References to the "Company," "we," "us," "our," or "Revelation" refer to
Revelation Biosciences, Inc. (f/k/a Petra Acquisition, Inc.). The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto which are included in "Item 8. Financial
Statements and Supplementary Data" of this Annual Report on Form 10-K. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form
10-K.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form
10-K including, without limitation, statements under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. When used in
this Form 10-K, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of certain factors detailed in our filings with the SEC.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Annual Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
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Overview
We are a former blank check company formed under the laws of the State of
Delaware on November 20, 2019 for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or other
similar business combination with one or more businesses. We completed our IPO
on October 13, 2020 and our Business Combination on January 10, 2022.
All activity through December 31, 2021 relates to our formation, IPO, and search
for a prospective initial business combination target.
Recent Developments
On the Closing Date, Petra consummated the previously announced Business
Combination, pursuant to the terms of the Business Combination Agreement, by and
among Petra, Merger Sub, and Old Revelation. Pursuant to the Business
Combination Agreement, on the Closing Date, (i) Merger Sub merged with and into
Old Revelation, with Old Revelation as the surviving company in the Merger, and,
after giving effect to such Merger, Old Revelation was renamed Revelation
Biosciences Sub, Inc. and became a wholly-owned subsidiary of Petra and (ii)
Petra changed its name to Revelation Biosciences, Inc.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the period from November 20, 2019 (inception) through
December 31, 2021 were organizational activities, those necessary to consummate
the IPO, described below, searching for a target company for a business
combination, and the proposed acquisition of Old Revelation. At the consummation
of the IPO, cash amounting to $10.10 per share issued in the IPO was deposited
into a trust account for the shares of common stock subject to redemption (the
"Trust Account"). We generate non-operating income from interest earned on cash
held in the Trust Account, interest earned on cash and cash equivalents held in
our operating account and gains or losses from marketable securities held in our
operating account. We incur expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for
due diligence expenses.
For the year ended December 31, 2021, we had a net loss of $2,130,625 which
consisted of interest income of $222, interest expense of $41,750, realized loss
on marketable securities of $17,356, as well as interest income from cash held
in the Trust Account of $6,896, a change in the fair value of the warrant
liability of $1,009,620, and operating costs of $3,088,248, which were primarily
professional fees and insurance expense.
For the year ended December 31, 2020, we had a net loss of $1,630,500 which
consisted of interest income of $9,325 and unrealized loss on marketable
securities of $1,831, as well as interest income from cash held in the Trust
Account of $1,590, a change in fair value of warrant liability of $1,494,092,
and operating costs of $145,492 which were primarily professional fees and
insurance expense.
We classify the Private Warrants issued in our private placement in connection
with the IPO as liabilities at their fair value and adjust the warrant
instruments to fair value at each reporting period. These liabilities are
subject to re-measurement at each balance sheet date until exercised, and any
change in fair value is recognized in our statements of operations.
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Liquidity and Capital Resources
For the year ended December 31, 2020, cash used in operating activities was
$216,664. The net loss of $1,630,500 was affected by interest earned on cash
held in the Trust Account of $1,590, an unrealized loss on marketable securities
of $1,831 and a change in the fair value of the warrant liability of $1,494,092.
Changes in operating assets and liabilities was $80,497 from operating
activities.
For the year ended December 31, 2021, cash used in operating activities was
$725,618. The net loss of $2,130,625 was affected by interest earned on cash
held in the Trust Account of $6,896 and a change in the fair value of the
warrant liability of $1,009,620. Changes in operating assets and liabilities was
$2,421,523 from operating activities.
In October 2020, we consummated our IPO and sold a total of 7,281,151 units.
Each unit consists of one share of common stock of the Company, par value $0.001
per share, and one redeemable warrant of the Company, with each warrant
entitling the holder thereof to purchase one share of common stock for $11.50
per share (the "Units"). The Units were sold at a price of $10.00 per Unit,
generating gross proceeds to the Company of $72,781,510. Simultaneously with the
IPO, the Company consummated the sale of 3,233,446 Private Warrants at a price
of $1.00 per Private Warrant, generating total proceeds of $3,233,446. Each
Private Warrant entitles the holder thereof to purchase one share of common
stock for $11.50 per share.
Following the IPO and sale of Private Warrants, an aggregate amount of
$73,509,325 was placed in the Company's Trust Account established in connection
with the IPO. Transaction costs amounted to $4,366,890, consisting of
$3,450,000 of underwriting fees and $315,846 of other offering costs.
On October 13, 2021, we entered into three promissory notes payable for a total
of up to an aggregate principal amount of $750,000 with a minimum draw of
$50,000 (Promissory Notes Payable) with three Lenders (the Lenders). Such
Promissory Notes Payable are being made for the purpose of funding a
contribution of cash for each share of common stock issued in Petra's IPO that
was not redeemed in connection with the stockholder vote to approve the
extension of the deadline for us to complete an initial business combination, as
contemplated in the definitive proxy statement on Scheduled 14A filed by us with
the SEC on September 24, 2021. The Promissory Notes Payable will bear interest
at the rate of 2% per month on the outstanding balance of the Promissory Notes
Payable. The Promissory Notes Payable will be forgiven if we are unable to
consummate an initial business combination except to the extent of any funds
held outside of the Trust Account.
