Attachment: FORM 10-Q

Document


HYCROFT MINING HOLDING CORPORATION

November 9, 2020

Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, NY 10004
Attention: Compliance Department

        Re:    WARRANT ADJUSTMENT CERTIFICATE

Ladies and Gentlemen:

BACKGROUND

This certificate is given pursuant to Section 5.2 of that certain Warrant Agreement, dated as of October 22, 2015 (the “Warrant Agreement”), between Hycroft Mining Corporation, a Delaware corporation (the “Company”), and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary, Computershare Trust Company, N.A., a federally chartered trust company, together as Warrant Agent. Capitalized terms used and not defined herein have the meanings ascribed to them in the Warrant Agreement.
On May 29, 2020, pursuant to that certain Purchase Agreement, dated as of January 13, 2020 and amended as of February 26, 2020 (as amended, the “Purchase Agreement”), between the Company, Mudrick Capital Acquisition Corporation, a Delaware corporation (“MUDS”), and MUDS Acquisition Sub, Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of Parent (“Acquisition Sub”), the parties thereto consummated the business combination contemplated thereby, whereby, among other things, Acquisition Sub acquired from the Company the issued and outstanding equity interests of the Company’s direct subsidiaries and Acquisition Sub acquired substantially all of the other assets and assumed substantially all of the liabilities of the Company. In connection with the consummation of the business combination, the Company adopted a plan of dissolution and liquidation and filed a certificate of dissolution with the Secretary of State of the State of Delaware and therefore no longer exists. MUDS was a blank check company 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. In connection with the consummation of the business combination, MUDS changed its name to “Hycroft Mining Holding Corporation.” MUDS is hereinafter referred to as “HYMC” where the reference is to a time after the consummation of the business combination. Upon consummation of the business combination, (1) HYMC assumed the Company’s liabilities and obligations under the Warrant Agreement and (2) Continental Stock Transfer & Trust Company became the new Warrant Agent under the Warrant Agreement.


On October 6, 2020, the HYMC completed a registered public offering of 9,583,334 units (the “Offering”), at a price to the public of $9.00 per unit. Each unit consisted of one share of HYMC’s Class A Common Stock, par value $0.0001 per share (the “Common Stock) and one warrant to purchase one share of Common Stock at an exercise price of $10.50 per share (the “New Warrants”). Certain of the units were sold in the Offering to Restricted Persons within the meaning of Section 1.1(aaa) of the Warrant Agreement.
The consideration received by HYMC in the Offering was determined on the basis of arms’ length negotiations with the unaffiliated third party underwriters and in the good faith judgment of HYMC’s Board of Directors reflected the fair market value of such securities. However, since a portion of the units sold in the Offering were to Restricted Persons, HYMC has elected to treat that portion of Offering that was sold to Restricted Persons, consisting of 4,951,388 shares of Common Stock and 4,951,388 shares of Common Stock issuable in the future upon exercise of the New Warrants, as an issuance of Additional Shares of New Common Stock and an issuance of Additional Shares of New Common Stock deemed to be issued, respectively, under Section 5.1(c) of the Warrant Agreement.
Per the Warrant Agreement, this issuance and deemed issuance of Additional Shares of New Common Stock require that an adjustment be made to the Cheap Stock Factor1, exercise price and number of shares into which warrants issued under the Warrant Agreement are exercisable following the Offering.
CERTIFICATION
    HYMC has issued and been deemed to have issued Additional Shares of New Common Stock under the Warrant Agreement. Accordingly, pursuant to Section 5.2 of the Warrant Agreement, the undersigned executive officer of HYMC, hereby certifies solely in such capacity and not in an individual capacity, on behalf of HYMC, that, as of date first written above:
1.Stanley Rideout is the duly appointed Executive Vice President and Chief Financial Officer of HYMC.

