DEFM14A: AlphaTime SPAC to Merge with HCYC Group

AlphaTime Acquisition Corp announces a definitive merger agreement with Hong Kong-based insurance broker HCYC Group, forming a new public entity, HCYC Holding Company, to be listed on Nasdaq.

Summary

• AlphaTime Acquisition Corp (SPAC) is merging with HCYC Group Company Limited (Hong Kong-based insurance broker) to form HCYC Holding Company (PubCo), which will be listed on Nasdaq under symbols HCYC and HCYCW.
• The business combination utilizes a multiple-merger structure designed for business, legal, and accounting reasons, including PubCo's eligibility as a foreign private issuer and intended U.S. federal income tax-free treatment for the Initial Mergers.
• HCYC shareholders will collectively receive 7,500,000 PubCo ordinary shares, valued at an aggregate of $75,000,000.
• An additional 1,500,000 Earnout Shares will be issued to HCYC shareholders, contingent on PubCo achieving net income exceeding $5,000,000 in fiscal year 2024 and $10,000,000 in fiscal year 2025 (or $15,000,000 in 2025 if the 2024 target is missed).
• A PIPE financing of $11.5 million has been secured from institutional investors, exchanging for 1,150,000 ordinary shares and 2,300,000 warrants of AlphaTime (amended from HCYC Holding Company).
• AlphaTime shareholders have redemption rights; as of October 1, 2025, 917,814 shares were redeemed for approximately $11,362,537, at a price of approximately $12.38 per share.
• Post-merger, HCYC shareholders are expected to hold approximately 63-65% of PubCo, while AlphaTime public shareholders will hold 6-9% (excluding dilutive interests), and AlphaTime's Sponsor and its affiliates will hold 18-19%.
• HCYC reported a net loss of $792,883 for the fiscal year ended March 31, 2025, a significant decline from a net income of $18,206 in the prior year.
• HCYC's net revenues decreased from $10,887,830 in FY2024 to $5,878,552 in FY2025.
• As of March 31, 2025, HCYC had an accumulated loss of $1,656,956 and a working capital deficit of $825,582.
• AlphaTime's independent auditor has expressed substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 3

Explanation: HCYC's recent financial performance shows a significant decline in revenue and a shift from net income to net loss, missing projections. AlphaTime also faces a going concern doubt. While the merger provides a path to public listing and outlines growth strategies, the current financial state and regulatory risks, particularly from China, present substantial headwinds.

Positives

• HCYC is believed to be well-positioned for public company status in terms of scale and size, appealing to public equity market investors.
• HCYC's operations in Hong Kong's global market environment allow it to offer international products through linked exchange rates.
• The company targets customers across Southeast Asian countries, which is expected to provide diversified revenue streams, broader market penetration, and resilience against regional market volatilities.
• The multiple-merger structure is intended to allow PubCo to qualify as a foreign private issuer, potentially leading to less burdensome U.S. securities law reporting obligations.
• The Initial Mergers are structured to qualify as a tax-free transaction for U.S. federal income tax purposes.
• Newbridge Securities provided a fairness opinion, concluding that the merger consideration is fair from a financial point of view to AlphaTime's public shareholders.
• HCYC's management team is experienced in the insurance brokerage industry and familiar with the Hong Kong regulatory environment.
• HCYC has a strong brand and established long-term strategic partnerships with major insurers in Hong Kong.
• The company's 'legacy-light' organizational structure is seen as an advantage for quickly identifying market opportunities and adapting to changes.
• HCYC employs a customer-led service strategy, focusing on personalized financial protection plans and in-person interactions.
• Strategic initiatives include active expansion into Southeast Asian and European markets to diversify revenue streams and strengthen internal management processes for financial and health insurance products.
• The successful completion of the business combination and subsequent listing is expected to significantly enhance the company's brand influence and client acquisition capabilities.

