UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including zip code) |
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(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
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).
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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer | ☐ Accelerated filer |
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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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of August 15, 2022, there were
HPX CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022
TABLE OF CONTENTS
HPX CORP.
CONDENSED BALANCE SHEETS
| June 30, |
| December 31, | |||
2022 | 2021 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
Current assets | ||||||
Cash | $ | | $ | | ||
Prepaid expenses | | | ||||
Total Current Assets | | | ||||
Marketable securities held in Trust Account | | | ||||
TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ DEFICIT |
| |||||
Current liabilities |
| |||||
Accounts payable and accrued expenses | $ | | $ | | ||
Accrued offering costs | | | ||||
Promissory note – related party | |
| — | |||
Total Current Liabilities | |
| | |||
Deferred legal fees | | — | ||||
Warrant liabilities | | |||||
Deferred underwriting fee payable | | |||||
Total Liabilities | | |||||
| ||||||
Commitments and Contingencies (Note 6) | ||||||
Class A ordinary shares subject to possible redemption; | | | ||||
Shareholders’ Deficit |
| |||||
Preference shares, $ |
| |||||
Class A ordinary shares, $ | — |
| — | |||
Class B ordinary shares, $ | |
| | |||
Accumulated deficit | ( |
| ( | |||
Total Shareholders’ Deficit | ( | ( | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
HPX CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended | For the Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Operating and formation costs | $ | $ | $ | | $ | | ||||||
Loss from operations | ( | ( | ( | ( | ||||||||
| ||||||||||||
Other income (expense): | ||||||||||||
Change in fair value of warrant liabilities | | ( | | | ||||||||
Interest income from operating bank account | — | | — | | ||||||||
Earnings on marketable securities held in Trust Account | | | | | ||||||||
Total other income (expense), net | | ( | | | ||||||||
| ||||||||||||
Net (loss) income | $ | ( | $ | ( | $ | | $ | | ||||
Weighted average shares outstanding, Class A ordinary shares | | |||||||||||
Basic and diluted net (loss) income per share, Class A ordinary shares | ( | ( | $ | | $ | | ||||||
Weighted average shares outstanding, Class B ordinary shares |
| |
| | ||||||||
Basic and diluted net (loss) income per share, Class B ordinary shares | ( | ( | $ | | $ | | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
HPX CORP.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
| Class A |
| Class B | ||||||||||||||||
Ordinary Shares | Ordinary Shares | Total | |||||||||||||||||
Additional | Accumulated | Shareholders' | |||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Paid-in Capital |
| Deficit |
| Deficit | ||||||
Balance – January 1, 2022 |
| | $ | |
| | $ | | $ | | $ | ( | $ | ( | |||||
Remeasurement of Class A ordinary shares to redemption amount |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||
Net income |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||
Balance – March 31, 2022 |
| — | — |
| | | — | ( | ( | ||||||||||
Remeasurement of Class A ordinary shares to redemption amount |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Balance – June 30, 2022 |
| — | $ | — |
| | $ | | $ | — | $ | ( | $ | ( | |||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
Class A | Class B | ||||||||||||||||||
Ordinary Shares | Ordinary Shares | Total | |||||||||||||||||
Additional | Accumulated | Shareholders’ | |||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Paid-in Capital |
| Deficit |
| Equity (Deficit) | ||||||
Balance – January 1, 2021 | | $ | | | $ | | $ | $ | ( | $ | ( | ||||||||
Remeasurement of Class A ordinary shares to redemption amount |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Cancellation of Class B ordinary shares |
|
|
| ( |
| ( |
| — |
| |
| — | |||||||
|
| ||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||
Balance – March 31, 2021 | — | — | — | ( | ( | ||||||||||||||
Remeasurement of Class A ordinary shares to redemption amount | — | — | — | — | — | ( | ( | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance – June 30, 2021 | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
HPX CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, | ||||||
| 2022 |
| 2021 | |||
Cash Flows from Operating Activities: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash used in operating activities: |
| |||||
Change in fair value of warrant liabilities | ( | ( | ||||
Earnings on marketable securities held in Trust Account | ( | ( | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses | | | ||||
Accounts payable and accrued expenses | | | ||||
Deferred legal fees | | — | ||||
Net cash used in operating activities | ( | ( | ||||
Cash Flows from Financing Activities: |
| |||||
Proceeds from promissory note – related party | |
| | |||
Net cash provided by financing activities | | — | ||||
Net Change in Cash | | ( | ||||
Cash – Beginning of period | | | ||||
Cash – End of period | $ | | $ | | ||
Non-Cash investing and financing activities: | ||||||
Remeasurement of Class A ordinary shares to redemption amount | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
HPX CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
HPX Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on March 20, 2020. The Company was formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses (a “Business Combination”).
