Phoenix Biotech Acquisition (PBAX) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the unaudited financial statements and management's analysis for Phoenix Biotech Acquisition Corp Item 1. Financial Statements (Unaudited) This section presents Phoenix Biotech Acquisition Corp.'s unaudited condensed financial statements, including balance sheets, statements of operations, changes in stockholders' deficit, and cash flows, along with explanatory notes Unaudited Condensed Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Unaudited Condensed Balance Sheets (USD) | ASSETS / LIABILITIES & EQUITY | March 31, 2023 (Unaudited) | December 31, 2022 | | :------------------------------ | :------------------------- | :------------------ | | Cash | $178,093 | $475,870 | | Marketable securities and cash held in Trust Account | $14,031,783 | — | | Restricted cash held in Trust Account | — | $41,665,974 | | Total Assets | $14,430,169 | $42,367,032 | | Total Current Liabilities | $3,293,189 | $30,748,341 | | Total Liabilities | $12,443,189 | $39,898,341 | | Class A Common stock subject to possible redemption | $13,565,640 | $13,468,845 | | Total Stockholders' Deficit | $(11,578,660) | $(11,000,154) | - Total Assets decreased significantly from $42,367,032 at December 31, 2022, to $14,430,169 at March 31, 2023, primarily due to the redemption of shares and corresponding reduction in restricted cash held in the Trust Account[10] - Shareholder redemption liability, which was $27,842,747 at December 31, 2022, was reduced to zero by March 31, 2023, indicating payments were made to redeeming shareholders[10] Unaudited Condensed Statements of Operations This section details the company's revenues, expenses, and net loss over specific periods, reflecting operational performance Unaudited Condensed Statements of Operations (USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Total Operating Expenses | $590,268 | $404,777 | | Total Other Income | $108,556 | $26,780 | | Net Loss | $(481,712) | $(377,997) | | Basic and Diluted Net Loss per Share, Class A | $(0.07) | $(0.02) | | Basic and Diluted Net Loss per Share, Class B | $(0.07) | $(0.02) | - Net loss increased from $(377,997) in Q1 2022 to $(481,712) in Q1 2023, primarily due to higher general and administrative expenses and franchise tax[13] - Interest income earned on marketable securities held in the Trust Account significantly increased to $108,556 in Q1 2023 from zero in Q1 2022, partially offsetting the increased operating expenses[13] Unaudited Condensed Statements of Changes in Stockholders' Deficit This section tracks changes in the company's equity over time, reflecting accumulated deficit and total stockholders' deficit Unaudited Condensed Statements of Changes in Stockholders' Deficit (USD) | Metric | December 31, 2022 | March 31, 2023 | | :-------------------------- | :---------------- | :------------- | | Accumulated Deficit | $(11,000,701) | $(11,579,207) | | Total Stockholders' Deficit | $(11,000,154) | $(11,578,660) | - The accumulated deficit increased by $578,506 from December 31, 2022, to March 31, 2023, primarily due to the net loss of $481,712 and accretion for Class A Common Stock Subject to Redemption of $96,794[16] Unaudited Condensed Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Unaudited Condensed Statements of Cash Flows (USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(197,777) | $(308,091) | | Net cash used in investing activities | $(100,000) | — | | Net change in cash | $(297,777) | $(308,091) | | Cash, end of period | $178,093 | $790,482 | - Net cash used in operating activities decreased from $(308,091) in Q1 2022 to $(197,777) in Q1 2023, despite a higher net loss, due to changes in operating assets and liabilities[19] - The company used $100,000 in investing activities in Q1 2023 for cash deposited into the Trust Account, compared to no investing activities in Q1 2022[19] Notes to (Unaudited) Condensed Financial Statements This section provides detailed explanations and additional information supporting the unaudited condensed financial statements Note 1 – Description of Organization and Business Operations and Liquidity This note describes the company's formation as a SPAC, its IPO, business combination deadline extensions, significant share redemptions, and going concern risks - The company was incorporated on June 8, 2021, as a blank check company (SPAC) to pursue a business combination[22] - The IPO was consummated on October 8, 2021, raising $155,000,000 from 15,500,000 units, plus an additional $20,000,000 from the overallotment option and $8,450,000 from private placement units, with $178,500,000 placed in a Trust Account[24][25][26][28] - The business combination period was extended to June 8, 2023, with the possibility of further extensions, following a special meeting where stockholders approved amendments to the IMTA and Certificate of Incorporation[36][37] - In connection with the extension, 16,211,702 shares of Class A common stock were redeemed, leaving 2,173,298 shares outstanding as of March 31, 2023[38] - The company projects insufficient funds to cover expenses over the next year, raising substantial doubt about its ability to continue as a going concern[46] - The Inflation Reduction Act of 2022 introduces a new 1% excise tax on stock repurchases, which may apply to redemptions in connection with a business combination or extension vote, potentially reducing cash available[43][44] Note 2 – Summary of Significant Accounting Policies This note details the company's significant accounting policies, including U.S. GAAP basis, emerging growth company status, and specific treatments for investments, stock, and fair value measurements - The financial statements are