ARYA Sciences Acquisition IV(ARYD) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents ARYA Sciences Acquisition Corp IV's unaudited condensed financial statements, including balance sheets, statements of operations, changes in shareholders' deficit, cash flows, and detailed notes on organization, accounting policies, related party transactions, commitments, and subsequent events Item 1. Financial Statements This section presents ARYA Sciences Acquisition Corp IV's unaudited condensed financial statements, including balance sheets, statements of operations, changes in shareholders' deficit, cash flows, and detailed notes on organization, accounting policies, related party transactions, commitments, and subsequent events Condensed Balance Sheets | Metric | June 30, 2023 (Unaudited) ($) | December 31, 2022 ($) | | :-------------------------------- | :-------------------------- | :------------------ | | Cash | $18,033 | $91,049 | | Prepaid expenses | $264,004 | $55,400 | | Total current assets | $282,037 | $146,449 | | Cash and investments held in Trust Account | $38,706,222 | $151,628,894 | | Total Assets | $38,988,259 | $151,775,343 | | Accounts payable | $79,609 | $65,892 | | Accrued expenses | $6,524,093 | $5,994,774 | | Due to related party | $150,000 | $90,000 | | Convertible promissory note - related party | $1,260,000 | $120,000 | | Total current liabilities | $8,013,702 | $6,270,666 | | Deferred underwriting commissions | $2,616,250 | $2,616,250 | | Total liabilities | $10,629,952 | $8,886,916 | | Total shareholders' deficit | $(10,247,915) | $(8,640,467) | Unaudited Condensed Statements of Operations | Metric | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | $78,851 | $304,811 | $1,047,448 | $557,533 | | Loss from operations | $(78,851) | $(304,811) | $(1,047,448) | $(557,533) | | Interest earned on cash and investments held in Trust Account | $460,364 | $108,807 | $1,589,210 | $150,343 | | Net income (loss) | $381,513 | $(196,004) | $541,762 | $(407,190) | | Basic and diluted net income (loss) per share, Class A ordinary share | $0.05 | $(0.01) | $0.05 | $(0.02) | | Basic and diluted net income (loss) per share, Class B ordinary share | $0.05 | $(0.01) | $0.05 | $(0.02) | Unaudited Condensed Statements of Changes in Shareholders' Deficit | Metric | Balance - December 31, 2022 ($) | Adjustment of accretion (6 months) ($) | Net income (6 months) ($) | Balance - June 30, 2023 ($) | | :---------------------------------------------------- | :-------------------------- | :------------------------- | :-------------------- | :---------------------- | | Class A Ordinary Shares Amount | $50 | - | - | $50 | | Class B Ordinary Shares Amount | $374 | - | - | $374 | | Accumulated Deficit | $(8,640,891) | $(2,149,210) | $541,762 | $(10,248,339) | | Total Shareholders' Deficit | $(8,640,467) | $(2,149,210) | $541,762 | $(10,247,915) | | Metric | Balance - December 31, 2021 ($) | Net loss (6 months) ($) | Increase in redemption value (3 months) ($) | Net loss (3 months) ($) | Balance - June 30, 2022 ($) | | :---------------------------------------------------- | :-------------------------- | :------------------ | :------------------------------------ | :------------------ | :---------------------- | | Class A Ordinary Shares Amount | $50 | - | - | - | $50 | | Class B Ordinary Shares Amount | $374 | - | - | - | $374 | | Accumulated Deficit | $(10,295,731) | $(211,186) | $(102,679) | $(196,004) | $(10,805,600) | | Total Shareholders' Deficit | $(10,295,307) | $(211,186) | $(102,679) | $(196,004) | $(10,805,176) | Unaudited Condensed Statements of Cash Flows | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | | :---------------------------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $541,762 | $(407,190) | | Interest earned on cash and investments held in Trust Account | $(1,589,210) | $(150,343) | | Net cash used in operating activities | $(653,016) | $(406,707) | | Cash deposited in Trust Account | $(560,000) | — | | Cash Withdrawn from Trust Account for Redemption | $115,071,882 | — | | Net cash provided by investing activities | $114,511,882 | — | | Proceeds from convertible promissory note – related party | $1,140,000 | — | | Redemption of Class A ordinary shares | $(115,071,882) | — | | Offering costs paid | - | $(45,000) | | Net cash used in financing activities | $(113,931,882) | $(45,000) | | Net change in cash | $(73,016) | $(451,707) | | Cash - beginning of the period | $91,049 | $501,242 | | Cash - end of the period | $18,033 | $49,535 | Notes to Unaudited Condensed Financial Statements Note 1 - Description