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus on businesses in Brazil. 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 through June 30, 2022 relates to the Company’s formation, its initial public offering (“Initial Public Offering”), which is described below, and after the Initial Public Offering, the search for 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 generates non-operating income in the form of earnings from the marketable securities held in the Trust Account (as defined below).
Recent Developments
Proposed Business Combination
As previously reported in our current report on Form 8-K filed with the SEC on July 7, 2022, on July 5, 2022, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among Ambipar Emergency Response, an exempted company incorporated with limited liability in the Cayman Islands (“New PubCo”), Ambipar Merger Sub, an exempted company incorporated with limited liability in the Cayman Islands (“Merger Sub”), Emergência Participações S.A., a corporation (sociedade anônima) organized under the laws of Brazil (“Emergencia”), Ambipar Participações e Empreendimentos S.A., a corporation (sociedade anônima) organized under the laws of Brazil (“Ambipar”), and the Company (the “Proposed Business Combination”). Emergencia is a leading environmental and industrial service provider with a diversified client base in logistics, chemical, oil and gas, mining and industrial sectors in Brazil and globally (see Note 10).
The Company’s board of directors (i) unanimously approved the Business Combination Agreement, the Mergers and the Transaction Agreements (as defined in the Business Combination Agreement) and (ii) unanimously determined to recommend that the shareholders of the Company vote to approve the SPAC Shareholder Matters (as defined in the Business Combination Agreement) and such other actions as contemplated by the Business Combination Agreement (see Note 10).
The Company is focused on consummating the agreements entered into in connection to the Business Combination Agreement by submitting the Proposed Business Combination to the Company’s shareholders for their consideration. The Company intends to file a registration statement on Form F-4 (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “SEC”) which will include preliminary and definitive proxy statements to be distributed to the Company’s shareholders in connection with the Company’s solicitation for proxies for the vote by the Company’s shareholders in connection with the Proposed Business Combination and other matters as described in the Registration Statement, as well as the prospectus relating to the offer of the securities to be issued in connection with the completion of the Proposed Business Combination.
After the Registration Statement has been filed and declared effective, the Company will mail a definitive proxy statement and other relevant documents to its shareholders as of the record date established for voting on the Proposed Business Combination. The Company’s shareholders and other interested persons are advised to read, once available, the preliminary proxy statement/prospectus and any amendments thereto and, once available, the definitive proxy statement/prospectus, in connection with the Company’s solicitation of proxies for its special meeting of shareholders to be held to approve, among other things, the Proposed Business Combination, because these documents will contain important information about the Company, Emergencia, and the Proposed Business Combination. Shareholders may also obtain a copy of the preliminary or definitive proxy statement, once available, as well as other documents filed with the SEC regarding the Proposed Business Combination and other documents filed with the SEC by the Company, without charge, at the SEC’s website located at www.sec.gov or by directing a request to: HPX Corp., 1000 N. West Street, Suite 1200, Wilmington, Delaware 19801.
5
For further information, please see our current report on Form 8-K filed with the SEC on July 7, 2022 and Note 10 of these notes to the condensed financial statements included in this quarterly report on Form 10-Q (the “Quarterly Report”).
