References to the "Company," "Orion Biotech Opportunities Corp.," "Orion" "our,"
"us" or "we" refer to Orion Biotech Opportunities Corp. The following discussion
and analysis of the Company's financial condition and results of operations
should be read in conjunction with the 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 Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act. We have based these forward-looking statements on our
current expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements 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 "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such forward-looking statements relate to
future events or future performance, but reflect management's current beliefs,
based on information currently available. A number of factors could cause actual
events, performance or results to differ materially from the events, performance
and results discussed in the forward-looking statements.
Overview
The Company is a blank check company incorporated as a Cayman Islands exempted
company on February 5, 2021. The Company was incorporated for the purpose of
effecting a Business Combination. The Company is an early stage and emerging
growth company and, as such, the Company is subject to all of the risks
associated with early stage and emerging growth companies.
As of December 31, 2022, the Company had not yet commenced operations. All
activity for the period from February 5, 2021 (inception) through December 31,
2022 relates to the Company's formation and the Initial Public Offering, which
is described below. The Company will not generate any operating revenues until
after the completion of its initial business combination, at the earliest. The
Company generates non-operating income in the form of interest income from the
proceeds derived from the Initial Public Offering. The Company has selected
December 31 as its fiscal year end.
The registration statement for the Company's Initial Public Offering was
declared effective on April 28, 2021. On May 17, 2021, the Company consummated
its Initial Public Offering generating gross proceeds of $200.0 million, and
incurring offering costs of approximately $11.6 million, of which $7.0 million
was for deferred underwriting commissions. The Company granted the underwriter a
45-day option to purchase up to an additional 3,000,000 Units at the Initial
Public Offering price to cover over-allotments, if any. On June 28, 2021, the
over-allotment option expired and was not exercised.
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the Private Placement at a price of $1.50 per Private Placement
Warrant to the sponsor, generating proceeds of $6.5 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$200.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in
the Initial Public Offering and of the Private Placement Warrants in the Private
Placement were invested in Government Securities that were placed in the Trust
Account with Continental Stock Transfer & Trust Company acting as trustee, until
the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account as described below.
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The Company's management has broad discretion with respect to the specific
application of the net proceeds of its Initial Public Offering and the sale of
the Private Placement Warrants, although substantially all of the net proceeds
are intended to be applied generally toward consummating a Business Combination.
The Company's initial Business Combination must be with one or more operating
businesses or assets with a fair market value equal to at least 80% of the net
assets held in the Trust Account (excluding the deferred underwriting
commissions and taxes payable on the income earned on the Trust Account) at the
time the Company signs a definitive agreement in connection with the initial
Business Combination. However, the Company will only complete a Business
Combination if the post-Business Combination company owns or acquires 50% or
more of the outstanding voting securities of the target business or otherwise
acquires a controlling interest in the target business sufficient for it not to
be required to register as an investment company under the Investment Company
Act.
The Company will provide the "public shareholders" with the opportunity to
redeem all or a portion of their Public Shares upon the completion of a Business
Combination either (i) in connection with a general meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to
whether the Company will seek shareholder approval of a Business Combination or
conduct a tender offer will be made by the Company. The public shareholders will
be entitled to redeem their Public Shares for a pro rata portion of the amount
then in the Trust Account (initially at $10.00 per share). The per-share amount
to be distributed to public shareholders who redeem their Public Shares will not
be reduced by the deferred underwriting commissions the Company will pay to the
underwriter. These Public Shares were recorded at a redemption value and
classified as temporary equity upon the completion of the Initial Public
Offering, in accordance with ASC 480. In such case, the Company will proceed
with a Business Combination if the Company has net tangible assets of at least
$5,000,001 upon such consummation of a Business Combination and a majority of
the shares voted are voted in favor of the Business Combination. If a
shareholder vote is not required by applicable law or stock exchange listing
requirements and the Company does not decide to hold a shareholder vote for
business or other reasons, the Company will, pursuant to the Amended and
Restated Memorandum and Articles of Association, conduct the redemptions
pursuant to the tender offer rules of the SEC, and file tender offer documents
with the SEC prior to completing a Business Combination. If, however, a
shareholder approval of the transactions is required by applicable law or stock
exchange listing requirements, or the Company decides to obtain shareholder
approval for business or other reasons, the Company will offer to redeem shares
in conjunction with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. Additionally, each public shareholder may
elect to redeem their Public Shares irrespective of whether they vote for or
against the proposed transaction or whether they were a public shareholder on
the record date for the general meeting held to approve the proposed
transaction. If the Company seeks shareholder approval in connection with a
Business Combination, the Initial Shareholders agreed to vote their Founder
Shares and any Public Shares purchased during or after the Initial Public
Offering in favor of a Business Combination. In addition, the Initial
Shareholders agreed to waive their redemption rights with respect to their
Founder Shares and Public Shares in connection with the completion of a Business
Combination. In addition, the Company agreed not to enter into a definitive
agreement regarding an initial Business Combination without the prior consent of
the sponsor.
