UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarter ended
For the transition period from to
Commission
file number:
| (Exact Name of Registrant as Specified in Its Charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one Class A ordinary share, $0.0001 par value, and one-half of one redeemable warrant | BIOTU | The Nasdaq Stock Market LLC | ||
| The | ||||
| Redeemable warrants included as part of the units, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | BIOTW | The Nasdaq Stock Market LLC |
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ☐ Yes
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
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 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 | ☐ |
| 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 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As
of November 16, 2021, there were
BIOTECH ACQUISITION COMPANY
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
BIOTECH ACQUISITION COMPANY
CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Deferred offering costs | ||||||||
| Marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Advances from related parties | ||||||||
| Promissory note – related party | ||||||||
| Total Current Liabilities | ||||||||
| Warrant liabilities | ||||||||
| Deferred underwriting commission payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ (Deficit) Equity | ||||||||
| Preference shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ (Deficit) Equity | ( | ) | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
BIOTECH ACQUISITION COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three
Months Ended September 30, 2021 | Nine
Months Ended September 30, 2021 | For
the (Inception) Through September 30, 2020 | ||||||||||
| Operating and formation costs | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other income: | ||||||||||||
| Interest income – bank | ||||||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||||||
| Change in fair value of warrants | ||||||||||||
| Transaction cost – warrants | ( | ) | ||||||||||
| Other income, net | ||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | |||||||
| Basic and diluted weighted average shares outstanding, Class A ordinary shares | ||||||||||||
| Basic and diluted net income per share, Class A ordinary shares | $ | $ | $ | |||||||||
| Basic and diluted weighted average shares outstanding, Class B ordinary shares | ||||||||||||
| Basic and diluted net income per share, Class B ordinary shares | $ | $ | $ | |||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
BIOTECH ACQUISITION COMPANY
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY
(UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance – January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Proceeds in excess of fair value of Private placement warrants | — | — | ||||||||||||||||||||||||||
| Accretion of Class A ordinary shares subject to redemption | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2021 (Restated) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Accretion of Class A ordinary shares subject to redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – June 30, 2021 (Restated) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Accretion of Class A ordinary shares subject to redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
THE PERIOD FROM SEPTEMBER 3, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance – September 3, 2020 (inception) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Issuance of Class B ordinary shares to Sponsor | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
BIOTECH ACQUISITION COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months September 30, | For the September 30, | |||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ||||||
| Transaction costs incurred in connection with IPO | ||||||||
| Payment of formation costs through issuance of Class B ordinary shares | ||||||||
| Changes in operating assets and liabilities: | — | |||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of Units, net of underwriting discounts paid | ||||||||
| Proceeds from sale of Private Placement Warrants | ||||||||
| Advances from related party | ||||||||
| Refund of over payment of promissory note | ||||||||
| Proceeds from promissory note – related party | ||||||||
| Payments made on promissory note - related party | ( | ) | ||||||
| Payment of offering costs | ( | ) | ||||||
| Payment of deferred offering costs | ||||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ||||||||
| Cash – Beginning | ||||||||
| Cash – Ending | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Initial classification of public warrant liability | $ | $ | ||||||
| Initial classification of private warrant liability | $ | $ | ||||||
| Initial classification of Class A ordinary shares subject to possible redemption | $ | $ | ||||||
| Deferred underwriting commission payable | $ | $ | ||||||
| Payment of deferred offering costs by the Sponsor in exchange for the issuance of Class B ordinary shares | $ | $ | ||||||
Payment of offering costs through the issuance of promissory note | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Biotech Acquisition Company (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on September 3, 2020. The Company was formed for the purpose of effectuating a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of completing a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period September 3, 2020 (inception) through September 30, 2021 relates to the Company’s formation and its initial public offering (the “Initial Public Offering” or “IPO”), which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
registration statements for the Company’s Initial Public Offering became effective on January 25, 2021. On January 28, 2021, the
Company consummated the Initial Public Offering, selling
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of
Transaction
costs amounted to $
Following
the closing of the Initial Public Offering on January 28, 2021, an amount of $
5
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
completing a Business Combination. The Company must complete its initial Business Combination with one or more target businesses that
together have a fair market value equal to at least
The
Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a
Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender
offer will be made by the Company. The shareholders will be entitled to redeem their shares for a pro rata portion of the amount held
in the Trust Account (initially $
The
Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
Notwithstanding
the foregoing, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder,
together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group”