2.As a result of the Offering, HYMC has issued and been deemed to have issued Additional Shares of New Common Stock under the Warrant Agreement.
1 Pursuant to Section 5.1(c) of the Warrant Agreement the Cheap Stock Factor shall be reduced, concurrently with such issuance, by multiplying the Cheap Stock Factor then in effect by the following fraction: “(A) the numerator of which shall be the sum of (I) the number of shares of New Common Stock outstanding immediately prior to such issuance plus (II) the number of shares of New Common Stock which the aggregate consideration received by or payable to the Company for the total number of Additional Shares of Common Stock so issued would purchase at the Fair Market Value of the New Common Stock on the date of, and immediately prior to such issuance or, if such Additional Shares of New Common Stock are issued (or, pursuant to Section 5.1(c)(iv), deemed to be issued) to a Restricted Person, the Exercise Price in effect of the date of, and immediately prior to such issuance, and (B) the denominator of which shall be the sum of (I) the number of Additional Shares of New Common Stock outstanding immediately prior to such issuance plus (II) the number of Additional Shares of New Common Stock so issued. For purposes of the above calculation, the number of shares of New Common Stock outstanding immediately prior to such issuance shall be calculated on a fully diluted basis, as if . . . any outstanding Options had been fully exercised . . . as of such date.” [References to Convertible Securities deleted as no longer applicable]
31218195.3




3.The Initial Share Number, the issuance and deemed issuance of shares of New Common Stock to Restricted Persons, the Cheap Stock Factor, the Cheap Stock adjustment fraction, the Per Warrant Share Number, the Exercise Price and the number of shares of New Common Stock to be acquired upon exercise of a Warrant, as of immediately prior to, and as adjusted to reflect, the Offering and 12,721,623 outstanding Warrants, are as follows:

Cheap Stock Factor Adjustment Fraction [Section 5.1(c)]
Numerator
Initial Share Number50,160,143
Number of shares of new Common Stock to be issued upon exercise of outstanding warrants, other than Warrants
             34,289,898

Number of shares of new Common Stock to be issued upon exercise of Warrants3,210,213
(I) Fully diluted number of shares of Common Stock outstanding immediately prior to issuance of new Common Stock
             87,660,254

plus
(II) Number of shares of new Common Stock deemed issued at Fair Market Value with aggregate consideration received by the Company from Restricted Persons upon exercise of Warrants; and
994,255
Number of shares of new Common Stock deemed issued at Exercise Price with aggregate consideration payable to the Company for deemed exercise of new warrants issued to Restricted Persons upon exercise of Warrants
1,159,964


             89,814,473
Denominator
(I) Fully diluted number of shares of Common Stock outstanding immediately prior to issuance of New Common Stock
             87,660,254

plus
(II) Shares of New Common Stock issued to a Restricted Person in the offering; and
               4,951,388

Shares of New Common Stock deemed to be issued to a Restricted Person upon exercise of new warrants issued in the offering to a Restricted Person
               4,951,388



97,563,030

The Cheap Stock Factor is therefore reduced by the foregoing fraction and applying the adjusted Cheap Stock Factor, (i) the Exercise Price is reduced and (ii) the number of shares of New Common Stock to be acquired upon exercise of a Warrant is increased, as follows:

31218195.3



Pre-AdjustmentAs Adjusted
Cheap Stock Factor1.000.92058
Per Warrant Share Number0.252340.27411
Exercise Price$44.82$41.26
Number of shares of New Common Stock to be issued upon exercise of Warrants
3,210,213
3,487,168
    
4.A true and correct copy of the computations of the adjustments made to the Cheap Stock Factor, and, accordingly, the Per Warrant Share Number, the Exercise Price and total number of shares of New Common Stock issuable upon exercise of the Warrants, are attached as Exhibit A hereto.

DIRECTION TO WARRANT AGENT

    Pursuant to Section 5.2(ii) of the Warrant Agreement, you are hereby directed as Warrant Agent to give written notice to each Registered Holder in the manner provided in Section 10.2 of the Warrant Agreement, which notice shall state the information herein provided.
HYCROFT MINING HOLDING CORPORATION


By: /s/ Stanton Rideout
Stanton Rideout, Executive Vice President and Chief Financial Officer


31218195.3


Document

Exhibit 31.1
CERTIFICATION
I, Diane R. Garrett, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Hycroft Mining Holding Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 9, 2020/s/ Diane R. Garrett
Diane R. Garrett
President and Chief Executive Officer

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Exhibit 31.2
CERTIFICATION
I, Stanton Rideout, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Hycroft Mining Holding Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 9, 2020/s/ Stanton Rideout
Stanton Rideout
Executive Vice President and Chief Financial Officer

