Business context and reporting period
This is Avista Public Acquisition Corp. II’s unaudited Form 10-Q for the three months ended March 31, 2022, signed May 20, 2022. Despite the request metadata, the filing is for the SPAC, not OmniAb, Inc.; it does not report OmniAb’s operating results. Avista had no operations or revenue and was searching for a business combination.
On March 23, 2022, Avista agreed to combine with Ligand Pharmaceuticals’ OmniAb antibody-discovery business in a Reverse Morris Trust transaction. The proposed deal included a stated $850 million pre-money equity value for OmniAb and remained subject to closing conditions.
Financial position and results
- Revenue: None reported; Avista had not commenced operations.
- Net loss: $4.36 million for Q1 2022, comprising $3.82 million of formation and operating costs and a $591,310 loss from remeasurement of forward-purchase and backstop securities, partly offset by a $51,285 unrealized gain on Trust Account investments. The comparable inception-to-March 31, 2021 period recorded a $7,786 loss, but is not a full-quarter comparison.
- Cash flow: $255,342 used in operating activities and $500,000 provided by sponsor financing; cash outside the Trust Account rose to $434,629.
- Assets and liquidity: Total assets were $236.90 million, including $235.80 million in the Trust Account. Working capital deficit was $4.36 million.
- Liabilities: Total liabilities were $13.51 million, including an $8.05 million deferred underwriting fee payable and a $500,000 non-interest-bearing sponsor working-capital note. The note had a maximum available amount of $750,000 and may be convertible into warrants at the sponsor’s option.
- Equity and shares: Shareholders’ deficit was $12.36 million. All 23 million public Class A shares, carried at $235.75 million, were classified as subject to possible redemption; 5.75 million founder Class B shares were outstanding.
Changes, outlook and key risks
- Versus December 31, 2021, cash increased from $189,971 to $434,629, current liabilities rose from $438,211 to $5.46 million, and shareholders’ deficit widened from $7.55 million to $12.36 million. The new $1.04 million derivative liability reflects the amended forward-purchase and backstop agreement; its fair-value increase contributed $591,310 to the quarter’s loss.
- The amended agreement provides for a $15 million sponsor purchase of shares and warrants at closing, plus up to $100 million of additional sponsor purchases to backstop redemptions if needed to leave at least $100 million of Trust Account proceeds for OmniAb stockholders. These are transaction terms, not completed funding as of quarter-end.
- OmniAb holders and equity-award holders may receive earnout shares tied to post-transaction share-price thresholds of $12.50 and $15.00, subject to specified trading-day tests within five years. The sponsor also agreed to price-based vesting conditions on up to 1,916,667 founder shares.
- Avista had until February 12, 2023—18 months after its IPO—to complete a business combination. Management disclosed substantial doubt about its ability to continue as a going concern, citing limited outside cash, a working-capital deficit and continuing costs; the proposed transaction was its plan, with no assurance it would close on time. If no deal closes within the period, public shares are to be redeemed and warrants expire worthless.
- The company disclosed a material weakness in internal control over financial reporting relating to accounting for complex financial instruments; disclosure controls were therefore not effective as of March 31. Remediation was planned, but effectiveness was not assured.
- Other risks included uncertainty about COVID-19 effects, potential effects of proposed SEC SPAC rules, and possible Investment Company Act consequences if the transaction did not close within relevant timeframes. No legal proceedings or off-balance-sheet arrangements were reported.
Investor facts to verify
- Whether the proposed OmniAb transaction closed, its final terms and the resulting ownership, dilution and cash available after redemptions.
- Whether the sponsor’s forward-purchase and redemption-backstop commitments were funded and on what final terms.
- Avista’s remaining liquidity, sponsor-note balance and ability to meet costs through the business-combination deadline.
- Progress in remediating the complex-financial-instruments material weakness.
- The final separation, tax treatment, earnout conditions and treatment of Ligand equity awards in the completed transaction.