☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 2023
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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6272 W 91st Ave, Westminster, CO | 80031 | ||||
(Address of | (Zip Code) |
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Warrants, each whole warrant exercisable for one share of | TLSIW |
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Large accelerated filer |
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Emerging growth company |
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Summary Risk Factors |
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Unregistered Sales of Equity Securities |
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1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MEDTECH ACQUISITION CORPORATION
CONDENSED BALANCE SHEETS
| | | | | | |
|
| September 30, |
| December 31, | ||
|
| 2022 |
| 2021 | ||
| | (Unaudited) | | | ||
ASSETS | | | | | | |
Current assets | | | | | | |
Cash | | $ | 207,598 | | $ | 200,884 |
Prepaid expenses | |
| 98,625 | |
| 325,000 |
Total current assets | | | 306,223 | | | 525,884 |
| |
| | |
| |
Cash and investments held in Trust Account | | | 251,018,841 | | | 250,007,295 |
TOTAL ASSETS | | $ | 251,325,064 | | $ | 250,533,179 |
| | | | | | |
LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | |
| | |
| |
LIABILITIES | | | | | | |
Current liabilities | | | | | | |
Accounts payable and accrued expenses | | $ | 806,260 | | $ | 1,057,616 |
Income taxes payable | | | 163,486 | | | — |
Promissory note - related party | | | 944,000 | | | 544,000 |
Total current liabilities | | | 1,913,746 | | | 1,601,616 |
| | | | | | |
Warrant liabilities | | | 796,000 | | | 6,898,666 |
Convertible note - related party | | | 700,000 | | | — |
Deferred underwriting fee payable | | | 8,750,000 | | | 8,750,000 |
TOTAL LIABILITIES | | | 12,159,746 | | | 17,250,282 |
| | | | | | |
Commitments and Contingencies | |
| | |
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Class A common stock subject to possible redemption, 25,000,000 shares at $10.03 and $10.00 per share redemption value as of September 30, 2022 and December 31, 2021, respectively | |
| 250,824,486 | |
| 250,000,000 |
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| | |
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STOCKHOLDERS' DEFICIT | |
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Preferred stock, par value $0.0001 per share; 1,000,000 shares authorized, none issued and outstanding | |
| — | |
| — |
Class A common stock, par value $0.0001 per share; 100,000,000 shares authorized, none issued and outstanding | |
| — | |
| — |
Class B common stock, par value $0.0001 per share; 10,000,000 shares authorized; 6,250,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021 | |
| 625 | |
| 625 |
Additional paid-in capital | |
| — | |
| — |
Accumulated deficit | |
| (11,659,793) | |
| (16,717,728) |
TOTAL STOCKHOLDERS' DEFICIT | |
| (11,659,168) | |
| (16,717,103) |
TOTAL LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | | $ | 251,325,064 | | $ | 250,533,179 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
MEDTECH ACQUISITION CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| | | | | | | | | | | | |
| | For the | | For the | ||||||||
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
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| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
General and administrative expenses | | $ | 432,225 | | $ | 807,259 | | $ | 1,390,305 | | $ | 1,899,176 |
Loss from operations | | | (432,225) | | | (807,259) | | | (1,390,305) | | | (1,899,176) |
| | | | | | | | | | | | |
Other income: | | | | | | | | | | | | |
Change in fair value of warrant liabilities | | | 265,334 | | | 2,653,334 | | | 6,102,666 | | | 3,714,667 |
Interest earned on marketable securities held in Trust Account | | | 1,017,632 | | | 18,665 | | | 1,389,546 | | | 56,081 |
Total other income | | | 1,282,966 | | | 2,671,999 | | | 7,492,212 | | | 3,770,748 |
| | | | | | | | | | | | |
Income before provision for income taxes | | | 850,741 | | | 1,864,740 | | | 6,101,907 | | | 1,871,572 |
(Provision) for income taxes | | | (191,284) | | | — | | | (219,486) | | | — |
Net income | | $ | 659,457 | | $ | 1,864,740 | | $ | 5,882,421 | | $ | 1,871,572 |
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Weighted average shares outstanding of Class A common stock | |
| 25,000,000 | | | 25,000,000 | | | 25,000,000 | | | 25,000,000 |
Basic and diluted net income per share, Class A common stock | | $ | 0.02 | | $ | 0.06 | | $ | 0.19 | | $ | 0.06 |
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Weighted average shares outstanding of Class B common stock | |
| 6,250,000 | | | 6,250,000 | | | 6,250,000 | | | 6,250,000 |
Basic and diluted net income per share, Class B common stock | | $ | 0.02 | | $ | 0.06 | | $ | 0.19 | | $ | 0.06 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
MEDTECH ACQUISITION CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
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| | Class B | | Additional | | | | | Total | |||||
| | Common Stock | | Paid-in | | Accumulated | | Stockholders’ | ||||||
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| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||
Balance — January 1, 2022 | | 6,250,000 | | $ | 625 | | $ | — | | $ | (16,717,728) | | $ | (16,717,103) |
Net income | | — | | | — | |
| — | |
| 2,836,725 | |
| 2,836,725 |
Balance – March 31, 2022 | | 6,250,000 | | | 625 | | | — | | | (13,881,003) | | | (13,880,378) |
Accretion of shares of Class A common stock to redemption amount | | — | | | — | | | — | | | (48,138) | | | (48,138) |
Net income | | — | | | — | | | — | | | 2,386,239 | | | 2,386,239 |
Balance – June 30, 2022 | | 6,250,000 | | | 625 | | | — | | | (11,542,902) | | | (11,542,277) |
Accretion of shares of Class A common stock to redemption amount | | — | | | — | | | — | | | (776,348) | | | (776,348) |
Net income | | — | | | — | | | — | | | 659,457 | | | 659,457 |
Balance – September 30, 2022 | | 6,250,000 | | $ | 625 | | $ | — | | $ | (11,659,793) | | $ | (11,659,168) |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
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| | Class B | | Additional | | | | | Total | |||||
| | Common Stock | | Paid-in | | Accumulated | | Stockholders’ | ||||||
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| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||
Balance — January 1, 2021 | | 6,250,000 | | $ | 625 | | $ | — | | $ | (21,485,011) | | $ | (21,484,386) |
Net loss | | — | | | — | |
| — | |
| (372,034) | |
| (372,034) |
Balance – March 31, 2021 | | 6,250,000 | | | 625 | | | — | | | (21,857,045) | | | (21,856,420) |
Net income | | — | | | — | | | — | | | 378,866 | | | 378,866 |
Balance – June 30, 2021 | | 6,250,000 | | | 625 | | | — | | | (21,478,179) | | | (21,477,554) |
Net income | | — | | | — | | | — | | | 1,864,740 | | | 1,864,740 |
Balance – September 30, 2021 | | 6,250,000 | | $ | 625 | | $ | — | | $ | (19,613,439) | | $ | (19,612,814) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
MEDTECH ACQUISITION CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | |
| | For the Nine Months Ended | ||||
| | September 30, | ||||
|
| 2022 |
| 2021 | ||
Cash Flows from Operating Activities: | | | | | | |
Net income | | $ | 5,882,421 | | $ | 1,871,572 |
Adjustments to reconcile net income to net cash used in operating activities: | |
| | |
| |
Change in fair value of warrant liabilities | | | (6,102,666) | | | (3,714,667) |
Interest earned on marketable securities held in Trust Account | | | (1,389,546) | | | (56,081) |
Changes in operating assets and liabilities: | | | | | | |
Prepaid expenses | | | 226,375 | | | 248,632 |
Income taxes payable | | | 163,486 | | | — |
Accounts payable and accrued expenses | |
| (251,356) | |
| 593,351 |
Net cash used in operating activities | | | (1,471,286) | | | (1,057,193) |
| | | | | | |
Cash Flows from Investing Activities: | | | | | | |
Cash withdrawn from Trust Account to pay franchise and income taxes | | | 378,000 | | | — |
Net cash provided by investing activities | | | 378,000 | | | — |
| | | | | | |
Cash Flows from Financing Activities: | | | | | | |
Proceeds from convertible promissory note - related party | | | 700,000 | | | — |
Proceeds from promissory note - related party | | | 400,000 | | | — |
Net cash provided by financing activities | | | 1,100,000 | | | — |
| | | | | | |
Net Change in Cash | |
| 6,714 | |
| (1,057,193) |
Cash - Beginning of period | |
| 200,884 | |
| 1,334,998 |
Cash - End of period | | $ | 207,598 | | $ | 277,805 |
| | | | | | |
Supplemental disclosure of cash flow information: | | | | | | |
Cash paid for income taxes | | $ | 56,000 | | $ | — |
The accompanying notes are an integral part of the unaudited condensed financial statements.
5
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
MedTech Acquisition Corporation (the “Company”) was incorporated in DelawareThis Quarterly Report on September 11, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating 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, 2022, the Company had not commenced any operations. All activity from inception through September 30, 2022, relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination, including the terminated business combination with Memic Innovative Surgery, Ltd. (the “Memic Business Combination”) as more fully described in Note 6. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering, held in the Trust Account.
The registrationForm 10-Q contains forward-looking statements for the Company’s Initial Public Offering were declared effective on December 17, 2020. On December 22, 2020, the Company consummated the Initial Public Offering of 25,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public Shares”), which includes the partial 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 $250,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,933,333 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to MedTech Acquisition Sponsor LLC (the “Sponsor”), generating gross proceeds of $7,400,000, which is described in Note 4.
Following the closing of the Initial Public Offering on December 22, 2020, an amount of $250,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the United States and invested only in U.S. government securities, within the meaning set forth inof Section 2(a)(16)27A of the Investment CompanySecurities Act of 1940,1933, as amended (the “Investment Company“Securities 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 certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
Transaction costs amounted to $14,161,525, consisting of $5,000,000 in cash underwriting fees, $8,750,000 of deferred underwriting fees and $411,525 of other offering costs.
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 Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the amount of deferred underwriting discounts held in trust and net of taxes payable). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.
