Filing summary
Registrant and period: This is Consonance-HFW Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2021, not a Surrozen, Inc. quarterly filing. Consonance-HFW was a blank-check company seeking a business combination and had not begun operating activities. It reported no operating revenue.
Financial results and position
- Quarterly results: Operating and formation costs were $1.065 million. A $802,834 non-cash gain from the change in warrant fair value, $23,112 of trust-account interest and a $6,299 unrealized investment gain partly offset costs, leaving a net loss of $232,964. Non-redeemable-share loss per share was $0.07.
- Cash flow: Cash used in operating activities was $212,256. Cash outside the trust account fell to $774,931 from $987,187 at December 31, 2020.
- Liquidity and liabilities: Trust-account cash and marketable securities were $92.027 million, versus $91.998 million at year-end. Current assets were $1.409 million and current liabilities were $986,585. Total liabilities were $6.808 million, including $2.601 million of warrant liabilities and a $3.220 million deferred underwriting fee payable. The filing reports no long-term debt.
- Equity and redemption amounts: $81.628 million of Class A shares were classified as temporary equity subject to possible redemption. Shareholders’ equity was $5.000 million.
- Comparison: The supplied statements do not provide a prior-year comparable quarter for earnings or cash flow; balance-sheet comparisons are to December 31, 2020. Warrant liabilities declined from $3.404 million at year-end, producing the quarter’s $802,834 fair-value gain.
Business combination, outlook and risks
- On April 15, 2021, after quarter-end, Consonance-HFW signed a business combination agreement with Surrozen. The announced transaction contemplated a $200 million implied Surrozen equity value, a merger and Consonance-HFW redomiciling as a Delaware corporation. Completion remained subject to the agreement’s conditions; the filing gives no assurance it would close.
- Concurrent PIPE subscription agreements contemplated 12.02 million units at $10 each, or $120.2 million gross proceeds. Each unit included one share and one-third of a warrant. The filing describes the financing as agreed, not as proceeds already received.
- Management expected ongoing costs to identify and complete a business combination and said outside-trust funds were intended to cover search and transaction expenses. It believed additional funds would not be needed for operations, but cautioned that cost overruns or substantial shareholder redemptions could require additional financing.
- The company disclosed possible adverse effects from COVID-19, whose specific impact was not determinable, and the risk that negative interest rates could reduce trust assets and public shareholders’ redemption proceeds.
- Controls: Management concluded disclosure controls were not effective at a reasonable-assurance level, citing the restatement of warrants as liabilities rather than equity. It reported no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Confirm transaction status and final terms of the Surrozen merger, including required approvals, conditions and any changes to the announced $200 million valuation.
- Verify whether the $120.2 million PIPE closed, and compare final proceeds and terms with the agreements described here.
- Review redemption levels and cash available to the combined company after transaction costs, deferred underwriting fees and redemptions.
- Assess the effect of warrant accounting, potential dilution and the disclosed control deficiency.
- Note that this filing reports the SPAC’s pre-combination finances; it does not report Surrozen’s standalone operating results or provide Surrozen guidance.