HCM ACQUISITION CORP
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(MARK ONE)
For the quarter ended
June 30, 2022
For the transition period from to
Commission file number:
001-41241
(Exact Name of Registrant as Specified in Its Charter)
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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(Address of principal executive offices)
(
203
)
930-2200
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large
accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☒
No ☐
As of August 15, 2022, there were
28,750,000
Class A ordinary shares, par value $0.0001 per share, and
10,062,500
Class B ordinary shares, par value $0.0001 per share, issued and outstanding.
HCM ACQUISITION CORP
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022
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Page
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Part I. Financial Information
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Item 1. Financial Statements
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1
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2
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3
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4
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5
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14
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17
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17
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Part II. Other Information
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18
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18
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19
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19
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19
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19
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19
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20
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PART I - FINANCIAL INFORMATION
HCM ACQUISITION CORP
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June 30,
2022
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December 31,
2021
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(Unaudited)
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ASSETS
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Current assets
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||||||||
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Cash
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$
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$
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Prepaid expenses
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Total Current Assets
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Prepaid expenses - Long Term
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Deferred offering costs
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Cash and marketable securities held in trust account
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Total Assets
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$
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$
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LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO REDEMPTION AND SHAREHOLDERS’ (DEFICIT) EQUITY
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||||||||
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Current liabilities
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Accrued expenses
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$
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$
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Accrued offering costs
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Promissory note – related party
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Total current liabilities
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Warrant liabilities
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Deferred underwriting fee payable
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Total Liabilities
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CLASS A ORDINARY SHARES SUBJECT TO REDEMPTION
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Class A ordinary shares subject to possible redemption;
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Shareholders’ (Deficit) Equity
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Preference shares, $
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Class A ordinary shares, $
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Class B ordinary shares, $
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Additional paid-in capital
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Accumulated deficit
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(
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)
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(
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Total Shareholders’ (Deficit) Equity
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(
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Total Liabilities, Class A Ordinary Shares Subject to Redemption and Shareholders’ (Deficit) Equity
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$
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$
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The accompanying notes are an integral part of the unaudited condensed financial statements.
HCM ACQUISITION CORP
(UNAUDITED)
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Three Months
Ended
June 30,
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Six Months Ended
June 30,
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For the Period from February 5, 2021 (inception) through
June 30,
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2022
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2021
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2022
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2021
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Operating and formation costs
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$
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$
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$
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$
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Loss from operations
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(
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)
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(
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)
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(
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(
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Other income (expense):
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Interest earned on marketable securities held in Trust Account
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Unrealized loss on marketable securities held in Trust Account
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(
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(
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Change in fair value of warrant liabilities
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Transaction cost incurred in connection with Initial Public Offering
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(
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)
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Other income (expense), net
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Net income (loss)
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$
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$
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(
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)
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$
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$
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(
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)
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Basic and diluted weighted average shares outstanding, Class A ordinary shares
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Basic and diluted net income (loss) per share, Class A ordinary shares
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$
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$ |
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$ |
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$ |
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Basic and diluted weighted average shares outstanding, Class B ordinary shares
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Basic and diluted net income (loss) per share, Class B ordinary shares
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$
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$ | ( ) | $ |
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$ | ( ) | ||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
HCM ACQUISITION CORP
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
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Class B
Ordinary Shares
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Additional
Paid-in
Capital
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Accumulated
Deficit
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Total
Shareholders’
Deficit
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Shares
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Amount
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Balance — January 1, 2022
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$
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$
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$
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(
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$
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Cash in excess of fair value of Private Placement Warrants
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—
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Accretion for Class A ordinary shares to redemption amount
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—
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(
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(
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(
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Net income
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—
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Balance — March 31, 2022
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$
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$
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$
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(
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$
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(
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Accretion for Class A ordinary shares to redemption amount
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— |
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(
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(
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Net income
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— |
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| Balance — June 30, 2022 |
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$ |
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$ |
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$ |
(
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) | $ |
(
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FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND FOR THE PERIOD
FROM FEBRUARY 5, 2021 (INCEPTION) TO JUNE 30, 2021
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Class B
Ordinary Shares
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Additional
Paid-in
Capital
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Accumulated
Deficit
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Total
Shareholders’
Equity
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Shares
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Amount
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Balance — February 5, 2021 (inception)
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$
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$
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$
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$
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Issuance of Class B ordinary shares to Sponsor
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Net loss
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—
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(
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)
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(
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|||||||||||||
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Balance — March 31, 2021
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$
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$
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$
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(
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$
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Net loss
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— |
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(
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(
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| Balance — June 30, 2021 |
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$
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$
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$
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(
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$
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The accompanying notes are an integral part of the unaudited condensed financial statements.