Negatives

• HCYC reported a net loss of $792,883 for the fiscal year ended March 31, 2025, a significant deterioration from a net income of $18,206 in the prior year.
• HCYC's net revenues decreased substantially by $5,009,278, from $10,887,830 in FY2024 to $5,878,552 in FY2025.
• The number of new insurance policies facilitated by HCYC decreased from 1,186 in FY2024 to 392 in FY2025.
• As of March 31, 2025, HCYC had an accumulated loss of $1,656,956 and a working capital deficit of $825,582.
• AlphaTime's independent registered public accounting firm's report contains an explanatory paragraph expressing substantial doubt about AlphaTime's ability to continue as a going concern.
• HCYC did not achieve its projected financial results for fiscal year 2024, attributing the miss to a post-pandemic slowdown in the Chinese economy and delays in U.S. Federal Reserve interest rate cuts.
• HCYC anticipates it will be unable to meet its financial forecast for fiscal year 2025, with expected net income of $5,699,704, representing a 47.7% decrease compared to FY2024 revenue and only 11.1% of the projected FY2025 revenue.
• HCYC has significant customer concentration, with two partnered insurance providers accounting for approximately 51.2% and 40.0% of total revenue in FY2025, and one accounting for 92.0% of accounts receivable.
• HCYC relies heavily on long-term informal collaboration arrangements with large insurance providers, with no formal written agreements in place with all or most strategic partners, posing a risk to business continuity.
• The company lacks product and business diversification, making its future operating income and earnings more susceptible to fluctuations.
• The effective rate of underwriting discounts and commissions paid by AlphaTime will be significantly higher for non-redeeming shareholders due to redemptions (e.g., 37.1% in a 50% redemption scenario).
• AlphaTime public shareholders will hold a minority position (9% in no redemption, 6% in 100% redemption scenario, excluding dilutive interests) in the combined company, potentially reducing their influence on management.
• AlphaTime shareholders will experience immediate dilution as a consequence of the issuance of PubCo Ordinary Shares as consideration in the Business Combination and from other dilution sources.
• AlphaTime's directors and officers have interests in the Business Combination that may conflict with public shareholders' interests, as their initial investments would be worthless if the combination is not completed.

