References to the "Company," "ARYA Sciences Acquisition Corp IV," "ARYA," "our,"
"us" or "we" refer to ARYA Sciences Acquisition Corp IV. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on August 24, 2020. We were formed for the purpose of effecting a Business
Combination that we have not yet identified. Our sponsor is ARYA Sciences
Holdings IV, a Cayman Islands exempted limited company (the "Sponsor").
Our registration statement for our Initial Public Offering was declared
effective on February 25, 2021. On March 2, 2021, we consummated its Initial
Public Offering of 14,950,000 Class A ordinary shares (the "Public Shares"),
including the 1,950,000 Public Shares as a result of the underwriters' full
exercise of their over-allotment option, at an offering price of $10.00 per
Public Share, generating gross proceeds of $149.5 million, and incurring
offering costs of approximately $8.8 million, inclusive of approximately $5.2
million in deferred underwriting commissions. On August 8, 2022, the Company
received a waiver from one of the underwriters of its Initial Public Offering
pursuant to which such underwriter waived all rights to its 50% share of the
deferred underwriting commissions payable upon completion of an initial Business
Combination. In connection with this waiver, the underwriter also agreed that
(i) this waiver is not intended to allocate its 50% portion of the deferred
underwriting commissions to the other underwriter that has not waived its right
to receive its share of the deferred underwriting commissions and (ii) the
waived portion of the deferred underwriting commissions can, at the discretion
of the Company, be paid to one or more parties or otherwise be used in
connection with an initial Business Combination.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 499,000 Class A ordinary shares
(the "Private Placement Shares"), at a price of $10.00 per Private Placement
Share to the Sponsor, generating gross proceeds of approximately $5.0 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$149.5 million ($10.00 per Public Share) of the net proceeds of the Initial
Public Offering and certain of the proceeds of the Private Placement were placed
in a trust account ("Trust Account"), located in the United States, with
Continental Stock Transfer & Trust Company acting as trustee, and are invested
only in United States "government securities" within the meaning of Section
2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment
Company Act") having a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations,
until the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of Private
Placement Shares, although substantially all of the net proceeds are intended to
be applied generally toward consummating a Business Combination.
If we have not completed a Business Combination by the Termination Date, the
Company will (i) cease all operations except for the purpose of winding up; (ii)
as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account and not previously
released to us to pay our income taxes, if any (less up to $100,000 of interest
to pay dissolution expenses), divided by the number of the then-outstanding
Public Shares, which redemption will completely extinguish Public Shareholders'
rights as shareholders (including the right to receive further liquidation
distributions, if any); and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of our remaining shareholders and our
board of directors, liquidate and dissolve, subject in the case of clauses (ii)
and (iii) to our obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable law.
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We intend to effectuate our initial Business Combination using cash from the
proceeds of our Initial Public Offering and the sale of the Private Placement
Shares, our shares, debt or a combination of cash, equity and debt.
The issuance of additional shares in a Business Combination:
• may significantly dilute the equity interest of investors in our Initial Public
Offering, which dilution would increase if the anti-dilution provisions in the
Class B ordinary shares resulted in the issuance of Class A ordinary shares on
a greater than one-to-one basis upon conversion of the Class B ordinary shares;
• may subordinate the rights of holders of Class A ordinary shares if preference
shares are issued with rights senior to those afforded our Class A ordinary
shares;
• could cause a change in control if a substantial number of our Class A ordinary
shares are issued, which may affect, among other things, our ability to use our
net operating loss carry forwards, if any, and could result in the resignation
or removal of our present officers and directors;
• may have the effect of delaying or preventing a change of control of us by
diluting the share ownership or voting rights of a person seeking to obtain
control of us; and
• may adversely affect prevailing market prices for our Class A ordinary shares.
Similarly, if we issue debt or otherwise incur significant debt, it could result
in:
• default and foreclosure on our assets if our operating revenues after an
initial Business Combination are insufficient to repay our debt obligations;
• acceleration of our obligations to repay the indebtedness even if we make all
principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any, if the
debt is payable on demand;
• our inability to obtain necessary additional financing if the debt contains
covenants restricting our ability to obtain such financing while the debt is
outstanding;
• our inability to pay dividends on our Class A ordinary shares;
• using a substantial portion of our cash flow to pay principal and interest on
our debt, which will reduce the funds available for dividends on our Class A
ordinary shares if declared, expenses, capital expenditures, acquisitions and
other general corporate purposes;
• limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation; and
• limitations on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, execution of our
strategy and other purposes and other disadvantages compared to our competitors
who have less debt.
