Orchestra BioMed (OBIO) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements This section presents the unaudited interim financial statements, including balance sheets, statements of operations, changes in shareholders' deficit, and cash flows, along with notes detailing the SPAC's nature, proposed merger, and going concern uncertainty Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (as of June 30, 2022 vs. Dec 31, 2021) | Account | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $1,306,702 | $1,754,460 | | Investments held in Trust Account | $160,239,964 | $160,022,447 | | Total Assets | $161,583,083 | $161,823,574 | | Liabilities & Equity | | | | Total current liabilities | $1,097,658 | $165,539 | | Deferred underwriting commissions | $5,600,000 | $5,600,000 | | Ordinary shares subject to possible redemption | $160,139,964 | $160,000,000 | | Total shareholders' deficit | ($5,254,539) | ($3,941,965) | Unaudited Condensed Consolidated Statements of Operations Statements of Operations Summary | Period | General & Admin Expenses | Interest Income (Trust) | Net Loss | Basic and Diluted Net Loss per Share | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2022 | $908,173 | $203,252 | ($734,921) | ($0.04) | | Three Months Ended June 30, 2021 | $66,318 | $3,989 | ($92,329) | ($0.00) | | Six Months Ended June 30, 2022 | $1,330,127 | $217,517 | ($1,172,610) | ($0.06) | | Six Months Ended June 30, 2021 | $148,266 | $7,935 | ($200,331) | ($0.01) | Unaudited Condensed Consolidated Statements of Changes in Shareholders' Deficit - The total shareholders' deficit increased from approximately $3.94 million at the end of 2021 to approximately $5.25 million as of June 30, 2022, primarily driven by the net loss for the period and an increase in the redemption value of ordinary shares subject to possible redemption[14] Unaudited Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Six Months Ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($447,758) | ($115,517) | | Cash - beginning of the period | $1,754,460 | $2,026,822 | | Cash - end of the period | $1,306,702 | $1,911,305 | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide critical context, detailing the company's formation as a SPAC targeting the healthcare innovation sector, its IPO and private placement financing, and the terms of its Trust Account, along with the proposed merger with Orchestra BioMed and a going concern uncertainty due to the impending business combination deadline - The Company is a Cayman Islands exempted company formed on May 25, 2020, for the purpose of a business combination, with an intent to focus on healthcare innovation targets[18] - On August 6, 2020, the Company completed its Initial Public Offering (IPO) of 16,000,000 ordinary shares at $10.00 per share, raising gross proceeds of $160.0 million, with a simultaneous private placement raising an additional $6.0 million[20][21] - Management has determined that the mandatory liquidation and subsequent dissolution required if a Business Combination is not consummated by the deadline (February 6, 2023) raises substantial doubt about the Company's ability to continue as a going concern[32] - On July 4, 2022, the Company entered into a merger agreement with Orchestra BioMed, Inc., involving the Company domesticating as a Delaware corporation and Orchestra BioMed becoming a wholly-owned subsidiary[79] - In connection with the proposed merger, the Company secured approximately $20.0 million in Forward Purchase Agreements and a backstop agreement to ensure a minimum of $60 million in cash at closing[81][82] - On July 26, 2022, shareholders approved extending the business combination deadline from August 6, 2022, to potentially as late as February 6, 2023, leading to the redemption of 9,237,883 public shares (approx. 57.7%), reducing the trust account balance to approximately $67.8 million[86][87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results, noting no operating revenue, net losses from administrative expenses, and the proposed merger with Orchestra BioMed, while addressing liquidity and going concern risks - The company is a blank check company formed to effect a business combination, with an intention to target the healthcare innovation sector, and has not generated any operating revenue to date[92][113] Results of Operations (Net Loss) | Period | Net Loss | Key Drivers | | :--- | :--- | :--- | | Three Months Ended June 30, 2022 | ~$735,000 | ~$938,000 in operating expenses, offset by ~$203,000 in interest income | | Six Months Ended June 30, 2022 | ~$1.1 million | ~$1.39 million in operating expenses, offset by ~$217,000 in interest income | - The company entered into a definitive merger agreement with Orchestra BioMed, Inc. on July 4, 2022, with the transaction supported by forward purchase and backstop agreements to ensure funding[98][99][100] - Shareholders approved an extension of the combination period to February 6, 2023, which led to the redemption of approximately 57.7% of public shares, reducing the trust account to about $67.8 million[104][105] - As of June 30, 2022, the company had approximately $1.3 million in cash and $245,000 in working capital, which management believes is sufficient for near-term needs, but the mandatory liquidation requirement raises substantial doubt about its ability to continue as a going concern[108][110] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide the information for this item - As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, the company is not required to provide quantitative and qualitative disclosures about market risk[138] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with a material weakness identified in fiscal year 2021 fully remediated during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[139] - A material weakness in internal control over financial reporting that was previously identified in fiscal year 2021 was fully remediated as of June 30, 2022[141][143] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no legal proceedings - There are no legal proceedings to report[145] Item 1A. Risk Factors As a smaller reporting company, the company is not required to provide this information - The company is a smaller reporting company and is not required to provide the information otherwise required under this item[146] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds for the period - None reported[147] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None reported[148] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[149] Item 5. Other Information The company reports no other information - None reported[150] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes a list of exhibits filed, such as officer certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents[152]