HPX(HPX) - 2022 Q4 - Annual Report

Part I Business HPX Corp., a SPAC, completed its IPO, merged with Ambipar Emergency Response, and delisted its securities - HPX Corp. was a blank check company incorporated on March 20, 2020, for the purpose of effecting a business combination[18] - On July 20, 2020, the company consummated its Initial Public Offering (IPO) of 25,300,000 units at $10.00 per unit, generating gross proceeds of $253,000,000[19] - On March 3, 2023, HPX consummated its business combination with Ambipar Emergency Response (AMBI), merging into AMBI which became the surviving entity[9][33] - Following the business combination, on March 3, 2023, the NYSE American filed to delist HPX's securities, and on March 16, 2023, HPX filed for deregistration[38] - As of December 31, 2022, the company had one officer and no full-time employees[39] Risk Factors As a smaller reporting company, HPX Corp. is not required to include risk factors in this Annual Report - The company is not required to include risk factors in the Annual Report as it qualifies as a smaller reporting company[40] Unresolved Staff Comments The company reports no unresolved staff comments - None[41] Properties The company's executive offices are in Wilmington, Delaware, with costs covered by a monthly Sponsor fee - The company maintains its executive offices in Wilmington, Delaware. The cost is included in a $10,000 per month fee paid to the Sponsor for office space and support services[42] Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings[43] Mine Safety Disclosures This item is not applicable to the company - None[44] Part II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities HPX's securities were delisted from NYSE American on March 3, 2023, and the company has never paid cash dividends - The company's units, Class A common stock, and warrants were delisted from the NYSE American on March 3, 2023[47] - As of December 31, 2022, there was approximately one holder of record for Units, one for Class A ordinary shares, and two for redeemable warrants[47] - The company has not paid any cash dividends on its ordinary shares to date[48] Management's Discussion and Analysis of Financial Condition and Results of Operations HPX reported a net loss of $3.4 million in 2022 due to higher costs and lower warrant gains, with identified material internal control weaknesses Results of Operations The company reported a net loss of $3.4 million in 2022, a shift from $9.4 million net income in 2021 Comparison of Results of Operations (Years Ended Dec 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net (Loss) Income | ($3,425,810) | $9,394,728 | | Operating Costs | $6,633,923 | $1,163,690 | | Change in Fair Value of Warrant Liabilities | $2,278,476 | $10,533,024 | | Interest Income on Trust Account | $694,357 | $25,305 | Liquidity and Capital Resources HPX managed liquidity through cash and Sponsor loans, with significant trust account depletion from shareholder redemptions Cash and Trust Account Balances (as of Dec 31, 2022) | Account | Balance | | :--- | :--- | | Cash held outside Trust Account | $199,388 | | Cash held in Trust Account | $21,905,597 | - In 2022, shareholders redeemed shares for an aggregate amount of approximately $231.8 million ($195.1 million in July and $36.7 million in November), significantly reducing the Trust Account balance[28][29][178] - The Sponsor provided working capital loans to the company, with $905,000 outstanding as of December 31, 2022. An additional $410,000 was loaned in January 2023. In March 2023, $1,168,548 of this debt was forgiven[70][72] Critical Accounting Policies and Estimates Critical accounting policies involve fair value measurement for warrant and derivative liabilities, and temporary equity classification for redeemable shares - Warrant Liabilities: Warrants are treated as liabilities recorded at fair value, with changes in value recognized in the statements of operations[76] - Derivative Financial Instruments: The PIPE derivative liability, resulting from the Downside Protection Agreement, is recorded at fair value with changes recognized in the statements of operations[77] - Class A Ordinary Shares Subject to Redemption: These shares are classified as temporary equity and presented at their redemption value, outside of the shareholders' equity section[79] Controls and Procedures Management concluded disclosure controls were ineffective as of December 31, 2022, due to material weaknesses in financial instrument accounting and cash management - Management concluded that disclosure controls and procedures were not effective as of December 31, 2022[87] - A material weakness was identified in accounting for complex financial instruments, as processes to apply accounting requirements were inadequate[88] - A second material weakness was identified due to a lack of segregation of duties in cash management, where the CEO/CFO could execute payments without a required independent review[88] - The company's internal control structure ceased to be in operation subsequent to the closing of the business combination[89][92] Part III Directors, Executive Officers and Corporate Governance As of December 31, 2022, HPX had a seven-member board with three independent committees and a Code of Ethics - The company's executive team included Carlos Piani as CEO & CFO, and Bernardo Hees and Rodrigo Xavier as Co-Chairmen of the Board[98] - The board of directors consisted of seven members and had three standing committees: Audit, Compensation, and Nominating and Corporate Governance, each composed solely of independent directors[113][115] - The Audit Committee was chaired by Salete Pinheiro, who was determined to be an 'audit committee financial expert'[116] - The company maintained a Code of Ethics applicable to all directors, officers, and employees[120] Executive Compensation Directors and officers received no cash compensation, with the Sponsor receiving a monthly fee and independent directors receiving Founder Shares - No directors or officers received any cash compensation for services rendered[126] - The company paid its Sponsor $10,000 per month for office space and administrative support services[126] - The Sponsor transferred 20,000 Founder Shares to each of the independent directors at the original purchase price[126] Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters As of December 