Combination Period Extension
As previously reported in our current report on Form 8-K filed with the SEC on July 14, 2022, on July 14, 2022, in connection with its Extraordinary General Meeting held on July 14, 2022 (the “Extraordinary General Meeting”), the Company’s shareholders approved: (1) a special resolution to amend the Amended and Restated Memorandum and Articles of Association of the Company (the “Extension Amendment”) to extend the date by which the Company must (a) consummate a Business Combination, (b) cease its operations except for the purpose of winding up if it fails to complete such Business Combination, and (c) redeem all of the Company’s Class A ordinary shares included as part of the units sold in the Company’s Initial Public Offering from July 20, 2022 to November 20, 2022; and (2) the proposal to extend the date on which Continental Stock Transfer & Trust Company (the “Trustee”) must liquidate the trust account established in connection with the Company’s Initial Public Offering if the Company has not completed its initial Business Combination from July 20, 2022 to November 20, 2022 (the “Trust Amendment” and, together with the Extension Amendment, the “Combination Period Extension”) (see Note 10).
For further information, please see our current report on Form 8-K as filed with the SEC on July 14, 2022 and Note 10 of these notes to the condensed financial statements included in this Quarterly Report.
Redemption of Class A Ordinary Shares
As previously reported in our current report on Form 8-K filed with the SEC on July 14, 2022, on July 14, 2022, in connection with the vote to approve the Combination Period Extension, the holders of
For further information, please see our current report on Form 8-K as filed with the SEC on July 14, 2022 and Note 10 of these notes to the condensed financial statements included in this Quarterly Report.
Company’s Initial Public Offering and Search for a Target
The registration statement for the Company’s Initial Public Offering became effective on July 15, 2020. On July 20, 2020, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
Transaction costs amounted to $
Following the closing of the Initial Public Offering on July 20, 2020, an amount of $
6
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 consummating a Business Combination. The New York Stock Exchange rules require that a Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least
The Company will provide the holders of the Public Shares (the “Public 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 a 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, solely in its discretion. The Public Shareholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account (initially $
The Company will proceed with a Business Combination only if the Company has net tangible assets, after payment of the deferred underwriting commission, of at least $
Notwithstanding the foregoing, if the Company seeks shareholder approval of a Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, 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
The Sponsor 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 not seek to sell its shares to the Company in any tender offer the Company undertakes in connection with its initial Business Combination) and (b) not to propose an amendment to the Amended and Restated Memorandum of Articles of Association (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem
7
The Company initially had until July 20, 2022 to consummate a Business Combination. However, pursuant to the Combination Period Extension mentioned above, the Company now will have until November 20, 2022 to consummate a Business Combination (the “Combination Period”) (see Note 10). However, if the Company has not completed a Business Combination, including the Proposed Business Combination, within the Combination Period, as may be extended from time to time by the Company as a result of a shareholder vote to amend its Amended and Restated Memorandum and Articles of Association (the “Extension Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period or any Extension Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares, 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 or any Extension Period. The underwriter has agreed to waive its rights to its deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period or any Extension Period and, in such event, such amounts will be included with the other 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 ($
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 (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or 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 (1) $
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result, various nations, including the United States, have imposed economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and the related sanctions on the world economy, and the specific impacts on the Company’s financial position, results of operations and its ability to identify and complete an initial business combination are not determinable as of the date of these condensed financial statements.
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus 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 of these condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.
8
Liquidity
As of June 30, 2022, the Company had $
As discussed in Note 5, on June 24, 2022, the Company entered into promissory notes with the Sponsor pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements—Going Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for another extension of the deadline or complete a Business Combination by November 20, 2022, then the Company will cease all operations except for the purpose of liquidating. The Company intends to complete a Business Combination before the mandatory liquidation date or obtain approval for an extension, however, it is uncertain whether the Company will be able to do so. If a Business Combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after November 20, 2022.
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 Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on April 14, 2022. The accompanying condensed balance sheet as of December 31, 2021 has been derived from the Company’s audited financial statements included in the Form 10-K. 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.
9
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 independent registered public accounting firm 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 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 financial statements in conformity with GAAP requires 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 financial statements and the reported amounts of income and expenses during the reporting periods.
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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the Private Placement Warrants as of June 30, 2022 and December 31, 2021. Such estimates may be subject to change as more current information becomes available and 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 not have any cash equivalents as of June 30, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
As of June 30, 2022 and December 31, 2021, all of the assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities.
