UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
|
For
the quarterly period ended June 30, 2008.
or
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
|
For
the transition period from
to
.
Commission
File Number: 001-33516
Apex
Bioventures Acquisition Corporation
(Exact
Name of Registrant as Specified in its Charter)
Delaware
|
|
20-4997725
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
18
Farm Lane
Hillsborough,
California 94010
(Address
of Principal Executive Offices including Zip Code)
(650)
344-3029
(Registrant's
Telephone Number, Including Area Code)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90
days. Yes
x
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange. (Check
one):
Large
Accelerated Filer
¨
Accelerated
Filer
¨
Non-Accelerated
Filer
x
Smaller
Reporting Company
¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
x
No
¨
There
were 10,781,250 shares of the Registrant's common stock issued and
outstanding as of August 11, 2008.
Apex
Bioventures Acquisition Corporation Form 10-Q
PART
I - FINANCIAL INFORMATION
|
3
|
ITEM 1.
FINANCIAL STATEMENTS
|
3
|
Condensed
Consolidated Balance Sheets
|
3
|
Condensed
Consolidated Statements of Operations
|
4
|
Condensed
Consolidated Statement of Stockholders' Equity
(Deficiency)
|
5
|
Condensed
Consolidated Statement of Cash Flows
|
6
|
Notes
to Unaudited Condensed Consolidated Financial
Statements
|
7
|
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
|
11
|
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
13
|
ITEM 4.
CONTROLS AND PROCEDURES
|
13
|
PART
II - OTHER INFORMATION
|
13
|
ITEM 1.
LEGAL PROCEEDINGS
|
13
|
ITEM 1A.
RISK FACTORS
|
13
|
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
13
|
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
|
13
|
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
13
|
ITEM 5.
OTHER INFORMATION
|
13
|
ITEM 6.
EXHIBITS
|
14
|
SIGNATURES
|
14
|
Apex
Bioventures Acquisition Corporation and Subsidiary
(a
development stage company)
Condensed
Consolidated Balance Sheets
|
|
June
30, 2008 (Unaudited)
|
|
December
31, 2007
|
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
221,007
|
|
$
|
1,060,427
|
|
Cash
held in trust
|
|
|
65,204,309
|
|
|
65,514,688
|
|
Cash
held in trust from underwriter
|
|
|
2,070,000
|
|
|
2,070,000
|
|
Refundable
income taxes
|
|
|
483,454
|
|
|
-
|
|
Prepaid
expenses
|
|
|
44,620
|
|
|
66,244
|
|
Total
current assets
|
|
$
|
68,023,390
|
|
$
|
68,711,359
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
237,418
|
|
|
198,106
|
|
Total
assets
|
|
$
|
68,260,808
|
|
$
|
68,909,465
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
84,969
|
|
$
|
126,007
|
|
Accounts
payable, stockholders
|
|
|
7,521
|
|
|
2,776
|
|
Income
taxes payable
|
|
|
-
|
|
|
704,281
|
|
Due
to underwriter
|
|
|
2,070,000
|
|
|
2,070,000
|
|
Deferred
dividend
|
|
|
129,707
|
|
|
-
|
|
Total
current liabilities
|
|
|
2,292,197
|
|
|
2,903,064
|
|
|
|
|
|
|
|
|
|
Common
stock subject to conversion (2,587,499 shares at conversion
value)
|
|
|
20,208,367
|
|
|
20,208,367
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value; 1,000,000 authorized shares; none issued
|
|
|
-
|
|
|
-
|
|
Common
Stock, $0.0001 par value; 60,000,000 shares authorized;
10,781,250
shares (which includes 2,587,499 shares subject to possible
conversion)
issued
and outstanding
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
45,152,355
|
|
|
45,152,355
|
|
Income
accumulated during the development stage
|
|
|
606,811
|
|
|
644,601
|
|
Total
stockholders' equity
|
|
|
45,760,244
|
|
|
45,798,034
|
|
Total
liabilities and stockholders' equity
|
|
$
|
68,260,808
|
|
$
|
68,909,465
|
|
See
notes
to unaudited condensed consolidated financial statements.
Apex
Bioventures Acquisition Corporation and Subsidiary
(a
development stage company)
Condensed
Consolidated Statements of Operations
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|
Period
from Inception
(June
1, 2006) to
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
June
30, 2008
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formation
and operating costs
|
|
$
|
(156,307
|
)
|
$
|
(78,370
|
)
|
$
|
(923,041
|
)
|
$
|
(83,935
|
)
|
$
|
(1,558,245
|
)
|
Dividend
and interest income
|
|
|
275,878
|
|
|
116,026
|
|
|
887,011
|
|
|
116,535
|
|
|
2,673,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before provision for income taxes
|
|
|
119,571
|
|
|
37,656
|
|
|
(36,030
|
)
|
|
32,600
|
|
|
1,115,546
|
|
Provision
for income taxes
|
|
|
(48,662
|
)
|
|
-
|
|
|
(1,760
|
)
|
|
-
|
|
|
(508,735
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (loss)
|
|
$
|
70,909
|
|
$
|
37,656
|
|
$
|
(37,790
|
)
|
$
|
32,600
|
|
$
|
606,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share - basic and diluted
|
|
$
|
0.01
|
|
$
|
0.01
|
|
$
|
(0.00
|
)
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and
diluted
|
|
|
10,781,250
|
|
|
3,767,514
|
|
|
10,781,250
|
|
|
2,966,333
|
|
|
|
|
See
notes
to unaudited condensed consolidated financial statements.
Apex
Bioventures Acquisition Corporation and Subsidiary
(a
development stage company)
Condensed
Consolidated Statement of Stockholders' Equity
(Deficiency)
For
the period from June 1, 2006 (Inception) to June 30, 2008
|
|
Common
Stock
|
|
Additional
Paid-in
|
|
Income
(Deficit) Accumulated During the Development
|
|
Total
Stockholders'
Equity
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
(Deficiency)
|
|
Common
shares issued on June 27, 2006 at $0.01159 per share
|
|
|
2,156,250
|
|
$
|
216
|
|
$
|
24,784
|
|
$
|
-
|
|
$
|
25,000
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(52,324
|
)
|
|
(52,324
|
)
|
Balances
at December 31, 2006
|
|
|
2,156,250
|
|
|
216
|
|
|
24,784
|
|
|
(52,324
|
)
|
|
(27,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of private placement warrants
|
|
|
-
|
|
|
-
|
|
|
1,800,000
|
|
|
-
|
|
|
1,800,000
|
|
Sale
of 8,625,000 Units net of underwriters' discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
offering expenses (includes 2,587,499 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subject
to conversion)
|
|
|
8,625,000
|
|
|
862
|
|
|
63,535,838
|
|
|
-
|
|
|
63,536,700
|
|
Proceeds
subject to forfeiture of 2,587,499 shares
|
|
|
-
|
|
|
-
|
|
|
(20,208,367
|
)
|
|
-
|
|
|
(20,208,367
|
)
|
Sale
of underwriter option
|
|
|
-
|
|
|
-
|
|
|
100
|
|
|
-
|
|
|
100
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
696,925
|
|
|
696,925
|
|
Balances
at December 31, 2007
|
|
|
10,781,250
|
|
|
1,078
|
|
|
45,152,355
|
|
|
644,601
|
|
|
45,798,034
|
|
Unaudited:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(37,790
|
)
|
|
(37,790
|
)
|
Balances
at June 30, 2008
|
|
|
10,781,250
|
|
$
|
1,078
|
|
$
|
45,152,355
|
|
$
|
606,811
|
|
$
|
45,760,244
|
|
See
notes
to unaudited condensed consolidated financial statements.
Apex
Bioventures Acquisition Corporation and Subsidiary
(a
development stage company)
Condensed
Consolidated Statement of Cash Flows
|
|
Six
Months Ended June 30,
|
|
Period
from June 1, 2006 (inception) to
|
|
|
|
2008
|
|
2007
|
|
June
30, 2008
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(37,790
|
)
|
$
|
32,600
|
|
$
|
606,811
|
|
Adjustments
to reconcile net income (loss) to
net
cash used in operating activities
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
(39,312
|
)
|
|
-
|
|
|
(237,418
|
)
|
Dividends
earned on trust account
|
|
|
(1,006,167
|
)
|
|
(115,798
|
)
|
|
(2,779,309
|
)
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
-
|
|
Prepaid
expenses
|
|
|
21,624
|
|
|
(21,658
|
)
|
|
(44,620
|
)
|
Accounts
payable and accrued expenses
|
|
|
(41,038
|
)
|
|
24,368
|
|
|
75,172
|
|
Refundable
income taxes
|
|
|
(1,187,735
|
)
|
|
-
|
|
|
(483,454
|
)
|
Deferred
dividend
|
|
|
129,707
|
|
|
-
|
|
|
129,707
|
|
Net
cash used in operating activities
|
|
|
(2,160,711
|
)
|
|
(80,488
|
)
|
|
(2,733,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Disbursements
from trust account
|
|
|
1,316,546
|
|
|
-
|
|
|
2,835,000
|
|
Cash
held in trust account
|
|
|
-
|
|
|
(67,330,000
|
)
|
|
(67,330,000
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
1,316,546
|
|
|
(67,330,000
|
)
|
|
(64,495,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from public offering
|
|
|
-
|
|
|
69,000,000
|
|
|
69,000,000
|
|
Proceeds
from private placement of warrants
|
|
|
-
|
|
|
1,800,000
|
|
|
1,800,000
|
|
Proceeds
from loans from stockholders
|
|
|
-
|
|
|
(225,000
|
)
|
|
225,000
|
|
Repayment
of loans from stockholders
|
|
|
-
|
|
|
-
|
|
|
(225,000
|
)
|
Proceeds
from advances from stockholders
|
|
|
89,265
|
|
|
109,348
|
|
|
240,330
|
|
Repayment
of advances from stockholders
|
|
|
(84,520
|
)
|
|
(78,504
|
)
|
|
(232,809
|
)
|
Proceeds
from sale of option
|
|
|
-
|
|
|
100
|
|
|
100
|
|
Proceeds
from the sale of common stock
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Payment
of offering expenses
|
|
|
-
|
|
|
(3,213,396
|
)
|
|
(3,383,503
|
)
|
Net
cash provided by financing activities
|
|
|
4,745
|
|
|
67,392,548
|
|
|
67,449,118
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(839,420
|
)
|
|
(17,940
|
)
|
|
221,007
|
|
Cash
and cash equivalents, beginning of period
|
|
|
1,060,427
|
|
|
82,739
|
|
|
-
|
|
Cash
and cash equivalents, end of period
|
|
$
|
221,007
|
|
$
|
64,799
|
|
$
|
221,007
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of non cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
Accrual
of offering costs
|
|
$
|
-
|
|
$
|
49,797
|
|
$
|
9,797
|
|
Accrual
of deferred underwriting fees
|
|
$
|
-
|
|
$
|
2,070,000
|
|
$
|
2,070,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of cash paid for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
1,235,000
|
|
$
|
800
|
|
$
|
1,235,800
|
|
See
notes
to unaudited condensed consolidated financial statements.
Apex
Bioventures Acquisition Corporation and Subsidiary
(a
development stage company)
Notes
to Unaudited Condensed Consolidated Financial Statements
June
30, 2008
Note
1 -- Basis of Presentation
The
financial statements at June 30, 2008 and for the periods ended June 30, 2008
and 2007 are unaudited. The condensed financial statements include the accounts
of Apex Bioventures Acquisition Corporation (“Apex”) and its wholly owned
subsidiary, Apex Acquisition Sub, Inc. (“Acquisition Sub”) (collectively
referred to as the “Company”). All significant intercompany transactions and
balances have been eliminated. In the opinion of management, all adjustments
(consisting of normal accruals) have been made that are necessary to present
fairly the financial position of the Company as of June 30, 2008 and the results
of its operations for the three and six months ended June 30, 2008 and 2007
and
for the period from June 1, 2006 (inception) through June 30, 2008 and its
cash
flows for the six months ended June 30, 2008 and 2007 and for the period from
June 1, 2006 (inception) through June 30, 2008. Operating results for the
interim periods presented are not necessarily indicative of the results to
be
expected for a full year.
The
financial statements and related notes have been prepared pursuant to the rules
and regulations of the U.S. Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. Audited
financial statements as of and for the year ended December 31, 2007, prepared
in
accordance with generally accepted accounting principles, are contained in
the
Company’s 2007 annual report on Form 10-K filed with the Securities and Exchange
Commission. The December 31, 2007 balance sheet included in this report has
been
derived from the audited financial statements included in said annual
report.
Note
2 -- Organization and Business Operations
The
Company was incorporated in Delaware on June 1, 2006. The Company was
formed to acquire one or more domestic or foreign operating businesses in the
healthcare industry through a merger, capital stock exchange, asset acquisition
or other similar business combination. All activities through June 30, 2008
relate to the Company's formation and public offering described below, the
search for a suitable business combination and the Dynogen transaction described
in Note 5. The Company has neither engaged in any operations nor generated
revenue to date. The Company is considered to be in the development stage and
is
subject to the risks associated with activities of development stage
companies.
The
registration statement for the Company's initial public offering (the “Public
Offering”) (as described in Note 4) was declared effective on June 7, 2007. The
Company consummated the Public Offering on June 13, 2007 and received net
proceeds of approximately $65,300,000, including $1,800,000 of proceeds from
the
private placement (the “Private Placement”) sale of 1,800,000 insider warrants
to the Company’s stockholders prior to the Public Offering (the “Initial
Stockholders”). The warrants sold in the Private Placement are identical to the
warrants sold in the Public Offering, except that such warrants are
non-redeemable and can be exercised on a cashless basis as long as these persons
hold such warrants. In addition, subject to certain limited exceptions, none
of
the warrants purchased by the Initial Stockholders are transferable or salable
until six months after the consummation of a business combination.
The
Company's management has broad discretion with respect to the specific
application of the net proceeds of the Public Offering, although substantially
all of the net proceeds of the Public Offering are intended to be generally
applied toward consummating a business combination with (or acquisition of)
one
or more domestic or foreign operating businesses in the healthcare industry
(“Business Combination”), which may not constitute a business combination for
accounting purposes. Furthermore, there is no assurance that the Company will
be
able to successfully effect a Business Combination. Upon the closing of the
Public Offering and Private Placement, $67,330,000, including $2,070,000 of
the
underwriters' discounts and commissions as described in Note 4, is being held
in
a trust account (the “Trust Account”) invested in government securities. The
Trust Account will be maintained until the earlier of (i) the consummation
of
the Company's first Business Combination and (ii) liquidation of the Company.
The placing of funds in the Trust Account may not protect those funds from
third
party claims against the Company. Although the Company will seek to have all
vendors, prospective target businesses and other entities it engages, execute
agreements with the Company waiving any right, title, interest or claim of
any
kind in or to any monies held in the Trust Account, there is no guarantee that
they will execute such agreements. Our Initial Stockholders have agreed that
they will be personally liable, on a joint and several basis, to cover claims
made by such third parties, but only if, and to the extent, the claims reduce
the amounts in the Trust Account available for payment to our public
stockholders in the event of a liquidation and the claims are made by a vendor
or service provider for services rendered, or products sold, to us or by a
prospective acquisition target. However, our Initial Stockholders will not
have
any personal liability as to any claimed amounts owed to a third party who
executed a waiver (including a prospective acquisition target) or the
underwriters. However, there can be no assurance that that the Initial
Stockholders will be able to satisfy those obligations. The remaining net
proceeds (not held in the Trust Account), along with $1,600,000 in dividend
income net of taxes payable on such dividends, may be used to pay for business,
legal or accounting due diligence on prospective acquisitions, negotiations
with
prospective targets and satisfaction of closing conditions, and continuing
general and administrative expenses.
The
Company, after signing a definitive agreement for a Business Combination is
required to submit such transaction for stockholder approval. In the event
that
stockholders owning 30% or more of the shares sold in the Public Offering vote
against the Business Combination and exercise their conversion rights described
below, the Business Combination will not be consummated. All of the Company's
Initial Stockholders have agreed to vote their 2,156,250 founding shares of
common stock, as well as any shares of common stock acquired in connection
with
or following the Public Offering, in accordance with the vote of the majority
in
interest of all other stockholders of the Company (“Public Stockholders”) with
respect to any Business Combination. After the consummation of a Business
Combination, these voting agreements will terminate.
With
respect to a Business Combination which is approved and consummated, any Public
Stockholder who voted against the Business Combination may demand that the
Company convert his or her shares to cash. The per share conversion price will
equal the amount in the Trust Account (including dividends, but less amounts
reserved or released to us for working capital and net of income taxes payable),
calculated as of two business days prior to the consummation of the proposed
Business Combination, divided by the number of shares of common stock held
by
Public Stockholders at the consummation of the Public Offering. Accordingly,
Public Stockholders holding 29.99% of the aggregate number of shares owned
by
all Public Stockholders may seek conversion of their shares in the event of
a
Business Combination. Such Public Stockholders are entitled to receive their
per
share interest in the Trust Account (subject to distributions for working
capital and amounts paid or accrued for taxes) computed without regard to the
shares held by Initial Stockholders. Accordingly, a portion of the net proceeds
from the Public Offering (29.99% of the amount that was placed in the Trust
Fund) has been classified as common stock subject to possible conversion on
the
accompanying June 30, 2008 balance sheet.
Deferred
dividend represents 29.99% of the excess interest and dividends earned on the
investments held in the Trust Fund above the $1,600,000 allowable to be released
to the Company to fund working capital requirements and income tax
obligations.
The
Company's Second Amended and Restated Certificate of Incorporation provides
that
the Company will continue in existence only until 18 months from the date of
the
consummation of the Public Offering, or 24 months from the consummation of
the
Public Offering if certain extension criteria have been satisfied. If the
Company has not completed a Business Combination by such date, its corporate
existence will cease and, subject to stockholder approval, it will dissolve
and
liquidate for the purposes of winding up its affairs. In the event of
liquidation, it is likely that the per share value of the residual assets
remaining available for distribution (including Trust Fund assets) will be
less
than the initial public offering per share in the Public Offering (assuming
no
value is attributed to the Warrants contained in the Units sold in the Public
Offering discussed in Note 4). The accompanying financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Note
3 -- Summary of Significant Accounting Policies
New
Accounting Pronouncements
Net
Income (Loss) per Common Share
Income
(loss) per share is computed by dividing the net income (loss) by the weighted
average number of common shares outstanding for the period. The effect of the
8,625,000 outstanding warrants issued in connection with the initial public
offering, the 1,800,000 outstanding warrants issued in connection with the
private placement and the 450,000 units included in the underwriters purchase
option has not been considered in diluted income (loss) per share calculations
since the warrants cannot be exercised until the later of the Company's initial
Business Combination or June 7, 2008.
Note
4 -- Initial Public Offering & Value of Unit Purchase
Option
On
June
13, 2007, the Company sold 8,625,000 units (“Units”), including 1,125,000 Units
pursuant to the over-allotment option granted to the underwriters, in the Public
Offering at a price of $8.00 per Unit. Each Unit consists of one share of the
Company's common stock, $0.0001 par value, and one Common Stock Purchase Warrant
(“Warrant”). Each Warrant entitles the holder to purchase from the Company one
share of common stock at an exercise price of $6.00 commencing on the later
of
the completion of a Business Combination with a target business and one year
from the effective date of the registration statement for the Public Offering
and expiring four years from such effective date, unless earlier redeemed.
The
Warrants will be redeemable at a price of $0.01 per Warrant upon 90 days' notice
after the Warrants become exercisable, only in the event that the last sale
price of the common stock is at least $11.50 per share for any 20 trading days
within a 30 trading day period ending on the third business day prior to the
date on which notice of redemption is given. In accordance with the warrant
agreement relating to the Warrants sold and issued in the Public Offering,
the
Company is only required to use its best efforts to maintain the effectiveness
of the registration statement covering the Warrants. The Company will not be
obligated to deliver securities, and there are no contractual penalties for
failure to deliver securities, if a registration statement is not effective
at
the time of exercise. Additionally, in the event that a registration statement
is not effective at the time of exercise, the holder of such Warrant shall
not
be entitled to exercise such Warrant and in no event (whether in the case of
a
registration statement not being effective or otherwise) will the Company be
required to net cash settle the warrant exercise. Consequently, the Warrants
may
expire unexercised and unredeemed.
In
connection with the Public Offering, the Company paid Lazard Capital Markets
LLC
and Ladenburg Thalmann & Co. Inc., the underwriters of the Public Offering,
underwriting discounts and commissions of 7% of the gross proceeds of the Public
Offering, of which 3% of the gross proceeds ($2,070,000) are held in the Trust
Account and payable only upon the consummation of a Business Combination. If
a
Business Combination is approved and completed, Public Stockholders who voted
against the combination and have exercised their conversion rights will be
entitled to their pro rata share of the deferred underwriters' discounts and
commissions.
Each
of
the common stock and Warrants began separate trading on June 20,
2007.
Simultaneously
with the consummation of the Public Offering, the Initial Stockholders purchased
1,800,000 warrants (“Private Placement Warrants”) at a purchase price of $1.00
per warrant, in a private placement. The proceeds of $1,800,000 were placed
in
the Trust Account. The Private Placement Warrants are identical to the Warrants
underlying the Units sold in the Public Offering except that such Private
Placement Warrants are non-redeemable and are exercisable on a cashless basis
as
long as they are still held by the initial purchasers. The purchasers have
agreed that the Private Placement Warrants will not be sold or transferred
by
them (other than to certain permitted transferees who agree to be similarly
bound), until six months after the completion of a Business
Combination.
The
Initial Stockholders and the holders of the Private Placement Warrants will
be
entitled to registration rights with respect to their securities pursuant to
an
agreement signed as of the effective date of the Public Offering. With respect
to the Private Placement Warrants (and underlying shares), from and after the
date on which the Company files a current report on Form 8-K announcing that
it
has entered into a definitive agreement with respect to a Business Combination,
the holders of a majority of these securities are entitled to demand
registration of the resale of these securities. However, the Company is not
required to effect such registration until six months following the consummation
of a Business Combination. With respect to the shares issued to the Initial
Stockholders prior to the Public Offering and the Private Placement Warrants
(and underlying shares), from and after the first anniversary of the
consummation of the Business Combination, the holders of a majority of these
securities are entitled to demand registration of the resale of these
securities. In addition, such holders have certain “piggy back” registration
rights on registration statements filed subsequent to the Company’s consummation
of a Business Combination. The Company will bear the expenses incurred in
connection with the filing of any such registration statements.
In
connection with this Offering, the Company issued an option to the underwriters,
for $100, to purchase up to a total of 450,000 Units at $10.00 per Unit. The
Units issuable upon exercise of this option are identical to those offered
in
the Public Offering. The purchase option and its underlying securities have
been
registered under the registration statement. The option has a useful life of
five years.
The
sale
of the option was accounted for as an equity transaction. Accordingly, there
was
no net impact on the Company’s financial position or results of operations,
except for the recording of the $100 proceeds from the sale. The Company has
determined, based upon a Black-Scholes model, that the fair value of the option
on the date of sale was approximately $1.35 million, using an expected life
of
five years, volatility of 43% and a risk free interest rate of
4.75%.
The
volatility calculation of 43% is based on the actual volatilities of other
similarly situated blank check companies. Because the Company did not have
a
trading history at the time of the issuance of the option, the Company needed
to
estimate the potential volatility of its unit price, which will depend on a
number of factors which could not be ascertained at that time. Although an
expected life of five years was taken into account for the purposes of assigning
a fair value to the option, if the Company does not consummate a business
combination within the prescribed time period and liquidate the Trust Account
as
part of any plan of dissolution and distribution approved by the Company’s
stockholders, the option will become worthless.
Note
5 -- Dynogen
On
February 5, 2008, Apex and Acquisition Sub entered into an Agreement and Plan
of
Merger (the “Merger Agreement”) with Dynogen Pharmaceuticals, Inc., a Delaware
corporation (“Dynogen”) and Kate Bingham and Michael Bigham, acting jointly as
representatives of the Company Holders (defined in the Merger Agreement to
refer
collectively to the holders of Dynogen capital stock, options, warrants and
other securities), pursuant to which Acquisition Sub would merge with and into
Dynogen and Dynogen would become a wholly-owned subsidiary of Apex (the
“Merger”).
On
April
16, 2008, Apex, Acquisition Sub and Dynogen entered into a Termination and
Release Agreement (the “Termination Agreement”) to mutually terminate the Merger
Agreement. Due to current market conditions, particularly those for small
capitalization public biotech companies, Apex and Dynogen determined that
terminating the merger agreement was in the best interest of both companies
and
their respective stockholders. Under the terms of the Termination Agreement,
the
parties agreed to release claims they may have against the
other.
Note
6 -- Related Party Transactions
As
of
June 30, 2008 and December 31, 2007, accounts payable includes $7,521 and
$2,776, respectively, due to officers and directors for operating costs incurred
on behalf of the Company.
Note
7 - Income Taxes
The
provision for income taxes for the three and six months ended June 30, 2008
consists of the following:
|
|
Three
months ended June 30, 2008
|
|
Six
months ended
June
30, 2008
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
Federal
|
|
$
|
62,438
|
|
$
|
20,982
|
|
State
|
|
|
20,090
|
|
|
20,090
|
|
|
|
|
|
|
|
|
|
Total
current
|
|
|
82,528
|
|
|
41,072
|
|
Deferred:
|
|
|
|
|
|
|
|
Federal
|
|
|
(22,400
|
)
|
|
(27,846
|
)
|
State
|
|
|
(11,466
|
)
|
|
(11,466
|
)
|
|
|
|
|
|
|
|
|
Total
deferred
|
|
|
(33,866
|
)
|
|
(39,312
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
48,662
|
|
$
|
1,760
|
|
The
tax
effect of temporary differences that give rise to the net deferred tax asset
at
June 30, 2008 is as follows:
Expenses
deferred for income tax purposes
|
|
|
|
|
$
|
234,821
|
|
Dividends
deferred for reporting purposes
|
|
|
|
|
|
55,566
|
|
|
|
|
|
|
|
290,387
|
|
Valuation
allowance
|
|
|
|
|
|
(52,969
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
237,418
|
|
The
Company has recorded a valuation allowance against the state deferred tax asset
since it cannot determine realizability for tax purposes and therefore can
not
conclude that the deferred tax asset is more likely than not recoverable at
this
time.
Note
8 -- Preferred Stock
The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined
from
time to time by the Company’s board of directors.
Note
9 -- Reserved Common Stock
At
June
30, 2008, 11,325,000 shares of common stock were reserved for issuance upon
exercise of redeemable warrants and the underwriters’ purchase option.
Note
10 -- Commitments
On
July
23, 2008, the Company entered into finders agreements with a third-party.
The
agreements expire by their terms on April 30, 2009, but are terminable by
either
party upon 15 days prior written notice. If either the Company or the
third-party introduces the other to a potential target with whom such other
party consummates a Business Combination, such other party is obligated to
pay
the introducing party a success fee between 1% and 1.5% of the total value
of
the transaction. Neither the Company nor the third-party is obligated to
pay the
other any fee unless a Business Combination is consummated with a referred
target.
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, 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 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. Factors that might cause or contribute
to
such a discrepancy include, but are not limited to, those described in our
other
Securities and Exchange Commission filings.
The
following discussion should be read in conjunction with our unaudited Financial
Statements and related Notes thereto included elsewhere in this
report.
Critical
Accounting Policies
The
preparation of financial statements 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 at the date of the financial statements and the reported amounts
of
expenses during the reporting period. Actual results could differ from those
estimates.
Management
does not believe that any recently issued, but not yet effective, accounting
standards if currently adopted would have a material effect on the accompanying
financial statements.
Overview
We
were
formed on June 1, 2006 as a blank check company for the purpose of acquiring,
through a merger, capital stock exchange, asset acquisition or other similar
business combination, one or more operating businesses in the healthcare
industry. Until the closing of our initial public offering on June 13, 2007
(“Public Offering”), all of our activity related to our formation and our Public
Offering. We intend to use cash derived from the net proceeds of our initial
public offering, together with any additional financing arrangements that we
undertake, to effect a business combination.
Apex
Acquisition Sub, Inc. is a Delaware corporation and a wholly-owned subsidiary
of
Apex (“Acquisition Sub”). Acquisition Sub was formed for the purpose of
effecting the proposed merger with Dynogen and has engaged in no other business
activities or operations since its formation.
Results
of Operations
The
Company's net income of $70,909 for the three months ended June 30, 2008
consisted of formation and operating costs of $156,307, offset by dividend
and
interest income of $275,878. During the same three month period, we recorded
a
provision for income taxes in the amount of $48,662. For the three months ended
June 30, 2007, the Company had net income of $37,656, consisting of formation
and operating costs of $78,370 offset by dividend and interest income of
$116,026.
The
net
loss for the six months ended June 30, 2008 amounted to $37,790 and consisted
of
formation and operating expenses of $923,041, dividend and interest income
of
$887,011 and a provision for income taxes of $1,760. For the six months ending
June 30, 2007, the net income of $32,600 consisted of formation and operating
expenses of $83,935 offset by dividend and interest income of
$116,535.
The
net
income of $606,811 for the period from June 1, 2006 (date of inception) to
June
30, 2008 consisted of formation and operating costs of $1,558,245, offset by
dividend and interest income of $2,673,791 and a provision for income taxes
of
$508,735.
Operating
costs during the six month period ending June 30, 2008 included $395,483 in
expenses related to due diligence associated with the recently terminated merger
with Dynogen. In addition, $150,000 of legal expenses, associated with the
potential merger, were incurred. Operating costs in the near term are expected
to be significantly below the first two quarters until we identify a new merger
target and begin the due diligence process.
Liquidity
and Capital Resources
We
will
likely use all or substantially all of the net proceeds of the Public Offering
and private placement that occurred immediately prior thereto held outside
the
trust account and the up to $1,600,000 of dividend income (net of income taxes
payable thereon) available to us for working capital to acquire a target
business, including identifying and evaluating prospective acquisition
candidates, selecting the target business, and structuring, negotiating and
consummating the business combination. We believe the funds currently available
to us outside of the trust account, together with the balance of dividend
income, net of income taxes on such dividends, to be released to us for working
capital requirements will be sufficient to allow us to operate for at least
the
next three months. We may need to raise additional funds through a private
offering of debt or equity securities if such funds are not adequate to
consummate a business combination. To the extent that our capital stock is
used
in whole or in part as consideration to effect a business combination the
proceeds held in the trust account as well as any other net proceeds not
expended will be used to finance the operations of the target
business.
Off-Balance
Sheet Arrangements
Options
and warrants issued in conjunction with our initial public offering are equity
linked derivatives and accordingly represent off-balance sheet arrangements.
The
options and warrants meet the scope exception in paragraph 11(a) of Statement
of
Financial Accounting Standards 133 “Accounting for Derivative Instruments and
Hedging Activities” (“SFAS 133”) and are accordingly not accounted for as
derivatives for purposes of SFAS 133, but instead are accounted for as equity.
See Note 4 to the financial statements for more
information.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market
risk is the sensitivity of income to changes in interest rates, foreign
exchanges, commodity prices, equity prices, and other market-driven rates
or
prices. We are not presently engaged in, and if a suitable business target
is
not identified by us prior to the prescribed liquidation date of the trust
fund
we may not engage in, any substantive commercial business. Accordingly, we
are
not and, until such time as we consummate a business combination, we will
not
be, exposed to risks associated with foreign exchange rates, commodity prices,
equity prices or other market-driven rates or prices. The net proceeds of
our
initial public offering held in the trust account are to be invested only
in
money market funds meeting certain conditions under Rule 2a-7 promulgated
under
the Investment Company Act of 1940 or United States treasury bills having
a
maturity of 180 days or less. Given our limited risk in our exposure to money
market funds and treasury bills, we do not view the interest rate risk to
be
significant.
An
evaluation of the effectiveness of our disclosure controls and procedures as
of
June 30, 2008 was made under the supervision and with the participation of
our
management. Based on that evaluation, our management concluded that our
disclosure controls and procedures are effective as of the end of the period
covered by this report to ensure that information required to be disclosed
by us
in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. During the most recently completed fiscal
quarter, there has not been any change in our internal control over financial
reporting in connection with the evaluation required by Rule 13a-15(d) of the
Exchange Act that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in the section titled “Risk Factors” in our
December 31, 2007 annual report on Form 10-K as filed with the Securities and
Exchange Commission, which could materially affect our business, financial
condition or future results. There have been no material updates or changes
to
such Risk Factors that are required to be disclosed in this
Item 1A.
ITEM 3.
DEFAULTS UPON SENIOR
SECURITIES
|
Exhibit No.
|
|
Description
|
31.1
|
|
Section
302 Certification of Chief Executive Officer
|
|
|
|
31.2
|
|
Section
302 Certification of Chief Financial Officer
|
|
|
|
32.1
|
|
Section
906 Certification of Chief Executive Officer and Chief Financial
Officer
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
APEX
BIOVENTURES ACQUISITION CORPORATION
|
|
|
|
August
13, 2008
|
By:
|
/s/ Darrell
J. Elliott
|
|
Darrell
J. Elliott
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
August
13, 2008
|
By:
|
/s/ Gary
E.
Frashier
|
|
Gary
E. Frashier
|
|
Chief
Financial Officer
|
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