6
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) 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 stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 1321E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. We have based these forward-looking statements on our current expectations and projections about future events. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases.
The Sponsor has agreed (a)markets for our products and our ability to waive its redemption rightsserve those markets;
The Company will have until December 22, 2022 to complete a Business Combination (the “Combination Period”). If the Company has not completed 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 not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earnedinfringe on the funds heldrights of others;
7
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if andExcept to the extent required by applicable law, we are under no obligation (and expressly disclaim any claimssuch obligation) to update or revise their forward-looking statements whether as a result of new information, future events, or otherwise. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Liquidity and Going Concern
The accompanying condensed financial statements have been prepared assuming the Company willour ability to continue as a going concern,concern.
September 30, 2023 | December 31, 2022 | ||||||||||
(unaudited) | |||||||||||
Assets | |||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | 21,383 | $ | 9,414 | |||||||
Accounts receivable | 3,052 | 1,557 | |||||||||
Inventory, net | 1,629 | 1,471 | |||||||||
Prepaid expenses | 2,977 | 4,772 | |||||||||
Total current assets | 29,041 | 17,214 | |||||||||
Property and equipment, net | 1,897 | 2,231 | |||||||||
Right-of-use assets | 1,252 | 1,381 | |||||||||
Intangible assets, net | 997 | 802 | |||||||||
Other assets | 367 | 367 | |||||||||
Total assets | $ | 33,554 | $ | 21,995 | |||||||
Liabilities and Stockholders’ Equity (Deficit) | |||||||||||
Current liabilities: | |||||||||||
Trade payables | $ | 1,899 | $ | 4,947 | |||||||
Accrued liabilities | 6,600 | 6,377 | |||||||||
Series B-2 tranche liabilities | — | 4,702 | |||||||||
Series B-3 warrant liabilities | — | 15,819 | |||||||||
Short-term lease liabilities | 379 | 370 | |||||||||
Other current liabilities | 427 | 142 | |||||||||
Total current liabilities | 9,305 | 32,357 | |||||||||
Long-term lease liabilities | 1,318 | 1,593 | |||||||||
Contingent earnout liability | 9,023 | — | |||||||||
Warrant liabilities | 5,421 | 369 | |||||||||
Total liabilities | 25,067 | 34,319 | |||||||||
Commitments and contingencies | |||||||||||
Convertible preferred stock | — | 164,006 | |||||||||
Stockholders’ equity (deficit): | |||||||||||
Preferred stock, Series A, $0.0001 par value per share, $10.00 liquidation value per share. Authorized 10,000,000 and 0 shares at September 30, 2023, and December 31, 2022, respectively; issued and outstanding, 4,015,002 and 0 shares at September 30, 2023, and December 31, 2022, respectively | 1 | — | |||||||||
Common stock, $0.0001 par value per share. Authorized 400,000,000 and 30,898,162 shares at September 30, 2023, and December 31, 2022, respectively; issued and outstanding, 26,316,681 and 347,926 shares at September 30, 2023, and December 31, 2022, respectively | 2 | — | |||||||||
Additional paid-in capital | 221,351 | 10,028 | |||||||||
Accumulated deficit | (212,867) | (186,358) | |||||||||
Total stockholders’ equity (deficit) | 8,487 | (176,330) | |||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 33,554 | $ | 21,995 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue | $ | 5,193 | $ | 3,923 | $ | 12,790 | $ | 9,172 | |||||||||||||||
Cost of goods sold | 589 | 701 | 2,023 | 1,442 | |||||||||||||||||||
Gross profit | 4,604 | 3,222 | 10,767 | 7,730 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 9,367 | 4,808 | 21,871 | 15,091 | |||||||||||||||||||
Sales and marketing | 4,689 | 3,030 | 11,430 | 8,881 | |||||||||||||||||||
General and administrative | 9,025 | 3,495 | 17,498 | 8,425 | |||||||||||||||||||
Loss from operations | (18,477) | (8,111) | (40,032) | (24,667) | |||||||||||||||||||
Interest income | 116 | 49 | 187 | 75 | |||||||||||||||||||
Interest expense | (4) | — | (13) | — | |||||||||||||||||||
Loss on equity issuance | — | — | (4,171) | — | |||||||||||||||||||
Change in fair value of tranche and warrant liabilities | (2,812) | — | 660 | 21 | |||||||||||||||||||
Change in fair value of contingent earnout liability | 19,904 | — | 19,904 | — | |||||||||||||||||||
Other expense, net | (13) | (31) | (56) | (71) | |||||||||||||||||||
Loss before income taxes | (1,286) | (8,093) | (23,521) | (24,642) | |||||||||||||||||||
Income tax expense | — | — | 8 | 3 | |||||||||||||||||||
Net loss available to common stockholders | $ | (1,286) | $ | (8,093) | $ | (23,529) | $ | (24,645) | |||||||||||||||
Deemed dividend related to Series B-2 preferred stock down round provision | $ | — | $ | — | $ | (2,981) | $ | — | |||||||||||||||
Undeclared dividends on Series A preferred stock | $ | (458) | $ | — | $ | (458) | $ | — | |||||||||||||||
Net loss attributable to common stockholders | $ | (1,744) | $ | (8,093) | $ | (26,968) | $ | (24,645) | |||||||||||||||
Net loss per common share, basic and diluted | $ | (0.13) | $ | (25.95) | $ | (5.68) | $ | (82.17) | |||||||||||||||
Weighted average common shares outstanding, basic and diluted | 13,173,422 | 311,823 | 4,749,849 | 299,936 |
Nine months ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
Preferred stock | Common stock | Additional paid-in capital | Accumulated deficit | Total | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
At December 31, 2022 | — | $ | — | 347,926 | $ | — | $ | 10,028 | $ | (186,358) | $ | (176,330) | |||||||||||||||||||||||||||||
Exercise of options | — | — | 95,842 | — | 50 | — | 50 | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 73 | — | 73 | ||||||||||||||||||||||||||||||||||
Deemed dividend | — | — | — | — | 959 | (959) | — | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (8,268) | (8,268) | ||||||||||||||||||||||||||||||||||
At March 31, 2023 | — | — | 443,768 | — | 11,110 | (195,585) | (184,475) | ||||||||||||||||||||||||||||||||||
Exercise of options | — | — | 4,592 | — | 16 | — | 16 | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 69 | — | 69 | ||||||||||||||||||||||||||||||||||
Deemed dividend | — | — | — | — | 2,022 | (2,022) | — | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (13,974) | (13,974) | ||||||||||||||||||||||||||||||||||
At June 30, 2023 | — | — | 448,360 | — | 13,217 | (211,581) | (198,364) | ||||||||||||||||||||||||||||||||||
Exercise of options | — | — | 50,646 | — | 29 | — | 29 | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 259 | — | 259 | ||||||||||||||||||||||||||||||||||
Impact of Business Combination | |||||||||||||||||||||||||||||||||||||||||
Conversion of redeemable convertible preferred stock into common stock in connection with the Business Combination | — | — | 21,500,867 | 2 | 204,234 | — | 204,236 | ||||||||||||||||||||||||||||||||||
Assumption of warrants to purchase common stock in connection with the Business Combination | — | — | — | — | (2,568) | — | (2,568) | ||||||||||||||||||||||||||||||||||
Issuance of common stock upon closing the Business Combination, net of expenses | — | — | 4,316,808 | — | 957 | — | 957 | ||||||||||||||||||||||||||||||||||
Contingent earnout liability recognized upon closing of the Business Combination | — | — | — | — | (28,927) | — | (28,927) | ||||||||||||||||||||||||||||||||||
Assumption of preferred stock in connection with the Business Combination | 4,015,002 | 1 | — | — | 34,150 | — | 34,151 | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (1,286) | (1,286) | ||||||||||||||||||||||||||||||||||
At September 30, 2023 | 4,015,002 | $ | 1 | 26,316,681 | $ | 2 | $ | 221,351 | $ | (212,867) | $ | 8,487 |
Nine months ended September 30, 2022 | |||||||||||||||||||||||||||||
Common stock | Additional paid-in capital | Accumulated deficit | Total | ||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
At December 31, 2021 | 264,978 | $ | — | $ | 6,738 | $ | (136,342) | $ | (129,604) | ||||||||||||||||||||
Exercise of options | 33,747 | — | 61 | — | 61 | ||||||||||||||||||||||||
Stock-based compensation | — | — | 62 | — | 62 | ||||||||||||||||||||||||
Net loss | — | — | — | (7,873) | (7,873) | ||||||||||||||||||||||||
At March 31, 2022 | 298,725 | $ | — | $ | 6,861 | $ | (144,215) | $ | (137,354) | ||||||||||||||||||||
Exercise of options | 9,393 | — | 5 | — | 5 | ||||||||||||||||||||||||
Stock-based compensation | — | — | 70 | — | 70 | ||||||||||||||||||||||||
Net loss | — | — | — | (8,679) | (8,679) | ||||||||||||||||||||||||
At June 30, 2022 | 308,118 | $ | — | $ | 6,936 | $ | (152,894) | $ | (145,958) | ||||||||||||||||||||
Exercise of options | 12,128 | — | 7 | — | 7 | ||||||||||||||||||||||||
Stock-based compensation | — | — | 119 | — | 119 | ||||||||||||||||||||||||
Net loss | — | — | — | (8,093) | (8,093) | ||||||||||||||||||||||||
At September 30, 2022 | 320,245 | $ | — | $ | 7,062 | $ | (160,987) | $ | (153,925) |
Nine Months Ended September 30, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss available to common stockholders | $ | (23,529) | $ | (24,645) | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | 500 | 452 | |||||||||
Change in fair value of warrant and tranche liabilities | (660) | (21) | |||||||||
Change in fair value of contingent earnout liability | (19,904) | — | |||||||||
Loss on equity issuance | 4,171 | — | |||||||||
Stock-based compensation expense | 402 | 251 | |||||||||
Loss on disposal of fixed assets | 60 | 50 | |||||||||
Milestone payments to Dynavax | 1,000 | 1,000 | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (1,477) | (936) | |||||||||
Inventory | (158) | 6 | |||||||||
Prepaid expenses | 1,041 | (1,306) | |||||||||
ROU assets | 130 | 38 | |||||||||
Trade payables, accrued expenses and other liabilities | (2,772) | 1,108 | |||||||||
Net cash used in operating activities | (41,196) | (24,003) | |||||||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | (216) | (451) | |||||||||
Milestone payments to Dynavax | (1,000) | (1,000) | |||||||||
Cash paid for intellectual property and licenses | (205) | (63) | |||||||||
Net cash used in investing activities | (1,421) | (1,514) | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from the issuance of preferred stock | 9,189 | 3,499 | |||||||||
Refundable prepayments for Series B-2 preferred stock | — | 3,986 | |||||||||
Proceeds from exercise of preferred stock warrants | 9,630 | — | |||||||||
Proceeds from Business Combination | 36,854 | — | |||||||||
Offering costs related to Business Combination | (1,116) | — | |||||||||
Payments on finance lease liabilities | (65) | (4) | |||||||||
Cash proceeds from the exercise of stock options | 94 | 73 | |||||||||
Net cash provided by financing activities | 54,586 | 7,554 | |||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | 11,969 | (17,963) | |||||||||
Cash, cash equivalents and restricted cash, beginning of period | 9,664 | 30,301 | |||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 21,633 | $ | 12,338 | |||||||
Supplemental disclosures of cash flow information: | |||||||||||
Supplemental disclosure of noncash items: | |||||||||||
Transfer of warrant liability to preferred stock upon exercise of warrants | $ | 25,409 | $ | — |
On December 30, 2021, the Company issued an unsecured promissory note to the Sponsor in the principal amount of $544,000 (the “2021 Promissory Note”). The 2021 Promissory Note,$212,867 as described in Note 5, does not bear interest and matures upon closing of the Company’s initial Business Combination. As of September 30, 20222023. We are currently undergoing a strategic transformation from a company focused solely on the sale of our infusion systems to a therapeutics company whereby our medical devices will be marketed in combination with the pharmaceutical drugs and December 31, 2021, there was $544,000 outstanding underother treatments that the 2021 Promissory Note.