HCM ACQUISITION CORP
(UNAUDITED)
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For the Six
Months Ended
June 30,
2022
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For the Period
from February 5,
2021 (Inception)
Through June 30,
2021
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Cash Flows from Operating Activities:
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Net income (loss)
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$
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$
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(
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)
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Adjustments to reconcile net income (loss) to net cash used in operating activities:
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Formation cost paid by Sponsor in exchange for issuance of founder shares
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Interest earned on marketable securities held in Trust Account
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(
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)
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Unrealized loss on marketable securities held in Trust Account
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Change in fair value of warrant liabilities
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(
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)
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Transaction cost incurred in connection with IPO
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Changes in operating assets and liabilities:
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Prepaid expenses and other current assets
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(
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Accrued expenses
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Net cash used in operating activities
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(
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(
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Cash Flows from Investing Activities:
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Investment of cash in Trust Account
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(
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)
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Net cash used in investing activities
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(
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)
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Cash Flows from Financing Activities:
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Proceeds from sale of Units, net of underwriting discounts paid
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Proceeds from sale of Private Placements Warrants
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Proceeds from promissory note - related party
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Repayment of promissory note – related party
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(
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)
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Payment of offering costs
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(
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)
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(
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)
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Net cash provided by financing activities
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Net Change in Cash
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Cash – Beginning of period
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Cash – End of period
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$
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$
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Non-Cash investing and financing activities:
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||||||||
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Offering costs included in accrued offering costs
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$
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$
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|
||||
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Offering costs paid by Sponsor in exchange for issuance of founder shares
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$
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|
$
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|
||||
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Initial classification of Class A ordinary share subject to possible redemption
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$
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$
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|
||||
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Change in value of Class A ordinary share subject to possible redemption
|
|
|||||||
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Deferred underwriting fee payable
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$
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|
$
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|
||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
NOTE 1 — ORGANIZATION AND PLAN OF BUSINESS OPERATIONS
HCM
Acquisition Corp (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on February 5, 2021. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses (“Business Combination”).
The
Company is not limited to a particular industry or geographic region for purposes of completing a Business Combination. 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 June 30, 2022, the Company had not commenced any operations. All activity for the period from February 5, 2021 (inception) through June 30, 2022 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which
is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the
earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The
registration statement for the Company’s Initial Public Offering was declared effective on January 20, 2022. On January 25, 2022, the Company consummated the Initial Public Offering of
28,750,000
units (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares” or the “Class A Ordinary Shares”), which
includes the full exercise by the underwriter of its over-allotment option in the amount of
3,750,000
Units at $
10.00
per Unit, generating gross proceeds of $
287,500,000
,
which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of
13,000,000
warrants (each, a “Private Placement
Warrant” and, collectively, the “Private Placement Warrants”) at a price of $
1.00
per Private Placement Warrant in a private placement
to HCM Investor Holdings, LLC (the “Sponsor”) and Cantor Fitzgerald & Co. (“Cantor Fitzgerald”), generating gross proceeds of $
13,000,000
,
which is described in Note 4.
Transaction
costs amounted to $
20,771,606
, consisting of $
5,000,000
of underwriting fees, $
15,125,000
of deferred underwriting fees, and $
646,606
of other offering costs.
Following
the closing of the Initial Public Offering on January 25, 2022, an amount of $
293,250,000
($
10.20
per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account
(the “Trust Account”), to be 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 185 days or less, or in any
open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or
(ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
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 completing a Business Combination. The Company must complete its initial Business Combination with
one
or
more target businesses that together have a fair market value equal to at least
80
% of the net assets held in the Trust Account (as
defined below) (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting discount held in the Trust Account) at the time of the agreement to enter into a Business
Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires
50
% or
more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.
The
Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business
Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The shareholders will be entitled to redeem
their shares for a pro rata portion of the amount held in the Trust Account (initially $
10.20
per share), calculated as of
business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account
(which interest shall be net of taxes payable).
The
Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
5,000,001
upon such
completion of a Business Combination and, if the Company seeks shareholder approval in connection with a Business Combination, it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the
affirmative vote of a majority of the shareholders who vote at a general meeting of the Company. If a shareholder vote is not required under applicable law or stock exchange listing requirements and the Company does not decide to hold a
shareholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission
(“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with
a Business Combination, each of the Sponsor, Cantor Fitzgerald and the Company’s officers and directors has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased in or after the Initial Public Offering in favor
of approving a Business Combination and to waive its redemption rights with respect to any such shares in connection with a shareholder vote to approve a Business Combination. However, in no event will the Company redeem its Public Shares in an
amount that would cause its net tangible assets to be less than $
5,000,001
. Additionally, each public shareholder may elect to redeem
its Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.
