HCM Acquisition p(HCMA) - 2022 Q4 - Annual Report

Part I Business HCM Acquisition Corp is a Cayman Islands blank check company with no operations, formed to acquire a disruptive financial services technology company within 15 months of its January 2022 IPO - The company is a blank check or "shell company" with no current operations or revenue, formed solely to effect a business combination[15] Initial Public Offering Details | Offering Detail | Value | | :--- | :--- | | Initial Public Offering (IPO) Date | January 25, 2022 | | Units Offered | 28,750,000 | | Price per Unit | $10.00 | | Gross Proceeds (IPO) | $287.5 million | | Gross Proceeds (Private Placement Warrants) | $13 million | | Amount Deposited in Trust Account | $293.25 million | - The business strategy targets acquiring companies with disruptive technology or innovations within the financial services industry, including FinTech, payments, insurance, asset management, and blockchain technology[20][28] - The company must complete an initial business combination within 15 months of its IPO closing, or it will cease operations and redeem public shares[90] - Public shareholders can redeem their shares for a pro-rata portion of the trust account upon business combination completion, with an anticipated initial redemption value of $10.20 per share[76] - Potential conflicts of interest arise as management and the sponsor have fiduciary duties to other entities and may sponsor competing blank check companies[32][35][113] Risk Factors The company faces significant risks including its limited operating history, the challenge of completing a business combination within the timeframe, potential high redemption rates, conflicts of interest, and market disruptions - The company is a newly incorporated entity with no operating history, and its ability to complete an initial business combination remains uncertain[131] - The 15-month deadline to complete a business combination grants potential targets negotiating leverage and may limit due diligence time[140] - High public shareholder redemption rates could render the company's financial condition unattractive to targets, potentially preventing a business combination from closing[136][137] - The sponsor and management have conflicts of interest, as failure to complete a business combination would result in the loss of their entire investment, potentially influencing target selection[226] - Warrants are accounted for as a liability, with fair value changes impacting earnings, potentially affecting stock price and hindering business combination consummation[201] - As a Cayman Islands company, U.S. investors may face difficulties enforcing legal rights or judgments from U.S. courts[259][260][261] - The COVID-19 pandemic and other market disruptions could materially adversely affect the search for a business combination and any potential target's business[185] Unresolved Staff Comments The company has no unresolved comments from the Securities and Exchange Commission staff - The company has no unresolved staff comments[272] Properties The company's corporate offices in Stamford, Connecticut, are provided by a Sponsor affiliate under an administrative services agreement - The company's corporate office is located in Stamford, Connecticut, with costs covered by a $10,000 per month fee paid to a Sponsor affiliate for administrative services[273] Legal Proceedings The company is not currently involved in any material legal proceedings, nor are any known to be threatened - The company is not currently subject to any material legal proceedings[274] Mine Safety Disclosures This disclosure item is not applicable to the company's operations - This item is not applicable to the company[275] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section provides market information for the company's Nasdaq-listed securities, including trading symbols, dividend policy, and details of unregistered securities sales - The company's Units, Class A Ordinary Shares, and public Warrants trade on Nasdaq under symbols HCMAU, HCMA, and HCMAW, with trading commencing in Q1 2022[277] Market Price Information (2022) | Quarter Ended (2022) | Units (HCMAU) High/Low | Class A Shares (HCMA) High/Low | Warrants (HCMAW) High/Low | | :--- | :--- | :--- | :--- | | March 31, 2022 | $10.01 / $9.95 | $9.97 / $9.87 | $0.26 / $0.15 | | June 30, 2022 | $10.34 / $9.91 | $10.05 / $9.91 | $0.23 / $0.10 | | September 30, 2022 | $10.14 / $10.00 | $10.11 / $9.98 | $0.18 / $0.06 | | December 31, 2022 | $10.24 / $10.09 | $10.41 / $10.06 | $0.10 / $0.01 | - The company has not paid and does not plan to pay any cash dividends prior to completing its initial Business Combination[281] - Unregistered securities sales include 10,062,500 Founder Shares issued to the Sponsor for $25,000 and 13 million Private Placement Warrants sold for $13 million to the Sponsor and Cantor Fitzgerald[283][284][288] Management's Discussion and Analysis of Financial Condition and Results of Operations As a blank check company, HCM reported $14.8 million net income for 2022, primarily from trust account interest and warrant liability fair value changes, while facing substantial doubt about its going concern ability due to its April 2023 business combination deadline Financial Performance for the Year Ended December 31, 2022 | Financial Metric | Amount (USD) | | :--- | :--- | | Net Income | $14.8 million | | Interest Earned on Trust Account | $4.3 million | | Change in Fair Value of Warrant Liabilities | $12.9 million | | Operating Costs | ($1.9 million) | - As of December 31, 2022, the company held $792,423 in cash and $297.6 million in marketable securities within the Trust Account[302][303] - Management has determined substantial doubt exists regarding the company's ability to continue as a going concern due to the mandatory liquidation date of April 25, 2023, if a business combination is not completed or an extension is not approved[306][360] - Contractual obligations include a deferred underwriting fee of $15.1 million payable upon a business combination and a monthly fee of up to $10,000 to a Sponsor