of Organization and Business Operations ARYA Sciences Acquisition Corp IV, a blank check company formed in August 2020, completed its IPO in March 2021, raising $149.5 million and $5.0 million in private placement, with proceeds initially in a Trust Account, later liquidated to cash, and experienced significant share redemptions during multiple extension periods - The Company was incorporated on August 24, 2020, as a Cayman Islands exempted company, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination[20] - The Initial Public Offering was consummated on March 2, 2021, raising gross proceeds of $149.5 million from 14,950,000 Class A ordinary shares at $10.00 per share, incurring approximately $8.8 million in offering costs, including $5.2 million in deferred underwriting commissions[22] - On February 27, 2023, the Company liquidated investments in the Trust Account to cash in an interest-bearing demand deposit account to mitigate the risk of being deemed an investment company[24] - The Extension Amendment Proposal was adopted on February 28, 2023, extending the Business Combination Period and resulting in the redemption of 11,259,169 Public Shares for $115.1 million[36] Note 2 - Summary of Significant Accounting Policies This note outlines the company's accounting policies, including GAAP basis, emerging growth company status, and treatments for cash, Trust Account investments, fair value, offering costs, Class A shares subject to redemption, income taxes, and net income per share calculations - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[46][48] - On February 27, 2023, the Company liquidated its Trust Account investments (U.S. Treasury securities and money market funds) and now holds funds in cash in an interest-bearing demand deposit account to mitigate Investment Company Act risks[56][60] - Class A ordinary shares subject to possible redemption are classified as temporary equity and presented at redemption value on the balance sheets, as their redemption rights are outside the Company's control[63] Net Income (Loss) per Ordinary Share (Three Months Ended June 30) | Metric | Class A (2023) ($) | Class B (2023) ($) | Class A (2022) ($) | Class B (2022) ($) | | :---------------------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Allocation of net income (loss) | $189,558 | $191,955 | $(157,823) | $(38,181) | | Basic and diluted weighted average ordinary shares outstanding | 3,690,831 | 3,737,500 | 15,449,000 | 3,737,500 | | Basic and diluted net income (loss) per ordinary share | $0.05 | $0.05 | $(0.01) | $(0.01) | Net Income (Loss) per Ordinary Share (Six Months Ended June 30) | Metric | Class A (2023) ($) | Class B (2023) ($) | Class A (2022) ($) | Class B (2022) ($) | | :---------------------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Allocation of net income (loss) | $361,341 | $180,421 | $(327,870) | $(79,320) | | Basic and diluted weighted average ordinary shares outstanding | 7,485,358 | 3,737,500 | 15,449,000 | 3,737,500 | | Basic and diluted net income (loss) per ordinary share | $0.05 | $0.05 | $(0.02) | $(0.02) | Note 3 – Initial Public Offering This note details the Company's Initial Public Offering on March 2, 2021, including gross proceeds, offering costs, deferred underwriting commissions, and a subsequent waiver of a portion of these commissions - The Initial Public Offering on March 2, 2021, generated gross proceeds of $149.5 million from 14,950,000 Public Shares at $10.00 per share[72] - Offering costs amounted to approximately $8.8 million, including $5.2 million in deferred underwriting commissions[72] - On August 8, 2022, one underwriter waived its rights to 50% ($2.6 million) of the deferred underwriting commissions[72] Note 4 – Related Party Transactions This note outlines related party transactions, including Founder and Private Placement Shares issuance to the Sponsor, various loan agreements (First and Second Convertible Promissory Notes) for working capital and extension deposits, and an administrative support agreement for monthly services - The Sponsor paid $25,000 for 3,737,500 Class B ordinary shares (Founder Shares) on January 4, 2021, with 90,000 shares transferred to independent directors[73] - Simultaneously with the IPO, the Sponsor purchased 499,000 Private Placement Shares for approximately $5.0 million[76] - The Company has outstanding borrowings of $1.26 million as of June 30, 2023, under the First and Second Convertible Promissory Notes from the Sponsor, up from $120,000 at December 31, 2022[41][79][82] - The Company reimburses the Sponsor $10,000 per month