5
HCM ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Notwithstanding
the foregoing, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provide that a
public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder 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
% of the Public Shares without the
Company’s prior written consent.
The
Sponsor, Cantor Fitzgerald and the Company’s officers and directors has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b)
not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the Company’s obligation to redeem
100
% of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision
relating to shareholders’ rights or pre-initial business combination activity, unless the Company provides the public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment and (iii) to waive its
rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination.
The
Company will have until
15
months from the closing of the Initial Public Offering or during any extended time that the Company has to
consummate a Business Combination beyond
15
months as a result of a shareholder vote to amend the Amended and Restated Memorandum and
Articles of Association (an “Extension Period”) (the “Combination Period”) to complete a Business Combination. If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than
10
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 pay taxes (less up to $
100,000
of interest to pay dissolution expenses and which interest shall be net of taxes payable), divided by the number of then issued and
outstanding Public Shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, dissolve and liquidate, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law.
The
Sponsor, Cantor Fitzgerald and the Company’s officers and directors agreed to waive their respective liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period.
However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the
Combination Period. The underwriter has agreed to waive their rights to their deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such
event, such amounts will be included with the 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 assets remaining
available for distribution will be less than the Initial Public Offering price per Unit ($
10.00
).
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a third party for services rendered or products sold to the Company, or by a prospective
target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $
10.20
per Public Share or (2) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $
10.20
per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay the Company’s tax obligations. This
liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriter 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 (other than the Company’s independent auditors), 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 June 30, 2022, the Company had a cash balance of $
1,071,079
and working capital of $
950,171
. Prior to the completion of the Initial Public Offering, the Company lacked the liquidity it needed to sustain operations for a reasonable period of time, which is
considered to be one year from the issuance date of the financial statements. The Company has since completed its Initial Public Offering at which time capital in excess of the funds deposited in the Trust Account and/or used to fund offering
expenses was released to the Company for general working capital purposes. Accordingly, management has since reevaluated the Company’s liquidity and financial condition and determined that sufficient capital exists to sustain operations one year
from the date of this filing and therefore substantial doubt has been alleviated.
In
connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to
Continue as a Going Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for an extension of the deadline or complete a Business Combination by April 25, 2023,
then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern one year from the
date that these financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be unable to continue as a going concern. The Company intends to complete a Business Combination
before the mandatory liquidation date or obtain approval for an extension.
Risks and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and the Russian-Ukraine war on the industry and has concluded that while it is reasonably possible that the virus and the war 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 these condensed financial statements are issued. The condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
6
HCM ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
NOTE 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 8 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 complete 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 prospectus for its Initial Public Offering as filed with the
SEC on January 25, 2022, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on January 25, 2022. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be
expected for the year ending December 31, 2022 or for any future 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, 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 shareholder 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 condensed 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 the condensed financial statements in
conformity with GAAP requires the Company’s 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 period.
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.
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
no
t have any cash equivalents as
of June 30, 2022 and December 31, 2021.
Cash and Marketable Securities Held in Trust Account
At June 30, 2022, all of the assets held in the Trust
Account were held in U.S. Treasury securities.
7
HCM ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Warrant Instruments
The Company accounts for the warrants issued in connection
with the Initial Public Offering and the private placement in accordance with the guidance contained in FASB ASC 815 “Derivatives and Hedging” whereby under that provision the warrants do not meet the criteria for equity treatment and must be
recorded as a liability. Accordingly, the Company evaluated the tender offer provision of the warrant agreement and Section 4.5 fails the “classified in shareholders’ equity” criteria in ASC 815-40-25. After this evaluation, the Company
classified the warrant instrument as a liability at fair value and will adjust the instrument to fair value at each reporting period. This liability will be re-measured at each balance sheet date until the warrants are exercised or expire, and
any change in fair value will be recognized in the Company’s statement of operations.
Offering Costs
The Company complies with the requirements of ASC
340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A –“Expenses of Offering”. Offering costs consist of underwriting, legal, accounting and other expenses incurred through the Initial Public Offering that are directly related to the Initial
Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative
warrant liabilities are expensed as incurred and presented as non-operating expenses. Offering costs amounted to $
20,771,606
, of which
$
20,235,416
were charged to shareholders’ (deficit) equity upon the completion of the Initial Public Offering and $
536,190
were charged to operations.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to
possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and are
measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares 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) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside
of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2022, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’
(deficit) equity section of the Company’s condensed balance sheets.
