References to the "Company," "Health Sciences Acquisitions Corporation 2,"
"our," "us" or "we" refer to Health Sciences Acquisitions Corporation 2. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the annual 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.
Overview
We are a blank check company incorporated as a Cayman Islands company on May 25,
2020. We were formed for the purpose entering into a merger, share exchange,
asset acquisition, share purchase, recapitalization, reorganization or other
similar business combination with one or more target businesses (the "Business
Combination"). Our efforts to identify a prospective target business will not be
limited to any particular industry or geographic region, although we intend to
focus our search on target businesses domiciled in North America or Europe that
are developing assets in the biopharma and medical technology sectors. We are an
emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
19
Our sponsor is HSAC 2 Holdings, LLC (the "Sponsor"). The registration statement
for the initial public offering (the "Initial Public Offering") was declared
effective on August 3, 2020. On August 6, 2020, we consummated an Initial Public
Offering of 16,000,000 ordinary shares (the "Public Shares"), including the
2,086,956 Public Shares as a result of the underwriters' full exercise of their
over-allotment option, at an offering price of $10.00 per Public Share,
generating gross proceeds of $160.0 million, and incurring offering costs of
approximately $9.4 million, inclusive of $5.6 million in deferred underwriting
commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of (i) 450,000 ordinary shares
("Private Placement Share") at $10.00 per Private Placement Share (for a total
purchase price of $4.5 million) and (ii) 1,500,000 warrants ("Private Placement
Warrants") at a price of $1.00 per Private Placement Warrant (for a total
purchase price of $1.5 million), for an aggregate of $6.0 million to the
Sponsor, generating gross proceeds of $6.0 million.
Upon the closing of the Initial Public Offering and the Private Placement
(including the exercise of the over-allotment), $160.0 million ($10.00 per
Public Share) of the net proceeds of the sale of the Public Shares in the
Initial Public Offering and the Private Placement were placed in a trust account
("Trust Account") located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and held as cash or invested only in U.S.
"government securities," within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or in money market
funds meeting certain conditions under the Investment Company Act, which invest
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.
We paid a total of $3.2 million in underwriting discounts and commissions (not
including the $5.6 million deferred underwriting commission payable at the
consummation of the initial Business Combination) and approximately $0.6 million
for other costs and expenses related to our formation and the Initial Public
Offering.
We will have until August 6, 2022, to complete our initial Business Combination
(the "Combination Period"). If we do not complete a Business Combination by that
date, it will trigger the Company's automatic winding up, liquidation and
dissolution and, upon notice from us, the trustee of the Trust Account will
distribute the amount in the Trust Account to the Public Shareholders.
Concurrently, we shall pay, or reserve for payment, from funds not held in
trust, its liabilities and obligations, although we cannot assure that there
will be sufficient funds for such purpose. If there are insufficient funds held
outside the Trust Account for such purpose, our Sponsor has agreed that it will
be liable to ensure that the proceeds in the Trust Account are not reduced by
the claims of target businesses or claims of vendors or other entities that are
owed money by us for services rendered or contracted for or products sold to us
and which have not executed a waiver agreement. However, we cannot assure that
the liquidator will not determine that he or she requires additional time to
evaluate creditors' claims (particularly if there is uncertainty over the
validity or extent of the claims of any creditors). We also cannot assure that a
creditor or shareholder will not file a petition with the Cayman Islands Court
which, if successful, may result in our company's liquidation being subject to
the supervision of that court. Such events might delay distribution of some or
all of our assets to the Public Shareholders. The holders of the Insider Shares
prior to the Initial Public Offering (the "Initial Shareholders") have agreed to
waive their liquidation rights with respect to the Insider Shares and Private
Placement Shares held by them if we fail to complete a Business Combination
within the Combination Period. However, if the Initial Shareholders should
acquire Public Shares in or after the Initial Public Offering, they will be
entitled to liquidating distributions from the Trust Account with respect to
such Public Shares if we fail to complete a Business Combination within the
Combination Period. The underwriters have agreed to waive their rights to their
deferred underwriting commission held in the Trust Account in the event we do
not complete a Business Combination within the Combination Period and, in such
event, such amounts will be included with the funds held in the Trust Account
that will be available to fund the redemption of our Public Shares. In the event
of such distribution, it is possible that the per ordinary share value of the
residual assets remaining available for distribution (including Trust Account
assets) will be only $10.00 per ordinary share initially held in the Trust
Account.
20
Liquidity and Going Concern
As of December 31, 2021, we had approximately $1.8 million of cash in our
operating account and working capital of approximately $1.6 million.
