S-4/A 1 fs42018a4_bisoncapitalacq.htm AMENDMENT NO. 4 TO FORM S-4

As filed with the Securities and Exchange Commission on April 29, 2019.

Registration No. 333-229127

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 4

to

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

Bison Capital Acquisition Corp.

(Exact name of registrant as specified in its charter)

 

British Virgin Islands*   6770   N/A
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 

609-610 21st Century Tower

No. 40 Liangmaqiao Road

Chaoyang District, Beijing 100016, China

+86 (10) 8444-6968

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

CT Corporation System

111 Eighth Avenue

New York, New York 10011

+1 (212) 590-9070

(Name, address, including zip code, and telephone number, including area code, of agent for service

 

Copies to:

 

Arila Er Zhou, Esq.

Hunter Taubman Fischer &Li LLC
1450 Broadway, 26th Floor

New York, NY 10018
Tel: 212.530.2232
Fax: 212.202.6380

  Michael Killourhy
Ogier
Ritter House, 6th Floor
Wickhams Cay II
PO Box 3170
Road Town, Tortola
British Virgin Islands, VG 1110
(+1284) 852 7300
 

Wenseng “Wendy” Pan, Esq.

Sidley Austin LLP

787 Seventh Avenue

New York, New York 10019

(212) 839-5300

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the business combination described in the enclosed Proxy Statement/Prospectus have been satisfied or waived.

 

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer ☐   Accelerated filer ☐   Non-accelerated filer ☒   Smaller reporting company ☒   Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

 

* The Registrant intends, subject to shareholder approval, to effect a domestication under Section 388 of the Delaware General Corporation Law, pursuant to which the Registrant’s state of incorporation shall be Delaware.

  

 

 

  

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Security Being Registered   Amount
Being
Registered(2)(3)
    Proposed Maximum Offering
Price per
Security(1)
    Proposed Maximum Aggregate Offering
Price(1)(2)
    Amount of Registration
Fee
 
Units, each consisting of one share of common stock, one right entitling the holder to receive one-tenth (1/10) of one share of common stock and one-half (1/2) of one Warrant, each whole Warrant entitling the holder to purchase one share of common stock     2,707     $ 10.70     $ 28,965     $ 3.5  
Shares of common stock, par value $0.0001 per share, included as part of the units     2,707                   (4)
Shares of common stock, par value $0.0001 per share     800,373     $ 10.59     $ 8,475,950     $ 1,027.3  
Warrants included as part of the units     1,354                   (4)
Rights included as part of the units     2,707                   (4)
Warrants separated from the units     3,017,396                          
Rights separated from the units     6,034,793                          
Shares of common stock underlying the warrants     3,018,750                   (4)
Shares of common stock underlying the rights     603,750                   (4)
Total                   $ 8,504,915     $ 1,031 (5)

 

(1) Based on the market price of the units, shares and rights of Bison Capital Acquisition Corp. on April 26, 2019 for the purpose of calculating the registration fee pursuant to rule 457(f)(1).

 

(2) The securities of the Registrant being registered will be exchanged on a one-for-one basis for securities of Bison Capital Acquisition Corp. in connection with the domestication of Bison Capital Acquisition Corp. out of the British Virgin Islands and continue as a company incorporated in the State of Delaware.

 

(3) Pursuant to Rule 416, there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions.

 

(4) No fee pursuant to Rule 457(o).
   
(5) Previously paid.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

PROXY STATEMENT FOR

A SPECIAL MEETING OF BISON CAPITAL ACQUISITION CORP.

 

PROSPECTUS FOR

 

2,707 UNITS (EACH UNIT COMPRISING ONE SHARE OF COMMON STOCK, ONE RIGHT ENTITLING THE HOLDER TO RECEIVE ONE-TENTH OF ONE SHARE OF COMMON STOCK AND ONE-HALF OF ONE WARRANT, EACH WHOLE WARRANT ENTITLING THE HOLDER TO PURCHASE ONE SHARE OF COMMON STOCK), 803,080 SHARES OF COMMON STOCK (INCLUDING COMMON STOCKS INCLUDED IN THE UNITS), 6,037,500 RIGHTS AND 3,018,750 WARRANTS AND 3,622,500 SHARES OF COMMON STOCK UNDERLYING THE WARRANTS AND RIGHTS OF BISON CAPITAL ACQUISITION CORP. (AFTER ITS DOMESTICATION AS A CORPORATION INCORPORATED IN THE STATE OF DELAWARE, WHICH WILL BE RENAMED XYNOMIC PHARMACEUTICALS HOLDINGS, INC. IN CONNECTION WITH THE BUSINESS COMBINATION DESCRIBED HEREIN).

 

The board of directors of Bison Capital Acquisition Corp., a British Virgin Islands business company (“we,” “us,” “our,” “Bison” or the “Company”), has unanimously approved (1) an agreement and plan of merger, dated as of September 12, 2018, as amended, by and among the Company, Bison Capital Merger Sub Inc. (“Merger Sub”), a company incorporated under the laws of Delaware, Xynomic Pharmaceuticals, Inc., a company incorporated under the laws of Delaware (“Xynomic”), and Yinglin Mark Xu, solely in his capacity as the Shareholder Representative (as amended, the “Merger Agreement”), pursuant to which, Merger Sub will merge with and into Xynomic, with Xynomic surviving the merger as a direct wholly-owned subsidiary of the Company (we refer to such merger and other transactions contemplated in the Merger Agreement hereafter as the “Business Combination”); (2) the domestication of Bison BVI out of the British Virgin Islands and its continuation as a company incorporated in the State of Delaware (the “Domestication”); and (3) the other transactions as contemplated by the Merger Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A. In connection with the Business Combination, we will change our name to “Xynomic Pharmaceuticals Holdings, Inc.” As used in this proxy statement/prospectus, “Bison BVI” refers to Bison Capital Acquisition Corp. before the Domestication, “Bison DE” refers to Bison Capital Acquisition Corp. after the Domestication and the “combined entity” refers to the surviving company following the closing of the Business Combination, including after its name change to Xynomic Pharmaceuticals Holdings, Inc.

 

On the effective date of the Domestication, (1) the issued and outstanding ordinary shares, with no par value, of Bison BVI will convert automatically, on a one-for-one basis, into shares of common stock, par value $0.0001 per share, of Bison DE (“Company common stock”); (2) the issued and outstanding warrants of Bison BVI will automatically become warrants of Bison DE, each entitling the holder to acquire one share of Company common stock; and (3) the issued and outstanding units of Bison BVI (less the number of units that have been separated into the underlying ordinary shares, rights and warrants upon the request of the holder thereof) will automatically become units of Bison DE, with each unit representing one share of Company common stock, one right entitling the holder to receive one-tenth of one share of Company common stock and one-half of one warrant.

 

The issuance of shares of Company common stock to the equity holders of Xynomic will be consummated on a private placement basis, pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The aggregate value of the consideration to be paid by Bison in the Business Combination consists of (i) a closing merger consideration of $350 million subject to certain adjustments set forth in the Merger Agreement, payable in shares of Company common stock at $10.15 per share, and (ii) an earnout consideration of an additional 9,852,216 shares of Company common stock.

 

Bison’s units, ordinary shares, rights and warrants are currently listed on the Nasdaq Capital Market (“Nasdaq”) under the symbols “BCACU”, “BCAC”, “BCACR” and “BCACW”, respectively. Bison has applied for listing, to be effective at the time of the Business Combination, of combined entity’s common stock and warrants on Nasdaq under the proposed symbols “XYN” and “XYNPW,” respectively. The combined entity will have new CUSIP numbers for their common stock and warrants to be effective following the closing of the Business Combination, 98421X102 and 98421X110, respectively.

 

This proxy statement/prospectus provides shareholders of Bison with detailed information about the Business Combination and other matters to be considered at the special meeting of Bison Capital Acquisition Corp. We encourage you to read this entire document, including the Annexes and other documents referred to herein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 34 of this proxy statement/prospectus.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

 

This proxy statement/prospectus is dated April 29, 2019, and is first being mailed to Bison’s shareholders on or about May 1, 2019.

 

 

 

 

Bison Capital Acquisition Corp.

609-610 21st Century Tower

No. 40 Liangmaqiao Road

Chaoyang District, Beijing 100016, China

 

Dear Bison Capital Acquisition Corp. Shareholders:

 

You are cordially invited to attend the special meeting (the “Meeting”) of shareholders of Bison Capital Acquisition Corp., which we refer to as “we,” “us,” “our,” “Bison,” or the “Company,” on May 13, 2019 at 9:00 a.m., Beijing Time (May 12, 2019 at 9:00 p.m., Eastern Daylight Time), at 609-610 21st Century Tower, No. 40 Liangmaqiao Road, Chaoyang District, Beijing, 100016, China. This proxy statement/prospectus is dated April 29, 2019, and is first being mailed to shareholders of the Company on or about May 1, 2019.

 

At the Meeting, our shareholders will be asked to consider and vote upon a proposal, which we refer to as the “Business Combination Proposal,” to approve an agreement and plan of merger, dated as of September 12, 2018 (as amended, the “Merger Agreement”), by and among the Company, Bison Capital Merger Sub Inc., a Delaware corporation (“Merger Sub”), Xynomic Pharmaceuticals, Inc., a Delaware corporation (“Xynomic”), and Yinglin Mark Xu, solely in his capacity as the Shareholder Representative. Pursuant to the Merger Agreement, Merger Sub will merge with and into Xynomic, with Xynomic surviving the merger as a direct wholly-owned subsidiary of the Company. We refer to such merger and other transactions contemplated in the Merger Agreement hereafter as the “Business Combination.

 

In connection with the Merger Agreement, if the Business Combination Proposal and the Domestication Proposal (as defined below) are approved, the Company will re-domicile out of the British Virgin Islands and continue as a company incorporated in the State of Delaware prior to the Closing (as defined below) by filing a notice of continuation out of the British Virgin Islands with the British Virgin Islands Registrar of Corporate Affairs under Section 184 of the Companies Act of 2004 (as defined below) and filing a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which we will be domesticated and continue as a Delaware corporation. We refer to these actions as the “Domestication.” On the effective date of the Domestication, each of our currently issued and outstanding ordinary shares, with no par value, will automatically convert in connection with the Domestication, on a one-for-one basis, into shares of common stock, par value $0.0001 per share (the “Company common stock”).

 

Under the Merger Agreement, upon the consummation of the Business Combination (the “Closing”) all Xynomic stockholders will receive a number of newly issued shares of Company common stock (the Company now having re-domiciled to the State of Delaware) equal to the Closing Merger Consideration divided by $10.15 per share (the “Closing Consideration Shares”). The “Closing Merger Consideration” will be equal to $350,000,000, minus (i) the amount of Xynomic’s closing indebtedness, plus (ii) the amount of Xynomic’s closing cash, minus (iii) the amount of Xynomic’s transaction expenses, plus (iv) certain closing tax assets, plus (v) the amount, if any, by which Xynomic’s closing working capital exceeds an agreed upon target amount of working capital, minus (vi) the amount, if any, by which such target amount of working capital exceeds Xynomic’s closing working capital.

 

In addition to the Closing Consideration Shares, Xynomic stockholders will receive additional consideration (the “Earnout Consideration” and, together with the Closing Merger Consideration, the “Aggregate Merger Consideration”), of an additional 9,852,216 shares of Company common stock in aggregate (the “Earnout Shares” and, together with the Closing Consideration Shares, the “Merger Consideration Shares”). At the Closing, the Merger Agreement provides that the Earnout Shares will be deposited in an earnout escrow account (the “Earnout Escrow Account”). The Merger Agreement provides that in the event that Xynomic (or, after the Closing, the Company) obtains a worldwide exclusive license to a Phase 2 ready oncology drug candidate identified by the parties on or prior to March 12, 2019 (the “Earnout Criteria”), the Earnout Shares will be released to Xynomic stockholders, except that 3% of the Earnout Shares will be deposited in the Escrow Account (as defined below) as a part of the Escrow Shares (as defined below) upon the release. The Merger Agreement provides that if the Earnout Criteria are not achieved, the Earnout Shares will be returned to the Company. The Earnout Criteria were achieved in December of 2018, and thus the Earnout Shares will be issued to Xynomic stockholders at the Closing, except that 3% of the Earnout Shares will be deposited in the Escrow Account as part of the Earnout Shares.

 

The newly issued Merger Consideration Shares will be issued in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, which exempts transactions by an issuer not involving any public offering on the basis that the securities were offered and sold in a non-public offering to “accredited investors” (as defined in Rule 501(a) of Regulation D under the Securities Act) or to non-U.S. persons (as defined in Regulation S as promulgated under the Securities Act).

 

 

 

 

At the Closing, 3% of the Closing Consideration Shares will be deposited in an escrow account (the “Escrow Account”) to serve as security for, and the exclusive source of payment of, the Company’s indemnity rights under the Merger Agreement and any excess of the estimated Closing Merger Consideration over the final Closing Merger Consideration amount determined post-Closing. 3% of the Earnout Shares will be added to the Escrow Account for the same purposes (all shares deposited in the Escrow Account are referred to as “Escrow Shares”). Xynomic stockholders are entitled to vote all the Escrow Shares and the Earnout Shares while they are held in escrow.

 

At the Closing, each outstanding Xynomic option (whether vested or unvested) shall be assumed by the combined entity and automatically converted into an option to purchase Company common shares (each, an “Assumed Option”). Each Assumed Option will be subject to the terms and conditions set forth in the Company Stock Incentive Plan as described in the Incentive Plan Proposal below, and shall (i) constitute the right to acquire a number of Company common shares equal to (as rounded down to the nearest whole number) the product of (A) the Closing Consideration Shares divided by the aggregate number of Company common shares outstanding immediately prior to the effective time of the Merger (including the Dissenting Shares as defined in the Merger Agreement) (the “Per Share Closing Merger Consideration”), multiplied by (B) the number of Company common shares subject to the unexercised portion of such Xynomic option, (ii) be subject to the same vesting schedule as the applicable Xynomic option, and (iii) have an exercise price per share equal to (as rounded up to the nearest whole cent) the quotient of (A) the exercise price per share of such Xynomic option prior to its assumption, divided by (B) the Per Share Closing Merger Consideration, subject to certain adjustments. In accordance with the Merger Agreement, we expect that there will be in aggregate 1,921,969 Company common shares underlying the Assumed Options subject to vesting schedule of each.

 

In addition to the proposed Meeting, we held a special meeting of stockholders (the “Extension Meeting”) on March 21, 2019. At the Extension Meeting, the Company’s stockholders approved the following items: (i) an amendment to the Company’s Amended and Restated Memorandum of Association and Articles of Association extending the date by which the Company must consummate its initial business combination and the date for cessation of operations of the Company if the Company has not completed an initial business combination from March 23, 2019 to June 24, 2019 or such earlier date as determined by the Board of Directors of the Company (the “Extension Amendment Proposal”) and (ii) an amendment (the “Amendment to Trust Agreement”) to the Trust Agreement (the “Trust Agreement”) between the Company and Continental extending the date on which to commence liquidation of the Trust Account in accordance with the Trust Agreement, as amended by the Amendment to Trust Agreement, from March 23, 2019 to June 24, 2019 (the “Trust Amendment Proposal”). Following the Extension Meeting, an amended and restated version of our memorandum and articles of association incorporating the amendments made pursuant to the Extension Amendment Proposal was filed with (and registered by) the Registrar of Corporate Affairs in the British Virgin Islands. In connection with the Extension Meeting, shareholders holding 5,234,420 public shares exercised their right to redeem such public shares for a pro rata portion of the Trust Account. As a result, an aggregate of $55,177,977 (or $10.54 per share) was removed from the Trust Account to pay such holders.

 

It is anticipated that, following the completion of the Business Combination and if there are no redemptions in connection with the Business Combination, and assuming the issuance of 44,334,974 shares of Company common stock as the Merger Consideration Shares, Bison’s existing shareholders, including our Sponsor (as defined below) and underwriter (and its designees) in the initial public offering, will retain an ownership interest of approximately 7.11% of the Company, and Xynomic stockholders collectively will own approximately 92.89% of the outstanding Company common stock. These percentages are calculated based on a number of assumptions (as described in the accompanying proxy statement/prospectus) and are subject to adjustment in accordance with the terms of the Merger Agreement. A copy of the Merger Agreement is attached to the accompanying proxy statement/prospectus as Annex A.

 

Our shareholders will also be asked to consider and vote upon the following proposals:

 

  (1) Proposal 1 — to consider and vote upon a proposal to approve the Merger Agreement and the transactions contemplated thereby, which provides for the acquisition by us of all of the outstanding capital stock of Xynomic through a merger of a wholly-owned subsidiary of the Company with and into Xynomic Pharmaceuticals, Inc., with Xynomic Pharmaceuticals, Inc. surviving such merger as a direct wholly-owned subsidiary of the Company (the “Business Combination Proposal”).

 

  (2) Proposal 2 — to consider and vote upon a proposal to (a) re-domicile out of the British Virgin Islands and continue as a company incorporated in the State of Delaware, prior to the Closing; (b) in connection therewith to adopt upon the Domestication taking effect the certificate of incorporation, appended to this proxy statement/prospectus as Annex B (the “Interim Charter”) in place of our memorandum and articles of association (the “Current Charter”), currently registered by the Registrar of Corporate Affairs in the British Virgin Islands and which will remove or amend those provisions of our Current Charter that terminate or otherwise cease to be applicable as a result of the Domestication; and (c) to file a notice of continuation out of the British Virgin Islands with the British Virgin Islands Registrar of Corporate Affairs under Section 184 of the Companies Act of 2004 and in connection therewith to file the Interim Charter with the Secretary of State of the State of Delaware, under which we will be domesticated and continue as a Delaware corporation (the “Domestication Proposal”);

  

 

 

  

  (3) Proposal 3 — to approve and adopt, subject to and conditional on the Domestication and Closing (but with immediate effect therefrom the latter), separate proposals for amendments to the Company’s bylaws appended to this proxy statement/prospectus as Annex C (the “Proposed Amended and Restated Bylaws”) and amendments to the Company’s Interim Charter, as set out in the draft amended and restated certificate of incorporation (charter) appended to this proxy statement/prospectus as Annex D (the “Proposed Amended and Restated Charter”) to (1) change the name of the Company to Xynomic Pharmaceuticals Holdings, Inc., and (2) remove or amend those provisions of our Interim Charter which terminate or otherwise cease to be applicable following the Closing (the “Charter Amendment Proposal”);

 

  (4) Proposal 4 — to consider and vote upon a proposal to re-elect Messrs. Richard Wu, Thomas Folinsbee, Charles Prizzi, and James Jiayuan Tong to serve as directors on our board of directors until the 2019 annual meeting of shareholders, and to elect Messrs. Yinglin Mark Xu, Tingzhi Qian and Adam Inglis to serve as directors on our board of directors until the 2019 annual meeting of the shareholders, in each case under the terms of the Amended and Restated Charter (the “Director Election Proposal”);

 

  (5) Proposal 5 — to consider and vote upon a proposal to approve and assume the Xynomic 2018 Equity Incentive Plan, a copy of which is attached to the accompanying proxy statement/prospectus as Annex E (the “Incentive Plan Proposal”);

 

  (6) Proposal 6 — to consider and vote upon a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of more than 20% of the current total issued and outstanding ordinary shares of Bison, which Nasdaq may deem to be a change of control pursuant to the Business Combination (the “Nasdaq Proposal”); and

 

  (7) Proposal 7 — to consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, or the Nasdaq Proposal (the “Adjournment Proposal”).

 

Each of these proposals is more fully described in the accompanying proxy statement/prospectus, which each shareholder is encouraged to review carefully.

 

Our units, ordinary shares, rights, and warrants are currently listed on The Nasdaq Capital Market under the symbols “BCACU,” “BCAC,” “BCACR,” and “BCACW,” respectively. We will apply to continue the listing of Company common stock and warrants on The Nasdaq Capital Market under the new symbols “XYN” and “XYNPW,” respectively, upon the Closing. At the Closing, given effect of the Domestication, each unit will separate into (1) one share of common stock of the Company, par value $0.0001 per share (the “Company common share”), (2) one-half of one warrant to purchase one Company common share, and (3) one right to receive 1/10 of a Company common share. Each holder of a right will at the Closing be entitled to receive 1/10 of a Company common share, and both the units and the rights will cease trading at the Closing. No fractional share will be issued as a result of the issuance of shares for rights, and any right to a fractional share will be rounded down to the nearest whole share (in effect extinguishing any fractional entitlement), or the holder is entitled to hold any remaining fractional entitlement (without any share being issued) and to aggregate the same with any future fractional entitlement to receive Company common share until the holder is entitled to receive a whole number.

 

Pursuant to the final prospectus filed with the Securities Exchange Commission (Registration No. 333-218404 and 333-218839) (the “Prospectus”) dated June 21, 2017, the Company has established a trust account (the “Trust Account”) containing the proceeds of its initial public offering (the “IPO”) and from certain private placement occurring simultaneously with the IPO (collectively, with interest accrued from time to time thereon, the “Trust Fund”). for the benefit of the Company’s public shareholders (individually a “Public Shareholder,” collectively, the “Public Shareholders”) and the Company may disburse monies from the Trust Fund only: (i) to the Public Shareholders if the Company fails to consummate its initial business combination (as such term is used in the Prospectus) before June 24, 2019 or such earlier date as determined by Bison’s board of directors, unless otherwise extended as provided in the Merger Agreement and in accordance with the Current Charter (the “Outside Date”), (ii) to the Public Shareholders in the event that they elect to redeem their ordinary shares of the Company in connection with the business combination, (iii) with respect to any interest income earned on the Trust Fund balance, to pay income and to pay any taxes or dissolution expenses, or (iv) to the Company after or concurrently with the Closing. As of the Record Date, the amount of the Trust Fund was $8,492,591.12 and the estimated redemption price was $10.57 per share.

 

 

 

 

Pursuant to our memorandum and articles of association (the “Current Charter”), currently registered by the Registrar of Corporate Affairs in the British Virgin Islands and our Interim Charter, as applicable, we are providing our Public Shareholders with the opportunity to redeem, upon the Closing, Bison common shares then held by them for cash equal to the aggregate amount then on deposit in the trust account (which was $10.54 per share at the redemption in connection with the Extension Meeting held on March 21, 2019), including interest less taxes payable as permitted under the trust agreement, divided by the number of then outstanding public shares, subject to the limitation that no redemptions will take place if all of the redemptions would cause our net tangible assets to be less than $5,000,001. Under the Merger Agreement, Xynomic is not required to consummate the Business Combination if Bison’s net tangible assets are less than $7,500,000 after giving effect to such redemptions and the Merger.

 

Public Shareholders may elect to redeem their public shares even if they vote for the Business Combination Proposal.

 

A Public Shareholder, together with any of his, her, or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her, or its shares or, if part of such a group, the group’s shares, of 20% or more of the outstanding public shares without our prior written consent (the “20% threshold”). Holders of our outstanding public warrants, rights, and units do not have redemption rights in connection with respect to such securities in connection with the Business Combination. Holders of outstanding units must separate the underlying public shares, public rights, and public warrants prior to exercising redemption rights with respect to the public shares.

 

The holders of Bison ordinary shares issued prior to our IPO have agreed to waive their redemption rights with respect to any capital stock they own in connection with the Closing, including their 1,509,375 shares of Bison ordinary shares issued to our Sponsor (as defined below) and James Jiayuan Tong in a private placement prior to our IPO (the “Founder Shares”), 432,062 shares of Bison ordinary shares underlying 432,062 units Bison sold privately to our Sponsor and EarlyBirdCapital, Inc. (and its designees) in connection with the IPO (the “Private Shares” and “Private Units”), and public shares that they have purchased during or after the IPO, if any.

 

In connection to the Extension Meeting held on March 21, 2019, shareholders holding 5,234,420 public shares exercised their right to redeem such public shares for a pro rata portion of the Trust Account. Currently, Bison Capital Holding Company Limited, which we refer to as our “Sponsor,” together with certain of its affiliates and our independent directors including underwriters in Bison’s IPO, own approximately 70.74% of our issued and outstanding ordinary shares, including all of the Founder Shares and Private Shares. Our Sponsor and other founders have agreed to retain their Founder Shares and Private Shares for all periods relevant to our shareholder vote on the Business Combination Proposal and to vote any Bison ordinary shares owned by them in favor of the proposals described in the accompanying proxy statement/prospectus.

 

We are providing this proxy statement/prospectus and accompanying proxy card to our shareholders in connection with the solicitation of proxies to be voted at the special meeting and at any adjournments or postponements of the special meeting. Regardless of whether you plan to attend the special meeting, we urge you to read this proxy statement/prospectus carefully. Please pay particular attention to the section entitled “Risk Factors” commencing on page 34 of this proxy statement/prospectus.

 

After careful consideration, our board of directors has unanimously approved and adopted the Merger Agreement and unanimously recommends that our shareholders vote FOR adoption and approval of the Business Combination and FOR all other proposals presented to our shareholders in the accompanying proxy statement/prospectus. When you consider the board recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “The Business Combination Proposal — Certain Benefits of Bison’s Directors and Officers and Others in the Business Combination.

 

 

 

 

Approval of the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Nasdaq Proposal, and the Adjournment Proposal requires the affirmative vote of a majority of the votes entitled to vote thereon which are cast by shareholders present in person or represented by proxy at the special meeting (it being noted, for the purposes of the Current Charter that each of the Proposals is made for the purposes of approving or is in conjunction with the consummation of the Business Combination). The boards of directors of Xynomic, Merger Sub, and Bison have already approved the Business Combination as well as the stockholders of Xynomic and Merger Sub.

 

Each redemption of Bison ordinary shares by our Public Shareholders will decrease the amount in our trust account, which held $8,492,591.12 of marketable securities at a redemption price of $10.57 per share as of the Record Date.

 

Your vote is very important. If you are a registered shareholder, please vote your shares as soon as possible by completing, signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name” through a bank, broker, or other nominee, you will need to follow the instructions provided to you by your bank, broker, or other nominee to ensure that your shares are represented and voted at the Meeting. Once a valid quorum is established, a failure to vote your shares will have no effect on the outcome of any vote on the proposals to be considered at the Meeting. Abstentions will be counted in connection with the determination of whether a valid quorum is established, but will have no effect on the outcome of any vote on the proposals.

 

The transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, and the Nasdaq Proposal are approved at the Meeting. In addition, (i) the Nasdaq Proposal is conditioned on the approval of the Business Combination Proposal and Charter Amendment Proposal; (ii) the Charter Amendment Proposal is conditioned on the approval of the Domestication Proposal; and (iii) each of the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal, and the Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal. 

 

If you sign, date, and return your proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals described in the accompanying proxy statement/prospectus. If you fail to return your proxy card or fail to instruct your bank, broker, or other nominee how to vote, and do not attend the special meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have no effect on the outcome of any vote on the proposals. If you are a shareholder of record and you attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

PUBLIC SHAREHOLDERS ARE NOT REQUIRED TO AFFIRMATIVELY VOTE FOR OR AGAINST THE TRANSACTION IN ORDER TO REDEEM THEIR SHARES FOR CASH. THIS MEANS THAT PUBLIC SHAREHOLDERS WHO HOLD PUBLIC SHARES OF BISON CAPITAL ACQUISITION CORP. ON OR BEFORE MAY 8, 2019 (TWO (2) BUSINESS DAYS BEFORE THE SPECIAL MEETING) MAY ELECT TO REDEEM THEIR SHARES WHETHER OR NOT THEY ARE HOLDERS AS OF THE RECORD DATE, AND WHETHER OR NOT THEY VOTE FOR THE BUSINESS COMBINATION PROPOSAL. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH AND ANY SHARE CERTIFICATES DELIVERED BY YOU TO THE TRANSFER AGENT WILL BE RETURNED TO YOU. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.

 

On behalf of our board of directors, I thank you for your support and look forward to the successful completion of the Business Combination.

 

April 29, 2019 Sincerely,
   
  /s/ James Jiayuan Tong
  Name: James Jiayuan Tong
 

Title:

Chief Executive Officer

 

This proxy statement/prospectus is dated April 29, 2019, and is first being mailed to shareholders of the Company on or about May 1, 2019.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

 

 

 

 

BISON CAPITAL ACQUISITION CORP.

 

609-610 21st Century Tower

No. 40 Liangmaqiao Road

Chaoyang District, Beijing

China

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
BISON CAPITAL ACQUISITION CORP.

 

To Be Held on May 13, 2019 at 9:00 a.m. Beijing Time

 

To the Shareholders of Bison Capital Acquisition Corp.:

 

NOTICE IS HEREBY GIVEN that a special meeting (the “Meeting”) of Bison Capital Acquisition Corp., a British Virgin Islands corporation (“we,” “us,” “our,” “Bison,” or the “Company”), will be held on May 13, 2019 at 9:00 a.m., Beijing Time (May 12, 2019 at 9:00 p.m., Eastern Daylight Time), at 609-610 21st Century Tower, No. 40 Liangmaqiao Road, Chaoyang District, Beijing, 100016, China. You are cordially invited to attend the special meeting for the following purposes:

 

  (1) The Business Combination Proposal — to approve an agreement and plan of merger, dated as of September 12, 2018 (as amended, the “Merger Agreement”), providing for the merger of our wholly-owned subsidiary, Bison Capital Merger Sub Inc. (“Merger Sub”), a Delaware corporation, with and into Xynomic Pharmaceuticals, Inc., a Delaware corporation (“Xynomic”), with Xynomic surviving the merger as a wholly-owned subsidiary of the Company. We refer the transactions contemplated in the Merger Agreement the “Business Combination” in the accompanying proxy statement/prospectus.

 

Under the Merger Agreement, upon the consummation of the Business Combination (the “Closing”) all Xynomic stockholders will receive a number of newly issued shares of Company common stock upon the Closing equal to the Closing Merger Consideration divided by $10.15 per share (the “Closing Consideration Shares”). The “Closing Merger Consideration” will be equal to $350,000,000, minus (i) the amount of Xynomic’s closing indebtedness, plus (ii) the amount of Xynomic’s closing cash, minus (iii) the amount of Xynomic’s transaction expenses, plus (iv) certain closing tax assets, plus (v) the amount, if any, by which Xynomic’s closing working capital exceeds an agreed upon target amount of working capital, minus (vi) the amount, if any, by which such target amount of working capital exceeds Xynomic’s closing working capital.

 

In addition to the Closing Consideration Shares, Xynomic stockholders will receive additional consideration (the “Earnout Consideration” and, together with the Closing Merger Consideration, the “Aggregate Merger Consideration”) of an additional 9,852,216 shares of Company common stock in aggregate (the “Earnout Shares” and, together with the Closing Consideration Shares, the “Merger Consideration Shares”). The Merger Agreement provides that at the Closing, the Earnout Shares will be deposited in an earnout escrow account (the “Earnout Escrow Account”). In the event that Xynomic (or, after the Closing, the Company) obtains a worldwide exclusive license to a Phase 2 ready oncology drug candidate identified by the parties on or prior to March 12, 2019 (the “Earnout Criteria”), the Merger Agreement provides that the Earnout Shares will be released to Xynomic stockholders, except that 3% of the Earnout Shares will be deposited in the Escrow Account (as defined below) as a part of the Escrow Shares (as defined below) upon the release. The Merger Agreement provides that if the Earnout Criteria are not achieved, the Earnout Shares will be returned to the Company. The Earnout Criteria were achieved in December of 2018, and thus the Earnout Shares will be issued to Xynomic stockholders at the Closing, except that 3% of the Earnout Shares will be deposited in the Escrow Account as part of the Earnout Shares.

 

The newly issued Merger Consideration Shares will be issued in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, which exempts transactions by an issuer not involving any public offering on the basis that the securities were offered and sold in a non-public offering to “accredited investors” (as defined in Rule 501(a) of Regulation D under the Securities Act) or to non-U.S. persons (as defined in Regulation S as promulgated under the Securities Act).