(as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from redeeming its shares with respect to more than an aggregate of
6
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Sponsor has agreed (a)
to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a
Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify
the substance or timing of the Company’s obligation to redeem
The
Company will have until January 28, 2023 (the “Combination Period”) to complete a Business Combination. If the Company is
unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose
of winding up, (ii) as promptly as reasonably possible but no more than 10 business days thereafter, redeem
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
The
Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a third party for services rendered or products
sold to the Company, or by a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below (1) $
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that although it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
7
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Liquidity and Capital Resources
As
of September 30, 2021, the Company had cash of $
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation
of the Company’s financial statements as of September 30, 2021, management, in consultation with its advisors, identified
a correction required to be made in its previously issued financial statements. The requirement to make the change arose
from the manner in which, as of the closing of the Company’s Initial Public Offering, the Company valued its Class
A ordinary shares subject to possible redemption. The Company previously determined the value of such Class A ordinary shares to
be equal to the redemption value of such shares, after taking into consideration the terms of the Company’s Amended and Restated
Memorandum and Articles of Association, under which a redemption cannot result in net tangible assets being less than $
In connection with the change in presentation for the Class A ordinary shares subject to redemption, the Company also restated its income (loss) per ordinary share, to allocate net income (loss) evenly to Class A and Class B ordinary shares. This presentation contemplates, as the most likely outcome, a Business Combination in which both classes of ordinary shares share pro rata in the income (loss) of the Company. There is no resulting impact on previously reported amounts for total assets, total liabilities, cash flows, or net income (loss).
8
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The following table summarizes the effect of the restatement on each financial statement line item as of the dates and for the periods indicated below.
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Balance Sheet as of January 28, 2021 (Unaudited) | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Shareholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Number of Class A ordinary shares subject to redemption | ||||||||||||
| Number of Class A ordinary shares | ( | ) | ||||||||||
| Balance Sheet as of March 31, 2021 (Unaudited) | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | $ | ( | ) | $ | ( | ) | |||||
| Total Shareholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Number of Class A ordinary shares subject to redemption | ||||||||||||
| Number of Class A ordinary shares | ( | ) | ||||||||||
| Balance Sheet as of June 30, 2021 (Unaudited) | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Shareholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Number of Class A ordinary shares subject to redemption | ||||||||||||
| Number of Class A ordinary shares | ( | ) | ||||||||||
| Statement of Operations for the Three Months Ended March 31, 2021 (Unaudited) | ||||||||||||
| Basic and diluted weighted average shares outstanding, Class A ordinary shares | ( | ) | ||||||||||
| Basic and diluted net income per share, Class A ordinary shares | $ | $ | $ | |||||||||
| Basic and diluted weighted average shares outstanding, Class B ordinary shares | ( | ) | ||||||||||
| Basic and diluted net income per share, Class B ordinary shares | $ | $ | ( | ) | $ | |||||||
| Statement of Operations for the Three Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| Basic and diluted weighted average shares outstanding, Class A ordinary shares | ||||||||||||
| Basic and diluted net income per share, Class A ordinary shares | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, Class B ordinary shares | ( | ) | ||||||||||
| Basic and diluted net income per share, Class B ordinary shares | $ | ( | ) | $ | $ | ( | ) | |||||
| Statement of Operations for the Six Months Ended June 30, 2021 (Unaudited) | ( | ) | ||||||||||
| Basic and diluted weighted average shares outstanding, Class A ordinary shares | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted net income per share, Class A ordinary shares | ||||||||||||
| Basic and diluted weighted average shares outstanding, Class B ordinary shares | ( | ) | ||||||||||
| Basic and diluted net income per share, Class B ordinary shares | $ | ( | ) | $ | $ | ( | ) | |||||
| Condensed Statement of Changes in Shareholders’ Equity (Deficit) for the Three Months Ended March 31, 2021 (Unaudited) | ||||||||||||
| Sale of 23,000,000 Units, net of underwriting discounts, initial fair value of Public Warrants, and offering expenses | $ | $ | ( | ) | $ | |||||||
| Class A ordinary shares | $ | $ | ( | ) | $ | |||||||
| Class A ordinary shares subject to redemption | $ | ( | ) | $ | $ | |||||||
| Accretion for Class A ordinary shares to redemption amount | $ | $ | ( | ) | $ | ( | ) | |||||
| Total Shareholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Number of Class A ordinary shares not subject to redemption | ( | ) | ||||||||||
| Condensed Statement of Changes in Shareholders’ Equity (Deficit) for the Three Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| Class A ordinary shares | $ | $ | ( | ) | $ | |||||||
| Change in value of Class A ordinary shares subject to redemption | $ | $ | ( | ) | $ | |||||||
| Total Shareholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Number of Class A ordinary shares not subject to redemption | ( | ) | ||||||||||
| Statement of Cash Flows for the Three Months Ended March 31, 2021 (Unaudited) | ||||||||||||
| Initial classification of Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Statement of Cash Flows for the Six Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| Initial classification of Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
9
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
10
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on January 27th, 2021, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on February 3rd, 2021 (see Note 3). The interim results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly, the actual results could differ significantly from those estimates.
