☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
September 30, 2022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Johannes Vermeerplein 9
1071 DV Amsterdam, Netherlands
Not Applicable
(Former name or former address, if changed since last report)
+41 77 979 21 09
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, each consisting of one Class A Ordinary Share and one-third of one Redeemable Warrant | EBACU | The NASDAQ Stock Market LLC | ||
Class A Ordinary Shares, par value $0.0001 per share | EBAC | The NASDAQ Stock Market LLC | ||
Warrants, each whole warrant exercisable for one Class A Ordinary Share for $11.50 per share | EBACW | The NASDAQ Stock Market LLC |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
EUROPEAN BIOTECH ACQUISITION CORP.
Quarterly Report on Form 10-Q
For the period from January 8, 2021 (Inception) Through March 31, 2021The Three Months Ended September 30, 2022
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
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Item 4. | Controls and Procedures | 26 | ||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
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Statements Assets Current assets: Cash Prepaid expenses Total current assets Cash held in Trust Account Total Assets Liabilities and Shareholders’ Equity Current liabilities: Accounts payable Accrued expenses Due to related parties Total current liabilities Derivative warrant liabilities Deferred underwriting commissions Total liabilities Commitments and Contingencies Class A ordinary shares, $0.0001 par value; 10,763,552 shares subject to possible redemption at $10.00 per share Shareholders’ Equity: Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding Class A ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 1,676,448 shares issued and outstanding (excluding 10,763,552 shares subject to possible redemption) Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized; 3,450,000 shares issued and outstanding (1) Additional paid-in capital Accumulated deficit Total shareholders’ equity Total Liabilities and Shareholders’ Equity SHEETSStatements.SHEETMARCH 31, 2021 $ 1,606,051 254,790 1,860,841 120,360,000 $ 122,220,841 $ 305,295 154,289 360,000 819,584 4,565,730 4,200,000 9,585,314 107,635,520 — 168 345 4,744,654 254,840 5,000,007 $ 122,220,841 (1)This number includes up to 450,000 Class B ordinary shares subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters.
2022
2021 $ 272,629 $ 868,280 111,900 48,190 384,529 916,470 128,317,115 127,556,289 $ 212,824 $ 57,906 1,139,742 447,295 1,352,566 505,201 440,330 2,641,980 271,606 — 4,464,174 4,464,174 6,528,676 7,611,355 128,217,115 127,547,840 — — 46 46 319 319 — — (6,044,512 ) (6,686,801 ) (6,044,147 ) (6,686,436 )
For The Period From January 8, 2021 (inception) through March 31, 2021
General and administrative expenses | $ | 89,850 | ||
General and administrative expenses - related party | 20,000 | |||
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Loss from operations | $ | (109,850 | ) | |
Other income (expense) | ||||
Change in fair value of derivative warrant liabilities | 663,470 | |||
Offering costs associated with derivative warrant liabilities | (298,780 | ) | ||
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Net income | $ | 254,840 | ||
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Weighted average shares outstanding of Class A common stock subject to possible redemption , basic and diluted | 11,193,039 | |||
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Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | 0.00 | ||
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Weighted average shares outstanding of non-redeemable common stock, basic and diluted | 3,210,331 | |||
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Basic and diluted net income per share, non-redeemable common stock | $ | 0.08 | ||
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For The Three Months Ended September 30, | For The Nine Months Ended September 30, 2022 | For The Period From January 8, 2021 (Inception) Through September 30, 2021 | ||||||||||||||
2022 | 2021 | |||||||||||||||
General and administrative expenses | $ | 955,277 | $ | 193,336 | $ | 1,470,911 | $ | 417,997 | ||||||||
General and administrative expenses - related party | 60,000 | 60,000 | 180,000 | 140,000 | ||||||||||||
Loss from operations | (1,015,277 | ) | (253,336 | ) | (1,650,911 | ) | (557,997 | ) | ||||||||
Other income (expenses): | ||||||||||||||||
Change in fair value of derivative warrant liabilities | 39,520 | 1,453,090 | 2,201,650 | 2,796,850 | ||||||||||||
Income from investments held in Trust Account | 575,736 | 1,640 | 760,825 | 5,751 | ||||||||||||
Offering costs associated with derivative warrant liabilities | — | — | — | (314,846 | ) | |||||||||||
Net income (loss) | $ | (400,021 | ) | $ | 1,201,394 | $ | 1,311,564 | $ | 1,929,758 | |||||||
Weighted average shares outstanding of Class A ordinary shares subject to possible redemption, basic and diluted | 12,754,784 | 13,209,880 | 13,209,880 | 10,027,078 | ||||||||||||
Basic and diluted net income (loss) per share, Class A ordinary shares subject to possible redemption | $ | (0.02 | ) | $ | 0.07 | $ | 0.08 | $ | 0.15 | |||||||
Weighted average shares outstanding of non-redeemable Class A ordinary shares and Class B ordinary shares, basic | 3,643,792 | 3,188,696 | 3,188,696 | 3,3,111,301 | ||||||||||||
Basic net income (loss) per share, non-redeemable Class A ordinary shares and Class B ordinary shares | $ | (0.02 | ) | $ | 0.07 | $ | 0.08 | $ | 0.15 | |||||||
Weighted average shares outstanding of non-redeemable Class A ordinary shares and Class B ordinary shares, diluted | 3,643,792 | 3,188,696 | 3,188,696 | 3,3,188,696 | ||||||||||||
