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 September 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 September 30, 2022, we had a net income of
$1,867,031, which consists of interest earned on marketable securities held in
the Trust Account of $599,266, an unrealized gain on marketable securities held
in our Trust Account of $824,061 and change in fair value of warrant liabilities
of $821,250, offset by operating costs of $377,546.
For the nine months ended September 30, 2022, we had a net income of
$11,956,900, which consists of interest earned on marketable securities held in
the Trust Account of $1,146,917, an unrealized gain on marketable securities
held in our Trust Account of $794,781 and change in fair value of warrant
liabilities of $11,497,500, offset by operating costs of $946,108 and
transaction cost incurred in connection with the IPO of $536,190.
For the three months ended September 30, 2021, we had net loss of $0.
For the period from February 5, 2021 (inception) through September 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 nine months ended September 30, 2022, cash used in operating activities
was $712,987. Net income of $11,956,900 was affected by interest earned on
marketable securities held in the Trust Account of $1,146,917, an unrealized
gain on marketable securities held in our Trust Account of $794,781 and change
in fair value of warrant liabilities of $11,497,500 and transaction incurred in
connection with the IPO of $536,190. Changes in operating assets and liabilities
provided $233,121 of cash for operating activities.
14
--------------------------------------------------------------------------------
Table of Contents
For the period from February 5, 2021 (inception) through September 30, 2021,
cash used in operating activities was $10,786. Net loss of $15,786 was affected
by formation cost paid by Sponsor in exchange for issuance of founder shares of
$5,000.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $295,191,698 (including approximately $1,941,698 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 September 30, 2022, we had cash of $969,621. 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 does not 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 September 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 September 30, 2022, the Company
incurred $50,000.
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.
15
--------------------------------------------------------------------------------
Table of Contents
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.
16
--------------------------------------------------------------------------------
Table of Contents
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.
© Edgar Online, source Glimpses
HCM ACQUPAR 
