OmniAb, Inc. (formerly Avista Public Acquisition Corp. II) — Q3 2022 Form 10-Q
Reporting period: Quarter ended September 30, 2022. This filing reports the pre-combination SPAC’s financial position and activity, not the operating results of Legacy OmniAb’s antibody discovery business. The business combination closed November 1, 2022; subsequent-period results should reflect Legacy OmniAb as the accounting acquirer.
Business context and key financial metrics
- Revenue and margins: No operating revenue or operations were reported; margin metrics are not meaningful. The company’s activity related to formation, its IPO and pursuing a business combination.
- Net loss: Q3 2022 net loss was $2.47 million, versus $0.17 million in Q3 2021. Nine-month 2022 net loss was $8.45 million; net loss attributable to ordinary shareholders was $8.68 million, including a $225,000 deemed dividend. The comparable 2021 inception-to-September period reported a $0.18 million net loss. Basic and diluted loss per share was $0.09 for Q3 and $0.29 for the nine months of 2022.
- Drivers: Nine-month formation and operating costs were $8.74 million; a $1.44 million Trust Account investment gain partly offset expenses, while a $1.15 million loss from changes in the fair value of forward purchase and backstop securities increased the loss. Q3 included $2.34 million of formation and operating costs, $1.09 million of Trust Account gains and a $1.21 million derivative fair-value loss.
- Cash flow: Net cash used in operating activities was $0.92 million for the first nine months of 2022, compared with $0.97 million from inception through September 2021. Financing provided $0.75 million in 2022, from a Sponsor working-capital loan; there were no 2022 investing cash flows.
- Liquidity and debt: At September 30, cash outside the Trust Account was $19,847; Trust Account investments were $237.19 million. Working capital deficit was $9.84 million. Current liabilities totaled $10.27 million, including a $750,000 non-interest-bearing convertible Sponsor note, and total liabilities were $14.29 million. The Sponsor note could be converted into warrants at the Sponsor’s option.
- Equity and other items: Shareholders’ deficit was $13.87 million. The $4.03 million deferred underwriting fee waiver by Credit Suisse was recorded as a benefit to accumulated deficit; the remaining deferred underwriting fee payable was $4.03 million. No off-balance-sheet arrangements were reported.
Material changes, transaction and outlook
- The company completed its business combination with Legacy OmniAb on November 1, 2022 through a Reverse Morris Trust transaction. It was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded for the transaction.
- After the combination, 21,713,864 public shares were redeemed for approximately $224 million, or about $10.32 per share. The Sponsor purchased $15 million of forward-purchase securities and $86.73 million of backstop securities to support the transaction and redemption level.
- Before closing, management said available operating cash was not expected to cover obligations through the SPAC’s February 12, 2023 deadline. Management concluded that the circumstances raised substantial doubt about the SPAC’s ability to continue as a going concern. This assessment applied to the pre-combination entity; this filing does not provide a post-combination liquidity forecast or operating guidance.
- Management cited potential effects from COVID-19, the Russia-Ukraine conflict and related sanctions, and debt and equity market conditions, but said their specific impact was not readily determinable.
- A material weakness in internal control over financial reporting relating to accounting for complex financial instruments remained unresolved at September 30. Disclosure controls and procedures were therefore deemed ineffective. Management described remediation plans but gave no assurance they would be effective.
- No material changes to the previously disclosed risk factors were reported. No legal proceedings were reported.
Important facts for investors to verify
- Review subsequent post-combination filings for OmniAb’s actual cash, debt, liquidity runway, operating results and use of transaction proceeds after redemptions.
- Check whether management remediated the complex-financial-instruments material weakness and whether controls were tested and found effective.
- Verify the final share count, dilution from warrants and equity awards, and conditions for price-based earnout shares.
- Assess the transaction’s tax treatment, transition arrangements with Ligand, and any related-party or other contingent obligations in subsequent disclosures.
- Distinguish the SPAC’s reported losses and cash flows in this 10-Q from the operating performance of the antibody discovery business.