 

At the Closing, 3% of the Closing Consideration Shares will be deposited in an escrow account (the “Escrow Account”) to serve as security for, and the exclusive source of payment of, the Company’s indemnity rights under the Merger Agreement and any excess of the estimated Closing Merger Consideration over the final Closing Merger Consideration amount determined post-Closing. 3% of the Earnout Shares will be added to the Escrow Account for the same purposes (all shares deposited in the Escrow Account are referred to as “Escrow Shares”). Xynomic stockholders are entitled to vote all the Escrow Shares and the Earnout Shares while they are held in escrow.

 

 

 

 

At the Closing, each outstanding Xynomic option (whether vested or unvested) shall be assumed by the combined entity and automatically converted into an option to purchase Company common shares (each, an “Assumed Option”). Each Assumed Option will be subject to the terms and conditions set forth in the Company Stock Incentive Plan as described in the Incentive Plan Proposal below, and shall (i) constitute the right to acquire a number of Company common shares equal to (as rounded down to the nearest whole number) the product of (A) the Closing Consideration Shares divided by the aggregate number of Company common shares outstanding immediately prior to the effective time of the Merger (including the Dissenting Shares as defined in the Merger Agreement) (the “Per Share Closing Merger Consideration”), multiplied by (B) the number of Company common shares subject to the unexercised portion of such Xynomic option, (ii) be subject to the same vesting schedule as the applicable Xynomic option, and (iii) have an exercise price per share equal to (as rounded up to the nearest whole cent) the quotient of (A) the exercise price per share of such Xynomic option prior to its assumption, divided by (B) the Per Share Closing Merger Consideration, subject to certain adjustments. In accordance with the Merger Agreement, we expect that there will be in aggregate 1,921,969 Company common shares underlying the Assumed Options subject to vesting schedule of each.

 

  (2) The Domestication Proposal — to consider and vote upon a proposal to: (a) re-domicile out of the British Virgin Islands and continue as a company incorporated in the State of Delaware, prior to the Closing; (b) in connection therewith to adopt upon the Domestication taking effect the certificate of incorporation, appended to this proxy statement/prospectus as Annex B (the “Interim Charter”) in place of our memorandum and articles of association (the “Current Charter”), currently registered by the Registrar of Corporate Affairs in the British Virgin Islands and which will remove or amend those provisions of our Current Charter that terminate or otherwise cease to be applicable as a result of the Domestication; and (c) to file a notice of continuation out of the British Virgin Islands with the British Virgin Islands Registrar of Corporate Affairs under Section 184 of the Companies Act of 2004 and in connection therewith to file the Interim Charter with the Secretary of State of the State of Delaware, under which we will be domesticated and continue as a Delaware corporation;

 

  (3) The Charter Amendment Proposal — to approve and adopt, subject to and conditional on the Domestication and the Closing (but with immediate effect from the latter), separate proposals for amendments to the Interim Charter as set out in the draft amended and restated certificate of incorporation (charter) appended to this proxy statement/prospectus as Annex C (the “Proposed Amended and Restated Bylaws”) and amendments to the Company’s Interim Charter, as set out in the draft amended and restated certificate of incorporation (charter) appended to this proxy statement/prospectus as Annex D (the “Proposed Amended and Restated Charter”) to (1) change the name of the Company to Xynomic Pharmaceuticals Holdings, Inc., and (2) remove or amend those provisions of our Interim Charter which terminate or otherwise cease to be applicable following the Closing.

 

(4)The Director Election Proposal — to consider and vote upon a proposal to re-elect Messrs. Richard Wu, Thomas Folinsbee, Charles Prizzi, and James Jiayuan Tong to serve as directors on our board of directors until the 2019 annual meeting of shareholders; and to elect Messrs. Yinglin Mark Xu, Tingzhi Qian and Adam Inglis to serve as directors on our board of directors until the 2019 annual meeting of the shareholders, in each case under the terms of the Amended and Restated Charter.

 

(5)The Incentive Plan Proposal — to consider and vote upon a proposal to adopt and assume the Xynomic 2018 Equity Incentive Plan, a copy of which is attached to the accompanying proxy statement/prospectus as Annex E.

 

(6)The Nasdaq Proposal — to consider and vote upon a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of more than 20% of the current total issued and outstanding ordinary shares of Bison, which Nasdaq may deem to be a change of control pursuant to the Business Combination.

 

(7)The Adjournment Proposal — to consider and vote upon a proposal to adjourn the Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Meeting, there are not sufficient votes to approve the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, or the Nasdaq Proposal (collectively, the “Bison Proposals”).

 

Only holders of record of our ordinary shares at the close of business on April 5, 2019, are entitled to notice of the Meeting and to vote at the Meeting and any adjournments or postponements of the Meeting. A complete list of our shareholders of record entitled to vote at the Meeting will be available for 10 days before the Meeting at our principal executive offices for inspection by shareholders during ordinary business hours for any purpose germane to the Meeting.

 

 

 

 

Pursuant to the final prospectus filed with the Securities Exchange Commission (File No. 333-218404) (the “Prospectus”) dated June 19, 2017, the Company has established a trust account containing the proceeds of its initial public offering (the “IPO”) and from certain private placements occurring simultaneously with the IPO (collectively, with interest accrued from time to time thereon, the “Trust Fund”) initially in an amount of $61,884,375 for the benefit of the Company’s public shareholders (the “Public Shareholders”) and the Company may disburse monies from the Trust Fund only: (i) to the Public Shareholders if the Company fails to consummate its initial business combination (as such term is used in the Prospectus) before June 24, 2019 or such earlier date as determined by Bison’s board of directors, unless otherwise extended as provided in the Merger Agreement and in accordance with the Current Charter (the “Outside Date”), (ii) to the Public Shareholders in the event that they elect to redeem their Company common shares of the Company in connection with the Business Combination, (iii) with respect to any interest income earned on the Trust Fund balance, to pay income and to pay any taxes or dissolution expenses, or (iv) to the Company after or concurrently the Closing.  As of the Record Date, the amount of the Trust Fund was $8,492,591.12 and the estimated redemption price was $10.57 per share.

 

A Public Shareholder, together with any of his, her, or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her, or its shares or, if part of such a group, the group’s shares, of 20% or more of the outstanding public shares without our prior written consent (the “20% threshold”). Holders of our outstanding public warrants, rights, and units do not have redemption rights in connection with respect to such securities in connection with the Business Combination. Holders of outstanding units must separate the underlying public shares, public rights, and public warrants prior to exercising redemption rights with respect to the public shares.

 

The holders of Bison ordinary shares issued prior to our IPO have agreed to waive their redemption rights with respect to any capital stock they own in connection with the Closing, including 1,509,375 shares of Bison ordinary shares issued to our Sponsor (as defined below) and James Jiayuan Tong in a private placement prior to our IPO (the “Founder Shares”), 432,062 shares of Bison ordinary shares underlying 432,062 units Bison sold privately to our Sponsor and EarlyBirdCapital, Inc. (and its designees) in connection with the IPO (the “Private Shares” and “Private Units”), and public shares that they have purchased during or after the IPO, if any.

 

In connection to the Extension Meeting held on March 21, 2019, shareholders holding 5,234,420 public shares exercised their right to redeem such public shares for a pro rata portion of the Trust Account. Currently, Bison Capital Holding Company Limited, which we refer to as our “Sponsor,” together with certain of its affiliates and our independent directors including the underwriters in Bison’s IPO, own approximately 70.74% of our issued and outstanding ordinary shares, including all of the Founder Shares and Private Shares. Our Sponsor and other founders have agreed to retain their Founder Shares and Private Shares for all periods relevant to our shareholder vote on the Business Combination Proposal and to vote any Bison ordinary shares owned by them in favor of the proposals described in the accompanying proxy statement/prospectus.

 

Each redemption of shares of our outstanding ordinary shares by our Public Shareholder will decrease the amount in our trust account, which held $63,310,884 of marketable securities as of December 31, 2018. Given that shareholders holding 5,234,420 public shares exercised their right to redeem such public shares for a pro rata portion of the Trust Account in the Extension Meeting, an aggregate of $55,177,977 (or $10.54 per share) was removed from the Trust Account to pay such holders. As of the Record Date, the Trust Account held $8,492,591.12 of marketable securities and the estimated redemption price was $10.57 per share.

 

The transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, and the Nasdaq Proposal are approved at the Meeting. In addition, (i) the Nasdaq Proposal is conditioned on the approval of the Business Combination Proposal and the Charter Amendment Proposal; (ii) the Charter Amendment Proposal is conditioned on the approval of the Domestication Proposal; and (iii) each of the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal, and the Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal.

 

Your attention is directed to the proxy statement/prospectus accompanying this notice (including the annexes thereto) for a more complete description of the proposed Business Combination and related transactions and each of our proposals. We encourage you to read this proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Advantage Proxy at (877) 870-8565 (toll free) or by email at ksmith@advantageproxy.com.

 

  By Order of the Board of Directors,
   
April 29, 2019 Sincerely,
   
  /s/ James Jiayuan Tong
  Name: James Jiayuan Tong
  Title: Chief Executive Officer

 

 

 

 

TABLE OF CONTENTS

 

SUMMARY TERM SHEET   1
Frequently Used Terms   6
Summary of the Proxy Statement/prospectus   21
Selected Historical Financial Information of Bison   29
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF XYNOMIC   30
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION   31
Cautionary Note Regarding Forward-Looking Statements   33
Risk Factors   34
Unaudited Pro Forma Condensed Combined Financial Information   85
Special meeting of Bison Shareholders   92
The Business Combination Proposal   97
The Merger Agreement   97
Related Agreements   107
Background of the Business Combination   110
Bison’s Board of Directors’ Reasons for the Approval of the Business Combination   115
Satisfaction of 80% Test   116
Opinion of Financial advisor to the Special Committee   119
Certain Bison Projected Financial Information   124
Certain Benefits of Bison’s Directors and Officers and Others in the Business Combination   127
Potential Purchases of Public Shares   128
Total Company Common Shares to Be Issued In the Business Combination   128
Sources and Uses for the Business Combination   129
Board of Directors of Bison Following the Business Combination   129
Domestication   130
Current Charter and Charter Amendment   130
Name; Headquarters   130
Redemption Rights   130
Appraisal Rights   131
Accounting Treatment   131
Material U.S. Federal Income Tax Considerations for Shareholders Exercising Redemption Rights   131
Vote Required for Approval   135
Recommendation of the Board   135
The DOMESTICATION Proposal   136
Overview   136
Material U.S. Federal Income Tax Consequences of the Domestication   138
Vote Required for Approval   143
Recommendation of the Board   143
The Charter Amendment Proposal   144
Overview   144
Vote Required for Approval   147
Recommendation of the Board   147

 

i

 

 

THE Director Election Proposal   148
Overview   148
Vote Required for Approval   150
Recommendation of the Board   150
THE INCENTIVE PLAN PROPOSAL   151
Overview   151
U.S. Federal Income Tax Consequences   153
Assumed Options   155
Option Grants and Stock Awards   155
Vote Required for Approval   155
Recommendation of the Board   155
THE NASDAQ PROPOSAL   156
Overview   156
Effect of Proposal on Current Shareholders   156
Vote Required for Approval   156
Recommendation of the Board   156
The Adjournment Proposal   157
Consequences if the Adjournment Proposal is Not Approved   157
Vote Required for Approval   157
Recommendation of the Board   157
Information About Bison   158
Bison Management’s Discussion and Analysis of Financial Condition and Results of Operations   169
Information About XYNOMIC   173
XYNOMIC Management’s Discussion and Analysis of Financial Condition and Results of Operations   222
Executive and Director Compensation Of XYNOMIC   230
Management After The Business Combination   233
Description of Securities   236
Beneficial Ownership of Securities   244
Certain Relationships and Related Party Transactions   248
Price Range of Securities and Dividends   252
LEGAL MATTERS   253
EXPERTS   253
Appraisal Rights   253
Delivery of Documents to Shareholders   253
Transfer Agent and Registrar   253
Submission of Shareholder Proposals   253
Future Shareholder Proposals   253
Where You Can Find More Information   254
INDEX TO FINANCIAL STATEMENTS   F-1
     
ANNEXES    
Annex A — Merger Agreement   A-1
Annex B — Interim Charter   B-1
Annex C — Amended and Restated Bylaws of Bison   C-1
Annex D — Amended and Restated Memorandum and Articles of Association of Bison   D-1
Annex E — Xynomic Equity Incentive Plan   E-1
Annex F — Opinion of Cassel Salpeter & Co., LLC   F-1
Annex G — Corporation Governance and Nominating Committee Charter   G-1

 

ii

 

 

SUMMARY TERM SHEET

 

This Summary Term Sheet, together with the sections entitled Questions and Answers About the Proposals for Shareholdersand Summary of the Proxy statement/prospectus,summarizes certain information contained in this proxy statement/prospectus, but does not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus, its annexes, and the documents referred to or incorporated by reference in this proxy statement/prospectus, as this summary may not contain all of the information that may be important to you in determining how to vote. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section entitled Where You Can Find Additional Information.In addition, for definitions of terms commonly used throughout this proxy statement/prospectus, including this Summary Term Sheet, see the section entitled Frequently Used Terms.

 

Bison is a special purpose acquisition company formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other similar business combination with one or more businesses or entities.
   

There currently are 2,744,517 Bison ordinary shares issued and outstanding, consisting of 803,080 shares originally sold as part of units in Bison’s IPO and remaining after the redemption in connection with the Extension, 1,509,375 Founder Shares that were issued to our Sponsor and Chief Executive Officer prior to Bison’s IPO, and 432,062 shares sold as part of units in a private placement consummated simultaneously with Bison’s IPO.
   

There currently are also 6,469,562 rights of Bison outstanding, consisting of 6,037,500 rights originally sold as part of units in Bison’s IPO, and 432,062 rights sold as part of units in a private placement consummated simultaneously with Bison’s IPO. Each holder of a right will be entitled to receive one-tenth of one Company common share upon the Closing, even if the holder of such right redeemed all Company common shares held by him, her, or it in connection with the Business Combination. No fractional shares will be issued as a result of the issuance of shares for rights, and any right to a fractional share will be rounded down to the nearest whole share (in effect extinguishing any fractional entitlement), or the holder is entitled to hold any remaining fractional entitlement (without any share being issued) and to aggregate the same with any future fractional entitlement to receive Company common share until the holder is entitled to receive a whole number. No additional consideration will be required to be paid by a holder of rights in order to receive his, her, or its additional ordinary shares upon the Closing,
   

In addition, there currently are 3,234,781 warrants of Bison outstanding, consisting of: (i) 3,018,750 public warrants originally sold as part of units in Bison’s IPO and (ii) 216,031 private warrants sold as part of units in a private placement consummated simultaneously with the consummation of Bison’s IPO. Each warrant entitles the holder thereof to purchase one share of Bison’s ordinary shares at a price of $11.50 per whole share, subject to adjustment. Warrants may be exercised only for a whole number of Bison’s ordinary shares. No fractional shares will be issued upon exercise of the warrants. The public warrants will become exercisable on the Closing, and expire at 5:00 p.m., New York time, five years after the Closing or earlier upon redemption. Once the warrants become exercisable, the Company may redeem the outstanding warrants at a price of $0.01 per warrant provided that the last sale price of Company common shares equals or exceeds $24.00 per share for any 20 trading days within a 30 trading day period ending on the third trading day before the Company sends the notice of redemption to the warrant holders and if there is a current registration statement in effect with respect to Company common shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. The private warrants, however, are non-redeemable so long as they are held by our Sponsor, the initial purchasers, or their permitted transferees. For more information about Bison and its securities, see the sections entitled “Information about Bison,” “Bison Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Securities.
   

There currently is also a unit purchase option held by the underwriter in Bison’s IPO to purchase up 157,500 Company common shares, 157,500 rights to receive 15,750 Company common shares, and 78,750 public warrants to purchase up to a total of 78,750 Company common shares that will remain outstanding following the Closing. The unit purchase option expires on June 19, 2022, five years from the effective date of the registration statement relating to the IPO.

 

1

 

 

Pursuant to the Merger Agreement, in exchange for all issued and outstanding shares of Xynomic, we will issue approximately 34,482,758 shares of Company common stock as the Closing Consideration Shares (assuming Closing Merger Consideration of $350 million) to the Xynomic stockholders in such amounts in proportion to their respective equity interests in Xynomic immediately prior to the Closing, with 3% of such shares (the “Escrow Shares”) being deposited in an escrow account (the “Escrow Account”) at the Closing. The Escrow Shares will be the sole source to pay for the Xynomic stockholders’ indemnification obligations under the Merger Agreement and will be released on the 18-month anniversary of the Closing, subject to amounts reserved for indemnification claims then pending or unpaid.

 

In addition to the Closing Consideration Shares, Xynomic stockholders will receive additional consideration (the “Earnout Consideration” and, together with the Closing Merger Consideration, the “Aggregate Merger Consideration”) of an additional 9,852,216 shares of Company common stock in aggregate (the “Earnout Shares” and, together with the Closing Consideration Shares, the “Merger Consideration Shares”). At the Closing, the Merger Agreement provides that the Earnout Shares will be deposited in an earnout escrow account (the “Earnout Escrow Account”). The Merger Agreement provides that in the event that Xynomic (or, after the Closing, the Company) obtains a worldwide exclusive license to a Phase 2 ready oncology drug candidate identified by the parties on or prior to March 12, 2019 (the “Earnout Criteria”), the Earnout Shares will be released to Xynomic stockholders, except that 3% of the Earnout Shares will be deposited in the Escrow Account as a part of the Escrow Shares upon the release. The Merger Agreement provides that if the Earnout Criteria are not achieved, the Earnout Shares will be returned to Bison. The Earnout Criteria were achieved in December of 2018, and thus the Earnout Shares will be issued to Xynomic stockholders at the Closing, except that 3% of the Earnout Shares will be deposited in the Escrow Account as part of the Earnout Shares.

 

The newly issued Merger Consideration Shares will be issued in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, which exempts transactions by an issuer not involving any public offering on the basis that the securities were offered and sold in a non-public offering to “accredited investors” (as defined in Rule 501(a) of Regulation D under the Securities Act) or to non-U.S. persons (as defined in Regulation S as promulgated under the Securities Act).

 

At the Closing, 3% of the Closing Consideration Shares will be deposited in an escrow account (the “Escrow Account”) to serve as security for, and the exclusive source of payment of, the Company’s indemnity rights under the Merger Agreement and any excess of the estimated Closing Merger Consideration over the final Closing Merger Consideration amount determined post-Closing. 3% of the Earnout Shares will be added to the Escrow Account for the same purposes (all shares deposited in the Escrow Account are referred to as “Escrow Shares”). Xynomic stockholders are entitled to vote all the Escrow Shares and the Earnout Shares while they are held in escrow.

 

  At the Closing, each outstanding Xynomic option (whether vested or unvested) shall be assumed by the combined entity and automatically converted into an option to purchase Company common shares (each, an “Assumed Option”). Each Assumed Option will be subject to the terms and conditions set forth in the Company Stock Incentive Plan as described in the Incentive Plan Proposal below, and shall (i) constitute the right to acquire a number of Company common shares equal to (as rounded down to the nearest whole number) the product of (A) the Closing Consideration Shares divided by the aggregate number of Company common shares outstanding immediately prior to the effective time of the Merger (including the Dissenting Shares as defined in the Merger Agreement) (the “Per Share Closing Merger Consideration”), multiplied by (B) the number of Company common shares subject to the unexercised portion of such Xynomic option, (ii) be subject to the same vesting schedule as the applicable Xynomic option, and (iii) have an exercise price per share equal to (as rounded up to the nearest whole cent) the quotient of (A) the exercise price per share of such Xynomic option prior to its assumption, divided by (B) the Per Share Closing Merger Consideration, subject to certain adjustments. In accordance with the Merger Agreement, we expect that there will be in aggregate 1,921,969 Company common shares underlying the Assumed Options subject to vesting schedule of each.

  

Pursuant to the Lock-up Agreement to be entered into by each Xynomic stockholder, Xynomic stockholders will not transfer, assign, or sell the Merger Consideration Shares for a period of nine months from the Closing (which period may be shortened under certain circumstances as described below under the heading “The Business Combination Proposal — Related Agreements — Lock-up Agreement”).

 

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For more information on the Merger Consideration Shares, see the section entitled “The Business Combination Proposal — Total Company Common Shares to be Issued in the Business Combination.” For more information about the Merger Agreement and related transaction agreements, see the section entitled “The Business Combination Proposal — The Merger Agreement.

 

  It is anticipated that, immediately following completion of the Business Combination and if there are no redemptions, and assuming the issuance of 44,334,974 shares of Company common stock as the Merger Consideration Shares (assuming Closing Merger Consideration of $350 million and Earnout Consideration of 9,852,216 shares), Bison’s Public Shareholders will retain an ownership interest of 2.95% in Bison and our Initial Shareholders (as defined below) and affiliates (including the underwriter in our IPO) will retain an ownership interest of 4.16% in Bison. These relative percentages assume the automatic conversion of 6,469,562 rights of Bison into approximately 646,956 Company ordinary shares at the Closing. In addition, if any of Bison’s shareholders exercise their redemption rights, the ownership interest in Bison by Bison’s Public Shareholders will decrease and the ownership interest in Bison by our Initial Shareholders, including our Sponsor, will increase. These ownership percentages with respect to Bison following the Business Combination do not take into account: (i) the 3,018,750 public warrants to purchase up to a total of 3,018,750 Company common shares, (ii) the 216,031 private warrants to purchase up to a total of 216,031 Company common shares, (iii) the unit purchase option, held by the underwriter in our IPO, to purchase up to 157,500 Company common shares, 157,500 rights to receive 15,750 Company common shares, and 78,750 public warrants to purchase up to a total of 78,750 Company common shares that will remain outstanding following the Business Combination, (iv) the issuance of any Company common shares under the Assumed Options upon the Closing, or (v) any adjustments to the number of the Closing Consideration Shares that will be issued to the Xynomic stockholders. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by Bison’s existing shareholders in Bison will be different. See “Summary — Impact of the Business Combination on Bison’s Public Float” and “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

 

Our management and board of directors considered various factors in determining whether to approve the Merger Agreement and the transactions contemplated thereby, including that the value of the Business Combination is equal to at least 80% of the balance in the trust account (excluding any taxes payable on interest earned). For more information about our decision-making process, see the section entitled “The Business Combination Proposal — Bison’s Board of Directors’ Reasons for the Approval of the Business Combination.

 

  Pursuant to our memorandum and articles of association (the “Current Charter”), in connection with the Business Combination, holders of our public shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Current Charter regardless of whether such shares are voted for or against the Business Combination. If a holder exercises its redemption rights in connection with the Business Combination, then such holder will be exchanging its ordinary shares for cash and will no longer own shares of the Company and will not participate in any future growth of the Company except the shares received as a result of exercise of rights at the Closing and the shares to be received as a result of exercise of warrant. Such a holder is not required to affirmatively vote for or against the Business Combination in order to redeem its shares for cash but needs to properly demands redemption and delivers its shares (either physically or electronically) to our transfer agent at least two business days prior to the special meeting. See the section entitled “Special Meeting of Bison Shareholders — Redemption Rights.

 

  In addition to voting on the Business Combination Proposal, at the special meeting, the shareholders of Bison will be asked to vote upon:

 

(i)a proposal to: (a) re-domicile out of the British Virgin Islands and continue as a company incorporated in the State of Delaware, prior to the Closing; (b) in connection therewith to adopt upon the Domestication taking effect the certificate of incorporation, appended to this proxy statement/prospectus as Annex B (the “Interim Charter”) in place of our Current Charter and which will remove or amend those provisions of our Current Charter that terminate or otherwise cease to be applicable as a result of the Domestication; and (c) to file a notice of continuation out of the British Virgin Islands with the British Virgin Islands Registrar of Corporate Affairs under Section 184 of the Companies Act of 2004 and in connection therewith to file the Interim Charter with the Secretary of State of the State of Delaware, under which we will be domesticated and continue as a Delaware corporation;

 

(ii)separate proposals, subject to and conditional on the Domestication and the Closing (but with immediate effect from the latter), for amendments to the Company’s bylaws appended to this proxy statement/prospectus as Annex C and amendments to the Company’s Interim Charter, as set out in the draft amended and restated certificate of incorporation (charter) appended to this proxy statement/prospectus as Annex D to (1) change the name of the Company to Xynomic Pharmaceuticals Holdings, Inc. and (2) remove or amend those provisions of our Interim Charter which terminate or otherwise cease to be applicable following the Closing;

 

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  (iii) a proposal to re-elect Messrs. Richard Wu, Thomas Folinsbee, Charles Prizzi, and James Jiayuan Tong to serve as directors on our board of directors until the 2019 annual meeting of shareholders; and to elect Messrs. Yinglin Mark Xu, Tingzhi Qian, and Adam Inglis to serve as directors on our board of directors until the 2019 annual meeting of the shareholders;

 

(iv)a proposal to approve and adopt the Xynomic 2018 Equity Incentive Plan;

 

(v)a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of more than 20% of the current total issued and outstanding ordinary shares of Bison, which Nasdaq may deem to be a change of control pursuant to the Business Combination; and

 

  (vi) to consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve the Business Combination Proposal, Charter Proposal, the Director Election Proposal, or the Nasdaq Proposal.

 

The transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, and the Nasdaq Proposal are approved at the Meeting. In addition, (i) the Nasdaq Proposal is conditioned on the approval of the Business Combination Proposal and Charter Amendment Proposal; (ii) the Charter Amendment Proposal is conditioned on the approval of the Domestication Proposal; and (iii) each of the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal, and the Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal.

 

Unless waived by the parties to the Merger Agreement, in accordance with applicable law, the Closing is subject to a number of conditions set forth in the Merger Agreement including, among others, receipt of the requisite shareholder approval contemplated by this proxy statement/prospectus. For more information about the closing conditions to the Business Combination, see the section entitled “The Business Combination Proposal — Conditions to Closing of the Business Combination.

 

The Merger Agreement may be terminated at any time prior to the Closing upon agreement of Xynomic and Bison, or by Xynomic or Bison acting alone, in specified circumstances. For more information about the termination rights under the Merger Agreement, see the section entitled “The Business Combination Proposal — Termination.

 

The Business Combination involves numerous risks. For more information about these risks, see the section entitled “Risk Factors.

 

  In considering the recommendation of Bison’s board of directors to vote FOR the proposals presented at the special meeting, you should be aware that our executive officers and members of our board of directors have interests in the Business Combination that are different from, or in addition to, the interests of our shareholders generally. The members of our board of directors were aware of these differing interests and considered them, among other matters, in evaluating and negotiating the transaction agreements and in recommending to our shareholders that they vote in favor of the proposals presented at the special meeting. These interests include, among other things:

 

(i) the fact that our Sponsor and our Chief Executive Officer, Dr. Tong, paid an aggregate purchase price of $25,000, or approximately $0.017 per share, for their 1,509,375 Founder Shares which would have a value of approximately $15.97 million based on the closing price of Bison ordinary shares of the Record Date as reported by Nasdaq and that are not subject to redemption. Such Founder Shares will have no value if we do not complete an initial business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors; as a result, our Sponsor (and its members, including our executive officers and directors) have a financial incentive to see the Business Combination consummated rather than losing whatever value is attributable to the Founder Shares;

 

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(ii)the fact that our Sponsor holds 401,875 private units and will continue to hold 422,062 Company common shares and 200,937 warrants following the separation of such private units upon the consummation of the Business Combination, subject to certain lock-up agreement. Those private units and securities underlying those private units are not subject to redemption and will be worthless if we do not complete an initial business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors;

 

(iii)if Bison is unable to complete a business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors, our Sponsor will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Bison for services rendered or contracted for or products sold to Bison, but only if such a vendor or target business has not executed a waiver of claims against the trust account and except as to any claims under our indemnity of the underwriters;

 

(iv)the continuation of four of our five existing directors as directors of the combined company;

 

(v)the fact that Bison has issued a $500,000 note to the Sponsor which is convertible into private units at the Sponsor’s discretion at the Closing;

 

  (vi) the fact that in addition to the $500,000 notes, the Sponsor has loaned us $100,000 for working capital and may need to loan us additional funds through the Closing, which, in the event that the initial business combination does not close, cannot be paid from the proceeds or the interest on such proceeds in the trust account;

 

(vii)the fact that (a) Zhongshan Bison Healthcare Investment Limited (Limited Partnership) (“Zhongshan Bison”) is holding 1,553,265 shares of Series B preferred stock of Xynomic representing approximately 2.96% equity interest in Xynomic immediately prior to the Closing, (b) Mr. Peixin Xu, the Chairman of Bison, is the beneficial owner of 21% of Zhongshan Bison and his wife owns 100% of Sponsor;

 

  (viii)  the fact that the Merger Agreement provides a termination fee of $4,500,000 payable to our Sponsor if (i) the breach by Xynomic causes Bison to not be able to satisfy its obligations under the Merger Agreement relating to preparing and filing a proxy statement/prospectus for obtaining, and obtaining, approval of the Business Combination and the Merger Agreement by its shareholders and not consummating an alternative business combination with another party, or to close the Business Combination on or prior to June 24, 2019 or such earlier date as determined by Bison’s board of directors, unless otherwise extended as provided in the Merger Agreement and in accordance with the Current Charter (the “Outside Date”), or enter into a definitive agreement to consummate an alternative business combination by that date, and (ii) Bison ceases operations other than making required distributions to its shareholders pursuant to its organizational documents and its winding up and dissolution as a result of (x) failing to obtain shareholder approval to consummate any alternative business combination or (y) occurrence of an Automatic Redemption Event (as defined in the Current Charter); and

  

  (ix)  the continued indemnification of current directors and officers of the Company and the continuation of directors’ and officers’ liability insurance after the Business Combination.

  

These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combination and the transactions contemplated thereby. These interests were considered by our Special Committee and the board of directors when they approved the Business Combination.

 

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Frequently Used Terms

 

Unless otherwise stated or unless the context otherwise requires, the terms we,” “us,” “our,the Company,and Bisonrefer to Bison Capital Acquisition Corp., and the terms combined companyand post-combination companyrefer to Bison and its subsidiaries, including Xynomic Pharmaceuticals, Inc., following the Closing.

 

Furthermore, in this document:

 

10% Shareholder” means a U.S. Holder of Bison ordinary shares who actually and constructively owns (after taking into account the attribution rules of Section 424(d) of the Code) 10% or more (by vote or value) of Bison’s ordinary shares. 

20% threshold” means the restriction as set forth in the Current Charter that a Public Shareholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, of 20% or more of the outstanding public shares without the Company’s prior written consent. 

Assumed Options” means options to purchase Company common shares, automatically converted from the outstanding Xynomic options (whether vested or unvested) assumed by the combined entity at the Closing pursuant to the Merger Agreement.

Aggregate Merger Consideration” means the sum of Earnout Consideration and Closing Merger Consideration.  

Bison,” “we,” “our” “us,” or the “Company” means Bison Capital Acquisition Corp., a British Virgin Islands company, which, if the Business Combination is successfully completed as contemplated, would continue as a Delaware corporation renamed “Xynomic Pharmaceuticals Holdings, Inc.” 

Bison ordinary shares” or “our ordinary shares” means ordinary shares, no par value, of Bison. 

Bison Proposals” means all of the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, and the Nasdaq Proposal.  

Business Combination” means the acquisition by us of all of Xynomic equity interests, pursuant to the Merger Agreement, whereby Merger Sub, a wholly-owned subsidiary of Bison, will merge with and into Xynomic, with Xynomic surviving the merger and being the whole owned subsidiary of Bison and other transactions contemplated in the Merger Agreement. 

Cassel Salpeter” means Cassel Salpeter & Co., LLC.

Closing” means the closing of the Business Combination as set forth in the Merger Agreement. 

Closing Date” means the date on which the Closing actually occurs. 

