References to the "Company," "Omega Alpha SPAC," "our," "us" or "we" refer to
Omega Alpha SPAC. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited interim condensed 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We have based these forward-looking statements on
our current expectations, assumptions and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us. No assurance can be given that future results, levels
of activity, performance or achievements expressed or implied by such
forward-looking statements will be achieved, and actual results, levels of
activity, performance or achievements could be affected by one or more factors,
which could cause them to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "anticipate," "believe," "continue," "could,"
"estimate," "expect," "intends," "may," "might," "plan," "possible,"
"potential," "predict," "project," "should," "would" or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings. All subsequent written or oral forward-looking statements
attributable to us or persons acting on our behalf are qualified in their
entirety by this paragraph.
Overview
We are a blank check company incorporated on October 26, 2020 as a Cayman
Islands exempted company for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses. While we may pursue an acquisition
opportunity in any business or industry, we are focusing on the healthcare or
healthcare-related industries to capitalize on the expertise and capabilities of
our management team in order to create long-term shareholder value. In
particular, we are targeting North American or European companies in the
biotechnology sector where our management has extensive investment experience.
Our sponsor is Omega Alpha Management, a Cayman Islands limited liability
company (the "Sponsor").
The registration statement for our initial public offering (the "Initial Public
Offering") was declared effective on January 6, 2021. On January 11, 2021, we
consummated the Initial Public Offering of 13,800,000 Class A ordinary shares at
$10.00 per share, generating gross proceeds of $138.0 million, and incurring
offering costs of approximately $8.13 million, inclusive of approximately $4.83
million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement (the "Private Placement") of 501,000 Class A ordinary
shares (the "Private Placement Shares") at a price of $10.00 per Private
Placement Share to the Sponsor, generating gross proceeds of approximately
$5.01 million.
Upon the closing of the Initial Public Offering and Private Placement, $138.0
million ($10.00 per share) of the net proceeds of the Initial Public Offering
and certain of the proceeds of the Private Placement were placed in the trust
account (the "Trust Account"), located in the United States at J.P. Morgan Chase
Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee,
and will only be invested 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 any open-ended investment company that holds itself out as a
money market fund selected by us meeting the conditions of paragraphs (d)(2),
(d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by
us, until the earlier of: (i) the completion of a business combination and (ii)
the distribution of the assets held in the Trust Account. Our management has
broad discretion with respect to the specific application of the net proceeds of
the Initial Public Offering and the Private Placement, although substantially
all of the net proceeds are intended to be applied toward consummating a
business combination. As of September 30, 2021, the balance of the Trust Account
was approximately $138.0 million.
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If we are unable to complete a business combination within 24 months from the
closing of the Initial Public Offering, or January 11, 2023, we will (i) cease
all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but not more than ten business days thereafter, redeem the
Class A ordinary shares sold in our Initial Public Offering (the "Public
Shares"), at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account including interest earned on the funds held
in the Trust Account and not previously released to us to pay for our income
taxes (less up to $100,000 of interest to pay dissolution expenses), divided by
the number of the then outstanding Public Shares, which redemption will
completely extinguish the rights of the holders of our Public Shares, including
our Sponsor and management team to the extent they purchase Public Shares (the
"Public Shareholders") as shareholders (including the right to receive further
liquidating distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of our remaining shareholders and our board of directors, proceed to
commence a voluntary liquidation and thereby a formal dissolution of our
company, subject in each case to our obligations under Cayman Islands law to
provide for claims of creditors and the requirements of other applicable law.
Results of Operations
Our entire activity from our inception on October 26, 2020, up to January 11,
2021 was in preparation for and for the consummation of the Initial Public
Offering. Since the closing of our Initial Public Offering, our activity has
been limited to evaluating and searching for business combination candidates. As
of September 30, 2021, we had not identified any business combination target. We
generate small amounts of non-operating income in the form of interest income on
cash and marketable securities held in the Trust Account. Interest income is not
expected to be significant in view of current low interest rates on risk-free
investments (treasury securities). We expect to incur increased expenses as a
result of being a public company (for legal fees; financial reporting;
accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2021, we had net loss of approximately
$170,000, which consisted of approximately $174,000 in general and
administrative costs, partly offset by approximately $3,000 investment income
from our Trust Account.
For the nine months ended September 30, 2021, we had net loss of approximately
$652,000, which consisted of approximately $662,000 in general and
administrative costs, partly offset by approximately $10,000 investment income
from our Trust Account.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $642,000 in our operating bank
account, working capital of approximately $1.0 million, and approximately
$10,000 of investment income available in the Trust Account for our tax
obligations, to the extent any.
Our liquidity needs to date have been satisfied through a contribution of
$25,000 from our Sponsor to cover certain expenses in exchange for our issuance
of certain Class B ordinary shares, par value $0.0001 per share (the "Founder
Shares"), a loan of approximately $98,000 through December 31, 2020 and
approximately $145,000 in total prior to the Initial Public Offering from our
Sponsor pursuant to a promissory note (the "Note"), and since the Initial Public
Offering, the proceeds from the consummation of the Private Placement not held
in the Trust Account. We fully repaid the Note on January 13, 2021. No future
borrowings are permitted under this Note. In addition, in order to finance
transaction costs in connection with a business combination, our Sponsor or an
affiliate of our Sponsor, or our officers and directors may, but are not
obligated to, provide us working capital loans. As of September 30, 2021 and
December 31, 2020, there were no amounts outstanding under any working capital
loan.
