Business context and reporting period
Important entity distinction: This is Avista Public Acquisition Corp. II’s 2021 Form 10-K, not an operating-company 10-K for OmniAb, Inc. Avista was a shell SPAC with no operations or operating revenue. The financial period runs from its February 5, 2021 inception through December 31, 2021; there is no comparable prior-year period.
On March 23, 2022, after year-end, Avista agreed to combine with Ligand Pharmaceuticals’ OmniAb antibody-discovery business in a Reverse Morris Trust transaction. The transaction and its terms are subsequent developments, not results included in the 2021 financial statements.
Financial performance, cash flow and liquidity
| Metric | Period or date | Reported amount |
|---|---|---|
| Operating revenue | Inception through Dec. 31, 2021 | None |
| Formation and operating costs / net loss | Inception through Dec. 31, 2021 | $516,442 / $(516,442) |
| Basic and diluted loss per share | Inception through Dec. 31, 2021 | $(0.03) for both Class A and Class B |
| Cash outside Trust Account | Dec. 31, 2021 | $189,971 |
| Cash in Trust Account | Dec. 31, 2021 | $235.75 million |
| Total assets / total liabilities | Dec. 31, 2021 | $236.68 million / $8.49 million |
| Working capital | Dec. 31, 2021 | $496,302 surplus |
| Net cash used in operating activities | Inception through Dec. 31, 2021 | $1.14 million |
| Net cash used in investing activities | Inception through Dec. 31, 2021 | $235.75 million |
| Net cash provided by financing activities | Inception through Dec. 31, 2021 | $237.08 million |
The Trust Account held $10.25 per public share at year-end. The balance sheet included an $8.05 million deferred underwriting fee payable, due only if a business combination closes. The filing reports no operating debt at year-end. Margins are not meaningful because the SPAC had no operating revenue.
Management said cash outside the Trust Account was not expected to fund operations for the next 12 months without a business combination. The auditor’s report includes a going-concern paragraph, citing substantial doubt about the company’s ability to continue as a going concern.
Material changes, transaction terms and outlook
- Avista raised $230 million in its August 2021 IPO and received $12.35 million from the sponsor’s private placement warrants. It placed $235.75 million in trust and reported $189,971 of cash outside trust at year-end.
- The March 2022 proposed OmniAb transaction references an $850 million pre-money equity value. Ligand is to separate and distribute OmniAb shares to Ligand stockholders, then OmniAb is to merge with Avista’s subsidiary. Ligand is to contribute $15 million in capital to OmniAb, less specified expenses.
- Up to 15 million earnout shares are tied to post-transaction share-price tests: half at a $12.50 VWAP threshold and half at $15, each requiring 20 trading days within a consecutive 30-trading-day period and occurring within five years after closing.
- Under the amended forward purchase agreement, the sponsor is to purchase shares and warrants for $15 million. It also agreed to provide up to $100 million of additional purchases to backstop redemptions if specified cash proceeds would otherwise be below $100 million. Closing remains subject to conditions, including shareholder approval, regulatory clearances, listing approval and completion of the separation and distribution.
- No operating guidance or forecast for OmniAb is provided in this 10-K. Avista’s stated plan was to complete a business combination within 18 months of its August 12, 2021 IPO closing; if it failed, public shares would be redeemed from trust, subject to claims and applicable law, and warrants would expire worthless.
Risks, contingencies and unusual items
- Financial reporting control weakness: Management reported ineffective disclosure controls at December 31, 2021 and a material weakness involving complex financial instruments and classification of redeemable Class A shares. Earlier interim financial statements were restated; remediation was ongoing, with no assurance it would be effective.
- Funding and completion risk: Limited cash outside trust, redemptions, availability of sponsor funding and transaction conditions could affect the ability to complete a combination. The filing says there is no assurance the proposed OmniAb transaction will close.
- Trust-account claims: Creditor claims, insolvency proceedings, or negative investment returns could reduce amounts available to public shareholders. The sponsor’s indemnity has exceptions, and its ability to pay was not verified.
- Conflicts and dilution: The sponsor and insiders have voting, redemption-waiver and economic interests; Avista personnel also have obligations to other entities. Future share and warrant issuance could dilute existing holders.
- Other uncertainties: The filing identifies COVID-19 and market disruption, including geopolitical events, as potential risks to deal execution and financing. It also discusses potential post-combination impairments, healthcare-sector risks, and the possibility that redemptions or financing needs alter transaction economics.
Most important facts for investors to verify
- Confirm the filing entity and period: the reported financials are Avista SPAC financials, not OmniAb operating results.
- Review the merger agreement and subsequent transaction filings for final consideration, capitalization, redemption levels, closing conditions and any amendments to the stated $850 million reference value.
- Verify the sponsor’s forward-purchase and redemption-backstop obligations, including their conditions and the cash ultimately available at closing.
- Assess the status and remediation of the material weakness, and review any later restatements or auditor disclosures.
- Check the latest cash outside trust, working-capital funding, related-party loans and any effect of creditor claims on trust proceeds.