Closing Merger Consideration” means $350,000,000, minus (i) the amount of Xynomic’s closing indebtedness, plus (ii) the amount of Xynomic’s closing cash, minus (iii) the amount of Xynomic’s transaction expenses, plus (iv) certain closing tax assets, plus (v) the amount, if any, by which Xynomic’s closing working capital exceeds an agreed upon target amount of working capital, minus (vi) the amount, if any, by which such target amount of working capital exceeds Xynomic’s closing working capital. 

Closing Consideration Shares” means the aggregate number of newly issued shares of Company common stock equal to the Closing Merger Consideration divided by $10.15. 

Companies Act of 2004” and the “Insolvency Act” mean the British Virgin Islands Business Companies Act,2004 (as amended) and the Insolvency Act, 2003 of the British Virgin Islands, respectively. 

“Company common stock” Bison Capital Acquisition Corp.’s issued and outstanding ordinary shares with no par value converted in connection with the Domestication on a one-for-one basis into common stock, par value $0.0001 per share. 

Code” means the Internal Revenue Code of 1986, as amended or now in effect or as hereafter amended, including, but not limited to, any successor or substitute federal Tax codes or legislation. 

Current Charter” means the memorandum and articles of association as amended and restated on June 19, 2017 and March 21, 2019, currently registered by the Registrar of Corporate Affairs in the British Virgin Islands. 

“Domestication” means Bison Capital Acquisition Corp.’s plan to re-domicile out of the British Virgin Islands and continue as a company incorporated in the State of Delaware. 

EarlyBirdCapital” means EarlyBirdCapital, Inc., an underwriter and sole book-running manager in the IPO. 

Earnout Criteria” means in the event that Xynomic (or, after the Closing, the Company) obtains a worldwide exclusive license to a Phase 2 ready oncology drug candidate identified by the parties on or prior to March 12, 2019, the Earnout Shares will be released to Xynomic stockholders, except that 3% of the Earnout Shares will be deposited in the Escrow Account as a part of the Escrow Shares upon the release. 

Earnout Shares” means 9,852,216 shares of Company common stock (representing $100,000,000 based on a $10.15 per share value of the Company’s common stock).

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“Earnout Escrow Account” means the account where the Merger Agreement provides that the Earnout Shares will be deposited at Closing. 

“Effective Time” means the time of filing the certificate of merger with the Secretary of State of the State of Delaware or such other time specified in the certificate of merger. 

“Escrow Account” means at the Closing, 3% of the Closing Consideration Shares will be deposited in an escrow account to serve as security for, and the exclusive source of payment of, the Company’s indemnity rights under the Merger Agreement and any excess of the estimated Closing Merger Consideration over the final Closing Merger Consideration amount determined post-Closing. 

Escrow Agent” means Continental Stock Transfer & Trust Company. 

Escrow Agreement” means an escrow agreement to be entered among Bison, the shareholder representative on behalf of certain Xynomic stockholders, and the Escrow Agent pursuant to which, certain Xynomic stockholders will deposit certain Escrow Shares with the Escrow Agent to security the performance of the indemnification obligations of the Xynomic stockholders under the Merger Agreement. 

Escrow Shares” means 3% of the Closing Consideration Shares to be deposited into escrow to support certain indemnification obligations under the Merger Agreement in accordance with the terms set forth in certain escrow agreement. 

Exchange Act” means the Securities Exchange Act of 1934, as amended. 

Extension Amendment Proposal” means a proposal that was approved at the Extension Meeting on March 21, 2019 to amend the Company’s memorandum and articles of Association dated June 19, 2017 ( to extend the date before which the Company must complete a business combination from March 23, 2019 to June 24, 2019 or such earlier date as determined by the Board, and provide that the date for cessation of operations of the Company if the Company has not completed a business combination would similarly be extended. 

Extension Meeting” means a special meeting of stockholders held by the Company on March 21, 2019 to approve the Extension Amendment Proposal and Trust Amendment Proposal.

Founder Shares” means the 1,509,375 shares of Bison ordinary shares issued to our Sponsor and James Jiayuan Tong in a private placement prior to our IPO. 

Group Company(ies)” means Xynomic and its subsidiaries, including Xynomic Pharmaceuticals (Nanjing) Co., Ltd., Xynomic Pharmaceuticals (Shanghai) Co., Ltd., and Xynomic Pharmaceuticals (Zhongshan) Co., Ltd. as listed in Schedule 3.04 of the Company Disclosure Letter to the Merger Agreement. 

Interim Charter” means the certificate of incorporation attached to the accompanying proxy statement/prospectus as Annex B and to be adopted upon the Domestication taking effect. 

Incentive Plan” means the proposed Xynomic 2018 Equity Incentive Plan attached to the accompanying proxy statement/prospectus as Annex E

Initial Shareholders” means our Sponsor and each of our current officers and current directors and an advisor, in each case, that hold Founder Shares. 

Initial Public Offering” or “IPO” means the initial public offering of Bison units, each comprised of one ordinary share, one-half of one warrant, and one right to receive one–tenth of an ordinary share upon the Closing, consummated on June 23, 2017 with respect to 5,250,000 units and on June 28, 2017 with respect to 787,500 units related to the full exercise of the underwriter’s over-allotment option, in each case at $10.00 per unit. 

Lock-Up Agreement” means a lock-up letter agreement that each of Xynomic stockholders will enter into with the Company upon closing of the Business Combination restricting the sale, transfer or other disposition for value of Bison ordinary shares received as part of the Closing Consideration Shares for nine months post-Closing. 

Meeting” means the special meeting of shareholders of Bison that is the subject of this proxy statement/prospectus. 

Merger” or “merger” means acquisition by us of all of Xynomic equity interests, pursuant to the Merger Agreement, whereby Merger Sub, a wholly-owned subsidiary of Bison, will merge with and into Xynomic Pharmaceuticals, Inc., with Xynomic Pharmaceuticals, Inc. surviving the merger and being the wholly-owned subsidiary of Bison. 

Merger Agreement” means the Merger Agreement, dated as of September 12, 2018, as it may be amended, by and among the Company, Merger Sub, Xynomic and a representative of Xynomic stockholders, a copy of which is attached hereto as Annex A

Merger Sub” means Bison Capital Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Bison, solely set up for the purpose of facilitate and effect the Business Combination. 

Merger Consideration Shares” means the sum of Closing Consideration Shares and Earnout Shares. 

ordinary shares” or “our ordinary shares” means ordinary shares, no par value, of Bison. 

“Outside Date” means June 24, 2019 or such earlier date as determined by Bison’s board of directors. 

“Per Share Closing Merger Consideration” means the Closing Consideration Shares divided by the aggregate number of Company common shares outstanding immediately prior to the Effective Time of the Merger (including the Dissenting Shares as defined in the Merger Agreement). 

PRC” or “China” means the People’s Republic of China excluding Taiwan, Hong Kong and Macau for purposes of this proxy statement/prospectus.

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Prospectus” means the final prospectus filed with the Securities Exchange Commission (Registration No. 333-218404 and 333-218839) dated June 21, 2017. 

private shares,” “private rights” and “private warrants” mean the ordinary shares, rights and warrants included within the private units. 

Private Units” or “private units” means the 432,062 units Bison sold privately to our Sponsor and EarlyBirdCapital in connection with the IPO. 

private warrants” means the 216,031 warrants included in the private units, each of which entitles the holder to purchase one share of Bison Ordinary Share at a price of $11.50 per whole share, subject to certain adjustment. 

Proposed Amended and Restated Charter” means the proposed amended and restated certificate of incorporation of Bison immediately upon the closing of the Business Combination, which will become the Company’s amended and restated certificate of incorporation upon the approval of the Business Combination Proposal, a copy of which is attached hereto as Annex C

public rights” mean rights included in units issued in our IPO (whether they were purchased in the IPO or thereafter in the open market). 

Public Shareholders” or “public shareholders” means holders of public shares, including the Initial Shareholders to the extent the Initial Shareholders hold public shares, provided that the Initial Shareholders will be considered a “public shareholder” only with respect to any public shares held by them. 

Public Shares” or “public shares” means the ordinary shares issued in our IPO (whether they were purchased in the IPO or thereafter in the open market). 

public warrants” means the warrants issued in our IPO, each of which is exercisable for one Bison ordinary share, in accordance with its terms. 

public rights” means the rights issued in our IPO, each of which entitles its holder to receive one-tenth of a share upon consummation of our initial business combination. 

Record Date” means April 5, 2019. 

Registration Rights Agreement” means the proposed Registration Rights Agreement to be entered into upon closing of the Business Combination by the Company, and certain Xynomic stockholders and each of our Initial Shareholders. 

rights” means the private rights and the public rights, taken together. 

Securities Act” means the Securities Act of 1933, as amended. 

shares,” with respect to Bison, means, (1) prior to the Domestication, our ordinary shares, and (2) after the Domestication, shares of our common stock, $0.0001 par value per share. 

Sponsor” means Bison Capital Holding Company Limited, a Cayman Islands company. 

“Special Committee” means a committee of Bison Capital Acquisition Corp.’s Board of Directors, which was established in connection with the proposed Business Combination and consists solely of Bison’s independent directors. 

Trust Amendment Proposal” means a proposal to amend to the Company’s investment management trust agreement, dated June 19, 2017 by and between the Company and Continental Stock Transfer & Trust Company to extend the date on which to commence liquidating the Trust Account in the event the Company has not consummated a business combination from March 23, 2019 to June 24, 2019 or such earlier date as determined by Bison’s board of directors if approved by Bison’s shareholders.

Trust Fund” means the proceeds of Bison IPO and from certain private placement occurring simultaneously with the IPO, together with interests accrued from time to time thereon, held in a trust account, for the benefit of public shareholders. 

Trust Account” means the trust account where the Company places its net proceeds of the sale of the Units in the Initial Public Offering and the Private Units upon the closing of the Initial Public Offering and the private placement on June 23, 2017. 

unit” consists of one ordinary share, one right and one warrant. 

Voting Agreement” means a voting and support agreement entered into by and among certain shareholders of Bison and Xynomic dated as of September 12, 2018. 

warrants” means the private warrants and the public warrants, taken together. 

Xynomic” means Xynomic Pharmaceuticals, Inc. a Delaware corporation, and, unless the context requires otherwise, its consolidated subsidiaries, taken together. 

Xynomic stockholders” means the stockholders of Xynomic Pharmaceuticals, Inc. immediately prior to the closing of the Business Combination. 

Zhongshan Bison” means Zhongshan Bison Healthcare Investment Limited, a limited partnership holding 1,553,265 shares of Series B preferred stock of Xynomic representing approximately 2.96% equity interest in Xynomic immediately prior to the Closing. 

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Questions and Answers about the Proposals for Shareholders

 

The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the special meeting (the Meeting), including with respect to the proposed Business Combination. The following questions and answers do not include all the information that is important to our shareholders. We urge shareholders to read carefully this entire proxy statement/prospectus, including the annexes and the other documents referred to herein.

 

Q:Why am I receiving this proxy statement/prospectus?

 

A:Our shareholders will be asked to consider and vote upon a proposal, which we refer to as the “Business Combination Proposal,” to approve an agreement and plan of merger, dated as of September 12, 2018, which was amended on February 11, 2019, February 22, 2019, and April 2, 2019 (as amended, the “Merger Agreement”), providing for the merger of our wholly-owned subsidiary, Bison Capital Merger Sub Inc. (“Merger Sub”), a Delaware corporation, with and into Xynomic, a Delaware corporation, with Xynomic being the surviving company and a wholly-owned subsidiary of the Company.

 

Under the Merger Agreement, all of Xynomic stockholders will receive a number of newly issued shares of Company common stock upon the Closing equal to the Closing Merger Consideration divided by $10.15 per share (the “Closing Consideration Shares”). The “Closing Merger Consideration” will be equal to $350,000,000, minus (i) the amount of Xynomic’s closing indebtedness, plus (ii) the amount of Xynomic’s closing cash, minus (iii) the amount of Xynomic’s transaction expenses, plus (iv) certain closing tax assets, plus (v) the amount, if any, by which Xynomic’s closing working capital exceeds an agreed upon target amount of working capital, minus (vi) the amount, if any, by which such target amount of working capital exceeds Xynomic’s closing working capital.

 

In addition to the Closing Consideration Shares, Xynomic stockholders will receive an additional 9,852,216 Company common shares in aggregate (the “Earnout Shares,” and together with the Closing Consideration Share, the “Merger Consideration Shares”). At the Closing, the Merger Agreement provides that the Earnout Shares will be deposited in an earnout escrow account (the “Earnout Escrow Account”). The Merger Agreement provides that in the event that Xynomic (or, after the Closing, the Company) obtains a worldwide exclusive license to a Phase 2 ready oncology drug candidate identified by the parties on or prior to March 12, 2019 (the “Earnout Criteria”), the Earnout Shares will be released to Xynomic stockholders, except that 3% of the Earnout Shares will be deposited in the Escrow Account (as defined below) as a part of the Escrow Shares (as defined below) upon the release. The Merger Agreement provides that if the Earnout Criteria are not achieved, the Earnout Shares will be returned to the Company. The Earnout Criteria were achieved in December of 2018, and thus the Earnout Shares will be issued to Xynomic stockholders at the Closing, except that 3% of the Earnout Shares will be deposited in the Escrow Account as part of the Earnout Shares.

 

The newly issued Merger Consideration Shares will be issued in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, which exempts transactions by an issuer not involving any public offering on the basis that the securities were offered and sold in a non-public offering to “accredited investors” (as defined in Rule 501(a) of Regulation D under the Securities Act) or to non-U.S. persons (as defined in Regulation S as promulgated under the Securities Act).

 

At the Closing, 3% of the Closing Consideration Shares will be deposited in an escrow account (the “Escrow Account”) to serve as security for, and the exclusive source of payment of, the Company’s indemnity rights under the Merger Agreement and any excess of the estimated Closing Merger Consideration over the final Closing Merger Consideration amount determined post-Closing. 3% of the Earnout Shares will be added to the Escrow Account for the same purposes (all shares deposited in the Escrow Account are referred to as “Escrow Shares”). Xynomic stockholders are entitled to vote all the Escrow Shares and the Earnout Shares while they are held in escrow.

 

At the Closing, each outstanding Xynomic option (whether vested or unvested) shall be assumed by the combined entity and automatically converted into an option to purchase Company common shares (each, an “Assumed Option”). Each Assumed Option will be subject to the terms and conditions set forth in the Company Stock Incentive Plan as described in the Incentive Plan Proposal below, and shall (i) constitute the right to acquire a number of Company common shares equal to (as rounded down to the nearest whole number) the product of (A) the Closing Consideration Shares divided by the aggregate number of Company common shares outstanding immediately prior to the effective time of the Merger (including the Dissenting Shares as defined in the Merger Agreement) (the “Per Share Closing Merger Consideration”), multiplied by (B) the number of Company common shares subject to the unexercised portion of such Xynomic option, (ii) be subject to the same vesting schedule as the applicable Xynomic option, and (iii) have an exercise price per share equal to (as rounded up to the nearest whole cent) the quotient of (A) the exercise price per share of such Xynomic option prior to its assumption, divided by (B) the Per Share Closing Merger Consideration, subject to certain adjustments. In accordance with the Merger Agreement, we expect that there will be in aggregate 1,921,969 Company common shares underlying the Assumed Options subject to vesting schedule of each.

 

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For additional information regarding sources and uses for funding the consideration to be paid in the Business Combination, see “The Business Combination Proposal — Sources and Uses for the Business Combination.

 

Our units, ordinary shares, rights, and warrants are currently listed on The Nasdaq Capital Market under the symbols “BCACU,” “BCAC,” “BCACR,” and “BCACW,” respectively.

  

This proxy statement/prospectus and its annexes contain important information about the proposed Business Combination and the other matters to be addressed at the Meeting. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.

 

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement and its annexes.

 

Q:When and where is the Meeting?

 

A: The Meeting will be held on May 13, 2019 at 9:00 a.m., Beijing Time (May 12, 2019 at 9:00 p.m., Eastern Daylight Time), at 609-610 21st Century Tower, No. 40 Liangmaqiao Road, Chaoyang District, Beijing, 100016, China.

 

Q:What is being voted on at the Meeting?

 

A:Below are proposals on which our shareholders are being asked to vote:

 

(1)The Business Combination Proposal — to approve the Merger Agreement providing for the merger of our Merger Sub with and into Xynomic Pharmaceuticals, Inc., with Xynomic Pharmaceuticals, Inc. being the surviving company and a wholly-owned subsidiary of the Company. Pursuant to the Merger Agreement, at the Closing, we will issue shares of Company common stock equal to the Closing Merger Consideration to the Xynomic stockholders in exchange of 100% equity capital of Xynomic Pharmaceuticals, Inc., resulting Xynomic Pharmaceuticals, Inc. being a wholly-owned subsidiary of the Company and additional 9,852,216 shares of common stock as the Earnout Shares to be released to Xynomic stockholders subject to the achievement of the Earnout Criteria and other conditions and terms set forth in the Merger Agreement.

 

(2)The Domestication Proposal — to consider and vote upon a proposal to: (a) re-domicile out of the British Virgin Islands and continue as a company incorporated in the State of Delaware, prior to the Closing; (b) in connection therewith to adopt upon the Domestication taking effect the certificate of incorporation, appended to this proxy statement/prospectus as Annex B (the “Interim Charter”) in place of our Current Charter and which will remove or amend those provisions of our Current Charter that terminate or otherwise cease to be applicable as a result of the Domestication; and (c) to file a notice of continuation out of the British Virgin Islands with the British Virgin Islands Registrar of Corporate Affairs under Section 184 of the Companies Act of 2004 and in connection therewith to file the Interim Charter with the Secretary of State of the State of Delaware, under which we will be domesticated and continue as a Delaware corporation;

 

(3)The Charter Amendment Proposal — to approve and adopt, subject to and conditional on the Domesticate and the Closing (but with immediate effect from the latter), Proposed Amended and Restated Bylaws and Proposed Amended and Restated Charter to (1) change the name of the Company to Xynomic Pharmaceuticals Holdings, Inc. and (2) remove or amend those provisions of our Interim Charter which terminate or otherwise cease to be applicable following the Closing.

 

  (4) The Director Election Proposal — to consider and vote upon a proposal to re-elect Messrs. Richard Wu, Thomas Folinsbee, Charles Prizzi, and James Jiayuan Tong to serve as directors on our board of directors until the 2019 annual meeting of shareholders; and to elect Messrs. Yinglin Mark Xu, Tingzhi Qian and Adam Inglis to serve as directors on our board of directors until the 2019 annual meeting of the shareholders, in each case under the terms of the Amended and Restated Charter.

 

(5)The Incentive Plan Proposal — to consider and vote upon a proposal to adopt and assume the Xynomic 2018 Equity Incentive Plan, a copy of which is attached to the accompanying proxy statement/prospectus as Annex E.

 

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(6)The Nasdaq Proposal — to consider and vote upon a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of more than 20% of the current total issued and outstanding ordinary shares of Bison, which Nasdaq may deem to be a change of control pursuant to the Business Combination.

 

(7)The Adjournment Proposal — to consider and vote upon a proposal to adjourn the Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Meeting, there are not sufficient votes to approve the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, or the Nasdaq Proposal (collectively, the “Bison Proposals”).

 

Q:Are the proposals conditioned on one another?

 

A:The Nasdaq Proposal is conditioned on the approval of the Business Combination Proposal and Charter Amendment Proposal. The Charter Amendment Proposal is conditioned on the approval of the Domestication Proposal. In addition, each of the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal, and the Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in the proxy statement/prospectus.

 

It is important for you to note that in the event that any of the Bison Proposal does not receive the requisite vote for approval, then we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors, we will be required to dissolve and liquidate our trust account by returning the then remaining funds in such account to the public shareholders.

 

Q:Why is Bison providing shareholders with the opportunity to vote on the Business Combination?

 

A:Under the Current Charter and Interim Charter, as applicable, we must provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a shareholder vote. We are seeking to obtain the approval of our shareholders of the Business Combination Proposal in order to allow our public shareholders to effectuate redemptions of their public shares in connection with the Closing.

 

Q:What will happen in the Business Combination?

 

A:At the Closing, Merger Sub will be merged with and into Xynomic Pharmaceuticals, Inc., following which Merger Sub shall cease existence and Xynomic Pharmaceuticals, Inc. shall continue as the surviving entity and become our direct wholly-owned subsidiary. The merger shall have the effects specified in Delaware law. As the consideration for the Business Combination, all the issued and outstanding shares of Xynomic Pharmaceuticals, Inc. will be exchanged for the Merger Consideration Shares.

 

Q:Following the Business Combination, will the Company’s securities continue to trade on a stock exchange?

 

A:Yes. We will apply to continue the listing of Company common shares and warrants on The Nasdaq Capital Market under the new symbols “XYN” and “XYNPW,” respectively, upon the Closing. Our public units will automatically separate into the component securities upon the Closing and, as a result, will no longer trade as a separate security.

 

Q:What are the Earnout Shares, and in what circumstances will it be payable to Xynomic stockholders?

 

  A: The Merger Agreement provides that, in addition to the Closing Consideration Shares, Xynomic stockholders will receive additional 9,852,216 shares of Company common stock. At the Closing, the Merger Agreement provides that the Earnout Shares will be deposited in the Earnout Escrow Account. The Merger Agreement provides that in the event that the Earnout Criteria are achieved, the Earnout Shares will be released to Xynomic stockholders, except that 3% of the Earnout Shares will be deposited in the Escrow Account as a part of the Escrow Shares upon the release. The Merger Agreement provides that if the Earnout Criteria are not achieved, the Earnout Shares will be returned to the Company. The Earnout Criteria were achieved in December of 2018, and thus the Earnout Shares will be issued to Xynomic stockholders at the Closing, except that 3% of the Earnout Shares will be deposited in the Escrow Account as part of the Earnout Shares. For more information, see “The Business Combination Proposal General Description of the Merger Agreement.

 

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Q:What equity stake will (i) current Bison shareholders hold in the Company after the Closing and (ii) Bison hold in Xynomic after the Closing?

 

A: We anticipate that, at the Closing, and assuming there are no redemptions, and assuming the issuance of 34,482,758 Closing Consideration Shares (assuming Closing Merger Consideration of $350 million) and 9,852,216 Earnout Shares, Bison’s Public Shareholders will retain an ownership interest of 2.95% in the Company post-Closing and our Initial Shareholders and affiliates (including the underwriter in our IPO) will retain an ownership interest of 4.16% in the Company post-Closing. These relative percentages assume the automatic conversion of 6,469,562 rights of Bison into 646,956 Company common shares at the Closing. In addition, if any of our Public Shareholders exercises their redemption rights, the aggregate ownership interest of our Public Shareholders in the Company post-Closing will decrease and the ownership interest our of Initial Shareholders, including our Sponsor and the Chief Executive Officer and the ownership interest of Xynomic stockholders in the Company post-Closing, will increase. Upon the Closing, Bison will own 100% of the issued and outstanding shares of common stock of Xynomic. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by our existing shareholders in the Company post-Closing will be different. These ownership percentages with respect to the Company following the Business Combination do not take into account: (i) the 3,018,750 public warrants to purchase up to a total of 3,018,750 Company common shares, (ii) the 216,031 private warrants to purchase up to a total of 216,031 Company common shares, (iii) the unit purchase option, held by the underwriters in our IPO, to purchase up to 157,500 Company common shares, 157,500 rights to receive 15,750 Company common shares, and 78,750 warrants to purchase up to a total of 78,750 Company common shares that will remain outstanding following the Business Combination, (iv) the issuance of any Company common shares under the Assumed Options at the Closing, or (v) any adjustments to the number of the Closing Consideration Shares that will be issued to the Xynomic stockholders.

  

For more information, please see the section entitled “Summary of the Proxy statement/prospectus — Impact of the Business Combination on Bison’s Public Float.

 

Q:What will the business of the combined company be like following the Business Combination, assuming that the Business Combination is approved?

 

A:Assuming the Business Combination is approved, following the Closing, the combined company’s business will be that of Xynomic. The combined company will change its corporate name from “Bison Capital Acquisition Corp.” to “Xynomic Pharmaceuticals Holdings, Inc.” For more information about Xynomic and its business, see the section entitled “Information about Xynomic.

 

Q:What conditions must be satisfied to complete the Business Combination?

 

A:There are a number of closing conditions in the Merger Agreement, including that our shareholders have approved the Business Combination, the Merger Agreement, and the rest of the Bison Proposals. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, see the section entitled “The Business Combination Proposal — The Merger Agreement — Conditions to Closing of the Business Combination.

 

Q:Are there any arrangements to help ensure that the Company will have sufficient funds, together with the proceeds in its trust account, to fund the refinancing of existing Xynomic indebtedness and certain additional payments related to the Business Combination?

 

A:Yes. Under the Merger Agreement, Xynomic is not required to consummate the Business Combination if Bison’s net tangible assets are less than $7,500,000 after giving effect to such redemptions and the Merger. In the event that redemption by Public Shareholders may cause the net tangible assets of the Company post the Closing less than $7,500,000, we may consider additional financing in connection with the Business Combination.

 

Q:Why is Bison proposing the Domestication Proposal?

 

  A: The Domestication Proposal allows the Company to re-domicile as a Delaware entity. We believe that the Domestication would, among other things, provide legal, administrative, and other similar efficiencies; relocate our jurisdiction of organization to one that is the choice of domicile for many publicly traded corporations, as there is an abundance of case law to assist in interpreting the Delaware General Corporation Law (the “DGCL”), and the Delaware legislature frequently updates the DGCL to reflect current technology and legal trends; and provide a favorable corporate environment which will help us compete more effectively with other publicly traded companies in raising capital and in attracting and retaining skilled and experienced personnel. Additionally, the Domestication would avoid certain tax inefficiencies to the combined company. In connection with the Domestication, we will be filing the Interim Charter with the Secretary of State of the State of Delaware, which amends and removes the provisions of our current charter that terminate or otherwise become inapplicable because of the Domestication and provides our shareholders with the same or substantial the same rights in connection with the Business Combination.

 

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Q:What are the federal income tax consequences of the Domestication?

 

A: The Domestication will constitute a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the “Code”). Upon the closing of the Domestication, Bison becomes a domestic corporation for federal income tax purposes, U.S. Holders (as defined in “Material U.S. Federal Income Tax Consequences of the Domestication” below) of Bison ordinary shares, will be subject to Section 367(b) of the Code and, as a result:

 

Subject to the discussion below concerning passive foreign investment companies (“PFICs”), a U.S. Holder of Bison ordinary shares whose ordinary shares have a fair market value of less than $50,000 on the date of the Domestication and does not own actually and constructively 10% or more (by vote or value) of Bison (a “10% Shareholder”) will not recognize any gain or loss and will not be required to include any part of the Company’s earnings in income.

 

Subject to the discussion below concerning PFICs, a U.S. Holder of Bison ordinary shares whose ordinary shares have a fair market value of $50,000 or more, but who is not a 10% Shareholder will generally recognize gain (but not loss) on the deemed receipt of Company common stock in the Domestication. As an alternative to recognizing gain, such U.S. Holders may file an election to include in income, as a dividend, the “all earnings and profits amount” (as defined in the Treasury Regulations under Section 367) attributable to its Bison ordinary shares provided certain other requirements are satisfied.

 

Subject to the discussion below concerning PFICs, a U.S. Holder of Bison ordinary shares whose ordinary shares have a fair market value of $50,000 or more, and who on the date of the Domestication is a 10% Shareholder will generally be required to include in income, as a dividend, the “all earnings and profits amount” (as defined in the Treasury Regulations under Section 367) attributable to its Bison ordinary shares provided certain other requirements are satisfied.

 

As discussed further under “PFIC Considerations” below, the Company believes that it has been considered a PFIC since its inception. Accordingly, subject to certain exceptions, the Domestication will be a taxable event for any U.S. Holder under the PFIC rules. The determination of whether a foreign corporation is a PFIC is primarily factual, and there is little administrative or judicial authority on which to rely to make a determination. If the Company is considered a PFIC for U.S. federal income tax purposes, proposed Treasury Regulations, if finalized in their current form, would generally require U.S. Holders of Bison ordinary shares to recognize gain on the deemed receipt of Company common stock in the Domestication unless such U.S. Holder has made certain tax elections with respect to such U.S. Holder’s Bison ordinary shares. The tax on any such gain would be imposed at the rate applicable to ordinary income and an interest charge would apply based on complex rules designed to offset the tax deferral to such U.S. Holder on the undistributed earnings, if any, of the Company. It is not possible to determine at this time whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) will be adopted. For a more complete discussion of the potential application of the PFIC rules to U.S. Holders as a result of the Domestication, see “Material U.S. Federal Income Tax Consequences of the Domestication.”

 

If you are a non-U.S. Holder (as defined in “Material U.S. Federal Income Tax Consequences of the Domestication” below) of Bison ordinary shares, you may become subject to withholding tax on any dividends paid on the ordinary shares of Bison or the Company common stock subsequent to the Domestication.

 

For a more detailed description of the material U.S. federal income tax consequences associated with the Domestication, please read “Material U.S. Federal Income Tax Consequences of the Domestication” of this proxy. WE STRONGLY URGE YOU TO CONSULT WITH YOUR OWN TAX ADVISOR.

 

Q:Why is Bison proposing the Charter Amendment Proposal?

 

A:The Proposed Charter Amendment that we are asking our shareholders to approve in connection with the Business Combination provides (1) change the name of the Company to Xynomic Pharmaceuticals Holdings, Inc. and (2) remove or amend those provisions of our Interim Charter which terminate or otherwise cease to be applicable following the Closing.

 

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Q:Why is Bison proposing the Director Election Proposal?

 

A:Upon the Closing, we anticipate that the size of our board of directors will increase to seven directors, all of whom will be voted on by our shareholders at the Meeting. See the section entitled “Director Election Proposal” for additional information. Unless waived by Xynomic, approval of the Director Election Proposal is a condition to the Closing pursuant to the Merger Agreement.

 

Q:Why is the Company proposing the Incentive Plan Proposal?

 

A:The Xynomic 2018 Equity Incentive Plan allows us to grant equity awards (including stock options, restricted stock units, and performance share awards) to our employees, officers, directors, and advisors. We believe our success is due to our highly talented employee base and that future success depends on the ability to attract and retain high caliber personnel. We compete with many companies for a limited pool of talented people. The ability to grant equity awards is a necessary and powerful recruiting and retention tool for us to obtain the quality personnel we need to move our business forward.

 

Q:Why is the Company proposing the Nasdaq Proposal?

 

  A: We are proposing the Nasdaq Proposal in order to comply with Nasdaq Listing Rules 5635(a) and (b), which require shareholder approval of the issuance of shares of stock in certain transactions that result in (1) the issuance of 20% or more of the voting power outstanding or ordinary shares outstanding before such issuance of shares and (2) a change of control. Pursuant to the Merger Agreement, assuming Closing Merger Consideration of $350 million, we estimate that we may issue up to 44,334,974 Company common shares (assuming Closing Merger Consideration of $350 million and Earnout Consideration of 9,852,216 shares), subject to adjustment as described in the Merger Agreement. We anticipate that the Merger Consideration Shares to be issued to Xynomic stockholders (1) will constitute more than 20% of our outstanding common shares and more than 20% of outstanding voting power prior to such issuance and (2) will result in a change of control of the Company. As a result, we are required to obtain shareholder approval of such issuances pursuant to Nasdaq Listing Rules 5635(a) and (b). For more information, see the section entitled “Nasdaq Proposal.” Approval of the Nasdaq Proposal is a condition to the Closing pursuant to the Merger Agreement. The Nasdaq Proposal is conditioned on the approval of the Business Combination Proposal and Charter Amendment Proposals.

 

Q:What happens if I sell my Bison ordinary shares before the Meeting?

 

A:The Record Date for the Meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your Bison ordinary shares after the Record Date, but before the Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Meeting. However, you will not be able to seek redemption of your shares because you will no longer be able to deliver them for cancellation upon the Closing. If you transfer your Bison ordinary shares prior to the Record Date, you will have no right to vote those shares at the Meeting or redeem those shares for a pro rata portion of the proceeds held in our trust account.