On January 28, 2022,devices deliver to patients. This transformation requires that we restructure our operating infrastructure, resulting in an increase in operating expenses — including the Company issued an unsecured promissory note in principal amountdevelopment of up to $400,000 to the Sponsor (the “2022 Promissory Note”). The 2022 Promissory Note, as described in Note 5, does not bear interest and matures upon closing of the Company’s initial Business Combination. As of September 30, 2022, there was $400,000 outstanding under the 2022 Promissory Note.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see Note 5). On May 24, 2022, the Company issued the Convertible Promissory Note (as defined in Note 5)candidate pharmaceutical — that, in the principal amount of upshort term, will not be fully offset by increased revenues. Without additional financing and based on our sales, operations and research and development plans, our management estimates that our existing cash and cash equivalents will be insufficient to $1,500,000 tofund our projected liquidity requirements for the Sponsor. As of September 30, 2022 and December 31, 2021, there were amounts of $700,000 and $0 outstanding under the Convertible Promissory Note, respectively.
next 12 months.
Risksnormal course of business, and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while 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
8
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
target company, the specific impact is not readily determinable as of thedate of the condensedfinancial statement. The condensed financial statement doesdo not include any adjustments that might result frombe necessary should we be unable to continue as a going concern.
In February 2022,growth, particularly companies in the Russian Federationrapidly evolving market for medical technology-based and Belarus commencedpharmaceutical products and services. Such risks and uncertainties include, but are not limited to, a military actionlimited operating history, need for additional capital, a volatile business and technological environment, the process to test and obtain approval to market the candidate pharmaceutical, the process to obtain continuing CMS approval and application for a new ACS code for our PEDD product for reimbursement, an evolving business model, and demand for our products. To address these risks, we must, among other things, gain access to capital in sufficient amounts and on acceptable terms, maintain and increase our customer base, implement and successfully execute our business strategy, develop the candidate pharmaceutical, continue to enhance our technology, provide superior customer service, and attract, retain, and motivate qualified personnel. There can be no guarantee that we will succeed in addressing such risks.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs afteryear ended December 31, 2022, included in connection with a Business Combination, a vote by the stockholders to extend the period of time to complete the Company’s initial Business Combination (the “extension vote”) or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connectionMTAC's Proxy Statement/Prospectus filed with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the natureSEC on July 18, 2023. Certain information and amount of any “PIPE” or other equity issuancesfootnote disclosures, including significant accounting policies, normally included in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxablefiscal year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying 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 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuantomitted. The Condensed Consolidated Balance Sheets as of December 31, 2022, was derived from the audited financial statements. We do not have any activity that would be reported on a Statement of Comprehensive Income.
The accompanying condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 2, 2022. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
9
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (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
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 condensed 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 actualperiod. Actual results could differ significantly from those estimates.
Cash The most significant estimates relate to the valuation of earnout, warrant and Cash Equivalentstranche liabilities, and the valuation allowance on deferred tax assets.
The Company considersConcentrations of Credit Risk and Other Risks and Uncertainties
Cash and Investments Held in Trust Account
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with Accounting Standards Codification (“ASC”) Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized costnon-employee share-based compensation awards by recording expense based on the accompanying condensed balance sheets and adjusted for the amortization or accretion of premiums or discounts.
At September 30, 2022, substantially all of the assets held in the Trust Account were invested primarily in U.S. Treasury securities, which were presented at amortized cost on the condensed balance sheet. At December 31, 2021, substantially all of the assets held in the Trust Account were held in money market funds which invest primarily in U.S. Treasury securities. The money market funds are
10
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
presented at fair value within the accompanying condensed balance sheet, andestimated fair value of the investmentsawards at the time of grant using the Black-Scholes-Merton option valuation model (“Black-Scholes”). The determination of fair value using an option-pricing model is affected by the estimated fair value of the Company’s stock, as well as assumptions regarding a number of variables including, but not limited to, the fair value of underlying stock at the grant date, expected volatility of the underlying stock over the term of the awards, projected employee stock option exercise behaviors, and risk-free interest rates. We have elected to not include an estimated forfeiture rate in our share-based compensation expense recognition, in accordance with ASC Topic 718, Compensation — Stock Compensation, and we account for forfeitures in the Trust Accountperiod in which they occur. The estimated fair value of options granted is equal torecognized as compensation expense on a straight-line basis over the amortized cost basisexpected life for each separately vesting portion of the money market funds.
Class A Common Stock Subjectawards. The fair value of options granted to Possible Redemptionnon-employees is periodically reevaluated and adjusted to current fair value.
The Company recognizes changesconsolidated financial statements.
Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital and accumulated deficit.
At September 30, 2022 and December 31, 2021, the Class A common stock subject to possible redemption reflected in the condensed balance sheets is reconciled in the following table:
| | | |
Gross proceeds |
| $ | 250,000,000 |
Less: | |
| |
Proceeds allocated to Public Warrants | | | (9,083,333) |
Class A common stocks issuance costs | | | (13,638,664) |
Plus: | | | |
Accretion of carrying value to redemption value | | | 22,721,997 |
Class A common stock subject to possible redemption, December 31, 2021 | | | 250,000,000 |
Plus: | | | |
Accretion of carrying value to redemption value | | | 824,486 |
Class A common stock subject to possible redemption, September 30, 2022 | | $ | 250,824,486 |
Offering Costs
Offering costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to warrant liabilities were expensed as incurred in the statements of operations. Offering costs associated with the Class A common stock issued were initially charged to temporary equity and then accreted to common stock subject to redemption upon the completion of the Initial Public Offering. A total of $14,161,525 in offering costs were incurred. Of these offering costs $13,638,664 were related to the Initial Public Offering and charged to Class ALegacy TriSalus (“Legacy TriSalus Common Stock subject to possible redemption. Offering costs allocable to Public Warrants (as defined below) and Private Placement Warrants were $514,106 and $8,755, respectively, and expensed at the date of Initial Public Offering.
11
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheets date. The Company accounts for the Public Warrants and Private Placement Warrants (together with the Public Warrants, the “Warrants”Stock”) in accordance with the guidanceAmended and Restated Certificate of Incorporation of Legacy TriSalus at the then current conversion price, such that each converted share of Legacy TriSalus Preferred Stock was no longer outstanding and ceased to exist, and each holder of Legacy TriSalus Preferred Stock thereafter ceased to have any rights with respect to such securities.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements 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 740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in interim periods under ASC 740-270-30-5. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective tax rate was 22.48% and 0% for the three months ended September 30, 2022 and 2021, respectively, and 3.60% and 0.00% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21%Operations for the three and nine months ended September 30, 20222023, respectively.
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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
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 ofat September 30, 20222023, and December 31, 2021. 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 has been subject to income taxation by major taxing authorities since inception. These examinations may include questioning2022. In general, asset and liability fair values are determined using the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
12
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Net Income per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per share of common stock is computed by dividing net income by the weighted average number of common stock outstanding for the period. The Company has two classes of common stock, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value. The calculation of diluted income 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 warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 13,266,666 shares of Class A common stock in the aggregate. As of September 30, 2022 and 2021, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted net income per common stock is the same as basic net income per common stock for the periods presented.
The following table reflects the calculation of basic and diluted net income per common stock (in dollars, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | ||||||||||||||||||||
|
| 2022 | | 2021 | | 2022 | | 2021 | ||||||||||||||||
|
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B | ||||||||
Basic and diluted net income per Share of common stock | | | | | | | | | | | | | | | | | | | | | | | | |
Numerator: |
| |
| | | | | | | | | | | | | | | | | | | | | |
Allocation of net income | | $ | 527,566 | | $ | 131,891 | | $ | 1,491,792 | | $ | 372,948 | | $ | 4,705,937 | | $ | 1,176,484 | | $ | 1,497,258 | | $ | 374,314 |
Denominator: | |
| | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted weighted average shares outstanding | | | 25,000,000 | | | 6,250,000 | | | 25,000,000 | | | 6,250,000 | | | 25,000,000 | | | 6,250,000 | | | 25,000,000 | | | 6,250,000 |
Basic and diluted net income per Share of common stock | | $ | 0.02 | | $ | 0.02 | | $ | 0.06 | | $ | 0.06 | | $ | 0.19 | | $ | 0.19 | | $ | 0.06 | | $ | 0.06 |
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 Deposit Insurance Corporation’s coverage limit of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature, except for the Warrant Liabilities.