Prior to the completion of the Initial Public Offering, our liquidity needs had
been satisfied through a payment of $28,750 from our Sponsor to exchange for the
issuance of 3,593,750 ordinary shares to the Sponsor, and a loan of $300,000
pursuant to a promissory note originally issued to our Sponsor on June 11, 2020
(the "Note"), which was repaid in full on August 7, 2020. Subsequent to the
consummation of the Initial Public Offering and Private Placement, our liquidity
needs have been satisfied with the proceeds from the consummation of the Private
Placement not held in the Trust Account. In addition, in order to finance
transaction costs in connection with a Business Combination, the Sponsor may,
but is not obligated to, provide us loans (the "Working Capital Loans"). As of
December 31, 2021 and 2020, there were no amounts outstanding under any Working
Capital Loans.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet its needs through the earlier of the
consummation of a Business Combination or one year from this filing. Over this
time period, we will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Business Combination. We plan to
complete a business combination by the mandatory liquidation date. However, in
connection with our assessment of going concern considerations in accordance
with FASB Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern," we have
determined that the mandatory liquidation and subsequent dissolution raises
substantial doubt about our ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after August 6, 2022. The financial
statements do not include any adjustment that might be necessary if we are
unable to continue as a going concern.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the balance sheet. The financial statement does not include any adjustments that
might result from the outcome of this uncertainty.
Results of Operations
Our entire activity from inception to December 31, 2021 was for our formation,
preparation for our Initial Public Offering, and, since the closing of our
Initial Public Offering, a search for business combination candidates. 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 interest income on investments held in the Trust Account. We are
incurring expenses as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance).
For the year ended December 31, 2021, we had a net loss of approximately
$379,000 which consisted of approximately $275,000 in general and administrative
expenses and related party administrative fees of $120,000, partially offset by
approximately $16,000 of net income on the investments held in the Trust
Account.
For the period from May 25, 2020 (inception) through December 31, 2020, we had a
net loss of approximately $174,000, which consisted of approximately $130,000 in
general and administrative expenses and related party administrative fees of
$50,000, partially offset by approximately $6,000 of net income on the
investments held in the Trust Account.
Related Party Transactions
Insider Shares
On June 11, 2020, we issued 3,593,750 ordinary shares to the Sponsor (the
"Insider Shares") for an aggregate purchase price of $28,750. On August 3, 2020,
we effected a share dividend of 0.113043478 ordinary shares for each outstanding
share (an aggregate of 406,250 ordinary shares), resulting in an aggregate of
4,000,000 ordinary shares outstanding. All shares and associated amounts have
been retroactively restated to reflect the share dividend. The holders of the
Insider Shares had agreed to forfeit up to an aggregate of 521,739 Insider
Shares, on a pro rata basis, to the extent that the option to purchase
additional ordinary shares is not exercised in full by the underwriters. On
August 6, 2020, the underwriters fully exercised the over-allotment option;
thus, the 521,739 Insider Shares were no longer subject to forfeiture.
21
The Initial Shareholders have agreed not to transfer, assign or sell any of
their Insider Shares (except to certain permitted transferees) until, with
respect to 50% of the Insider Shares, the earlier of six months after the date
of the consummation of the initial Business Combination and the date on which
the closing price of our ordinary shares equals or exceeds $12.50 per ordinary
share for any 20 trading days within a 30-trading day period following the
consummation of the initial Business Combination, and, with respect to the
remaining 50% of the Insider Shares, six months after the date of the
consummation of the initial Business Combination, or earlier in each case if,
subsequent to the initial Business Combination, we complete a liquidation,
merger, stock exchange or other similar transaction which results in all of the
shareholders having the right to exchange their ordinary shares for cash,
securities or other property.
Related Party Loans
On June 11, 2020, our Sponsor agreed to loan us up to $300,000 to be used for
the payment of costs related to the Initial Public Offering pursuant to the
Note. The Note was non-interest bearing, unsecured and due on the date we
consummate the Initial Public Offering. We borrowed $300,000 under the Note, and
repaid the Note in full on August 7, 2020.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Initial Shareholders may, but are not obligated to, loan us the
Working Capital Loans, from time to time or at any time, in whatever amount they
deem reasonable in their sole discretion. Each loan would be evidenced by a
promissory note. The notes would either be paid upon consummation of the initial
Business Combination, without interest, or, at the lender's discretion, up to
$500,000 of such loans may be converted upon consummation of the Business
Combination into additional private warrants at a price of $1.00 per warrant. If
we do not complete a Business Combination within the Combination Period, the
Working Capital Loans will be repaid only from amounts remaining outside the
Trust Account, if any. The warrants would be identical to the Private Placement
Warrants. As of December 31, 2021 and 2020, the Company had no borrowings under
the Working Capital Loans.