Offering Costs
The Company complies with the requirement of Accounting Standards Codification (“ASC”) 340-10-S99-1. Offering costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were 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 allocated to warrant liabilities were expensed as incurred in the statements of operations. Offering costs associated with the Class A ordinary shares issued were initially charged to temporary equity and remeasured to ordinary shares subject to redemption upon the completion of the Initial Public Offering.
10
Warrant Liabilities
The Company accounts for the Public Warrants (as defined in Note 3) and Private Placement Warrants (together, with the Public Warrants, 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, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The Warrants for periods where no observable traded price was available are valued using a binomial lattice simulation. For periods subsequent to the detachment of the Public Warrants from the Units, which occurred on September 8, 2020, the Public Warrant quoted market price was used as the fair value as of each relevant date.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in 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 the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A 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, all Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit 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. Immediately upon the closing of the Initial Public Offering, the Company recognized the remeasurement from initial book value to initial redemption amount value. The change in the carrying value of redeemable Class A ordinary shares resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Subsequent to the initial measurement upon the closing of the Initial Public Offering, the Company recognizes changes in the redemption value that result from earnings on marketable securities held in Trust Account that have not been withdrawn to pay taxes. As of June 30, 2022, the Company has not incurred any taxes or permitted expenses that could be withdrawn from the Trust Account.
As of June 30, 2022 and December 31, 2021, the Class A ordinary shares reflected in the condensed balance sheets are reconciled in the following table:
Gross proceeds from Initial Public Offering |
| $ | |
Less: |
| ||
Proceeds allocated to Public Warrants |
| ( | |
Class A ordinary shares issuance costs |
| ( | |
Plus: |
| ||
Initial remeasurement of carrying value to redemption value |
| | |
Subsequent remeasurement of carrying value to redemption value | | ||
Total remeasurement of carrying value to redemption value | | ||
Class A ordinary shares subject to possible redemption, December 31, 2021 |
| | |
Remeasurement of carrying value to redemption value |
| ( | |
Class A ordinary shares subject to possible redemption, June 30, 2022 | $ | |
11
During the six months ended June 30, 2022, the Company increased the carrying value of Class A ordinary shares for earnings on marketable securities held in Trust Account by $
Income Taxes
The Company accounts for income taxes under ASC Topic 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 statements 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 statements 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. There were
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
Net (Loss) Income Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net (loss) income per ordinary share is computed by dividing net (loss) income by the weighted average number of ordinary shares outstanding for the period. Remeasurement associated with the redeemable Class A ordinary shares is excluded from (loss) income per ordinary share as the redemption value approximates fair value.
The calculation of diluted (loss) income 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
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The following table reflects the calculation of basic and diluted net (loss) income per ordinary share (in dollars, except share amounts):
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||||||||||
| Class A |
| Class B |
| Class A |
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| Class B |
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| Class B | |||||||||
Basic and diluted net (loss) income per ordinary share |
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Numerator: |
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Allocation of net (loss) income | $ | ( | $ | ( | $ | ( | $ | ( | $ | | $ | | $ | | $ | | ||||||||
Denominator: |
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Basic and diluted weighted average shares outstanding | | | | | | | | |||||||||||||||||
Basic and diluted net (loss) income 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 Coverage of $
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, except for the Warrants (see Note 9).
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have 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 accompanying condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering on July 20, 2020, the Company sold
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NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On April 8, 2020, the Sponsor purchased
On July 23, 2021, a former director and a newly appointed director entered into a Securities Assignment Agreement (the “Securities Assignment Agreement”). The terms of the Securities Assignment Agreement specified that the former director transfer the
The transfer of the Founders Shares to the Company’s directors and director nominees is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Founder Shares were effectively transferred subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founder Shares is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance (i.e., upon consummation of a Business Combination). Stock-based compensation would be recognized at the date a Business Combination is considered probable (i.e., upon consummation of a Business Combination) in an amount equal to the number of Founders Shares times the grant date fair value per share (unless subsequently modified).