affiliate for administrative services[308][309] Financial Statements and Supplementary Data This section presents the audited financial statements for 2022 and 2021, including the auditor's going concern emphasis, and notes the subsequent signing of a Business Combination Agreement with Murano PV, S.A. DE C.V - The independent auditor's report includes an explanatory paragraph highlighting substantial doubt about the company's ability to continue as a going concern[323] Balance Sheet Summary as of December 31, 2022 | Balance Sheet Item | Amount (USD) | | :--- | :--- | | Total Assets | $298.6 million | | Cash and marketable securities in trust | $297.6 million | | Total Liabilities | $17.0 million | | Class A ordinary shares subject to redemption | $297.6 million | | Total Shareholders' (Deficit) | ($16.0 million) | - Warrants are accounted for as liabilities and measured at fair value, with public warrants valued at $287,500 (Level 1) and private placement warrants at $260,000 (Level 3) as of December 31, 2022[312][414] - Subsequent to the reporting period, on March 13, 2023, the company entered into a definitive Business Combination Agreement with MURANO PV, S.A. DE C.V[418] - On March 27, 2023, the company filed a proxy statement for a shareholder meeting to vote on extending the business combination deadline from April 25, 2023, potentially up to January 25, 2024[422] Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, with no material changes during the recent fiscal quarter - Management concluded the company's disclosure controls and procedures were effective as of December 31, 2022[424] - Based on the COSO framework, management determined the company maintained effective internal control over financial reporting as of December 31, 2022[427] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[428] Part III Directors, Executive Officers and Corporate Governance This section details the company's leadership, including key executives and independent directors, and addresses potential conflicts of interest arising from management's external fiduciary duties Executive Officers and Directors | Name | Title | | :--- | :--- | | Shawn Matthews | Chairman and Chief Executive Officer | | James Bond | President, Chief Financial Officer and Director | | Jacob Loveless | Director | | Steven Bischoff | Director | | David Goldfarb | Director | - The board of directors is divided into three classes and includes three independent directors who comprise the Audit, Nominating, and Compensation committees[438][443][444] - Significant conflicts of interest are disclosed, as executive officers have fiduciary duties to other entities like Hondius Capital Management, potentially competing for business opportunities[460][464][469] - The company has adopted a Code of Ethics applicable to its directors, officers, and employees[457] Executive Compensation Executive officers and directors receive no cash compensation, with an affiliate reimbursed for administrative services, and post-business combination compensation to be determined by the new board - No executive officers or directors have received cash compensation for services rendered, only reimbursement for out-of-pocket expenses[479] - An affiliate of the sponsor receives up to $10,000 per month for office space and administrative services[479] - Post-business combination compensation for directors or management will be determined by the board of the new combined company[480] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership as of March 29, 2023, highlighting the Sponsor's significant stake and the collective 25.9% ownership by executive officers and directors, granting them substantial voting influence Beneficial Ownership as of March 29, 2023 | Name of Beneficial Owner | Number of Shares Beneficially Owned | Approximate Percentage of Outstanding | | :--- | :--- | :--- | | HCM Investor Holdings, LLC | 9,987,500 | 25.7% | | Shawn Matthews | 9,987,500 | 25.7% | | All executive officers and directors as a group (5 individuals) | 10,062,500 | 25.9% | - The ownership structure grants initial shareholders effective control over matters requiring shareholder approval, including director appointments prior to the initial business combination[486] Certain Relationships and Related Transactions, and Director Independence This section details related party transactions, including the Sponsor's purchase of Founder Shares and Private Placement Warrants, administrative service agreements, potential working capital loans, and confirms the independence of three directors - The Sponsor purchased 10,062,500 Founder Shares for an aggregate price of $25,000[489] - The Sponsor and Cantor purchased an aggregate of 13 million Private Placement Warrants at $1.00 per warrant[492] - The company has an agreement to pay a Sponsor affiliate up to $10,000 per month for office space and administrative services[499] - Holders of Founder Shares and Private Placement Warrants are entitled to registration rights for their securities post-business combination[494] Principal Accounting Fees and Services This section summarizes fees paid to independent auditor Marcum LLP, with $66,040 in audit fees for 2022, and notes the audit committee's pre-approval policy for all services Principal Accounting Fees | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $66,040 | $43,775 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | - The audit committee maintains a pre-approval policy for all auditing and permitted non-audit services provided by the auditors[505] Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, notably including the Underwriting Agreement, Warrant Agreement, and the Business Combination Agreement with Murano PV, S.A. DE C.V - The report includes a comprehensive list of all filed exhibits, such as the Underwriting Agreement, Warrant Agreement, and various related-party agreements[506] - A key exhibit is the Business Combination Agreement, dated March 13, 2023, with MURANO PV, S.A. DE C.V. and other related parties, signifying a definitive agreement for the company's initial business combination[506]