REVELATION BIOSCIENCES, INC. quarterly report, Q2 FY2021

Business context and reporting period

The supplied filing is Petra Acquisition, Inc.’s unaudited Form 10-Q for the three and six months ended June 30, 2021—not a filing for Revelation Biosciences, Inc. Petra is a shell company formed to pursue a business combination; it had no operating revenue or business operations as of quarter-end.

Financial highlights

  • Revenue: None; management expected no operating revenue before a business combination.
  • Net loss: $1.331 million for Q2 2021, versus $521 for Q2 2020. For the first half, net loss was $153,000, versus $7,681 in 2020.
  • Expenses and warrant valuation: Q2 general and administrative expense was $842,000, and the change in fair value of warrant liabilities was a $491,000 loss. First-half general and administrative expense was $1.311 million, partly offset by a $1.171 million gain from the warrant-liability revaluation.
  • Cash flow: Operating activities used $218,000 in the first half of 2021. Cash and cash equivalents were zero at June 30; marketable securities outside the trust were $302,000.
  • Liquidity and liabilities: Trust assets were $73.515 million, primarily in U.S. Treasury securities, and were intended principally to fund a business combination. Current liabilities were $3.313 million; management reported a $2.939 million working-capital deficiency. Total liabilities were $6.224 million, including $2.911 million of deferred underwriting commissions payable only if a business combination closes. The company reported no long-term debt.
  • Equity: $73.509 million of public shares was classified as temporary equity subject to possible redemption. Stockholders’ deficit was $5.845 million.

Material changes versus the prior comparable period

Costs increased substantially as the company operated as a public SPAC and pursued a target; the prior-year periods reflected only minimal pre-IPO expenses. The Q2 loss also included a warrant fair-value charge, while the first-half result benefited from a warrant revaluation gain. The company’s reported financial statements had previously been restated to classify derivative warrants as liabilities; the filing says the related control weakness remained outstanding.

Outlook, risks and unusual items

  • The company had until 12 months after its October 13, 2020 IPO closing to complete a business combination. If it failed to do so, it was required to cease operations, redeem public shares from the trust and liquidate; warrants could expire worthless.
  • Management believed available working capital and borrowing capacity would cover needs through a business combination or one year from the filing. However, outside-trust cash was zero, the company reported a working-capital deficit, and sponsor or insider loans were optional, not committed.
  • Management warned it might need financing to complete a transaction or cover redemptions. Issuing shares could dilute holders; debt could add repayment, covenant and default risks.
  • Disclosure controls were deemed ineffective because of a material weakness associated with the prior restatement. Management described remediation plans but gave no assurance they would be effective.
  • The filing reported no pending legal proceedings and no material changes to previously disclosed risk factors. A business-combination marketing fee of 4% of IPO gross proceeds would be payable upon a completed transaction.

Important facts for investors to verify

  1. Confirm the issuer identity: this source is Petra Acquisition, Inc., despite the request metadata naming Revelation Biosciences, Inc.
  2. Check whether Petra completed a business combination before its stated deadline and the resulting redemption, liquidation or extension outcome.
  3. Review the prior restatement, warrant-liability valuation assumptions and progress remediating the material weakness.
  4. Assess usable funds outside the trust, accrued transaction expenses, potential insider financing and the terms and dilution effects of any business-combination financing.