XYNOMIC PHARMACEUTICALS HOLDINGS, INC. References to the "Company," "
Overview
We are a blank check company incorporated in
Our Sponsor is
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 247,000 private placement units
(each, a "Private Placement Unit" and collectively, the "Private Placement
Units") at a price of
Upon the closing of the Initial Public Offering and the Private Placement, approximately$58.1 million ($10.10 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account ("Trust Account") inthe United States maintained byContinental Stock Transfer & Trust Company , as trustee, and will be invested only inU.S "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, or 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 invest only in directU.S. government treasury obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of the net proceeds of its 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. Our initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the amount of taxes payable on the income earned on the Trust Account) at the time we sign a definitive agreement in connection with 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.
54--------------------------------------------------------------------------------
Table of Contents
The Company's IPO prospectus and charter provided that the Company initially had untilMay 2, 2022 (the date which was 15 months after the consummation of the IPO) to complete a Business Combination. The Board currently believes that there will not be sufficient time beforeMay 2, 2022 , to complete a Business Combination. OnMarch 29, 2022 , the Company mailed its proxy statement with respect to a special meeting of the Company's stockholders of record as ofMarch 21, 2022 to be held onApril 26, 2022 for purposes of considering and voting upon a proposal to amend the Company's charter to extend the date by which the Company must consummate a Business Combination fromMay 2, 2022 (the date which is 15 months from the closing date of the IPO on a monthly basis up toNovember 2, 2022 (the date which is 21 months from the closing date of the IPO) (such period, the " Combination Period "). The proposal is more fully described in the Company's proxy statement filed with theSEC onMarch 28, 2022 . The sole purpose of the Extension Amendment is to provide the Company more time to complete a Business Combination, which our Board believes is in the best interests of our stockholders. OnMarch 17, 2022 , the Company andApexigen entered into the BCA pursuant to which the Company andApexigen would combine, with the former equityholders of both entities holding equity in theSurviving Company and withApexigen's existing equityholders owning a majority of the equity in theSurviving Company . It is expected that there will be a substantial rollover of equity by the existing equityholders ofApexigen . Under the BCA, the transaction valuesApexigen at$205.0 million on a net-equity basis, net of exercise proceeds forApexigen's pre-closing options and warrants. As a result of the transaction, the combined company is expected to receive approximately$73.1 million in gross proceeds funded by approximately$58.1 million in cash held in the Company's trust account (assuming no shareholders exercise their redemption rights at closing) and$15.0 million from a fully committed PIPE consisting of units of shares and half a warrant for one share being sold at$10.00 per unit. The PIPE includes participation from healthcare institutional and individual investors. In addition, concurrent with the execution of the BCA, the Company,Apexigen andLincoln Park have entered into a committed investment agreement under which theSurviving Company would have the right to directLincoln Park to purchase up to an aggregate of$50 million of common stock of theSurviving Company over a 24-month period. For more information regarding the BCA and related transactions, see Note 11 (Subsequent Events) to the Financial Statements and the Form 8-K filed by the Company with theSEC onMarch 18, 2022 .
The Company's IPO prospectus and charter provided that the Company initially had
until
The completion of the proposed Business Combination with
If we are unable to consummate a Business Combination within the Combination Period, we will (i) cease all operations except for the purposes 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 any interest earned on the Trust Account not previously released to us to pay its tax obligations and up to$100,000 of interest to pay dissolution expenses, divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders' rights as stockholders (including the right to receive further liquidating distributions, if any), 55
--------------------------------------------------------------------------------
Table of Contents
subject to applicable law, and; (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject in each case to our
obligations under
Going Concern
As of
Our liquidity needs to date have been satisfied through a payment of
Until the consummation of a Business Combination, we will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. We will need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors, or third parties. Our officers, directors and Sponsor may, but are not obligated to, loan us funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
We cannot provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all. These conditions raise substantial
doubt about the Company's ability to continue as a going concern until the
earlier of the consummation of the Business Combination or the date the Company
is required to liquidate,
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception throughDecember 31, 2021 related to our formation, the preparation for an Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We generate non-operating income in the form of investment income from the Trust Account. We will continue to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. 56
--------------------------------------------------------------------------------
Table of Contents
Additionally, we recognize non-cash gains and losses within other income (expense) related to changes in recurring fair value measurement of our derivative liabilities at each reporting period.
For the year ended
For the period from
Contractual Obligations
Administrative Support Agreement
Commencing on the effective date of the prospectus, the Company agreed to pay an
affiliate of the Sponsor a total of
We incurred
Registration and Stockholder Rights
The holders of the Founder Shares,
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final prospectus included in the Initial Public Offering to purchase up to 750,000 additional Units at the Initial Public Offering price less the underwriting discounts and commissions. OnFebruary 2, 2021 , the underwriters fully exercised the over-allotment option.
The underwriters were entitled to an underwriting discount of
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in
57--------------------------------------------------------------------------------
Table of Contents
liabilities at the date of the financial statements, and the reported amounts of income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Investments Held in Trust Account
Our portfolio of investments is comprised solely of
Derivative warrant liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to theFinancial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity" and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The warrants issued in connection with the Initial Public Offering (the "Public Warrants") are classified as equity. The Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the Private Placement Warrants as liabilities at fair value and adjust 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 our statements of operations. The fair value of the Private Placement Warrants are measured using a Monte Carlo simulation model.
Common stock subject to possible redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in ASC 480. Shares of common stock subject to mandatory
redemption (if any) are classified as liability instruments and are measured at
fair value. Shares of conditionally redeemable common stock (including common
stock 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, shares of common stock are classified as stockholders' equity. Our Public
Shares feature certain redemption rights that are considered to be outside of
our control and subject to the occurrence of uncertain future events.
Accordingly, at
Under ASC 480, we have elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of the reporting period. This method would view the end of the reporting period as if it were also the redemption date of the security. Effective with the closing of the Initial Public Offering (including the sale of the Over-Allotment Units), we recognized the remeasurement from initial book value to redemption amount value. The change in the carrying value of shares of the common stock subject to possible redemption resulted in charges
against additional
paid-in
capital.
58
--------------------------------------------------------------------------------
Table of Contents
Net income (loss) per common share
Income and losses are shared pro rata between the outstanding redeemable and non-redeemable common shares. Net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
We have not considered the effect of the Public Warrants and the Private
Placement Warrants to purchase an aggregate of 2,998,500 shares of the Company's
common stock in the calculation of diluted net income (loss) per share, since
the exercise of the warrants are contingent upon the occurrence of future events
and the inclusion of such warrants would be anti-dilutive under the treasury
stock method. As a result, diluted net income (loss) per share is the same as
basic net income (loss) per share for the year ended
Recent Accounting Pronouncements
InAugust 2020 , the FASB issued Accounting Standard Update (the "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, 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 also simplifies the diluted earnings per share calculation in certain areas. We early adopted the ASU onJanuary 1, 2021 . Adoption of the ASU did not impact the Company's financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Off-Balance
Sheet Arrangements
As ofDecember 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 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 financial statements
59--------------------------------------------------------------------------------
Table of Contents
(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.
© Edgar Online, source