Diluted net income (loss) per share, non-redeemable Class A ordinary shares and Class B ordinary shares | $ | (0.02 | ) | $ | 0.07 | $ | 0.08 | $ | 0.15 | |||||||
For The Period From JanuaryDEFICIT
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - December 31, 2021 | 455,096 | $ | 46 | 3,188,696 | $ | 319 | $ | — | $ | (6,686,801 | ) | $ | (6,686,436 | ) | ||||||||||||||
Net income | — | — | — | — | — | 1,510,900 | 1,510,900 | |||||||||||||||||||||
Balance - March 31, 2022 | 455,096 | 46 | 3,188,696 | 319 | — | (5,175,901 | ) | (5,175,536 | ) | |||||||||||||||||||
Subsequent remeasurement of Class A ordinary shares subject to possible redemption amount | — | — | — | — | — | (93,539 | ) | (93,539 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 200,685 | 200,685 | |||||||||||||||||||||
Balance - June 30, 2022 | 455,096 | 46 | 3,188,696 | 319 | — | (5,068,755 | ) | (5,068,390 | ) | |||||||||||||||||||
Subsequent remeasurement of Class A ordinary shares subject to possible redemption amount | — | — | — | — | — | (575,736 | ) | (575,736 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (400,021 | ) | (400,021 | ) | |||||||||||||||||||
Balance - September 30, 2022 | 455,096 | $ | 46 | 3,188,696 | $ | 319 | $ | — | $ | (6,044,512 | ) | $ | (6,044,147 | ) | ||||||||||||||
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance - January 8, 2021 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B ordinary shares to | — | — | 3,450,000 | 345 | 24,655 | — | 25,000 | |||||||||||||||||||||
Sale of units in initial public offering, less allocation to derivative warrant liabilities, gross | 12,000,000 | 1,200 | — | — | 114,958,800 | — | 114,960,000 | |||||||||||||||||||||
Sale of units in private placement, less allocation to derivative warrant liabilities, gross | 440,000 | 44 | — | — | 4,210,756 | — | 4,210,800 | |||||||||||||||||||||
Offering costs | — | — | — | — | (6,815,113 | ) | — | (6,815,113 | ) | |||||||||||||||||||
Shares subject to possible redemption | (10,763,552 | ) | (1,076 | ) | — | — | (107,634,444 | ) | — | (107,635,520 | ) | |||||||||||||||||
Net income | — | — | — | — | — | 254,840 | 254,840 | |||||||||||||||||||||
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Balance - March 31, 2021 | 1,676,448 | $ | 168 | 3,450,000 | $ | 345 | $ | 4,744,654 | $ | 254,840 | $ | 5,000,007 | ||||||||||||||||
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(UNAUDITED)
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - January 8, 2021 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B ordinary shares to Sponsor | — | — | 3,450,000 | 345 | 24,655 | — | 25,000 | |||||||||||||||||||||
Sale of units in private placement, less allocation to derivative warrant liabilities | 440,000 | 44 | — | — | 4,210,756 | — | 4,210,800 | |||||||||||||||||||||
Remeasurement of Class A ordinary shares subject to possible redemption amount | — | — | — | — | (4,235,411 | ) | (7,619,702 | ) | (11,855,113 | ) | ||||||||||||||||||
Net income | — | — | — | — | — | 254,840 | 254,840 | |||||||||||||||||||||
Balance - March 31, 2021 | 440,000 | 44 | 3,450,000 | 345 | — | (7,364,862 | ) | (7,364,473 | ) | |||||||||||||||||||
Forfeiture of Class B ordinary shares | — | — | (261,304 | ) | (26 | ) | 26 | — | — | |||||||||||||||||||
Sale of units in private placement, less allocation to derivative warrant liabilities, gross (over-allotment) | 15,096 | 2 | — | — | 145,119 | — | 145,121 | |||||||||||||||||||||
Remeasurement of Class A ordinary shares subject to possible redemption amount (over-allotment) | — | — | — | — | (145,145 | ) | (545,770 | ) | (690,915 | ) | ||||||||||||||||||
Net income | — | — | — | — | — | 473,524 | 473,524 | |||||||||||||||||||||
Balance - June 30, 2021 | 455,096 | 46 | 3,188,696 | 319 | — | (7,437,108 | ) | (7,436,743 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 1,201,394 | 1,201,394 | |||||||||||||||||||||
Balance - September 30, 2021 | 455,096 | $ | 46 | 3,188,696 | $ | 319 | $ | — | $ | (6,235,714 | ) | $ | (6,235,349 | ) | ||||||||||||||
For The Period From January 8, 2021 (inception) through March 31, 2021
Cash Flows from Operating Activities: | ||||
Net income | $ | 254,840 | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Offering costs associated with derivative warrant liabilities | 298,780 | |||
Change in fair value of derivative liabilities | (663,470 | ) | ||
General and administrative expenses paid by Sponsor in exchange for issuance of Class B ordinary shares | 25,000 | |||
Changes in operating assets and liabilities: | ||||
Prepaid expenses | (254,790 | ) | ||
Accounts payable | 305,296 | |||
Accrued expenses | 19,289 | |||
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Net cash used in operating activities | (15,055 | ) | ||
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Cash Flows from Investing Activities: | ||||
Cash deposited in Trust Account | (120,000,000 | ) | ||
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Net cash used in investing activities | (120,000,000 | ) | ||
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Cash Flows from Financing Activities: | ||||
Proceeds received from initial public offering, gross | 120,000,000 | |||
Proceeds received from private placement | 4,400,000 | |||
Repayment of note payable to related parties | (37,806 | ) | ||
Offering costs paid | (2,741,088 | ) | ||
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Net cash provided by financing activities | 121,621,106 | |||
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Net increase in cash | 1,606,051 | |||
Cash - beginning of the period | — | |||
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Cash - ending of the period | $ | 1,606,051 | ||