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by
charges against additional paid in capital and accumulated deficit.
At June 30, 2022, the Class A ordinary shares reflected in
the condensed balance sheet are reconciled in the following table:
|
Gross proceeds
|
$
|
|
||
|
Less:
|
||||
|
Proceeds allocated to Public Warrants
|
(
|
)
|
||
|
Class A ordinary shares issuance costs
|
(
|
)
|
||
|
Plus:
|
||||
|
Remeasurement of carrying value to redemption value
|
|
|||
|
Class A ordinary shares subject to possible
redemption, June 30, 2022
|
$
|
|
Income Taxes
The Company accounts for income taxes under ASC 740,
“Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future
tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in
income taxes recognized in an enterprise’s financial statement and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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 June 30, 2022 and December 31, 2021. 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.
The Company is considered an exempted Cayman Islands
Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented.
8
HCM ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Net Income (Loss) per Ordinary Share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. Subsequent measurement of the
redeemable Class A ordinary shares is excluded from income (loss) per ordinary share as the redemption value approximates fair value.
The Company calculates its earnings per share to allocate
net income (loss) pro rata to Class A and Class B ordinary shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of ordinary shares share pro rata in the income (loss) of the
Company.
The calculation of diluted income (loss) per ordinary share
does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are
exercisable to purchase
27,375,000
Class A ordinary shares in the aggregate. As a result, diluted net income (loss) per ordinary share
is the same as basic net income (loss) per ordinary share for the periods presented.
The following table reflects the calculation of basic and
diluted net income (loss) per ordinary share (in dollars, except per share amounts):
|
Three Months Ended
June 30, 2022
|
Three Months Ended
June 30, 2021
|
Six Months Ended
June 30, 2022
|
For the Period from February 5, 2021 (inception) through
June 30, 2021
|
|||||||||||||||||||||||||||||
|
Class A
|
Class B
|
Class A
|
Class B
|
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||||||||||||||
|
Basic and diluted net income (loss) per ordinary share
|
||||||||||||||||||||||||||||||||
|
Numerator:
|
||||||||||||||||||||||||||||||||
|
Allocation of net income (loss), as adjusted
|
$
|
|
$
|
|
$ |
|
(
|
)
|
$ |
|
$
|
|
$ |
|
$ |
(
|
) | |||||||||||||||
|
Denominator:
|
||||||||||||||||||||||||||||||||
|
Basic and diluted weighted average shares outstanding
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Basic and diluted net income (loss) per ordinary share
|
$ |
|
$ |
|
$ |
|
(
|
)
|
$ |
|
$ |
|
$ |
|
$ |
(
|
)
|
|||||||||||||||
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 Corporation limit of $250,000. The Company has not experienced losses on this 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 Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received
for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring 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). These tiers include:
|
|
• |
Level 1, defined as observable inputs such as quoted prices
(unadjusted) for identical instruments in active markets;
|
|
|
• |
Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
|
|
• |
Level 3, defined as unobservable inputs in which little or no market
data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. In some
circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy
based on the lowest level input that is significant to the fair value measurement.
|
Derivative Financial Instruments
The Company evaluates its financial instruments to
determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and
revalued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement
or conversion of the instrument could be required within 12 months of the balance sheet date.
9
HCM ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board
(“FASB”) issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging -- Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity
classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the
diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early
adoption permitted beginning on January 1, 2021. The Company retrospectively adopted ASU 2020-06 and the adoption did not have an impact on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued,
but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statement.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the
Initial Public Offering, the Company sold
28,750,000
units, which includes a full exercise by the underwriter of its over-allotment
option in the amount of
3,750,000
units at a purchase price of $
10.00
per Unit. Each Unit consists of
one
Class A ordinary
share and
of
one
redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at an exercise price of $
11.50
per share, subject to adjustment (see Note 7).
NOTE 4 — PRIVATE
PLACEMENT
Simultaneously with
the closing of the Initial Public Offering, the Sponsor and Cantor Fitzgerald purchased an aggregate of
13,000,000
Private Placement
Warrants at a price of $
1.00
per Private Placement Warrant, of which the Sponsor purchased
10,500,000
Private Placement Warrants and Cantor Fitzgerald purchased
2,500,000
Private Placement Warrants (for an aggregate purchase price of $
13,000,000
) from the Company in a private placement.