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjustedLevel 1 — Inputs utilize quoted prices in active markets for identical assets or liabilities.
13
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
In some circumstances,Of these, 8,333,272 are traded publicly and 5,933,333 are privately held. At the inputs used to measure fair value might be categorized within different levels ofClosing Date, we determined the fair value hierarchy. In those instances,of all the warrants to be $2,568 based on the closing price of $0.18 for the publicly traded warrants (Level 1).
Level 3 Liabilities | Fair Value at December 31, 2022 | Change in Unrealized (Gains) Losses | Issuances (Settlements) | Net Transfer In (Out) of Level 3 | Fair Value at September 30, 2023 | |||||||||||||||||||||||||||
Contingent earnout liability | $ | — | $ | (19,904) | $ | 28,927 | $ | — | $ | 9,023 |
Recent Accounting Standards
of the underlying preferred stock, the Company’s volatility, discount rate, and expected term of the related instrument.
Level 3 Liabilities | Fair Value at December 31, 2021 | Change in Unrealized (Gains) Losses | Issuances (Settlements) | Net Transfer In (Out) of Level 3 | Fair Value at September 30, 2022 | |||||||||||||||||||||||||||
Warrant liability | $391 | $(19) | $— | $— | $372 |
Level 3 Liabilities | Fair Value at December 31, 2022 | Change in Unrealized (Gains) Losses | Issuances (Settlements) | Net Transfer In (Out) of Level 3 | Fair Value at September 30, 2023 | |||||||||||||||||||||||||||
Warrant liability | $ | 369 | $ | — | $ | (369) | $ | — | $ | — | ||||||||||||||||||||||
Series B-2 tranche liabilities | $ | 4,702 | $ | (3,200) | $ | (1,502) | $ | — | $ | — | ||||||||||||||||||||||
Series B-3 Warrant liabilities | $ | 15,819 | $ | (311) | $ | (15,508) | (1) | $ | — | $ | — |
September 30, 2023 | December 31, 2022 | ||||||||||
Cash and cash equivalents | $ | 21,383 | $ | 9,414 | |||||||
Restricted cash (included in Other assets) | 250 | 250 | |||||||||
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | $ | 21,633 | $ | 9,664 |
September 30, 2023 | December 31, 2022 | ||||||||||
Raw materials | $ | 289 | $ | 753 | |||||||
Finished goods | 1,340 | 718 | |||||||||
Inventory, net | $ | 1,629 | $ | 1,471 |
Management does
September 30, 2023 | December 31, 2022 | ||||||||||
Accrued liabilities | $ | 3,404 | $ | 2,905 | |||||||
Accrued bonus | 2,706 | 2,896 | |||||||||
Accrued vacation | 475 | 329 | |||||||||
Accrued payroll | 15 | 247 | |||||||||
Total accrued liabilities | $ | 6,600 | $ | 6,377 |
September 30, 2023 | August 10, 2023 | ||||||||||
Current stock price | $ | 5.12 | $ | 11.34 | |||||||
Expected share price volatility | 65.0 | % | 65.0 | % | |||||||
Risk-free interest rate | 4.6 | % | 4.2 | % | |||||||
Expected term (years) | 4.9 | 5 | |||||||||
Estimated dividend yield | — | % | — | % |
historical equity volatility of publicly traded peer companies for a term equal to the expected term of the earnout period;
expected term, which we based on the earnout period per the agreement;
NOTE 3. PUBLIC OFFERING
September 30, 2023 | December 31, 2022 | ||||||||||
Public Warrants | 8,333,272 | — | |||||||||
Private Placement Warrants | 5,933,333 | — | |||||||||
Series B-3 Warrants | — | 15,819,000 | |||||||||
Total warrants | 14,266,605 | 15,819,000 |
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 4,933,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant ($7,400,000) from the Company in a private placement. Each Private Placement Warrant will be exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On September 11, 2020, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. In December 2020, the Company effected a stock dividend for 0.1 shares for each share of Class B common stock outstanding, resulting in 6,325,000 Founder Shares outstanding. As a result of the partial over-allotment exercised by the underwriters, 75,000 shares of Class B common stock were forfeited, and no shares remain subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the 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 reported closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other
14
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Administrative Services Agreement
The Company entered into an agreement, commencing on December 22, 2020, to pay the Sponsor an amount not to exceed $10,000 per month for office space, utilities, secretarial and administrative support. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 30, 2022, the Company incurred $30,000 and $90,000, respectively, in fees for these services. For the three and nine months ended September 30, 2021, the Company incurred $30,000 and $90,000, respectively, in fees for these services. There were $210,000 and $120,000 included in accrued expenses for these services in the accompanying condensed balance sheets at September 30, 2022 and December 31, 2021, respectively.
Promissory Note - Related Party
On December 30, 2021, the Company issued the 2021 Promissory Note to the Sponsor, pursuant to which the Company could borrow up to an aggregate principal amount of $544,000. The 2021 Promissory Note is non-interest bearing. No amount shall be due under this note if the Business Combination is not consummated on or before December 22, 2022.adjustment. As of September 30, 2022 and December 31, 2021, there was $544,000 outstanding under the 2021 Promissory Note.
On January 28, 2022, the Company issued the 2022 Promissory Note in principal amount of up to $400,000 to the Sponsor. The 2022 Promissory Note is non-interest bearing. No amount shall be due under this note if the Business Combination is not consummated on or before December 22, 2022. As of September 30, 2022 and December 31, 2021,2023, there were amounts of $400,000 and $0 outstanding under the 2022 Promissory Note, respectively.
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 officers and directors 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 for the foregoing, the terms of such Working Capital Loans, if any, 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 $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants as described in Note 8. On May 24, 2022, the Company issued a promissory note in the principal amount of up to $1,500,000 to the Sponsor for working capital requirements and payment of certain expenses in connection the Company’s initial Business Combination (the “Convertible Promissory Note”). The Convertible Promissory Note is non-interest bearing and payable on the earlier of (i) the date of the initial Business Combination or (ii) the winding up of the Company. At any time prior to payment in full of the principal balance of the Convertible Promissory Note, the Sponsor may elect to convert all or any portion of the unpaid principal balance into that number of warrants, each exercisable for one share of Class A common stock of the Company (the “Conversion Warrants”), equal to: (x) the portion of the principal amount of this Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Conversion Warrants and their underlying securities are entitled to certain demand and piggyback registration rights as set forth in the Convertible Promissory Note. As of September 30, 2022 and December 31, 2021, the Company had $700,000 and $0, respectively, borrowings under the Working Capital Loans. The Convertible Promissory Note was valued using the fair value method. There was no change in the fair value of the Convertible Promissory Note for the three and nine months ended September 30, 2022.
15
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on December 17, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock 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) have registration rights to require the Company to register a sale of any of the securities held by them pursuant to a registration rights agreement to be signed prior to or on the effective date of the Initial Public Offering. These holders of these securities are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by the Company, subject to certain limitations. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,750,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Contingent Professional Fees
The Company incurred legal fees of $508,525 and investment advisory fees of $400,000, which were contingent upon the consummation of the Memic Business Combination. On March 12, 2022, the Memic Business Combination was terminated, as such, the incurred contingent legal and investment advisory fees are no longer due. These fees were not recorded on the Company’s balance sheet, therefore no reversal was required.
Business Combination Agreement
On August 12, 2021, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with Memic Innovative Surgery Ltd., a private company organized under the laws of the State of Israel (“Memic”), and Maestro Merger Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Memic (“Merger Sub”).
Termination of Business Combination Agreement
On March 10, 2022, the Company, Memic and Merger Sub entered into a Termination of Business Combination Agreement (the “Termination Agreement”), pursuant to which the parties agreed to mutually terminate the Business Combination Agreement. The termination of the Business Combination Agreement was effective as of March 9, 2022.
As a result of the termination of the Business Combination Agreement, the Business Combination Agreement, along with any Transaction Agreement (as defined in the Business Combination Agreement) entered into in connection therewith, are void and there is no liability under either of the Business Combination Agreement or any Transaction Agreement on the part of any party thereto (including, without limitation, under the SPAC Sponsor Letter Agreement by and among Memic, the Sponsor, and the other parties signatory thereto dated August 12, 2021). Pursuant to the Termination Agreement, subject to certain exceptions, the Company, Memic and Merger Sub have also agreed, on behalf of themselves and their respective related parties, to a release of claims relating to the business combination.
16
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 7. STOCKHOLDERS’ DEFICIT
Preferred Stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2022 and December 31, 2021, there were no shares of preferred stock issued and outstanding.
Class A Common Stock— The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2022 and December 31,2021, there were 25,000,000 shares of Class A common stock subject to possible redemption which are presented as temporary equity.
Class B Common Stock—The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At September 30, 2022 and December 31, 2021, there were 6,250,000 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders except as otherwise required by law.
The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering, plus the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in a Business Combination and any private placement-equivalent warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans; provided that such conversion of Founder Shares will never occur on a less than one for one basis. The Company cannot determine at this time whether a majority of the holders of our Class B common stock at the time of any future issuance would agree to waive such adjustment to the conversion ratio.
NOTE 8. WARRANT LIABILITIES
As of September 30, 2022 and December 31, 2021, there were 8,333,3338,333,272 Public Warrants outstanding. Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade.
