| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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References in this report (the “Quarterly Report”) to “we,” “us,” or the “Company,” refer to HCM Acquisition Corp. References to our “management” or our “management team” refer to our officers and
directors, and references to the “Sponsor” refer to HCM Investor Holdings, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements
and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and
involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in
this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination, the Company’s financial position, business strategy and the plans and objectives of management
for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek,” and variations and similar words and expressions are intended to identify such forward-looking statements. Such
forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance, or results to differ materially
from the events, performance, and results discussed in the forward-looking statements, including satisfaction of the conditions of the Proposed Business Combination. 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 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s
securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events, or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on February 5, 2021 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization
or similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a
combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from February 5, 2021, (inception) through September 30, 2023, were organizational activities,
activities necessary to prepare for the Initial Public Offering (described below), and identification of a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business
Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account and changes in the fair value of warrants. 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 and non-cash expense of changes in the fair value of warrants.
For the three months ended September 30, 2023, we had a net loss of $945,139, which consists of interest earned on marketable securities held in the Trust Account of $572,450, interest income in
bank of $40, offset by operating costs of $1,517,629.
For the three months ended September 30, 2022, we had a net income of $1,867,031, which consists of interest earned on marketable securities held in the Trust Account of $599,266, an unrealized
gain on marketable securities held in our Trust Account of $824,061 and change in fair value of warrant liabilities of $821,250, offset by operating costs of $377,546.
For the nine months ended September 30, 2023, we had a net income of $1,178,392, which consists of interest earned on marketable securities held in the Trust Account of $4,736,501, interest income
in bank of $3,067 and reduction of underwriting fee payable of $297,062, offset by operating costs of $3,858,238.
For the nine months ended September 30, 2022, we had a net income of $11,956,900, which consists of interest earned on marketable securities held in the Trust Account of $1,146,917, an unrealized
gain on marketable securities held in our Trust Account of $794,781 and change in fair value of warrant liabilities of $11,497,500, offset by operating costs of $946,108 and transaction cost incurred in connection with the IPO of $536,190.
Liquidity, Capital Resources and Going Concern
On January 25, 2022, we consummated the Initial Public Offering of 28,750,000 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of 3,750,000
Units at $10.00 per Unit, generating gross proceeds of $287,500,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 13,000,000 Private Placement Warrant at a price of $1.00 per Private Placement Warrant in
a private placement to Sponsor and Cantor Fitzgerald & Co., generating gross proceeds of $13,000,000.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Units, a total of $293,250,000 was placed in the Trust Account. We incurred
$20,771,606 in Initial Public Offering related costs, consisting of $5,000,000 of underwriting fees, $15,125,000 of deferred underwriting fees, and $646,606 of other offering costs.
For the nine months ended September 30, 2023, cash used in operating activities was $1,043,319. Net income of $1,178,392 was affected by interest earned on marketable securities held in the Trust
Account of $4,736,501 and reduction of deferred underwriter fees of $297,062. Changes in operating assets and liabilities provided $2,811,852 of cash for operating activities.
For the nine months ended September 30, 2022, cash used in operating activities was $712,987. Net income of $11,956,900 was affected by interest earned on marketable securities held in the Trust
Account of $1,146,917, an unrealized gain on marketable securities held in our Trust Account of $794,781 and change in fair value of warrant liabilities of $11,497,500 and transaction incurred in connection with the IPO of $536,190. Changes in
operating assets and liabilities provided $233,121 of cash for operating activities.
As of September 30, 2023, we had marketable securities held in the Trust Account of $44,680,719 (including approximately $2,214,102 of interest income and unrealized gains) consisting of U.S.
Treasury Bills with a maturity of 185 days or less. We may withdraw interest from the Trust Account to pay taxes, if any. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on
the Trust Account (less income taxes payable), to complete our Business Combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the
Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2023, we had cash of $79,103. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on
prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses,
structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may,
but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside
the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price
of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
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.
On April 19, 2023, the Company held an extraordinary general meeting of shareholders (the “Extraordinary Meeting”) where its shareholders approved
the Extension Amendment. The Company filed the Extension Amendment with the Registrar of Companies of the Cayman Islands on April 21, 2023. As of September 30, 2023, the Sponsor paid $856,676. The Company has made seven total extension payments, as
of October 23, 2023, bringing the total amount paid into the Trust Account to $999,453. As a result of the most recent extension payment, the Termination Date was extended to November 25, 2023.
On July 18, 2023, the Sponsor loaned the Company an additional $400,000 for working capital purposes under the Working Capital Note. The loan does
not bear interest and shall be payable in full upon the consummation of a Business Combination. As of September 30, 2023, there was $400,000 in borrowings outstanding under the Working Capital Note.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company does not obtain approval for an extension of the deadline or complete a Business Combination by November 25, 2023
(or through maximum monthly extension date of January 25, 2024 if extended), then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution as well as our current cash
balance raise substantial doubt about the Company’s ability to continue as a going concern one year from the date that these financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the
Company be unable to continue as a going concern. The Company intends to complete a Business Combination before the mandatory liquidation date or obtain approval for an extension.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships
with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet
financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a total of up to
$10,000 per month for office space and secretarial and administrative services. As of September 30, 2023, the Company incurred $90,000.