Marketable Securities Held in Trust Account
At
September 30, 2021, substantially all of the assets held in the Trust Account were held in money market funds which are invested primarily
in U.S. Treasury securities. Interest income is recognized when earned. The Company’s portfolio of marketable securities is comprised
solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity
of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting
the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act. Upon the closing of the Initial Public
Offering and the Private Placement, $
11
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2021, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s unaudited condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
At September 30, 2021, the Class A ordinary shares reflected in the condensed balance sheet are reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | $ | ( | ) | |
| Class A ordinary shares issuance costs | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value - IPO | $ | |||
| Accretion of carrying value to redemption value | ||||
| Class A ordinary shares subject to possible redemption | $ |
Offering Costs
Offering
costs consist of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related
to the Initial Public Offering. Offering costs amounting to $
Warrant Liabilities
The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F, under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value in respect of each reporting period. This liability is subject to re-measurement at each balance sheet date until the Warrants are exercised, and any change in fair value is recognized in our statements of operations. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation. The Private Placement Warrants are valued using a lattice model, specifically a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology.
12
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented.
Net Earnings per Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
The
calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial
Public Offering, and (ii) the private placement since the exercise of the dilutive warrants is contingent upon the occurrence of future
events. Additionally, the private placement warrants are excluded from the calculation due to being not-in-the-money, therefore, anti-dilutive
as of September 30, 2021. The warrants are exercisable to purchase
The following table reflects the calculation of basic and diluted net income per common share (in dollars, except per share amounts):
| Three
Months Ended September 30, 2021 | Nine
Months Ended September 30, 2021 | For the Period
from September 3, 2020 (Inception) Through September 30, 2020 | ||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||
| Basic and diluted net income (loss) per ordinary share | ||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||
| Allocation of net income (loss), as adjusted | $ | $ | $ | $ | $ | $ | ( | ) | ||||||||||||||||
| Denominator: | ||||||||||||||||||||||||
| Basic and diluted weighted average shares outstanding | ||||||||||||||||||||||||
| Basic and diluted net income per ordinary share | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
13
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $
Fair Value of Financial Instruments
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 — “Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”)”, to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold
NOTE 5. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased of
14
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On
September 8, 2020, the Sponsor paid $
The
Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur
of: (A) one year after the completion of a Business Combination; and (B) subsequent to a Business Combination, (x) if the last reported
sale price of the Class A ordinary shares equals or exceeds $
Administrative Services Agreement
The
Company entered into an agreement commencing on January 25, 2021 through the earlier of the Company’s consummation of a Business
Combination and its liquidation, to pay an affiliate of the Sponsor a total of up to $
Promissory Note — Related Party
On
September 8, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which
the Company may borrow up to an aggregate principal amount of $
Sponsor Commitment
On
November 10, 2021, the Sponsor committed to provide the Company with an aggregate of $
Related Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of
the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust
Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
Except to the extent described in the preceding paragraph, the terms of such Working Capital Loans have not been determined and no written
agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination,
without interest, or, at the lender’s discretion, up to $
15
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on January 25, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A ordinary shares). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
NOTE 8. SHAREHOLDERS’ EQUITY
Preference
Shares — The Company is authorized to issue
Class A
Ordinary Shares — The Company is authorized to issue
Class B
Ordinary Shares — The Company is authorized to issue
Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of the Company’s shareholders except as otherwise required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which the Class B ordinary shares will convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of all ordinary shares issued and outstanding upon the completion of the Initial Public Offering plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with a Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in Business Combination.
16
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 9. WARRANTS
Warrants —
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the
Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business
Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating thereto is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A ordinary shares are, at the time of any exercise of a warrant, not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elect, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants— Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| ● | at a price of $0.01 per Public Warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
17
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of its Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 10. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
At
September 30, 2021, assets held in the Trust Account were comprised of $
18
BIOTECH ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| September 30, | ||||||||
| Level | 2021 | |||||||
| Assets: | ||||||||
| Cash and marketable securities held in Trust Account | 1 | $ | ||||||
| Liabilities: | ||||||||
| Warrant liability – Public Warrants | 1 | $ | ||||||
| Warrant liability – Private Placement Warrants | 3 | $ | ||||||
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our accompanying September 30, 2021 condensed balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.