31, 2022, HPX Capital Partners LLC was the largest beneficial owner of Class B shares Beneficial Ownership as of December 31, 2022 | Beneficial Owner | Class | Shares Owned | Percentage of Class | | :--- | :--- | :--- | :--- | | HPX Capital Partners LLC (Sponsor) | B | 6,245,000 | 19.8% | | James A. & Margaret M. Ruffalo | A | 272,810 | 12.5% | | Meteora Capital, LLC. | A | 174,719 | 8.0% | | Mizuno Financial Group, Inc. | A | 123,794 | 5.8% | | All directors and officers as a group | B | 6,305,000 | 19.9% | Certain Relationships And Related Party Transactions The company engaged in related party transactions with its Sponsor, including share sales, administrative fees, and working capital loans, largely forgiven post-merger - The Sponsor purchased 5,750,000 Founder Shares for $25,000 and 7,060,000 Private Placement Warrants for $7,060,000[131][135] - The company paid the Sponsor $10,000 per month for administrative services. At closing, the entire outstanding balance of $315,000 was forgiven[140][148] - The Sponsor provided multiple working capital loans, totaling $1,315,000 by January 2023. On the closing date, $1,168,548 of this amount was forgiven[144][145][148] - Concurrently with the business combination, the company entered into an Investor Rights Agreement, which amended and restated the original Registration Rights Agreement, and a Sponsor Letter Agreement, which recapitalized the Sponsor's shares and warrants[138][146][149] Principal Accountant Fees and Services The company paid Marcum LLP $280,418 in audit fees in 2022, with all services pre-approved Audit Fees Paid to Marcum LLP | Year | Audit Fees | | :--- | :--- | | 2022 | $280,418 | | 2021 | $94,760 | - No fees were paid to Marcum LLP for audit-related, tax, or other services in 2022 or 2021[155][156] - All services provided by the auditor were pre-approved by the audit committee or, prior to its formation, by the board of directors[158] Part IV Exhibits, Financial Statement Schedules This section lists all financial statements and exhibits filed with the Form 10-K - This section contains the financial statements and a list of all exhibits filed with the Form 10-K[160][327] Form 10-K Summary This item is not applicable - None[328] Financial Statements Report of Independent Registered Public Accounting Firm Marcum LLP issued an unqualified opinion on HPX Corp.'s financial statements for 2021 and 2022, confirming GAAP conformity - The auditor, Marcum LLP, expressed an unqualified opinion on the financial statements, stating they are presented fairly in all material respects[164] - The audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB)[166] Financial Statements Data Total assets significantly decreased in 2022 due to redemptions, resulting in a net loss, while liabilities also decreased Balance Sheet Summary (as of Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Total Assets | $22,192,485 | $253,686,710 | | Cash held in Trust Account | $21,905,597 | $253,037,516 (as marketable securities) | | Total Liabilities | $18,525,222 | $20,127,451 | | Class A shares subject to redemption | $21,905,597 | $253,037,516 | | Total Shareholders' Deficit | ($18,238,334) | ($19,478,257) | Statement of Operations Summary (Year Ended Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Loss from operations | ($6,633,923) | ($1,163,690) | | Change in fair value of warrant liabilities | $2,278,476 | $10,533,024 | | Net (Loss) Income | ($3,425,810) | $9,394,728 | | Basic and diluted net (loss) income per share | ($0.16) | $0.30 | Statement of Cash Flows Summary (Year Ended Dec 31) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,255,404) | ($582,258) | | Net cash provided by investing activities | $231,826,276 | $0 | | Net cash used in financing activities | ($230,921,276) | $0 | Notes to Financial Statements Notes detail the Ambipar business combination, significant shareholder redemptions, related-party transactions, and fair value measurements of financial instruments Note 1. Description of Organization and Business Operations This note details HPX's SPAC formation, IPO, business combination with Ambipar, and significant shareholder redemptions - The business combination with Ambipar Emergency Response was consummated on March 3, 2023[187] - In July 2022, holders of 19,472,483 Class A shares redeemed them for ~$195.1 million. In November 2022, holders of 3,650,973 Class A shares redeemed them for ~$36.7 million[198][199] - The company's combination period was extended first to November 20, 2022, and then to March 31, 2023, through shareholder approvals[191][192] Note 5. Related Party Transactions This note outlines Sponsor transactions including Founder Shares, Private Placement Warrants, administrative fees, and working capital loans - The Sponsor purchased 6,305,000 Founder Shares (net of forfeiture) and 7,060,000 Private Placement Warrants[207][263] - The company incurred $120,000 in administrative service fees to the Sponsor in 2022. The total accrued amount of $295,000 as of Dec 31, 2022 was later forgiven[270][275] - As of Dec 31, 2022, $905,000 was outstanding under a Working Capital Note from the Sponsor. This amount was later increased to $1,315,000 and then substantially forgiven[272][275] Note 9. Fair Value Measurements This note describes the fair value measurement of warrants and PIPE derivative liability using Level 1, 2, and 3 inputs Fair Value of Liabilities (as of Dec 31, 2022) | Liability | Fair Value Hierarchy | Value | | :--- | :--- | :--- | | Warrant Liability – Public Warrants | Level 1 | $5,313,000 | | Warrant Liability – Private Placement Warrants | Level 2 | $2,965,200 | | PIPE derivative liability | Level 3 | $3,259,630 | - The PIPE derivative liability was valued using a Monte Carlo model (Level 3), with key inputs including share price, volatility, and risk-free rate[314][316] Note 10. Subsequent Events This note details post-balance sheet events including additional Sponsor loans, debt forgiveness, and further share redemptions - On January 17, 2023, the Sponsor loaned an additional $410,000 to the company[318] - On March 3, 2023, the Sponsor forgave approximately $1.48 million in debt, comprising $1,168,548 in promissory notes and $315,000 in administrative fees[319] - In connection with the final business combination vote, holders of 1,258,439 Class A shares redeemed them for an aggregate of $12,655,426[322]