The
17
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
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 best efforts to filetime) with the SEC a registration statement registering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and will use its best efforts to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination or within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” pursuant to the exemption provided by Section 3(a)(9) of the Securities Act; provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
18
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
As of September 30, 2022 and December 31, 2021, there were 4,933,3335,933,333 MTAC Private Placement Warrants outstanding.Warrants. 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 common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of athe 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.
As of September 30, 2023, there were 5,933,333 Private Placement Warrants outstanding.
NOTE 9. FAIR VALUE MEASUREMENTS
Derivatives and
Series | September 30, 2023 | August 10, 2023 | December 31, 2022 | |||||||||||||||||
Series A-1 preferred stock, $0.001 par value per share. Issued, and outstanding 0 and 131,797 shares at September 30, 2023, and December 31, 2022, respectively | $ | — | $ | 6,065 | $ | 6,065 | ||||||||||||||
Series A-2 preferred stock, $0.001 par value per share. Issued, and outstanding 0 and 576,126 shares at September 30, 2023, and December 31, 2022, respectively | — | 8,976 | 8,976 | |||||||||||||||||
Series A-3 preferred stock, $0.001 par value per share. Issued, and outstanding 0 and 612,822 shares at September 30, 2023, and December 31, 2022, respectively | — | 10,611 | 10,611 | |||||||||||||||||
Series A-4 preferred stock, $0.001 par value per share. Issued, and outstanding 0 and 127,787 shares at September 30, 2023, and December 31, 2022, respectively | — | 1,993 | 1,993 | |||||||||||||||||
Series A-5 preferred stock, $0.001 par value per share. Issued and outstanding 0 shares at September 30, 2023;authorized 734,533, issued and outstanding 730,320 and December 31, 2022 | — | 12,858 | 12,858 | |||||||||||||||||
Series A-6 preferred stock, $0.001 par value per share. Issued and outstanding 0 shares at September 30, 2023; authorized 805,848, issued and outstanding 800,657 at December 31, 2022 | — | 15,476 | 15,476 | |||||||||||||||||
Series B preferred stock, $0.001 par value per share. Issued and outstanding 0 shares at September 30, 2023; authorized 7,021,678, issued and outstanding 6,984,971 at December 31, 2022, respectively | — | 84,637 | 84,528 | |||||||||||||||||
Series B-1 preferred stock, $0.001 par value per share. Issued, and outstanding 0 shares at September 30, 2023, authorized, issued and outstanding 1,659,672 at and December 31, 2022 | — | 23,500 | 23,499 | |||||||||||||||||
Series B-2 preferred stock, $0.001 par value per share. Issued and outstanding 0 and 706,243 shares at September 30, 2023, and December 31, 2022, respectively | — | — | — | |||||||||||||||||
Series B-3 preferred stock, $0.001 par value per share. Issued and outstanding 0 and 0 shares at September 30, 2023, and December 31, 2022, respectively | — | 39,858 | — | |||||||||||||||||
Total convertible preferred stock | $ | — | $ | 203,974 | $ | 164,006 |
Series | Balance at December 31, 2022 | Issuances | Retirements / Conversions | Balance at September 30, 2023 | ||||||||||||||||||||||
Series A-1 | $ | 6,065 | $ | — | $ | (6,065) | $ | — | ||||||||||||||||||
Series A-2 | 8,976 | — | (8,976) | — | ||||||||||||||||||||||
Series A-3 | 10,611 | — | (10,611) | — | ||||||||||||||||||||||
Series A-4 | 1,993 | — | (1,993) | — | ||||||||||||||||||||||
Series A-5 | 12,858 | — | (12,858) | — | ||||||||||||||||||||||
Series A-6 | 15,476 | — | (15,476) | — | ||||||||||||||||||||||
Series B | 84,528 | 109 | (84,637) | — | ||||||||||||||||||||||
Series B-1 | 23,499 | 1 | (23,500) | — | ||||||||||||||||||||||
Series B-2 | — | — | — | — | ||||||||||||||||||||||
Series B-3 | — | 39,858 | (39,858) | — | ||||||||||||||||||||||
Total convertible preferred stock | $ | 164,006 | $ | 39,968 | $ | (203,974) | $ | — |
Series | Balance at December 31, 2021 | Issuances | Balance at September 30, 2022 | |||||||||||||||||
Series A-1 | $ | 6,065 | $ | — | $ | 6,065 | ||||||||||||||
Series A-2 | 8,976 | — | 8,976 | |||||||||||||||||
Series A-3 | 10,611 | — | 10,611 | |||||||||||||||||
Series A-4 | 1,993 | — | 1,993 | |||||||||||||||||
Series A-5 | 12,858 | — | 12,858 | |||||||||||||||||
Series A-6 | 15,476 | — | 15,476 | |||||||||||||||||
Series B | 84,528 | — | 84,528 | |||||||||||||||||
Series B-1 | 20,000 | 3,499 | 23,499 | |||||||||||||||||
Total convertible preferred stock | $ | 160,507 | $ | 3,499 | $ | 164,006 |
Series | September 30, 2023 | December 31, 2022 | ||||||||||||
Series A-5 preferred stock, $17.81 exercise price | — | 4,213 | ||||||||||||
Series A-6 preferred stock, $20.23 exercise price | — | 5,190 | ||||||||||||
Series B preferred stock, $0.41 exercise price | — | 36,707 | ||||||||||||
Series B-3 preferred stock, $2.03 exercise price | — | 2,824,974 | ||||||||||||
Total warrants | — | 2,871,084 |
Series | Balance at December 31, 2022 | Exercises | Issuances | Retirements / Conversions | Balance at September 30, 2023 | |||||||||||||||||||||||||||
Series A-5 | 4,213 | — | — | (4,213) | — | |||||||||||||||||||||||||||
Series A-6 | 5,190 | — | — | (5,190) | — | |||||||||||||||||||||||||||
Series B | 36,707 | (11,123) | — | (25,584) | — | |||||||||||||||||||||||||||
Series B-3 | 2,824,974 | (4,771,642) | 2,595,777 | (649,109) | — |
December 31, 2022 | |||||
Series B-2 preferred stock fair value per share | $14.97 | ||||
Series B-2 preferred stock exercise price per share | $14.16 | ||||
Series B-3 preferred stock fair value per share | $3.24 | ||||
Series B-3 Warrants exercise price per share | $2.03 | ||||
Volatility | 50.0% – 65.0% | ||||
Risk free rate | 4.0% – 4.7% | ||||
Series B-2 Tranche Liability expected term | 0.2 – 0.4 years | ||||
Series B-3 Warrants expected term | 5.8 – 6.0 years | ||||
Expected dividends | — |
September 30, | |||||||||||
2023 | 2022 | ||||||||||
Preferred stock | 4,015,002 | 11,624,155 | |||||||||
Preferred stock warrants | — | 46,111 | |||||||||
Common stock warrants | 14,266,605 | — | |||||||||
Restricted stock units | 184,018 | — | |||||||||
Options to purchase common stock | 2,632,206 | 1,710,860 | |||||||||
21,097,831 | 13,381,126 |
At September 30, 2022, assets held in the Trust Account were comprisedshares of $347 in cash and $251,018,494 in U.S. Treasury securities.Common Stock determined by our Board prior to January 1 of a given year. During the nine months ended September 30, 2022, the Company withdrew $378,000 of interest income from the Trust Account to pay for taxes.
At December 31, 2021, assets held in the Trust Account were comprised $250,007,295 in money market funds. During the year ended December 31, 2021, the Company withdrew $60,000 of interest income from the Trust Account to pay for taxes.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on2023, we granted 1,179,480 options with a recurring basis at September 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The gross holding loss andweighted average fair value of held-to-maturity securities at September 30, 2022$2.66, and December 31, 2021, are as follows:
| | | | | | | | |
| | | | September 30, | | December 31, | ||
|
| Level |
| 2022 |
| 2021 | ||
Assets: | | | | | | | | |
Cash and investments held in Trust Account – Treasury Trust Money Market Fund | | 1 | | $ | 251,018,841 | | $ | 250,007,295 |
Liabilities: | | | | | | | | |
Warrant Liabilities - Public Warrants | | 1 | | $ | 500,000 |
| $ | 4,333,333 |
Warrant Liabilities - Private Placement Warrants | | 3 | | $ | 296,000 |
| $ | 2,565,333 |
The Warrants were accounted for as liabilities in accordance184,018 restricted stock units with ASC 815-40 and are presented within warrant liabilities on the condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change inweighted average fair value of warrants in$2.43. As of September 30, 2023, the condensed statementsbalances under the two plans are below.
September 30, 2023 | |||||||||||||||||
Authorized | Outstanding | Available for Issue | |||||||||||||||
2009 Plan | 1,915,724 | 1,915,724 | — | ||||||||||||||
2023 Plan | 5,585,008 | 900,500 | 4,684,508 | ||||||||||||||
Total | 7,500,732 | 2,816,224 | 4,684,508 |
The Private Placement Warrants were initiallySeptember 30, 2023, we had unrecognized compensation expense of $250 and subsequently valued using$337, respectively, for options and RSUs granted under the 2009 Plan, and $3,002 for options granted under the 2023 Plan.
19
MEDTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
The key inputs into the Monte Carlo Simulation for the Private Placement Warrants as of September 30, 2022 and December 31, 2021, were as follows:
| | | | | | | |
| | | September 30, | | | December 31, | |
|
| 2022 |
| 2021 | | ||
Exercise price | | $ | 11.50 | | $ | 11.50 | |
Stock price | | $ | 9.93 | | $ | 9.88 | |
Volatility | |
| 5.50 | % | | 9.60 | % |
Term | |
| 5.25 | | | 5.16 | |
Risk-free rate | |
| 3.97 | % | | 1.27 | % |
Dividend yield | | | 0.00 | % | | 0.00 | % |
The following tables present the changes in the level 3 fair value of warrant liabilities during the three and nine months ended September 30, 2022 and 2021:
| | | |
|
| Private Placement | |
Fair value as of December 31, 2021 | | $ | 2,565,333 |
Change in fair value | | | (1,282,666) |
Fair value as of March 31, 2022 | | | 1,282,667 |
Change in fair value | | | (888,000) |
Fair value as of June 30, 2022 | | | 394,667 |
Change in fair value | | | (98,667) |
Fair value as of September 30, 2022 | | $ | 296,000 |
| | | |
|
| Private Placement | |
Fair value as of December 31, 2020 | | $ | 5,476,000 |
Change in fair value | | | 98,666 |
Fair value as of March 31, 2021 | | | 5,574,666 |
Change in fair value | | | (493,333) |
Fair value as of June 30, 2021 | | | 5,081,333 |
Change in fair value | | | (986,667) |
Fair value as of September 30, 2021 | | $ | 4,094,666 |
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. There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the three and nine months ended September 30, 2022 and 2021.