prepared in accordance with U.S. GAAP for interim financial information, condensed or omitted certain disclosures per SEC rules[47] - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new or revised financial accounting standards[50][51] - Investments held in the Trust Account are classified as trading securities and measured at fair value, with gains and losses included in the statements of operations[57] - Class A common stock subject to possible redemption is classified as temporary equity, and changes in redemption value are recognized immediately[65][66] - The company adopted ASU 2016-13 (Credit Losses) on January 1, 2023, which had no impact on its financial statements[72] Note 3 – Initial Public Offering and Over-Allotment This note details the company's Initial Public Offering (IPO) where it sold 17,500,000 units at $10.00 each, including the partial exercise of the over-allotment option. Each unit consisted of one Class A common stock and one-half of a redeemable public warrant - The company sold 17,500,000 units in its IPO, including 2,000,000 units from the underwriter's partial exercise of the over-allotment option, at $10.00 per unit[74] - Each unit comprised one share of Class A common stock and one-half of a redeemable public warrant, with each whole warrant exercisable for one Class A common stock at $11.50 per share[74] Note 4 – Private Placement Warrants This note describes the private placement of 885,000 units at $10.00 per unit, generating $8,850,000, concurrently with the IPO. These units were purchased by the Sponsor, Cantor, and CCM, with proceeds added to the Trust Account. Each unit included one Private Placement Share and one-half of a redeemable Private Placement Warrant - Concurrently with the IPO, 885,000 Private Placement Units were sold at $10.00 per unit, generating $8,850,000[75] - Purchasers included the Sponsor, Cantor Fitzgerald & Co., and Cohen & Company Capital Markets[75] - Each Private Placement Unit consisted of one Private Placement Share and one-half of a redeemable Private Placement Warrant, exercisable for one Class A common stock at $11.50 per share[75] Note 5 – Related Party Transactions This note details transactions with related parties, including the issuance of Founder Shares to the Sponsor, non-interest-bearing loans from the Sponsor for IPO expenses and working capital, and monthly fees paid to the CEO's spouse for consulting services and to an affiliate of the Sponsor for administrative services - The Sponsor received 4,598,750 Founder Shares for $25,000, adjusted for a stock dividend and forfeiture, resulting in 4,596,250 shares outstanding[76] - The Sponsor provided non-interest-bearing Working Capital Loans, with $650,000 outstanding as of March 31, 2023, and December 31, 2022[79] - Monthly consulting fees of $15,000 to the CEO's spouse ended on December 31, 2022[80][131] - Monthly fees of $20,000 for office space and administrative services to an affiliate of the Sponsor were suspended on December 31, 2022, and reinstated on March 31, 2023[81][130] Note 6 – Commitments and Contingencies This note outlines the company's commitments, including registration rights for certain security holders and the underwriting agreement. The underwriting agreement includes a deferred underwriting commission of $9,150,000, payable only upon the completion of a business combination - Holders of Founder Shares, Private Placement Warrants, and warrants from Working Capital Loans have registration rights[82] - A deferred underwriting commission of $9,150,000 is payable to the underwriter only upon the completion of a Business Combination[84][132] Note 7 – Stockholders' Deficit This note details the company's capital structure, including authorized and outstanding shares of Class A common stock, Class B common stock (Founder Shares), and preferred stock. It also describes the terms and conditions of the Public Warrants and Private Placement Warrants, including their exercisability, redemption, and potential adjustments Stockholders' Deficit (Shares) | Stock Class | Authorized Shares | Issued & Outstanding (March 31, 2023 & Dec 31, 2022) | | :---------- | :---------------- | :------------------------------------------------- | | Class A | 60,000,000 | 885,000 (excluding 1,288,298 subject to redemption) | | Class B | 10,000,000 | 4,596,250 | | Preferred | 1,000,000 | None | - As of March 31, 2023, there were 8,750,000 Public Warrants and 442,500 Private Placement Warrants outstanding[90] - Public Warrants become exercisable 30 days after a business combination and expire five years after, or earlier upon redemption or liquidation[91] - Private Placement Warrants are identical to Public Warrants but are not transferable, assignable, or salable until after a business combination, with limited exceptions[94] Note 8 – Fair Value Measurements This note explains the fair value hierarchy used for financial assets and liabilities, categorizing them into Level 1, Level 2, or Level 3 based on the observability of inputs. As of March 31, 2023, the company's investments in U.S. Treasury securities held in the Trust Account were classified as Level 1 assets - The company uses a fair value hierarchy (Level 1, 2, 3) to classify assets and liabilities based on observable and unobservable inputs[97][98][99] Fair Value Measurements (USD) | Assets (March 31, 2023) | Level | Quoted Prices in Active Markets (Level 1) | | :---------------------- | :---- | :---------------------------------------- | | U.S. Treasury Securities | 1 | $14,031,783 | Note 9 – Uncertainty Regarding Impacts of Recent Disruptions In U.S. Banking System This note addresses the economic concerns arising from recent disruptions in the U.S. banking system in March 2023. The