Filing summary
Entity and period: The supplied filing is Avista Healthcare Public Acquisition Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2018, filed August 7, 2018. It is not an Organogenesis Holdings Inc. filing; the source identifies Avista as a Cayman Islands blank-check company seeking a business combination.
Business context and financial results
Avista had not begun operating activities or generated operating revenue. Its activity was pursuing and evaluating acquisition targets; interest and dividend income on trust assets was its only reported income.
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 | Comparable 2017 period |
|---|---|---|---|
| Interest/dividend income | $1.30 million | $2.32 million | $0.60 million / $0.96 million |
| Operating costs | $0.94 million | $2.10 million | $0.22 million / $0.44 million |
| Net income | $0.36 million | $0.22 million | $0.38 million / $0.52 million |
| Reported basic and diluted loss per share | $(0.09) | $(0.20) | $(0.02) / $(0.04) |
The reported per-share loss reflects the allocation of trust income to shares subject to redemption; the filing reconciles net income to an adjusted loss attributable to the shares included in the earnings-per-share calculation. No operating margin or revenue growth measure is applicable because the company had no operating revenue.
For the six months, operating cash outflow was $436,475, partly offset by $375,000 borrowed from the Sponsor; cash declined by $61,475 to $64,411. At June 30, 2018, the Trust Account held $314.82 million. Total assets were $314.98 million, current liabilities were $5.90 million, and the company reported a $5.74 million working-capital deficit. It had $475,000 outstanding on a non-interest-bearing Sponsor note, due at the earlier of October 14, 2018 or a business-combination closing, and $10.85 million of deferred underwriting commissions payable only if a combination closes.
Changes and management commentary
Operating costs rose substantially year over year: to $942,527 from $221,808 for the quarter and to $2.10 million from $440,456 for the six-month period. Trust income also increased, but net income fell year over year in both periods. Accrued expenses were $5.42 million at quarter-end, including $5.39 million of vendor and other costs deferred pending a combination or liquidation.
The proposed Envigo transaction was mutually terminated on February 14, 2018. Avista said it continued to seek a business combination. It had until October 14, 2018—24 months after its IPO closing—to complete one; otherwise it was required to cease operations and redeem public shares from the Trust Account, subject to applicable creditor claims and other legal requirements. Management believed available resources would support operations through that deadline or a transaction closing, but warned that higher-than-expected search or transaction costs could leave insufficient funds.
Risks, contingencies, and other items
- Completion of a business combination was uncertain; failure to complete one by October 14, 2018 would trigger the stated wind-up and redemption process.
- The Sponsor’s indemnity for certain claims against Trust Account funds may be difficult to collect; the filing says its ability to satisfy the obligation was not independently verified and its assets may consist only of company securities.
- The Sponsor note and deferred administrative fees add obligations outside the Trust Account; the affiliate had accrued $140,000 in administrative fees deferred until a combination.
- Trust investments were short-term government securities and a qualified money-market fund; management considered interest-rate exposure immaterial. No off-balance-sheet arrangements or material changes to previously disclosed risk factors were reported.
- Avista received a NASDAQ notice for not holding a timely annual meeting, then reported that the June 28, 2018 meeting restored compliance. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer: this filing is for Avista Healthcare Public Acquisition Corp., not Organogenesis Holdings Inc.
- Verify whether Avista completed a business combination by the October 14, 2018 deadline and the resulting treatment of public shares and Trust Account funds.
- Review liquidity outside the Trust Account, deferred expenses, Sponsor borrowing, and the conditions for payment of deferred underwriting commissions.
- Check subsequent filings for transaction developments, redemption outcomes, and any updates to the company’s stated risks.