The Public Warrants were initially valued using a lattice model, specifically a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology. As of September 30, 2021, the Public Warrants were valued using the instrument’s publicly listed trading price as of the balance sheet date, which is considered to be a Level 1 measurement due to the use of an observable market quote in an active market.
The Private Placement Warrants were valued using a lattice model, specifically a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of our ordinary shares. The expected volatility of the Company’s ordinary shares was determined based on the implied volatility of the Public Warrants.
The key inputs into the binomial lattice model for the Warrants were as follows:
| January
28, 2021 (Initial Measurement) | September 30, 2021 | |||||||||||
| Input | Public Warrants | Private Warrants | Private Warrants | |||||||||
| Market price of public shares | $ | $ | ||||||||||
| Risk-free rate | % | % | % | |||||||||
| Dividend yield | % | % | % | |||||||||
| Exercise price | $ | $ | ||||||||||
| Effective expiration date | ||||||||||||
| One-touch hurdle | $ | |||||||||||
The following table presents the changes in the fair value of warrant liabilities:
| Private Placement | Public | Warrant Liabilities | ||||||||||
| Fair value as of January 1, 2021 | $ | $ | $ | |||||||||
| Initial measurement on January 28, 2021 | ||||||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of September 30, 2021 | $ | $ | $ | |||||||||
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the nine months ended September 30, 2021.
19
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued.
On November 8, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blade Therapeutics, Inc., a Delaware corporation (“Blade”), Blade Merger Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Blade Merger Sub”), Biotech Sponsor LLC, a Delaware limited liability company, in the capacity as the representative from and after the closing (the “Closing”) of the stockholders of the Company as of immediately prior to the Closing and their successors and assignees (in such capacity, the “BAC Representative”), and Jean-Frédéric Viret in the capacity as the representative of the Earnout Participants (as defined in the Merger Agreement) from and after the Closing (in such capacity, the “Blade Representative”).
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior to the Closing, the Company will transfer by way of continuation out of the Cayman Islands and into the State of Delaware to re-domicile and become a Delaware corporation (the “Conversion”) and (ii) at the Closing, and following the Conversion and the PIPE Investment (defined below), Blade Merger Sub will merge with and into Blade (the “Merger”), with Blade continuing as the surviving entity and wholly-owned subsidiary of the Company, and with each Blade stockholder receiving shares of the Company’s common stock at the Closing. Simultaneously with entering into the Merger Agreement, the Company entered into Subscription Agreements (as defined below) with investors (the “PIPE Investors”) to purchase a total of 2,430,000 shares of the Company’s common stock in a private equity investment (the “PIPE”) for a purchase price equal to $10.00 per share and aggregate gross proceeds to the Company equal to $24,300,000. The PIPE Investors include certain existing Blade stockholders.
The
total consideration received by Blade security holders from the Company at the Closing will have an aggregate value equal to $
In
addition to the Merger Consideration set forth above, the Earnout Participants will also have a contingent right to receive up to an
additional
Simultaneously
with the execution of the Merger Agreement, the Company and Blade entered into subscription agreements (collectively, the “Subscription
Agreements”) with PIPE Investors for an aggregate purchase of 2,430,000 shares of the Company’s common stock, par
value $0.0001 per share (the “PIPE Shares”), at a price of $10.00 per share, for an aggregate of $24,300,000,
in a private placement to be consummated simultaneously with the Closing (the “PIPE Investment”).
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Biotech Acquisition Company References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Biotech Sponsor LLC. 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 Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on September 3, 2020, for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
Recent Developments
On November 8, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blade Therapeutics, Inc., a Delaware corporation (“Blade”), Blade Merger Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Blade Merger Sub”), Biotech Sponsor LLC, a Delaware limited liability company, in the capacity as the representative from and after the closing (the “Closing”) of the stockholders of the Company as of immediately prior to the Closing and their successors and assignees (in such capacity, the “BAC Representative”), and Jean-Frédéric Viret in the capacity as the representative of the Earnout Participants (as defined in the Merger Agreement) from and after the Closing (in such capacity, the “Blade Representative”).