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Supplemental disclosure of noncash investing and financing activities: | ||||
Offering costs included in accrued expenses | $ | 135,000 | ||
Offering costs paid by Sponsor under promissory note | $ | 37,806 | ||
Deferred underwriting commissions | $ | 4,200,000 | ||
Loan proceeds desposited in Trust Account | $ | 360,000 | ||
Initial value of Class A ordinary shares subject to possible redemption | $ | 112,260,760 | ||
Change in value of Class A common shares subject to possible redemption | $ | (4,625,240 | ) |
For The Nine Months Ended September 30, 2022 | For The Period From January 8, 2021 (Inception) Through September 30, 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 1,311,564 | $ | 1,929,758 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Offering costs associated with derivative warrant liabilities | — | 314,846 | ||||||
Change in fair value of derivative warrant liabilities | (2,201,650 | ) | (2,796,850 | ) | ||||
Income from investments held in the Trust Account | (760,825 | ) | (5,751 | ) | ||||
General and administrative expenses paid by Sponsor in exchange for issuance of Class B ordinary shares | — | 25,000 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | (63,711 | ) | (111,966 | ) | ||||
Accounts payable | 154,918 | 152,000 | ||||||
Accrued expenses | 692,447 | 11,998 | ||||||
Deferred legal fees | 271,606 | — | ||||||
Net cash used in operating activities | (595,651 | ) | (480,965 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Cash deposited in Trust Account | — | (127,547,843 | ) | |||||
Net cash used in investing activities | — | (127,547,843 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds received from initial public offering, gross | — | 127,547,840 | ||||||
Proceeds received from private placement, gross | — | 4,550,960 | ||||||
Repayment of note payable to related parties | — | (37,806 | ) | |||||
Offering costs paid | — | (2,956,040 | ) | |||||
Net cash provided by financing activities | — | 129,104,954 | ||||||
Net increase (decrease) in cash | (595,651 | ) | 1,076,146 | |||||
Cash - beginning of the period | 868,280 | — | ||||||
Cash - end of the period | $ | 272,629 | $ | 1,076,146 | ||||
Supplemental disclosure of noncash activities: | ||||||||
Offering costs included in accrued expenses | $ | — | $ | 71,003 | ||||
Offering costs paid by Sponsor under promissory note | $ | — | $ | 37,806 | ||||
Deferred underwriting commissions | $ | — | $ | 4,464,174 | ||||
Remeasurement of Class A ordinary shares subject to possible redemption amount | $ | 669,275 | $ | 12,546,028 |
$7.5 million, and the allotment option for the remaining 1,045,216 Over-Allotment Units expired.
parties, and placed the net proceeds of $7.4 million in the Trust Account.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
pay income taxes). The
Notwithstanding the foregoing, if the Company seeks shareholder approval of its Business Combination and does not conduct redemptions in connection with its Business Combination pursuant to the tender offer rules, the Amended and Restated Memorandum and Articles of Association will provide that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
does not complete a Business Combination within the Combination Period, and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account.
Risks
Going Concern
Prior toworking capital deficit of approximately $968,000.
continue as a going concern.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
2022, or for any future interim period.
In April 2021, the Company identified a misstatement in its accounting treatment for warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants (collectively, the “Warrants”) asaudited financial statements presented in its audited balance sheet as of March 18, 2021 included in its Current Report onthat Form8-K, filed March 24, 2021. The Warrants were reflected as a component of equity as opposed to liabilities on the balance sheet. Pursuant to FASB ASC Topic 250, Accounting Changes and Error Corrections, and Staff Accounting Bulletin 99, “Materiality”) (“SAB 99”) issued by the SEC, the Company determined the impact of the error was immaterial. The following balance sheet items were impacted from the error correction as of March 9, 2021: an increase of $5.2 million in warrant liabilities; a decrease of $5.2 million in the amount of Class A ordinary shares subject to redemption; an increase of $298,780 in additional paid-in capital; and an increase of $298,780 in accumulated deficit.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Cash Held in Trust Account
As of March 31, 2021, the Company had $120.4 million in cash held in the Trust Account.
pay taxes.
sheets.
The 4,000,0004,251,595 warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the 146,667151,699 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC
The Company classifies deferred underwriting commissions as
sheets.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company’s statement of operations includes a presentation of income (loss) per ordinary share forwhich are referred to as Class A ordinary shares subject to possible redemption in a manner similar to the two-class method of income (loss) per ordinary share. Net income (loss) per ordinary share, basic and diluted, for
for the period. Net income (loss) per ordinarycommon share basic and diluted, for non-redeemable ordinary shares is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to ordinary shares subject to possible redemption, by the weighted average number of non-redeemableordinary shares outstanding for the respective period.
Non-redeemable ordinary shares include Founder Shares
diluted calculation for the applicable periods.