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Adoption of Extension Amendment Proposal
On February 27, 2023, the Company delivered an instruction letter to Continental
Stock Transfer & Trust Company acting, as trustee, to liquidate the investments
held in the Trust Account and instead to hold the funds in the Trust Account in
cash in an interest-bearing demand deposit account until the earlier of the
consummation of an initial Business Combination or the Company's liquidation.
The Company is taking these steps in order to mitigate the risk that the Company
might be deemed to be an investment company for purposes of the Investment
Company Act following the adoption of the Extension Amendment Proposal described
below.
On February 28, 2023, following the date of the financial statements included in
this Report, the Company held an extraordinary general meeting of shareholders
in view of approving an amendment to its amended and restated memorandum and
articles of association to extend the date (the "Termination Date") by which the
Company has to consummate a Business Combination from March 2, 2023 (the
"Original Termination Date") to June 2, 2023 (the "Articles Extension Date") and
to allow the Company, without another shareholder vote, to elect to extend the
Termination Date to consummate a Business Combination on a monthly basis for up
to nine times by an additional one month each time after the Articles Extension
Date, by resolution of the Company's board of directors, if requested by the
Sponsor, and upon five days' advance notice prior to the applicable Termination
Date, until March 2, 2024 (each, an "Additional Articles Extension Date") or a
total of up to thirty-six months after the Original Termination Date, unless the
closing of a Business Combination shall have occurred prior thereto (the
"Extension Amendment Proposal"). In connection with the initial three-month
extension from the Original Termination Date to the Articles Extension Date the
Sponsor made an initial deposit into the Trust Account of $420,000, in exchange
for the Second Convertible Promissory Note (as defined below). In connection
with any subsequent optional monthly extensions following the Articles Extension
Date, the Sponsor is expected to make deposits of $140,000 per month into the
Trust Account, as provided for in the amendment to the Amended and Restated
Memorandum and Articles of Association that was adopted on February 28, 2023.
As contemplated by the Company's amended and restated memorandum and articles of
association, the holders of Public Shares were able to elect to redeem all or a
portion of their Public Shares in exchange for their pro rata portion of the
funds held in the Trust Account in connection with the Extension Amendment
Proposal. On February 28, 2023, the Extension Amendment Proposal was adopted and
11,259,169 Public Shares were redeemed. Following the adoption of the Extension
Amendment Proposal, the Company has 4,189,831 Class A ordinary shares, including
3,690,831 Public Shares and 499,000 private placement shares, and 3,737,500
Class B ordinary shares issued and outstanding. Following the approval of the
Extension Amendment Proposal, the Class B ordinary shares held by the initial
shareholders represent 47.1% of the issued and outstanding ordinary shares.
In connection with the adoption of the Extension Amendment Proposal, the Company
issued a non-interest bearing, unsecured convertible promissory note to our
sponsor in connection with the Extension Amendment Proposal, pursuant to which
the Company may borrow up to $1,680,000 from our sponsor for general corporate
purposes and the funding of the deposits that the Company is required to make
pursuant to its amended and restated memorandum and articles of association (as
amended following the adoption of the Extension Amendment Proposal at the
Company's extraordinary general meeting of shareholders on February 28, 2023)
and following the request of our sponsor in connection with an optional monthly
extension of the time period during which the Company may consummate a Business
Combination (the "Second Convertible Promissory Note"). Up to $1,380,000 of the
amounts loaned under the Second Convertible Promissory Note will be convertible
at the option of our sponsor into Working Capital Shares. This working capital
loan outstanding pursuant to the Second Convertible Promissory Note (the "Second
Working Capital Loan") will not bear any interest, and will be repayable by the
Company to our Sponsor to the extent the Company has funds available outside of
the Trust Account and if not converted or repaid on the effective date of a
Business Combination. The maturity date of the Second Convertible Working
Capital Loan may be accelerated upon the occurrence of an Event of Default (as
defined under the Second Convertible Promissory Note). The Company granted
customary registration rights to the Sponsor with respect to any Working Capital
Shares issued pursuant to the Second Convertible Promissory Note, which shall
constitute "Registrable Securities" pursuant to that certain Registration and
Shareholder Rights Agreement, dated March 2, 2021, by and among the Company, the
Sponsor and the other parties thereto. Further, each newly issued Working
Capital Share shall bear the same transfer restrictions that apply to the
Private Placement Shares, as contemplated by the Letter Agreement, dated
February 25, 2021, by and among the Company, the Sponsor and the other parties
thereto. As of the date of this Report, $600,000 were drawn under the Second
Convertible Promissory Note.