for administrative services, incurring $60,000 for the six months ended June 30, 2023 and 2022, with $150,000 due to related party as of June 30, 2023[85] Note 5 - Commitments and Contingencies This note details the Company's commitments, including registration rights for Founder and Private Placement Shares, and underwriting agreement terms regarding deferred underwriting commissions and a waiver from one underwriter - Holders of Founder Shares and Private Placement Shares are entitled to registration rights, allowing them to demand registration of their securities[86] - A deferred underwriting commission of approximately $5.2 million is payable to underwriters upon completion of a Business Combination[89] - On August 8, 2022, one underwriter waived its rights to 50% ($2.6 million) of the deferred underwriting commissions[90] Note 6 - Class A Ordinary Shares Subject to Possible Redemption This note explains the classification and accounting for Class A ordinary shares subject to possible redemption, presented as temporary equity at redemption value due to rights outside Company control - As of June 30, 2023, 3,690,831 Class A ordinary shares were subject to possible redemption, down from 14,950,000 at December 31, 2022[91] Class A Ordinary Shares Subject to Possible Redemption Reconciliation | Metric | Amount ($) | | :---------------------------------------------------- | :------------- | | Class A ordinary shares subject to possible redemption at December 31, 2022 | $151,528,894 | | Less: Redemption of Class A ordinary shares | $(115,071,882) | | Plus: Adjustment for accretion of Class A ordinary shares subject to possible redemption | $2,149,210 | | Class A ordinary shares subject to possible redemption at June 30, 2023 | $38,606,222 | Note 7 - Shareholders' Deficit This note details the Company's authorized and outstanding share capital, including Preference, Class A, and Class B Ordinary Shares, outlining par values, voting rights, and Class B conversion terms - The Company is authorized to issue 1 million preference shares, with none issued or outstanding as of June 30, 2023, and December 31, 2022[95] - As of June 30, 2023, there were 4,189,831 Class A ordinary shares issued and outstanding (479 million authorized), with 3,690,831 subject to possible redemption[95] - As of June 30, 2023, there were 3,737,500 Class B ordinary shares issued and outstanding (20 million authorized), which will convert to Class A shares upon business combination[96][97] Note 8 – Fair Value Measurements This note describes the Company's fair value hierarchy application for financial instruments, focusing on Trust Account assets liquidated from U.S. Treasury securities and money market funds to cash in an interest-bearing demand deposit account - The Company uses a three-tier fair value hierarchy (Level 1, 2, 3) for measuring fair value, prioritizing unadjusted quoted prices in active markets (Level 1)[58] - As of June 30, 2023, cash held in the Trust Account of $38.7 million was classified as Level 1 fair value measurement[99] - As of December 31, 2022, assets held in the Trust Account included U.S. Treasury Securities ($151.6 million) and cash equivalents – money market funds ($614), both classified as Level 1[100] Note 9 - Subsequent Events This note discloses two subsequent one-month extensions of the Business Combination Period in July and August 2023, each funded by a $140,000 draw from the Second Convertible Promissory Note and deposited into the Trust Account - On July 2, 2023, the Company approved a one-month extension of the Business Combination Period to August 2, 2023, drawing $140,000 from the Second Convertible Promissory Note[103] - On August 2, 2023, another one-month extension was approved, extending the period to September 2, 2023, with an additional $140,000 drawn from the Second Convertible Promissory Note[103] - Following these extensions, a total of $1.42 million has been drawn under the Second Convertible Promissory Note[104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and operational results, highlighting its blank check status, impact of the Extension Amendment Proposal and share redemptions, financial performance for June 30, 2023 and 2022, liquidity, going concern risks, contractual obligations, critical accounting policies, and emerging growth company status implications Cautionary Note Regarding Forward-Looking Statements - The report contains forward-looking statements based on current expectations, which involve risks and uncertainties that may cause actual results to differ materially[107][108] - Key risks