Notwithstanding the foregoing, the Company's Amended and Restated Memorandum and
Articles of Association will provide that a public shareholder, together with
any affiliate of such shareholder or any other person with whom such shareholder
is acting in concert or as a "group" (as defined under Section 13 of the
Exchange Act), will be restricted from redeeming its shares with respect to more
than an aggregate of 15% or more of the Class A ordinary shares sold in the
Initial Public Offering, without the prior consent of the Company.
The Company's sponsor, officers, and directors agreed not to propose an
amendment to the Company's Amended and Restated Memorandum and Articles of
Association (A) to modify the substance or timing of the Company's obligation to
allow the redemption of its Public Shares in connection with a Business
Combination or to redeem 100% of its Public Shares if the Company does not
complete a Business Combination the Combination Period or (B) with respect to
any other provisions relating to shareholders' rights or pre-initial business
combination activity, unless the Company provides the public shareholders with
the opportunity to redeem their Class A ordinary shares in conjunction with any
such amendment.
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If the Company is unable to complete a Business Combination within the
Combination Period, the Company 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 Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest (which interest shall be net of taxes payable and up
to $100,000 of interest to pay dissolution expenses), divided by the number of
then issued and outstanding Public Shares, which redemption will completely
extinguish public shareholders' rights as shareholders (including the right to
receive further liquidation distributions, if any) and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the
remaining shareholders and the board of directors, liquidate and dissolve,
subject, in the case of clauses (ii) and (iii), to the Company's obligations
under Cayman Islands law to provide for claims of creditors and in all cases
subject to the other requirements of applicable law.
In connection with the redemption of 100% of the Company's outstanding Public
Shares for a portion of the funds held in the Trust Account, each holder will
receive a full pro rata portion of the amount then in the Trust Account, plus
any pro rata interest earned on the funds held in the Trust Account and not
previously released to the Company to pay the Company's taxes payable (less
taxes payable and up to $100,000 of interest to pay dissolution expenses).
The Initial Shareholders agreed to waive their liquidation rights with respect
to the Founder Shares if the Company fails 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 the Company fails to complete a Business Combination
within the Combination Period. The underwriter agreed to waive its rights to its
deferred underwriting commission held in the Trust Account in the event the
Company does 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 the Company's
Public Shares. In the event of such distribution, it is possible that the per
share value of the residual assets remaining available for distribution in the
Trust Account will be less than the $10.00 per share initially held in the Trust
Account. In order to protect the amounts held in the Trust Account, the sponsor
agreed that it will be liable to the Company if and to the extent any claims by
a third party for services rendered or products sold to the Company, or a
prospective target business with which the Company has entered into a written
letter of intent, confidentiality or other similar agreement or business
combination agreement, reduce the amount of funds in the Trust Account to below
the lesser of (i) $10.00 per public share and (ii) the actual amount per public
share held in the trust account as of the date of the liquidation of the Trust
Account, if less than $10.00 per share due to reductions in the value of the
trust assets, less taxes payable, provided that such liability will not apply to
any claims by a third party or prospective target business who executed a waiver
of any and all rights to the monies held in the Trust Account (whether or not
such waiver is enforceable) nor will it apply to any claims under the Company's
indemnity of the underwriter of the Initial Public Offering against certain
liabilities, including liabilities under the Securities Act. In the event that
an executed waiver is deemed to be unenforceable against a third party, the
sponsor will not be responsible to the extent of any liability for such
third-party claims. The Company will seek to reduce the possibility that the
sponsor will have to indemnify the Trust Account due to claims of creditors by
endeavoring to have vendors, service providers (except the Company's independent
registered public accounting firm), prospective target businesses or other
entities with which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to monies
held in the Trust Account. There can be no guarantee that the Company will be
successful in obtaining such waivers from its targeted vendors and service
providers.
Liquidity and Going Concern
As of December 31, 2022, the Company had approximately $267,000 in its operating
bank account and working capital of approximately $372,000.