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Results of Operations
Our entire activity since inception up to December 31, 2022 was in preparation
for our formation and the Initial Public Offering, and since the Initial Public
Offering, the search for a prospective initial Business Combination. We will not
be generating any operating revenues until the closing and completion of our
initial Business Combination.
For the year ended December 31, 2022, we had net income of approximately $1.1
million, which consisted of approximately $2.1 million in unrealized gains on
marketable securities, dividends and interest held in Trust Account, partially
offset by approximately $1.0 million general and administrative expenses.
For the year ended December 31, 2021, we had net loss of approximately $6.6
million, which consisted of approximately $6.6 million general and
administrative expenses, partially offset by approximately $52,000 in gains on
marketable securities, dividends and interest held in Trust Account.
Going Concern
As of December 31, 2022, we had approximately $91,000 in our operating bank
account and working capital deficit of approximately $6.1 million.
Our liquidity needs to date have been satisfied through a contribution of
$25,000 from Sponsor to cover for certain expenses in exchange for the issuance
of the Founder Shares, the loan of approximately $161,000 from the Sponsor
pursuant to the Note (as defined in Note 5), the proceeds from the consummation
of the Private Placement not held in the Trust Account, the First Convertible
Promissory Note and the Second Convertible Promissory Note. We fully repaid the
Note upon closing of the Initial Public Offering. In addition, in order to
finance transaction costs in connection with a Business Combination, the Sponsor
or an affiliate of the Sponsor, or certain of our officers and directors may,
but are not obligated to, provide the Company working capital loans.
As of December 31, 2021, there were no amounts outstanding under any Working
Capital Loan, and as of December 31, 2022, there was $120,000 of borrowings
outstanding under the First Convertible Promissory Note.
We cannot provide any assurance that new financing along the lines detailed
above will be available to us on commercially acceptable terms, if at all.
Further, we have until the Termination Date to consummate a Business
Combination, but we cannot provide assurance that we will be able to consummate
a Business Combination by that date. If a Business Combination is not
consummated by the required date, there will be a mandatory liquidation and
subsequent dissolution. In connection with our assessment of going concern
considerations in accordance with the Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") Topic 205-40, "Basis of
Presentation - Going Concern," we have determined that the working capital
deficit and mandatory liquidation and subsequent dissolution raises substantial
doubt about our ability to continue as a going concern until the earlier of the
consummation of the Business Combination or the date we are required to
liquidate. The financial statements do not include any adjustment that might be
necessary if the Company is unable to continue as a going concern. We intend to
complete our initial Business Combination before the mandatory liquidation date;
however, there can be no assurance that we will be able to consummate any
Business Combination by the Termination Date. No adjustments have been made to
the carrying amounts of assets and liabilities should we be required to
liquidate after the Termination Date, nor do these financial statements include
any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should we be unable to
continue as a going concern.
Contractual Obligations
Administrative Support Agreement
Commencing on the effective date of the registration statement on Form S-1
related to the Initial Public Offering through the earlier of consummation of
the initial Business Combination and our liquidation, we reimburse the Sponsor
for office space, secretarial and administrative services provided to us in the
amount of $10,000 per month. We incurred approximately $120,000 and $101,000 in
general and administrative expenses in the accompanying statements of operations
for the years ended December 31, 2022 and 2021, respectively. As of December 31,
2022 and 2021, the Company had $90,000 and $0, respectively, included in due to
related party on the balance sheets.
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Registration Rights
The holders of Founder Shares and Private Placement Shares or Working Capital
Shares that may be issued upon conversion of working capital loans are entitled
to registration rights pursuant to a registration and shareholder rights
agreement signed upon the consummation of the Initial Public Offering. The
holders of these securities are entitled to make up to three demands, excluding
short form demands, that we register such securities. In addition, the holders
have certain "piggy-back" registration rights with respect to registration
statements filed subsequent to our completion of a Business Combination.
However, the registration and shareholder rights agreement provides that we will
not permit any registration statement filed under the Securities Act to become
effective until termination of the applicable lock-up period, which occurs (i)
in the case of the Founder Shares, in accordance with the letter agreement our
initial shareholders entered into and (ii) in the case of the Private Placement
Shares, 30 days after the completion of our Business Combination. We will bear
the expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final
prospectus relating to the Initial Public Offering to purchase up to 1,950,000
additional Public Shares to cover over-allotments at the Initial Public Offering
price less the underwriting discounts and commissions. On March 2, 2021, the
underwriters fully exercised the over-allotment option.