Risks

• AlphaTime will be forced to liquidate its Trust Account if it cannot consummate a business combination by January 4, 2026, leading to public shareholders receiving approximately $7.45 per share and Public Rights expiring worthless.
• AlphaTime's independent registered public accounting firm's report contains an explanatory paragraph expressing substantial doubt about its ability to continue as a going concern.
• Third-party claims against AlphaTime could reduce the proceeds held in trust, potentially lowering the per-share liquidation price for AlphaTime Shareholders.
• Any distributions received by AlphaTime Shareholders could be viewed as an unlawful payment if AlphaTime is proved unable to pay its debts immediately following the distribution.
• If AlphaTime's due diligence investigation of HCYC was inadequate, AlphaTime shareholders could lose some or all of their investment.
• Shareholder litigation and regulatory inquiries and investigations are expensive and could harm AlphaTime's business, financial condition, and operating results, diverting management attention.
• Nasdaq may delist AlphaTime's securities from trading, limiting investors' ability to transact and subjecting the company to additional trading restrictions.
• Conflicts of interest may arise for AlphaTime's founders in determining an appropriate business combination target, as their entire investment would be lost if a combination is not completed.
• Specific requirements for redemption may make it more difficult for AlphaTime shareholders to exercise their redemption rights.
• If AlphaTime's security holders exercise their registration rights, it may have an adverse effect on the market price of AlphaTime's securities.
• If the Business Combination's benefits do not meet the expectations of financial or industry analysts, the market price of AlphaTime's (or PubCo's) securities may decline.
• AlphaTime's directors and officers have certain conflicts of interest in recommending the acquisition of HCYC.
• Significant costs associated with the Business Combination will reduce the cash available for other corporate purposes.
• In the event of significant redemptions, PubCo's securities may become less liquid, and it may be unable to meet Nasdaq listing standards.
• AlphaTime may waive one or more conditions to the Business Combination without resoliciting shareholder approval.
• AlphaTime Shareholders will experience immediate dilution as a consequence of the issuance of PubCo Ordinary Shares.
• Having a minority share position may reduce the influence of non-redeeming AlphaTime shareholders on PubCo's management.
• The completion of the Business Combination is subject to a number of important conditions, and the Merger Agreement may be terminated.
• The Unaudited Pro Forma Condensed Combined Financial Information may not be representative of results after the Business Combination.
• Being offered a fixed number of PubCo Ordinary Shares involves the risk of market fluctuations.
• The Initial Mergers may be a taxable event for U.S. Holders of ATMC Ordinary Shares, Public Rights, or Public Warrants.
• AlphaTime may be deemed an investment company under the Investment Company Act, requiring burdensome compliance or liquidation.
• HCYC's business model is dependent on strategic partners (large insurance companies), and their inability to pay commission fees or refer clients could have a material adverse effect.
• HCYC lacks product and business diversification, making its operating income and earnings more susceptible to fluctuations.
• HCYC's success depends on its ability to retain existing customers and expand its customer base.
• HCYC may be unable to expand its product offerings or its new business initiatives may not achieve intended results.
• HCYC is subject to intense competition in the insurance industry, which could negatively affect profitability.
• Extensive regulation as an insurance company may restrict activities and increase compliance costs.
• Changes in tax regulations may adversely affect the demand for HCYC's insurance products.
• HCYC faces the risk of litigation, regulatory investigations, and other proceedings.
• Failure to understand and respond effectively to corporate governance risks could adversely affect HCYC.
• Failure to understand and respond effectively to certain social changes could adversely affect HCYC's strategies.
• HCYC HK's operations in Hong Kong are subject to complex and rapidly evolving PRC laws and regulations, with potential for significant government oversight and intervention.
• The PRC government could disallow the holding company structure, potentially causing the value of PubCo Ordinary Shares to significantly decline or become worthless.
• Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit legal protections available to HCYC.
• Risks of license revocation due to non-compliant broker referral practices in insurance sales.
• PCAOB may not be able to inspect audit documentation located in China, potentially leading to delisting under the Holding Foreign Companies Accountable Act (HFCAA).
• PRC M&A Rules and other regulations could make it more difficult for HCYC to pursue growth through acquisitions in China.
• Governmental control of currency conversion may limit HCYC's ability to utilize revenues effectively.
• PRC regulations relating to offshore investment activities by PRC residents may expose HCYC or its PRC resident beneficial owners to liability and penalties.
• Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of HCYC's operations in Hong Kong.
• If PubCo ceases to qualify as a foreign private issuer, it would incur significant additional legal, accounting, and other expenses.
• As a foreign private issuer, PubCo is permitted to adopt certain home country corporate governance practices that differ from Nasdaq standards, potentially offering less protection to shareholders.
• PubCo may not be able to maintain its Nasdaq listing, which could negatively impact the price and liquidity of its securities.
• Shareholders may face difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against PubCo or its management.
• PubCo may redeem unexpired Public Warrants prior to their exercise at a time that is disadvantageous to holders, potentially making them worthless.
• Future changes to U.S. and non-U.S. tax laws could adversely affect PubCo.
• PubCo may be or become a Passive Foreign Investment Company (PFIC), which could result in adverse U.S. federal income tax consequences to U.S. Holders.
• A market for PubCo Shares may not develop, which would adversely affect the liquidity and price of PubCo's Shares.

Future Outlook

PubCo plans to apply for listing on Nasdaq under symbols HCYC and HCYCW, effective at the time of the Business Combination's closing. HCYC projects revenue growth rates of 33%, 50%, 33%, and 25% for fiscal years ending March 31, 2025 through March 31, 2028, respectively, despite anticipating not meeting its FY2025 forecast. The company aims to achieve these projections by intensifying sales and referral programs, expanding into Southeast Asian and European markets, and strengthening internal management. PubCo will qualify as a foreign private issuer, which is expected to result in less burdensome U.S. reporting obligations, and will be a controlled company under Nasdaq rules due to the Sponsor's majority voting power. PubCo's board will consist of four directors, including three independent directors, and its executive management will be led by the current HCYC management.