 

Q:What vote is required to approve the proposals presented at the Meeting?

 

A: Approval of each Bison Proposal requires the affirmative vote of a majority of the votes entitled to vote thereon which are cast by shareholders present in person or represented by proxy at the Meeting. As each of the Proposals is made for the purposes of approving or is in conjunction with the consummation of the Business Combination and that none would in any event substantively affect the rights attaching to the Bison ordinary shares (even as they become common stock following the Domestication), the directors of the Company are of the view that the higher 65% voting threshold, as would apply in certain circumstances under the Current Charter, would not apply in respect of the Bison Proposals. With particular regard to the Domestication, it is further noted that not only with the Interim Charter preserve the existing rights of the Bison ordinary shares unchanged, but also that the existing provisions of the Current Charter (including Regulation 23 of the Current Charter and those others which cannot be amended prior to the consummation of a Business Combination or made subject to certain restrictions on amendment) will be replicated or substantively replicated in the Current Charter.

 

Bison shareholder’s failure to vote by proxy or to vote in person at the Meeting or the failure of a Bison shareholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee (a “broker non-vote”) will result in that shareholder’s shares not being counted towards the number of Bison ordinary shares required to validly establish a quorum, but if a valid quorum is otherwise established, it will have no effect on the outcome of any vote on the proposals. Abstentions will be counted in connection with the determination of whether a valid quorum is established and Broker non-votes will not be counted for purposes of establishing a quorum.

 

Additionally, you are not required to affirmatively vote for or against the Business Combination Proposal in order to exercise your redemption rights.

 

Currently, our Sponsor, together with certain of its affiliates and our independent directors including underwriters in Bison’s IPO, own approximately 70.74% of our issued and outstanding ordinary shares, including all of the Founder Shares and Private Shares. Our Sponsor and other affiliates have agreed to retain their Founder Shares and Private Shares for all periods relevant to our shareholder vote on the Business Combination Proposal and to vote any Bison ordinary shares owned by them in favor of the proposals described in the accompanying proxy statement/prospectus. As a result, the approval of each proposal by our public shareholders is not needed in order to approve the Business Combination or to consummate the Business Combination.

 

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Q:May Bison or the Sponsor, Bison Capital’s directors, officers, advisors, or their affiliates purchase shares in connection with the Business Combination?

 

A:In connection with the shareholder vote to approve the proposed Business Combination, our Initial Shareholders, directors, executive officers, advisors, or their affiliates may (i) purchase Bison ordinary shares from institutional and other investors who vote, or indicate an intention to vote, against the Business Combination Proposal, (ii) execute agreements to purchase such shares from institutional and other investors in the future, and/or (iii) enter into transactions with institutional and other investors to provide such persons with incentives to acquire Bison ordinary shares or vote their shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions by the Initial Shareholders and/or their respective affiliates would be to increase the likelihood of satisfaction of the requirements that (x) the holders of a majority of the public shares present and entitled to vote at the Meeting vote in favor of the Business Combination Proposal, and/or (y) that the Company will have at least $7,500,000 in net tangible assets upon the Closing after taking into account holders of public shares that properly demanded redemption of their public shares into cash, when, in each case, it appears that such requirements would otherwise not be met. However, they have no current commitments or plans to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares in such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act.

 

Q:How many votes do I have at the Meeting?

 

A: Our shareholders are entitled to one vote at the Meeting for each share of Bison ordinary shares held of record at the close of business on April 5, 2019, the Record Date for the Meeting. As of the close of business on the Record Date, there were 2,744,517 outstanding ordinary shares.

  

Q:What constitutes a quorum at the Meeting?

 

A: Holders of 50% of the votes of the Company’s issued and outstanding shares as of the Record Date that are entitled to vote on the Bison Proposals at the Meeting, present in person or represented by proxy, constitute a quorum. In the absence of a quorum, the Chairman has the power to adjourn the Meeting. As of the Record Date for the Meeting, 50% of 2,744,517 ordinary shares would be required to achieve a quorum.

 

Q:Who at Bison has approved the Merger Agreement and the Business Combination?

 

A: The Merger Agreement and the Business Combination have been approved by the special committee of Bison’s board (the “Special Committee”), which was established in connection with the proposed Business Combination and consists solely of Bison’s independent directors. Upon the recommendation of the Special Committee, Bison’s board has approved the Merger Agreement and the Business Combination and decided to recommend our shareholders to vote FOR all Bison Proposals. Concurrently with execution of the Merger Agreement, certain shareholders of Bison entered into a voting and support agreement with Xynomic (the “Voting Agreement”). Under the Voting Agreement, such Bison shareholders party thereto generally agreed to vote all of their capital shares representing 70.74% of the outstanding voting power in Bison in favor of the Merger Agreement and the transactions contemplated thereby, and each other Proposal contained herein.

  

Q:What interests do Bison’s current officers and directors have in the Business Combination?

 

A:Our directors and executive officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. These interests include, among other things:

 

  (1) the fact that our Sponsor and our Chief Executive Officer, Dr. Tong, paid an aggregate purchase price of $25,000, or approximately $0.017 per share, for their 1,509,375 Founder Shares which would have a value of approximately $15.97 million based on the closing price of Bison ordinary shares of the Record Date as reported by Nasdaq and that are not subject to redemption. Such Founder Shares will have no value if we do not complete an initial business combination by Outside Date; as a result, our Sponsor (and its members, including our executive officers and directors) have a financial incentive to see the Business Combination consummated rather than losing whatever value is attributable to the Founder Shares;

 

  (2) the fact that our Sponsor holds 401,875 private units and will continue to hold 422,062 Company common shares and 200,937 warrants following the separation of such private units upon the consummation of the Business Combination, subject to certain lock-up agreement. Those private units and securities underlying those private units are not subject to redemption and will be worthless if we do not complete an initial business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors;

 

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  (3) if Bison is unable to complete a business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors, given that the Extension Amendment Proposal was approved by Bison’s shareholders on March 21, 2019, our Sponsor will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Bison for services rendered or contracted for or products sold to Bison, but only if such a vendor or target business has not executed a waiver of claims against the trust account and except as to any claims under our indemnity of the underwriters;

 

  (4) the continuation of four of our five existing directors as directors of the combined company;

 

  (5) the fact that Bison has issued a $500,000 note to the Sponsor which is convertible into private units at the Sponsor’s discretion at the Closing;
     
  (6) the fact that in addition to the $500,000 notes, the Sponsor has loaned us $100,000 for working capital and may need to loan us additional funds through the Closing, which, in the event that the initial business combination does not close, cannot be paid from the proceeds or the interest on such proceeds in the trust account;

 

  (7) the fact that (a) Zhongshan Bison Healthcare Investment Limited (Limited Partnership) (“Zhongshan Bison”) is holding 1,553,265 shares of Series B preferred stock of Xynomic representing approximately 2.96% equity interest in Xynomic immediately prior to the Closing, (b) Mr. Peixin Xu, the Chairman of Bison, is the beneficial owner of 21% of Zhongshan Bison and his wife owns 100% of Sponsor;

 

  (8) the fact that the Merger Agreement provides a termination fee of $4,500,000 payable to our Sponsor if (i) the breach by Xynomic causes Bison to not be able to satisfy its obligations under the Merger Agreement relating to preparing and filing a proxy statement/prospectus for obtaining, and obtaining, approval of the Business Combination and the Merger Agreement by its shareholders and not consummating an alternative business combination with another party, or to close the Business Combination on or prior to June 24, 2019 or such earlier date as determined by Bison’s board of directors, given that the Extension Amendment Proposal was approved by Bison’s shareholders on March 21, 2019, unless otherwise extended as provide in the Merger Agreement and in accordance with the Current Charter (the “Outside Date”), or enter into a definitive agreement to consummate an alternative business combination by that date, and (ii) Bison ceases operations other than making required distributions to its shareholders pursuant to its organizational documents and its winding up and dissolution as a result of (x) failing to obtain shareholder approval to consummate any alternative business combination or (y) occurrence of an Automatic Redemption Event (as defined in the Current Charter); and

 

  (9) the continued indemnification of current directors and officers of the Company and the continuation of directors’ and officers’ liability insurance after the Business Combination.

 

These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combination and the transactions contemplated thereby. These interests were considered by our Special Committee and the Board when they approved the Business Combination.

 

Q:What happens if I vote against the Business Combination Proposal?

 

A: If the Business Combination Proposal is not approved and we do not otherwise consummate an alternative business combination and close such transaction by June 24, 2019 or such earlier date as determined by Bison’s board of directors, we will be required to dissolve and liquidate our trust account by returning the then remaining funds in such account to the public shareholders.

  

Q:Do I have redemption rights?

 

A: If you are a holder of public shares, you may redeem your public shares for cash equal to a pro rata share of the aggregate amount on deposit in the trust account which holds the proceeds of our IPO as of two business days prior to the Closing, less taxes payable, upon the Closing. A public shareholder, together with any of his, her, or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her, or its shares or, if part of such a group, the group’s shares, of 20% or more of the outstanding public shares without our prior written consent (the “20% threshold”). Our Sponsor and Initial Shareholders have agreed to waive their redemption rights with respect to any shares of our capital stock they may hold in connection with the Closing, and the Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. For illustrative purposes, based on funds in the trust account of approximately $8,492,591.12 on the Record Date, the estimated per share redemption price would have been approximately $10.57 per share. Additionally, shares properly tendered for redemption will only be redeemed if the Business Combination is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the trust account (including interest but net of taxes payable and dissolution expenses) in connection with the liquidation of the trust account. If the Business Combination is not consummated, we may enter into an alternative business combination and close such transaction by June 24, 2019 or such earlier date as determined by Bison’s board of directors.

  

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  Q: Will how I vote affect my ability to exercise redemption rights?

 

  A: No. You may exercise your redemption rights whether you vote your Bison ordinary shares for or against the Business Combination Proposal or any other proposal described by this proxy statement/prospectus. As a result, the Merger Agreement can be approved by shareholders who will redeem their shares and no longer remain shareholders, leaving shareholders who choose not to redeem their shares holding shares in a company with a less liquid trading market, fewer shareholders, less cash, and the potential inability to meet the listing standards of the Nasdaq Capital Market.

 

Q:How do I exercise my redemption rights?

 

A: In order to exercise your redemption rights, you must, prior to 5:00 p.m. Eastern Daylight Time on May 8, 2019 (two business days before the Meeting), (x) submit a written request to our transfer agent that we redeem your public shares for cash, and (y) deliver your stock to our transfer agent physically or electronically through Depository Trust Company, or DTC. The address of Continental Stock Transfer & Trust Company, our transfer agent, is listed under the question “Who can help answer my questions?” below.

 

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to our transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that our transfer agent return the shares (physically or electronically). You may make such request by contacting our transfer agent at the phone number or address listed under the question “Who can help answer my questions?” below.

 

Q:What are the federal income tax consequences of exercising my redemption rights?

 

A:Bison shareholders who exercise their redemption rights to receive cash from the trust account in exchange for their Bison ordinary shares generally will be required to treat the transaction as a sale of such shares and recognize gain or loss upon the redemption in an amount equal to the difference, if any, between the amount of cash received and the tax basis of the Bison ordinary shares redeemed. The redemption, however, may be treated as a distribution if it does not effect a meaningful reduction in the redeeming shareholder’s percentage ownership in Bison. It is important to note that the Section 318 of the Code attribution or constructive ownership of stock rules apply when testing redemption treatment under Section 302(b). If there is attribution sufficient to cause the redemption to be treated instead under the Section 301 distribution rules which breaks non-liquidating corporate distributions into three distinct parts: (i) dividend treatment included in shareholder’s gross income under Section 301(c)(1) (which may or may not receive “qualified dividend” treatment under Section 1(h)(11)), (ii) the portion of the distribution that is not a dividend shall be applied against and reduce the shareholder’s adjusted basis in the stock pursuant to Section 301(c)(2), and (iii) any remaining portion of the distribution shall be treated as gain from the sale or exchange of the Bison ordinary shares under Section 301(c)(3). If the receipt of cash in exchange for the ordinary shares is treated under Section 302(b) of the Code, then such gain or loss will be treated as capital gain or loss if such shares were held as a capital asset on the date of the redemption. See the section entitled “The Business Combination Proposal — Material U.S. Federal Income Tax Considerations for Shareholders Exercising Redemption Rights.

 

Q:If I am a Bison warrant holder, can I exercise redemption rights with respect to my warrants?

 

A:No. The holders of our warrants have no redemption rights with respect to our warrants.

 

Q:If I am a Bison unit holder, can I exercise redemption rights with respect to my units?

 

A:No. You can only exercise redemption rights with respect to your public shares (excluding the Bison shares upon the automatic conversion of the rights include in the units). Holders of outstanding units must separate the underlying public shares, public rights, and public warrants prior to exercising redemption rights with respect to the public shares.

 

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If you hold units registered in your own name, you must deliver the certificate for such units to Continental Stock Transfer & Trust Company, our transfer agent, with written instructions to separate such units into public shares, public rights, and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates back to you so that you may then exercise your redemption rights upon the separation of the public shares from the units. See “How do I exercise my redemption rights?” above. The address of Continental Stock Transfer & Trust Company is listed under the question “Who can help answer my questions?” below.

 

If a broker, dealer, commercial bank, trust company, or other nominee holds your units, you must instruct such nominee to separate your units. Your nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company, our transfer agent. Such written instructions must include the number of units to be separated and the nominee holding such units. Your nominee must also initiate electronically, using DTC’s deposit withdrawal at custodian (DWAC) system, a withdrawal of the relevant units and a deposit of an equal number of public shares, public rights, and public warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the public shares from the units. While this is typically done electronically the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

 

Q:Do I have appraisal rights if I object to the proposed Business Combination?

 

A:No. There are no appraisal rights available to holders of Bison ordinary shares in connection with the Business Combination.

 

Q:What happens to the funds held in the trust account upon the Closing?

 

A: If the Business Combination is consummated, the funds held in the trust account will be released to pay (i) to Bison shareholders who properly exercise their redemption rights, (ii) the remaining cash balance (if any) will be used to pay up to $2.73 million (of which we currently estimate all to be incurred and payable) of fees, costs, and expenses of Bison (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees, and banking fees payable to the underwriters of our IPO), and (iii) after all redemption payments and approximately $2.73 million of such fees, costs, and expenses are paid, the remaining cash balance will be used as future working capital and for other general corporate purposes of the combined company.

  

Q:What happens if the Business Combination is not consummated?

 

A:There are certain circumstances under which the Merger Agreement may be terminated. See the section entitled “The Business Combination Proposal — The Merger Agreement — Termination” for information regarding the parties’ specific termination rights.

 

If we do not consummate the Business Combination and fail to complete an initial business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors, the Current Charter provides that we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than five business days thereafter, redeem 100% of the outstanding Public Shares (including any public units in the IPO or any public units or shares that the Initial Shareholders or their affiliates purchased in the IPO or later acquired in the open market or in private transactions) which will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject (in each case of (ii) and (iii) above) to its obligations to provide for claims of creditors and the requirements of applicable law. In connection with the redemption of 100% of the Company’s outstanding public shares, each holder will receive a full pro rata portion of the amount then in the Trust Account plus any pro rata interest earned on the funds held in the Trust Account (net of any taxes payable).

 

We expect that the amount of any distribution our public shareholders will be entitled to receive upon our dissolution will be approximately the same as the amount they would have received if they had redeemed their shares in connection with the Business Combination, subject in each case to Bison’s obligations under the requirements of applicable law. Holders of our Founder Shares have waived any right to any liquidation distribution with respect to those shares.

 

In the event of liquidation, there will be no distribution with respect to Bison’s outstanding warrants and rights. Accordingly, the warrants and rights will expire worthless.

 

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Q:When is the Business Combination expected to be completed?

 

A:It is currently anticipated that the Business Combination will be consummated promptly following the Meeting, provided that all other conditions to the Closing have been satisfied or waived. For a description of the conditions to the completion of the Business Combination, see the section entitled “The Business Combination Proposal — The Merger Agreement — Conditions to Closing of the Business Combination.

 

Q:What do I need to do now?

 

A:You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a shareholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank, or other nominee, on the voting instruction form provided by the broker, bank, or nominee.

 

Q:How do I vote?

 

A: If you were a holder of record of our ordinary shares at the close of business on April 5, 2019, the Record Date for the Meeting, you may vote with respect to the proposals in person at the Meeting, or by completing, signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank, or other nominee, you should contact your broker, bank, or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Meeting and vote in person, obtain a legal proxy from your broker, bank, or nominee.

 

Q:What will happen if I abstain from voting or fail to vote at the Meeting?

 

A:At the Meeting, we will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. A failure to vote or an abstention will have no effect on the outcome of any vote on the proposals. Additionally, if you abstain from voting or fail to vote at the Meeting, you will not be able to exercise your redemption rights (as described above).

 

Q:What will happen if I sign and return my proxy card without indicating how I wish to vote?

 

A:Signed and dated proxies received by us without an indication of how the shareholder intends to vote on a proposal will be voted “FOR” each proposal described herein and in favor of all director nominees.

 

Q:If I am not going to attend the Meeting in person, should I return my proxy card instead?

 

A:Yes. Whether you plan to attend the Meeting or not, please read the enclosed proxy statement/prospectus carefully, and vote your shares by completing, signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided.

 

Q:If my shares are held in “street name,” will my broker, bank, or nominee automatically vote my shares for me?

 

A:No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. We believe the proposals presented to the shareholders at the Meeting will be considered non-discretionary and therefore your broker, bank, or nominee cannot vote your shares without your instruction. If you do not provide instructions with your proxy, your bank, broker, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purpose of determining the existence of a quorum or for purposes of determining the number of votes cast at the Meeting. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

Q:May I change my vote after I have mailed my signed proxy card?

 

A:Yes. You may change your vote by sending a later-dated, signed proxy card to our acting secretary for the Business Combination or our proxy solicitor so that it is received by us prior to the Meeting or attend the Meeting in person and vote. You also may revoke your proxy by sending a notice of revocation to our acting secretary or proxy solicitor, which must be received by them prior to the Meeting. You can find address of our acting secretary and proxy solicitor in “Who can help answer my questions?”

 

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Q:What should I do if I receive more than one set of voting materials?

 

A:You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date, and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

 

Q:Who will solicit and pay the cost of soliciting proxies?

 

A:Bison will pay the cost of soliciting proxies for the Meeting. Bison has engaged Advantage Proxy to assist in the solicitation of proxies for the Meeting. Bison has agreed to pay Advantage Proxy a fee of $7,500 plus expenses, which fee also includes Advantage Proxy acting as the inspector of elections at the Meeting. Bison will reimburse Advantage Proxy for reasonable out-of-pocket expenses and will indemnify Advantage Proxy and its affiliates against certain claims, liabilities, losses, damages, and expenses. Bison will also reimburse banks, brokers, and other custodians, nominees, and fiduciaries representing beneficial owners of shares of Bison’s ordinary shares for their expenses in forwarding soliciting materials to beneficial owners of Bison’s ordinary shares and in obtaining voting instructions from those owners. Our directors and officers may also solicit proxies by telephone, by facsimile, by mail, on the Internet, or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:Who can help answer my questions?

 

A:If you have questions about the proposals or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card, you should contact:

 

Bison Capital Acquisition Corp.

 

609-610 21st Century Tower

No. 40 Liangmaqiao Road, Chaoyang District

Beijing 100016, China

Attn: Jim (Keshu) Li
Tel: (86)10-8444-6968
Email: jim.li@bisonholding.com

 

You may also contact our proxy solicitor at:

 

Advantage Proxy, Inc.
P.O. Box 13581
Des Moines, WA 98198
Attn: Karen Smith
Toll Free: (877) 870-8565
Collect: (206) 870-8565
Email: ksmith@advantageproxy.com

 

To obtain timely delivery, our shareholders must request the materials no later than five business days prior to the Meeting.

 

You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.

 

If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to our transfer agent prior to the Meeting. If you have questions regarding the certification of your position or delivery of your stock, please contact:

 

Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, NY 10004-1561

Attn: Mark Zimkind

Email: mzimkind@continentalstock.com

 

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Summary of the Proxy statement/prospectus

 

This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the Business Combination and the proposals to be considered at the special meeting, you should read this entire proxy statement/prospectus carefully, including the annexes. See also the section entitled Where You Can Find More Information.This proxy statement/prospectus also includes forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements.

 

Unless otherwise specified, all share calculations assume (a) 2,744,517 Bison ordinary shares are issued and outstanding, (b) issuance of approximately 44,334,974 Company common shares (subject to certain adjustments) as Merger Consideration Shares pursuant to the Merger Agreement, (c) 6,037,500 rights issued in the IPO to receive 603,750 Company common shares upon the Closing, (d) 432,062 rights issued in the private placement in connection with the IPO to receive 43,206 Company common shares upon the Closing and do not take into account: (i) the 3,018,750 public warrants to purchase up to a total of 3,018,750 Company common shares, (ii) the 216,031 private warrants to purchase up to a total of 216,031 Company common shares, (iii) the unit purchase option, held by the underwriter in our IPO, to purchase up to 157,500 Company common shares, 157,500 rights to receive 15,750 Company common shares, and 78,750 public warrants to purchase up to a total of 78,750 Company common shares that will remain outstanding following the Business Combination, (iv) the issuance of any Company common shares under the Assumed Options upon the Closing, or (v) any adjustments to the number of the Closing Consideration Shares that will be issued to the Xynomic stockholders. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by Bison’s existing shareholders in Bison will be different. See “Summary — Impact of the Business Combination on Bison’s Public Float” and “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

 

Parties to the Business Combination

 

Bison Capital Acquisition Corp.

 

Bison Capital Acquisition Corp. (the “Company,” “we,” “our,” “us,” or “Bison”) is a blank check company incorporated in the British Virgin Islands on October 7, 2016. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or entities (a “Business Combination”). Although the Company is not limited to a particular industry or geographic region for purposes of consummating an initial business combination, the Company intends to focus on businesses that have their primary operations located in Asia and North America in media/entertainment, consumer services, and healthcare industries.

 

Bison’s units, ordinary shares, rights, and warrants are each traded on the Nasdaq Capital Market under the symbols “BCACU,” “BCAC,” “BCACR,” and “BCACW,” respectively.

 

The mailing address of Bison’s principal executive office is 609-610 21st Century Tower, No. 40 Liangmaqiao Road, Chaoyang District, Beijing, China.

 

Merger Sub

 

Bison Capital Merger Sub Inc., a Delaware corporation, is a wholly-owned subsidiary of the Company, formed by the Company on August 20, 2018, to consummate the Business Combination (“Merger Sub”). In the Business Combination, Merger Sub will merge with and into Xynomic Pharmaceuticals, Inc., with Xynomic Pharmaceuticals, Inc. continuing as the surviving entity.

 

The mailing address of Merger Sub’s principal executive office is 609-610 21st Century Tower, No. 40 Liangmaqiao Road, Chaoyang District, Beijing, China.

 

Xynomic Pharmaceuticals, Inc.

 

Xynomic Pharmaceuticals, Inc. was incorporated on August 24, 2016, in Wyoming and was redomesticated to Delaware on April 3, 2018 (“Xynomic”). As of December 31, 2018, Xynomic has one wholly owned subsidiary in China, Xynomic Pharmaceuticals (Nanjing) Co., Ltd., which has two wholly owned subsidiaries, namely Xynomic Pharmaceuticals (Zhongshan) Co., Ltd. and Xynomic Pharmaceuticals (Shanghai) Co., Ltd.

 

The mailing address of Xynomic’s principal executive office is: Suite 4202, K. Wah Centre, 1010 Middle Huaihai Road, Shanghai 200031, China.

 

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Xynomic’s Business

 

Xynomic is a clinical stage biopharmaceutical company that discovers and develops innovative small molecule drug candidates for the treatment of cancer in humans. Xynomic’s approach is to focus on drug candidates that target both hematological malignancies and solid tumors. Xynomic’s lead drug candidate is abexinostat, an orally dosed, hydroxamic acid-based small molecule histone deacetylase (“HDAC”) inhibitor. Xynomic’s other clinical stage drug candidate is XP-105, an orally bioavailable kinase inhibitor, which inhibits both raptor-mammalian target of rapamycin (“mTOR”) complex 1 and rictor-mTOR complex 2. In addition, Xynomic has several pre-clinical oncology drug candidates in its pipeline. Among these drug candidates, XP-102 (also known as BI 882370), a selective RAF inhibitor, is the closest to clinical testing. The following is a summary of Xynomic’s product development pipeline:

 

 

 

Xynomic has not completed any clinical trials since its inception. With respect to the pipeline programs referenced in the above figure, all of the completed clinical trials of abexinostat were conducted by or on behalf of either Pharmacyclics LLC (“Pharmacyclics”) or Servier Laboratories and the one completed clinical trial of XP-105 was conducted by or on behalf of Boehringer Ingelheim International GmbH (“Boehringer Ingelheim” or “BII”). Xynomic has obtained exclusive rights to use all the data generated in these previously completed clinical trial.

 

  Abexinostat – Xynomic’s most advanced drug candidate, abexinostat, has been evaluated in 18 Phase 1/2 clinical trials for lymphoma and solid tumors. In February 2017, Xynomic entered into a license agreement with Pharmacyclics, a subsidiary of AbbVie Inc. (“AbbVie”), for the worldwide exclusive rights to develop and commercialize abexinostat for all human and non-human diagnostic, prophylactic, and therapeutic uses. Since its in-licensing of abexinostat, Xynomic has started enrolling patients in clinical trials for three different indications: (1) in follicular lymphoma, as a monotherapy, (2) in renal cell carcinoma, in combination with pazopanib, and (3) in multiple solid tumors, in combination with Keytruda®. In addition, Xynomic plans to initiate four clinical trials of abexinostat in the next six months.
  XP-105 (also known as BI 860585) – In December 2018, Xynomic entered into a license agreement with Boehringer Ingelheim for the worldwide exclusive rights to develop and commercialize XP-105 (also known as BI 860585) for all human and non-human diagnostic, prophylactic, and therapeutic uses. Prior to this license, BII had completed one Phase 1 clinical trial for solid tumors. Xynomic plans to initiate two clinical trials of XP-105 in late 2019.
  Pre-Clinical Programs – In addition, Xynomic has several pre-clinical oncology drug candidates in its pipeline. Among these drug candidates, XP-102 (also known as BI 882370), a selective RAF inhibitor to which Xynomic obtained a worldwide exclusive license from Boehringer Ingelheim, is the closest to clinical testing.

  

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Xynomic’s business strategy has been designed to enable Xynomic to achieve its mission of developing and commercializing potentially innovative drug products in the field of oncology. The key tenets of its strategy include the following:

 

  Build an oncology franchise to maximize value.
  Capitalize on its expertise to develop a pipeline of small molecule, oral, targeted drug candidates.
  Strategically in-license global rights to late stage drug candidates.
  Build a strong internal research and development team to enrich the pipeline.
  Utilize global resources to lower cost and improve efficiency.
  Capture potential lower research and development costs, better access to patient pool and growing market in China.

 

Opinion of Financial Advisor to the Special Committee

 

On September 11, 2018, Cassel Salpeter rendered its oral opinion to the Special Committee (which was confirmed in writing by delivery of Cassel Salpeter’s written opinion dated such date), to the effect that, as of September 11, 2018, and based on and subject to the assumptions, limitations, qualifications, and other matters considered in the preparation of such opinion, (i) the Aggregate Merger Consideration to be issued by the Company in the merger pursuant to the Merger Agreement was fair, from a financial point of view, to the Company and (ii) Xynomic had a fair market value equal to at least 80% of the balance of funds in the Company’s trust account.

 

The summary of the opinion in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the written opinion, which is included as Annex F to this proxy statement/prospectus and sets forth the procedures followed, assumptions made, qualifications, and limitations on the review undertaken and other matters considered by Cassel Salpeter in preparing its opinion. Neither Cassel Salpeter’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement/prospectus, however, are intended to be, and do not constitute, advice or a recommendation to any shareholder as to how such shareholder should act or vote with respect to any matter relating to the proposed Business Combination or otherwise. The opinion was addressed to the Special Committee for the use and benefit of the members of the Special Committee (in their capacities as such) in connection with the Special Committee’s evaluation of the Business Combination. Cassel Salpeter’s opinion was just one of the several factors the Special Committee took into account in making its determination to recommend the Business Combination, including those described elsewhere in this proxy statement/prospectus.

 

Redemption Rights

 

Pursuant to our Current Charter and Interim Charter which will take effect upon the Domestication, as applicable, in connection with the Business Combination, our public shareholders may elect to have their public shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Current Charter and the Interim Charter. This would have amounted to approximately $10.49 per share as of December 31, 2018 and was $10.54 at the Extension Meeting on March 21, 2019 when shareholders holding 5,234,420 public shares exercised their right to redeem such public shares for a pro rata portion of the Trust Account with an aggregate of $55,177,977 (or $10.54 per share) removed from the Trust Account to pay such holders. If a holder exercises its redemption rights, then such holder will be exchanging its Bison common shares for cash and will no longer own Bison common shares and will not participate in the future growth of the Company, if any other than the shares received as a result of conversion of rights and the shares to be received as a result of exercise of warrants. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our transfer agent in accordance with the procedures described herein. See the section entitled “Special Meeting of Bison Shareholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

 

Impact of the Business Combination on Bison’s Public Float

 

We anticipate that, upon the completion of the Business Combination, and assuming there are no redemptions, and assuming the issuance of 34,482,758 Company common shares as the Closing Consideration Shares (assuming Closing Merger Consideration of $350 million) and the issuance of 9,852,216 Company common shares as Earnout Shares to Xynomic stockholders upon the Closing, Bison’s public shareholders will retain an ownership interest of 2.95% in the Company post-Closing and our Initial Shareholders and affiliates (including the underwriters in our IPO) will retain an ownership interest of 4.16% in the Company post-Closing. These relative percentages assume the automatic conversion of 6,469,562 rights of Bison into 646,956 common shares at the Closing. In addition, if any of our public shareholders exercises its redemption rights, the aggregate ownership interest of our public shareholders in the Company post-Closing will decrease and the ownership interest of our Initial Shareholders and the ownership interest of Xynomic stockholders in the Company post-Closing, will increase. Upon the Closing, Bison will own 100% of the issued and outstanding shares of common stock of Xynomic. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by our existing shareholders in the Company post-Closing will be different. These ownership percentages with respect to the Company following the Business Combination do not take into account: (i) the 3,018,750 public warrants to purchase up to a total of 3,018,750 Company common shares, (ii) the 216,031 private warrants to purchase up to a total of 216,031 Company common shares, (iii) the unit purchase option, held by the underwriter in our IPO, to purchase up to 157,500 Company common shares, 157,500 rights to receive 15,750 Company common shares, and 78,750 public warrants to purchase up to a total of 78,750 Company common shares that will remain outstanding following the Business Combination, (iv) the issuance of any Company common shares under the Assumed Options upon the Closing, or (v) any adjustments to the number of the Closing Consideration Shares that will be issued to the Xynomic stockholders. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by Bison’s existing shareholders in Bison will be different. See “Summary — Impact of the Business Combination on Bison’s Public Float” and “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

 

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Organizational Structure

 

The following diagram illustrates the ownership structure of the Company immediately following the Business Combination and the jurisdictions in which the identified entities were organized.

 

 

Board of Directors of Bison Following the Business Combination

 

Upon the Closing, we anticipate that the size of our board of directors will increase to seven directors, whom will be voted on by our shareholders at the Meeting. Our board of directors has Messrs. Richard Wu, Thomas Folinsbee, Charles Prizzi and Dr. James Jiayuan Tong for re-election as directors and will have Mr. Yinglin Mark Xu, Messrs. Tingzhi Qian and Adam Inglis to serve as directors. Mr. Peixin Xu has informed us that he will resign from our board of directors upon the Closing. Therefore, if the Business Combination is consummated, our board of directors will consist of: Yinglin Mark Xu, the current Chairman, Chief Executive Officer, and President of Xynomic, Tingzhi Qian, the current director of Xynomic, James Jiayuan Tong, the current Chief Executive Officer and a director of Bison, three incumbent independent directors of Bison (Charles Prizzi, Thomas Folinsbee, and Richard Wu), and Adam Inglis, one additional independent director. See the sections entitled “Director Election Proposal” and “Management after the Business Combination.”