Administrative Services Agreement
Commencing on the date of our prospectus, we agreed to pay the Sponsor a total
of $10,000 per month for office space and certain office and secretarial
services. Upon completion of the Business Combination or our liquidation, we
will cease paying these monthly fees. For the year ended December 31, 2021 and
the period from May 25, 2020 (inception) through December 31, 2020, we incurred
$120,000 and $50,000 in expenses for these services, respectively.
Contractual Obligations
Registration Rights
The holders of the Insider Shares, Private Placement Shares, Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital
Loans (and any ordinary shares issuable upon the exercise of the Private
Placement Warrants) are entitled to registration rights pursuant to a
registration rights agreement. The holders of a majority of these securities are
entitled to make up to two demands that we register such securities. The holders
of the majority of the Insider Shares can elect to exercise these registration
rights at any time commencing three months prior to the date on which these
ordinary shares are to be released from escrow. The holders of a majority of the
Private Placement Shares, Private Placement Warrants or warrants that may be
issued upon conversion of Working Capital Loans made to us can elect to exercise
these registration rights at any time after we consummate a Business
Combination. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to our
consummation of the initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
22
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the prospectus to
purchase up to 2,086,956 additional ordinary shares at the Initial Public
Offering price less the underwriting discounts and commissions. On August 6,
2020, the underwriters fully exercised the over-allotment option.
The underwriters were entitled to an underwriting discount of $0.20 per share,
or $3.2 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, the underwriters will be entitled to a deferred
underwriting commission of $0.35 per share, or $5.6 million in the aggregate
since the underwriters' over-allotment option was exercised in full. 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.
Purchase Agreement
Our Sponsor has entered into an agreement with us to purchase an aggregate of
2,500,000 of our ordinary shares or their equivalent in the securities of a
target company for an aggregate purchase price of $25.0 million prior to,
concurrently with, or following the closing of our Business Combination, either
in the open market transaction (to the extent permitted by law) or in a private
placement. The capital from such transaction may be used as part of the
consideration to the sellers in our initial Business Combination, and any excess
capital from such private placement would be used for working capital in the
post-transaction company.
Critical Accounting Policies
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities and generally have
a readily determinable fair value, or a combination thereof. When the Company's
investments held in the Trust Account are comprised of U.S. government
securities, the investments are classified as trading securities. When our
investments held in the Trust Account are comprised of money market funds, the
investments are recognized at fair value. Trading securities and investments in
money market funds are presented on the balance sheets at fair value at the end
of each reporting period. Gains and losses resulting from the change in fair
value of these securities are included in interest income from investments held
in Trust Account in the accompanying statements of operations. The estimated
fair values of investments held in the Trust Account are determined using
available market information.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption (if any) are classified as
liability instruments and are measured at fair value. Conditionally redeemable
ordinary shares (including 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, ordinary shares are classified as
shareholders' equity. Our 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 of December 31, 2021 and 2020,
16,000,000 ordinary shares subject to possible redemption are presented as
temporary equity, outside of the shareholders' equity section of the
accompanying balance sheets.
Under ASC 480-10-S99, 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, we
recognized the accretion from initial book value to redemption amount, which
resulted in charges against additional paid-in capital (to the extent available)
and accumulated deficit.
23
Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net income (loss) per ordinary share is calculated by
dividing the net income (loss) by the weighted average number of ordinary shares
outstanding for the respective period.
The calculation of diluted net income (loss) per ordinary share does not
consider the effect of the Private Placement Warrants to purchase 1,500,000
ordinary shares since their exercise is contingent upon future events and their
inclusion would be anti-dilutive under the treasury stock method. As a result,
diluted net loss per share is the same as basic net loss per share for year
ended December 31, 2021 and the period from May 25, 2020 (inception) through
December 31, 2020. Accretion associated with the redeemable ordinary shares is
excluded from earnings per share as the redemption value approximates fair
value.
Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
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
(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.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("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. We adopted ASU 2020-06 on January 1, 2021 ( using the modified
retrospective method for transition. Adoption of the ASU did not impact our
financial position, results of operations or cash flows.
Our management does not believe there are any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our financial statements.
© Edgar Online, source Glimpses
HEAH SCIE 