Management Comments

• AlphaTime's board of directors believes the Business Combination with HCYC is in the best interests of AlphaTime and presents an opportunity to increase shareholder value.
• AlphaTime's board of directors believes that based upon the financial skills and background of its directors, it was qualified to conclude that the Business Combination was fair from a financial perspective to AlphaTime's shareholders.
• HCYC management conveyed that their projected revenue trajectory was based on monetary dynamics in the overall global economic market, HCYC's market positioning, and its growth strategy.
• HCYC management stated that interim internal data indicated the number of insurance policies has been increasing significantly and no specific events would materially impact their overall business performance.
• HCYC management is committed to maintaining strong customer relationships and actively implementing strategies to mitigate any risks associated with client attrition.
• HCYC management attributes not meeting FY2024 projections to the post-pandemic slowdown in the Chinese economy and delays in U.S. Federal Reserve interest rate cuts, which caused prospective customers to reallocate wealth.
• HCYC management determined that the smaller average check size for insurance products sold was the main reason the forecasted projections for FY2024 were not met.
• HCYC management believes it will be able to achieve the projections one year later by intensifying its sales and referral programs, retaining existing customers, and expanding its customer pool.

Industry Context

The Hong Kong insurance market is projected to grow, with premiums expected to increase from HKD 566.0 billion in 2023 to HKD 621.7 billion in 2027, representing a CAGR of 2.4%. Life insurance is a dominant segment, with a projected volume of $72.09 billion USD in 2024. The industry is currently experiencing a rebound, driven by the recovery of travel business and increased new policies in the medical sector, particularly benefiting from the full resumption of cross-border travel between mainland China and Hong Kong. The industry is cyclical, and HCYC is currently operating in a 'hard market' phase. The COVID-19 pandemic has also accelerated the development of insurtech applications. However, the broader industry faces increasing oversight and control from the PRC government over overseas offerings and foreign investments in China-based issuers, which could extend to Hong Kong-based companies.

Comparison to Industry Standards

• Newbridge Securities conducted a public company comparable analysis, identifying eight similar insurance brokerage companies listed on major U.S. stock exchanges (NYSE American, NASDAQ, NYSE).
• The average 2024E Price-to-Earnings (P/E) multiple derived from these comparable public companies was 14.5x.
• Newbridge also performed an M&A transaction comparable analysis of similar insurance brokerage companies, yielding an average Equity Value / Net Income multiple of 20.3x, which was adjusted to 15.5x.
• The Merger Consideration of $75.0 million is below the midpoint of Newbridge's derived valuation ranges, which were between $87.7 million (public company comparable analysis) and $93.5 million (M&A transaction comparable analysis).

Management Changes

Corporate Governance

Legal Proceedings

• HCYC is subject to routine legal proceedings in the normal course of operating its insurance business, but none are expected to have a material adverse effect.
• PubCo is not currently a party to any material legal proceedings.
• Shareholder litigation and regulatory inquiries and investigations are identified as a risk for AlphaTime, potentially leading to substantial costs and diversion of management attention.

Related Party Transactions

• AlphaTime's Sponsor (Alphamade Holding LP) acquired 1,725,000 Founder Shares for $25,000 and 409,200 Private Placement Units for $4,092,000.
• The Sponsor sold 132,825 Founder Shares to Chardan or its designees for $265,650.
• The Sponsor loaned AlphaTime $690,000 and $660,000 via non-interest bearing promissory notes for business combination extensions, with outstanding balances of $1,262,500 as of June 30, 2025.
• The Sponsor paid certain formation, operating, or deferred offering costs on behalf of AlphaTime, amounting to $754,589 as of June 30, 2025.
• AlphaTime paid TenX Global Capital LP (a related party) $200,000 for advisory services.
• AlphaTime pays its Sponsor $10,000 per month for office space, utilities, and administrative support.
• AlphaTime borrowed an additional $104,979 from HCYC to extend the business combination period, and subsequently borrowed $320,201 more from HCYC for working capital and extension payments.
• Ms. Xiameng Ding (HCYC's controlling shareholder and chairman) is owed $929,224 in non-interest bearing borrowings from HCYC as of March 31, 2025.
• Mr. Kwok Wai Man (CEO of HCYC HK) is owed $4,260 in non-interest bearing borrowings and $163 for referral services from HCYC as of March 31, 2025.
• HCYC has agreements with Summit Planned Ltd and Mr. Kwok Wai Man for referral services, paying commissions.
• HCYC HK sold its 34% ownership interest in SGI Group Limited to Ms. Xiameng Ding for HKD 1,564,000, settled by relief of debt due to Mihoshi Technology Group (Hong Kong) Company Limited (controlled by Ms. Ding).