The Sponsor (including the directors) has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier of: (A)
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Administrative Services Agreement
The Company entered into an agreement whereby, commencing on July 16, 2020, the Company will pay the Sponsor up to $
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $
On June 24, 2022, the Company entered into promissory notes with the Sponsor pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on July 15, 2020, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued on conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A ordinary shares). The holders of these securities will be entitled to make up to
Underwriting Agreement
The underwriter is entitled to a deferred fee of $
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Consulting Arrangements
The Company has arrangements with a consultant to provide services to the Company relating to market and industry analyses, assistance with due diligence, and financial modeling and valuation of potential targets. The Company agreed to pay the service provider a fee of
Restricted Stock Unit Award
In July 2021, pursuant to a Director Restricted Stock Unit Award Agreement, dated July 23, 2021, between the Company and a director, the Company agreed to grant
The RSUs to be granted by the Company are in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The RSUs to be granted are subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the RSUs is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. As of June 30, 2022 and December 31, 2021, the Company did not have a shareholder approved equity plan and also determined that a Business Combination is not considered probable, therefore, no stock-based compensation expense has been recognized. Stock-based compensation would be recognized at the date a Business Combination is considered probable (i.e., upon consummation of a Business Combination) in an amount equal to the number of RSUs times the grant date fair value per share (unless subsequently modified).
Contingent Fee Arrangement
On June 27, 2022, the Company entered into an agreement with a vendor to provide advisory services in connection with a potential Business Combination. The agreement calls for the Company to pay a fee of $2,000,000 upon the closing of a business combination. If the Business Combination is not consummated for any reason, no fee is payable under this agreement.
NOTE 7. SHAREHOLDERS’ DEFICIT
Preference Shares—The Company is authorized to issue
Class A Ordinary Shares— The Company is authorized to issue
Class B Ordinary Shares— The Company is authorized to issue
Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s shareholders except as otherwise required by law.
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The Class B ordinary shares will automatically convert into Class A ordinary shares on the first business day following the completion of a Business Combination, or earlier at the option of the holder, on a
NOTE 8. WARRANTS
As of June 30, 2022 and December 31, 2021, there were
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the reported last sale price of the Class A ordinary shares for any |
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Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at $ |
| ● | if, and only if, the Reference Value equals or exceeds $ |
| ● | if the Reference Value is less than $ |
If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The exercise price and number of 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 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 or any Extension 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 $
As of June 30, 2022 and December 31, 2021, there were
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NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC Topic 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
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| December 31, |
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Description | Level | 2021 | Level | 2022 | ||||||
Assets: |
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Marketable securities held in Trust Account | 1 | $ | | 1 | $ | | ||||
Liabilities: | ||||||||||
Warrant Liability – Public Warrants | 1 | $ | | 1 | $ | | ||||
Warrant Liability – Private Placement Warrants |
| 3 |
| $ | | 2 | $ | | ||
The Warrants were accounted for as liabilities in accordance with ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented in the condensed statements of operations.
The Private Placement Warrants were initially valued using a binomial lattice model, 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 Private Placement Warrants is the expected volatility of the ordinary shares. The expected volatility as of the Initial Public Offering date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own Public Warrant pricing. Beginning on March 31, 2022 and as of June 30, 2022, the Private Placement Warrants are classified as Level 2 due to the use of a quoted price in an active market for a similar liability.
The measurement of the Public Warrants after the detachment of the Public Warrants from the Units on September 8, 2020, is classified as Level 1 due to the use of an observable market quote in an active market. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant on the New York Stock Exchange was used as the fair value of the Warrants as of each relevant date.
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The following table presents the quantitative information regarding Level 3 fair value measurements for the Private Placement Warrants.
| December 31, |
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2021 |
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Exercise price | $ | | ||
Share price | $ | | ||
Volatility |
| | % | |
Term |
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Risk-free rate |
| | % | |
Dividend yield |
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The following table presents the changes in the fair value of Level 3 warrant liabilities as of June 30, 2022 and December 31, 2021:
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| Private | |
Placement | |||
Fair value as of December 31, 2021 | $ | | |
Change in fair value |
| ( | |
Transfer to Level 2 | ( | ||
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
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than outlined below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
Proposed Business Combination
As previously reported in our current report on Form 8-K filed with the SEC on July 7, 2022, on July 5, 2022, the Company entered into the Business Combination Agreement by and among New PubCo, Merger Sub, Emergencia, Ambipar, and the Company. Emergencia is a leading environmental and industrial service provider with a diversified client base in logistics, chemical, oil and gas, mining and industrial sectors in Brazil and globally.