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior to the Closing, the Company will transfer by way of continuation out of the Cayman Islands and into the State of Delaware to re-domicile and become a Delaware corporation (the “Conversion”) and (ii) at the Closing, and following the Conversion and the PIPE Investment (defined below), Blade Merger Sub will merge with and into Blade (the “Merger”), with Blade continuing as the surviving entity and wholly-owned subsidiary of the Company, and with each Blade stockholder receiving shares of the Company’s common stock at the Closing. Simultaneously with entering into the Merger Agreement, the Company entered into Subscription Agreements (as defined below) with investors (the “PIPE Investors”) to purchase a total of 2,430,000 shares of the Company’s common stock in a private equity investment (the “PIPE”) for a purchase price equal to $10.00 per share and aggregate gross proceeds to the Company equal to $24,300,000. The PIPE Investors include certain existing Blade stockholders.
21
The total consideration received by Blade security holders from the Company at the Closing will have an aggregate value equal to $280,000,000 less the value of certain contingent payments that may become payable to Blade’s current Series C-1 Preferred Stockholders (the “Merger Consideration”), payable, in the case of Blade stockholders, solely in newly issued shares of the Company’s common stock and, in the case of Blade option holders, by assumption of such options by the Company (valued based on the net spread of such options), plus the additional contingent right to receive the Earnout Shares (as defined below) after the Closing, as described below. All preferred stock of Blade and all convertible promissory notes of Blade will be required to be converted into shares of Blade common stock prior to the Closing, and will share in the Merger Consideration. All warrants of Blade will be required to be exercised in full on a cash or cashless basis or terminated without exercise, as applicable and in accordance with their respective terms prior to the Closing.
In addition to the Merger Consideration set forth above, the Earnout Participants will also have a contingent right to receive up to an additional 3,500,000 shares of the Company’s common stock (the “Earnout Shares”) after the Closing based on the stock price performance of the Company’s common stock (the “Earnout Period”). The Earnout Shares will become issuable if, during the Earnout Period, the closing price of the Company’s common stock is equal to or greater than $15.00 per share for any 20 trading days within any 30 trading day period (the “Price Earnout Milestone”) or, prior to the occurrence of a Price Earnout Milestone, (A) the Company consummates a sale, merger, consolidation, liquidation, exchange offer or other similar transaction that results in the stockholders of the Company immediately prior to such transaction having beneficial ownership of less than fifty percent (50%) of the outstanding voting securities of the Company or the surviving entity in such transaction, directly or indirectly, immediately following such transaction, (B) the Company consummates a “going private transaction” or otherwise ceases to be subject to the reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or (C) the Company’s Common Stock ceases to be listed on a national securities exchange. Unlike the Merger Consideration, the Earnout Shares will be allocated among Blade’s security holders on a fully-diluted basis as of the Closing, without treating assumed Blade options on a net exercise basis, and with holders of unvested Blade options receiving restricted stock units for a number of shares of common stock of the Company equal to such portion of the Earnout Shares otherwise issuable to such Earnout Participant in respect of such unvested Blade options.
Simultaneously with the execution of the Merger Agreement, the Company and Blade entered into subscription agreements (collectively, the “Subscription Agreements”) with PIPE Investors for an aggregate purchase of 2,430,000 shares of the Company’s common stock, par value $0.0001 per share (the “PIPE Shares”), at a price of $10.00 per share, for an aggregate of $24,300,000, in a private placement to be consummated simultaneously with the Closing (the “PIPE Investment”). The consummation of the transactions contemplated by the Subscription Agreements is conditioned on the concurrent Closing and other customary closing conditions. Among other things, each PIPE Investor agreed in the Subscription Agreement that it and its affiliates will not have any right, title, interest or claim of any kind in or to any monies in the Company’s trust account held for its public stockholders, and agreed not to, and waived any right to, make any claim against the trust account (including any distributions therefrom).
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through September 30, 2021 were organizational activities and those necessary to prepare for our initial public offering, described below. We do not expect to generate any operating revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form of interest income on marketable securities held after our initial public offering. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a business combination.
For the three months ended September 30, 2021, we had a net income of $2,941,970, which consists of the change in fair value of warrant liabilities of $3,566,000, interest earned from the bank of $22, and interest earned from marketable securities held in the Trust Account of $5,798, offset by formation and operational costs of $629,850.
For the nine months ended September 30, 2021, we had a net income of $420,976, which consists of the change in fair value of warrant liabilities of $2,166,000, interest earned from the bank of $58, and interest earned from marketable securities held in the Trust Account of $15,440, offset by formation and operational costs of $1,240,203 and transaction costs associated with the Initial Public Offering of $520,319.
