 2020).

10.34

10.34

Consulting Agreement, dated July 1, 2020, between Randy Buffington and Hycroft Mining Holding Corporation (Incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K, filed with the SEC on July 2, 2020).

10.35

Employment Agreement, dated August 31, 2020, between Diane R. Garrett and Hycroft Mining Holding Corporation (Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K, filed with the SEC on August 31, 2020).

21.1

10.36

Restricted Stock Unit Agreement (Time-Vesting), dated August 31, 2020, between Diane R. Garrett and Hycroft Mining Holding Corporation (Incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K, filed with the SEC on August 31, 2020).

16.1

Letter from Withum+Smith, PC dated July 8, 2020 to the SEC regarding statements included Current Report on Form 8-K filed on July 13, 2020 (Incorporated by reference to Exhibit 16.1 to the Registrant’s first amendment to its Form 8-K, filed with the SEC on July 16, 2020).

21.1

Subsidiaries of the Registrant (Incorporated by reference to Exhibit 21.1 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).

23.1

23.1

Consent of Plante & Moran PLLC relating to Hycroft Mining Corporation’s financial statements.*

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23.2

Consent of WithumSmith+Brown, PC relating to Mudrick Capital Acquisition Corporation’s financial statements.*

23.3

23.3

Consent of Neal, Gerber & Eisenberg LLP (included in Exhibit 5.1)*

23.4

23.4

Consent of M3 Engineering and Technology Corporation.*

23.5

23.5

Consent of Steven Newman.*

23.6

23.6

Consent of Brooke Miller Clarkson.*

23.7

23.7

Consent of Tim Carew.*

23.8

23.8

Consent of Matt Hartmann.*

23.9

23.9

Consent of Richard F. DeLong.*

24.1

24.1

Power of Attorney (included as part of signature page).*

96.1

96.1

Technical Report Summary, Heap Leaching Feasibility Study prepared for Hycroft Mining Corporation and issued effective as of July 31, 2019 by M3 Engineering and Technology Corporation and other qualified persons (Incorporated by reference to Exhibit 96.1 to the joint proxy statement/prospectus on Form S-4/A of the Registrant filed with the SEC on April 24, 2020).

99.1

Consent of Diane R. Garrett to be Named as a Person Chosen to Become a Director.*


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*

Filed herewith

*            Filed herewith

Item 17. Undertakings.

The undersigned registrant hereby undertakes:

(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)To include any prospectus required by Section 10(a)(3) of the Securities Act ;

(ii)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;

(iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2)That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4)That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser.

(5)Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(6)That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the undersigned registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on July 13,August 31, 2020.

HYCROFT MINING HOLDING CORPORATION

By:

/s/ Stephen M. Jones

Stephen M. Jones

President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned constitutes and appoints Stephen M. Jones and David S. Stone, his or her true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him or her and in his or her name, place and stead, in any and all capacities, to execute any or all amendments including any post-effective amendments and supplements to this Registration Statement, and any additional Registration Statement filed pursuant to Rule 462(b), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Name

Title

Date

Name

Title

Date

/s/ Stephen M. Jones

President and Chief Executive Officer (principal executive officer)

July 13, 2020

Stephen M. Jones

August 31, 2020

/s/ Jeffrey Stieber

Chief Financial Officer (principal financial and accounting officer)

July 13,

August 31, 2020

Jeffrey Stieber

/s/ David Kirsch

Chairman of the Board

July 13,

August 31, 2020

David Kirsch

/s/ Eugene Davis

Director

July 13,

August 31, 2020

Eugene Davis

/s/ John Ellis

Director

July 13,

August 31, 2020

John Ellis

/s/ Michael Harrison

Director

August 31, 2020

Michael Harrison

/s/ Thomas Weng

Director

July 13,

August 31, 2020

Thomas Weng

/s/ Marni Wieshofer

Director

July 12,

August 31, 2020

Marni Wieshofer