For The Period From January 8, 2021 (inception) through March 31, 2021 | ||||
Class A Common stock subject to possible redemption | ||||
Numerator: Earnings allocable to Common stock subject to possible redemption | ||||
Income from cash held in Trust Account | $ | — | ||
Less: Company’s portion available to be withdrawn to pay taxes | — | |||
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Net income attributable | $ | — | ||
Denominator: Weighted average Class A common stock subject to possible redemption | ||||
Basic and diluted weighted average shares outstanding | 11,193,039 | |||
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Basic and diluted net income per share | $ | — | ||
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Non-Redeemable Common Stock | ||||
Numerator: Net Income minus Net Earnings | ||||
Net income | $ | 254,840 | ||
Net income allocable to Class A common stock subject to possible redemption | — | |||
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Non-redeemable net income | $ | 254,840 | ||
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Denominator: weighted average Non-redeemable common stock | ||||
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | 3,210,331 | |||
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Basic and diluted net income per share, Non-redeemable common stock | $ | 0.08 | ||
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Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoptionfor each class of the ASU did not impact the Company’s financial position, resultsordinary shares:
For The Three Months Ended September 30, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Class A | Class A non-redeemable and Class B | Class A | Class A non-redeemable and Class B | |||||||||||||
Basic and diluted net income (loss) per ordinary share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income (loss), basic | $ | (311,135 | ) | $ | (88,885 | ) | $ | 967,783 | $ | 233,611 | ||||||
Allocation of net income (loss), diluted | $ | (311,135 | ) | $ | (88,885 | ) | $ | 967,783 | $ | 233,611 | ||||||
Denominator: | ||||||||||||||||
Basic weighted average ordinary shares outstanding | 12,754,784 | 3,643,792 | 13,209,880 | 3,188,696 | ||||||||||||
Diluted weighted average ordinary shares outstanding | 12,754,784 | 3,643,792 | 13,209,880 | 3,188,696 | ||||||||||||
Basic net income (loss) per ordinary share | $ | (0.02 | ) | $ | (0.02 | ) | $ | 0.07 | $ | 0.07 | ||||||
Diluted net income (loss) per ordinary share | $ | (0.02 | ) | $ | (0.02 | ) | $ | 0.07 | $ | 0.07 | ||||||
For The Nine Months Ended September 30, 2022 | For The Period From January 8, 2021 (Inception) Through September 30, 2021 | |||||||||||||||
Class A | Class A non-redeemable and Class B | Class A | Class A non-redeemable and Class B | |||||||||||||
Basic and diluted net income per ordinary share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income, basic | $ | 1,156,531 | $ | 255,0 | $ | 1,472,772 | $ | 456,986 | ||||||||
Allocation of net income, diluted | $ | 1,156,531 | $ | 255,0 | $ | 1,464,147 | $ | 465,611 | ||||||||
Denominator: | ||||||||||||||||
Basic weighted average ordinary shares outstanding | 13,209,880 | 3,188,696 | 10,027,078 | 3,111,301 | ||||||||||||
Diluted weighted average ordinary shares outstanding | 13,209,880 | 3,188,696 | 10,027,078 | 3,188,696 | ||||||||||||
Basic net income per ordinary share | $ | 0.08 | $ | 0.08 | $ | 0.15 | $ | 0.15 | ||||||||
Diluted net income per ordinary share | $ | 0.08 | $ | 0.08 | $ | 0.15 | $ | 0.15 | ||||||||
over-allotments. On May 3, 2021, the Company issued 754,784 Over-Allotment Units resulting in total gross proceeds of approximately $7.5 million, and the allotment option for the remaining 1,045,216 Over-Allotment units expired.
On May 3, 2021, the Company issued 754,784 Over-Allotment Units resulting in the forfeiture of 261,304 Class B ordinary shares during the three months ended June 30, 2021.
The Private Placement Units (including the Private Placement Shares, the Private Placement Warrants (as defined below) and Class A ordinary shares issuable upon exercise of such warrants) will not be transferable or salable until 30 days after the completion of the initial Business Combination.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Units until 30 days after the completion of the initial Business Combination.
Subsequent to the repayment, the facility was no longer available to the Company.
During the nine months ended September 30, 2022 and the period from January 8, 2021 (inception) through June 30, 2021, the Company incurred approximately $180,000 and $140,000 of such fees, which are recognized in general and administrative expenses-related party, in the accompanying condensed statements of operations, respectively. As of September 30, 2022 and December 31, 2021, there was $186,000 and $0 of such fees in accounts payable on the condensed balance sheets, respectively.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
If the over-allotment option is exercised in full,
occurrence of future events. The Company is authorized to issue 200,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holder of the Company’s Class A ordinary shares are entitled to one vote for each share. As of September 30, 2022 and December 31, 2021, there were 12,754,784 Class A ordinary shares subject to possible redemption.
Gross proceeds from Initial Public Offering | $ | 127,547,840 | ||
Less: | ||||
Fair value of Public Warrants at issuance | (5,331,850 | ) | ||
Offering costs allocated to Class A ordinary shares subject to possible redemption | (7,214,179 | ) | ||
Plus: | ||||
Remeasurement of Class A ordinary shares subject to possible redemption amount | 12,546,029 | |||
Class A ordinary shares subject to possible redemption, December 31, 2021 | 127,547,840 | |||
Subsequent remeasurement of Class A ordinary shares subject to possible redemption amount | 93,539 | |||
Class A ordinary shares subject to possible redemption, June 30, 2022 | $ | 127,641,379 | ||
Subsequent remeasurement of Class A ordinary shares subject to possible redemption amount | 575,736 | |||
Class A ordinary shares subject to possible redemption, September 30, 2022 | $ | 128,217,115 | ||
Deficit
redemption and are classified as temporary equity (see Note 6).
Ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Except as described below, holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders except as required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-convertedas converted basis, 20% of the sum of (i) the total number of ordinary shares issued and outstanding (excluding the Private Placement Shares underlying the Private Placement Units) upon completion of the Initial Public Offering, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities (as defined herein) or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Company’s Sponsor, its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than
Public Warrants may only be exercised for a whole number of shares. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The Company agreed that as soon as practicable, but in no event later than 20 business days after the closing of the initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of the initial Business Combination, and to maintain the effectiveness of such
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
registration statement and a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elect, the Company will not be required to file or maintain in effect a registration statement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th60th day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
$10.00.
|
Quoted Prices in Active | Significant Other | Significant Other | ||||||||||
Markets | Observable Inputs | Unobservable Inputs | ||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | |||||||||
Liabilities: | ||||||||||||
Derivative warrant liabilities - Public warrants | $ | — | $ | — | $ | 4,400,000 | ||||||
Derivative warrant liabilities - Private placement warrants | $ | — | $ | — | $ | 165,730 |
September 30, 2022 | ||||||||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account - Money Market Funds | $ | 128,317,115 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative warrant liabilities - Public warrants | $ | — | $ | 425,160 | $ | — | ||||||
Derivative warrant liabilities - Private placement warrants | $ | — | $ | 15,170 | $ | — | ||||||
December 31, 2021 | ||||||||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account - Money Market Funds | $ | 127,556,289 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative warrant liabilities - Public warrants | $ | 2,550,960 | $ | — | $ | — | ||||||
Derivative warrant liabilities - Private placement warrants | $ | — | $ | 91,020 | $ | — |
The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially and subsequently measured at fair value using a Monte Carlo simulation model. The estimated fair value of the Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement in May 2021, when the Public Warrants were separately listed and traded in an active market and subsequently transferred to a Level 2 in September 2022 due to low trading volume. The estimated fair value of the Private Placement Warrants is determined usingwas transferred from a Level 3 inputs. Inherentmeasurement to a Level 2 measurement in May 2021, as the transfer of Private Placement Warrants to anyone who is not a Monte Carlo simulation are assumptions relatedpermitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, so the Company determined that the fair value of each Private Placement Warrant is equivalent to expected stock-price volatility, expected life, risk-free interest rate and dividend yield.that of each Public Warrant.
EUROPEAN BIOTECH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 15, 2021 | March 31, 2021 | |||||||
Exercise price | $ | 11.50 | $ | 11.50 | ||||
Stock price | $ | 9.58 | $ | 9.70 | ||||
Volatility | 21.7 | % | 19.0 | % | ||||
Term | 5.5 | 5.5 | ||||||
Risk-free rate | 0.95 | % | 1.03 | % |
dates for the Public Warrants and Private Placement Warrants:
March 18, 2021 | May 3, 2021 | |||||||
Exercise price | $ | 11.50 | $ | 11.50 | ||||
Stock price | $ | 9.58 | $ | 9.59 | ||||
Volatility | 21.7 | % | 18.6 | % | ||||
Term | 5.5 | 5.5 | ||||||
Risk-free rate | 0.95 | % | 0.95 | % |
Derivative warrant liabilities at January 8, 2021 (inception) | $ | — | ||
Issuance of Public and Private Warrants | 5,229,200 | |||
Change in fair value of derivative warrant liabilities | (663,470 | ) | ||
|
| |||
Derivative warrant liabilities at March 31, 2021 | $ | 4,565,730 | ||
|
|
Derivative warrant liabilities at January 8, 2021 (inception) | $ | — | ||
Issuance of Public and Private Warrants | 5,229,200 | |||
Change in fair value of derivative warrant liabilities | (663,470 | ) | ||
Derivative warrant liabilities at March 31, 2021 | 4,565,730 | |||
Issuance of Public Warrants - over-allotment | 291,850 | |||
Issuance of Private Placement Warrants - over-allotment | 5,840 | |||
Transfer of Public Warrants to Level 1 | (4,691,850 | ) | ||
Transfer of Private Placement Warrants to Level 2 | (171,570 | ) | ||
Derivative warrant liabilities at June 30, 2021 | $ | — | ||
Derivative warrant liabilities at September 30, 2021 | $ | — | ||
On April 29, 2021, the Underwriters partially exercised the Over-allotment Option to purchase an additional 754,784 units (the “Option Units”). Each Option Unit consists of one Class A Ordinary Share and one-third of one Warrant. As a result, the Sponsor forfeited 261,304 shares of Class B ordinary shares following the expiration of the unexercised portion of the underwriters’ over-allotment option. Simultaneously with the issuance and sale of the Option Units, the Company consummated the private placement with LSP Sponsor EBAC B.V. (the “Sponsor”) of 15,096 units (the “Additional Private Placement Units”), generating total proceeds of $150,960 (the “Private Placement Proceeds” and, together with the “Option Unit Proceeds”, the “Proceeds”).
Subsequent
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to European Biotech Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue to be consistently below,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated on January 8, 2021 as a Cayman Islands exempted company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”), that we have not yet identified.Business Combination. We will not be limited to a particular industry or geographic region in our identification and acquisition of a target company.