For the period from September 3, 2020 (inception) through September 30, 2020, we had a net loss of $5,000, which consists of formation and operational costs.
22
Liquidity and Capital Resources
On January 28, 2021, we consummated our initial public offering of 23,000,000 units, at a price of $10.00 per unit, which included the full exercise of the underwriter’s over-allotment option in the amount of 3,000,000 units, generating gross proceeds of $230,000,000. Simultaneously with the closing of our initial public offering, we consummated the sale of 6,000,000 private placement warrants to the sponsor at a price of $1.00 per private placement warrant generating gross proceeds of $6,000,000.
Following our initial public offering, the full exercise of the over-allotment option, and the sale of the private placement warrants, a total of $230,000,000 was placed in the trust account. We incurred $13,114,249 in transaction costs, including $4,000,000 of underwriting fees, $8,650,000 of deferred underwriting commission and $464,249 of other offering costs.
For the nine months ended September 30, 2021, net cash used in operating activities was $1,154,224. Net income of $420,976 was affected by noncash charges (income) related to the change in fair value of the warrant liabilities of $2,166,000, transaction costs associated with the IPO of $520,319, and interest earned on marketable securities held in the Trust Account of $15,440. Changes in operating assets and liabilities provided $85,921 of cash from operating activities.
For the period from September 3, 2020 (inception) through September 30, 2020, there was no cash used in operating activities.
At September 30, 2021, we had cash held in the Trust Account of $230,015,440. We are using substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less deferred underwriting commission and income taxes payable), to complete our business combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
At September 30, 2021, we had cash of $402,397 held outside of the Trust Account. We are using the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or our officers, directors or their respective affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.00 per warrant at the option of the lender.
On November 10, 2021, our Sponsor committed to provide us with an aggregate of $600,000 in loans. The loans, if issued, will be non-interest bearing, unsecured, convertible into warrants with terms identical to the private placement warrants at a price of $1.00 per warrant and repaid upon the consummation of an initial business combination to the extent then outstanding. If the Company does not consummate an initial business combination, all amounts loaned to the Company will be forgiven except to the extent that we have funds available outside of the Trust Account to repay such loans.
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Excluding the commitment noted above, we do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. In such circumstances, our Sponsor, an affiliate of our Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. However, the terms of any such loans have not been determined, except to the extent described in the preceding paragraph. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of up to $10,000 for office space, administrative and support services. We began incurring these fees on January 25, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation.
The underwriters are entitled to a deferred fee of (i) 3.5% of the gross proceeds of the initial 20,000,000 units sold in our initial public offering, or $7,000,000, and (ii) 5.5% of the gross proceeds from the units sold pursuant to the over-allotment option, representing a total deferred fee of $8,650,000. 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.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC 815-40, under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value in respect of each reporting period. This liability is subject to re-measurement at each balance sheet date until the Warrants are exercised, and any change in fair value is recognized in our statements of operations. The Private Warrants and the Public Warrants for periods where no observable traded price was available are valued using a lattice model, specifically a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology. For periods subsequent to the severability of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
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Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption is presented as temporary equity, outside of the shareholders’ equity section of our unaudited condensed balance sheets.
Net Income per Common Share
Net income (loss) per ordinary shares is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, including the standard referenced in the next paragraph, if currently adopted, would have a material effect on our condensed financial statements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
As of September 30, 2021, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation and in light of the material weakness in internal controls described below, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective. Our internal control over financial reporting did not result in the proper accounting classification of complex financial instruments which, due to its impact on our financial statements, represents a material weakness.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, other than as described herein. Management has implemented remediation steps to address the material weakness described above and to improve our internal control over financial reporting. Specifically, we enhanced the supervisory review of accounting procedures in the financial reporting area described above and expanded and improved our review process for complex securities and related accounting standards. As of September 30, 2021, the material weakness described above had not been remediated.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our business, prospects, results of operations or financial condition to differ materially from the descriptions provided in this report include the risk factors described in our final prospectus for our Initial Public Offering filed with the SEC. In addition, the following risk factors could also have such an effect.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the staff of the SEC (the “SEC Staff”) issued the Staff Statement, wherein the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to being treated as equity. Specifically, the Staff Statement focused on certain terms and provisions similar to those contained in the warrant agreement governing our warrants. As a result of the Staff Statement, we reevaluated the accounting treatment of our warrants, and pursuant to the guidance in ASC 815, Derivatives and Hedging (“ASC 815”), determined that the warrants should be classified as derivative liabilities measured at fair value on our balance sheet, with any changes in fair value from period to period to be reported in earnings on our statements of operations.