We intend to use substantially all of the net proceeds of the Initial Public
Offering, including the funds held in the Trust Account (including interest
accrued thereon), in connection with our business combination and to pay our
expenses relating thereto, including a deferred underwriting commission payable
to the underwriters from our Initial Public Offering upon consummation of our
initial business combination. To the extent that our capital stock is used in
whole or in part as consideration to effect our initial business combination,
the remaining proceeds held in the Trust Account, as well as any other net
proceeds not expended, will be used as working capital to finance the operations
of the target business. Such working capital funds could be used in a variety of
ways including continuing or expanding the target business' operations, for
strategic acquisitions and for marketing, research and development of existing
or new products. Such funds could also be used to repay any operating expenses
or finders' fees which we may incur prior to the completion of our initial
business combination, if the funds available to us outside of the Trust Account
are insufficient to cover such expenses.
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Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor,
or our officers and directors to meet our 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.
If our estimates of the costs of undertaking the aforementioned activities are
less than the actual amount necessary to do so, we may have insufficient funds
available to operate our business prior to our initial business combination.
Moreover, we may need to obtain additional financing either to consummate our
initial business combination or because we become obligated to convert a
significant number of our Public Shares upon consummation of our initial
business combination, in which case we may issue additional securities or incur
debt in connection with such business combination. Subject to compliance with
applicable securities laws, we would only consummate such financing
simultaneously with the consummation of our initial business combination.
Following our initial business combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
Contractual Obligations
As of September 30, 2021, we did not have any lease obligations or purchase
obligations.
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Shares and the Private
Placement Shares that may be issued upon conversion of working capital loans
were and will be entitled to registration rights pursuant to a registration and
shareholder rights agreement signed upon consummation of our Initial Public
Offering. The holders of these securities are entitled to make up to three
demands, excluding short form demands, that we register such securities. In
addition, the holders have certain "piggy-back" registration rights with respect
to registration statements filed subsequent to our completion of the business
combination. However, the registration and shareholder rights agreement provides
that we will not permit any registration statement filed under the Securities
Act to become effective until termination of the applicable lock-up period,
which occurs (i) in the case of the Founder Shares, in accordance with the
letter agreement our initial shareholders entered into and (ii) in the case of
the Private Placement Shares, 30 days after the completion of our business
combination. We will bear the expenses incurred in connection with the filing of
any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the final prospectus relating
to our Initial Public Offering to purchase up to 1,800,000 additional Public
Shares to cover over-allotments, if any, at our Initial Public Offering price
less the underwriting discounts and commissions. The underwriters fully
exercised the over-allotment option on January 7, 2021.
The underwriters were entitled to an underwriting discount of $0.20 per Public
Share, or approximately $2.8 million, paid upon the closing of our Initial
Public Offering. In addition, $0.35 per Public Share, or approximately
$4.8 million in the aggregate will be payable to the underwriters for deferred
underwriting commissions upon the completion of our business combination. The
deferred fee is a liability that is considered not current for accounting
purposes, as we have not yet identified any target for a business combination,
and such 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.
Risks and Uncertainties
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 these unaudited condensed financial
statements. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as
provided for in Item 303(b) of Regulation S-K.
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Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with GAAP. The preparation of our unaudited
condensed financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
the disclosure of contingent assets and liabilities in our unaudited condensed
financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. We have identified the following as our critical
accounting policies:
Investments Held in the Trust Account
Our portfolio of investments 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 our 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 is included in
income from investments held in Trust Account in the accompanying unaudited
condensed statements of operations. The estimated fair values of investments
held in the Trust Account are determined using available market information.
Additionally, investments held in the Trust Account are classified as assets
that are not current, as such funds are restricted from use until a business
combination, which we have until January 11, 2023, to complete.
Class A ordinary shares subject to possible redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A 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, Class A ordinary shares are classified as shareholders' equity. Our Class
A 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 September 30, 2021, 13,800,000 Class A ordinary shares
subject to possible redemption are presented as temporary equity, outside of the
shareholders' equity section of our balance sheets. There were no Class A
ordinary shares outstanding as of December 31, 2020.
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.
Net Income (Loss) Per Ordinary Share
We comply with the accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of ordinary shares: Class A ordinary
shares and Class B ordinary shares. Income and losses are shared pro rata
between the two classes of ordinary shares. Net income (loss) per ordinary share
is calculated by dividing the net income (loss) by the weighted average ordinary
shares outstanding for the respective period.
At September 30, 2021, we did not have any dilutive securities and other
contracts that could potentially be exercised or converted into ordinary shares
and then share in our earnings. As a result, diluted net loss per ordinary share
is the same as basic net loss per ordinary share for the three and nine months
ended September 30, 2021. Accretion associated with the redeemable Class A
ordinary shares is excluded from earnings per ordinary share as the redemption
value approximates fair value.
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Recent Accounting Pronouncements
In August 2020, the FASB issued 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. Adoption of the ASU
did not impact our financial position, results of operations or cash flows.
We do not believe that any recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material impact on our
unaudited condensed financial statements.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected 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, our
unaudited condensed financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public company
effective dates.
As an "emerging growth company", we are not 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 Public Company
Accounting Oversight Board (the "PCAOB") regarding mandatory audit firm rotation
or a supplement to the auditor's report providing additional information about
the audit and the unaudited condensed 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.
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