The Company's liquidity needs prior to the consummation of the Initial Public
Offering were satisfied through the payment of $25,000 from the sponsor to cover
certain expenses on the Company's behalf in exchange for issuance of Founder
Shares, a loan from the sponsor of approximately $120,000 under the Note. The
Company repaid the Note in full upon closing of the Initial Public Offering.
Subsequent to the consummation of the Initial Public Offering, the Company's
liquidity has been satisfied through the net proceeds from the Private Placement
held outside of the Trust Account. In addition, in order to finance transaction
costs in connection with a Business Combination, the sponsor or an affiliate of
the sponsor, or certain of the Company's officers and directors may, but are not
obligated to, provide the Company Working Capital Loans (as defined in Note 4).
As of December 31, 2022 and 2021, there were no amounts outstanding under any
Working Capital Loan.
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In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," we have until May 17, 2023 to consummate the proposed Business
Combination. We do not have adequate liquidity to sustain operations, however,
management believes that we have access to funds pursuant to a commitment letter
from the Sponsor that will enable it to sustain operations until it completes
its initial Business Combination. If a business combination is not consummated
by this date, there will be a mandatory liquidation and subsequent dissolution.
Management has determined that the liquidity needs, mandatory liquidation
(should a business combination not occur), and potential 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 May 17, 2023. We intend to complete the
proposed Business Combination before the mandatory liquidation date. However,
there can be no assurance that we will be able to consummate any business
combination by May 17, 2023.
Risk and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
financial statements. The specific impact on the Company's financial condition,
results of operations, and cash flows is also not determinable as of the date of
these financial statements.
Results of Operations
Our entire activity from February 5, 2021 (inception) through December 31, 2022
was in preparation for our formation and the Initial Public Offering and
subsequent to the Initial Public Offering, search for an initial Business
Combination. We will not be generating any operating revenues until the closing
and completion of our initial Business Combination.
For the year ended December 31, 2022, we had a net income of approximately $8.8
million, which consisted of approximately $6.8 million in non-operating gain
resulting from the change in fair value of derivative liabilities, and
approximately $2.9 million of income from investments held in the Trust Account,
offset by approximately $780,000 of general and administrative expenses, and
approximately $120,000 of general and administrative expenses to related party.
For the period from February 5, 2021 (inception) through December 31, 2021, we
had a net loss of approximately $724,000, which consisted of approximately
$554,000 of general and administrative expenses, and approximately $75,000 of
general and administrative expenses to related party, approximately $239,000 in
offering cost associated with derivative warrant liabilities, and approximately
$107,000 loss on forward purchase agreement, offset by approximately $242,000
from change in fair value of derivative liabilities, and approximately $9,000 of
income from investments held in the trust account.
Other Contractual Obligations
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants, Class A ordinary
shares underlying the Private Placement Warrants and warrants that may be issued
upon conversion of Working Capital Loans (and any Class A ordinary shares
issuable upon the exercise of the Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans) are entitled to
registration rights pursuant to the registration and shareholder rights
agreement. The holders of these securities are entitled to make up to three
demands, excluding short form demands, that the Company registers such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to the
completion of the initial Business Combination. The Company will bear the
expenses incurred in connection with the filing of any such registration
statements.
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Pursuant to the forward purchase agreement, the Company has agreed to use
reasonable best efforts (i) to file within 30 days after the closing of the
initial business combination a registration statement with the SEC for a
secondary offering of the forward purchase shares and the forward purchase
warrants (and underlying Class A ordinary shares), (ii) to cause such
registration statement to be declared effective promptly thereafter but in no
event later than sixty (60) days after the initial filing, (iii) to maintain the
effectiveness of such registration statement until the earliest of (A) the date
on which the sponsor or its assignees cease to hold the securities covered
thereby and (B) the date all of the securities covered thereby can be sold
publicly without restriction or limitation under Rule 144 under the Securities
Act and (iv) after such registration statement is declared effective, causes the
Company to conduct firm commitment underwritten offerings, subject to certain
limitations. In addition, the forward purchase agreement provides for
"piggy-back" registration rights to the holders of forward purchase securities
to include their securities in other registration statements filed by the
Company.
Underwriting Agreement
The Company granted the underwriter a 45-day option from the date of this
prospectus to purchase up to 3,000,000 additional Units at the Initial Public
Offering price less the underwriting discounts and commissions. On June 28,
2021, the over-allotment option expired and was not exercised.
