HCM Acquisition p(HCMA) - 2021 Q4 - Annual Report

Part I Business HCM Acquisition Corp is a shell company formed to effect a business combination within 15 months of its January 2022 IPO, focusing on disruptive financial technology Introduction and Offering Details HCM Acquisition Corp, a blank check company, completed its January 2022 IPO, raising $287.5 million and placing $293.25 million in a trust account - The company is a blank check company, or SPAC, formed for the purpose of effecting a business combination[14] Initial Public Offering (IPO) and Private Placement Details | Item | Details | | :--- | :--- | | IPO Units Sold | 28,750,000 Units | | Price per Unit | $10.00 | | IPO Gross Proceeds | $287,500,000 | | Private Placement Warrants | 13,000,000 warrants at $1.00 each | | Private Placement Proceeds | $13,000,000 | | Total Gross Proceeds | $300,500,000 | | Amount in Trust Account | $293,250,000 ($10.20 per Unit) | - Each unit consists of one Class A ordinary share and one-half of one redeemable warrant, with each whole warrant allowing purchase of one Class A share at $11.50[17] Business Strategy and Acquisition Criteria The company's strategy focuses on acquiring businesses with disruptive technology or innovations in the financial services industry, leveraging its management team's expertise - The company will employ a pro-active acquisition strategy focused on identifying targets with disruptive technology or innovations within the financial services industry[19] - Key areas of interest for acquisition include FinTech, payments processing, and digital assets/blockchain technology[27] - Acquisition criteria include established businesses, early-stage companies with scaling potential, strong management teams, and significant cash flow[26][32] Initial Business Combination The company must complete its initial business combination within 15 months of the IPO, with a target fair market value of at least 80% of trust assets, potentially with an affiliated entity requiring a fairness opinion - The initial business combination must have an aggregate fair market value of at least 80% of the net assets held in the trust account[37] - The company must complete its initial business combination within 15 months from the Public Offering closing, or it will liquidate the trust account[97] - The company is not prohibited from pursuing a business combination with an affiliated company, but must obtain a fairness opinion from an independent firm if it does so[30][47] Shareholder Redemption Rights and Process Public shareholders can redeem Class A ordinary shares for cash at approximately $10.20 per share upon business combination, with a 15% redemption limit, or if no combination is completed within 15 months - Public shareholders can redeem their shares for a per-share price initially anticipated to be approximately $10.20 per share from the trust account[80] - A public shareholder, along with affiliates, is restricted from redeeming more than 15% of the shares sold in the Public Offering without prior consent[89] - If no business combination is completed within 15 months, the company will liquidate and redeem all public shares, rendering warrants worthless[97] Risk Factors This section outlines significant investment risks, including the company's lack of operating history, potential failure to complete a business combination, and risks related to securities, management conflicts, and foreign acquisitions Risks Relating to Business Combination The company faces substantial risks in completing a business combination within the 15-month deadline, including potential liquidation, cash depletion from redemptions, and adverse impacts from market volatility or the COVID-19 pandemic - The requirement to consummate a business combination within 15 months may give potential targets leverage and limit due diligence time[154] - Public shareholders' ability to redeem shares for cash may make the company's financial condition unattractive to potential targets or hinder desirable transactions[150][151] - The COVID-19 outbreak could limit the ability to complete a business combination due to market volatility, travel restrictions, and negative impacts on target businesses[206] - The company may be deemed an investment company under the Investment Company Act if it fails to complete a business combination, imposing burdensome compliance requirements[175] Risks Relating to Our Securities Risks include potential Nasdaq delisting, shareholder dilution from additional share issuance, adverse earnings impact from warrant liability accounting, and warrant redemption potentially rendering them worthless - Nasdaq may delist the company's securities if it fails to meet continued listing standards, limiting liquidity and potentially subjecting shares to "penny stock" rules[211][213] - The company may redeem outstanding public warrants for $0.01 per warrant if the Class A ordinary share price equals or exceeds $18.00 for a specified period, potentially forcing disadvantageous exercise or sale[225] - The company's warrants are expected to be accounted for as a warrant liability, with fair value changes reported in earnings, potentially adversely affecting stock price[224] Risks Relating to Management and Governance Management and directors' other business obligations create potential conflicts of interest, as their financial incentive to complete a business combination may not align with public shareholders' best interests - Executive officers and directors are not required to commit full time to the company, potentially creating conflicts of interest and negatively impacting business combination completion[236] - The sponsor and management will lose their entire investment if a business combination is not completed, creating a conflict of interest that may influence them to pursue a deal not in public shareholders' best interest[250] - Management and affiliates may have fiduciary or contractual obligations to other entities, potentially presenting business opportunities to them before the company[243][244] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[297] Properties The company's corporate offices in Stamford, CT, are provided by a Sponsor affiliate for a monthly fee of $10,000 under an administrative services agreement - The company's principal executive offices are located in Stamford, CT, with space provided by a Sponsor affiliate for $10,000 per month[298] Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings[299] Mine Safety Disclosures This item is not applicable to the company - None[300] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details the company's Nasdaq-listed securities, including trading symbols, dividend policy, unregistered sales of founder shares and private placement warrants, and the $293.25 million IPO proceeds deposited into the Trust Account Securities Trading Information | Security | Trading Symbol | Exchange | | :--- | :--- | :--- | | Units | HCMAU | Nasdaq | | Class A Ordinary Shares | HCMA | Nasdaq | | Public Warrants | HCMAW | Nasdaq | - The company has not paid and