We have recorded our warrant liability at fair value as of the issuance of the warrants, as determined by us based upon a valuation report obtained from a third-party valuation firm. This warrant liability is subject to adjustment for changes in fair value during subsequent reporting periods, with each such change being reported as a non-cash gain or loss in our relevant statements of operations. The impact of such changes in fair value on our earnings, which may be material, may have an adverse effect on the market price of our securities. In addition, potential targets may seek a business combination partner that does not have warrants that are accounted for as liabilities, which may make it more difficult for us to consummate an initial business combination with a target business.
We have identified a material weakness in our internal control over financial reporting as of September 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
In connection with the preparation of the Company’s financial statements as of September 30, 2021, management, in consultation with its advisors, identified a correction required to be made in certain of its previously issued financial statements. The requirement to make the change arose from the manner in which, as of the closing of the Company’s Initial Public Offering, the Company valued its Class A ordinary shares subject to possible redemption. The Company previously determined the value of such Class A ordinary shares to be equal to the redemption value of such shares, after taking into consideration the terms of the Company’s Amended and Restated Memorandum and Articles of Association, under which a redemption cannot result in net tangible assets being less than $5,000,001. Management has now determined, after consultation with its advisors, and in light of SEC comments recently reported in respect of other special purpose acquisition companies (“SPACs”), that the Class A ordinary shares underlying the Units issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered to be outside the Company’s control. Therefore, management has concluded that the redemption value of its Class A ordinary shares subject to possible redemption should reflect the possible redemption of all Class A ordinary shares. As a result, management has noted a required reclassification related to temporary equity and permanent equity. This has resulted in a restatement of the initial carrying value of the Class A ordinary shares subject to possible redemption, with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and ordinary shares.
The foregoing represents a material weakness in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Measures to remediate material weaknesses may be time-consuming and costly and there is no assurance that such initiatives will ultimately have the intended effects. If we identify any new material weakness in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such a case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our share price may decline. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
As a result of the material weakness in our internal controls over financial reporting described above, the change in our accounting classification of complex financial instruments, and other matters that may in the future be raised by the SEC, we may face for the prospect of litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements, any of which claims could result in adverse effects to our business. As of the date hereof, we have no knowledge of any such litigation or dispute.
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The nominal purchase price paid by our sponsor for the founder shares may result in significant dilution to the implied value of your public shares upon the consummation of our initial business combination, and our sponsor may make a profit on its investment in circumstances where holders of our public shares would not.
The offering price of our units is $10.00 per unit and the amount in our trust account is anticipated to be $10.00 per public share, implying an initial value of our public shares of approximately $10.00 per share. However, prior to this offering, our sponsor paid only $25,000 for the founder shares, or approximately $0.004 per share. As a result, the value of your public shares may be significantly diluted upon the consummation of our initial business combination, when the founder shares are converted into public shares. For example, the following table shows the dilutive effect of the founder shares on the implied value of the public shares upon the consummation of our initial business combination, assuming that our equity value at that time is $230,000,000, which is the amount we would expect to have available for our initial business combination in the trust account, assuming no interest is earned on the funds held in the trust account and no public shares are redeemed in connection with our initial business combination (and without taking into account other potential impacts on our valuation, such as the trading price of our public shares, our business combination transaction costs, our payment of the deferred underwriting commission, any equity issued or cash paid to the target’s sellers or to other parties, the value of the target business itself and the value of our public and private warrants). At such a valuation, each of our shares would have an implied value upon the consummation of our business combination of $8.00 per share, which would represent a reduction of 20% compared to the initial $10.00 implied value of our public shares:
| Public shares | 23,000,000 | |||
| Founder shares | 5,750,000 | |||
| Total shares. | 28,750,000 | |||
| Assumed total funds available for initial business combination | $ | 230,000,000 | ||
| Implied value per share upon consummation of initial business combination | $ | 8.00 |
(Note: Does not reflect our sponsor’s investment of $6,000,000 in the private placement warrants.)
Although the implied value of our shares upon consummation of an initial business combination is 20% less that the initial implied value of our shares, this would still represent a significant implied profit for our sponsor, compared to what it paid for the founder shares. For example, at $8.00 per share, the 5,750,000 founder shares would have an implied value of $46,000,000.