Each Private
Placement Warrant is exercisable for
one
Class A ordinary share at a price of $
11.50
per share, subject to adjustment (see Note 7). The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in
the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public
Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5 — RELATED
PARTY TRANSACTIONS
Founder Shares
On February 10, 2021,
the Sponsor paid $
25,000
to cover certain offering and formation costs of the Company in consideration for
7,187,500
Class B ordinary shares (the “Founder Shares”). On January 5, 2022, the Company effected a share capitalization in which the Sponsor was
issued an additional
2,875,000
ordinary shares so that the Sponsor owns an aggregate of
10,062,500
Founder Shares.
The Sponsor has
agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A)
one year
after the completion of a Business Combination; and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A ordinary shares equals or exceeds $
12.00
per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any
20
trading days within any
30
-trading day period commencing at
least
150
days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, share
exchange, reorganization or other similar transaction that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Administrative Services Agreement
The Company entered
into an agreement, commencing on January 20, 2022 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay an affiliate of the Sponsor a total of up to $
10,000
per month for office space and secretarial and administrative services. Upon completion of a Business Combination or the Company’s liquidation, the Company will cease
paying these fees. For the three and six months ended June 30, 2022, the Company incurred $
20,000
and $
20,000
in fees for these services, respectively. For the three months ended June 30, 2021 and for the period from February 5, 2021 (inception) through
June 30, 2021, the Company did
no
t incur any fees for these services.
Promissory Note —
Related Party
On December 30, 2021,
the Company issued an amended and restated unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $
300,000
. The Promissory Note is non-interest bearing and payable on the earlier of June 30, 2022, or the consummation of the Initial Public Offering. As of June 30, 2022 and December 31,
2021, there was $
0
and $
208,500
outstanding, respectively. As of January 25, 2022, there was $
250,115
outstanding under the Promissory Note, which was due on demand.
Subsequently, on January 27, 2022 the $
250,115
outstanding under the Promissory Note was repaid.
10
HCM ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Related Party Loans
In order to fund
working capital deficiencies or to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers 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. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such
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. As of June 30, 2022 and December 31, 2021, there was
no
balance outstanding under the Working Capital Loans.
NOTE 6 —
COMMITMENTS AND CONTINGENCIES
Registration and Shareholder Rights
Pursuant to a
registration and shareholder rights agreement entered into on January 20, 2022, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights. The holders of these
securities will be entitled to make up to
three
demands, excluding short form registration demands, that the Company register such
securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the Business Combination. However, the registration and shareholder rights agreement
provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The registration rights agreement does not contain liquidated damages or
other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted
the underwriters a
45
-day option to purchase up to
3,750,000
additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. On January 25, 2022, the underwriter’s elected
to fully exercise the over-allotment option to purchase an additional
3,750,000
Units at a price of $
10.00
per Unit. The underwriters were paid a cash underwriting discount of $
0.20
per Unit, or $
5,000,000
in the aggregate payable upon the closing of
the Initial Public Offering. In addition, the underwriter will be entitled to a deferred fee of (i)
5.0
% of the gross proceeds of
the initial
25,000,000
Units sold in the Public Offering, or $
12,500,000
, and (ii)
7.0
% of the gross proceeds from the Units sold
pursuant to the over-allotment option, or $
2,625,000
. 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.
Finder’s Agreement
In February
2022, the Company entered into an agreement with a service provider to help identify targets, negotiate terms of potential Business Combinations, consummate a Business Combination and/or provide other services. In connection with this
agreement, the Company will be required to pay a finder’s fee for such services, in an amount equal to $
1,000,000
, which would be
contingent on the consummation of a Business Combination with a target that is introduced by the service provider.
NOTE 7 — WARRANT LIABILITIES
Warrants
— As of June 30,
2022 and December 31, 2021, there are
14,375,000
and zero outstanding Public Warrants, respectively. Public Warrants may only be
exercised for a whole number of shares. No fractional shares will
be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable commencing on the
later of
one year
from the closing of the Initial Public Offering and
30 days
after the completion of a
Business Combination. The Public Warrants will expire
five years
from the completion of a Business
Combination or earlier upon redemption or liquidation.
The Company will not
be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary
shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be
exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class A ordinary share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the
securities laws of the state of residence of the registered holder of the warrants.