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
$4.0 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, $0.35 per unit, or $7.0 million in the aggregate will be
payable to the representative for deferred underwriting commissions. The
deferred fee will become payable to the representative from the amounts held in
the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
Forward Purchase Agreement
On May 12, 2021, the Company entered the Forward Purchase Agreement with the
sponsor, pursuant to which the sponsor agreed to purchase up to $20,000,000 of
Forward Purchase Units. Each Forward Purchase Unit will consist of one Forward
Purchase Share and one-fifth of one Forward Purchase Warrant and will be sold at
a purchase price of $10.00 per Forward Purchase Unit in a private placement
concurrently with the closing of the initial Business Combination. The
obligations of the sponsor under the Forward Purchase Agreement do not depend on
whether any Class A ordinary shares held by public shareholders are redeemed by
the Company and the amount of Forward Purchase Units sold pursuant to the
Forward Purchase Agreement will be subject to the sponsor's sole discretion. The
proceeds from the sale of the Forward Purchase Units may be used as part of the
consideration to the sellers in the initial Business Combination, expenses in
connection with the initial Business Combination or for working capital in the
post-transaction company. The Forward Purchase Shares will generally be
identical to the Class A ordinary shares included in the Units being sold in the
Initial Public Offering, except that they will be entitled to certain
registration rights. The Forward Purchase Warrants will have the same terms as
the Private Placement Warrants so long as they are held by MSD Partners or its
permitted assignees and transferees.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these 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 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:
Derivative Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants and forward purchase agreement, to determine if
such instruments are derivatives or contain features that qualify as embedded
derivatives, pursuant to ASC 480 and ASC 815. The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
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The Public Warrants and the Private Placement Warrants are recognized as
derivative liabilities in accordance with ASC 815. Accordingly, we recognized
the warrant instruments as liabilities at fair value and adjusts the carrying
value of the instruments to fair value at each reporting period until they are
exercised. The estimated fair value of the Public Warrants issued in connection
with the Initial Public Offering were initially estimated using a Monte Carlo
simulation model. As the transfer of Private Placement Warrants to anyone who is
not a permitted transferee would result in the Private Placement Warrants having
substantially the same terms as the Public Warrants, we determined that the fair
value of each Private Placement Warrant is equivalent to that of each Public
Warrant. The fair value of the Warrants as of December 31, 2022 is based on
observable listed prices for such warrants. The determination of the fair value
of the warrant liability may be subject to change as more current information
becomes available and accordingly the actual results could differ significantly.
Derivative warrant liabilities are classified as non-current liabilities as
their liquidation is not reasonably expected to require the use of current
assets or require the creation of current liabilities.
We entered into a forward purchase agreement with forward purchasers pursuant to
which the forward purchasers will purchase up to $20,000,000 of forward purchase
units at a price equal to $10.00 per unit, in a private placement that will
close simultaneously with the closing of the Initial Business Combination. Each
forward purchase unit will consist of one Class A ordinary share and one-fifth
of one warrant to purchase one Class A ordinary share, with such warrants having
the same terms as the Private Placement Warrants. The forward purchase agreement
is recognized as a derivative liability in accordance with ASC 815. Accordingly,
the Company recognizes the instrument as a liability at fair value and adjusts
the instrument to fair value at each reporting period.
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 Initial Public Offering, 20,000,000 Class A ordinary shares
subject to possible redemption are presented as temporary equity, outside of the
shareholders' deficit section of the Company's balance sheets.
We recognized changes in redemption value immediately as they occur and adjusts
the carrying value of the Class A ordinary shares subject to possible redemption
to equal the redemption value at the end of each reporting period. This method
would view the end of the reporting period as if it were also the redemption
date for 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.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of shares. This presentation assumes a
business combination as the most likely outcome. 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.
The calculation of diluted net income (loss) per ordinary share does not
consider the effect of the warrants issued in connection with the Initial Public
Offering and the Private Placement to purchase an aggregate of 8,333,333 Class A
ordinary shares in the calculation of diluted income (loss) per share, because
their exercise is contingent upon future events and their inclusion would be
anti-dilutive under the treasury stock method. As a result, diluted net income
(loss) per share is the same as basic net income (loss) per share for the year
ended December 31, 2022 and for the period from February 5, 2021 (inception)
through December 31, 2021. Accretion associated with the redeemable Class A
ordinary shares is excluded from earnings per share as the redemption value
approximates fair value.
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Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. The Company is still
evaluating the impact of this pronouncement on the financial statements.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 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.
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