Our sponsor is LSP Sponsor EBAC B.V., a Dutch limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective on March 15, 2021. On March 18, 2021, we consummated itsour Initial Public Offering of 12,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units, being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $120.0 million, and incurring offering costs of approximately $7.1 million, of which $4.2$4.5 million was for deferred underwriting commissions (see Note 4)3 to our condensed financial statements). We granted the underwriter a 45-day option to purchase up to an additional 1,800,000 Units at the Initial Public Offering price to cover over-allotments, if any. On April 29, 2021, the underwriters partially exercised the over-allotment option, and the closing of the issuance and sale of the additional 754,784 Over-Allotment Units (the “Over-Allotment Units”) occurred on May 3, 2021. The issuance by the Company of the Over-Allotment Units at a price of $10.00 per unit resulted in total gross proceeds of approximately $7.4$7.5 million.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”)Placement of 440,000 units, (each, a “Private Placement Unit” and collectively, the “Private Placement Units”), at a price of $10.00 per Private Placement Unit with the Sponsor, generating gross proceeds of $4.4 million (see Note 4)4 to our condensed financial statements included in this Quarterly Report on Form 10-K for the year ended December 31, 2021). If the over-allotment option is exercised in full, the Sponsor will purchase an additional 36,000 Private Placement Units. Simultaneously with the issuance and sale of the Option Units, the Company consummated the private placement with LSPthe Sponsor EBAC B.V. of 15,096 units (the “AdditionalAdditional Private Placement Units”),Units, generating total proceeds of $150,960 (the “Private Placement Proceeds” and, together with the “Option Unit Proceeds”, the “Proceeds”).$150,960.
Upon the closing of the Initial Public Offering and the Private Placement, approximately $120.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”),Account, located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act, of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act which investinvests only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. In addition, the Sponsor and certain investors have advanced an aggregate amount of approximately $360,000 in tointo the Trust Account to cover for the over-allotment option, if exercised. If the over-allotment option is not exercised, the excess funds will be returned to such related parties. Upon partial exercise of the over-allotment, on May 4, 2021, the Company returned excess cash of $209,040 to the related parties.
22
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully.
We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of the signing of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
If we are unable to complete a Business Combination within the Combination Period, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to consummate a Business Combination within the Combination Period.
ResultsAs of OperationsSeptember 30, 2022, we held cash of approximately $273,000, current liabilities of approximately $1.4 million, deferred legal fees of approximately $272,000, and deferred underwriting commissions of approximately $4.5 million. Further, we expect to continue to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to complete an initial business combination will be successful.
Recent Developments
Proposed Business Combination
On October 17, 2022, EBAC, entered into a Business Combination Agreement with Oculis. Capitalized terms used in this Quarterly Report on Form 10-Q but not otherwise defined herein have the meanings given to them in the Business Combination Agreement.
Upon the terms and subject to the conditions of the Business Combination Agreement and in accordance with applicable law, as soon as practicable following the date of the Business Combination Agreement, EBAC will form, or cause to be formed, (a) New Parent, (b) Merger Sub 1, (c) Merger Sub 2 and (d) Merger Sub 3.
In connection with the transactions contemplated by the Business Combination Agreement, among other things, (i) Merger Sub 1 will merge with and into EBAC, with EBAC surviving such merger as a wholly owned subsidiary of New Parent (the “First Merger”), (ii) as a result of the First Merger, (a) each issued and outstanding share of EBAC Common Stock will automatically convert into one class of ordinary shares of the surviving company in the First Merger (“Surviving EBAC Shares”), (b) each issued and outstanding warrant issued by EBAC to purchase Class A Common Stock of EBAC will be automatically converted into warrants of the surviving company in the First Merger (“Surviving EBAC Warrants”), and (c) EBAC will deposit or cause to be deposited with the Exchange Agent the Surviving EBAC Shares and Surviving EBAC Warrants, (iii) following the First Merger Effective Time but prior to the Second Merger Effective Time, the Exchange Agent will contribute the Surviving EBAC Shares and Surviving EBAC Warrants to New Parent in exchange for New Parent Shares and New Parent Warrants, with both New Parent Shares and New Parent Warrants to be held by the Exchange Agent solely on behalf of the holders of Surviving EBAC
23
Shares and Surviving EBAC Warrants (the “New Parent Interests Consideration”), (iv) prior to the Second Merger Effective Time, the Exchange Agent will undertake to (a) distribute the New Parent Shares as part of the New Parent Interests Consideration to the holders of Surviving EBAC Shares and (b) distribute the New Parent Warrants as part of the New Parent Interests Consideration to the holders of Surviving EBAC Warrants, (v) after the First Merger Effective Time and following the completion of the Exchange Agent Contribution Actions, EBAC will merge with and into Merger Sub 2, with Merger Sub 2 as the surviving company and remaining a wholly owned subsidiary of New Parent, (vi) consenting Oculis shareholders executing the Company Shareholders Support Agreements will contribute their shares of Oculis to New Parent in exchange for New Parent Shares and (vii) approximately 30 days after the Acquisition Closing Date, Oculis will merge with and into Merger Sub 3, with Merger Sub 3 as the surviving company.
For additional information regarding the Business Combination Agreement, see the Company’s Current Report on Form 8-K filed with the SEC on October 17, 2022.
Registration Statement on Form F-4
New Parent initially filed a Registration Statement on Form F-4 with the SEC on November 7, 2022, in connection with the registration under the Securities Act of the shares of the New Parent’s ordinary shares and warrants to be issued in connection with the transactions contemplated in the Business Combination Agreement. However, there is no assurance as to when or if this Registration Statement will be declared effective by the SEC.