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the condensed balance sheets date upterminate with respect to any party thereto on the date that the condensed financial statements were issued. Based upon this review, other than the below, the Company did not identifysuch party no longer holds any subsequent events that would have required adjustment or disclosureRegistrable Securities (as defined in the condensed financial statements.
Amended and Restated Registration Rights Agreement). The Company has scheduled a special meeting,Amended and Restated Registration Rights Agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in lieu of its annual meeting of stockholders, for December 7, 2022, pursuant to which it will seek stockholder approval to, among other matters, extend the time by which the Company has to complete a Business Combination from December 22, 2022 to June 22, 2023. There is no assurance thatregistering the Company’s stockholders will votesecurities.
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “our,” “us” or the “Company” are to MedTech Acquisition Corporation. References to our “management” or our “management team” are to our officers and directors, and references to the “Sponsor” are to MedTech Acquisition Sponsor LLC.
Cautionary 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 (“Securities Act”), and Section 21E of the Securities Exchange Act that are not historical factsof 1934, as amended (“Exchange Act”). This information may involve known and involveunknown risks, uncertainties and uncertainties that couldother factors which may cause the actual results, performance or achievements of TriSalus Life Sciences, Inc., (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate," “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expected and projected. All statements other than statements of historical fact included under this Quarterly Report, including, without limitation, statements in this “Item 2. 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. When used in this Quarterly Report, 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 eventsexpressed or future performance, but reflect management’s current beliefs, based on information currently available. Forward-looking statements in this Quarterly Report may include, for example, statements about:
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 inimplied by the forward-looking statements please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K, as amended, 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 various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information futurebecomes available or other events occur in the future.
“our” refer to TriSalus Life Sciences, Inc. (which changed its name to TriSalus Operating Life Sciences, Inc. in connection with the Business Combination) and its subsidiaries prior to the consummation of the Business Combination and TriSalus Life Sciences, Inc. (formerly known as MedTech Acquisition Corporation) after the consummation of the Business Combination, unless the context otherwise requires.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful.
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Recent Developments
On August 12, 2021,November 11, 2022, we entered into a Business Combinationan Agreement and Plan of Merger (the “Business Combination“Merger Agreement”) with Memic Innovative Surgery Ltd., a private company organized under the laws of the State of IsraelMedTech Acquisition Corporation (“Memic”MTAC”), and MaestroMTAC Merger Sub, Inc., a Delaware corporation and a direct, wholly-ownedwholly owned subsidiary of MemicMTAC (“Merger Sub”).
Pursuant, pursuant to the Business Combination Agreement, subject to the terms and conditions set forth therein, upon the closing of the transactions contemplated thereby, Merger Sub willwhich, TriSalus would merge with and into us,Merger Sub, with usTriSalus surviving asthe merger and becoming a wholly-ownedwholly owned subsidiary of MemicMTAC (the “Merger”“Business Combination”).
On March 9, 2022, the Company convened and then adjourned, without conducting any other business, its special meeting The aggregate
On March 10, 2022, the Company, Memic and Merger Sub entered into a Termination of Business Combination Agreement (the “Termination Agreement”), pursuant to which the parties agreed to mutually terminate the Business Combination Agreement. The terminationclosed on August 10, 2023. Pursuant to the Merger Agreement, 890,020,482 shares of TriSalus common stock (after conversion of all outstanding shares of preferred stock and all in-the-money warrants) were exchanged for approximately 22,000,000 shares of MTAC common stock, reflecting an exchange ratio of approximately 0.02471853. All share and per share amounts of our common and preferred stock have been retrospectively adjusted for the exchange ratio in the following discussion.
2023, we effectuated closings (“Second Tranche Closings”) of a portion of the second tranche of the B-2 Preferred Stock Financing whereby (i) 207,541 shares of Series B-2 preferred stock and accompanying warrants to purchase 830,167 shares of Series B-3 preferred stock, representing 40% of the shares committed in the second tranche, were sold for an aggregate purchase price of approximately $2.9 million, net of execution costs, and (ii) 17,656 shares of Series B-2 preferred stock and accompanying warrants to purchase 70,624 shares of Series B-3 preferred stock, none of which were shares committed in the second tranche, were sold for an aggregate purchase price of $250. As a result of the terminationclosings of a portion of the second tranche of the B-2 Preferred Stock Financing described above, in accordance with the anti-dilution rights in the Company’s certificate of incorporation, the conversion prices of the Company’s preferred stock were adjusted. The conversion prices were further adjusted as a result of the June 2023 exercise of a portion of the second tranche of the B-2 Preferred Stock Financing described below, which represent the conversion prices in effect on the Closing Date.
Resultsstrategy, which includes advancing our manufacturing technologies into and through clinical development of Operations
We have neither engagedSD-101, expanding our R&D efforts,
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue | $ | 5,193 | $ | 3,923 | $ | 12,790 | $ | 9,172 | |||||||||||||||
Cost of goods sold | 589 | 701 | 2,023 | 1,442 | |||||||||||||||||||
Gross profit | 4,604 | 3,222 | 10,767 | 7,730 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 9,367 | 4,808 | 21,871 | 15,091 | |||||||||||||||||||
Sales and marketing | 4,689 | 3,030 | 11,430 | 8,881 | |||||||||||||||||||
General and administrative | 9,025 | 3,495 | 17,498 | 8,425 | |||||||||||||||||||
Loss from operations | (18,477) | (8,111) | (40,032) | (24,667) | |||||||||||||||||||
Interest income | 116 | 49 | 187 | 75 | |||||||||||||||||||
Interest expense | (4) | — | (13) | — | |||||||||||||||||||
Loss on equity issuance | — | — | (4,171) | — | |||||||||||||||||||
Change in fair value of tranche and warrant liabilities | (2,812) | — | 660 | 21 | |||||||||||||||||||
Change in fair value of contingent earnout liability | 19,904 | — | 19,904 | — | |||||||||||||||||||
Other expense, net | (13) | (31) | (56) | (71) | |||||||||||||||||||
Loss before income taxes | (1,286) | (8,093) | (23,521) | (24,642) | |||||||||||||||||||
Income tax expense | — | — | 8 | 3 | |||||||||||||||||||
Net loss available to common stockholders | $ | (1,286) | $ | (8,093) | $ | (23,529) | $ | (24,645) | |||||||||||||||
Deemed dividend related to Series B-2 preferred stock down round provision | $ | — | $ | — | $ | (2,981) | $ | — | |||||||||||||||
Undeclared dividends on Series A preferred stock | $ | (458) | $ | — | $ | (458) | $ | — | |||||||||||||||
Net loss attributable to common stockholders | $ | (1,744) | $ | (8,093) | $ | (26,968) | $ | (24,645) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
Cost of goods sold | 11.3 | 17.9 | 15.8 | 15.7 | |||||||||||||||||||
Gross profit | 88.7 | 82.1 | 84.2 | 84.3 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 180.4 | 122.6 | 171.0 | 164.5 | |||||||||||||||||||
Sales and marketing | 90.3 | 77.2 | 89.4 | 96.8 | |||||||||||||||||||
General and administrative | 173.8 | 89.1 | 136.8 | 91.9 | |||||||||||||||||||
Loss from operations | (355.8) | (206.8) | (313.0) | (268.9) | |||||||||||||||||||
Interest income | 2.2 | 1.2 | 1.5 | 0.8 | |||||||||||||||||||
Interest expense | (0.1) | — | (0.1) | — | |||||||||||||||||||
Loss on equity issuance | — | — | (32.6) | — | |||||||||||||||||||
Change in fair value of tranche and warrant liabilities | (54.1) | — | 5.2 | 0.2 | |||||||||||||||||||
Change in fair value of earnout liabilities | 383.3 | — | 155.6 | — | |||||||||||||||||||
Other expense, net | (0.3) | (0.8) | (0.4) | (0.8) | |||||||||||||||||||
Loss before income taxes | (24.8) | (206.3) | (183.9) | (268.7) | |||||||||||||||||||
Income tax benefit (expense) | — | 0.0 | 0.1 | 0.0 | |||||||||||||||||||
Net loss available to common stockholders | (24.8) | % | (206.3) | % | (184.0) | % | (268.7) | % | |||||||||||||||
Deemed dividend related to Series B-2 preferred stock down round provision | — | % | — | % | (23.3) | % | 0.0 | % | |||||||||||||||
Undeclared dividends on Series A preferred stock | (8.8) | % | — | % | (3.6) | % | — | % | |||||||||||||||
Net loss attributable to common stockholders | (33.6) | % | (206.3) | % | (210.8) | % | (268.7) | % |
For the three months ended September 30, 2022,2023, as compared to the three months ended September 30, 2022. The increase in revenue was primarily due to an increase of $1.1 million in units of TriNav sold as our launch of the product, begun in 2020, recovered from the impact of the Covid-19 pandemic. In addition, we hadrealized a netreduction in sales discounts of $0.2 million as we terminated the distributor agreements that required the discounts.
available funds will depend on many factors, including those described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q. See also “Funding Requirements” below.