As a result, even if the trading price of our ordinary shares declines substantially after our business combination, our sponsor may nevertheless make a significant profit on its investment. In fact, our sponsor could potentially recoup the entire cost of its investment even if the trading price of our shares were in the range of approximately $1.00 per share and the private placement warrants were worthless. As a result, our sponsor is likely to make a substantial profit on its investment even if our initial business combination is poorly received by the market and the trading price of our shares declines. Moreover if we fail to consummate a business combination, our sponsor’s investment will be worthless. In contrast, our public shareholders will suffer losses unless our trading price remains at or above $10.00 per share, and if no business combination is consummated they would receive $10.00 per share from our trust account. As a result of the foregoing, our sponsor may prefer to consummate an initial business combination with a risky, weakly performing or poorly established target, rather than consummate no business combination at all, even though our public shareholders would prefer that we consummate either a strong business combination or no business combination at all. You should consider our sponsor’s and management team’s financial incentives to consummate even a weak business combination when evaluating whether to redeem your shares prior to or in connection with that business combination.
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We may issue shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of such shares at that time.
In connection with our initial business combination, we may issue shares to investors that enter into private placement transactions with us (so-called PIPE transactions) at prices per share which approximate the amounts per share available in our trust account at such time, which we expect would usually be approximately $10.00. The principal reason we would enter into such PIPE transactions would be to help insure that we had sufficient funds to complete a particular business combination and provide sufficient liquidity to the post-business combination entity. Nevertheless, at the time we enter into any such PIPE transaction, the market price for our shares could be higher than, and potentially significantly higher than, the price being paid for our shares in such PIPE transaction. Such a divergence in prices could have a negative effect on the market price of our shares and could lead to losses for investors who purchased shares at the higher market price.
As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become more scarce and there may be more competition for attractive targets. This could increase the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business combination.
In recent years, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition companies have already entered into an initial business combination, and there are still many special purpose acquisition companies seeking targets for their initial business combination, as well as many such companies currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an initial business combination.
In addition, because there are more special purpose acquisition companies seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an initial business combination, and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
Changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination.
In recent months, the market for directors and officers liability insurance for special purpose acquisition companies has changed. The premiums charged for such policies have generally increased and the terms of such policies have generally become less favorable. There can be no assurance that these trends will not continue.
The increased cost and decreased availability of directors and officers liability insurance could make it more difficult and more expensive for us to negotiate an initial business combination. In order to obtain directors and officers liability insurance or modify its coverage as a result of becoming a public company, the post-business combination entity might need to incur greater expense, accept less favorable terms or both. However, any failure to obtain adequate directors and officers liability insurance could have an adverse impact on the post-business combination’s ability to attract and retain qualified officers and directors.
In addition, even after we were to complete an initial business combination, our directors and officers could still be subject to potential liability from claims arising from conduct alleged to have occurred prior to the initial business combination. As a result, in order to protect our directors and officers, the post-business combination entity will likely need to purchase additional insurance with respect to any such claims (“run-off insurance”). The need for run-off insurance would be an added expense for the post-business combination entity, and could interfere with or frustrate our ability to consummate an initial business combination on terms favorable to our investors.
There will be risks associated with the planned Business Combination.
There will be risks associated with the planned Business Combination, which we will discuss more fully in the Registration Statement on Form S-4 that we expect to file in connection with effectuating our Business Combination with Blade. Any of these risks could result in a material adverse effect on our results of operations, financial condition, business or prospects. Additional risk factors not currently known to us, or which we currently deem immaterial, could also have a material adverse effect on our results of operations, financial condition, business or prospects.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 28, 2021, we consummated the Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230,000,000. Cantor Fitzgerald & Co acted as the book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-251834). The Securities and Exchange Commission declared the registration statements effective on January 25, 2021.
Simultaneous with the consummation of the Initial Public Offering, and the full exercise of the over-allotment option, we consummated the private placement of an aggregate of 6,000,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating total proceeds of $6,000,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering including the over-allotment option, and the Private Placement Warrants, $230,000,000 was placed in the Trust Account.
We paid a total of $4,000,000 in underwriting discounts and commission and $464,249 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer up to $8,650,000 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 5. Other Information.
On November 8, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blade Therapeutics, Inc., a Delaware corporation (“Blade”), and other related parties. Pursuant to the Merger Agreement, we and Blade will consummate a business combination (the “Business Combination”). For a further description of the Merger Agreement and the planned Business Combination, see Item 2 herein, entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments.”
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BIOTECH ACQUISITION COMPANY | ||
| Date: November 16, 2021 | /s/ Michael Shleifer | |
| Name: | Michael Shleifer | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| /s/ Thomas Fratacci | ||
| Name: | Thomas Fratacci | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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