RESULTS OF OPERATIONS
We have neither engaged in any operations (other than searching for a Business Combination after our Initial Public Offering) nor generated any revenues to date. Our entire activity since inception up to March 31, 2021 was inSeptember 30, 2022 related to our formation, the preparation for our formation and the Initial Public Offering, and after IPOsince the closing of the Initial Public Offering, the search for target.a prospective initial Business Combination (see recent developments above). We will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest. We generate non-operating income in the form of income from investments held in the Trust Account and change in fair value of warrant liability. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in our search for and completion of a Business Combination.
For the three months ended September 30, 2022, we had net loss of approximately $400,000, which consisted of approximately $1.0 million of general and administrative expenses partially offset by approximately $40,000 of non-operating gain from changes in fair value of derivative warrant liabilities and approximately $576,000 in income from investments held in the Trust Account.
For the three months ended September 30, 2021, we had we had net income of approximately $1.2 million which consisted of approximately $1.5 million of non-operating gain from changes in fair value of derivative warrant liabilities and approximately $2,000 in income from investments held in the Trust Account, partially offset by approximately $253,000 of general and administrative expenses.
For the nine months ended September 30, 2022, we had net income of approximately $1.3 million, which consisted of approximately $2.2 million of non-operating gain from changes in fair value of derivative warrant liabilities and approximately $761,000 in income from investments held in the Trust Account, partially offset by approximately $1.7 million of general and administrative expenses.
For the period from January 8, 2021 (inception) through March 31,September 30, 2021, we had we had net income of approximately $255,000,$1.9 million, which consisted of approximately $663,000$2.8 million of non-operating gain from changes in fair value of derivative warrant liabilities and approximately $6,000 in income from investments held in the Trust Account, partially offset by approximately $110,000$558,000 of general and administrative expenses, and a non-operating expense of approximately $299,000$315,000 related to offering costs for derivative warrant liabilities.
Liquidity and Capital ResourcesGoing Concern
As of March 31, 2021,September 30, 2022, we had approximately $1.6 million$273,000 in our operating bank account and working capital deficit of approximately $1.0 million.$968,000.
Prior toOur liquidity needs through the completionconsummation of the Initial Public Offering we lacked the liquidity it needed to sustain operations forwere satisfied through a reasonable period or time, which is considered to be one yearpayment of $25,000 from the issuance dateSponsor to purchase Founders Shares, and the loan proceeds from the Sponsor of $300,000 under the Note (Note 4 to our condensed financial statements). We repaid the Note in full on March 22, 2021. Subsequent to the consummation of the financial statement. We have since completed our initialInitial Public Offering, at which time capital in excessour liquidity needs have been satisfied through the net proceeds
24
from the consummation of the funds depositedInitial Public Offering and the Private Placement held outside of the Trust Account. In addition, in the trust and/or usedorder to fund offering expenses was released to us for general working capital purposes. Accordingly, management has since reevaluated our liquidity and financial condition and determined that sufficient capital exists to sustain operations one year fromfinance transaction costs in connection with a Business Combination, the date this financial statement is issued and therefore substantial doubt has been alleviated.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of ourthe Sponsor, or certain of our officers and directors may, but are not obligated to, meet our needs throughprovide us Working Capital Loans (as defined in Note 4). As of September 30, 2022 and December 31, 2021, there were no amounts outstanding under Working Capital Loans.
Management does not believe the earlier of the consummation of a Business Combination orcurrent cash on hand will be sufficient to cover obligations that come due within one year from this filing. Over this time period, weof release. Management has determined that the liquidity, the mandatory liquidation and subsequent dissolution that will be using these funds for paying existing accounts payable, identifyingrequired if the Company does not complete a business combination before March 18, 2023 raises substantial doubt about the Company’s ability to continue as a going concern. Although Management expects that it will be able to raise additional capital to support its planned activities and evaluating prospective initial Business Combination candidates, performing due diligencecomplete the proposed business combination on prospective target businesses, paying for travel expenditures, selectingor prior to March 18, 2023, it is uncertain whether it will be able to do so. No adjustments have been made to the target businesscarrying amounts of assets or liabilities should we be required to merge with or acquire, and structuring, negotiating and consummatingliquidate after March 18, 2023. The condensed financial statements do not include any adjustments that might be necessary if the Business Combination.Company is unable to continue as a going concern.
We continue to evaluate the impact of the COVID-19 pandemic and hashave concluded that the specific impact is not readily determinable as of the date of the condensed balance sheet.sheets. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
Administrative Services Agreement
Commencing on the date that the Company’s securities were first listed on the Nasdaq, through the earlier of consummation of the initial Business Combination and the Company’s liquidation, the Company agreed to pay affiliates of the Sponsor a total of $20,000 per month for office space, administrative and support services. Such agreement terminated as of October 17, 2022.
Registration Rights
The holders of the Founder Shares, Private Placement Units, Private Placement Warrants, Class A ordinary shares underlying the Private Placement WarrantsUnits and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon the effective date of the Initial Public Offering. The holders of these securities were entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. However, the registration and shareholder rights agreement provide that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $2.4 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or $4.2 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
If the over-allotment option is exercised in full,On May 3, 2021 the underwriters will bepartially exercised their over-allotment option. As a result, the underwriters were entitled to an aggregateadditional underwriting discount of $360,000 in fees payableapproximately $151,000, which was paid upon closing and an additionalof the over-allotment. In addition, $264,000 will be payable to the underwriters for deferred underwriting commission of $630,000.commissions.
25
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenuesincome and expenses and the disclosure of contingent assets and liabilities in our condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company has identifieddetermined that there have been no material changes to the following as its critical accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all ofpolicies disclosed in our Annual Report on Form 10-K for the Company’s financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Stock” (“ASC 815-40”). The classification of derivative instruments, including whether such instruments should be classified as liabilities or as equity, is re-assessed at the end of each reporting period.
