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.
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