Pursuant to the Business Combination Agreement, the parties have agreed that, on the terms and subject to the conditions set forth in the Business Combination Agreement, (i) at least one business day before the Closing (as defined in the Business Combination Agreement), Ambipar will contribute all of the issued and outstanding equity of Emergencia into Merger Sub in exchange for ordinary shares of Merger Sub and (ii) on the Closing Date (as defined in the Business Combination Agreement), substantially concurrently with the closing of the PIPE Financing, and the Ambipar Financing, and in any case prior to the Second Merger (as defined below), (A) the Company shall be merged with and into New PubCo (the “First Merger”), with New PubCo as the surviving entity, and (B) immediately following the First Merger, Merger Sub shall be merged with and into New PubCo (the “Second Merger”), with New PubCo as the surviving entity.
Concurrently with the execution and delivery of the Business Combination Agreement, (i) certain investors and Opportunity Agro Fundo de Investimento em Participações Multiestratégia Investimento no Exterior (the “PIPE Investors”) entered into share subscription agreements pursuant to which the PIPE Investors committed to subscribe for and purchase
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Ambipar committed to subscribe for and purchase
For further information, please see our current report on Form 8-K filed with the SEC on July 7, 2022 and Note 1 of these notes to the condensed financial statements included this Quarterly Report.
Combination Period Extension
As previously reported in our current report on Form 8-K as filed with the SEC on July 14, 2022, on July 14, 2022, in connection with the Extraordinary General Meeting, the Company’s shareholders approved the Combination Period Extension. As a result, on July 14, 2022, the Company (i) amended the Amended and Restated Memorandum and Articles of Association of the Company to extend the date before which the Company must complete a Business Combination from July 20, 2022 to November 20, 2022 and (ii) entered into Amendment No. 1 to the Investment Management Trust Agreement, dated as of July 14, 2020, with the Trustee to extend the date on which the Trustee must liquidate the Trust Account established in connection with the Company’s Initial Public Offering if the Company has not completed its initial Business Combination from July 20, 2022 to November 20, 2022.
For further information, please see our current report on Form 8-K as filed with the SEC on July 14, 2022 and Note 1 of these notes to the condensed financial statements included in this Quarterly Report.
Redemption of Class A Ordinary Shares
As previously reported in our current report on Form 8-K as filed with the SEC on July 14, 2022, on July 14, 2022, in connection with the vote to approve the Combination Period Extension, the holders of
For further information, please see our current report on Form 8-K as filed with the SEC on July 14, 2022 and Note 1 of these notes to the condensed financial statements included in this Quarterly Report.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this Quarterly Report to “we,” “us” or the “Company” refer to HPX Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to HPX Capital Partners LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the 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 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 Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof 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. 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 (i) Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on April 14, 2022, (ii) quarterly report on Form 10-Q for the period ended March 31, 2022 filed with the SEC on May 19, 2022 and (iii) our proxy statement on Schedule 14A for the Extraordinary General Meeting held on July 1, 2022, except as disclosed below. This Quarterly Report does not include risk factors specifically related to the Proposed Business Combination. During the third quarter of 2022, the Company expects to file a Registration Statement with the SEC that will include a proxy statement/prospectus on Form F-4 including risk factors specific to the Proposed Business Combination, as well as in other documents filed by the Company from time to time with the SEC and as otherwise provided for in Item 1A herein. 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 March 20, 2020 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses, which we refer to throughout this Quarterly Report as a “Business Combination.” We intend to effectuate a 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.
Recent Developments
Proposed Business Combination
As previously reported in our current report on Form 8-K filed with the SEC on July 7, 2022, on July 5, 2022, the Company entered into the Proposed Business Combination pursuant to the Business Combination Agreement, by and among the Company, New PubCo, Merger Sub, Ambipar, and Emergencia. Emergencia is a leading environmental and industrial service provider with a diversified client base in logistics, chemical, oil and gas, mining and industrial sectors in Brazil and globally.