Nine Months Ended September 30, | |||||||||||
2023 | 2022 | ||||||||||
Net cash used in operating activities | $ | (41,196) | $ | (24,003) | |||||||
Net cash used in investing activities | (1,421) | (1,514) | |||||||||
Net cash provided by financing activities | 54,586 | 7,554 | |||||||||
Net increase / (decrease) in cash, cash equivalents and restricted cash | $ | 11,969 | $ | (17,963) |
For the three months ended September 30, 2021, we had a net income of $1,864,740, which consists of a change in fair value of warrant liability of $2,653,334 and interest income on marketable securities held in the Trust Account of $18,665, offset by general and administrative expenses of $807,259.
For the nine months ended September 30, 2021, we had2023, was due to purchases of property and equipment of $0.2 million ,payments of $0.2 million to acquire or maintain intellectual property, and a net incomemilestone payment of $1,871,572, which consists$1.0 million to Dynavax.
Liquidity and Going Concern
On December 22, 2020, we consummated the Initial Public Offering of 25,000,000 Units at $10.00 per Unit, generating gross proceeds of $250,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,933,333 Private
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Placement Warrants at a price of $1.50 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $7,400,000.
Following the Initial Public Offering, the partial exercise of the over-allotment option, and the sale of the Private Placement Units, a total of $250,000,000 was placed in the Trust Account. We incurred $14,161,525 in Initial Public Offering related costs, including $5,000,000 of underwriting fees and $8,750,000 of deferred underwriting fees and $411,525 of other offering costs.
For$1.5 million for the nine months ended September 30, 2022, was primarily due to purchases of property and equipment of $0.4 million, payments of $0.1 million to acquire or maintain intellectual property, and a milestone payment of $1.0 million to Dynavax.
For the nine months ended September 30, 2021,2023, consisted principally of proceeds from the merger of $36.9 million, proceeds from the issuance of Series B-2 preferred stock of $9.2 million, and proceeds from the exercise of warrants to purchase Series B-3 preferred stock of $9.6 million, partially offset by expenses incurred related to the Business Combination of $1.1 million.
As of September 30, 2022, we had investments held in the Trust Account of $251,018,841. Interest income on the balance in the Trust Account may be used by us to pay taxes. During the nine months ended September 30, 2022, we withdrew $378,000consisted of interest earnedprepayments of $4.0 million for Series B-2 preferred stock that was issued in the fourth quarter of 2022 and proceeds from the Trust Account.
sale of Series B-1 preferred stock of $3.5 million.
market ourselves.
On December 30, 2021, we issued the 2021 Promissory Note to the Sponsor, pursuant to which we borrowed an aggregate principal amount of $544,000. The 2021 Promissory Note is non-interest bearing and matures upon the closing of our initial business combination.
On January 28, 2022, we issued the 2022 Promissory Note, of which $400,000 was funded by the Sponsor during the quarter ended September 30, 2022. The 2022 Promissory Note does not bear interest and matures upon closing of our initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us fundscash equivalents as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that an initial 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 at a price of $1.50 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants. On May 24, 2022, the Company issued the Convertible Promissory Note in the principal amount of up to $1,500,000 to the Sponsor. As of September 30, 2022 and December 31, 2021, there was $700,000 and $0 outstanding under the Convertible Promissory Note.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until December 22, 2022, to consummate an initial business combination. It is uncertain that the Company2023, will be ablesufficient to consummate an initial business combination by this time. If an initial business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution offund our projected liquidity requirements for the Company. Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raisesnext 12 months, creating substantial doubt about the Company’sour ability to continue as a going concern. No adjustmentsWe will likely require additional capital in the near term in order to continue to fund our operations through equity or debt financings, partnerships, collaborations, or other sources which may not be available on a timely basis, on favorable terms, or at all, and such capital, if obtained, may not be sufficient to enable us to continue to implement our long-term business strategy. See factors in the section titled "Risk Factors" and also "Funding Requirements" above. As further discussed above in the section titled "Recent Developments," in October 2023, we entered into the Yorkville Purchase Agreement, whereby we have been madethe right, but not the obligation, to the carrying amountssell to Yorkville up to $30.0 million of assetsshares of Common Stock.
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Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangementstheir investment. As discussed in Note 1 to our unaudited consolidated financial statements accompanying this Quarterly Report on Form 10-Q, there is substantial doubt regarding our ability to continue as a going concern as of September 30, 2022.2023.
Contractual Obligations
The Company does not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial and administrative support. Upon completion of an initial business combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 30, 2022, the Company incurred $30,000 and $90,000estimates. Actual results may differ from those estimates. Additionally, changes in fees for these services, respectively. For the three and nine months ended September 30, 2021, the Company incurred $30,000 and $90,000 in fees for these services, respectively. As of September 30, 2022 and December 31, 2021, there were $210,000 and $120,000 included in accounts payable and accrued expensesaccounting estimates could occur in the accompanying balance sheets, respectively.
The underwritersfuture from period to period.
The Company incurred legal fees of $508,525purchase order and investment advisory fees of $400,000, which were contingent upon the consummationwe do not have any on-going service obligation after delivery.
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 liabilitiesare measured at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The Company accounts for the Public Warrants and Private Placement Warrants (together with the Public Warrants, 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, the Company classifies the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheets date until exercised, and any changewith changes in fair value is recognizedrecorded in the statementsCondensed Consolidated Statements of operations. Operations.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified asoccurring: (1) a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence
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of uncertain events not solely within our control) is classifiedquo scenario whereby the Company would continue as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considereda private company and (2) a scenario where the Business Combination would close. Under the status quo scenario, the Series B-3 Warrants, including warrants to be outsideissued under the second and third tranches, were valued using the Black-Scholes model.
Net Income per share of Common Stock
Net income per common stock is computed by dividing net income by the weighted average number of common stock outstanding forprior fiscal year’s second fiscal quarter; and (2) the period. The Company has two classes of common stock,date on which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata betweenwe have issued more than $1.0 billion in non-convertible debt securities during the two classes of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
prior three-year period.
In August 2020,Pronouncements
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Factors That May Adversely Affect our Results of Operation
Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.
operations.
Disclosure
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As required by Rules 13a-15 and 15d-15 under the Exchange Act, under the supervision and with the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in allto the effectiveness of any system of disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficienciesissues and instances of fraud, if any. The design ofany, with a company have been prevented or detected on a timely basis. Even disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and theredetermined to be effective can be noonly provide reasonable assurance that anytheir objectives are achieved.
Changes in Internal Control overExchange Act Rule 13a-15(e)) pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Reporting
There was no changeOfficer concluded that our disclosure controls and procedures are not effective at the reasonable assurance level.
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To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 1A. Risk Factors
Not required for a smaller reporting company. However, as of the date of this Quarterly Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2022 and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 as filed with the SEC on June 28, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from
Changes to laws or regulations or in how such laws or regulations are interpreted or applied, or a failure to comply with any laws, regulations, interpretations or applications, may adversely affect our business, including our ability to negotiate and complete our initial business combination.
We are subject to the laws and regulations, and interpretations and applications of such laws and regulations, of national, regional, state and local governments and, potentially, non-U.S. jurisdictions. In particular, we are required to comply with certain SEC and potentially other legal and regulatory requirements, and our consummation of an initial business combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications and any post-business combination company may be subject to additional laws, regulations, interpretationslitigation and applications. Compliance with,claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and monitoringwe are not aware of the foregoing may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time, and those changesany pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial position.
On March 30, 2022,expect to continue incurring losses for the SEC issued proposed rules (the “SPAC Rule Proposals”) relating, among other items, to disclosures in SEC filings in connection with business combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; theforeseeable future. Our financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. Certain of the proceduresstatements were prepared assuming that we will continue as a potential business combination target, or othersgoing concern and do not include any adjustments that may determine to undertakeresult from the outcome of this uncertainty. Although we have raised additional cash in connection with the SPAC Rule Proposals,Closing of the Business Combination and received cash proceeds from the exercise of warrants to purchase Series B-3 preferred stock in July 2023, without additional financing and based on our sales, operations and research and development plans, our management estimates that our existing cash and cash equivalents as proposedof September 30, 2023, will be insufficient to fund our projected liquidity requirements for the next 12 months, creating substantial doubt about our ability to continue as a going concern, and we may be unable to realize assets and discharge liabilities in the ordinary course of operations. If we are unable to obtain sufficient funding, we may be forced to delay, scale back, or eliminate some or all of our research and development activities, our financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as adopted,a going concern.
Recent increases in inflationrisks and uncertainties, as well as investor perception of our creditworthiness and prospects. It will also depend on a number of factors, including market conditions, interest rates, our operating performance and our credit rating. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations. If we are not able to continue operations, investors may suffer a complete loss of their investments in our securities.
RecentFor instance, in October 2023, we entered into a standby equity purchase agreement (the “YorkvillePurchase Agreement”) with YA II PN, LTD., a Cayman Islands exempt limited partnership (“Yorkville”), whereby we have the right, but not the obligation, to sell to Yorkville up to $30.0 million of our Common Stock at our request, subject to terms and conditions specified in the Yorkville Purchase Agreement. In addition, the incurrence of indebtedness would result in increased fixed or variable payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business, including grants of security interests in our intellectual property. If we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we may have to
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Military conflictcontrol processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed time frame or at all, that our internal control over financial reporting is effective as required by Sarbanes-Oxley Act Section 404. Our management has identified material weaknesses and in the future, our management may identify one or more material weaknesses, which could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
Military conflict in Ukraine or elsewhere may lead to increased and price volatility for publicly tradedis doing well.
Resources could be wasted in researching acquisitionsprices that are not completed, whichsignificantly less than the current trading price of our Common Stock. Accordingly, certain of the Selling Securityholder could materially adversely affect subsequent attempts to locate and acquire or merge with another business. Ifstill realize a profit on sales at lower prices.
We anticipate thatoutstanding Common Stock. Given the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons, including those beyond our control. Any such event will result in a lossshares of Common Stock being registered for potential resale by selling securityholders pursuant to usthe Resale S-1, the sale of shares by the related costs incurred, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business combination within the Combination Period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidationselling securityholders of our Trust Account and our Warrants will expire worthless.