include the ability to select and complete a Business Combination, obtain additional financing, and the impact of general economic and political conditions[108] Overview - ARYA Sciences Acquisition Corp IV is a blank check company formed on August 24, 2020, to effect a Business Combination[109] - The Company consummated its IPO on March 2, 2021, raising $149.5 million, and a Private Placement of $5.0 million, with proceeds placed in a Trust Account[110][111][112] - On February 27, 2023, the Trust Account investments were liquidated to cash to mitigate Investment Company Act risks[112] Adoption of Extension Amendment Proposal - Shareholders approved an amendment on February 28, 2023, to extend the Business Combination Termination Date from March 2, 2023, to June 2, 2023, with optional monthly extensions until March 2, 2024[119] - The Sponsor made an initial deposit of $420,000 into the Trust Account for the extension, and is expected to deposit $140,000 for each subsequent monthly extension[119] - In connection with the extension, 11,259,169 Public Shares were redeemed, leaving 4,189,831 Class A ordinary shares and 3,737,500 Class B ordinary shares outstanding[120] - The Company issued a Second Convertible Promissory Note to the Sponsor, allowing borrowing up to $1.68 million for general corporate purposes and extension deposits, with $1.14 million drawn as of June 30, 2023[122][123] Results of Operations - For the three months ended June 30, 2023, the Company reported net income of approximately $382,000, primarily from $460,000 in interest income from the Trust Account, offset by $79,000 in general and administrative expenses[126] - For the six months ended June 30, 2023, net income was approximately $542,000, driven by $1.6 million in Trust Account interest income, partially offset by $1.0 million in general and administrative expenses[126] - In contrast, for the three months ended June 30, 2022, the Company had a net loss of approximately $196,000, and for the six months ended June 30, 2022, a net loss of approximately $407,000, due to higher general and administrative expenses relative to interest income[127] Going Concern - As of June 30, 2023, the Company had approximately $18,000 in its operating bank account and a working capital deficit of approximately $7.7 million[129] - The Company's liquidity needs have been met through Sponsor contributions and convertible promissory notes, with $1.26 million outstanding as of June 30, 2023[129][130] - Management has determined that the working capital deficit and mandatory liquidation date raise substantial doubt about the Company's ability to continue as a going concern[131] Risks and Uncertainties - The Company's ability to complete a Business Combination may be adversely affected by economic uncertainty and volatility in financial markets[132] - Factors include downturns in financial markets, inflation, interest rate increases, supply chain disruptions, and geopolitical instability[132] Contractual Obligations - The Company has an Administrative Support Agreement to reimburse the Sponsor $10,000 per month for office and administrative services[133] - Holders of Founder Shares and Private Placement Shares have registration rights, entitling them to demand registration of their securities[135] - A deferred underwriting commission of approximately $5.2 million is payable upon completion of a Business Combination, with $2.6 million waived by one underwriter[137] - The Company has two convertible promissory notes from the Sponsor (First and Second Convertible Promissory Notes) for working capital and extension deposits, which are non-interest bearing and convertible into Working Capital Shares[138][139] Critical Accounting Estimates - Management has not identified any critical accounting estimates that would materially differ from actual results[140] Critical Accounting Policies - Class A ordinary shares subject to possible redemption are classified as temporary equity and measured at redemption value, as their redemption rights are outside the Company's control[142] - Changes in redemption value are recognized immediately, adjusting the carrying value of Class A ordinary shares subject to possible redemption to equal the redemption value at each reporting period end[144] Off-Balance Sheet Arrangements - As of June 30, 2023, the Company did not have any off-balance sheet arrangements[145] JOBS Act - The Company qualifies as an 'emerging growth company' under the JOBS Act[146] - The Company has elected to delay the adoption of new or revised accounting standards, which may impact