For further information, please see our current report on Form 8-K as filed with the SEC on July 7, 2022 and Notes 1 and 10 of the notes to the condensed financial statements included in this Quarterly Report.
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Combination Period Extension
As previously reported in our current report on Form 8-K filed with the SEC on July 14, 2022, on July 14, 2022, in connection with the Extraordinary General Meeting, the Company’s shareholders approved the Combination Period Extension.
For further information, please see our current report on Form 8-K as filed with the SEC on July 14, 2022 and Notes 1 and 10 of these notes to the condensed financial statements included in this Quarterly Report.
Redemption of Class A Ordinary Shares
As previously reported in our current report on Form 8-K as filed with the SEC on July 14, 2022, on July 14, 2022, in connection with the vote to approve the Combination Period Extension, the holders of 19,472,483 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.018 per share, for an aggregate redemption amount of approximately $195.1 million, which included approximately $0.4 million of Trust Account earnings, leaving approximately $58.4 million in the Trust Account. As of June 30, 2022, the redemption amount is not required to be classified as a liability as the event occurred subsequent to that date.
For further information, please see our current report on Form 8-K as filed with the SEC on July 14, 2022 and Notes 1 and 10 of these notes to the condensed financial statements on this Quarterly Report.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through June 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and subsequent to the Initial Public Offering, the search for a target company for a Business Combination. On July 5, 2022, the Company entered into the Business Combination Agreement. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. Upon the signing of the Business Combination Agreement, the Company will focus on ensuring that the transaction is consummated. We generate non-operating income in the form of earnings 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 in connection with searching for, and completing, a Business Combination.
For the three months ended June 30, 2022, we had a net loss of $112,780, which consisted of operating and formation costs of $2,440,653, partially offset by the change in fair value of warrant liabilities of $2,006,478 and earnings on marketable securities held in the Trust Account of $321,395.
For the six months ended June 30, 2022, we had a net income of $5,593,708, which consisted of a change in fair value of warrant liabilities of $8,981,847 and earnings on marketable securities held in the Trust Account of $343,952, partially offset by operating and formation costs of $3,732,091.
For the three months ended June 30, 2021, we had a net loss of $1,829,884, which consisted of operating and formation costs of $385,917 and a change in fair value of warrant liabilities of $1,450,300, offset by interest income from the operating bank account of $24 and earnings on marketable securities held in the Trust Account of $6,309.
For the six months ended June 30, 2021, we had a net income of $3,121,329, which consisted of a change in fair value of warrant liabilities of $3,674,300, interest income from the operating bank account of $51, and earnings on marketable securities held in the Trust Account of $12,548, partially offset by operating and formation costs of $565,570.
Liquidity and Capital Resources
On July 20, 2020, we consummated the Initial Public Offering of 25,300,000 Units, inclusive of the underwriter’s election to fully exercise its option to purchase an additional 3,300,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $253,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,060,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $7,060,000.
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Following the Initial Public Offering, the exercise of the over-allotment option in full and the sale of the Private Placement Warrants, a total of $253,000,000 was placed in the Trust Account. We incurred $14,528,328 in transaction costs, including $5,060,000 of underwriting fees, $8,855,000 of deferred underwriting fees and $613,328 of other costs.
For the six months ended June 30, 2022, net cash used in operating activities was $471,217. Net income of $5,593,708 was affected by earnings marketable securities of $343,952 and a change in fair value of warrant liabilities of $8,981,847. Changes in operating assets and liabilities provided $3,260,874 of cash from operating activities.
For the six months ended June 30, 2022, net cash from financing activities was $700,000. As discussed in Note 5, the company drew down on the Working Capital Note in the amount of $700,000.
For the six months ended June 30, 2021, net cash used in operating activities was $212,676. Net income of $3,121,329 was affected by earnings on marketable securities of $12,548 and a change in fair value of warrant liabilities of $3,674,300. Changes in operating assets and liabilities provided $352,843 of cash from operating activities.
As of June 30, 2022, we had marketable securities held in the Trust Account of $253,381,468. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing income earned on the Trust Account, which income shall be net of taxes payable and excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw income earned from the Trust Account to pay taxes, if any. Through June 30, 2022, we have not withdrawn any income from the Trust Account. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account after any redemptions 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 $778,575 held outside of the Trust Account. 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, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. 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 loans may be convertible into warrants, at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.