There may be significant competition for us to find an attractive target for an initial business combination. This could increase the costs associated with completing our initial business combination and may result in our inability to find a suitable target for our initial business combination.
In recent years, the number of SPACs that have been formed has increased substantially. Many companies have entered into business combinations with SPACs, and there are still many SPACs seeking targets for their initial business combination, as well as additional SPACs currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, effort and resources to identify a suitable target for an initial business combination.
In addition, because there are a large number of SPACs seeking to enter into an initial business combination with available targets,shares, or the competition for available targets with attractive fundamentals or business models may increase, which could cause target 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 increasesperception in the costmarket that the selling securityholders of additional capital neededa large number of shares intend to close business combinations or operate targets post-business combination. Thissell shares, could increase the costvolatility of delaythe market price of our Common Stock or otherwise complicate or frustrate our ability to find a suitable target for and/or complete our initial business combination and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
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The SEC has recently issued the SEC Proposed Rules. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with such proposals may increase our costs and the time needed to complete our initial business combination and may constrain the circumstances under which we could complete an initial business combination. The need for compliance with the SPAC Rule Proposals may cause us to liquidate the fundssignificant decline in the Trust Account or liquidatepublic trading price of our Common Stock. Even if our trading price is significantly below $10.00 per share, the Company at an earlier time than we might otherwise choose.
On March 30, 2022,offering price for the SEC issued the SPAC Rule Proposals relating, among other items, to disclosures in business combination transactions between SPACS such as us and private operating companies; the condensed financial statement requirements applicable to transactions involving shell companies; the use of projections by SPACs in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. The SPAC Rule Proposals have not yet been adopted, and may be adoptedunits offered in the proposed form or in a different form that could impose additional regulatory requirements on SPACs. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with the SPAC Rule Proposals, or pursuant to the SEC’s views expressed in the SPAC Rule Proposals, may increase the costs and time of negotiating and completing an initial business combination, and may constrain the circumstances under which we could complete an initial business combination. The need for compliance with the SPAC Rule Proposals may cause us to liquidate the funds in the Trust Account or liquidate the Company at an earlier time than we might otherwise choose.
If we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted. As a result, in such circumstances, unless we are able to modify our activities so that we would not be deemed an investment company, we would expect to abandon our efforts to complete an initial business combination and instead to liquidate the Company.
As described further above, the SPAC Rule Proposals relate, among other matters, to the circumstances in which SPACs such as the Company could potentially be subject to the Investment Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria, including a limited time period to announce and complete a business combination. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for a business combination no later than 18 months after the effective date of its registration statement for its initial public offering (the “IPO Registration Statement”). The companyof MTAC, the purchasers of which exchanged their MTAC shares for our Common Stock in the Business Combination, the selling securityholders may still have an incentive to sell our shares of our Common Stock because they purchased the shares at prices that are significantly lower than the purchase prices paid by our public investors or the current trading price of our Common Stock. While certain of the selling securityholders may experience a positive rate of return on their investment in our Common Stock as a result, the public securityholders may not experience a similar rate of return on the securities they purchased due to differences in their purchase prices and the trading price. For example, based on the closing price of our Common Stock of $4.30 as of October 31, 2023, assuming all shares held by the Sponsor that are subject to vesting and forfeiture are fully vested, the original holder of the Founder Shares would thenexperience a potential profit of up to approximately $4.30 per share that they purchased prior to the initial public offering of MTAC, or up to approximately $18.7 million in the aggregate (not giving effect to the issuance of Common Stock issuable upon exercise of the Warrants held by them).
BecauseClosing; (ii) the SPAC Rule Proposals have not yet been adopted, there is currently uncertainty concerningfirst day after the applicabilitydate on which the closing price of the Investment Company Act to a SPAC, including a company like ours, that has not entered into a definitive agreementCommon Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within 18 monthsany 30-trading day period commencing at least 150 days after the effective date of the IPO Registration StatementClosing; or (iii) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that does not complete its business combination within 24 months after such date. We have not entered into a definitive business combination agreement within 18 months after the effective dateresults in all of our IPO Registration Statementpublic shareholders having the right to exchange their Common Stock for cash, securities or other property. Even if the trading price of our Common Stock falls to or significantly below the current trading price, the selling securityholders may still have an incentive to sell and may not completeprofit due to the nominal purchase prices paid by such selling securityholders, which are significantly lower than the purchase prices paid by the public securityholders. Certain of our initial business combination within 24 monthsselling securityholders acquired the Common Stock at prices that are significantly lower than the current trading price of such date. As a result, it is possible that a claim could be made that we have been operating as an unregistered investment company.
If weour Common Stock.
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To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the securities heldfuture resale in the Trust Accountpublic market and insteadresult in dilution to holdour shareholders.
The funds in the Trust Account have, since our Initial Public Offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligationsthat certain warrant agreement, dated December 17, 2020 by and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk ofbetween us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, and we expect that we will, on or prior to the 24-month anniversary of the effective date of the IPO Registration Statement, instruct Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agreement”). The exercise price of the trusteeWarrants is $11.50 per share, or approximately $164.0 million in the aggregate, assuming none of the Warrants are exercised through “cashless” exercise. We believe the likelihood that warrant holders will exercise their warrants, and therefore the
In addition, even prior to the 24-month anniversary of the effective date of the IPO Registration Statement, we maysecurities shall be deemed to be an investment company. The longer thathave notice of and consented to the fundsforum provisions in our Certificate of Incorporation. Although we believe these exclusive forum provisions will benefit us by providing increased consistency in the Trust Account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in suchapplication of Delaware law and federal securities even prior to the 24-month anniversary, the greater the risk that we may be considered an unregistered investment company, in which case we may be required to liquidate the Company. Accordingly, we may determine, in our discretion, to liquidate the securities heldlaws in the Trust Account at any time, even priortypes of lawsuits to which each applies, the 24-month anniversary, and instead hold all funds in the Trust Account in cash, which would further reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
Weexclusive forum provisions may not be ablelimit a stockholder’s ability to complete an initial business combination withbring a U.S. target company since such initial business combination may be subject to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee on Foreign Investment in the United States (“CFIUS”), or ultimately prohibited.
Certain federally licensed businesses in the United States, such as broadcasters and airlines, may be subject to rules or regulations that limit foreign ownership. In addition, CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States. Were we considered to be a “foreign person” under such rules and regulations, any proposed business combination between us and a U.S. business engagedclaim in a regulated industryjudicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may affect national security could be subject to such foreign ownership restrictions and/or CFIUS review. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings. If our potential initial business combination with a U.S. business falls within the scope of foreign ownership restrictions, we may be unable to consummate an initial business combination with such business. In addition, if our potential business combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with the initial business combination without notifying CFIUS and risk CFIUS intervention, before or after closing the initial business combination. CFIUS may decide to block or delay our initial business combination, impose conditions to mitigate national security concernsdiscourage lawsuits with respect to such initial business combination or order usclaims. There is uncertainty as to divest all orwhether a portion of a U.S. business of the combined company if we had proceeded without first obtaining CFIUS clearance. The foreign ownership limitations,court would enforce such provisions, and the potential impactenforceability of CFIUS,similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may limitincur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition. Furthermore, investors cannot waive compliance with the attractivenessfederal securities laws and rules and regulations promulgated thereunder.
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Moreover, the process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial business combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public stockholders may only receive $10.00 per share, and our Warrants will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company.
Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds,
For and Issuer Purchases of Equity Securities
Securities Act.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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Incorporated by Reference | ||||||||||||||||||||||||||||||||
Exhibit | Description | Schedule/ Form | File Number | Exhibits | Filing Date | |||||||||||||||||||||||||||
2.1# | Form 8-K | 001-39813 | 2.1 | November 14, 2022 | ||||||||||||||||||||||||||||
2.2 | Form 8-K | 001-39813 | 10.1 | April 5, 2023 | ||||||||||||||||||||||||||||
2.3 | Form 8-K | 001-39813 | 10.1 | May 13, 2023 | ||||||||||||||||||||||||||||
2.4 | Form 8-K | 001-39813 | 10.1 | July 6, 2023 | ||||||||||||||||||||||||||||
3.1 | Form 8-K | 001-39813 | 3.1 | August 16, 2023 | ||||||||||||||||||||||||||||
3.2 | Form 8-K | 001-39813 | 3.2 | August 16, 2023 | ||||||||||||||||||||||||||||
3.3 | Form 8-K | 001-39813 | 3.3 | August 16, 2023 | ||||||||||||||||||||||||||||
4.1 | Form 8-K | 001-39813 | 4.1 | August 16, 2023 | ||||||||||||||||||||||||||||
4.2 | Form 8-K | 001-39813 | 4.2 | August 16, 2023 | ||||||||||||||||||||||||||||
4.3 | Form 8-K | 001-39813 | 4.1 | December 23, 2020 | ||||||||||||||||||||||||||||
10.1* | Form 8-K | 001-39813 | 10.21 | August 16, 2023 | ||||||||||||||||||||||||||||
10.2* | Form 8-K | 001-39813 | 10.22 | August 16, 2023 | ||||||||||||||||||||||||||||
10.3* | Form 8-K | 001-39813 | 10.23 | August 16, 2023 | ||||||||||||||||||||||||||||
10.4* | Form 8-K | 001-39813 | 10.24 | August 16, 2023 | ||||||||||||||||||||||||||||
10.5* | Form 8-K | 001-39813 | 10.25 | August 16, 2023 | ||||||||||||||||||||||||||||
10.6* | Form 8-K | 001-39813 | 10.26 | August 16, 2023 |
Incorporated by Reference Exhibit Description File Number Exhibits Filing Date 10.7*## Form S-1/A 333-274292 10.14 October 18, 2023 10.8 Form 8-K 001-39813 10.1 June 8, 2023 10.9 Form 8-K 001-39813 10.2 July 6, 2023 10.10 Form 8-K 333-269138 99.1 October 3, 2023 31.1 31.2 32.1 32.2 101.INS Inline XBRL Instance Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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