Business context and reporting period
Important entity discrepancy: The supplied filing is Avista Healthcare Public Acquisition Corp.’s Form 10-Q for the quarter ended September 30, 2017—not an Organogenesis Holdings Inc. filing. Avista was a blank-check company seeking a business combination, focused on healthcare. It reported no operating business or operating revenue during the period.
On August 21, 2017, Avista entered into an agreement for a proposed business combination involving Envigo International Holdings, Inc. The transaction was pending as of this filing.
Financial results and liquidity
| Metric | Three months ended September 30, 2017 | Nine months ended September 30, 2017 |
|---|---|---|
| Operating revenue | None reported | None reported |
| Formation and operating costs | $2.85 million | $3.29 million |
| Trust-account interest income | $736,128 | $1.70 million |
| Net loss | $2.12 million | $1.60 million |
| Basic and diluted loss per share | $0.30 | $0.35 |
As of September 30, 2017, cash outside the trust was $117,728; trust assets were $311.70 million, including accrued interest. Current liabilities were $2.70 million and working capital deficit was $2.34 million. Deferred underwriting commission was $10.85 million, payable if a business combination closes. The company reported no long-term debt; a sponsor note allowing up to $300,000 in borrowing was undrawn. Operating cash used during the first nine months was $494,762. Profit margins are not meaningful because Avista had no operating revenue.
Changes versus prior comparable periods
Third-quarter net loss increased from $14,492 in 2016 to $2.12 million in 2017, primarily reflecting higher transaction-related and public-company costs, partly offset by trust interest income. For the first nine months, net loss increased from $30,542 to $1.60 million; the 2017 period included $1.70 million of interest income and $3.29 million of operating costs, while the 2016 comparison had no interest income. Cash declined from $1.04 million at December 31, 2016 to $117,728 at September 30, 2017.
Outlook, risks, and unusual items
- Avista had until October 14, 2018 to complete a business combination; otherwise it was required to redeem public shares and liquidate, subject to applicable law. Public shareholders could redeem shares in connection with a transaction, subject to the filing’s terms.
- Management believed available liquidity, deferred vendor and administrative payments, and potential sponsor financing would support operations through the deadline. It cautioned that higher-than-expected acquisition costs or significant redemptions could require additional financing.
- The trust was invested in short-term U.S. Treasury bills. Management reported no material interest-rate exposure, and the filing reported no off-balance-sheet arrangements or legal proceedings.
- The sponsor’s trust-account indemnity may not be fully collectible; the filing states that Avista had not verified the sponsor’s ability to meet it. Trust funds may also be exposed to third-party claims.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting. It reported no material changes to the risk factors in its 2016 Form 10-K.
Important facts for investors to verify
- Confirm the intended issuer: this filing is for Avista Healthcare Public Acquisition Corp., not Organogenesis Holdings Inc.
- Verify the status, final terms, financing, and completion or termination of the proposed Envigo transaction; this 10-Q only describes it as pending.
- Review redemption levels and available cash after any redemptions, transaction expenses, and the $10.85 million deferred underwriting commission.
- Assess whether outside-trust liquidity and any sponsor support were sufficient, and whether deferred administrative fees and vendor invoices became payable.
- Check subsequent filings for developments after September 30, 2017; the filing provides no company operating revenue or target-company financial results.