The Company has
agreed that as soon as practicable, but in no event later than
20
business days after the closing of a Business Combination, the
Company will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants, and the Company will use its
commercially reasonable efforts to cause the same to become effective within
60
business days following the closing of a Business
Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if
the Class A ordinary shares are at the time of any exercise of a Public Warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company
may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required
to file or maintain in effect a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants, but the Company will use its commercially reasonably efforts to register
or qualify for sale the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the
60
th day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during
any period when the Company 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, but the Company will use its
commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
11
HCM ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Redemption
of warrants when the price per Class A ordinary share equals or exceeds $
18.00
— Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants (except
with respect to the Private Placement Warrants):
|
|
• |
in whole and not in part;
|
|
|
• |
at a price of $
|
|
|
• |
upon a minimum of
|
|
|
• |
if, and only if, if, and only if, the closing price
of the Class A ordinary shares equals or exceeds $
|
If and when the
warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The exercise price
and number of Class A ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or
consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of Class A ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle
the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with
respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x)
the Company issues additional Class A ordinary shares or equity-linked securities, for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $
9.20
per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors
and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate
gross proceeds from such issuances represent more than
60
% of the total equity proceeds, and interest thereon, available for the
funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of its Class A ordinary shares during the
20
trading day period starting on the trading day after to the day on which the Company consummates its Business Combination (such price, the “Market
Value”) is below $
9.20
per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to
115
% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest
cent) to be equal to
180
% of the higher of the Market Value and the Newly Issued Price.
As of June 30, 2022
and December 31, 2021, there are
13,000,000
and
0
outstanding Private Placement Warrants, respectively. The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except
that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or salable until
30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and be
non-redeemable, except as described above, 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.
NOTE 8 — CLASS A
ORDINARY SHARES SUBJECT TO REDEMPTION AND SHAREHOLDERS’ (DEFICIT) EQUITY
Preference Shares
— The
Company is authorized to issue
5,000,000
preference shares 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. At
June 30, 2022 and December 31, 2021, there were
no
preference shares issued or outstanding.
Class A Ordinary Shares
—
The Company is authorized to issue
500,000,000
Class A ordinary shares, with
a par value
of $
0.0001
per share. Holders of Class A ordinary shares are entitled to
one
vote for each share. At
June 30
, 2022 and December 31, 2021, there were
28,750,000
and
0
Class A
ordinary shares subject to possible redemption as presented in temporary equity, respectively.
Class B Ordinary Shares
—
The Company is authorized to issue
50,000,000
Class B ordinary shares, with
a par value
of $
0.0001
per share. Holders of the Class B ordinary shares are entitled to
one
vote for each share.
At
June 30, 2022 and December 31, 2021, there were
10,062,500
Class B ordinary shares issued and
outstanding, of which an aggregate of up to
1,312,500
shares were subject to forfeiture to the
extent that the underwriter
’
s over-allotment option
is not exercised in full or in part so that the number of Founder Shares will equal
25.9
% of the Company’s issued and outstanding
ordinary shares after the Initial Public Offering. As a result of the underwriter
’
s election to fully exercise their over-allotment option on January 25, 2022, a total of
1,312,500
Founder Shares are no longer subject to forfeiture.
12
HCM ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Holders of Class B
ordinary shares will have the right to elect all of the Company’s directors prior to a Business Combination. Holders of Class A ordinary shares and Class B ordinary shares will vote together as a single class on all other matters submitted to a
vote of shareholders except as required by law.
The Class B ordinary
shares will automatically convert into Class A ordinary shares at the time of a Business Combination, or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all
Founder Shares will equal, in the aggregate, on an as-converted basis,
25.9
% of the sum of (i) the total number of ordinary shares
issued and outstanding upon completion of the Initial Public Offering, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or
deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued,
deemed issued, or to be issued, to any seller of an interest in the target to the Company in a Business Combination and any Private Placement Warrants issued to the Sponsor, its affiliates or any member of the Company’s management team upon
conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than
one
-to-one.
NOTE 9 — FAIR VALUE MEASUREMENTS
The following table presents information about the
Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
Description
|
Level
|
June 30, 2022
|
||||||
|
Assets:
|
||||||||
|
Marketable securities held in Trust Account
|
1
|
$
|
|
|||||
|
Liabilities:
|
||||||||
|
Warrant liability – Public Warrants
|
1
|
|
||||||
|
Warrant liability – Private Placement Warrants
|
3
|
|
||||||
The Warrants were accounted for as liabilities in
accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the
statement of operations.