On June 24, 2022, the Company entered into a promissory note with the Sponsor pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $905,000 (the “Working Capital Note”). The Working Capital Note is non-interest bearing and payable on the earlier of the date on which the Company consummates a Business Combination or the date that the winding up of the Company is effective. If the Company does not consummate a Business Combination, all amounts loaned to the Company in connection with the Working Capital Note will be forgiven except to the extent that the Company has funds available to it outside of its Trust Account; however, no proceeds from the Trust Account may be used for such repayment. As of June 30, 2022 and December 31, 2021, there were $700,000 and $0 outstanding under the Working Capital Note, respectively.
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.
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Going Concern
The Company may need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements—Going Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for another extension of the deadline or complete a Business Combination by November 20, 2022, then the Company will cease all operations except for the purpose of liquidating. The Company intends to complete a Business Combination before the mandatory liquidation date or obtain approval for an extension, however, it is uncertain whether the Company will be able to do so. If a Business Combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after November 20, 2022.
Off-Balance Sheet Financing 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 the Sponsor a monthly fee of $10,000 for office space, administrative and support services, provided to the Company. We began incurring these fees on July 16, 2020 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s liquidation.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $8,855,000 in the aggregate. 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. Of such deferred fee amount, up to $0.175 per Unit, or up to $4,427,500, may be paid to third parties who did not participate in the Initial Public Offering (but who are members of FINRA or regulated broker-dealers) that assist us in consummating a Business Combination. The election to make such payments to third parties will be solely at the discretion of our management team, and such third parties will be selected by our management team in its sole and absolute discretion.
We have arrangements with a consultant to provide services to us relating to market and industry analyses, assistance with due diligence, and financial modeling and valuation of potential targets. We agreed to pay the service provider a fee of 6,600 BRL per month (approximately $1,200 per month). The agreement is for a fixed term of 24 months and will terminate on September 15, 2022.
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.
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The Company’s Critical Accounting Policies are included in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on April 14, 2022. There have been no changes in the Critical Accounting Policies described in our Form 10-K through the date of this Quarterly Report.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have 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 accompanying financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments.
Management has identified a material weakness in internal controls related to the accounting for complex financial instruments. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter ended June 30, 2022, covered by this Quarterly Report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in (i) our Annual Report on Form 10-K for the period ended December 31, 2021 as filed with the SEC on April 14, 2022, (ii) our quarterly report on Form 10-Q for the period ended March 31, 2022 as filed with the SEC on May 19, 2022, and (iii) our proxy statement on Schedule 14A for the Extraordinary General Meeting as filed with the SEC on July 1, 2022. Any of those factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in (i) our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on April 14, 2022, (ii) our quarterly report on Form 10-Q for the period ended March 31, 2022 as filed with the SEC on May 19, 2022, and (iii) our proxy statement on Schedule 14A for the Extraordinary General Meeting held on July 1, 2022. We also may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. For instance, this Quarterly Report does not include risk factors specifically related to the Proposed Business Combination. During the third quarter of 2022, the Company expects to file a Registration Statement with the SEC that will include a proxy statement/prospectus on Form F-4 including risk factors specific to the Proposed Business Combination, as well as in other documents filed by the Company from time to time with the SEC and as otherwise provided for in Item 1A herein.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
No. |
| Description of Exhibit |
3.1(1) | Amended and Restated Memorandum and Articles of Association of the Registrant. | |
10.1(2) | ||
31.1* |
| |
32.1** |
| |
101.INS* |
| XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.CAL* |
| XBRL Taxonomy Extension Calculation Linkbase Document. |
101.SCH* |
| XBRL Taxonomy Extension Schema 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. |
104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** Furnished.
| (1) | Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 21, 2020. |
| (2) | Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 28, 2022. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HPX CORP. | |
|
|
|
Date: August 15, 2022 |
| /s/ Carlos Piani |
| Name: | Carlos Piani |
| Title: | Chief Executive Officer and Chief Financial Officer |
|
| (Principal Executive Officer and Principal Financial and Accounting Officer) |
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