 

Approval of Domestication

 

At the Meeting, the Company’s shareholders will be asked to consider and vote upon a proposal to: (a) re-domicile out of the British Virgin Islands and continue as a company incorporated in the State of Delaware, prior to the Closing; (b) in connection therewith to adopt upon the Domestication taking effect the Interim Charter in place of our Current Charter and which will remove or amend those provisions of our Current Charter that terminate or otherwise cease to be applicable as a result of the Domestication; and (c) to file a notice of continuation out of the British Virgin Islands with the British Virgin Islands Registrar of Corporate Affairs under Section 184 of the Companies Act of 2004 and in connection therewith to file the Interim Charter with the Secretary of State of the State of Delaware, under which we will be domesticated and continue as a Delaware corporation.

 

For more information, see the section entitled “The Domestication Proposal.”

 

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Approval and Adoption of the Proposal Related to the Proposed Charter Amendment

 

At the Meeting, the Company’s shareholders will be asked to approve and adopt, subject to and conditional on (but with immediate effect therefrom) the Closing, separate proposal for amendments to the Current Charter registered by the Registrar of Corporate Affairs in the British Virgin Islands, as set out in the Proposed Amended and Restated Charter appended to this proxy statement/prospectus as Annex C to (1) change the name of the Company to Xynomic Pharmaceuticals Holdings, Inc. and (2) remove or amend those provisions of our Current Charter which terminate or otherwise cease to be applicable following the Closing.

 

For more information, see the section entitled “The Charter Amendment Proposal.

 

Appraisal Rights

 

Appraisal rights are not available to our shareholders in connection with the Business Combination.

 

Bison’s Board of Directors’ Reasons for the Approval of the Business Combination

 

We were organized for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. We have sought to capitalize on the ability of our management team to identify, acquire, and operate a business, concentrating on businesses which have their primary operations located in Asia and North America with a focus in media/entertainment, consumer services, and the healthcare industry.

 

The Business Combination resulted from a thorough search for a potential target, utilizing our resources along with the investment and operation experience of our management team and board of directors. The terms of the Business Combination are the result of extensive negotiations between Bison and Xynomic.

 

From the date of our IPO through the execution of the Merger Agreement on September 12, 2018, we evaluated various potential target companies. We have followed the initial set of criteria and guidelines outlined in the Prospectus to assess the value and the growth of the potential target. In reviewing various aspects of Xynomic, our board has identified the following factors that underlie our assessment.

 

Rapidly expanding healthcare market with growing unmet medical needs

 

The healthcare industry has been persistently growing, driving global economic growth and benefiting the human race. Due to the scientific breakthroughs and technological advancements, we observe many businesses with favorable margins and potential for sustainable growth in the healthcare industry. Oncology is the largest segment (approximately $116 billion in 2017, or 11.7% of the global pharmaceutical market1) and a fast growing segment in the global pharmaceutical market. With strong clinical data and well-designed trials, oncology drug candidates that Xynomic has in-licensed or is developing can potentially become commercially successful on a global scale after obtaining regulatory approvals.

 

A well-balanced portfolio with ongoing pivotal trials

 

Xynomic, founded by a group of industry veterans, is headquartered in Shanghai, China, with operations in Raleigh, North Carolina and major cities in China, including Beijing, Nanjing, and Zhongshan. Xynomic is engaged in research and development of innovative targeted cancer therapeutics in the U.S., Europe and China, and it focuses on small molecule drugs which are taken orally and have been tolerated well by patients. It builds and develops its oncology pipeline through both in-licensing and self-research and development efforts supported by its scientists with expertise in the industry. Xynomic’s product portfolio consists of late-stage in-licensed clinical Phase 3 drug candidate from Pharmacyclics, a Phase 2-ready drug candidate in-licensed from Boehringer Ingelheim and several pre-clinical programs. Xynomic is collaborating with Janssen and Memorial Sloan Kettering Cancer Center (“MSKCC”) in a clinical trial of a combination therapy.

 

 

 

 

1 Oncology/Cancer Drugs Market by Therapeutic Modalities (Chemotherapy, Targeted Therapy, Immunotherapy, Hormonal), Cancer Types (Blood, Breast, Gastrointestinal, Prostate, Skin, Respiratory/Lung Cancer) - Global Opportunity Analysis and Industry Forecast, 2013 - 2020 by Deepa Tatkare - Allied Market Research.

 

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Global rights, global trials, and global coverage of business development

 

Xynomic’s team consists of international business leaders, scientists, and clinicians who have in-depth knowledge and experience in the healthcare markets in the U.S., Europe and China. Xynomic has established an international presence in the discovery and development of innovative small molecule drug candidates for the treatment of cancer in humans.

 

Business where Bison could add value

 

Xynomic requires access to capital in order to support and further its business development, especially with on-going global trials (including two pivotal trials and potentially two additional trials). We believe that Bison, as a Nasdaq-listed public company, could provide a portal for Xynomic to achieve its goals within the healthcare industry with relatively low costs of funding, so that Xynomic could effectively conduct the clinical trials and efficiently supplement its pipelines with new in-licensed products.

 

The board has also considered a number of factors to approve the Business Combination, including, but not limited to:

 

the business, history, and credibility of Xynomic and its affiliates;

the likelihood that the Business Combination will be completed;

the terms of the Merger Agreement and the belief that the terms of the Merger Agreement, including the representations, warranties, covenants, and conditions to the parties’ respective obligations, are reasonable in light of the entire transaction;

the view of Bison’s management as to the financial condition, results of operations, and business of Xynomic before and after the Business Combination based on due diligence;

the fact that consummating the Business Combination will mean the Company cannot pursue other alternatives that potentially could result in a greater value for the Company;

the risk that the Business Combination may not be completed in a timely manner or at all; and

various other risks associated with the Business Combination.

 

Conditions to Closing of the Business Combination

 

In order to close the Business Combination and assuming that a quorum is present at the Meeting, a majority of the holders of Bison ordinary shares voting at the Meeting in person or by proxy will need to vote in favor of the Business Combination Proposal.

 

Additionally, any shareholder redemptions in connection therewith may not result in net tangible assets of Bison falling below $5,000,001, and, under the Merger Agreement, Xynomic is not required to consummate the Merger if Bison’s net tangible assets are less than $7,500,000 after giving effect to such redemptions and the Merger. As a result, even if the Business Combination Proposal is approved, we may be unable to consummate the Business Combination unless we have sufficient liquidity to maintain at least $7,500,000 in net tangible assets after redemptions.

 

There are a number of other closing conditions in the Merger Agreement, including that both our shareholders and Xynomic stockholders have approved and adopted the Merger Agreement and that our common shares continue to be listed on Nasdaq (Xynomic stockholders have approved the Merger Agreement). For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, see the section entitled “The Business Combination Proposal — Conditions to Closing of the Business Combination.

 

Quorum and Required Vote for Proposals for the Meeting

 

A quorum of Bison shareholders is necessary to hold a valid meeting. A quorum will be present at the Meeting if 50% of the votes of the ordinary shares outstanding and entitled to vote at the Meeting are represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum.

 

Approval of each of the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, the Nasdaq Proposal, and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by shareholders present in person or represented by proxy at the Meeting. Accordingly, a Bison shareholder’s failure to vote by proxy or to vote in person at the Meeting or the failure of a Bison shareholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee (a “broker non-vote”) will result in that shareholder’s shares not being counted towards the number of Bison ordinary shares required to validly establish a quorum, but if a valid quorum is otherwise established, it will have no effect on the outcome of any vote on the proposals. Abstentions will be counted in connection with the determination of whether a valid quorum is established, but will have no effect on the outcome of the proposals.

 

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The transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal, and the Nasdaq Proposal are approved at the Meeting. In addition, (i) the Nasdaq Proposal is conditioned on the approval of the Business Combination Proposal and Charter Amendment Proposal, (ii) the Charter Amendment Proposal is conditioned on the approval of the Domestication Proposal, and (iii) each of the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal, and the Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in the proxy statement/prospectus.

 

It is important for you to note that in the event that the Business Combination Proposal, the Charter Proposal, the Director Election Proposal (unless waived by Xynomic), the Incentive Plan Proposal and the Nasdaq Proposal do not receive the requisite vote for approval, we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors, we will be required to dissolve and liquidate our trust account by returning the then remaining funds in such account to the public shareholders.

 

Additionally, if you abstain from voting or fail to vote on the Business Combination Proposal at the Meeting, you will not be able to exercise your redemption rights.

 

Recommendation to Bison Shareholders

 

Our board of directors and the Special Committee believe that each of the Business Combination Proposal, the Domestication Proposal, the Charter Amendment Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Nasdaq Proposal, and the Adjournment Proposal to be presented at the Meeting is in the best interests of the Company and our shareholders and unanimously recommends that our shareholders vote “FOR” each of these proposals and “FOR” each of the director nominees.

 

When you consider the recommendation of our board of directors and the Special Committee in favor of approval of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests as a shareholder. These interests include, among other things:

 

  the fact that our Sponsor and our Chief Executive Officer, Dr. Tong, paid an aggregate purchase price of $25,000, or approximately $0.017 per share, for their 1,509,375 Founder Shares which would have a value of approximately $15.97 million based on the closing price of Bison ordinary shares of the Record Date as reported by Nasdaq and that are not subject to redemption. Such Founder Shares will have no value if we do not complete an initial business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors; as a result, our Sponsor (and its members, including our executive officers and directors) have a financial incentive to see the Business Combination consummated rather than losing whatever value is attributable to the Founder Shares;
  the fact that our Sponsor holds 401,875 private units and will continue to hold 422,062 Company common shares and 200,937 warrants following the separation of such private units upon the consummation of the Business Combination, subject to certain lock-up agreement. Those private units and securities underlying those private units are not subject to redemption and will be worthless if we do not complete an initial business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors;
  if Bison is unable to complete a business combination by June 24, 2019 or such earlier date as determined by Bison’s board of directors, our Sponsor will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Bison for services rendered or contracted for or products sold to Bison, but only if such a vendor or target business has not executed a waiver of claims against the trust account and except as to any claims under our indemnity of the underwriters;
  the continuation of four of our five existing directors as directors of the combined company;

 

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  the fact that Bison has issued a $500,000 note to the Sponsor which is convertible into private units at the Sponsor’s discretion at the Closing;
  the fact that in addition to the $500,000 notes, the Sponsor has loaned us $100,000 for working capital and may need to loan us additional funds through the Closing, which, in the event that the initial business combination does not close, cannot be paid from the proceeds or the interest on such proceeds in the trust account;

  the fact that (a) Zhongshan Bison Healthcare Investment Limited (Limited Partnership) (“Zhongshan Bison”) is holding 1,553,265 shares of Series B preferred stock of Xynomic representing approximately 2.96% equity interest in Xynomic immediately prior to the Closing, (b) Mr. Peixin Xu, the Chairman of Bison, is the beneficial owner of 21% of Zhongshan Bison and his wife owns 100% of Sponsor;

  the fact that the Merger Agreement provides a termination fee of $4,500,000 payable to our Sponsor if (i) the breach by Xynomic causes Bison to not be able to satisfy its obligations under the Merger Agreement relating to preparing and filing a proxy statement/prospectus for obtaining, and obtaining, approval of the Business Combination and the Merger Agreement by its shareholders and not consummating an alternative business combination with another party, or to close the Business Combination on or prior to the Outside Date, or enter into a definitive agreement to consummate an alternative business combination by that date, and (ii) Bison ceases operations other than making required distributions to its shareholders pursuant to its organizational documents and its winding up and dissolution as a result of (x) failing to obtain shareholder approval to consummate any alternative business combination or (y) occurrence of an Automatic Redemption Event (as defined in the Current Charter); and

  the continued indemnification of current directors and officers of the Company and the continuation of directors’ and officers’ liability insurance after the Business Combination.

 

These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combination and the transactions contemplated thereby. These interests were considered by our Special Committee and the Board when they approved the Business Combination.

 

Risk Factors

 

Following the Closing of the Merger, we will have no direct operations and no significant assets other than the ownership of 100% of Xynomic’s capital stock. Xynomic is a biopharmaceutical company with a limited operating history and has not yet generated any revenue from product sales. It has incurred operating losses since its inception and may never achieve or maintain profitability. All of Xynomic’s drug candidates are still at an early stage of development, which involves a lengthy and expensive process with an uncertain outcome. It may need to raise substantial additional funding for its drug development projects, which may cause dilution to Xynomic stockholders following the Merger. In addition, the drug candidates that are most advanced in Xynomic’s pipeline are in-licensed or otherwise obtained from third parties. If Xynomic breaches a license agreement or other intellectual property-related agreements for its drug candidates or otherwise experiences disruptions to its business relationships with its licensors, Xynomic could lose the ability to continue the development and commercialization of its drug candidates.

 

In evaluating the proposals set forth in this proxy statement/prospectus, you should carefully read this proxy statement/prospectus, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors” beginning on page 34.

 

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Selected Historical Financial Information of Bison

 

The following table sets forth selected historical financial information derived from Bison’s audited financial statements as of December 31, 2018, and 2017, and for the years ended December 31, 2018 and 2017, which are included elsewhere in this proxy statement/prospectus.

 

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should carefully read the following selected financial information in conjunction with the section entitled “Bison Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Bison’s financial statements and the related notes appearing elsewhere in this proxy statement/prospectus.

 

Dollars in thousands except share and per share amounts

 

   Year ended
December 31,
   Year ended
December 31,
 
   2018   2017 
Income Statement Data:        
Operating costs  $836   $365 
Interest income   1,122    341 
Unrealized loss on marketable securities held in Trust Account   (19)   (17)
Net Income (loss)  267  (41)
Weighted average number of shares outstanding, excluding shares subject to possible redemption, basic and diluted   2,426,155    1,870,947 
Net income (loss) per ordinary share: basic and diluted  (0.30)  (0.18)
           
Cash Flow Data:          
Net cash used in operating activities  (687)  (376)
Net cash used in investing activities   -    (61,884)
Net cash provided by financing activities   600    62,172 
           

 

   December 31,
2018
   December 31,
2017
 
Balance Sheet Data:        
Cash and cash equivalents  $123   $210 
Cash and marketable securities held in trust account   63,310    62,208 
Total assets   63,461    62,508 
Ordinary shares subject to possible redemption   57,694    57,427 
Total shareholders’ equity   5,000    5,000 

  

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF XYNOMIC

 

The following table sets forth selected historical consolidated financial information derived from Xynomic’s audited consolidated financial statements as of December 31, 2018 and 2017, and for the years ended December 31, 2018 and 2017, each of which is included elsewhere in this proxy statement/prospectus.

 

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should carefully read the following selected consolidated financial information in conjunction with the section entitled “Xynomic Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Xynomic’s consolidated financial statements and the related notes appearing elsewhere in this proxy statement/prospectus.

  

   For the Year Ended 
Selected Consolidated Statements of Comprehensive Loss:  December 31,
2018
   December 31,
2017
 
   (dollars in thousands) 
Operating expenses        
Research and development  $25,160   $4,321 
General and administrative  $3,049   $885 
General and administrative to related parties   362    249 
Loss from operations  $(28,571)  $(5,455)
Other income          
Investment income   17     
Interest expenses to a related party   (33)    
Loss from operations before income tax benefit  $(28,587)  $(5,455)
Income tax        
Net Loss  $(28,587)  $(5,455)
Accretion to preferred share redemption value  $(2,831)  $(1,269)
Net loss attributable to ordinary shareholders  $(31,418)  $(6,724)

 

   As of 
Selected Consolidated Balance Sheets:  December 31,
2018
   December 31,
2017
 
   (dollars in thousands) 
Current assets  $5,024   $238 
Non-current assets  $438   $2 
Total assets  $5,462   $240 
Current liabilities  $17,645   $895 
Non-current liabilities  $   $ 
Total liabilities  $17,645   $895 
Total mezzanine equity-Series Angel, A-1, B  $7,911   $5,080 
Shareholders’ deficit:          
Ordinary Shares  $1   $1 
Additional paid-in capital   14,169     
Accumulated other comprehensive income   59     
Accumulated deficit   (34,323)   (5,736)
Total shareholders’ deficit   (20,094   (5,735)

   

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

We are providing the following selected unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business Combination.

 

The following selected unaudited pro forma condensed combined balance sheet data as of December 31, 2018, combines amounts derived from the audited consolidated balance sheet of Xynomic as of December 31, 2018, with the audited consolidated balance sheet of Bison as of December 31, 2018, giving effect to the Business Combination as if it had been consummated on December 31, 2018.

 

The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2018 combines the amounts derived from audited consolidated statement of comprehensive loss of Xynomic for the year ended December 31, 2018 with the audited consolidated income statement of Bison for the year ended December 31, 2018, giving effect to the Business Combination as if it had occurred on January 1, 2018.

 

The historical financial information has been adjusted to give effect to pro forma events that are related and/or directly attributable to the Business Combination, are factually supportable, and are expected to have a continuing impact on the combined results. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon the Closing.

 

The selected unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. Bison and Xynomic have not had any historical relationship prior to the Business Combination except that (a) Zhongshan Bison Healthcare Investment Limited (Limited Partnership) (“Zhongshan Bison”) is holding 1,553,265 shares of Series B preferred stock of Xynomic representing approximately 2.96% equity interest in Xynomic immediately prior to the Closing, and (b) Mr. Peixin Xu, the Chairman of Bison, is the beneficial owner of 21% of Zhongshan Bison and his wife owns 100% of the Sponsor. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

The Business Combination will be accounted for as a reverse merger in accordance with accounting principles generally accepted in the United States of America. Under this method of accounting, Bison will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Xynomic comprising the ongoing operations of the combined entity, Xynomic’s senior management comprising the senior management of the combined company, and Xynomic’s shareholders having a majority of the voting power of the combined company. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Xynomic issuing stock for the net assets of Bison, accompanied by a recapitalization. These transactions are not business combinations because Bison is not a business under S-X Rule 11-01(d). The private operating company would credit equity for the fair value of the net assets of the shell company (i.e., no goodwill or intangible assets would be recognized). Operations prior to the Business Combination will be those of Xynomic.

 

In connection with the Extension Meeting on March 21, 2019, shareholders holding 5,234,420 public shares exercised their rights to redeem such public shares for a pro rata portion of the Trust Account. Although such redemption rights are exercised after December 31, 2018, such result should be reflected in the pro forma. Bison cannot predict how many of its public shareholders will elect to redeem their shares for cash at Extension Termination Date. As a result of the Extention Meeting on March 21, 2019, the pro forma financial statements under the following two circumstances have no substantial difference: (1) no holders of the Bison’s ordinary shares further exercise their right to have their shares redeemed upon the consummation of the Business Combination and (2) holders of no more than 29,041   of Bison’s ordinary shares elect to have their shares redeemed upon the consummation of the Business Combination at the conversion price of approximately $10.49 per share, which represents the maximum redemption such that the net asset maintains the minimum required balance of $7,500,000. Therefore, Bison has elected to only provide the pro forma financial statements under the circumstance where holders of no more than 29,041 of Bison’s ordinary shares elect to have their shares redeemed upon the consummation of the Business Combination. 

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 

 

(dollars in thousands except shares and per share amounts)

 

Income statement – year ended December 31, 2018  Xynomic   Bison   Pro Forma Assuming Maximum Redemptions 
Total operating expenses  $28,571   $836   $27,555 
Net operating loss   (28,571)   (836)   (27,555)
Other income/(expenses)   17   1,103    - 
Interest expenses to a related party   (33)   -    - 
Income (loss) from operations before income tax expenses/(benefit)   (28,587)   267    (27,571)
Income tax   -    -    - 
Net (loss) income   (28,587)   267    (27,571)
Accretion to preferred shares redemption value   (2,831)   -      
Net (loss) income attributable to ordinary shareholders  $(31,418)  $267   $(27,571)
Weighted average shares outstanding        2,426,155    47,347,263 
Basic and diluted net loss per share       $0.30   $(0.58)
Balance sheet data – as of December 31, 2018               
Total Current Assets  $5,024   $150   $6,720 
Total Non-Current Assets   438    63,311    438 
Total Assets   5,462    63,461    7,158 
Total Current Liabilities   17,645    767    14,577 
Total Liabilities   17,645    767    14,577 
Total Shareholders’ Equity/(Deficit)  $(20,094)  $5,000   $(7,419)

      

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Cautionary Note Regarding Forward-Looking Statements

 

This proxy statement/prospectus contains forward-looking statements. These forward-looking statements relate to expectations for future financial performance, business strategies, or expectations for our business, and the timing and ability for us to complete the Business Combination. Specifically, forward-looking statements may include statements relating to:

 

the benefits of the Business Combination;
the future financial performance of the post-combination company following the Business Combination;
the initiation, timing, progress, and results of Xynomic’s research and development programs, pre-clinical studies, clinical trials, and regulatory submissions;
commercialization of products by Xynomic; and
other statements preceded by, followed by, or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” or similar expressions.

 

These forward-looking statements are based on information available as of the date of this proxy statement/prospectus and our management’s current expectations, forecasts, and assumptions, and involve a number of judgments, risks, and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

 

You should not place undue reliance on these forward-looking statements in deciding how your vote should be cast or in voting your shares on the proposals set forth in this proxy statement/prospectus, or in deciding whether to exercise your redemption rights. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

the occurrence of any event, change, or other circumstances that could delay the Business Combination or give rise to the termination of the Merger Agreement;
the inability to complete the transactions contemplated by the proposed Business Combination due to the failure to obtain approval of the stockholders of the Company, or other conditions to closing in the Merger Agreement;
the inability to obtain or maintain the listing of the post-combination company on Nasdaq following the Business Combination;
the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things the ability of the combined company to obtain regulatory approvals, commercialize products, generate revenue, and manage growth profitably;
costs related to the Business Combination;
the ability to obtain additional funds for operations;
the ability to obtain and maintain intellectual property protection for Xynomic’s technologies and therapeutic candidates and to operate Xynomic’s business without infringing the intellectual property rights of others;
the impact of applicable laws and regulations;
the possibility that Xynomic or the Company may be adversely affected by other economic, business, or competitive factors; and
other risks and uncertainties indicated in this proxy statement/prospectus, including those set forth under the section entitled “Risk Factors.”

 

Any forward-looking statement in this proxy statement/prospectus reflects our current view with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our business, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future performance. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. 

 

This proxy statement/prospectus also contains projections and other information concerning Xynomic’s industry, business, and the markets for certain therapeutics, including data regarding the estimated size of those markets, their projected growth rates, and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, these industry, business, market, and other data were obtained from reports, research surveys, studies, and similar data prepared by third parties, industry, medical, and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

 

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Risk Factors

 

You should carefully review and consider the following risk factors and the other information contained in this proxy statement/prospectus, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combination and the proposals to be voted on at the Meeting. The following risk factors apply to the business and operations of Xynomic and will also apply to the business and operations of the post-combination company following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone, or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have a material adverse effect on the business, cash flows, financial condition, and results of operations of the post-combination company. You should carefully consider the following risk factors in addition to the other information included in this proxy statement/prospectus, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

 

Risks Related to Xynomic

 

Risks Related to Xynomic’s Financial Position and Need for Additional Capital

 

Xynomic is a biopharmaceutical company with a limited operating history and has not yet generated any revenue from product sales. Xynomic has incurred operating losses since its inception and may never achieve or maintain profitability.

 

Xynomic is a clinical stage biopharmaceutical company with a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a drug candidate will fail to gain regulatory approval or become commercially viable. Xynomic commenced operations in August 2016. Its operations to date have been limited primarily to organizing and staffing the company, business planning, raising capital, in-licensing drug candidates, undertaking pre-clinical studies, and clinically developing drug candidates. Xynomic has never generated any revenue from drug sales, and has not obtained regulatory approvals for any of its drug candidates. For the year ended December 31, 2018, Xynomic reported a net loss of $28.6 million.

 

Xynomic expects to incur significantly higher expenses and operating losses over the next several years in connection with its ongoing activities, as Xynomic:

 

continues pre-clinical and clinical development of its programs;
in-licenses and subsequently develops additional oncology drug candidates;
continues to discover, validate and develop additional drug candidates;
maintains, expands and protects Xynomic’s intellectual property portfolio;
hires additional research, development and business personnel;
incurs costs associated with filing marketing authorization applications;
if abexinostat is successfully approved for commercialization, incurs additional costs associated with establishing sales and marketing infrastructure for abexinostat in U.S., China and other territories; and
incurs additional costs associated with operating as a public company upon the Closing.

 

To become and remain profitable, Xynomic must develop and eventually commercialize drug candidates with significant market potential. This will require it to be successful in a range of challenging activities, including completing pre-clinical testing and clinical trials of its drug candidates, obtaining marketing approval for these drug candidates, manufacturing, marketing and selling those drug candidates for which it may obtain marketing approval, and satisfying any post-marketing requirements. It may never succeed in any or all of these activities and, even if it does, Xynomic may never generate revenues that are significant or large enough to achieve profitability. It may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect its business. The size of Xynomic’s future net losses will depend, in part, on the rate of future growth of its expenses and its ability to generate revenue. Even if it achieves profitability in the future, it may not be able to sustain profitability in subsequent periods.

 

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Xynomic must obtain additional funds to finance its operations and to remain a going concern.

 

Xynomic’s incurred recurring losses from operations since inception and the net current liabilities (current assets less current liabilities) as of December 31, 2018 raise substantial doubt about its ability to continue as a going concern. As a result, Xynomic has disclosed in Note 1 in its consolidated financial statements for the year ended December 31, 2018 with respect to this uncertainty. Xynomic’s ability to continue as a going concern will require it to obtain additional funding. The perception of Xynomic’s ability to continue as a going concern may make it more difficult to obtain financing for the continuation of Xynomic’s operations and could result in the loss of confidence by investors and employees. Additionally, volatility in the capital markets and general economic conditions in the United States may be a significant obstacle to raising the required funds.

 

Xynomic will need to raise substantial additional funding. If Xynomic is unable to raise capital when needed at favorable terms, it will be forced to delay, reduce, or eliminate some of its drug development programs or commercialization efforts.

 

Xynomic’s ability to continue as a going concern will require it to obtain additional funding. Furthermore, Xynomic’s future capital requirements will depend on and could increase significantly as a result of many factors, including:

 

the scope, progress, results, and costs of drug discovery, pre-clinical studies, laboratory testing, and clinical trials for its drug candidates;
the outcome, timing and cost of regulatory approvals by the Food and Drug Administration (“FDA”), National Medical Products Administration (“NMPA”), EMA and comparable regulatory authorities, including the potential that the FDA, NMPA, EMA or comparable regulatory authorities may require that Xynomic to perform additional studies;
the costs, timing, and outcome of regulatory review of abexinostat and other drug candidates;
the success of its effort to commercially launch abexinostat;
its ability to in-license additional drug candidates on favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under existing and new licensing agreements;
the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing its intellectual property rights, and defending intellectual property-related claims;
the costs of securing outsourced manufacturing arrangements for commercial production; and
the costs of establishing or contracting for sales and marketing capabilities if Xynomic obtains regulatory clearances to market abexinostat or another drug candidate.

 

Additional fundraising efforts may distract management from their day-to-day activities, which may adversely affect Xynomic’s ability to develop and commercialize its drug candidates. There is no guarantee that future financing will be available in sufficient amounts or on terms acceptable to Xynomic, if at all. Moreover, additional financing may adversely affect the holdings or the rights of stockholders, and the issuance of additional securities, whether equity or debt, by Xynomic, or the possibility of such issuance, may cause the market price of Xynomic’s shares to decline. The sale of additional equity or convertible securities would dilute all of Xynomic stockholders. The incurrence of indebtedness would result in increased interest payment obligations and Xynomic may be required to agree to certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire, sell, or license intellectual property rights, and other operating restrictions that could adversely impact Xynomic’s ability to conduct its business. Xynomic could also be required to agree to terms unfavorable to it, any of which may have a material adverse effect on Xynomic’s business, operating results and prospects.

 

If Xynomic is unable to obtain funding on a timely basis, it will be required to significantly curtail, delay, or discontinue one or more of its research or development programs or the commercialization of any drug candidate or be unable to expand its operations or otherwise capitalize on its business opportunities, as desired, which could materially adversely affect its business, financial condition, and results of operations.

 

Raising additional capital may cause dilution to Xynomic stockholders, restrict Xynomic operations, or require Xynomic to relinquish rights to its technologies or drug candidates.

 

Identifying and acquiring rights to develop potential drug candidates and conducting pre-clinical testing and clinical trials is a time-consuming, expensive, and uncertain process that may take years to complete, and Xynomic’s commercial revenue, if any, will be derived from sales of drug candidates that it does not expect to be commercially available until Xynomic receives regulatory approval, if at all. Xynomic may never generate the necessary data or results required to obtain regulatory approval and achieve product sales, and even if one or more of its drug candidates are approved, they may not achieve commercial success. Accordingly, Xynomic may need to continue to rely on additional financing to achieve its business objectives. Adequate additional financing may not be available to Xynomic on acceptable terms, or at all.

 

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Xynomic may seek additional funding through a combination of equity offerings, debt financings, collaborations, licensing arrangements, strategic alliances, and marketing or distribution arrangements. To the extent that Xynomic raises additional capital through the sale of equity or convertible debt securities, the ownership interest of Xynomic stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights as a holder of its common stock. The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on Xynomic’s ability to incur additional debt or issue additional equity, limitations on Xynomic’s ability to acquire or license intellectual property rights, and other operating restrictions that could adversely impact Xynomic’s ability to conduct its business. In addition, issuance of additional equity securities, or the possibility of such issuance, may cause the market price of its common stock to decline. In the event that Xynomic enters into collaborations or licensing arrangements to raise capital, Xynomic may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms Xynomic’s rights to technologies or drug candidates that Xynomic otherwise would seek to develop or commercialize itself or potentially reserve for future potential arrangements when it might be able to achieve more favorable terms.

 

Xynomic has a very limited operating history, which may make it difficult for you to evaluate the success of Xynomic’s business to date and to assess its future viability.

 

Xynomic commenced its operations in August 2016. Its operations to date have been limited to organizing and staffing the company, identifying potential partnerships and drug candidates, acquiring product and technology rights, and conducting research and development activities for its drug candidates. Xynomic has not yet demonstrated the ability to successfully complete large-scale, pivotal clinical trials. Xynomic has also not yet obtained regulatory approval for, or demonstrated an ability to manufacture or commercialize, any of its drug candidates. Consequently, any predictions about Xynomic’s future success, performance, or viability may not be as accurate as they could be if it had a longer operating history or approved products on the market.

 

Xynomic’s limited operating history, particularly in light of the rapidly evolving drug research and development industry in which it operates, may make it difficult to evaluate Xynomic’s current business and prospects for future performance. Its short history makes any assessment of its future performance or viability subject to significant uncertainty. Xynomic will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving fields as it seeks to transition to a company capable of supporting commercial activities. In addition, as a new business, it may be more likely to encounter unforeseen expenses, difficulties, complications, and delays due to limited experience. If Xynomic does not address these risks and difficulties successfully, its business will suffer.

 

Risks Related to Xynomic’s Business

 

All of Xynomic’s drug candidates are still in development. If Xynomic is unable to obtain regulatory approval and ultimately commercialize its drug candidates or experiences significant delays in doing so, its business, financial condition, results of operations, and prospects will be materially and adversely affected.