does not intend to pay cash dividends prior to its initial business combination[305] - Net proceeds of $293,250,000 from the IPO and private placement warrant sale were deposited into the Trust Account, with underwriting discounts totaling $5,000,000 and an additional $15,125,000 deferred[313] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition, reporting a $15,786 net loss for 2021, with post-IPO liquidity of $293.25 million in trust and $2.25 million in working capital, and no off-balance sheet arrangements - For the period from inception through December 31, 2021, the company reported a net loss of $15,786, primarily from formation and operating expenses[317] - Following the January 2022 IPO, $293,250,000 was placed in the Trust Account, with $2,250,025 of cash held outside for working capital[320] - The Sponsor may provide working capital loans up to $1,500,000, convertible into warrants at $1.00 per warrant at the lender's option[323] - The company has a contractual obligation to pay a Sponsor affiliate $10,000 per month for office space and administrative services, starting January 20, 2022[327] Quantitative and Qualitative Disclosures about Market Risk As of December 31, 2021, the company had no market or interest rate risk, with post-IPO trust funds invested in short-term U.S. government treasury obligations or money market funds - Funds in the Trust Account are invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds, minimizing interest rate risk[334] Financial Statements and Supplementary Data This section presents the company's audited financial statements from inception to December 31, 2021, reflecting pre-IPO status with minimal assets and liabilities, along with the independent auditor's report and notes on formation, IPO, and related-party transactions - The independent auditor, Marcum LLP, provided an unqualified opinion on the financial statements[338] Balance Sheet as of December 31, 2021 | Category | Amount (USD) | | :--- | :--- | | Assets | | | Current asset – cash | $158 | | Deferred offering costs | $341,864 | | Total Assets | $342,022 | | Liabilities & Equity | | | Accrued offering costs | $124,308 | | Promissory note — related party | $208,500 | | Total Liabilities | $332,808 | | Total Shareholders' Equity | $9,214 | Statement of Operations (Inception to Dec 31, 2021) | Item | Amount (USD) | | :--- | :--- | | Formation and operating costs | $15,786 | | Net Loss | ($15,786) | - The company will have 15 months from the IPO closing to complete a Business Combination[369] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal controls reported, and a management report on internal control over financial reporting not yet required - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[426] - A management report on internal controls over financial reporting is not included due to the transition period for newly public companies[428] Part III Directors, Executive Officers and Corporate Governance This section details the company's leadership, including executive officers Shawn Matthews and James Bond, a classified board with three independent directors serving on key committees, and disclosures regarding potential conflicts of interest and the adopted Code of Ethics - The executive team is led by Shawn Matthews, former CEO of Cantor Fitzgerald & Co., and James Bond, former Global COO of Cantor Fitzgerald & Co[433][434] - The board of directors is divided into three classes and includes three independent directors: Jacob Loveless, Steven Bischoff, and David Goldfarb[438][443] - The board has established an Audit Committee, a Nominating Committee, and a Compensation Committee, all composed of independent directors[444] - The company discloses that its officers and directors have fiduciary duties to other entities, potentially creating conflicts of interest regarding business opportunities[459][461] Executive Compensation No cash compensation has been paid to executive officers or directors, though a sponsor affiliate receives up to $10,000 monthly for services, and future post-combination fees for management are possible but not yet established - No cash compensation has been paid to executive officers or directors[475] - An affiliate of the sponsor receives up to $10,000 per month for office space and administrative services[475] - After the initial business combination, remaining directors or management may receive consulting or management fees, but no limits or amounts have been established[476] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership as of March 30, 2022, showing the sponsor and management collectively own 10,062,500 founder shares, representing 25.9% of outstanding ordinary shares, granting them significant voting influence Beneficial Ownership (as of March 30, 2022) | Name of Beneficial Owner | Number of Shares Beneficially Owned | Approximate Percentage of Outstanding Ordinary Shares | | :--- | :--- | :--- | | HCM Investor Holdings, LLC | 9,987,500 | 25.7% | | Shawn Matthews (CEO) | 9,987,500 | 25.7% | | All executive officers and directors as a group (5 individuals) | 10,062,500 | 25.9% | - The initial shareholders own 25.9% of the issued and outstanding ordinary shares and have the right to appoint all directors prior to the initial business combination[485] Certain Relationships and Related Transactions, and Director Independence This section details related-party transactions, including the sale of founder shares and private placement warrants to the Sponsor, a repaid $300,000 promissory note, an administrative services agreement, and identifies the three independent directors - The Sponsor purchased 10,062,500 Founder Shares for an aggregate price of $25,000[488] - The Sponsor and Cantor purchased an aggregate of 13,000,000 Private Placement Warrants at $1.00 per warrant[492] - The Sponsor provided a $300,000 unsecured, non-interest-bearing promissory note for offering expenses, repaid in full at IPO closing[495] - The company confirmed that Messrs. Loveless, Bischoff, and Goldfarb are independent directors under Nasdaq rules[500] Principal Accounting Fees and Services This section summarizes $43,775 in audit fees paid to Marcum LLP for the period from inception through December 31, 2021, with no other fees for audit-related, tax, or other services Accounting Fees (Inception to Dec 31, 2021) | Fee Category | Amount (USD) | | :--- | :--- | | Audit Fees | $43,775 | | Audit-Related Fees | $0 | | Tax Fees | $0 | | All Other Fees | $0 | - The audit committee pre-approves all auditing and permitted non-audit services to be performed by the auditors[505] Part IV Exhibits, Financial Statement Schedules This section lists key exhibits filed as part of the Form 10-K, including the Amended and Restated Memorandum and Articles of Association, Warrant Agreement, Investment Management Trust Agreement, and Registration Rights Agreement - Key filed exhibits include the Amended and Restated Memorandum and Articles of Association (3.1), Warrant Agreement (4.4), Investment Management Trust Agreement (10.1), and Registration Rights Agreement (10.2)[507]