Business context and reporting period
This is Avista Public Acquisition Corp. II’s unaudited Form 10-Q for the quarter ended June 30, 2022, filed August 11, 2022. Although the request identifies OmniAb, the filing reports the SPAC’s financials, not OmniAb’s operating results. Avista was a blank-check company seeking a business combination and reported no operating revenue or business operations.
Avista had agreed to combine with Ligand Pharmaceuticals’ OmniAb antibody-discovery business through a Reverse Morris Trust transaction. The proposed transaction included Ligand separating and distributing OmniAb shares to Ligand shareholders, followed by a merger with Avista. The filing cited an $850 million pre-money equity value for OmniAb.
Key financial metrics
| Metric | June 30, 2022 / Q2 2022 | Comparison |
|---|---|---|
| Revenue | No operating revenue | No operations to date |
| Net loss | $1.62 million for Q2; $5.99 million for six months | Q2 2021 loss was $2,185; inception through June 30, 2021 loss was $9,971 |
| Net loss attributable to ordinary shareholders | $6.21 million for six months, including a $225,000 deemed dividend | Prior-period comparison was $9,971 |
| Cash outside Trust Account | $159,194 | $189,971 at December 31, 2021 |
| Trust Account investments | $236.10 million | $235.75 million at December 31, 2021 |
| Operating cash flow | $(780,777) for the six months | $(5) from inception through June 30, 2021 |
| Debt and liquidity | $750,000 sponsor convertible working-capital note; $6.29 million working-capital deficit | Note balance was zero at December 31, 2021 |
Q2 formation and operating costs were $2.58 million, partly offset by $656,300 of income from a change in fair value of forward purchase and backstop securities and $297,047 of Trust Account investment gains. Six-month formation and operating costs were $6.40 million. No meaningful operating margin is reported because the company had no operating revenue. Total liabilities were $15.03 million, including an $8.05 million deferred underwriting fee payable. No off-balance-sheet arrangements were reported.
Material changes versus prior comparable period
- Q2 2022 net loss increased to $1.62 million from $2,185 in Q2 2021, primarily reflecting substantially higher formation and transaction-related costs.
- Cash outside the Trust Account declined by about $31,000 from year-end, while the company drew the full $750,000 available under its sponsor working-capital note.
- Trust investments rose by $348,332, recorded as investment gain and reflected in the redemption value of public shares.
- The amended forward purchase and backstop arrangements were recorded as a derivative liability; its June 30 fair value was $383,390, with fair-value changes recognized in earnings.
Outlook, risks and unusual items
- Management expected the OmniAb transaction to close in Q4 2022, subject to shareholder approval and customary conditions. The SPAC’s 18-month combination period ended February 12, 2023. Neither completion nor timing was assured.
- The sponsor agreed to purchase $15 million of forward-purchase securities and to provide up to $100 million of additional backstop financing if redemptions would otherwise leave less than $100 million of cash proceeds for OmniAb stockholders.
- Management stated that $159,194 of outside cash and the working-capital deficit raised substantial doubt about Avista’s ability to continue as a going concern. The financial statements included no adjustments for the outcome of this uncertainty.
- On July 25, 2022, the board decided not to allocate to third parties the remaining 50% of the deferred underwriting fee, or $4.025 million. The full $8.05 million fee remained disclosed as payable upon a completed business combination.
- COVID-19, Russia’s invasion of Ukraine and related sanctions, and debt and equity market conditions could adversely affect the company or its transaction search; the specific impact was not determinable.
- Disclosure controls were deemed ineffective due to a material weakness in accounting for complex financial instruments. Management described remediation plans but gave no assurance they would be effective. No material change in internal control was reported during the quarter.
Important facts for investors to verify
- Confirm transaction status, required approvals, closing conditions and any changes to the anticipated timing or $850 million pre-money valuation.
- Review redemption levels and whether the sponsor’s forward-purchase and backstop commitments provide sufficient cash at closing.
- Assess near-term liquidity, sponsor-note repayment or conversion terms, and the going-concern uncertainty before the combination period deadline.
- Check the final underwriting-fee treatment and other transaction costs, including the $4.025 million allocation decision.
- Monitor remediation of the material weakness and review the final transaction filings for pro forma financials, dilution, earnout terms and risks not quantified in this quarterly report.