The underwriters were paid an underwriting discount of $0.20 per Public Share,
or approximately $3.0 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per Public Share, or approximately
$5.2 million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, subject to the terms of the underwriting
agreement. On August 8, 2022, the Company received a waiver from one of the
underwriters of its Initial Public Offering pursuant to which such underwriter
waived all rights to its 50% share of the deferred underwriting commissions
payable upon completion of an initial Business Combination. In connection with
this waiver, the underwriter also agreed that (i) this waiver is not intended to
allocate its 50% portion of the deferred underwriting commissions to the other
underwriter that has not waived its right to receive its share of the deferred
underwriting commissions and (ii) the waived portion of the deferred
underwriting commissions can, at the discretion of the Company, be paid to one
or more parties or otherwise be used in connection with an initial Business
Combination.
Related Party Loan
On November 7, 2022, the Company issued the First Convertible Promissory Note to
the Sponsor, pursuant to which the Company borrowed $120,000 from the Sponsor
for general corporate purposes. Such First Working Capital Loan may, at the
Sponsor's discretion, be converted into Working Capital Shares at a conversion
price equal to $10.00 per Working Capital Share. The terms of the Working
Capital Shares will be identical to those of the Private Placement Shares that
were issued to the Sponsor in connection with the Initial Public Offering. The
First Convertible Working Capital Loan will not bear any interest and will be
repayable by the Company to the Sponsor, if not converted or repaid on the
effective date of an initial merger, share exchange, asset acquisition, share
purchase, reorganization or similar Business Combination involving the Company
and one or more businesses. The maturity date of the First Convertible Working
Capital Loan may be accelerated upon the occurrence of an Event of Default (as
defined under the First Convertible Promissory Note). The Company granted
customary registration rights to the Sponsor with respect to any Working Capital
Shares, which shall constitute "Registrable Securities" pursuant to that certain
Registration and Shareholder Rights Agreement, dated March 2, 2021, by and among
the Company, the Sponsor and the other parties thereto. Further, each newly
issued Working Capital Share shall bear the same transfer restrictions that
apply to the Private Placement Shares, as contemplated by the Letter Agreement,
dated February 25, 2021, by and among the Company, the Sponsor and the other
parties thereto.
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On February 28, 2023, subsequently to the date of the financial statements
included in this Report, the Company issued the Second Convertible Promissory
Note to the Sponsor in connection with the adoption of the Extension Amendment
Proposal and pursuant to which the Company may borrow up to $1,680,000 from the
Sponsor for general corporate purposes and the funding of the deposits that the
Company is required to make pursuant to its amended and restated memorandum and
articles of association (as amended following the adoption of the Extension
Amendment Proposal at the Company's extraordinary general meeting of
shareholders on February 28, 2023) and following the request of the Sponsor in
connection with an optional monthly extension of the time period during which
the Company may consummate a Business Combination. Up to $1,380,000 of the
amounts loaned under the Second Convertible Promissory Note will be convertible
at the option of the Sponsor into Working Capital Shares. This Second Working
Capital Loan will not bear any interest, and will be repayable by the Company to
the Sponsor to the extent the Company has funds available outside of the Trust
Account and if not converted or repaid on the effective date of a Business
Combination. The maturity date of the Second Convertible Working Capital Loan
may be accelerated upon the occurrence of an Event of Default (as defined under
the Second Convertible Promissory Note). The Company granted customary
registration rights to the Sponsor with respect to any Working Capital Shares
issued pursuant to the Second Convertible Promissory Note, which shall
constitute "Registrable Securities" pursuant to that certain Registration and
Shareholder Rights Agreement, dated March 2, 2021, by and among the Company, the
Sponsor and the other parties thereto. Further, each newly issued Working
Capital Share shall bear the same transfer restrictions that apply to the
Private Placement Shares, as contemplated by the Letter Agreement, dated
February 25, 2021, by and among the Company, the Sponsor and the other parties
thereto. As of the date of this Report, $600,000 was drawn under the Second
Convertible Promissory Note.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
income and expenses during the period reported. Actual results could materially
differ from those estimates. The Company has not identified any critical
accounting estimates.
Off-Balance Sheet Arrangements
As of December 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional
information about the audit and the financial statements (auditor discussion and
analysis) and (iv) disclose certain executive compensation related items such as
the correlation between executive compensation and performance and comparisons
of the executive compensation to median employee compensation. These exemptions
will apply for a period of five years following the completion of our Initial
Public Offering or until we are no longer an "emerging growth company,"
whichever is earlier.
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