The Warrants were valued using a binomial lattice model,
incorporating the Cox-Ross-Rubenstein methodology, which is considered to be a Level 3 fair value measurement. The binomial lattice model’s primary unobservable input utilized in determining the fair value of the Warrants is the expected
volatility of the ordinary shares. The expected volatility as of the closing date of the Initial Public Offering date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The
subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 1 due to the use of an observable market quote in an active market under the ticker HCMAW. For periods subsequent to
the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value of the Public Warrants as of each relevant date.
The following table provides quantitative information
regarding Level 3 fair value measurements:
|
January 25, 2022
(Initial
Measurement)
|
June 30, 2022
|
|||||||
|
Stock price
|
$
|
|
$
|
|
||||
|
Exercise price
|
$
|
|
$
|
|
||||
|
Expected term (in years)
|
|
|
||||||
|
Volatility
|
|
%
|
|
%
|
||||
|
Risk-free rate
|
|
%
|
|
%
|
||||
|
Dividend yield
|
|
%
|
|
%
|
||||
The following table presents the changes in the fair value of Level 3 warrant liabilities:
|
|
Private
Placement |
Public
|
Warrant Liabilities
|
|||||||||
|
Initial measurement on January 25, 2022
|
$
|
|
$
|
|
$
|
|
||||||
|
Change in fair value
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Transfer to Level 1
|
|
(
|
)
|
(
|
)
|
|||||||
|
Fair value as of March 31, 2022
|
$
|
|
$
|
|
$
|
|
||||||
|
Change in fair value
|
(
|
)
|
|
(
|
)
|
|||||||
|
Fair value as of June 30, 2022
|
$
|
|
$
|
|
$
|
|
||||||
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation
technique or methodology occurs. There were transfers in or out of Level 3 in the amount of $
2,875,000
from other levels in the fair
value hierarchy for the period from January 25, 2022 (inception) through June 30, 2022.
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated
subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have
required adjustment or disclosure in the condensed financial statements.
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to HCM Acquisition Corp. References to our “management” or our “management team” refer to our officers
and directors, and references to the “Sponsor” refer to HCM Investor Holdings, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial
statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts
and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation,
statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy and
the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to
identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual
events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information
identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public
Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law,
the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on February 5, 2021 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our
shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be
successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from February 5, 2021 (inception) through June 30, 2022 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business
Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the three months ended June 30, 2022, we had a net income of $2,985,788, which consists of interest earned on marketable securities held in the Trust Account of $452,149, an unrealized
loss on marketable securities held in our Trust Account of $41,723 and change in fair value of warrant liabilities of $2,737,500, offset by operating costs of $162,138.
For the six months ended June 30, 2022, we had a net income of $10,089,869, which consists of interest earned on marketable securities held in the Trust Account of $547,651, an unrealized
loss on marketable securities held in our Trust Account of $29,280 and change in fair value of warrant liabilities of $10,676,250, offset by operating costs of $568,562 and transaction cost incurred in connection with the IPO of $536,190.
For the three months ended June 30, 2021, we had net loss of $3,286, which consisted of formation and operating costs.
For the period from February 5, 2021 (inception) through June 30, 2021, we had net loss of $15,786, which consisted of formation and operating costs.
Liquidity, Capital Resources and Going Concern
On January 25, 2022, we consummated the Initial Public Offering of 28,750,000 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of
3,750,000 Units at $10.00 per Unit, generating gross proceeds of $287,500,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 13,000,000 Private Placement Warrant at a price of $1.00 per Private
Placement Warrant in a private placement to Sponsor and Cantor Fitzgerald & Co., generating gross proceeds of $13,000,000.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Units, a total of $293,250,000 was placed in the Trust Account. We incurred
$20,771,606 in Initial Public Offering related costs, consisting of $5,000,000 of underwriting fees, $15,125,000 of deferred underwriting fees, and $646,606 of other offering costs.
For the six months ended June 30, 2022, cash used in operating activities was $611,529. Net income of $10,089,869 was affected by interest earned on marketable securities held in the Trust
Account of $547,651, an unrealized loss on marketable securities held in our Trust Account of $29,280, change in fair value of warrant liabilities of $10,676,250 and transaction incurred in connection with the IPO of $536,190. Changes in
operating assets and liabilities used $42,967 of cash for operating activities.
For the period from February 5, 2021 (inception) through June 30, 2021, cash used in operating activities was $7,500. Net loss of $15,786 was affected by formation cost paid by Sponsor in
exchange for issuance of founder shares of $5,000 and changes in operating assets and liabilities, which provided $3,286 of cash for operating activities.
As of June 30, 2022, we had marketable securities held in the Trust Account of $293,768,371 (including approximately $518,371 of interest income and unrealized gains) consisting of U.S.
