References to the "Company," "our," "us" or "we" refer to HPX Corp. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Cautionary Note Regarding
Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk Factors" and
elsewhere in this Annual Report on Form 10-K.
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. 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.
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Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities through December 31, 2021 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. We do not expect to generate any
operating revenues until after the completion of our initial Business
Combination. We generate non-operating income in the form of interest income 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 year ended December 31, 2021, we had a net income of $9,394,728, which
consisted of a change in fair value of warrant liabilities of $10,533,024,
interest income from the operating bank account of $89, and interest income on
marketable securities held in the Trust Account of $25,305, partially offset by
operating costs of $1,163,690.
For the period from March 20, 2020 (inception) through December 31, 2020, we had
net loss of $8,683,738, which consisted of operating costs of $314,723,
transaction costs allocable to warrants of $497,297 and change in fair value of
warrant liabilities of $7,884,000, partially offset by interest income on
marketable securities held in the Trust Account of $12,211 and interest income
from the operating bank account of $71.
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.
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 year ended December 31, 2021, net cash used in operating activities was
$582,258. Net income of $9,394,728 was affected by interest income on marketable
securities of $25,305 and a change in fair value of warrant liabilities of
$10,533,024. Changes in operating assets and liabilities provided $581,343 of
cash from operating activities.
For the period from March 20, 2020 (inception) through December 31, 2020, cash
used in operating activities was $439,502. Net loss of $8,683,738 was impacted
by interest earned on marketable securities held in the Trust Account of
$12,211, change in fair value of warrant liabilities of $7,884,000, and
transaction costs allocable to warrants of $497,297. Changes in operating assets
and liabilities used $124,850 of cash from operating activities.
At December 31, 2021, we had marketable securities held in the Trust Account of
$253,037,516. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust
Account, which interest shall be net of taxes payable and excluding deferred
underwriting commissions, to complete our Business Combination. We may withdraw
interest from the Trust Account to pay taxes, if any. Through December 31, 2021,
we have not withdrawn any interest 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.
At December 31, 2021, we had cash of $549,792 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.
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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. As at December 31, 2021, there were
no amounts drawn.
On August 11, 2021, the Sponsor committed to provide the Company an aggregate of
$150,000 in loans for working capital purposes. On February 21, 2022, the
Sponsor committed to provide the Company with an additional $755,000 in loans
for working capital purposes, bring the total commitment amount to $905,000.
These loans will be non-interest bearing, unsecured and will be repaid upon the
consummation of a business combination. If the Company does not consummate a
business combination, all amounts loaned to the Company in connection with these
loans will be forgiven except to the extent that the Company has funds available
to it outside of its Trust Account. At December 31, 2021 and through filing date
of this Annual Report on Form 10-K, no amount was drawn under this agreement.
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.
Going Concern
The Company may need to raise additional capital through loans or additional
investments from its Sponsor, stockholders, 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 an extension of the deadline or complete a Business
Combination by July 20, 2022, then the Company will cease all operations except
for the purpose of liquidating. The liquidity condition and date for mandatory
liquidation and subsequent dissolution raise substantial doubt about the
Company's ability 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, however, it is uncertain whether the Company will be
able to do so. No adjustments have been made to the carrying amounts of assets
or liabilities should the Company be required to liquidate after July 20, 2022.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2021. 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
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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 a 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 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 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 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
occured 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 Redemption
We account for our Class A ordinary shares subject to possible redemption 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 balance sheets.
Net Income (Loss) 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 income
(loss) per ordinary share is computed by dividing net income (loss) by the
weighted average number of ordinary shares outstanding for the period.
Remeasurement associated with the redeemable Class A ordinary shares is excluded
from income (loss) per ordinary share as the redemption value approximates fair
value.
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
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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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