company acknowledges its exposure to credit risk due to cash amounts exceeding federally insured limits and states that the related financial impact cannot be reasonably estimated at this time - The company maintains cash amounts in excess of federally insured limits ($42,141,844 as of December 31, 2022), exposing it to credit risk from banking system disruptions[102] - The financial impact of recent U.S. banking system disruptions cannot be reasonably estimated at this time[102] Note 10 – Subsequent Events This note discloses subsequent events after March 31, 2023, including a NASDAQ notice regarding non-compliance with the minimum Market Value of Listed Securities (MVLS) requirement, additional working capital loans from the sponsor, an extension payment to the Trust Account, and a notice from the IRS for additional federal income taxes due - On April 3, 2023, NASDAQ notified the company of non-compliance with the $50,000,000 MVLS requirement, providing 180 days (until October 2, 2023) to regain compliance[104][105] - On May 5, 2023, the sponsor loaned an additional $250,000 under the working capital loan program[108] - On May 8, 2023, the company deposited $125,000 into the Trust Account for an extension[109] - On May 9, 2023, the company received an IRS notice for an additional $182,308 in federal income taxes due by May 22, 2023[110] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, covering its SPAC status, business combination deadline, share redemptions, increased net loss, liquidity, and going concern risks - The company is a blank check company formed to effect a business combination, incurring significant costs in pursuit of acquisition plans[113][114] - The business combination deadline was extended to April 8, 2023, with further monthly extensions possible up to July 8, 2023, following stockholder approval[115] - 16,211,702 Class A common shares were redeemed in connection with the extension, leaving 2,173,298 Class A shares outstanding as of December 31, 2022[116] Net Loss and Expenses (USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net Loss | $(481,712) | $(377,997) | | General and administrative and franchise taxes | $590,268 | $404,777 | | Unrealized gain on marketable securities held in Trust Account | $108,556 | $26,780 | - The company had a working capital deficit of $2,272,113 as of March 31, 2023, and projects insufficient funds to cover expenses over the next year, raising substantial doubt about its ability to continue as a going concern[122][128] - The company has no off-balance sheet arrangements[129] - Key accounting policies include the treatment of warrants (equity-classified), common stock subject to possible redemption (temporary equity), and net loss per common share[134][135][136] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Phoenix Biotech Acquisition Corp. is not required to provide the quantitative and qualitative disclosures about market risk - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[139] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2023, based on an evaluation by the Chief Executive Officer and Chief Financial Officer. It also states that there have been no material changes in internal control over financial reporting during the most recently completed fiscal quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[141] - There have been no material changes in internal control over financial reporting during the most recently completed fiscal quarter[142] PART II – OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company reports no legal proceedings - There are no legal proceedings to report[143] Item 1A. Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[144] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's IPO and concurrent private placements, including units sold, gross proceeds, allocation of funds to the trust account, and offering costs - The IPO involved the sale of 15,500,000 units at $10.00 per unit, generating $155,000,000[145] - Concurrently, 845,000 Private Placement Units were sold at $10.00 per unit, generating $8,450,000, and an additional 40,000 Private Placement Units generated $400,000[147][148] - The partial exercise of the over-allotment option resulted in the sale of 2,000,000 additional units, generating $20,000,000[148] - Total offering costs amounted to $12,729,318, including $9,150,000 in deferred underwriting fees contingent on a business combination[149] - $178,500,000 from the IPO and private placements was placed in a Trust Account, invested in U.S. government securities or money market funds[150] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - There are no defaults upon senior securities[152] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine safety disclosures are not applicable to the company[153] Item 5. Other Information The company reports no other information - There is no other information to report[154] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including key agreements and organizational documents - The exhibits include the Underwriting Agreement, Business Combination Agreement (and its termination), Amended and Restated Certificate of Incorporation, Warrant Agreement, Sponsor Support Agreement, and Investment Management Trust Agreement[158][159][160][161] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Securities Exchange Act and Sarbanes-Oxley Act are filed herewith[161] SIGNATURES This section contains the required signatures of the registrant's authorized officers, including the Chief Executive Officer and Chief Financial Officer, certifying the report - The report is signed by Chris Ehrlich, Chief Executive Officer and Director, and Daniel Geffken, Chief Financial Officer and Director, on May 12, 2023[165]