 

All of Xynomic’s drug candidates are still in development. One of its drug candidates is in clinical development and various others are in pre-clinical development. Xynomic’s ability to generate revenues from its drug candidates is dependent on its receipt of regulatory approval and successfully commercializing such products, which may never occur. Each of Xynomic’s drug candidates will require additional pre-clinical and/or clinical development, regulatory approval in multiple jurisdictions, development of manufacturing supply and capacity, substantial investment, and significant marketing efforts before it generates any revenue from product sales. The success of Xynomic’s drug candidates will depend on several factors, including the following:

 

successful completion of pre-clinical and/or clinical studies;
successful enrollment in, and completion of, clinical trials;

 

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receipt of regulatory approvals from applicable regulatory authorities for planned clinical trials, future clinical trials, or drug registrations, manufacturing, and commercialization;
successful completion of all safety studies required to obtain regulatory approval in China, the United States, and other jurisdictions for its drug candidates;
developing commercial manufacturing capabilities to the specifications for Xynomic’s drug candidates for clinical supply and commercial manufacturing;
making and maintaining arrangements with third-party manufacturers;
obtaining and maintaining patent, trade secret, and other intellectual property protection and/or regulatory exclusivity for Xynomic’s drug candidates;
launching commercial sales of Xynomic’s drug candidates, if and when approved, whether alone or in collaboration with others;
acceptance of the drug candidates, if and when approved, by patients, the medical community, and third-party payors;
effectively competing with other therapies and alternative drugs;
obtaining and maintaining healthcare coverage and adequate reimbursement;
successfully enforcing and defending intellectual property rights and claims; and
maintaining a continued acceptable safety profile of the drug candidates following regulatory approval.

 

The success of Xynomic’s business is dependent upon its ability to develop and commercialize its clinical-stage drug candidates, particularly abexinostat, which has three clinical trials currently on-going As a result, Xynomic’s business is substantially dependent on its ability to complete the development of, obtain regulatory approval for, and successfully commercialize abexinostat and its other drug candidates in a timely manner.

 

Xynomic cannot commercialize drug candidates in the United States or another jurisdiction outside of China without obtaining regulatory approval from the FDA or comparable foreign regulatory authorities. Similarly, Xynomic cannot commercialize drug candidates in China without first obtaining regulatory approval from the NMPA. The process to develop, obtain regulatory approval for, and commercialize drug candidates is long, complex, and costly and approval may not be granted. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Even if Xynomic’s drug candidates were to successfully obtain approval from the FDA and comparable foreign regulatory authorities, Xynomic would still need to seek approval in China and any other jurisdictions where it plans to market the product. Any safety issues, product recalls, or other incidents related to products approved and marketed in one jurisdictions may impact approval of those products by another jurisdiction. If Xynomic is unable to obtain regulatory approval for its drug candidates in one or more jurisdictions, or any approval contains significant limitations imposed on certain drug candidates, it may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of its drug candidates or any other drug candidate that Xynomic may in-license, acquire, or develop in the future.

 

Xynomic may be unable to obtain regulatory approval under applicable regulatory requirements.

 

To gain approval to market a drug product, regardless of whether it is through Accelerated Approval or the conventional pathway, Xynomic must provide the FDA and foreign regulatory agencies with clinical data that adequately demonstrates the safety and efficacy of the product for the intended indication applied for in the New Drug Application, or “NDA,” or other respective regulatory filing. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of our clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in clinical trials even after promising results in earlier nonclinical or clinical studies and trials. These setbacks have been caused by, among other things, nonclinical findings made while clinical trials were underway and safety or efficacy observations made in clinical trials, including previously unreported Adverse Events (“AEs”). Success in nonclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and the results of clinical trials by other parties may not be indicative of the results in trials we may conduct.

 

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Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Failure can occur at any stage of clinical development.

 

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of nonclinical and clinical studies and trials of Xynomic’s drug candidate may not be predictive of the results of later-stage clinical trials. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through nonclinical and clinical studies and trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies and trials, and Xynomic cannot be certain that it will not face similar setbacks. Based upon negative or inconclusive results, Xynomic or any potential future collaborator may decide, or regulators may require Xynomic, to conduct additional nonclinical and clinical studies and trials. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret Xynomic’s data as favorably as it does, which may delay, limit, or prevent regulatory approval. Furthermore, Xynomic relies on contract research organizations (“CROs”) and clinical trial sites to ensure the proper and timely conduct of its clinical trials and, while Xynomic has agreements governing their committed activities, it has limited influence over their actual performance.

 

In addition, Xynomic does not know whether future clinical trials, if any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all. Clinical trials can be delayed or aborted for a variety of reasons, including delay or failure to:

 

obtain regulatory approval to commence a trial, if applicable;
reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
obtain ethics committee or institutional review board, or “IRB,” approval at each site;
recruit suitable patients to participate in a trial and have such patients complete the clinical trial or return for post-treatment follow-up; 
ensure that clinical sites follow the trial protocol, comply with Good Clinical Practice, or “GCP,” and continue to participate in a clinical trial;
address any patient safety concerns that arise during the course of a clinical trial;
ensure that patients comply with and complete clinical trial protocol;
achieve a sufficient level of endpoint events in the placebo group, if applicable;
initiate or add a sufficient number of clinical trial sites;
ensure that trial sites do not deviate from clinical trial protocol or drop out of a clinical trial;
address any conflicts with new or existing laws or regulations;
manufacture sufficient quantities of drug candidate for use in clinical trials and ensure clinical trial material is provided to clinical sites in a timely manner; and
obtain the statistical analysis plan to be used to evaluate the clinical trial data.

 

Patient enrollment is a significant factor in the timing of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications Xynomic is investigating.

 

Xynomic could also encounter delays if a clinical trial is suspended or terminated by it, by the ethics committees or IRBs of the institutions in which such trials are being conducted, by an independent Safety Review Board, for such trial or by the FDA or other regulatory agencies. Such parties may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or Xynomic’s clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory agencies resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

 

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Further, conducting clinical trials in foreign countries presents additional risks that may delay completion of Xynomic’s clinical trials. These risks include the failure of physicians or enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries. In addition, the FDA may determine that clinical trial results obtained in foreign subjects do not represent the safety and efficacy of a product when administered in U.S. patients and are thus not supportive of an NDA approval in the United States.

 

If Xynomic experiences delays in the start or completion of, or termination of, any clinical trial of its drug candidates, the commercial prospects of its drug candidates may be harmed, and Xynomic’s ability to generate product revenues will be delayed. In addition, any delays in completing its clinical trials will increase Xynomic’s costs, slow down its drug candidates’ development and approval process and jeopardize Xynomic’s ability to commence product sales and generate revenues. Any of these occurrences may significantly harm Xynomic’s business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of its drug candidates.

 

Xynomic may allocate its limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may later prove to be more profitable or for which there is a greater likelihood of success.

 

Because Xynomic has limited financial and managerial resources, it must limit its licensing, research, and development programs to specific drug candidates that it identifies for specific indications. As a result, it may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential. Xynomic’s resource allocation decisions may cause it to fail to capitalize on viable commercial drugs or profitable market opportunities. In addition, if it does not accurately evaluate the commercial potential or target market for a particular drug candidate, it may relinquish valuable rights to that drug candidate through collaboration, licensing, or other royalty arrangements when it would have been more advantageous for Xynomic to retain sole development and commercialization rights to such drug candidate.

 

Xynomic may attempt to secure approval of abexinostat from the FDA through the use of the Accelerated Approval Program, but such mechanism may not actually lead to a faster development or regulatory review or approval process. If Xynomic is unable to obtain approval of abexinostat through the Accelerated Approval Program in the United States, it may be required to conduct additional nonclinical and clinical studies and trials beyond those that it currently contemplates, which could increase the expense of obtaining, reduce the likelihood of obtaining, and/or delay the timing of obtaining, necessary marketing approval. Even if Xynomic receives approval from the FDA under the Accelerated Approval Program, if its confirmatory post-marketing trial does not verify clinical benefit, or if it does not comply with rigorous post-marketing requirements, the FDA may seek to withdraw the approval.

 

Xynomic currently plans to seek U.S. approval for its lead drug candidate, abexinostat, through the FDA’s Accelerated Approval Program. For any approval to market a drug product, Xynomic must provide the FDA and foreign regulatory agencies with clinical data that adequately demonstrate the safety and efficacy of the product for the indication applied for in the NDA or other respective regulatory filings. As described in the section titled “Information about Xynomic—United States Regulation”, the Accelerated Approval Program is one of several approaches used by the FDA to make prescription drugs more rapidly available for the treatment of serious or life-threatening diseases. Section 506(c) of the Federal Food, Drug and Cosmetic Act, or the “FFDCA,” provides that the FDA may grant accelerated approval to “a product for a serious or life-threatening condition upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.” Approval under the Accelerated Approval Program is subject, however, to the requirement that the applicant conduct additional post-marketing clinical trials to verify and describe the drug’s clinical benefit, where there is uncertainty as to the relationship of the surrogate endpoint to the clinical benefit, or of the observed clinical endpoint to ultimate outcome. Typically, clinical benefit is verified when post-marketing clinical trials show that the drug provides a clinically meaningful positive therapeutic effect, that is, an effect on how a patient feels, functions, or survives. The FDA may require that any confirmatory post-marketing trial be initiated or substantially underway prior to the submission of an application under the Accelerated Approval Program. And, if such confirmatory post-marketing trial fails to confirm the drug’s clinical profile or risks and benefits, the FDA may withdraw its approval of the drug.

 

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The FDA has broad discretion with regard to approval under the Accelerated Approval Program, and even if Xynomic believes that the Accelerated Approval Program is appropriate for abexinostat, it cannot assure you that the FDA will ultimately agree. Furthermore, even if Xynomic does obtain approval under the Accelerated Approval Program, it may not experience a faster development process, review or approval compared to conventional FDA procedures.

 

Even if Xynomic receives approval for abexinostat under the Accelerated Approval Program, Xynomic will be subject to rigorous post-marketing requirements, including the completion of one or more confirmatory post-marketing trials to verify the clinical benefit of the product, and submission to the FDA of all promotional materials prior to their dissemination. The FDA could seek to withdraw an accelerated approval for multiple reasons, including if Xynomic fails to conduct any required confirmatory post-marketing trial with due diligence, a confirmatory post-marketing trial does not confirm the predicted clinical benefit, other evidence shows that the product is not safe or effective under the conditions of use, or Xynomic disseminates promotional materials that are found by the FDA to be false and misleading.

 

Any delay in obtaining, or inability to obtain, approval under the Accelerated Approval Program would delay or prevent commercialization of abexinostat and would materially adversely affect Xynomic’s business, financial condition, results of operations, cash flows, and prospects.

 

If Xynomic is unable to obtain NMPA approval for its drug candidates to be eligible for an expedited registration pathway as Category 1 drug candidates, the time and cost Xynomic would incur to obtain regulatory approvals may increase. Even if Xynomic receives such Category 1 designation, it may not lead to a faster development, review or approval process.

 

The NMPA categorizes domestically-manufactured innovative drug applications as Category 1, provided such drug has a new and clearly defined structure, pharmacological property and apparent clinical value and has not been marketed anywhere in the world. Domestically developed and manufactured innovative drugs will be attributed to Category 1 for their CTA and NDA applications. Xynomic’s clinical stage drug candidates are eligible for Category 1 designation. A Category 1 designation by the NMPA may not be granted for any of its drug candidates or may not lead to faster development or regulatory review or approval process. Moreover, a Category 1 designation does not increase the likelihood that its drug candidates will receive regulatory approval.

 

The regulatory process in China is evolving and subject to change. Any future policies, or changes to current polices, that the NMPA approves might require Xynomic to change its planned clinical study design or otherwise spend additional resources and effort to obtain approval of its drug candidates. In addition, policy changes may contain significant limitations related to use restrictions for certain age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. If Xynomic is unable to obtain regulatory approval for its drug candidates in one or more jurisdictions, or any approval contains significant limitations, Xynomic may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of its drug candidates or any other drug candidate that Xynomic may in-license, acquire or develop in the future.

 

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The research and development projects under its internal discovery programs are at an early stage of development. As a result, Xynomic is unable to predict if or when Xynomic will successfully develop or commercialize any drug candidates under such programs.

 

Xynomic’s internal discovery programs are at an early stage of development and will require significant investment and regulatory approvals prior to commercialization. Xynomic currently has no drug candidates beyond pre-clinical trials under its internal discovery programs. Each of its drug candidates will require additional clinical and pre-clinical development, management of clinical, pre-clinical and manufacturing activities, obtaining regulatory approval, obtaining manufacturing supply, building of a commercial organization, substantial investment, and significant marketing efforts before they generate any revenue from product sales. Xynomic is not permitted to market or promote any of its drug candidates before Xynomic’s receive regulatory approval from the FDA, NMPA, or comparable regulatory authorities, and Xynomic may never receive such regulatory approval for any such drug candidates.

 

Xynomic cannot be certain that clinical development of any drug candidates from its internal discovery programs will be successful or that Xynomic will obtain regulatory approval or be able to successfully commercialize any of its drug candidates and generate revenue. Success in pre-clinical testing does not ensure that clinical trials will be successful, and the clinical trial process may fail to demonstrate that its drug candidates are safe and effective for their proposed uses. Any such failure could cause Xynomic to abandon further development of any one or more of its drug candidates and may delay development of other drug candidates. Any delay in, or termination of, its clinical trials will delay and possibly preclude the filing of any NDAs, with the FDA, NMPA, or comparable regulatory authorities and, ultimately, its ability to commercialize its drug candidates and generate product revenue.

 

If Xynomic encounters difficulties enrolling patients in its clinical trials, its clinical development activities could be delayed or otherwise adversely affected.

 

Xynomic commenced three clinical trials involving abexinostat and timely completion of those clinical trials in accordance with their protocols depends, among other things, on its ability to enroll a sufficient number of patients who meet the trial criteria and remain in the trial until its conclusion. Xynomic may experience difficulties enrolling and retaining appropriate patients in its clinical trials for a variety of reasons, including but not limited to:

 

the size and nature of the patient population;
patient eligibility criteria defined in the clinical protocol;
the size of study population required for statistical analysis of the trial’s primary endpoints;
the proximity of patients to trial sites;
the design of the trial and changes to the design of the trial;
Xynomic’s ability to recruit clinical trial investigators with the appropriate competencies and experience;
competing clinical trials for similar therapies or other new therapeutics, which will reduce the number and types of patients available;
clinicians’ and patients’ perceptions as to the potential advantages and side effects of the drug candidates being studied in relation to other available therapies, including any new drug candidates or treatments that may be approved for the indications Xynomic is investigating;
Xynomic’s ability to obtain and maintain patient consents;
patients enrolled in clinical trials that may not complete a clinical trial; and
the availability of approved therapies that are similar to Xynomic’s drug candidates. 

 

Even if Xynomic is able to enroll a sufficient number of patients in its clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect its ability to advance the development of Xynomic’s drug candidates.

 

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Xynomic has limited experience in conducting clinical trials and results of earlier studies and trials may not be reproduced in future clinical trials.

 

For Xynomic’s drug candidates, clinical testing is expensive and can take many years to complete, while failure can occur at any time during the clinical trial process. The results of studies in animals and early clinical trials of its drug candidates may not predict the results of later-stage clinical trials. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through studies in animals and initial clinical trials. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same drug candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations (including genetic differences), patient adherence to the dosing regimen and the patient dropout rate. Results in later trials may also differ from earlier trials due to a larger number of clinical trial sites and additional countries and languages involved in such trials. In addition, the design of a clinical trial can determine whether its results will support approval of a drug candidate, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced and significant expense has been incurred.

 

A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of demonstrated efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Clinical trials of potential products often reveal that it is not practical or feasible to continue development efforts. Furthermore, if the trials Xynomic conducts fail to meet their primary statistical and clinical endpoints, they will not support the approval from the FDA, NMPA, EMA or other comparable regulatory authorities for its drug candidates. If this occurs, Xynomic would need to replace the failed study with new trials, which would require significant additional expense, cause substantial delays in commercialization and materially adversely affect Xynomic’s business, financial condition, cash flows and results of operations.

 

Results from completed human clinical trials may not be representative of the results that are obtained after approval, if obtained, and product launch.

 

Human clinical trials are very complicated undertakings. If Xynomic obtains FDA approval under the Accelerated Approval Program, safety risks not identified in Xynomic’s prior clinical trials may first appear after it obtains approval and commercializes its drug candidates. Any new post-marketing AEs may significantly impact Xynomic’s ability to market its drug candidates and may require that Xynomic recall and discontinue commercialization of its drug candidates. Furthermore, if any confirmatory post-marketing trial fails to confirm a drug candidate’s clinical profile or clinical benefits, the FDA may withdraw its approval. Any of these events would materially harm Xynomic’s business.

 

Xynomic’s drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following regulatory approval, if any.

 

Undesirable side effects caused by Xynomic’s drug candidates could cause it to interrupt, delay, or halt clinical trials or could cause regulatory authorities to interrupt, delay, or halt its clinical trials or could result in a more restrictive label or the delay or denial of regulatory approval by the NMPA, FDA, or other regulatory authorities. In particular, as is the case with all oncology drugs, it is likely that there may be side effects, such as fatigue, nausea, and low blood cell levels, associated with the use of certain of Xynomic’s oncology drug candidates. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm Xynomic’s business, financial condition, and prospects significantly.

 

Clinical trials assess a sample of the potential patient population. With a limited number of patients and duration of exposure, rare and severe side effects of Xynomic’s drug candidates may only be uncovered with a significantly larger number of patients exposed to the drug candidate. If Xynomic’s drug candidates receive regulatory approval and Xynomic, its partners, or others identify undesirable side effects caused by such drug candidates (or any other similar drugs) after such approval, a number of potentially significant negative consequences could result, including:

 

the NMPA, FDA, or other comparable regulatory authorities may withdraw or limit their approval of such drug candidates;
the NMPA, FDA, or other comparable regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contra-indication;
Xynomic may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

 

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Xynomic may be required to change the way such drug candidates are distributed or administered, conduct additional clinical trials, or change the labeling of its drug candidates;
the NMPA, FDA, or other comparable regulatory authorities may require a Risk Evaluation and Mitigation Strategy, or REMS (or analogous requirement), plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools;
Xynomic may be subject to regulatory investigations and government enforcement actions;
Xynomic may decide to remove such drug candidates from the marketplace;
Xynomic could be sued and held liable for injury caused to individuals exposed to or taking its drug candidates; and
Xynomic’s reputation may suffer.

 

Any of these events could prevent Xynomic from achieving or maintaining market acceptance of the affected drug candidates and could substantially increase the costs of commercializing its drug candidates, if approved, and significantly impact its ability to successfully commercialize its drug candidates and generate revenue.

 

Xynomic’s clinical development program may not uncover all possible AEs that patients may experience. The number of subjects exposed to its drug candidates and the average exposure time in the clinical development program may be inadequate to detect AEs, or chance findings, that may only be detected once Xynomic’s drug candidates are administered to more patients and for greater periods of time.

 

Clinical trials by their nature utilize a sample of the potential patient population. With a limited number of subjects and limited duration of exposure, however, Xynomic cannot be fully assured that any of its drug candidates has no serious or severe side effects, and any such side effects may only be uncovered with a significantly larger number of patients exposed to the drug candidate. It is possible that ongoing and future clinical trials, as well as reports received from commercial use, if any of its drug candidates are approved, may identify safety concerns.

 

Although Xynomic has monitored the subjects in its trials for certain safety concerns and it has not seen evidence of significant safety concerns in its clinical trials to date, patients treated with any of its drug candidates may experience adverse reactions. If safety problems occur or are identified after a product candidate reaches the market, the FDA may require that Xynomic amend the labeling or conduct recall. The FDA could also request that Xynomic withdraw a product form the market, or seek to withdraw its approval of a product.

 

The incidence and prevalence for target patient populations of Xynomic’s drug candidates are based on estimates and third-party sources. If the market opportunities for Xynomic’s drug candidates are smaller than it estimates or if any approval that Xynomic obtains is based on a narrower definition of the patient population, its revenue and ability to achieve profitability might be materially and adversely affected.

 

Periodically, Xynomic make estimates regarding the incidence and prevalence of target patient populations for particular diseases based on various third-party sources and internally generated analysis and use such estimates in making decisions regarding its drug development strategy, including acquiring or in-licensing drug candidates and determining indications on which to focus in pre-clinical or clinical trials.

 

These estimates may be inaccurate or based on imprecise data. The total addressable market opportunity for abexinostat and Xynomic’s other drug candidates will ultimately depend upon, among other things, the diagnosis criteria included in the final label for each of Xynomic’s drug candidates, acceptance by the medical community and patient access, drug pricing and reimbursement. The number of patients in the major markets and elsewhere may turn out to be lower than expected, patients may not be otherwise amenable to treatment with Xynomic’s drugs, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect Xynomic’s business, results of operations, and prospects.

 

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Xynomic faces substantial competition, which may result in its competitors discovering, developing, or commercializing drugs before or more successfully than Xynomic does, or develop therapies that are more advanced or effective than those of Xynomic.

 

The development and commercialization of new drugs are highly competitive. Xynomic faces competition with respect to its current drug candidates, and will face competition with respect to any drug candidates that it may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. For example, there are a number of large pharmaceutical and biotechnology companies that are currently marketing drugs or are pursuing the development of therapies in the field of HDAC inhibition to treat cancer. Some of these competitive drugs and therapies are based on scientific approaches that are the same as or similar to that of Xynomic’s drug candidates. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.

 

Specifically, there are a large number of companies developing or marketing treatments for cancer. If abexinostat receives marketing approval for renal cell carcinoma (“RCC”), follicular lymphoma (“FL”), and/or diffuse large B-cell lymphoma (“DLBCL”), it may face competition from approved drugs marketed by Bayer AG, Bristol-Myers Squibb Company, Gilead Sciences, Inc., Merck & Co., Inc., Novartis AG, and Pfizer Inc. If XP-102 receives marketing approval for patients with colorectal cancer or melanoma, it will face competition from Merck & Co., Inc., Novartis AG, Roche AG, and potentially other companies.

 

Many of the companies against which Xynomic is competing or against which it may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved drugs than Xynomic. Mergers and acquisitions in the pharmaceutical, biotechnology, and diagnostic industries may result in even more resources being concentrated among a smaller number of its competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with Xynomic in recruiting and retaining qualified scientific and management personnel and in establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, its programs.

 

Xynomic’s commercial opportunities could be reduced or eliminated if its competitors develop and commercialize drugs that are safer, more effective, with fewer or less severe side effects, more convenient, or less expensive than drugs that it may develop. Xynomic’s competitors also may obtain FDA, NMPA or other regulatory approval for their drugs more rapidly than it may obtain approval for its drugs, which could result in Xynomic’s competitors establishing a strong market position before Xynomic is able to enter the market. Additionally, technologies developed by its competitors may render its potential drug candidates uneconomical or obsolete, and Xynomic may not be successful in marketing its drug candidates against competitors.

 

Even if its drug candidates obtain regulatory approval, they may never achieve market acceptance or commercial success, which will depend, in part, upon the degree of acceptance among physicians, patients, patient advocacy groups, health care payors, and the medical community.

 

Even if Xynomic obtains FDA or other regulatory approvals, its drug candidates may not achieve market acceptance among physicians, patients, patient advocacy groups, health care payors, or the medical community, and may not be commercially successful. If approved, market acceptance of its drug candidates depends on a number of factors, including:

 

the efficacy of the product as demonstrated in clinical trials;
the prevalence and severity of any side effects and overall safety profile of the product;
the clinical indications for which the product is approved;
the potential and perceived advantages of Xynomic’s drug candidates over current options or future alternative treatments;
the strength of Xynomic’s marketing organization and distribution channels;
the quality of Xynomic’s relationships with patient advocacy groups;
the availability and sufficiency of third-party coverage and adequate reimbursement;
acceptance by physicians, major operators of clinics and patients of the product as a safe and effective chronic daily treatment and willingness of physicians to prescribe Xynomic’s drug candidates;

 

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the cost of treatment in relation to alternative treatments and willingness to pay for Xynomic’s drug candidates, if approved, on the part of patients;
relative convenience and ease of administration of its drug candidates; and
the availability of the product and Xynomic’s ability to meet market demand, including providing a reliable supply for long-term daily treatment.

 

Any failure by Xynomic’s drug candidates, if they obtain regulatory approval, to achieve market acceptance or commercial success would adversely affect Xynomic’s results of operations.

 

If any of Xynomic’s drug candidates are approved for marketing and commercialization and Xynomic is unable to develop sales, marketing and distribution capabilities on its own or enter into agreements with third parties to perform these functions on acceptable terms, Xynomic will be unable to successfully commercialize any such future therapeutics.

 

Xynomic currently has no sales, marketing, or distribution capabilities or experience. In order to commercialize its drug candidates, if approved, Xynomic must build marketing and sales capabilities or make arrangements with third parties to perform these services, and it may not be successful in doing so. Building the requisite sales, marketing or distribution capabilities will be expensive and time-consuming and will require significant attention of Xynomic’s leadership team to manage. Any failure or delay in the development of Xynomic’s sales, marketing or distribution capabilities would adversely impact the commercialization of its products. The competition for talented individuals experienced in selling and marketing pharmaceutical products is intense, and Xynomic cannot assure you that it can assemble an effective team. Additionally, Xynomic may choose to collaborate, either globally or on a territory-by-territory basis, with third parties on the commercialization of its drug candidates. If it is unable to enter into such arrangements on acceptable terms or at all, Xynomic may not be able to successfully commercialize its drug candidates if and when it receives regulatory approval or any such commercialization may experience delays or limitations.

 

Xynomic may be subject to additional risks related to operating in foreign countries either itself or through a third-party, including:

 

differing regulatory requirements in foreign countries;
unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;
economic weakness, including inflation or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign taxes, including withholding of payroll taxes;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
difficulties staffing and managing foreign operations;
workforce uncertainty in countries where labor unrest is more common than in the United States;
potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;
challenges enforcing Xynomic’s contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
business interruptions resulting from geopolitical actions, including war and terrorism.

 

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If Xynomic fails to obtain and sustain an adequate level of coverage and reimbursement for its drug candidates by third-party payors, sales would be adversely affected.

 

Xynomic expects patients who have cancer to need chronic treatment but it anticipates that most patients will rely on coverage and reimbursement by a third-party payor, such as Medicare, Medicaid or a private health insurer, to pay for such treatment. There will be no commercially viable market for Xynomic’s drug candidates without coverage and reimbursement from third-party payors. Additionally, even if Xynomic obtains third-party payor coverage and reimbursement for its drug candidates, if the level of coverage and reimbursement is below Xynomic’s expectations, its revenue and gross margins will be adversely affected.

 

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor can be an expensive and time-consuming process that could require Xynomic to provide supporting scientific, clinical and cost effectiveness data for the use of its products to the payor. Xynomic cannot be certain if and when it will obtain formulary approval to allow it to sell its drug candidates, if approved, into its target markets. Even if Xynomic does obtain formulary approval, third-party payors, carefully review and increasingly question the coverage of, and challenge the prices charged for, drugs. Reimbursement rates from third-party payors vary depending on the payor, the insurance plan and other factors. A current trend in the United States health care industry is toward cost containment. Large public and private payors, managed care organizations, group purchasing organizations and similar organizations are exerting increasing influence on decisions regarding the use of, and reimbursement levels for, particular treatments. Such third-party payors, including Medicare, are questioning the coverage of, and challenging the prices charged for medical products and services, and many third-party payors limit coverage of, or reimbursement for, newly approved health care products.

 

In addition, there may be significant delays in obtaining such coverage and reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a product will be paid for in all cases or at a rate that covers Xynomic’s costs, including research, development, intellectual property, manufacture, sale and distribution expenses.

 

Xynomic cannot be sure that reimbursement will be available for its drug candidates and, if coverage and reimbursement are available, what the level of reimbursement will be. Xynomic’s inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that it develops could have a material adverse effect on its operating results, its ability to raise capital needed to commercialize products and its overall financial condition.

 

Reimbursement may impact the demand for, and the price of, Xynomic’s drug candidates, if approved. Assuming Xynomic obtains coverage for its drug candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with those medications. Patients are unlikely to use Xynomic’s drug candidates unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of such drug candidates. Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new products when more established or lower cost therapeutic alternatives are already available or subsequently become available.

 

Outside the United States, international operations are generally subject to extensive governmental price controls and market regulations, and Xynomic believes the increasing emphasis on cost-containment initiatives in Europe, Canada, China and other countries will put pressure on the pricing and usage of its drug candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medicinal products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that Xynomic is able to charge for its drug candidates, if approved. Accordingly, in markets outside the United States, the reimbursement for Xynomic’s drug candidates compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

 

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Xynomic’s future success depends on its ability to retain key executives and to attract, retain, and motivate qualified personnel.  

Xynomic is highly dependent on the research, clinical and business development expertise of Yinglin Mark Xu, its Chairman, Chief Executive Officer, and President; Wentao Jason Wu, its Chief Operating Officer; Yong Cui, its Vice President of Chemistry, Manufacturing, and Controls; as well as the other principal members of its management, scientific, and clinical team. Xynomic has not entered into employment letter agreements with all of its executive officers. Under the employment letter agreements it has entered with its executive officers, any of them may terminate his or her employment with it at any time. Xynomic does not maintain key person insurance for any of its executives or other employees. In addition, Xynomic relies on consultants and advisors, including scientific and clinical advisors, to assist it in formulating its research, development, and commercialization strategy. Xynomic’s consultants and advisors may have commitments under consulting or advisory contracts with other entities that may limit their availability to Xynomic. If Xynomic is unable to continue to attract and retain high-quality personnel, its ability to pursue its growth strategy will be limited. While Xynomic is working on rectifying its failure to put proper employment arrangements in place in the past for certain senior management positions, it is uncertain that such failure could be retroactively rectified completely.

Recruiting and retaining qualified management, scientific, clinical, manufacturing, and sales and marketing personnel will also be critical to Xynomic’s success. The loss of the services of its executive officers or other key employees could impede the achievement of Xynomic’s research, development, and commercialization objectives and seriously harm its ability to successfully implement its business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in Xynomic’s industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of, and commercialize drugs. Competition to hire from this limited pool is intense, and Xynomic may be unable to hire, train, retain, or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. Xynomic also experiences competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, even though Dr. James Jiayuan Tong, the current Bison Chief Executive Officer, will remain as a Chief Strategy Officer at the combined entity, Xynomic’s management will be required to devote significant time to new compliance initiatives from its status as a U.S. public company, which may require it to recruit more management personnel. Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel. 

Xynomic will need to develop and expand its business, and Xynomic may encounter difficulties in managing this development and expansion, which could disrupt its operations.

As of March 28, 2019, there were 25 full-time and 10 part-time employees and consultants in Xynomic’s total staff headcount of 35, and in connection with becoming a public company, it expects to increase its number of employees and the scope of its operations. To manage its anticipated development and expansion, Xynomic must continue to implement and improve its managerial, operational, and financial systems, expand its facilities and continue to recruit and train additional qualified personnel. Also, Xynomic’s management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these development activities. Due to its limited resources, Xynomic may not be able to effectively manage the expansion of its operations or recruit and train additional qualified personnel. If Xynomic’s management is unable to effectively manage its expected development and expansion, Xynomic’s expenses may increase more than expected, its ability to generate or increase its revenue could be reduced and Xynomic may not be able to implement its business strategy. Xynomic’s future financial performance and its ability to commercialize its drug candidates, if approved, and compete effectively will depend, in part, on its ability to effectively manage the future development and expansion of its company. 

Product liability claims or lawsuits could cause Xynomic to incur substantial liabilities.  

Xynomic will face an inherent risk of product liability exposure related to the testing of its drug candidates in human clinical trials and will face an even greater risk if it commercially sells any drug candidates that it may develop. If Xynomic cannot successfully defend itself against claims that its drug candidates caused injuries, Xynomic could incur substantial liabilities. 