comparability with non-emerging growth companies[146] - As an EGC, the Company may take advantage of reduced reporting requirements, including exemptions from auditor attestation on internal controls and certain executive compensation disclosures[147] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, ARYA Sciences Acquisition Corp IV is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[148] Item 4. Controls and Procedures Management concluded the Company's disclosure controls and procedures were ineffective as of June 30, 2023, due to a material weakness in accounting for the extinguishment of a contingent obligation related to deferred underwriting commissions, with no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of June 30, 2023[150] - A material weakness was identified in internal control over financial reporting concerning the interpretation and accounting for the extinguishment of a significant contingent obligation (deferred underwriting commissions waiver)[150] - Despite the material weakness, management believes the financial statements fairly present the Company's financial position, results of operations, and cash flows after performing additional analysis[151] Changes in Internal Control over Financial Reporting - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[153] PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company reported no legal proceedings - There are no legal proceedings[154] Item 1A. Risk Factors As of the report date, there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report on Form 10-K filed on April 6, 2023, as of the date of this report[155] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section details the Company's unregistered sales of equity securities, including Founder Shares, Private Placement Shares, and convertible promissory notes, and outlines the use of IPO and private placement proceeds, emphasizing Trust Account funds and deferred underwriting commissions waiver Private Placements and Initial Public Offering Proceeds - On January 4, 2021, 3,737,500 Class B ordinary shares were issued to the Sponsor for $25,000[156] - The Sponsor purchased 499,000 Private Placement Shares for approximately $5.0 million simultaneously with the IPO[157] - The Company repaid a $161,000 loan from the Sponsor upon closing of the Initial Public Offering[77][157] Convertible Notes - On November 7, 2022, the Company issued the First Convertible Promissory Note to the Sponsor, borrowing $120,000 for general corporate purposes, convertible into Working Capital Shares at $10.00 per share[158] - On February 28, 2023, the Company issued the Second Convertible Promissory Note to the Sponsor, allowing borrowing up to $1.68 million for general corporate purposes and extension deposits, with $1.14 million drawn as of June 30, 2023[159] - Loans under both convertible notes are non-interest bearing and convertible into Working Capital Shares, which are identical to Private Placement Shares[158][159] Use of Proceeds - $149.5 million from the IPO was placed in the Trust Account, initially invested in U.S. government treasury bills and money market funds, then liquidated to cash on February 27, 2023[160][161] - Approximately $3.0 million in underwriting discounts and commissions were paid, with an additional $5.2 million deferred, of which $2.6 million was waived by one underwriter[161] - There has been no material change in the planned use of proceeds from the IPO and private placement, other than for the convertible notes[162] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - There are no defaults upon senior securities[164] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable[164] Item 5. Other Information The Company reported no other information - There is no other information to report[164] Item 6. Exhibits This section lists all exhibits filed or furnished as part of the report, including organizational documents, agreements, promissory notes, and certifications - The exhibits include the Amended and Restated Memorandum and Articles of Association, Private Placement Shares Purchase Agreement, Investment Management Trust Agreement, Registration and Shareholder Rights Agreement, Letter Agreement, Administrative Services Agreement, Form of Indemnity Agreement, and Convertible Promissory Notes[166] - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to the Securities Exchange Act of 1934 and Sarbanes-Oxley Act of 2002 are also included[166] Signature - The report was signed on August 11, 2023, by Michael Altman, Chief Financial Officer of ARYA Sciences Acquisition Corp IV[169]