ProKidney Corp. (formerly Social Capital Suvretta Holdings Corp. III) — Q2 2022 Form 10-Q
Reporting period: Quarter ended June 30, 2022; filed August 11, 2022. These interim statements principally report the pre-combination SPAC’s activity, not ProKidney LP’s operating business. The business combination closed on July 11, 2022, after the reporting date.
Financial results and position
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | None; the company said it did not expect operating revenue before completing a business combination. | |
| Operating and formation costs | $2.61 million | $6.61 million |
| Trust-account interest income | $337,595 | $362,771 |
| Net loss | $2.27 million | $6.25 million |
| Basic and diluted loss per share | $0.07 for each class | $0.20 for each class |
- Cash and liquidity: Cash was $107,546 at June 30, down from $440,488 at December 31, 2021. Working capital deficit was $7.30 million. The $250.37 million trust-account balance was primarily U.S. Treasury investments and was designated for the business combination, rather than ordinary operating liquidity.
- Assets and liabilities: Total assets were $251.00 million. Total liabilities were $15.63 million, including $7.60 million of accrued expenses, a $250,000 non-interest-bearing related-party note, and a $7.70 million deferred underwriting fee. The note and deferred fee were paid at the July 11 closing. No long-term debt or lease obligations were reported.
- Cash flow: Six-month cash used in operating activities was $582,942; financing activities provided $250,000, and cash declined by $332,942. Changes in operating assets and liabilities substantially offset the period’s net loss.
- Margins: Not meaningful because the pre-combination company reported no revenue.
Changes versus the prior comparable period
Q2 2022 net loss of $2.27 million compared with $143 for Q2 2021; first-half 2022 net loss of $6.25 million compared with $5,325 from inception through June 30, 2021. The prior-year periods covered only the SPAC’s early formation, so the comparison is not indicative of operating-business trends. First-half 2022 costs included $5.34 million associated with the business combination. Trust interest was $362,771 in first-half 2022 versus none in the comparable 2021 period.
Business combination, outlook, and risks
- On July 11, 2022, the company completed its combination with ProKidney LP and changed its name to ProKidney Corp. Holders redeemed 22,829,769 public shares for approximately $228.7 million, leaving about $21.7 million in the trust immediately before closing.
- The PIPE placement comprised 52.48 million Class A shares and 5.0 million common units at $10 each, for stated aggregate proceeds of $574.8 million. The filing says trust and PIPE proceeds, net of redemptions and transaction expenses, provided sufficient capital for operations; it gives no detailed post-closing forecast or revenue guidance.
- At June 30, accrued expenses were $7.60 million, including substantial legal, printing, due-diligence, and consulting costs. The company also disclosed vendor fees contingent on a completed combination and paid the deferred underwriting commission at closing.
- Management said the COVID-19 pandemic could adversely affect the business, financial position, results, or target search, but the specific impact was not determinable. It reported no material changes to previously disclosed risk factors.
- Shareholder demand letters alleged deficiencies or omissions in the combination proxy disclosure; the company said it considered the allegations meritless.
- Management concluded disclosure controls were ineffective due to a material weakness in accounting for complex financial instruments. It described expanded review procedures and plans for further remediation.
Important facts for investors to verify
- Review subsequent post-combination filings for ProKidney’s actual operating results, cash balance, cash burn, and liquidity runway; this 10-Q does not provide those operating-company results.
- Confirm net cash available after redemptions, PIPE proceeds, transaction expenses, and other closing payments, and how proceeds are being used.
- Assess the status and effectiveness of remediation for the disclosed material weakness in financial reporting controls.
- Monitor the shareholder disclosure demands and any related legal developments.
- Check post-closing capitalization and dilution. As of August 11, 2022, the cover reported 61,540,231 Class A and 170,723,961 Class B ordinary shares issued and outstanding.