The 4,000,000 warrants issued in the Initial Public Offering (“Public Warrants”) and the 146,667 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The estimated fair value of the Public Warrants and the Private Placement Warrants is measured at fair value using a Monte Carlo simulation.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in accordanceperiod ended December 31, 2021, filed with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as ofSEC on March 31, 2021, 10,763,552 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of our balance sheet.2022.
Net Income Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per ordinary share is computed by dividing net loss by the weighted average number of shares of ordinary shares outstanding during the period.
Our statement of operations includes a presentation of income (loss) per ordinary share for Class A ordinary shares subject to possible redemption in a manner similar to the two-class method of income (loss) per ordinary share. Net income (loss) per ordinary share, basic and diluted, for Class A ordinary shares subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A ordinary shares subject to possible redemption outstanding since original issuance.
Net income (loss) per ordinary share, basic and diluted, for non-redeemable ordinary shares is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to ordinary shares subject to possible redemption, by the weighted average number of non-redeemable ordinary shares outstanding for the period.
Non-redeemable ordinary shares include Founder Shares and non-redeemable shares of Class A ordinary shares as these shares do not have any redemption features. Non-redeemable ordinary shares participate in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.
Off-Balance Sheet Arrangements
As of MarchSeptember 30, 2022 and December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the condensed financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. As of March 31, 2021, we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021,September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer hashave concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of March 31, 2021, due solely to the material weakness in our internal control over financial reporting as a result of the reclassification of our Warrants described in Note 9 — Revision to Prior Period Financial Statements, included in Part 1, Item 1 of this Form 10-Q.September 30, 2022.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2021September 30, 2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHERII-OTHER INFORMATION
Item 1. Legal Proceedings |
None.
Item 1A. Risk Factors |
As of the date of this Quarterly Report, on Form 10-Q, there have been no material changes to the risk factors disclosed in our final prospectusAnnual Report on Form 10-K and in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022 and June 30, 2022, as filed with the SECSEC. Any of these factors could result in a significant or material adverse effect on March 17, 2021, except for the belowour results of operations or financial condition. Additional risk factor.factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results and thus may have an adverse effect on the market price of our securities.
On April 12, 2021, the staff of the SEC (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. As a result of the SEC Staff Statement, we reevaluated the accounting treatment of our 4,000,000 Public Warrants and 146,667 Private Placement Warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our condensed balance sheet as of March 31, 2021 contained elsewhere in this Quarterly Report are derivative liabilities related to embedded features contained within our warrants. ASC 815, Derivatives and Hedging, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material. The impact of changes in fair value on earnings may have an adverse effect on the market price of our securities.
We have identified a material weakness in our internal control over financial reporting as of March 31, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may result a material adverse effect on our ability to consummate an initial business combination.
Following the issuance of the SEC Staff Statement management identified a material weakness in our internal control over financial reporting related to the accounting for the warrants issued in connection with our Initial Public Offering. Our internal control over financial reporting did not result in the proper accounting classification of the warrants, which, due to its impact on our financial statements, we determined to be a material weakness.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Any failure to maintain internal control over our financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis, which could delay or disrupt our efforts to consummate an initial business combination. If our financial statements are not filed on a timely basis, we may also be subject to sanctions or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our ability to consummate an initial business combination. We have expanded and improved our review process for complex securities and related accounting standards and continue to evaluate other steps to remediate the material weakness.
In addition, as a result of such material weakness, the change in accounting for our warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weakness in our internal control over financial reporting and the preparation of our financial statements. As of the date of this report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a Business Combination.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public shareholders may be less than $10.00 per share.
The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated memorandum and articles of association, our public shareholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income, net of income taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest to pay dissolution expenses). Negative interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public shareholders may be less than $10.00 per share.
Item 2. Unregistered Sales |
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”)Equity Securities and Use of 440,000 units (each, a “Private Placement Unit” and collectively, the “Private Placement Units”), at a price of $10.00 per Private Placement Unit with the Sponsor, generating gross proceeds of $4.4 million (see Note 4). If the over-allotment option is exercised in full, the Sponsor will purchase an additional 36,000 Private Placement Warrants.
In connection with the Initial Public Offering, our sponsor had agreed to loan us an aggregate of up to $300,000 pursuant to a promissory note. This loan is non-interest bearing and payable on the consummation of the Initial Public Offering. We borrowed approximately $38,000 under a promissory note and fully repaid the promissory note on March 22, 2021.None.
Of the gross proceeds received from the Initial Public Offering and the full exercise of the option to purchase additional Shares, $120,000,000 was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the Private Placement are invested in U.S. government treasury bills with a maturity of 180 days or less and in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
We paid a total of approximately $2.9 million in underwriting discounts and commissions related to the Initial Public Offering. In addition, the underwriters agreed to defer $4.2 million in underwriting discounts and commissions.
Item 3. Defaults upon Senior Securities |
None.
Item 4. Mine Safety Disclosures |
Not applicable.
Item 5. Other Information. |
None.
Item 6. Exhibits. |
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Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
Exhibit 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 22nd14 day of June, 2021.November 2022
EUROPEAN BIOTECH ACQUISITION CORP. | ||
By: | /s/ Eduardo Bravo Fernandez de Araoz | |
Name: | Eduardo Bravo Fernandez de Araoz | |
Title: | Chief Executive Officer (Principal Executive Officer) |
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