Business Context and Reporting Period
This Form 8-K, dated March 7, 2017, reports on Zeta Acquisition Corp. II (the "Company"), a Delaware corporation. The filing details the entry into a definitive merger agreement with Aerpio Therapeutics, Inc. ("Aerpio"), a biopharmaceutical company focused on first-in-class treatments for ocular disease. Upon closing, the Company will acquire Aerpio's business and change its name to Aerpio Pharmaceuticals, Inc.
Key Financial Metrics and Transaction Terms
The filing does not provide specific revenue, profit, cash flow, or debt figures for either entity. Key transaction metrics include:
- Consideration: Approximately 18,000,000 shares of the Company's common stock will be issued to pre-merger Aerpio stockholders.
- Stock Options: All outstanding Aerpio stock options will be assumed and converted into options to purchase the Company's common stock.
- Capital Structure Changes:
- Post-merger, pre-merger Company stockholders will surrender 4,000,000 of their 5,000,000 shares for cancellation.
- Current Company stockholders will sell 1,000,000 shares to third parties.
- Authorized common stock will increase from 100,000,000 to 300,000,000 shares.
- Accounting Treatment: The transaction will be treated as a reverse acquisition (recapitalization), with Aerpio considered the accounting acquirer. Historical financial statements will reflect Aerpio's history.
Material Changes and Governance
Significant changes to the Company's governance and operations are contingent on the merger's completion:
- Management Resignations: Current directors and officers John Pappajohn and Matthew P. Kinley will resign.
- New Board and Officers: The new Board will consist of eight members, including Joseph Gardner (appointed President and CEO), James Murphy (Interim CFO), Kevin G. Peters (CSO), and Steve Pakola (CMO).
- Corporate Conversion: Aerpio will convert from a corporation to a Delaware limited liability company immediately following the merger closing.
- Equity Plans: A new 2017 Stock Option and Incentive Plan (up to 4,600,000 shares) and an Employee Stock Purchase Plan (up to 300,000 shares) have been approved by stockholders.
Outlook, Risks, and Contingencies
The transaction is subject to several material conditions and risks:
- Approval Requirements: Aerpio stockholders holding at least 60% of voting shares must approve the merger.
- Termination Date: The Merger Agreement will automatically terminate if the closing does not occur by March 24, 2017.
- Conditions Precedent: Closing is subject to customary conditions, including the absence of material adverse changes to either business.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from expectations due to known and unknown risks.
- Contingency: If the merger fails, the Company will continue its existing business of investigating potential acquisition targets.
Investor Verification Checklist
- Verify the status of the 60% Aerpio stockholder approval required for closing.
- Confirm the final closing date, noting the automatic termination deadline of March 24, 2017.
- Review the definitive Merger Agreement (Exhibit 2.1) for specific representations, warranties, and covenants.
- Monitor the filing of the Schedule 14C information statement regarding the name change and equity plans.
- Assess the impact of the reverse acquisition accounting treatment on future financial reporting.