Treasury Bills with a maturity of 185 days or less. We may withdraw interest from the Trust Account to pay taxes, if any. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest
earned on the Trust Account (less income taxes payable), to complete our Business Combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining
proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2022, we had cash of $1,071,079. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence
on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target
businesses, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their
affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working
capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such 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.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate 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, we may have insufficient funds available to operate our business prior to our initial Business Combination.
Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we
may issue additional securities or incur debt in connection with such Business Combination.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)
2014-15,“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for an extension of
the deadline or complete a Business Combination by April 25, 2023, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the
Company’s ability to continue as a going concern one year from the date that these financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be unable to continue as a
going concern. The Company intends to complete a Business Combination before the mandatory liquidation date or obtain approval for an extension.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2022. We do not participate in transactions that create relationships
with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance
sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a total of up
to $10,000 per month for office space and secretarial and administrative services. As of June 30, 2022, the Company incurred $20,000.
The underwriter is entitled to a deferred fee of (i) 5.0% of the gross proceeds of the initial 25,000,000 Units sold in the Initial Public Offering, or $12,500,000, and (ii) 7.0% of the
gross proceeds from the Units sold pursuant to the over-allotment option, or $2,625,000. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete a Business
Combination, subject to the terms of the underwriting agreement.
In February 2022, the Company entered into an agreement with a service provider to help identify targets, negotiate terms of potential Business Combinations, consummate a Business
Combination and/or provide other services. In connection with this agreement, the Company will be required to pay a finder’s fee for such services, in an amount equal to $1,000,000, which would be contingent on the consummation of a Business
Combination with a target that is introduced by the service provider.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC 815-40, under which the warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value in respect of each reporting period. This liability is subject to re-measurement at each balance sheet date until the
warrants are exercised, and any change in fair value is recognized in the statements of operations. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a lattice
model, specifically a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology.
Class A Ordinary Shares Subject to Redemption
We account for our Class A ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities
from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights
that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as
shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible
redemption are presented at redemption value as temporary equity, outside of the shareholders’ (deficit) equity section of our condensed balance sheets.
Net Income (Loss) Per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period. Subsequent measurement of the
redeemable Class A ordinary shares is excluded from income (loss) per ordinary share as the redemption value approximates fair value. We calculate our earnings per share to allocate net income (loss) pro rata to Class A and Class B ordinary
shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of ordinary shares share pro rata in the income (loss) of the Company.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt — “Debt with Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging — Contracts in Entity’s Own Equity” (Subtopic
815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and
simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are
indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and
should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We adopted ASU 2020-06 on January 1, 2022 on a modified retrospective basis. The adoption of ASU 2020-06 did not have an
impact our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial
statements.
Not required for smaller reporting companies.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within
the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of
the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal
executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided
reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2022 covered by this Quarterly Report on Form 10-Q that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Form 10-K for the fiscal year ended December 31, 2021 and
our Form 10-Q for the fiscal quarter ended March 31, 2022. As of the date of this Report, there have been no material changes to the risk factors disclosed in our Form 10- K for the period ended December 31, 2021 and our Form 10-Q for the
fiscal quarter ended March 31, 2022 filed with the SEC.
None
None
None
None
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
|
No.
|
Description of Exhibit
|
|
|
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
|
101.INS*
|
XBRL Instance Document
|
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB*
|
XBRL Taxonomy Extension Labels Linkbase Document
|
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
| * |
Filed herewith.
|
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
HCM ACQUISITION CORP
|
||
|
Date: August 15, 2022
|
By:
|
/s/ Shawn Matthews
|
|
Name:
|
Shawn Matthews
|
|
|
Title:
|
Chairman and Chief Executive Officer and Director
|
|
|
(Principal Executive Officer)
|
||
|
Date: August 15, 2022
|
By:
|
/s/ James Bond
|
|
Name:
|
James Bond
|
|
|
Title:
|
President and Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
||
20
TABLE OF CONTENTS
Part I - Financial InformationItem 1. Interim Financial StatementsNote 1 Organization and Plan Of Business OperationsNote 2 Summary Of Significant Accounting PoliciesNote 3 Initial Public OfferingNote 4 Private PlacementNote 5 Related Party TransactionsNote 6 Commitments and ContingenciesNote 7 Warrant LiabilitiesNote 8 Class A Ordinary Shares Subject To Redemption and Shareholders (deficit) EquityNote 9 Fair Value MeasurementsNote 10 Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits