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United States securities and exchange commission logo
October 14, 2022
Suren Ajjarapu
Chief Executive Officer
Aesther Healthcare Acquisition Corp.
515 Madison Avenue, Suite 8078
New York, New York 10022
Re: Aesther Healthcare
Acquisition Corp.
Preliminary Proxy
Statement on Schedule 14A
Filed September 16,
2022
File No. 001-40793
Dear Suren Ajjarapu:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Preliminary Proxy Statement on Schedule 14A filed September 16, 2022
Shareholder Letter, page -
1. Please balance your
statement that "Ocean Biomedical is developing five discoveries that
have the potential to
achieve life-changing outcomes" with information about the early
stage of development
for the candidates, the expense of clinical trials and uncertain
outcome. Similarly,
revise page 2. Additionally, complete the table appearing on page
165 to depict the stage
of development as of the most recent date practicable.
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany
October 14,NameAesther
2022 Healthcare Acquisition Corp.
October
Page 2 14, 2022 Page 2
FirstName LastName
What conditions must be satisfied to complete the Business Combination, page 10
2. Please identify the conditions that are subject to waiver here and on
pages 19 and 125. To
the extent that a waiver may have material consequences, please
include a risk factor
indicating describing the potential impact of the waiver. For example,
if the condition
that AHAC will have at least $5,000,001 of net tangible assets is
waivable, please discuss
the impact a waiver may have on a Nasdaq listing. If approval for a
Nasdaq listing is
waivable, include a discussion of the potential impact on liquidity.
May AHAC, the Sponsor or AHAC's directors, officers advisors or their
affiliates purchase
shares in connection with the Business Combination, page 12
3. We not your disclosure on page 12 indicating that the Sponsor,
directors, officers or
advisors and their affiliates may purchase shares in privately
negotiated transactions at
purchase prices that may be in excess of the per-share pro rata
portion of the Trust
account. Please explain how you intend to comply with Rule 14e-5 and
Tender Offers
and Schedules CDI 166.01.
What interests do AHAC's current officers and directors have in the Business
Combination?,
page 12
4. Please quantify the aggregate dollar amount and describe the nature of
what the sponsor
and its affiliates have at risk that is dependent on completion of a
business combination.
Include the current value of securities held, loans extended, fees
due, and out-of-pocket
expenses for which the sponsor and its affiliates are awaiting
reimbursement. Provide
similar disclosure for the company s officers and directors, if
material.
5. Please highlight the risk related to the sponsor's incentive to to
complete any acquisition
rather than liquidate and the potential result of completing an
acquisition that might not be
favorable to the public shareholders.
6. Please clarify here whether the sponsor and its affiliates can earn a
positive rate of return
on their investment, even if other SPAC shareholders experience a
negative rate of return
in the post-business combination company.
Summary of the Proxy Statement, page 18
7. Please revise your Summary to include descriptions of the Backstop
Agreement and
Common Stock Purchase Agreement, including the purposes of these
agreements,
material terms, and the short term and long term impacts, including
potential dilutive
effects and potential impacts on the stock price. Please also include
risk factor disclosure
identifying provisions that are likely to have dilutive effects and
put downward pressure
on the stock price.
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany
October 14,NameAesther
2022 Healthcare Acquisition Corp.
October
Page 3 14, 2022 Page 3
FirstName LastName
Unaudited Pro Forma Condensed Combined Financial Information
Introduction, page 29
8. We note that there are at least two conditions required to be met for
the merger to close:
(1) the minimum cash condition of $50 million, and (2) $5,000,001 of
net tangible assets.
Please expand your presentation and disclosures to explain how you
intend to address
these required conditions for those scenarios that one or both of the
conditions are not
met. With regards to the minimum cash condition, we note that Ocean
Biomedical has the
option to waive this condition. Ensure your pro forma presentation
gives effect to the full
range of possible results (i.e., Ocean Biomedical exercising its
option and also not
exercising its option). Refer to the guidance in Article 11-02(a)(10)
of Regulation S-X.
Basis of Pro Forma Presentation, page 30
9. Please revise your disclosures to clarify that the low redemptions
assumes 25% of the
AHAC public stockholders will exercise their redemption rights, and
that the high
redemptions assumes 75%.
10. For each redemption scenario presented, please disclose the number of
shares and
percentage of the total to be held by AHAC public stockholders, AHAC
sponsors, Vellar
Opportunity Fund SPV LLC Series 3, and former Ocean Biomedical
equity holders at
the closing of the business combination and as reflected in the pro
forma financial
statements in a tabular format. Include any necessary footnote
explanations for the
number of shares presented. Also include as a subsection to the
tabular presentation the
number of shares any other outstanding dilutive instrument is
convertible into along with
appropriate footnote explanations for the amounts presented.
Unaudited Pro Forma Condensed Combined Balance Sheet, page 31
11. Please revise your presentation here and on page 28 for cash and cash
equivalents under
Scenario 4, as negative cash and cash equivalents and total assets is
not a result that can
occur. Refer to Article 11-02(a)(6)(i)(A) of Regulation S-X for
guidance.
Notes to Unaudited Pro Forma Condensed Combined Financial Information, page 34
12. Please include a footnote that provides a detailed description of the
business combination,
including all material terms and the anticipated accounting
implications for each material
term. Specifically, a discussion of the Earnout Shares, Extension
Share Award, Warrant
Conversion provisions, and the Class B profit interests in Poseidon
should be provided,
including how each provision will be accounted for and has been
reflected in the pro
forma financial statements.
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany
October 14,NameAesther
2022 Healthcare Acquisition Corp.
October
Page 4 14, 2022 Page 4
FirstName LastName
2. Adjustments to Unaudited Pro Forma Combined Financial Information
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet, page 35
13. For footnote (2) regarding the Backstop Agreement, please address the
following:
Provide a more comprehensive explanation of the material terms of
the Backstop
Agreement.
Expand your columnar presentations for each redemption scenario in
which the
Backstop Agreement is utilized to give effect to the full range of
possible results. For
example, a range of results would include whether or not Vellar is
able to acquire the
shares from the public stockholder, since it appears that Vellar's
offering price of $10
per share is less than the $10.20 per share available under the
redemption option.
Another possible range of results would be whether or not Vellar
sells the acquired
shares prior to close and/or prior to maturity. In this regard,
Vellar may not be
willing to sell the shares at a price below $12.50 per share,
which is your required
buyback price at maturity of the Backstop Agreement. Refer to
Article 11-02(a)(10)
of Regulation S-K for guidance.
For the scenarios presented in which Vellar does not sell the
shares prior to closing
and/or prior to maturity, explain why you have not also recognized
a liability for the
repurchase of the shares at $10 per share in addition to the $2.50
per share required
for those shares not sold prior to maturity.
Revise your disclosures to better explain why you are recognizing
a cash inflow
adjustment under the low and high redemption scenarios, since you
are not issuing
any new shares for purposes of the Backstop Agreement. In this
regard, it is unclear
at what point AHAC repays Vellar under the Backstop Agreement for
the shares
Vellar acquires. We note your disclosures on page 126 that
AHAC has agreed to
purchase those shares from Vellar on a forward basis at maturity
We further note
on page 126 that Vellar will repay AHAC with a portion of the sale
proceeds to the
extent that Vellar sells some or all of the shares subject to this
agreement.
For the low redemption scenario, explain why you are presenting
Vellar as acquiring
2,680,000 shares while only 2,625,000 shares are shown as being
redeemed and
where the additional 55,000 shares came from.
14. Please expand footnote (5) to provide a discussion and analysis of the
factors that could
result in an adjustment to the merger consideration to be received by
Ocean s shareholders
as discussed on page 123. To the extent that any of those conditions
are present as of the
most recent balance sheet date, provide the calculation showing the
adjusted consideration
amount and reflect the adjusted amount in the pro forma presentation.
Refer to Article 11-
02(a)(11)(ii)(A) of Regulation S-X for guidance.
15. Regarding the adjustment related to footnote (7), please tell us why
you have included this
amount as an accounts payable rather than as a deduction to cash and
cash equivalents. In
this regard, we note the disclosures on page 234 that state $21.4
million of cash and cash
equivalents from the business combination will be used to repay
certain accrued expenses
and contingent payments. For those scenarios presented in which the
$50 million
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany
October 14,NameAesther
2022 Healthcare Acquisition Corp.
October
Page 5 14, 2022 Page 5
FirstName LastName
minimum cash requirement is not met, address whether the contingent
costs included
would still be incurred.
3. Net income per Share, page 36
16. Please expand your presentation to show the composition of the
weighted average shares
outstanding for each period presented. Also, disclose the number of
shares that are anti-
dilutive and not included in the diluted shares outstanding by type.
Refer to Article 11-
02(a)(9) of Regulation S-X for guidance.
Risk Factors, page 43
17. Please include risk factor discussions identifying the potential
consequences to investors
related to the Backstop Agreement and the Common Stock Purchase
Agreement.
We are a party yo license and sublicense agreements pursuant to which we are
obligated to make
substantial payments..., page 65
18. Please revise your risk factor heading and discussion to clarify that
the agreements may be
terminated for failure to meet the milestone events by certain dates
and include the
milestone events and dates.
Some intellectual property that we have in-licensed may have been discovered
through federal
government funded programs..., page 70
19. Please identify your license agreements that provide for "march-in"
rights.
We will be a "controlled company" within the meaning of Nasdaq rules and the
rules of the
SEC..., page 97
20. Please identify the controlling shareholder and indicate whether you
intend to rely on
corporate governance exemptions available to controlled companies.
Please also update
your summary to indicate that you will be a controlled company,
identify the controlling
shareholder and include a discussion of the consequences.
Backstop Agreement, page 126
21. Please revise the description of your Backstop Agreement with Vellar
to clearly explain
the obligations of each party and all material terms. For example,
Given that AHAC will purchase shares that Vellar purchases in the
open market,
explain how the agreement is intended to provide AHAC with
additional outstanding
shares and cash following the Business Combination. To the extent
that the
expectation is that AHAC will have the additional shares and cash
at the time of the
closing and the period immediately following the closing of the
Business
Combination, please clarify that the additional shares and cash
is limited to the short
term and for the purpose of ensuring the conditions of the
Business Combination are
met. Include a risk factor discussing the longer term impact on
cash.
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany
October 14,NameAesther
2022 Healthcare Acquisition Corp.
October
Page 6 14, 2022 Page 6
FirstName LastName
Explain the prepayment provisions referenced on page 35,
including the timing and
amount of such payments.
Clarify whether the phrase "AHAC stockholders that elected to
redeem and
subsequently revoked their prior elections..." is intended to
refer to AHAC
stockholders who in the future elect to redeem and subsequently
revoke their election.
Clarify when Vellar will make the purchases or over what period
of time.
When will AHAC purchase the shares from Vellar.
Your discussion indicates "maturity" is described but it is not
clear from the
discussion when maturity occurs or how it is determined.
Clarify the statement that "AHAC will not purchase any shares
of its Class A
common stock from Vellar at a price higher than the redemption
price during
the redemption period" to indicate whether AHAC will purchase
Class A common
stock at a price higher than the redemption price following the
redemption period and
if AHAC commits to the purchase during the redemption period.
Clarify when and how AHAC will determine the purchase price.
Explain Vellar's obligation to repay AHAC a portion of the sale
proceeds, including
identifying the referenced sale and quantifying the portion of
the proceeds.
If the shares to be sold back to AHAC are no longer subject to
the forward
transaction following the expiration of the redemption offer,
please explain the
significance of the maturity.
Shareholder Proposal No. 1: The Business Combination Proposal
Background of the Business Combination, page 128
22. We note you disclose here that EF Hutton performed additional services
after the IPO and
part of the IPO underwriting fee was deferred and conditioned on
completion of a
business combination. Please describe the extent of EF Hutton's role
and quantify the
aggregate fees payable to EF Hutton that are contingent on completion
of the business
combination.
23. Please revise to disclose how many of the targets the AHAC Board
discussed on August
5, 2022 were determined to be the best targets and disclose the
extent of negotiations
with those companies and why you decided not to pursue a business
combination with
those companies.
24. Disclose the reasons the company did not enter business combinations
with the other
companies it considered appropriate targets aside from Candidates A, B
and C.
25. We note your reference to the Cohen & Co. backstop agreement here on
page 131. Please
revise your disclosure to provide the material terms of the agreement
or otherwise advise.
26. Please revise your disclosure to state who proposed the common stock
purchase
agreement and the backstop agreement and describe the concerns the
agreements were
Suren Ajjarapu
Aesther Healthcare Acquisition Corp.
October 14, 2022
Page 7
intended to address. Discuss the negotiations leading to execution of
the agreements
including, without limitation, changes to the terms throughout
negotiations.
27. Revise to describe the meetings that took place between
representatives of AHAC and
Ocean Biomedical between August 13, 2022 and August 31, 2022. The
descriptions
should include the representatives at each meetings, the issues and
concerns discussed, the
initial offer, how the negotiations developed the valuations, Back
Stop Agreement,
Common Stock Purchase Agreement and the decision to provide for earn
earn out shares..
Timeline of the Business Combination, page 130
28. Please revise your discussion to discuss how you narrowed the list of
thirty six potential
acquisition targets to the ten you entered into non-disclosure
agreements with and how
you further narrowed the field of potential candidates to four.
The AHAC Board's Reasons for Approval of the Business Combination [to be
revised], page 133
29. Please revise this section to include the reasons for approval of the
business combination
in the next amendment.
30. Please revise to describe Mentor's methodology for identifying
comparable companies and
describe the analyses performed. To the extent there were any
transactions that met the
selection criteria that were not included in the analysis, please
identify the transactions
and explain why they were excluded.
The Opinion of the Mentor Group, page 136
31. Please disclose the interest rate used and discuss why you considered
projections
extending over an 18 year period to be reasonable. Additionally,
clarify how many FDA
product approvals you assumed were granted, the dates of such
approvals for purposes of
the projections, growth rates used and why you believe such
assumptions were appropriate
given the early stage of development for all of Ocean Biomedical
product candidates.
Additionally, discuss whether the projections factored in the
possibility of FDA approval
of new competitive products.
32. Discuss how the comparable companies were selected for the Guideline
Public Company
Data and explain how the fairness advisor used this data in its
analyses. If any companies
that met the selection criteria were excluded from the analysis,
please identify them and
explain the reason for excluding them.
Information About the Company, page 159
FirstName LastNameSuren Ajjarapu
33. Please revise to disclose that your board of directors approved an
extension of the period
Comapany NameAesther
of time available toHealthcare
AHAC to Acquisition
consummateCorp.
a business combination from
September 16,
2022 to December
October 14, 2022 Page 7 16, 2022.
FirstName LastName
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany
October 14,NameAesther
2022 Healthcare Acquisition Corp.
October
Page 8 14, 2022 Page 8
FirstName LastName
Business of Ocean Biodmedical, page 164
34. We note your statement that an estimated 1,500 patients in Puerto Rico
account for more
that 50% of the worldwide HPS population appears to conflict with your
subsequent
statement that HPS effects approximately 1 to 2 million individuals
worldwide outside of
Puerto Rico. Please reconcile your disclosure or otherwise advise.
Executive Officers, page 220
35. Please delete the value of UpHealth as of the fourth quarter of 2020.
Alternatively, tell us
why you believe this information is relevant and update the value to
the most recent
practicable date.
Ocean Biomedical's Management's Discussion and Analysis of Financial Condition
and Results
of Operations
Components of Our Results of Operations, page 230
36. Please expand your discussion and analysis of research and development
expenses for the
six-months ended June 30, 2022, to disclose the nature of the costs
incurred. Similarly,
please also address this comment for your analysis of general and
administrative expenses.
General
37. With a view toward disclosure, please tell us whether your sponsor is,
is controlled by, has
any members who are, or has substantial ties with, a non-U.S. person.
Please also tell us
whether anyone or any entity associated with or otherwise involved in
the transaction, is,
is controlled by, or has substantial ties with a non-U.S. person. If
so, please revise your
filing to include risk factor disclosure that addresses how this fact
could impact your
ability to complete your initial business combination. For instance,
discuss the risk to
investors that you may not be able to complete an initial business
combination with a
target company should the transaction be subject to review by a U.S.
government entity,
such as the Committee on Foreign Investment in the United States
(CFIUS), or ultimately
prohibited. Further, disclose that the time necessary for government
review of the
transaction or a decision to prohibit the transaction could prevent
you from completing an
initial business combination and require you to liquidate. Disclose
the consequences of
liquidation to investors, such as the losses of the investment
opportunity in a target
company, any price appreciation in the combined company, and the
warrants, which
would expire worthless.
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany
October 14,NameAesther
2022 Healthcare Acquisition Corp.
October
Page 9 14, 2022 Page 9
FirstName LastName
38. We note that EF Hutton was an underwriter for the initial public
offering of the SPAC
and advised on the business combination transaction with the target
company as
referenced on page 131. We also note press reports that certain firms
are ending
their involvement in SPAC business combination transactions. Please
tell us, with a view
to disclosure, whether you have received notice from EF Hutton about
it ceasing
involvement in your transaction and how that may impact your deal or
the deferred
underwriting compensation owed to EF Hutton for the SPAC s initial
public offer.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Tracey Houser at 202-551-3736 or Kevin Kuhar at
202-551-3662 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Daniel Crawford at 202-551-7767 or Suzanne Hayes at 202-551-3675 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Life
Sciences
cc: Andy Tucker, Esq.