ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “we,” “us” or the “Company” refer to BioPlus Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to BioPlus Sponsor LLC. 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 Quarterly 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
All statements other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our 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. 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.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Quarterly Report under “Item 1. Financial Statements.”
Overview
We are a blank check company incorporated in the Cayman Islands on February 11, 2021 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Placement Units, our shares, debt or a combination of cash, shares and debt.
As of March 31, 2023, the Company had not commenced any operations. All activity for the period from February 11, 2021 (inception) through March 31, 2023 relates to the Company’s formation, the Initial Public Offering, which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a 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.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Recent Developments
Business Combination Agreement
On May 2, 2023, the Company, Merger Sub, Avertix, and, solely with respect to Section 3.03(b) and Section 7.21 of the Business Combination Agreement, the Sponsor, entered into the Business Combination Agreement, pursuant to which Merger Sub will merge with and into Avertix, with Avertix surviving the Merger as a direct wholly owned subsidiary of the Company.
Pursuant to the Business Combination Agreement, prior to (but no later than the day preceding) the Closing and following the exercise of redemption rights by Public Shareholders, the Company will domesticate as a Delaware corporation in accordance with the Delaware General Corporation Law and the Companies Act (as revised) of the Cayman Islands. Upon the effectiveness of the Domestication, the Company will change its name to “Avertix Medical, Inc.”
Upon the effectiveness of the Domestication, (i) each then issued and outstanding Class A ordinary share of the Company will convert automatically into one (1) share of New Avertix Common Stock, (ii) each then issued and outstanding Class B ordinary share of the Company will convert automatically into one (1) share of New Avertix Common Stock, (iii) each then issued and outstanding warrant of the Company exercisable to purchase one Class A ordinary share of the Company will convert automatically into one New Avertix warrant exercisable to purchase one share of New Avertix Common Stock and (iv) each unit consisting of one Class A ordinary share of the Company and one-half of one warrant of the Company will convert automatically into a unit consisting of one share of New Avertix Common Stock and one-half of one New Avertix warrant.
Upon the consummation of the Merger, (i) each share of Avertix Common Stock issued and outstanding immediately prior to the Effective Time will be canceled and converted into the right to receive (A) a number of shares of New Avertix Common Stock equal to the Exchange Ratio and (B) the holder of such Avertix Common Stock’s contingent right to receive such holder’s pro rata share of the Avertix Earnout Shares in accordance with the terms of the Business Combination Agreement, in each case, without interest, and (ii) each Avertix Option that is outstanding and unexercised as of immediately prior to the Effective Time, whether then vested or unvested, will be assumed by New Avertix and converted into (A) an option to purchase a number of shares of New Avertix Common Stock (rounded down to the nearest whole share) equal to (x) the number of shares of Avertix Common Stock subject to such Avertix Option immediately prior to the Effective Time, multiplied by (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (1) the exercise price per share of such Avertix Option immediately prior to the Effective Time, divided by (2) the Exchange Ratio and (B) the holder of such Avertix Option’s contingent right to receive such holder’s pro rata share of the Avertix Earnout Shares in accordance with the terms of the Business Combination Agreement.
Following the Closing, as additional consideration for the Avertix Transactions, eligible equityholders of Avertix will be entitled to receive their respective pro rata share of 2,970,000 Avertix Earnout Shares in two equal tranches, each contingent upon New Avertix’s achievement of the applicable stock price milestones during the Earnout Period; provided that, with respect to any holder of a unvested Exchanged Option, an award of restricted stock units for a number of Avertix Earnout Shares otherwise issuable to such holder and subject to the same vesting terms as the unvested Exchanged Option will be issued to such holder in lieu of any Avertix Earnout Shares.
At the Effective Time, a portion of the Sponsor’s Founder Shares, consisting of 1,150,000 Class B ordinary shares of the Company as of the date hereof, will become unvested and subject to vesting and forfeiture, and will thereafter become vested only upon the occurrence of the applicable Triggering Event in the same proportion as the issuance of Avertix Earnout Shares to eligible equityholders of Avertix upon the occurrence of such Triggering Event. The Sponsor Earnout Shares are subject to reduction in connection with certain additional financing permitted under the Business Combination Agreement, and will be forfeited if the applicable Triggering Events do not occur during the Earnout Period.
The foregoing description of the Business Combination Agreement and the Avertix Transactions does not purport to be complete and is qualified in its entirety by the terms and conditions of the Business Combination Agreement, a copy of which is included hereto as Exhibit 2.1 to this Quarterly Report and incorporated herein by reference.
A&R Registration Rights Agreement
At the Closing, the Company, the Sponsor, the executive officers and directors of the Company, and certain equityholders of Avertix will enter into the A&R Registration Rights Agreement, pursuant to which, among other things, the parties thereto will be granted customary registration rights with respect to shares of New Avertix Common Stock.
The foregoing description of the A&R Registration Rights Agreement is qualified in its entirety by reference to the full text of the form of A&R Registration Rights Agreement, a copy of which is included as Exhibit 10.1 to this Quarterly Report and incorporated herein by reference.
Lock-Up Arrangements
The Sponsor, holders of Placement Units, and Avertix equityholders will be subject the Lock-Up contained in the proposed bylaws of New Avertix, pursuant to which, without the prior written consent of New Avertix’s board of directors, during the period commencing on the date of the Closing and ending on the date that is the one-year anniversary of the Closing, such parties will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, such shares or other equity securities or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of New Avertix Common Stock; provided, however, (a) if at any time 151 days after the Closing, the closing share price of New Avertix Common Stock is greater than or equal to $12.50 over any 20 trading days within any consecutive 30 trading day period, then one-third (1/3) of the Lock-Up Securities shall automatically be released from the Lock-Up, and (b) if at any time 151 days after the Closing, the closing share price of the New Avertix Common Stock is greater than or equal to $15.00 over any 20 trading days within any consecutive 30 trading day period, then an additional one-third (1/3) of the Lock-Up Securities shall be released from the Lock-Up. For clarity, in the event that the Initial Price Target and/or the Second Price Target are not met, then the Lock-up Period shall terminate for all Lock-up Securities on the one-year anniversary of the Closing. The lock-up restrictions contain customary exceptions, including for estate planning transfers, affiliates transfers, certain open market transfers and transfers upon death or by will.
Pursuant to the Letter Agreement Amendment by and between the Company, its officers and directors, and the Sponsor, to be entered into at the Closing and A&R Registration Rights Agreement, the lock-up restrictions for the Sponsor At-Risk Capital Lockup Shares, the Placement Shares and Placement Warrants (each as defined in the Letter Agreement Amendment) will lapse upon the six-month anniversary of the Closing, unless the Initial Price Target or Second Price Target are achieved before such date.
The foregoing description of the Lock-Up, Letter Agreement Amendment and A&R Registration Rights Agreement is qualified in its entirety by reference to the full text of the form of the New Avertix’s bylaws, the form of the Letter Agreement Amendment and the form of A&R Registration Rights Agreement, copies of which are included as Exhibit B to the Business Combination Agreement included as Exhibit 2.1, Exhibit 10.1 and Exhibit 10.2, respectively, to this Quarterly Report and incorporated herein by reference.
Stockholder Support Agreement
On May 2, 2023, the Company, Avertix, and Key Avertix Holders entered into the Stockholder Support Agreements, pursuant to which the Key Avertix Holders agreed to, among other things, (i) waive any appraisal rights in connection with the Merger and (ii) consent to and vote in favor of the Business Combination Agreement and the Avertix Transactions.
The foregoing description of the Stockholder Support Agreements is qualified in its entirety by reference to the full text of the form of Stockholder Support Agreement, a copy of which is included as Exhibit 10.3 to this Quarterly Report and incorporated herein by reference.
Sponsor Support Agreement
On May 2, 2023, the Company, the Sponsor, and Avertix entered into the Sponsor Support Agreement, pursuant to which, among other things, the Sponsor has agreed to (i) vote all of its ordinary shares in favor of the proposals being presented at the extraordinary general meeting of Public Shareholders, (ii) waive the anti-dilution or similar protections with respect to the Sponsor’s Founder Shares, consisting of 5,750,000 Class B ordinary shares of the Company as of the date hereof, in connection with the consummation of the Avertix Transactions and (iii) not redeem any of its shares in connection with the vote to approve the Avertix Transactions.
The foregoing description of the Sponsor Support Agreement is qualified in its entirety by reference to the full text of the Sponsor Support Agreement, a copy of which is included as Exhibit 10.4 to this Quarterly Report and incorporated herein by reference.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2023 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust 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 three months ended March 31, 2023, we had net income of $2,321,364, which consisted of interest earned on investments held in the Trust Account of $2,596,638, offset by formation and operating costs of $275,274.
For the three months period ended March 31, 2022, we had net loss of $261,822, which consisted of formation and operating costs of $307,189, offset by interest earned on investments held in the Trust Account of $45,367.
Liquidity and Capital Resources
On December 7, 2021, we consummated the Initial Public Offering of 23,000,000 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 560,000 Placement Units at a price of $10.000 per Placement Unit in a private placement to the Sponsor and Cantor, generating gross proceeds of $5,600,000.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Placement Units, a total of $234,600,000 was placed in the Trust Account. We incurred $14,483,021 in Initial Public Offering related costs, including $4,000,000 of underwriting fees and $683,021 of other offering costs.
For the three months ended March 31, 2023, cash used in operating activities was $315,607. Net income of $2,321,364 was affected by interest earned on marketable securities held in the Trust Account of $2,596,638. Changes in operating assets and liabilities used $40,333 of cash for operating activities.
For the three months ended March 31, 2022, cash used in operating activities was $166,491. Net loss of $261,822 was affected by interest earned on investments held in the Trust Account of $45,367. Changes in operating assets and liabilities used $140,698 of cash for operating activities.
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