On October 27, 2021 the Company paid an aggregate of $25,698,161 in cash to
various Unit holders that elected to redeem 2,544,127 shares of the common stock
subject to redemption.
Between October 2021 and December 2021, three contributions in the amount of
$160,957 were deposited into the Trust Account for each share of common stock
issued in the Petra IPO that was not redeemed in connection with the stockholder
vote at the October 2021 Special Meeting. As of December 31, 2021, a total of
$482,871 has been deposited into the Trust Account.
As of December 31, 2021, we had cash equivalents held in the Trust Account of
$48,302,521. Interest income on the balance in the Trust Account may be used by
us to pay taxes. As of December 31, 2021, we have not withdrawn any amount of
interest earned on the Trust Account to pay our taxes.
Petra Acquisition, Inc. intended to use substantially all of the funds held in
the Trust Account, to acquire a target business and to pay our expenses relating
thereto, including a fee payable to LifeSci Capital LLC, Ladenburg Thalmann, and
Ingalls & Snyder LLC, and Northland Securities, Inc., upon consummation of our
initial business combination for assisting us in connection with our initial
business combination. To the extent that our capital stock is used in whole or
in part as consideration to effect a business combination, the remaining funds
held in the Trust Account 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 had incurred prior to the
completion of our business combination if the funds available to us outside of
the Trust Account were insufficient to cover such expenses.
As of December 31, 2021, we had cash and cash equivalents of $78,532. During the
year ended December 31, 2021, the Company received proceeds from the sale of
marketable securities of $525,287. Historically we have and intend to use any
and all funds held outside the Trust Account for identifying and evaluating
prospective acquisition candidates, performing business due diligence on
prospective target businesses, traveling to and from the offices, plants or
similar locations of prospective target businesses, reviewing corporate
documents and material agreements of prospective target businesses, selecting
the target business to acquire and structuring, negotiating and consummating the
business combination.
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Related Party Transactions
This information appears following "Item 13. Certain Relationships and Related
Person Transactions, and Director Independence" of this Annual Report and is
included herein by reference.
Off-balance sheet financing arrangements
We did not have any off-balance sheet arrangements as of December 31, 2021.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
We have engaged to LifeSci Capital LLC, Ladenburg Thalmann, and Ingalls & Snyder
LLC, and Northland Securities, Inc. (collectively, the "Advisors") as advisors
in connection with a Business Combination to assist us in holding meetings with
our shareholders to discuss the potential Business Combination and the target
business' attributes, introduce us to potential investors that are interested in
purchasing our securities in connection with a Business Combination, assist us
in obtaining shareholder approval for the Business Combination and assist us
with our press releases and public filings in connection with the Business
Combination. We will pay the Advisors a cash fee of $2.9 million for such
services upon the consummation of a Business Combination which is equal to 4% of
the gross proceeds received by the Company in the IPO ("Fee") (exclusive of any
applicable finders' fees which might become payable). The Company will allocate
52.5% of the Fee to LifeSci, 10% of the Fee to Ingalls, 22.5% of the Fee to
Ladenburg and 15% of the Fee to Northland.
On October 13, 2021, we entered into three promissory notes payable for a total
of up to an aggregate principal amount of $750,000 with a minimum draw of
$50,000 (Promissory Notes Payable) with three Lenders (the Lenders). Such
Promissory Notes Payable are being made for the purpose of funding a
contribution of cash for each share of common stock issued in Petra's IPO that
was not redeemed in connection with the stockholder vote to approve the
extension of the deadline for us to complete an initial business combination, as
contemplated in the definitive proxy statement on Scheduled 14A filed by us with
the SEC on September 24, 2021. The Promissory Notes Payable will bear interest
at the rate of 2% per month on the outstanding balance of the Promissory Notes
Payable. The Promissory Notes Payable will be forgiven if we are unable to
consummate an initial business combination except to the extent of any funds
held outside of the Trust Account.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
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Common stock subject to possible redemption
We account for common stock subject to possible redemption in accordance with
the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including common stock that
feature redemption rights that is either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) is classified as temporary equity. At all other times, common stock
is classified as stockholders' equity. Our common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our balance sheet.
Net loss per common share
We apply the two-class method in calculating earnings per share. Common stock
subject to possible redemption which is not currently redeemable and is not
redeemable at fair value, have been excluded from the calculation of basic net
loss per common share since such shares, if redeemed, only participate in their
pro rata share of the Trust Account earnings. Our net income is adjusted for the
portion of income that is attributable to common stock subject to possible
redemption, as these shares only participate in the earnings of the Trust
Account and not our income or losses.
Derivative Warrant Liabilities
The Company accounts for the Warrants in accordance with the guidance contained
in ASC 815 under which the Private Warrants do not meet the criteria for equity
treatment and must be recorded as derivative liabilities. Accordingly, the
Company classifies the Private Warrants as liabilities at their fair value and
adjusts the Private Warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until the
Private Warrants are exercised or expire, and any change in fair value is
recognized in the Company's statement of operations. The fair value of the
Private Warrants was initially and subsequently measured at the end of each
reporting period, using a Monte Carlo simulation.
Recent accounting standards
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on our financial statements.
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REVELATION BIOSCIENCES, INC. 
