Revelation Biosciences(REVB) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company presents its unaudited condensed financial statements and notes for the period ending September 30, 2021 Condensed Balance Sheets The balance sheet shows a slight decrease in total assets and an increase in liabilities, resulting in a larger stockholder's deficit Condensed Balance Sheet Highlights (Unaudited) | | September 30, 2021 | December 31, 2020 (As Restated) | | :--- | :--- | :--- | | Assets | | | | Cash held in Trust Account | $73,516,414 | $73,510,915 | | Total assets | $73,555,497 | $74,162,206 | | Liabilities & Stockholder's Deficit | | | | Warrant liability | $2,143,416 | $3,399,878 | | Total liabilities | $6,648,789 | $6,344,910 | | Common stock subject to possible redemption | $73,509,325 | $73,509,325 | | Total stockholder's deficit | $(6,602,617) | $(5,692,029) | Condensed Statements of Operations The company reports a net loss for the third quarter and nine-month period, driven by general and administrative expenses Condensed Statements of Operations Highlights (Unaudited) | | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | General and administrative expenses | $844,531 | $2,155,418 | | Loss from operations | $(844,531) | $(2,155,418) | | Change in fair value of warrant liability | $85,040 | $1,256,462 | | Net loss | $(757,638) | $(910,588) | | Basic and diluted net loss per common share | $(0.42) | $(0.50) | Condensed Statements of Changes in Stockholders' Deficit The stockholder's deficit increased during the nine-month period primarily due to the net loss incurred - The total stockholder's deficit grew from $(5,692,029) at the beginning of the year to $(6,602,617) by the end of Q3 2021, driven by the cumulative net loss for the period[15] Condensed Statements of Cash Flows The company experienced a net cash outflow from operations, partially offset by cash provided from investing activities Cash Flow Summary for Nine Months Ended September 30, 2021 (Unaudited) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | $(499,916) | | Net cash used in investing activities | $488,182 | | Net change in cash | $(11,734) | Notes to Condensed Financial Statements The notes detail the company's SPAC status, a pending merger, and the accounting treatment for warrant liabilities - The company is a special purpose acquisition company (SPAC) formed to enter into a business combination, with all activity to date relating to its formation, IPO, and search for a target[21][22] - On August 29, 2021, the company entered into an Agreement and Plan of Merger with Revelation Biosciences, Inc, which will be treated as a reverse recapitalization upon closing[73][74] - The company classifies its Private Warrants as a derivative liability, re-measured to fair value each period, resulting in a gain of $1,256,462 for the nine months ended September 30, 2021[47][64][87] - Subsequent to the quarter end, stockholders approved an amendment to extend the business combination deadline from October 13, 2021, to November 13, 2021[91] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's SPAC operations, results driven by administrative costs, and liquidity from IPO proceeds - The company's activities are limited to its formation, IPO, and identifying a target, with a definitive merger agreement signed with Revelation Biosciences, Inc[96][97][99] Results of Operations Summary | Period | Net Loss | Key Drivers | | :--- | :--- | :--- | | Three months ended Sep 30, 2021 | $757,638 | G&A expenses of $844,531, offset by a $85,040 gain on warrant liability fair value | | Nine months ended Sep 30, 2021 | $910,588 | G&A expenses of $2,155,418, offset by a $1,256,462 gain on warrant liability fair value | - As of September 30, 2021, the company had $73,514,561 held in its Trust Account intended for acquiring a target business[107][108] - The company has no off-balance sheet arrangements, with its primary contractual obligation being a deferred underwriting fee payable upon a Business Combination[112][113] Quantitative and Qualitative Disclosures about Market Risk The company reports no material market or interest rate risk due to its investment strategy for funds held in trust - The company's exposure to market and interest rate risk is considered immaterial as Trust Account funds are invested in short-term U.S. government treasury securities[118] Controls and Procedures Management concluded that disclosure controls were ineffective due to a material weakness in accounting for warrants - Management concluded that disclosure controls and procedures were not effective as of September 30, 2021, due to a material weakness[120] - The material weakness stems from the need to restate financial statements to reclassify warrants as liabilities, a complex accounting issue[120] - A remediation plan is in place to enhance access to accounting literature and increase communication with third-party professionals[121] PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings - As of the reporting date, there are no pending legal proceedings involving the company[123] Risk Factors There have been no material changes to the company's previously disclosed risk factors - No material changes have occurred to the risk factors previously disclosed in the company's Form 10-K/A filed on June 16, 2021[124] Unregistered Sales of Equity Securities and Use of Proceeds This section details the issuance of unregistered securities and the allocation of IPO proceeds to the trust account - The company issued Founder Shares and Private Warrants to its Sponsor in transactions exempt from registration under Section 4(a)(2) of the Securities Act[125][127] - The IPO and over-allotment option generated total gross proceeds of $72,781,510[126] - Of the gross proceeds from the IPO and private placements, $73,509,325 was deposited into a trust account[129] Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None[131] Mine Safety Disclosures This disclosure requirement is not applicable to the company - Not applicable[132] Other Information The company reports no other material information for this period - None[133] Exhibits This section lists all exhibits filed with the report, including the merger agreement and officer certifications - A comprehensive list of exhibits filed with the report is provided, including the merger agreement, corporate governance documents, and various financial agreements[134]