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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hycroft Mining Holding Corporation (the “Corporation”) on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), the undersigned officer of the Corporation does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
Dated: November 9, 2020/s/ Diane R. Garrett
Diane R. Garrett
President and Chief Executive Officer

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Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hycroft Mining Holding Corporation (the “Corporation”) on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), the undersigned officer of the Corporation does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
Dated: November 9, 2020/s/ Stanton Rideout
Stanton Rideout
Executive Vice President and Chief Financial Officer

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MINE SAFETY DISCLOSURE

The following disclosures are provided pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Financial Reform Act”) and Item 104 of Regulation S-K, which requires certain disclosures by companies required to file periodic reports under the Exchange Act that operate mines regulated under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).

Mine Safety Information

Whenever the Federal Mine Safety and Health Administration (“MSHA”) believes a violation of the Mine Act, any health or safety standard or any regulation has occurred, it may issue a citation which describes the alleged violation and fixes a time within which the operator (e.g., our subsidiary, Hycroft Resources & Development Inc.) must abate the alleged violation. In some situations, such as when MSHA believes that conditions pose a hazard to miners, MSHA may issue an order removing miners from the area of the mine affected by the condition until the alleged hazards are corrected. When 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.

The following table reflects citations and orders issued to us by MSHA during the three months ended September 30, 2020, excluding citations and orders issued to contractors. The proposed assessments as of and for the three months ended September 30, 2020 were taken from the MSHA Mine Data Retrieval System. Section references below are to sections of the Mine Act.

Mine or Operation1:
Total # of "Significant and Substantial" Violations Under §104(a)2
 
Total # of Orders Issued Under §104(b)3
 
Total # of Citations and Orders Issued Under §104(d)4
 
Total # of Flagrant Violations Under §110(b)(2)5
 
Total # of Imminent Danger Orders Under §107(a)6
 
Total Amount of Proposed Assessments from MSHA under the Mine Act7
 
Total # of Mining-Related Fatalities8
 
Pending Legal Actions9
 
Legal Actions Instituted10
 
Legal Actions Resolved11
Hycroft Mine
(MSHA ID# 2601962)		1 — — — — $3,483 — — — —
1 
MSHA assigns an identification number to each mine or operation and may or may not assign separate identification numbers to related facilities. The definition of “mine” under section 3 of the Mine Act includes the mine, as well as other items used in, or to be used in, or resulting from, the work of extracting minerals, such as land, structures, facilities, equipment, machines, tools, and minerals preparation facilities.
2 
Represents the total number of citations issued by MSHA under Section 104 of the Mine Act for violations of health or safety standards that could significantly and substantially contribute to a serious injury if left unabated.
3 
Represents the total number of orders issued under Section 104(b) of the Mine Act, which represents a failure to abate a citation under Section 104(a) of the Mine Act within the period prescribed by MSHA. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines the violation has been abated.
4 
Represents the total number of citations and orders issued by MSHA under Section 104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards.
5 
Represents the total number of flagrant violations identified by MSHA under Section 110(b)(2) of the Mine Act.
6 
Represents the total number of imminent danger orders issued under Section 107(a) of the Mine Act.
7 
Amount represents the total United States dollar value of proposed assessments received from MSHA during the three months ended September 30, 2020.
8 
Represents the total number of mining-related fatalities at mines subject to the Mine Act pursuant to Section 1503(a)(1)(G) of the Financial Reform Act.
9 
Represents the total number of legal actions pending as of September 30, 2020 before the Federal Mine Safety and Health Review Commission as required by Section 1503(a) of the Financial Reform Act.
10 
Represents the total number of legal actions instituted as of September 30, 2020 before the Federal Mine Safety and Health Review Commission as required by Section 1503(a) of the Financial Reform Act.
11 
Represents the total number of legal actions resolved as of September 30, 2020 before the Federal Mine Safety and Health Review Commission as required by Section 1503(a) of the Financial Reform Act.


Pattern or Potential Pattern of Violations
In addition, as required by the reporting requirements regarding mine safety included in Section 1503(a)(2) of the Financial Reform Act, for the three months ended September 30, 2020, none of the Company’s mines of which the Company is an operator has received written notice from MSHA of:

(a)a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards under Section 104(e) of the Mine Act; or
(b)the potential to have such a pattern.

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