Pursuant to the underwriting agreement entered into in connection with the IPO, the underwriter was initially entitled to a deferred fee of (i) 5.0% of the gross proceeds of the initial 25,000,000
Units sold in the Initial Public Offering, or $12,500,000, and (ii) 7.0% of the gross proceeds from the Units sold pursuant to the over-allotment option, or $2,625,000. On March 13, 2023, the Company entered into a fee reduction agreement pursuant to
which the underwriters forfeited 80.17% of the deferred underwriting commissions resulting in a reduction of $12,125,000 with a remaining $3,000,000 that is deferred and payable upon the business combination. The deferred fee will become payable to
the underwriter upon the consummation of a Business Combination 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.
On March 17, 2023, the Company signed an agreement with Cohen & Company Capital Markets (“CCM”) to act as its financial advisor and capital markets advisor in connection with a possible
business combination transaction. The Company shall pay CCM (i) an advisor fee in an amount equal to $1,000,000 in connection with the Merger, and (ii) a transaction fee in connection with a private placement in an amount equal to 4.0% of the sum
of (A) the gross proceeds raised from investors and received by the Company or the target business simultaneously with or before the closing of the private placement plus (B) proceeds released from the Trust Account with respect to any stockholder of
the Company that (x) entered into a non-redemption or other similar agreement and did not redeem shares of the Company’s common stock or (y) did not redeem shares of the Company’s common stock as a result of CCM’s services hereunder in the good faith
reasonable judgement of the Company.
In addition, the Company may, in its reasonable discretion, pay to CCM a discretionary fee in an amount up to $1,000,000, payable only upon the closing of the Merger, if the Company determines in
its discretion and reasonable judgment that the performance of CCM in connection with its leadership role in connection with the Merger warrants such additional fee.
In February 2022, the Company entered into an agreement with a service provider to help identify targets, negotiate terms of potential Business
Combinations, consummate a Business Combination and/or provide other services. In connection with this agreement, the Company will be required to pay a finder’s fee for such services, in an amount equal to $1,000,000, which would be contingent on
the consummation of a Business Combination with a target that is introduced by the service provider. Payment of such amount is not triggered by and will not be due at the closing of the Merger.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported. Actual
results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC 815-40, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities.
Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value in respect of each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are
exercised, and any change in fair value is recognized in the statements of operations. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a lattice model, specifically a
binomial lattice model incorporating the Cox-Ross-Rubenstein methodology.
Class A Ordinary Shares Subject to Redemption
We account for our Class A ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from
Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are
either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity.
Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at
redemption value as temporary equity, outside of the shareholders’ deficit section of our condensed balance sheets.
Net Income Per Ordinary Share
Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding during the period. Subsequent measurement of the redeemable Class A
ordinary shares is excluded from income per ordinary share as the redemption value approximates fair value. We calculate our earnings per share to allocate net income pro rata to Class A and Class B ordinary shares. This presentation contemplates a
Business Combination as the most likely outcome, in which case, both classes of ordinary shares share pro rata in the income of the Company.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt — “Debt with Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging — Contracts in Entity’s Own Equity” (Subtopic 815-40)
(“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion, cash conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an
entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We adopted ASU 2020-06 on January 1, 2022 on a modified retrospective basis. The adoption of ASU 2020-06 did not have an impact our financial position, results
of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk
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Not required for smaller reporting companies.
| Item 4. |
Controls and Procedures
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Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the
time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the
effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive
officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance
that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2023 covered by this Quarterly Report on Form 10-Q that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
| Item 1. |
Legal Proceedings
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None
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Form 10-K for the fiscal year ended December 31, 2022. As of the
date of this Report, there have been no material changes to the risk factors disclosed in our Form 10- K for the period ended December 31, 2022. Any of these 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.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds.
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None
| Item 3. |
Defaults Upon Senior Securities
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None
| Item 4. |
Mine Safety Disclosures
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None
| Item 5. |
Other Information
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None
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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No.
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Description of Exhibit
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2.1
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Business Combination Agreement, dated March 13, 2023, by and among HCM
Acquisition Corp, MURANO PV, S.A. DE C.V., Elías Sacal Cababie, ES Agrupación, S.A. de C.V., Murano Global B.V., MPV Investment B.V., and Murano Global Cayman (incorporated by reference to Exhibit 2.1 on the Form 8-K filed with the
SEC on March 15, 2023)
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2.2
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Amended and Restated Business Combination Agreement, dated August 2, 2023, by and among HCM Acquisition Corp, MURANO PV, S.A. DE C.V., Elías
Sacal Cababie, ES Agrupación, S.A. de C.V., Murano Global B.V., MPV Investment B.V., and Murano Global Cayman (incorporated by reference to Exhibit 2.1 on the Form 8-K filed with the SEC on August 7, 2023)
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10.1
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Sponsor Support Agreement, dated August 2, 2023, by and among HCM Investor Holdings, LLC, the other holders of HCM Class B Ordinary Shares, and
Murano PV, S.A. de C.V. (incorporated by reference to Exhibit 10.1 on the Form 8-K filed with the SEC on August 7, 2023)
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Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS*
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XBRL Instance Document
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB*
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XBRL Taxonomy Extension Labels Linkbase Document
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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HCM ACQUISITION CORP
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Date: November 13, 2023
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By:
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/s/ Shawn Matthews
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Name:
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Shawn Matthews
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Title:
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Chairman and Chief Executive Officer and Director
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(Principal Executive Officer)
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Date: November 13, 2023
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By:
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/s/ James Bond
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Name:
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James Bond
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Title:
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President and Chief Financial Officer
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(Principal Financial and Accounting Officer)
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