Although Xynomic maintains product liability insurance coverage, it may not be adequate to cover all liabilities that it may incur. Insurance coverage is increasingly expensive. Xynomic may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. 

Our Proposed Amended and Restated Charter provides for an exclusive forum for any derivative action or proceeding brought on our behalf, which may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for such disputes and may discourage lawsuits with respect to such claims. 

Our amended and restated certificate of incorporation that will become effective upon the Closing specifies that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees or agents to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws; or (iv) any action asserting a claim against us governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Act, the Exchange Act or rules and regulations thereunder. We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, these provisions may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in such action.

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Xynomic’s internal IT systems, or those of Xynomic’s third-party CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of its drug candidates’ development programs.

 

Despite the implementation of security measures, Xynomic’s internal IT systems and those of its third-party CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. While Xynomic has not experienced any such system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in its operations, it could result in a material disruption of Xynomic’s programs. For example, the loss of clinical trial data for its drug candidates could result in delays in Xynomic’s regulatory approval efforts and significantly increase Xynomic’s costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to its data or applications or other data or applications relating to its technology or drug candidates, or inappropriate disclosure of confidential or proprietary information, including health information collected through clinical trials, Xynomic could incur liabilities and the further development of its drug candidates could be delayed.

 

Risks Related to Government Regulation

 

The regulatory approval process is highly uncertain and Xynomic may not obtain approval under the Accelerated Approval Program or the conventional pathway, as required for the commercialization.

 

The research, testing, manufacturing, labeling, approval, selling, import, export, pricing and reimbursement, marketing and distribution of drug products are subject to extensive regulation by the FDA and other regulatory agencies in the United States and other countries, which regulations differ from country to country. Neither Xynomic nor any future collaboration partner is permitted to market a drug product in the United States until it receives approval of an NDA from the FDA. Xynomic has not submitted an application or obtained marketing approval for any drug candidate anywhere in the world. Obtaining regulatory approval of an NDA, even under the Accelerated Approval Program, can be a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions or other actions, including:

 

warning letters;
civil and criminal penalties;
injunctions;
withdrawal of regulatory approval of products;
product seizure or detention;
product recalls;
total or partial suspension of production; and
refusal to approve pending NDAs or supplements to approved NDAs.

 

Prior to obtaining approval to commercialize a drug candidate in the United States or abroad, Xynomic or its collaborators must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or other foreign regulatory agencies, that such drug candidates are safe and effective for their intended uses. The number of nonclinical and clinical studies and trials that will be required for FDA approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to address, and the regulations applicable to any particular drug candidate. Xynomic may seek approval for one or more drug candidates under the FDA’s Accelerated Approval Program, which would allow it to demonstrate an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, but it will be subject to rigorous post-marketing requirements, including the completion of one or more confirmatory post-marketing trials to verify the clinical benefit of the product candidate. If unable to obtain approval under the Accelerated Approval Program, Xynomic will have to pursue a conventional approval pathway. In addition, in such case, the FDA could determine that any pivotal Phase 3 clinical trials Xynomic has conducted are not sufficient to support approval under the conventional pathway. Results from nonclinical and clinical trials and studies can be interpreted in different ways. Even if Xynomic believes the nonclinical or clinical data for its drug candidate is promising, such data may not be sufficient to support approval by the FDA and other regulatory agencies. Administering drug candidates to humans may produce undesirable side effects, which could interrupt, delay or halt clinical trials and result in the FDA or other regulatory agencies denying approval of a drug candidate for any or all targeted indications.

 

Both accelerated and conventional regulatory approval pathways of an NDA or NDA supplement are not guaranteed, and the approval process is expensive and may take several years. The FDA also has substantial discretion in the approval process and Xynomic may encounter matters with the FDA that require it to expend additional time and resources and delay or prevent the approval of its drug candidates. For example, the FDA may require Xynomic to conduct additional studies or trials either prior to approval or post-marketing, such as additional drug-drug interaction studies or safety or efficacy studies or trials, or it may object to elements of Xynomic’s clinical development program such as the number of subjects enrolled in its current clinical trials from the United States. Despite the time and expense exerted, failure can occur at any stage. The FDA can delay, limit or deny approval of a drug candidate for many reasons, including, but not limited to, the following:

 

a drug candidate may not be deemed safe or effective;
the FDA might not approve Xynomic’s trial design and analysis plan;
the FDA may not find the data from nonclinical and clinical studies and trials sufficient;
clinical inspection(s) by the FDA or other regulatory authorities may result in unacceptable findings that could negatively impact approval;

 

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the FDA might not accept or deem acceptable a third-party manufacturers’ processes or facilities; or
the FDA may change its approval policies or adopt new regulations.

 

If Xynomic fails to demonstrate safety and efficacy in clinical trials or do not gain regulatory approval, its business and results of operations will be materially and adversely harmed. Additionally, if the FDA requires that Xynomic conduct additional clinical trials, places limitations on product use in its FDA-approved labeling, delays approval to market or limits the use of any drug candidate, Xynomic’s business and results of operations may be harmed.

 

Xynomic is conducting and may in the future conduct clinical trials for its drug candidates outside the United States and the FDA may not accept data from such trials.

 

Although the FDA may accept data from clinical trials conducted outside the United States in support of safety and efficacy claims, this is subject to certain conditions. For example, such foreign clinical trials should be conducted in accordance with GCPs, including review and approval by an independent ethics committee and obtaining the informed consent from subjects of the clinical trials. The foreign clinical data should also be applicable to the U.S. population and U.S. medical practice. Other factors that may affect the acceptance of foreign clinical data include differences in clinical conditions, study populations or regulatory requirements between the United States and the foreign country. To the extent that Xynomic has conducted, is conducting, and will conduct trials with majority enrollment outside the United States, the FDA may not accept its foreign clinical data, and in such event, Xynomic may be required to re-conduct the relevant clinical trials within the United States, which would be costly and time-consuming, and which could have a material and adverse effect on its ability to carry out its business plans.

 

Even if Xynomic receives regulatory approval for any of its drug candidates, Xynomic will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense. Additionally, Xynomic’s drug candidates, if approved, could be subject to labeling and other restrictions and market withdrawal, and Xynomic may be subject to penalties if it fails to comply with regulatory requirements or experiences unanticipated problems.

 

Even if a drug is approved by the FDA and/or foreign regulatory agencies, regulatory agencies may still impose significant restrictions on a product’s indicated uses or marketing or impose various ongoing requirements. Furthermore, any new legislation addressing drug safety issues could result in delays or increased costs to assure compliance. In addition, if a drug receives approval under the FDA’s Accelerated Approval Program, it will be subject to special post-marketing requirements, including the completion of confirmatory post-marketing clinical trials to verify the clinical benefit of the product, and submission to the FDA of all promotional materials prior to their dissemination. The FDA could seek to withdraw the approval for multiple reasons, including if we fail to conduct any required confirmatory post-marketing trial with due diligence, a confirmatory post-marketing trial does not confirm the predicted clinical benefit, other evidence shows that the product is not safe or effective under the conditions of use, or we disseminate promotional materials that are found by the FDA to be false and misleading.

 

If any of Xynomic’s drug candidates receives approval under the Accelerated Approval Program, it will be subject to ongoing regulatory requirements for conducting post-marketing clinical studies and trials, labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information, including both federal and state requirements in the United States. In addition, manufacturers and manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to the current Good Manufacturing Practices, or “cGMP”. As such, Xynomic and its contract manufacturers are subject to continual review and periodic inspections to assess compliance with cGMP. Accordingly, Xynomic must conduct the confirmatory post-marketing trial in a diligent manner and we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control. We will also be required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with requirements concerning advertising and promotion. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote any product, if approved, for indications or uses for which it does not have FDA approval.

 

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If any of our product candidates receives approval under the Accelerated Approval Program but we fail to conduct the required confirmatory post-marketing trials with due diligence or such post-marketing trials fail to confirm the clinical profile or risks and benefits, the FDA may withdraw its approval. If a regulatory agency discovers previously unknown problems with a product, if approved, such as AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing, or labeling of a product, the regulatory agency may impose restrictions on the product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may:

 

issue warning letters;
impose civil or criminal penalties;
suspend regulatory approval;
suspend any of our ongoing clinical trials;
refuse to approve pending applications or supplements to approved applications submitted by us;
impose restrictions on our operations, including closing our contract manufacturers’ facilities; or
seize or detain products or require a product recall.

 

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate revenues from the sale of any of product candidates, if approved, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.

 

The regulatory requirements and policies may change, and additional government regulations may be enacted for which we may also be required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or in other countries. If we or any future collaboration partner are not able to maintain regulatory compliance, we or such collaboration partner, as applicable, may face government enforcement action and our business will suffer.

 

Xynomic may be exposed to liabilities under the U.S. Foreign Corrupt Practices Act, or FCPA, and Chinese anti-corruption laws, and any determination that Xynomic has violated these laws could have a material adverse effect on its business or its reputation.

 

Xynomic is subject to the FCPA. The FCPA generally prohibits it from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Xynomic is also subject to the anti-bribery laws of other jurisdictions, particularly China. As its business expands, the applicability of the FCPA and other anti-bribery laws to its operations will increase. Its procedures and controls to monitor anti-bribery compliance may fail to protect the combined company from reckless or criminal acts committed by its employees or agents. If Xynomic, due to either its own deliberate or inadvertent acts or those of others, fails to comply with applicable anti-bribery laws, its reputation could be harmed and Xynomic could incur criminal or civil penalties, other sanctions and/or significant expenses, which could have a material adverse effect on its business, including its financial condition, results of operations, cash flows and prospects.

 

Xynomic’s business may be affected by litigation and government investigations.

 

Xynomic may from time to time receive inquiries and subpoenas and other types of information requests from government authorities and others and it may become subject to claims and other actions related to its business activities. While the ultimate outcome of investigations, inquiries, information requests and legal proceedings is difficult to predict, defense of litigation claims can be expensive, time-consuming and distracting, and adverse resolutions or settlements of those matters may result in, among other things, modification of Xynomic’s business practices, costs and significant payments, any of which could have a material adverse effect on its business, financial condition, results of operations and prospects.

 

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If Xynomic or its current or future collaborators, manufacturers or service providers fail to comply with healthcare laws and regulations, Xynomic or they could be subject to enforcement actions, which could affect Xynomic’s ability to develop, market and sell its therapeutics and may harm its reputation.

 

Although Xynomic does not currently have any products on the market, once its therapeutic candidates or clinical trials are covered by federal health care programs, Xynomic will be subject to additional healthcare statutory and regulatory requirements and enforcement by the federal, state and foreign governments of the jurisdictions in which Xynomic conduct its business. Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any therapeutic candidates for which Xynomic obtains marketing approval. Xynomic’s arrangements with third-party payors and customers may expose it to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which Xynomic would market, sell or distribute its therapeutic candidates for which Xynomic obtains marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include, but are not limited to, the following:

 

the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made, in whole or in part, under a federal healthcare program, such as Medicare or Medicaid;

the U.S. federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

HIPAA includes a fraud and abuse provision referred to as the HIPAA All-Payor Fraud Law, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program (i.e., not just federal healthcare programs), or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

HIPAA, as amended by HITECH, and its implementing regulations, which impose obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information;

the federal Physician Payment Sunshine Act and the implementing regulations, also referred to as “Open Payments,” issued under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the ACA, which require that manufacturers of pharmaceutical and biological drugs reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program report to the Department of Health and Human Services all consulting fees, travel reimbursements, research grants, and other payments, transfers of value or gifts made to U.S.-licensed physicians and U.S. teaching hospitals with limited exceptions; and

analogous state laws and regulations, such as, state anti-kickback and false claims laws potentially applicable to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and state transparency laws that require the reporting of certain pricing information; among other state laws.

 

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Ensuring that Xynomic’s future business arrangements with third-parties comply with applicable healthcare laws and regulations could involve substantial costs. If its operations are found to be in violation of any such requirements, Xynomic may be subject to penalties, including civil or criminal penalties, monetary damages, the curtailment or restructuring of its operations, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect its financial results. Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against Xynomic for an alleged or suspected violation could cause it to incur significant legal expenses and could divert Xynomic’s management’s attention from the operation of its business, even if its defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to Xynomic in terms of money, time and resources.

 

If Xynomic or its current or future collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations, Xynomic could be subject to enforcement actions, which could affect its ability to develop, market and sell its therapeutics successfully and could harm its reputation and lead to reduced acceptance of its therapeutics by the market. These enforcement actions include, among others:

 

adverse regulatory inspection findings;
warning or untitled letters;
voluntary product recalls or public notification or medical product safety alerts to healthcare professionals;
restrictions on, or prohibitions against, marketing Xynomic’s therapeutics;
restrictions on, or prohibitions against, importation or exportation of Xynomic’s therapeutics;
suspension of review or refusal to approve pending applications or supplements to approved applications;
exclusion from participation in government-funded healthcare programs;
exclusion from eligibility for the award of government contracts for Xynomic’s therapeutics;
FDA debarment;
suspension or withdrawal of therapeutic approvals;
seizures or administrative detention of therapeutics;
injunctions; and
civil and criminal penalties and fines.

 

The healthcare industry is heavily regulated in the U.S. at the federal, state, and local levels, and Xynomic’s failure to comply with applicable requirements may subject it to penalties and negatively affect its financial condition.

 

As a healthcare company, Xynomic’s operations, clinical trial activities and interactions with healthcare providers may be subject to extensive regulation in the U.S., particularly if the company receives FDA approval for any of its therapeutics in the future. For example, if Xynomic receives FDA approval for a therapeutic for which reimbursement is available under a federal healthcare program (e.g., Medicare, Medicaid), it would be subject to a variety of federal laws and regulations, including those that prohibit the filing of false or improper claims for payment by federal healthcare programs (e.g., the False Claims Act), prohibit unlawful inducements for the referral of business reimbursable by federal healthcare programs (e.g., the federal Anti-Kickback Statute), and require disclosure of certain payments or other transfers of value made to U.S.-licensed physicians and teaching hospitals, or Open Payments. Xynomic is not able to predict how third parties will interpret these laws and apply applicable governmental guidance and may challenge its practices and activities under one or more of these laws. If Xynomic’s past or present operations are found to be in violation of any of these laws, it could be subject to civil and criminal penalties, which could hurt Xynomic’s business, its operations and financial condition.

 

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Similarly, HIPAA prohibits, among other offenses, knowingly and willfully executing a scheme to defraud any health care benefit program, including private payors, or falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for items or services under a health care benefit program. To the extent that it acts as a business associate to a healthcare provider engaging in electronic transactions, Xynomic may also be subject to the privacy and security provisions of HIPAA, as amended by HITECH, which restricts the use and disclosure of patient-identifiable health information, mandates the adoption of standards relating to the privacy and security of patient-identifiable health information, and requires the reporting of certain security breaches to healthcare provider customers with respect to such information. Additionally, many states have enacted similar laws that may impose more stringent requirements on entities like Xynomic. Failure to comply with applicable laws and regulations could result in substantial penalties and adversely affect Xynomic’s financial condition and results of operations.

 

If approved, Xynomic’s product candidates may cause or contribute to adverse medical events that it is required to report to regulatory agencies and if Xynomic fails to do so it could be subject to sanctions that would materially harm its business.

 

If Xynomic is successful in commercializing any product candidate, FDA and most foreign regulatory agency regulations require that it reports certain information about adverse medical events if the product may have caused or contributed to those AEs. The timing of Xynomic’s obligation to report would be triggered by the date it becomes aware of the adverse event as well as the nature of the event. Xynomic may fail to report AEs it becomes aware of within the prescribed timeframe. Xynomic may also fail to appreciate that it has become aware of a reportable adverse event, especially if it is not reported to Xynomic as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of a product, if approved. If Xynomic fails to comply with its reporting obligations, the FDA or a foreign regulatory agency could take action, including criminal prosecution, the imposition of civil monetary penalties, and seizure of its products, if approved.

 

Xynomic’s ability to obtain services, reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.

 

U.S. federal government agencies currently face potentially significant spending reductions. The Budget Control Act of 2011, or the “BCA,” established a Joint Select Committee on Deficit Reduction, which was tasked with achieving a reduction in the federal debt level of at least $1.2 trillion. That committee did not draft a proposal by the BCA’s deadline. As a result, automatic cuts, referred to as sequestration, in various federal programs were scheduled to take place, beginning in January 2013, although the American Taxpayer Relief Act of 2012 delayed the BCA’s automatic cuts until March 1, 2013. While the Medicare program’s eligibility and scope of benefits are generally exempt from these cuts, Medicare payments to providers and Part D health plans are not exempt. The BCA did, however, provide that the Medicare cuts to providers and Part D health plans would not exceed two percent. President Obama issued the sequestration order on March 1, 2013, and cuts went into effect on April 1, 2013. Additionally, the Bipartisan Budget Act of 2018 extended sequestration for Medicare through fiscal year 2027.

 

The U.S. federal budget remains in flux, which could, among other things, cut Medicare payments to providers. Although the BBA passed in February 2018 enacts a two-year federal spending agreement and raises the federal spending cap on non-defense spending for fiscal years 2018 and 2019, the Medicare program is frequently identified as a target for spending cuts. The full impact on Xynomic’s business of any future cuts in Medicare or other programs is uncertain. In addition, Xynomic cannot predict any impact President Trump’s administration and the U.S. Congress may have on the federal budget. If federal spending is reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or the National Institutes of Health, to continue to function at current levels. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve therapeutic research and development, manufacturing, and marketing activities, which may delay Xynomic’s ability to develop, market, and sell any drugs it may develop.

 

Xynomic’s business may be affected by litigation and government investigations.

 

Xynomic may from time to time receive inquiries and subpoenas and other types of information requests from government authorities and others and it may become subject to claims and other actions related to its business activities. While the ultimate outcome of investigations, inquiries, information requests and legal proceedings is difficult to predict, defense of litigation claims can be expensive, time-consuming and distracting, and adverse resolutions or settlements of those matters may result in, among other things, modification of Xynomic’s business practices, costs and significant payments, any of which could have a material adverse effect on its business, financial condition, results of operations and prospects.

  

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Legislative or regulatory FDA reforms in the United States may make it more difficult and costly for Xynomic to obtain regulatory clearance or approval and to produce, market and distribute its products after clearance or approval is obtained.

 

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture, and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect Xynomic’s business and its products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of Xynomic’s drug candidates. It cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on Xynomic’s business in the future. Such changes could, among other things, require:

 

additional clinical trials to be conducted prior to obtaining approval;
changes to manufacturing methods;
recall, replacement, or discontinuance of Xynomic’s products, if approved; and
additional record keeping.

 

Each of these would likely entail substantial time and cost and could materially harm Xynomic’s business and its financial results. In addition, delays in receipt of or failure to receive regulatory clearances or approvals would harm its business, financial condition and results of operations.

 

Further, the United States and some foreign jurisdictions have enacted or are considering a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products, if approved, and profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access.

 

In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives, including the Patient Protection and Affordable Care Act (the “PPACA”), which contains provisions that may potentially reduce the profitability of products, including, for example, increased rebates for products sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs. There have been judicial and Congressional challenges to the PPACA, as well as efforts by the Trump administration to repeal or replace certain aspects of the PPACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the PPACA have been signed into law, including the repeal, effective January 1, 2019, of the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain fees mandated by the PPACA, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Moreover, the Bipartisan Budget Act of 2018, among other things, amends the PPACA, effective January 1, 2019, to increase from 50% to 70% the point-of-sale discount to eligible beneficiaries during their coverage gap period that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” In the future, there may be additional challenges and amendments to the PPACA. It remains to be seen precisely what new legislation will provide, when it will be enacted, and what impact it will have on the availability of healthcare and containing or lowering the cost of healthcare, including the cost of pharmaceutical products.

 

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Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains additional drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to end Medicare Part B coverage of medications and to shift those medication costs to Medicare Part D, to allow some states to negotiate drug prices under Medicaid and to eliminate cost sharing for generic drugs for low-income patients. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. The implementation of cost containment measures or other healthcare reforms may prevent Xynomic from being able to generate revenue, attain profitability, or commercialize its drug candidates for which it may receive regulatory approval in the future.

 

Any therapeutics Xynomic develops may become subject to unfavorable pricing regulations, third party coverage and reimbursement practices or healthcare reform initiatives, thereby harming Xynomic’s business.

 

The regulations that govern marketing approvals, pricing and reimbursement for new therapeutics vary widely from country to country. Some countries require approval of the sale price of a therapeutic before it can be marketed. In many countries, the pricing review period begins after marketing or therapeutic licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. Although Xynomic intends to monitor these regulations, its programs are currently in the early stages of development and Xynomic will not be able to assess the impact of price regulations for a number of years. As a result, Xynomic might obtain regulatory approval for a therapeutic in a particular country, but then be subject to price regulations that delay its commercial launch of the therapeutic and negatively impact the revenues Xynomic is able to generate from the sale of the therapeutic in that country.

 

Xynomic’s ability to commercialize any therapeutics successfully also will depend in part on the extent to which coverage and reimbursement for these therapeutics and related treatments will be available from government health administration authorities, private health insurers and other organizations. However, there may be significant delays in obtaining coverage for newly-approved therapeutics. Moreover, eligibility for coverage does not necessarily signify that a therapeutic will be reimbursed in all cases or at a rate that covers Xynomic’s costs, including research, development, manufacture, sale and distribution costs. Also, interim payments for new therapeutics, if applicable, may be insufficient to cover Xynomic’s costs and may not be made permanent. Thus, even if Xynomic succeeds in bringing one or more therapeutics to the market, these therapeutics may not be considered cost-effective, and the amount reimbursed for any therapeutics may be insufficient to allow us to sell its therapeutics on a competitive basis. Because its programs are in the early stages of development, Xynomic are unable at this time to determine their cost effectiveness or the likely level or method of reimbursement. Increasingly, the third party payors who reimburse patients or healthcare providers, such as government and private insurance plans, are seeking greater upfront discounts, additional rebates and other concessions to reduce the prices for therapeutics. If the price Xynomic is able to charge for any therapeutics it develops, or the reimbursement provided for such therapeutics, is inadequate in light of its development and other costs, its return on investment could be adversely affected.

 

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Xynomic believes that the efforts of governments and third party payors to contain or reduce the cost of healthcare, and specifically, therapeutics, and legislative and regulatory proposals to broaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and biotechnology companies. A number of legislative and regulatory changes in the healthcare system in the U.S. and other major healthcare markets have been proposed. These developments could, directly or indirectly, affect Xynomic’s ability to sell its therapeutics, if approved, at a favorable price.

 

Risks Related to Xynomic’s Dependence on Third Parties

 

Xynomic depends on third party manufacturers for the manufacture of its drug candidates as well as on third parties for its supply chain, and if Xynomic experiences problems with any of these third parties, the manufacture of its drug candidates or products could be delayed, which could harm its results of operations.

 

Xynomic relies on third-party manufacturers to manufacture its drug candidates, such reliance entails risks to which Xynomic would not be subject to if Xynomic manufactured drug candidates or products ourselves, including reliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond its control (including a failure to synthesize and manufacture its drug candidates or any products Xynomic may eventually commercialize in accordance with its specifications) and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to Xynomic. In addition, the FDA, NMPA and other regulatory authorities require that its drug candidates and any products that Xynomic may eventually commercialize be manufactured according to the current Good Manufacturing Practices, or “cGMP,” standards. Any failure by its third-party manufacturers to comply with cGMP standards or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of drug candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of its drug candidates. In addition, such failure could be the basis for the FDA, NMPA, or other regulatory authorities to issue a warning or untitled letter, withdraw approvals for drug candidates previously granted to Xynomic, or take other regulatory or legal action, including recall or seizure, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention or product, refusal to permit the import or export of products, injunction, or imposing civil and criminal penalties.

 

Xynomic relies on third parties to conduct its pre-clinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, Xynomic may not be able to obtain regulatory approval for or commercialize its drug candidates and its business could be substantially harmed.

 

Xynomic has relied upon and plans to continue to rely upon third-party CROs to conduct, monitor and/or manage some of its ongoing pre-clinical and clinical programs. Xynomic relies on these parties for execution of its pre-clinical studies and clinical trials, and controls only certain aspects of their activities. Nevertheless, Xynomic is responsible for ensuring that each of its studies is conducted in accordance with the applicable protocol and legal, regulatory, and scientific standards, and Xynomic’s reliance on the CROs does not relieve it of its regulatory responsibilities. Xynomic also relies on third parties to assist in conducting its pre-clinical studies in accordance with Good Laboratory Practices, or “GLP,” and the Administrative Regulations on Experimental Animals, or the Animal Welfare Act requirements. Xynomic and its CROs are required to comply with GCP, regulations and guidelines enforced by the FDA, NMPA, and comparable foreign regulatory authorities for all of its drug candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, investigators, and trial sites. If Xynomic or any of its CROs fail to comply with applicable GCP requirements, the clinical data generated in its clinical trials may be deemed unreliable and the FDA, NMPA or comparable foreign regulatory authorities may require Xynomic to perform additional clinical trials before approving its marketing applications. Xynomic cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of its clinical trials comply with International Conference on Harmonisation-Good Clinical Practice, or “ICH-GCP,” requirements. In addition, Xynomic’s clinical trials must be conducted with product produced under the cGMP requirements. Failure to comply with these regulations may require Xynomic to repeat pre-clinical and clinical trials, which would delay the regulatory approval process.

 

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Xynomic’s CROs are not its employees, and except for remedies available to it under its agreements with such CROs, Xynomic cannot control whether or not they devote sufficient time and resources to its on-going clinical, non-clinical, and pre-clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data they obtain are compromised due to their failure to adhere to Xynomic’s clinical protocols, regulatory requirements, or for other reasons, Xynomic’s clinical trials may be extended, delayed, or terminated and it may not be able to obtain regulatory approval for or successfully commercialize its drug candidates. As a result, Xynomic’s results of operations and the commercial prospects for its drug candidates would be harmed, its costs could increase, and its ability to generate revenues could be delayed or compromised.

 

If Xynomic loses its relationships with CROs, its drug development efforts could be delayed.

 

Xynomic relies on third-party vendors and CROs for some of its pre-clinical studies and clinical trials related to its drug development efforts. Switching or adding additional CROs involves additional cost and requires management’s time and focus. Xynomic’s CROs have the right to terminate their agreements with it in the event of an uncured material breach. In addition, some of Xynomic’s CROs have the ability to terminate their respective agreements with it if it can be reasonably demonstrated that the safety of the subjects participating in Xynomic’s clinical trials warrants such termination, if Xynomic makes a general assignment for the benefit of its creditors, or if Xynomic is liquidated. Identifying, qualifying, and managing performance of third-party service providers can be difficult and time-consuming, and will cause delays in its development programs. In addition, there is a natural transition period when a new CRO commences work and the new CRO may not provide the same type or level of services as the original provider. If any of its relationships with its third-party CROs are terminated, Xynomic may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms, and Xynomic may not be able to meet its desired clinical development timelines.

 

Xynomic’s employees, principal investigators, CROs, and consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

 

Xynomic is exposed to the risk that its employees, principal investigators, CROs, and consultants may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to Xynomic that violate the regulations of the FDA, the Centers for Medicare and Medicaid Services (“CMS”), the Department of Health and Human Services (“HHS”), Office of Inspector General (“OIG”), and other regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities, healthcare fraud and abuse laws and regulations in the United States and abroad, or laws that require the reporting of financial information or data accurately. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials or creating fraudulent data in Xynomic’s pre-clinical studies or clinical trials, which could result in regulatory sanctions and cause serious harm to its reputation. Xynomic intends to adopt, prior to the completion of the Merger, a code of conduct, and other applicable policies and procedures, applicable to all of our employees, but it is not always possible to identify and deter misconduct by employees and other third parties, and the precautions Xynomic takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting Xynomic from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Additionally, Xynomic is subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against Xynomic, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on Xynomic’s business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of its operations, any of which could adversely affect Xynomic’s ability to operate its business and its results of operations.

 

Risks Related to Doing Business in China

 

Pharmaceutical companies in China are required to comply with extensive regulations and hold a number of permits and licenses to carry on their business. Xynomic’s ability to obtain and maintain these regulatory approvals is uncertain, and future government regulation may place additional burdens on its efforts to commercialize its drug candidates.

 

The pharmaceutical industry in China is subject to extensive government regulation and supervision. The regulatory framework addresses all aspects of operating in the pharmaceutical industry, including approval, registration, production, distribution, packaging, labelling, storage and shipment, advertising, licensing and certification requirements and procedures, periodic renewal and reassessment processes, registration of new drugs, and environmental protection. Violation of applicable laws and regulations may materially and adversely affect Xynomic’s business. In order to commercialize its drug candidates and manufacture and distribute pharmaceutical products in China, Xynomic is required to:

 

obtain a pharmaceutical manufacturing permit and Good Manufacturing Practice (“GMP”) certificate for each production facility from the NMPA and its relevant branches for trading and distribution of drugs not manufactured by the drug registration certificate holder;
obtain a drug registration certificate, which includes a drug approval number, from the NMPA for each drug manufactured by it;
obtain a pharmaceutical distribution permit and good supply practice, or “GSP,” certificate from the NMPA and its relevant branches; and
renew the pharmaceutical manufacturing permits, the pharmaceutical distribution permits, drug registration certificates, GMP certificates, and GSP certificates every five years, among other requirements. 

 

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If Xynomic is unable to obtain or renew such permits or any other permits or licenses required for its operations, Xynomic will not be able to engage in the commercialization, manufacture, and distribution of its drug candidates and its business may be adversely affected.

 

The regulatory framework governing the pharmaceutical industry in China is subject to changes and amendments from time to time. In recent years, the regulatory framework in China regarding the pharmaceutical industry has undergone significant changes, and Xynomic expect that it will continue to undergo significant changes. Any such changes or amendments may result in increased compliance costs on its business or cause delays in or prevent the successful development or commercialization of its drug candidates in China and reduce the current benefits Xynomic believe are available to it from developing and manufacturing drugs in China. Chinese authorities have become increasingly vigilant in enforcing laws in the pharmaceutical industry and any failure by Xynomic or its partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and permits may result in the suspension or termination of its business activities in China. Xynomic believe its strategy and approach is aligned with the Chinese government’s policies, but Xynomic cannot ensure that its strategy and approach will continue to be aligned.

 

If Xynomic fails to comply with environmental, health, and safety laws and regulations of the PRC, it could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of its business.

 

Xynomic is subject to numerous environmental, health, and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, and disposal of hazardous materials and wastes. Xynomic’s operations primarily occur in China and involve the use of hazardous materials, including chemical materials. Its operations also produce hazardous waste products. Xynomic is therefore subject to PRC laws and regulations concerning the discharge of waste water, gaseous waste, and solid waste during its processes of research and development of drugs. Although Xynomic engages competent third party contractors for the transfer and disposal of these materials and wastes, it may not at all times comply fully with environmental regulations. Any violation of these regulations may result in substantial fines, criminal sanctions, revocations of operating permits, shutdown of its facilities, and obligation to take corrective measures. Xynomic cannot completely eliminate the risk of contamination or injury from these materials and wastes. In the event of contamination or injury resulting from the use or discharge of hazardous materials, Xynomic could be held liable for any resulting damages, and any liability could exceed its resources. Xynomic also could incur significant costs associated with civil, administrative, or criminal fines and penalties.

 

Although Xynomic maintains workers’ compensation insurance to cover costs and expenses incurred due to on-the-job injuries to its employees and third party liability insurance for injuries caused by unexpected seepage, pollution, or contamination, such insurance may not provide adequate coverage against potential liabilities. Furthermore, the PRC government may take steps towards the adoption of more stringent environmental regulations. Due to the possibility of unanticipated regulatory or other developments, the amount and timing of future environmental expenditures may vary substantially from those currently anticipated. If there is any unanticipated change in the environmental regulations, Xynomic may need to incur substantial capital expenditures to install, replace, upgrade, or supplement its manufacturing facility and equipment or make operational changes to limit any adverse impact or potential adverse impact on the environment in order to comply with new environmental protection laws and regulations. If such costs become prohibitively expensive, Xynomic may be forced to cease certain aspects of its business operations.