Stakeholder Impact

• Shareholders of AlphaTime (Public): Will experience immediate dilution, hold a minority position (6-9%) in PubCo, and may have reduced influence on management. Redemption rights are available, but the per-share liquidation price is lower than the IPO price, and warrants may expire worthless.
• Shareholders of HCYC: Will become majority shareholders of PubCo (63-65%), receive earnout shares based on performance, and benefit from the public listing.
• AlphaTime's Sponsor and Insiders: Have significant financial interests in the completion of the Business Combination, as their initial investments would be worthless if it fails. They will hold 18-19% of PubCo.
• Employees of HCYC: The success of the combined entity depends on retaining and attracting key management and technical personnel.
• Customers of HCYC: The business model is customer-centric, but customer concentration with a few large insurance providers poses a risk.
• Strategic Partners of HCYC: The business relies on partnerships with large insurance companies for revenue; disruptions or changes in terms could adversely affect HCYC.
• Regulatory Bodies: The combined entity will be subject to various regulations (SEC, Nasdaq, Cayman Islands, Hong Kong, PRC), with potential for increased scrutiny and intervention, particularly from Chinese authorities, impacting operations and share value.

Next Steps

• An Extraordinary General Meeting of AlphaTime Shareholders is scheduled for December 5, 2025, to vote on the Business Combination Proposal, Initial Mergers Proposal, and Adjournment Proposal.
• PubCo plans to apply for listing of its ordinary shares on Nasdaq under symbols HCYC and HCYCW, with the listing to be effective at the time of the Business Combination's closing.
• PubCo will prepare and file its consolidated financial statements in accordance with U.S. GAAP.
• HCYC plans to continue expanding its insurance brokerage services regionally throughout Southeast Asia and Europe.
• HCYC aims to attract additional corporate referrers and utilize their network to support growth.
• HCYC intends to strengthen its internal management processes, with a focus on promoting financial and health insurance products.
• PubCo will adopt a Code of Business Conduct and Ethics upon consummation of the Business Combination.
• PubCo will enter into employment and indemnification agreements with its officers and directors.

Key Dates

Recommendation

HCYC's recent financial performance is concerning, showing a substantial net loss and a significant revenue decline in FY2025 compared to FY2024. The company also failed to meet its FY2024 projections and anticipates missing FY2025 forecasts. This indicates operational challenges and a deteriorating financial position. AlphaTime, the SPAC, has an auditor's report expressing substantial doubt about its ability to continue as a going concern, highlighting its precarious financial state. The transaction involves significant dilution for AlphaTime's public shareholders, who will hold a small minority stake in the combined entity. While there are stated growth strategies and a fairness opinion, the underlying financial performance of the target company (HCYC) and the ongoing operational and regulatory risks, particularly related to Chinese government oversight and potential delisting under the HFCAA, present considerable uncertainty and downside risk. The high customer concentration in HCYC's revenue stream adds to the business risk. Given the current financial deterioration of HCYC, the going concern issue for AlphaTime, and the numerous regulatory and operational risks, a seasoned investor would likely view this as a high-risk proposition with significant potential for further value erosion.

Keywords

SPAC, Merger, Business Combination, HCYC Group, AlphaTime Acquisition Corp, Insurance Brokerage, Hong Kong, Nasdaq Listing, PIPE Financing, Earnout Shares, SEC Filing, Financial Services, Corporate Governance, Risk Management, China Regulation, Foreign Private Issuer, PCAOB, Redemption Rights, Investment