 

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Xynomic’s audit report included in this proxy statement/prospectus is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and, as such, our investors are deprived of the benefits of such inspection.

 

Xynomic’s independent registered public accounting firm, as auditors of companies that are traded publicly in the United States and a firm registered with the U.S. Public Company Accounting Oversight Board (the “PCAOB”), is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because Xynomic’s auditors are located in China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the PRC authorities, Xynomic’s auditors are not currently inspected by the PCAOB.

 

Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating Xynomic’s auditor’s audits and its quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

 

The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of Xynomic’s auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in Xynomic’s reported financial information and procedures and the quality of its consolidated financial statements.

 

If additional remedial measures are imposed on the “big four” PRC-based accounting firms, including Xynomic’s independent registered public accounting firm, in administrative proceedings brought by the SEC alleging those firms’ failure to meet specific criteria set by the SEC with respect to requests for the production of documents, we could be unable to timely file our future financial statements in compliance with the requirements of the Exchange Act.

 

Starting in 2011, the PRC affiliates of the "big four" accounting firms, including Xynomic’s independent registered public accounting firm, were affected by a conflict between U.S. and PRC law. Specifically, for certain U.S. listed companies operating and audited in mainland China, the SEC and the PCAOB sought to obtain from the PRC-based accounting firms access to their audit work papers and related documents. The firms were, however, advised and directed that under PRC law they could not respond directly to the U.S. regulators on those requests, and that requests by foreign regulators for access to such papers in China had to be channeled through the China Securities Regulatory Commission, or the CSRC.

 

In late 2012, this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002 against the PRC-based accounting firms, including Xynomic’s independent registered public accounting firm. In January 2014, the administrative law judge reached an initial decision to impose penalties on the firms including a temporary suspension of their right to practice before the SEC. The accounting firms filed a petition for review of the initial decision. In February 2015, before a review by the commissioners of the SEC had taken place, the firms reached a settlement with the SEC. Under the settlement, the SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The firms will receive matching Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests, which in substance require them to facilitate production via the CSRC. If they fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure. Remedies for any future noncompliance could include, as appropriate, an automatic six-month bar on a single firm's performance of certain audit work, commencement of a new proceeding against a firm, or in extreme cases the resumption of the current proceeding against all four firms. If additional remedial measures are imposed on the Chinese affiliates of the "big four" accounting firms, including Xynomic’s independent registered public accounting firm, in administrative proceedings brought by the SEC alleging the firms' failure to meet specific criteria set by the SEC with respect to requests for the production of documents, we could be unable to timely file future financial statements in compliance with the requirements of the Exchange Act.

 

In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, companies listed in the U.S. with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in China, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future proceedings against these audit firms may cause investor uncertainty regarding PRC-based, U.S.-listed companies and the market price of our ordinary shares may be adversely affected.

 

If Xynomic’s independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and Xynomic was unable to timely find another registered public accounting firm to audit and issue an opinion on its financial statements, its financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delay or abandonment of this offering, delisting of our ordinary shares from Nasdaq or deregistration from the SEC, which would substantially reduce or effectively terminate the trading of our ordinary shares in the U.S.

 

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The PRC’s economic, political, and social conditions, as well as governmental policies, could affect the business environment and financial markets in China, and Xynomic’s ability to operate its business, maintain its liquidity, and keep its access to capital.

 

A significant portion of Xynomic’s operations are conducted in China. Accordingly, Xynomic’s business, results of operations, financial condition, and prospects may be influenced to a significant degree by economic, political, legal, and social conditions in China. China’s economy differs from the economies of developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources. While the PRC economy has experienced significant growth over the past 30 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may have a negative effect on Xynomic. For example, Xynomic’s financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are currently applicable to it. In addition, in the past the PRC government implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect Xynomic’s business and results of operation. More generally, if the business environment in China deteriorates from the perspective of domestic or international investment, Xynomic’s business in China may also be adversely affected.

 

Uncertainties with respect to the PRC legal system and changes in laws, regulations, and policies in China could materially and adversely affect Xynomic.

 

Xynomic conducts its business primarily through its subsidiaries in China. PRC laws and regulations govern its operations in China. Xynomic’s subsidiaries are generally subject to laws and regulations applicable to foreign investments in China, which may not sufficiently cover all of the aspects of Xynomic’s economic activities in China. In addition, the implementation of laws and regulations may be in part based on government policies and internal rules that are subject to the interpretation and discretion of different government agencies (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, Xynomic may not always be aware of any potential violation of these policies and rules. Such unpredictability regarding its contractual, property, and procedural rights could adversely affect Xynomic’s business and impede its ability to continue its operations. Furthermore, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection Xynomic enjoys in Chinese legal system than in more developed legal systems. These uncertainties could materially and adversely affect Xynomic’s business and results of operations.

 

In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.

 

Restrictions on dividend distribution and currency exchange may limit our PRC Subsidiaries to distribute dividend to us or limit our ability to utilize revenues generated by our PRC subsidiaries effectively.

 

A portion of our future revenue potentially will be generated by our PRC subsidiaries. Under PRC laws and regulations, our PRC subsidiaries, each of which is a wholly foreign-owned enterprise, may pay dividends only out of its respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. Such reserve funds cannot be distributed to us as dividends.

 

In addition, our PRC subsidiaries will generate primarily all of their revenue in RMB and the Chinese government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Such control and restrictions could affect the ability of our PRC subsidiaries to remit sufficient foreign currency to us for us to pay dividends or make other payments or otherwise to satisfy our foreign currency denominated obligations. The RMB is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans that we may secure from our PRC subsidiaries. Currently, our PRC subsidiaries may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the approval of the state administration of foreign exchange, or the “SAFE.”, by complying with certain procedural requirements. However, in response to the persistent capital outflow in China and the RMB’s depreciation against the U.S. dollar, the relevant Chinese governmental authorities have tightened up their control over currency exchange. Any existing and future restrictions on currency exchange could limit our ability to utilize revenue generated in RMB to fund our business activities outside of China or pay dividends in US dollars to our shareholders. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant Chinese governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiaries. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

 

Restrictions on currency exchange may limit Xynomic’s ability to receive and use financing in foreign currencies effectively.

 

Xynomic’s PRC subsidiaries’ ability to obtain foreign exchange is subject to significant foreign exchange controls and, in the case of transactions under the capital account, requires the approval of and/or registration with PRC government authorities, including the SAFE In particular, if Xynomic finances its PRC subsidiaries by means of foreign debts from Xynomic or other foreign lenders, the amount is not allowed to, among other things, exceed the statutory limits and such loans must be registered with the local counterpart of the SAFE. If Xynomic finances its PRC subsidiaries by means of additional capital contributions, the amount of these capital contributions must first be approved or filed by the relevant government approval authority.

 

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In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, Xynomic cannot assure you that it will be able to complete the necessary government registrations or obtain the necessary government approval on a timely basis, if at all, with respect to future loans or capital contributions by Xynomic to its PRC subsidiaries. If it fails to complete such registrations or obtain such approval, Xynomic’s ability to use the proceeds it receives from this Business Combination and to capitalize or otherwise fund its PRC operations may be negatively affected, which could materially and adversely affect its liquidity and its ability to fund and expand its business.

 

Any failure to comply with PRC regulations regarding the registration requirements for Xynomic’s employee equity incentive plans may subject it to fines and other legal or administrative sanctions, which could adversely affect its business, financial condition and results of operations.

 

In February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly Listed Companies, or the Stock Option Rules. In accordance with the Stock Option Rules and relevant rules and regulations, PRC citizens or non-PRC citizens residing in China for a continuous period of not less than one year, who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain procedures. Xynomic and its employees who are PRC citizens or who reside in China for a continuous period of not less than one year and who participate in its stock incentive plan will be subject to such regulation. Xynomic plans to assist its employees to register their share options or shares. However, any failure of its PRC individual beneficial owners and holders of share options or shares to comply with the SAFE registration requirements may subject them to fines and legal sanctions and may limit the ability of its PRC subsidiaries to distribute dividends to Xynomic. Xynomic also faces regulatory uncertainties that could restrict its ability to adopt additional incentive plans for its directors and employees under PRC law.

 

Risks Related to Intellectual Property

 

If Xynomic breaches a license agreement or other intellectual property-related agreements for its drug candidates or otherwise experience disruptions to its business relationships with its licensors, Xynomic could lose the ability to continue the development and commercialization of its drug candidates.

 

Xynomic’s business relies, in large part, on its ability to develop and commercialize drug candidates it has licensed and sublicensed from third parties, including abexinostat from Pharmacyclics and XP-102 and XP-105 from Boehringer Ingelheim. If its licensors breach such agreements, Xynomic may not be able to enforce such agreements against its licensors’ parent entity or affiliates. Under each of its licenses and intellectual property-related agreements, in exchange for licensing or sublicensing to Xynomic the right to develop and commercialize the applicable drug candidates, its licensors will be eligible to receive from Xynomic milestone payments, royalties from commercial sales of such drug candidates, assuming relevant approvals from government authorities are obtained, or other payments. Xynomic’s licenses and intellectual property-related agreements also require it to comply with other obligations including development and diligence obligations, providing certain information regarding its activities with respect to such drug candidates, and/or maintaining the confidentiality of information it receives from its licensors.

 

If Xynomic fails to meet any of its material obligations under its license and intellectual property-related agreements, Xynomic’s licensors have the right to terminate their licenses and sublicenses and, upon the effective date of such termination, have the right to re-obtain the licensed and sub-licensed technology and intellectual property. While Xynomic would expect to exercise all rights and remedies available to it, including seeking to cure any breaches by it, and otherwise seek to preserve its rights under the intellectual property rights licensed and sublicensed to it, Xynomic may not be able to do so in a timely manner, at an acceptable cost, or at all. In particular, some of the milestone payments are payable upon its drug candidates reaching development milestones and before Xynomic has commercialized, or received any revenue from the sales of such drug candidates, and Xynomic cannot guarantee that it will have sufficient resources to make such milestone payments. Any uncured material breach under the license agreements could result in Xynomic’s loss of exclusive rights and may lead to a complete termination of Xynomic’s rights to the applicable drug candidate. Any of the foregoing could have a material adverse effect on Xynomic’s business, financial conditions, results of operations, and prospects.

 

In addition, the agreements under which Xynomic currently licenses intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what Xynomic believes to be the scope of its rights to the relevant intellectual property or technology, or increase what Xynomic believes to be its financial or other obligations under the relevant agreement, either of which could have a material adverse effect on its business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that Xynomic has licensed or sublicensed prevents or impairs its ability to maintain its current licensing arrangements on commercially acceptable terms, Xynomic may be unable to successfully develop and commercialize the affected drug candidates, which could have a material adverse effect on its business, financial conditions, results of operations, and prospects.

 

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Xynomic depends on its licensors or patent owners of its in-licensed patent rights to prosecute and maintain patents and patent applications that are material to its business. Any failure by Xynomic’s licensors or such patent owners to effectively protect these patent rights could adversely impact its business and operations.

 

Xynomic has licensed and sublicensed patent rights from third parties for some of its development programs, including abexinostat from Pharmacyclics and XP-102 and XP-105 from Boehringer Ingelheim. As a licensee and sublicensee of third parties, Xynomic relies on these third parties to file and prosecute patent applications, maintain patents, and otherwise protect the licensed intellectual property under certain of its license agreements. In addition, Xynomic has not had and does not have primary control over these activities for certain of its patents or patent applications and other intellectual property rights that it jointly owns with certain of its licensors and sub-licensors. Xynomic cannot be certain that these patents and patent applications have been or will be prepared, filed, prosecuted, or maintained by such third parties in compliance with applicable laws and regulations, in a manner consistent with the best interests of its business, or in a manner that will result in valid and enforceable patents or other intellectual property rights that cover its drug candidates. If Xynomic’s licensors or such third parties fail to prepare, prosecute, or maintain such patent applications and patents, or lose rights to those patent applications or patents, the rights Xynomic has licensed may be reduced or eliminated, and its rights to develop and commercialize any of its drug candidates that are subject of such licensed rights could be adversely affected.

 

If Xynomic is unable to obtain and maintain patent protection for its drug candidates through intellectual property rights, or if the scope of such intellectual property rights obtained is not sufficiently broad, third parties may compete directly against Xynomic.

 

Xynomic’s success depends, in part, on its ability to protect its drug candidates from competition by obtaining, maintaining, and enforcing its intellectual property rights, including patent rights. Xynomic seeks to protect the drug candidates and technology that it considers commercially important by filing U.S., PRC, and international patent applications, relying on trade secrets or pharmaceutical regulatory protection or employing a combination of these methods. Xynomic also seeks to protect its proprietary position by in-licensing intellectual property relating to its technology and drug candidates. Xynomic does not own or exclusively license any issued patents with respect to certain of its drug candidates in all territories in which it plans to commercialize its drug candidates. If Xynomic or its licensors are unable to obtain or maintain patent protection with respect to Xynomic’s drug candidates and technology it develops, its business, financial condition, results of operations, and prospects could be materially harmed.

 

The patent prosecution process is expensive, time-consuming, and complex, and Xynomic may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, Xynomic’s license and intellectual property-related agreements may not provide it with exclusive rights to use its in-licensed intellectual property rights relating to the applicable drug candidates in all relevant fields of use and in all territories in which it may wish to develop or commercialize its technology and products in the future.

 

Patents may be invalidated and patent applications may not be granted for a number of reasons, including known or unknown prior art, deficiencies in the patent application, or the lack of novelty of the underlying invention or technology. It is also possible that Xynomic will fail to identify patentable aspects of its research and development output in time to obtain patent protection. Although Xynomic enters into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of its research and development output, such as its employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors, and any other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing Xynomic’s ability to seek patent protection. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases, not at all. Therefore, Xynomic cannot be certain that it or its licensors were the first to make the inventions claimed in its owned or in-licensed patents or pending patent applications or that Xynomic or its licensors were the first to file for patent protection of such inventions. Furthermore, the PRC and, recently, the United States have adopted the “first-to-file” system under which whoever first files a patent application will be awarded the patent if all other patentability requirements are met. Under the first-to-file system, third parties may be granted a patent relating to a technology, which Xynomic invented.

 

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In addition, under the PRC Patent Law, any organization or individual that applies for a patent in a foreign country for an invention or utility model accomplished in China is required to report to the State Intellectual Property Office, or “SIPO,” for confidentiality examination. Otherwise, if an application is later filed in China, the patent right will not be granted. Moreover, even if a patent is granted from any of the applications, the grant of a patent is not conclusive as to its scope, validity, or enforceability.

 

The coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications Xynomic currently, or in the future, licenses or owns are issued as patents, they may not be issued in a form that will provide Xynomic with any meaningful protection, prevent competitors or other third parties from competing with it, or otherwise provide Xynomic with any competitive advantage. In addition, the patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and commercial value of Xynomic’s patent rights are highly uncertain.

 

The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and Xynomic’s patents may be challenged in the courts or patent offices in the PRC, United States, and abroad. Xynomic and its licensors may be subject to a third-party pre-issuance submission of prior art to the United States Patent and Trademark Office, or “USPTO,” or become involved in opposition, derivation, revocation, re-examination, post-grant and inter partes review, or interference proceedings or similar proceedings in foreign jurisdictions challenging Xynomic’s patent rights or the patent rights of others. An adverse determination in any such submission, proceeding, or litigation could reduce the scope of, or invalidate, Xynomic’s owned or in-licensed patent rights, allow third parties to commercialize its technology or drug candidates and compete directly with Xynomic without payments to it, or result in Xynomic’s inability to manufacture or commercialize drug candidates without infringing, misappropriating, or otherwise violating third-party patent rights. Moreover, Xynomic, or one of its licensors, may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge the priority of its or its licensor’s invention or other features of patentability of its owned or in-licensed patents and patent applications. Such challenges may result in the loss of patent rights, the loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit Xynomic’s ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of its technology and drug candidates. Such proceedings also may result in substantial costs and require significant time from Xynomic’s scientists and management, even if the eventual outcome is favorable to it. Consequently, Xynomic does not know whether any of its technologies or drug candidates will be protectable or remain protected by valid and enforceable patents. Xynomic’s competitors or other third parties may be able to circumvent its owned or in-licensed patents by developing similar or alternative technologies or products in a non-infringing manner.

 

Furthermore, the terms of patents are finite. The patents Xynomic owns or in-licenses and the patents that may issue from its currently pending owned and in-licensed patent applications generally have a 20-year protection period starting from the earliest filing date of such patents and patent applications. Given the amount of time required for the development, testing, and regulatory review of new drug candidates, patents protecting such drug candidates might expire before or shortly after such drug candidates are commercialized. As a result, Xynomic’s owned or in-licensed patents and patent applications may not provide it with sufficient rights to exclude others from commercializing products similar or identical to those of Xynomic. Moreover, some of Xynomic’s patents and patent applications are, and may in the future be, co-owned with third parties. If it is unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including Xynomic’s competitors, and its competitors could market competing products and technology. In addition, Xynomic may need the cooperation of any such co-owners of its patents in order to enforce such patents against third parties, and such cooperation may not be provided to Xynomic. Any of the foregoing could have a material adverse effect on Xynomic’s competitive position, business, financial conditions, results of operations, and prospects.

 

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Xynomic may not be able to protect its intellectual property and proprietary rights throughout the world.

 

Filing, prosecuting, maintaining, and defending patents on drug candidates in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect Xynomic’s rights to the same extent as the laws of the United States. Consequently, Xynomic may not be able to prevent third parties from practicing its inventions in all countries outside the United States or PRC or from selling or importing products made using Xynomic’s inventions in or into the United States, the PRC, or other jurisdictions. Competitors may use Xynomic’s technologies in jurisdictions where it has not obtained patent protection to develop their own competing products and, in addition, may export otherwise infringing products to territories where Xynomic has patent protection or licenses but the enforcement is not as strong as that in the United States. These products may compete with Xynomic’s products, and its patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

 

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions, including China. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for Xynomic to stop the infringement of its patents or marketing of competing products in violation of its intellectual property and proprietary rights generally. Proceedings to enforce Xynomic’s intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business, could put its patents at risk of being invalidated or interpreted narrowly, could put its patent applications at risk of not issuing, and could provoke third parties to assert claims against Xynomic. Xynomic may not prevail in any lawsuits that it initiates, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, Xynomic’s efforts to enforce its intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that it develops or licenses.

 

Furthermore, many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If Xynomic or any of its licensors is forced to grant a license to third parties with respect to any patents relevant to its business, Xynomic’s competitive position may be impaired, and its business, financial condition, results of operations, and prospects may be adversely affected.

 

If Xynomic’s drug candidates infringe, misappropriate, or otherwise violate the intellectual property rights of third parties, Xynomic may incur substantial liabilities, and it may not be able to sell or commercialize these drug candidates.

 

Xynomic’s commercial success depends significantly on its ability to develop, manufacture, market, and sell its drug candidates and use its proprietary technologies without infringing, misappropriating, or otherwise violating the patents and other proprietary rights of third parties. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. In the PRC and the United States, invention patent applications are generally maintained in confidence until their publication, which typically is 18 months after the filing date. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and invention patent applications were filed. Even after reasonable investigation, Xynomic may not know with certainty whether any third party may have filed a patent application without its knowledge while it is still developing or producing that product. Xynomic may become a party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to its technologies and any drug candidates it may develop, including interference proceedings, post-grant review, inter partes review, and derivation proceedings before the USPTO and similar proceedings in foreign jurisdictions.

 

Third parties may assert infringement claims against Xynomic based on existing patents or patents that may be granted in the future, regardless of their merit. Even if Xynomic believes third-party intellectual property claims are without merit, there is no assurance that a court would find in its favor on questions of infringement, validity, enforceability, or priority. A court of competent jurisdiction could hold that these third-party patents are valid, enforceable, and infringed, which could materially and adversely affect Xynomic’s ability to commercialize any drug candidates it may develop and any other drug candidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity of any such U.S. patent in federal court, Xynomic would need to overcome a presumption of validity. There is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent.

 

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If Xynomic is found to infringe a third party’s patent rights, and is unsuccessful in demonstrating that such patents are invalid or unenforceable, Xynomic could be required to:

 

obtain royalty-bearing licenses from such third party to such patents, which may not be available on commercially reasonable terms, if at all, and even if Xynomic were able to obtain such licenses, they could be non-exclusive, thereby giving its competitors and other third parties access to the same technologies licensed to Xynomic, and could require it to make substantial licensing and royalty payments;
defend litigation or administrative proceedings;
reformulate product(s) so that it does not infringe the intellectual property rights of others, which may not be possible or could be very expensive and time consuming;
cease developing, manufacturing, and commercializing the infringing technology or drug candidates; and
pay such third party significant monetary damages, including treble damages and attorneys’ fees, if Xynomic is found to have willfully infringed a patent or other intellectual property right.

 

Claims that Xynomic has misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on its business, financial condition, results of operations, and prospects. Even if Xynomic is successful in such litigation or administrative proceedings, such litigation and proceedings may be costly and could result in a substantial diversion of management resources. Any of the foregoing may have a material adverse effect on Xynomic’s business, prospects, financial condition, and results of operations.

 

Intellectual property litigation and proceedings could cause Xynomic to spend substantial resources and distract its personnel from their normal responsibilities.

 

Even if resolved in its favor, litigation or other legal proceedings relating to Xynomic, its licensor’s or other third parties’ intellectual property claims may cause Xynomic to incur significant expenses and could distract its personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of its common stock. Such litigation or proceedings could substantially increase Xynomic’s operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. Xynomic may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of its competitors may be able to sustain the costs of such litigation or proceedings more effectively than Xynomic can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on Xynomic’s ability to compete in the marketplace.

 

Xynomic may not be successful in obtaining necessary intellectual property rights to drug candidates for its development pipeline through acquisitions and in-licenses. 

 

Although Xynomic also intends to develop drug candidates through its own internal research, its near-term business model is predicated, in large part, on its ability to successfully identify and acquire or in-license drug candidates to grow its drug candidate pipeline. However, Xynomic may be unable to acquire or in-license intellectual property rights relating to, or necessary for, any such drug candidates from third parties on commercially reasonable terms, or at all, because Xynomic is focusing on specific areas of care such as oncology and inflammatory and infectious diseases. In that event, it may be unable to develop or commercialize such drug candidates. Xynomic may also be unable to identify drug candidates that it believes are an appropriate strategic fit for its company and intellectual property relating to, or necessary for, such drug candidates. Any of the foregoing could have a materially adverse effect on Xynomic’s business, financial condition, results of operations, and prospects.

 

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The in-licensing and acquisition of third-party intellectual property rights for drug candidates is a competitive area, and a number of more established companies are also pursuing strategies to in-license or acquire third-party intellectual property rights for drug candidates that Xynomic may consider attractive or necessary. These established companies may have a competitive advantage over Xynomic due to their size, cash resources, and greater clinical development and commercialization capabilities. Furthermore, companies that perceive Xynomic to be a competitor may be unwilling to assign or license rights to it. If Xynomic is unable to successfully obtain rights to suitable drug candidates, its business, financial condition, results of operations, and prospects for growth could suffer.

 

In addition, Xynomic expects that competition for the in-licensing or acquisition of third-party intellectual property rights for drug candidates that are attractive to it may increase in the future, which may mean fewer suitable opportunities for Xynomic as well as higher acquisition or licensing costs. Xynomic may be unable to in-license or acquire the third-party intellectual property rights for drug candidates on terms that would allow it to make an appropriate return on its investment.

 

Risks Related to Bison and the Business Combination

 

Following the Closing, our only significant asset will be the ownership of 100% of Xynomic’s capital stock, and we do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on the appreciation in the price of our common stock.

 

Following the Closing, we will have no direct operations and no significant assets other than the ownership of 100% of Xynomic’s capital stock. We will depend on Xynomic for distributions, loans, and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company, and to pay any dividends with respect to our shares. Legal and contractual restrictions in agreements governing the current indebtedness of Xynomic as well as the financial condition and operating requirements of Xynomic, may limit our ability to obtain cash from Xynomic. Thus, we do not expect to pay cash dividends on our shares. Any future dividend payments are within the absolute discretion of our board of directors and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, level of indebtedness, contractual restrictions with respect to payment of dividends, business opportunities, anticipated cash needs, provisions of applicable law, and other factors that our board of directors may deem relevant.

 

We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes Oxley Act of 2002 that will be applicable to us after the Business Combination. Furthermore, if our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

 

As a public company, Bison is subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations. Following the Business Combination, the combined company will continue to be required to provide management’s attestation on internal controls commencing with the Company’s annual report for the year ending December 31, 2019, in accordance with applicable SEC guidance. The standards required for a public company under Section 404 of the Sarbanes Oxley Act of 2002 are significantly more stringent than those required of Xynomic as a privately held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the regulatory compliance and reporting requirements that will be applicable to the Company after the Business Combination. If we are not able to implement the additional requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our common stock.

 

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Prospective Financial Information Regarding Xynomic and Bison may not prove accurate.

 

In connection with the Merger, Xynomic and Bison prepared and considered prospective financial information for Xynomic and Bison, please see “Certain Company Prospective Financial Information” on page 124. This prospective financial information is based on several assumptions, including regarding future operating cash flows, expenditures and income of Xynomic and Bison, including benefits and earnout to be realized from the Merger. This prospective financial information was not prepared with a view to public disclosure, are subject to significant economic, competitive, industry and other uncertainties and may not be achieved in full, within projected timeframes or at all. The failure of Xynomic or Bison to achieve projected results could have a material adverse effect on the price of the Bison ordinary shares, the combined company’s financial position after the date on which the Closing actually occurs (the “Closing Date”), and the combined company’s ability to pay dividends, and/or pay dividends at or above the rate currently paid by Bison or Xynomic, following the consummation of the Merger.

 

Subsequent to the Closing, the combined company may be required to take write-downs or write-offs, restructuring and impairment, or other charges that could have a significant negative effect on its financial condition, results of operations, and stock price, which could cause you to lose some or all of your investment.

 

We cannot assure you that the due diligence we conducted on Xynomic revealed all material issues that may be present in Xynomic’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of our and Xynomic’s control will not later arise. As a result, the combined company may be forced to later write down or write off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analyses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the combined company or its securities. In addition, charges of this nature may cause us to be unable to obtain future financing on favorable terms or at all.

 

We will incur increased costs as a result of operating as a public company with more complex operations following the Business Combination, and our management will be required to devote substantial time to compliance initiatives.

 

As a public company with more complex operations, and particularly after we are no longer an “emerging growth company,” we will incur significant legal, accounting, and other expenses that we did not incur as a blank check company. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the Securities and Exchange Commission (“SEC”) and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.

 

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, public companies are required to furnish a report by their management on their internal control over financial reporting, including an attestation report on internal control over financial reporting issued by their independent registered public accounting firms, which requirement is subject to certain exceptions. While we remain an emerging growth company, however, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in a loss of confidence in the reliability of our financial statements, which could cause our stock price to decline.

 

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The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for holders of our common stock.

 

Our stock price is likely to be volatile. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the price at which you purchased it. The market price for our common stock may be influenced by many factors, including:

 

the success of competitive drugs;
results of clinical trials of our drug candidates or those of our competitors;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents, or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our drug candidates or clinical development programs;
the results of our efforts to discover, develop, acquire, or in-license additional drug candidates or drugs;
actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors;
general economic, industry, and market conditions; and
the other factors described in this “Risk Factors” section.

 

Our executive officers, directors, principal shareholders, and their affiliates will continue to exercise significant influence over our company after the Business Combination, which will limit your ability to influence corporate matters and could delay or prevent a change in corporate control .

 

Our Sponsor and our officers as a group currently own approximately 69.64% of the outstanding voting power of the Company and our officers, directors and principal shareholders and their affiliates in aggregate own 85.74% of the outstanding voting power of the Company. After the Business Combination, our executive officers, directors, principal shareholders and their affiliates will beneficially hold in aggregate 84.78% of the outstanding voting power, assuming no redemption of the public shares in connection with the Business Combination. Their voting power will increase when and if the public shares are redeemed. Assuming 29,041 public shares of the Company are redeemed at the Closing representing the maximum redemption such that the net tangible asset maintains the minimum required balance of $7,500,000 under the Merger Agreement, they will own approximately 84.84% of the outstanding voting power after the consummation of the Business Combination.

 

Our initial stockholders have agreed to vote in favor of our initial business combination, regardless of how our unaffiliated public stockholders vote.

 

Our initial stockholders have agreed to vote any shares of Bison owned by them in favor of our initial business combination. As of the date hereof, our initial stockholders and affiliates, including the underwriters in the IPO, own shares equal to 70.74% of our issued and outstanding shares. Accordingly, it is more likely that the necessary stockholder approval will be received for the Business Combination than would be the case if our initial stockholders agreed to vote any shares of Bison owned by them in accordance with the majority of the votes cast by our unaffiliated public stockholders.

 

Your ability to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash.

 

At the time of your investment in us, you were not provided with an opportunity to evaluate the specific merits or risks of any target businesses. Since our Sponsor and other initial stockholders own 70.74% of the issued and outstanding shares of Bison, and they have agreed to vote their shares in favor of the Business Combination, public stockholders may not have the right to affect the vote on the Business Combination. Accordingly, your ability to affect the investment decision regarding the Business Combination may be limited to exercising your redemption rights with respect to the Business Combination.

 

Anti-takeover provisions under Delaware law could make an acquisition of us, which may be beneficial to our shareholders, more difficult and may prevent attempts by our shareholders to replace or remove our current management.

 

Because we will be incorporated in Delaware following the Domestication, we will be governed by the provisions of Section 203 of the DGCL, which limits the ability of shareholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for shareholders by requiring potential acquirors to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some shareholders. In addition, these provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors, which is responsible for appointing the members of our management.

 

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Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

 

Xynomic stockholders have agreed to lock up their Merger Consideration Shares up to nine months after the Closing (subject to certain exceptions) and our Initial Shareholders have agreed to lock up 50% of the Founder Shares until the earlier of (a) one year after the Closing, or (b) the date on which the closing price of the Company common shares equals or exceeds $12.50 per share for any 20 trading days within any 30-trading day period after the Closing and lock up the remaining 50% of the Founder Shares for one year following the Closing. If our Initial Shareholders after the Closing sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after all legal restrictions on resale lapse, the market price of our common stock could decline.

 

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

 

Under Section 382 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in the ownership of its equity over a three year period), the corporation’s ability to use its pre-change net operating loss carryforwards and certain other pre-change tax attributes to offset its post-change income may be limited. We may have experienced such ownership changes in the past, we expect to experience such ownership change related to the Business Combination, and we may experience ownership changes in the future as a result of changes in our stock ownership, some of which are outside the Company’s control. Our ability to utilize these net operating loss carryforwards could be limited by an “ownership change,” which could result in increased tax liability to the Company, potentially decreasing the value of our common stock. There are additional limitations found under Sections 269, 383, and 384 of the Code that may also limit the use of net operating loss carryforwards that may apply and result in increased tax liability to the Company, potentially decreasing the value of our common stock. In addition, a “Separate Return Limitation Year” (“SRLY”) generally encompasses all separate return years of a member (or predecessor in a Section 381 or other transaction), including tax years in which it joins a consolidated return of another group. According to Treasury Regulation Section 1.1502-21, a net operating losses of a member that arises in a SRLY may be applied against consolidated taxable income only to the extent of the loss member’s cumulative contribution to the consolidated taxable income. As a result, this SRLY limitation may also increase the tax liability to the Company (by reducing the carryforward of certain net operating losses that otherwise might be used to offset the amount of taxable gain), potentially decreasing the value of our common stock.

 

We will incur significant transaction and transition costs in connection with the Business Combination. If we fail to consummate the Business Combination, we may not have sufficient cash available to pay such costs.