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Item 7. Management’s Discussion and Analysis

2023-03-22 compared with 2022-03-03 · 89 added, 57 removed, 46 unchanged (76% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8.

Financial Statements and Supplementary Data” of this Report.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A.

Risk Factors” and elsewhere in this Report.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report.

We are a blank check company formed under the laws of the State of Delaware on September 11, 2020 for the purpose of effecting an initial business combination.

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We cannot assure you that our plans to complete an initial business combination will be successful.

Recent Developments

On August 12, 2021, we 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”).

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 will merge with and into us, with us surviving as a wholly-owned subsidiary of Memic (the “Merger”).

For more information about the Business Combination Agreement and related agreements, see Item 1.

Business of this Report.

Termination of Memic Business Combination Agreement

On August 12, 2021, we entered into the Memic Business Combination Agreement with Memic and Memic Merger Sub.

On March 9, 2022, we convened and then adjourned, without conducting any other business, a special meeting of stockholders relating to the proposed business combination with Memic and the other transactions contemplated by the Memic Business Combination Agreement.

On March 10, 2022, we entered into the Termination Agreement with Memic and Memic Merger Sub, under which the parties agreed to mutually terminate the Memic Business Combination Agreement.

The termination of the Memic Business Combination Agreement became effective as of March 9, 2022.

As a result of the termination of the Memic Business Combination Agreement, the Memic Business Combination Agreement, along with any Transaction Agreement (as defined in the Memic Business Combination Agreement) entered into in connection therewith, are void and there is no liability under either of the Memic 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 Memic Merger Sub have also agreed, on behalf of themselves and their respective related parties, to a release of claims relating to the proposed business combination.

TriSalus Business Combination

On November 11, 2022, the Company entered into the TriSalus Merger Agreement with Merger Sub, and TriSalus under which Merger Sub will merge with and into TriSalus, with TriSalus surviving the TriSalus Merger as a wholly owned subsidiary of the Company.

The TriSalus Business Combination is subject to certain closing conditions as summarized below under “Conditions to Closing.” Upon consummation of the TriSalus Business Combination, the Company will be renamed “TriSalus Life Sciences, Inc.”

For a full description of the TriSalus Merger Agreement and the proposed TriSalus Business Combination, please see “Item 1.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date.

Our only activities from September 11, 2020 (inception) through December 31, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and after the Initial Public Offering, identifying a target company for an initial business combination, including Memic.

Our only activities from September 11, 2020 (inception) through December 31, 2022 were organizational activities, those necessary to prepare for the initial public offering, and identifying a target company for an initial business combination, including TriSalus.

We do not expect to generate any operating revenues until after the completion of our initial business combination.

We generate non-operating income in the form of interest income on marketable securities held in the Trust Account.

Until the Extension Special Meeting, we generated non-operating income in the form of interest income on cash and investments held in the trust account.

After the Extension Special Meeting, the funds are now held in the trust account is in a demand deposit account held by Continental Stock Transfer & Trust Company and no longer contains marketable securities.

We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance) as well as identifying and evaluating targets for an initial business combination.

For the year ended December 31, 2021, we had a net income of $4,767,283, which consists of a change in fair value of warrant liabilities of $7,744,000 and interest income on marketable securities held in the Trust Account of $63,997, offset by general and administrative expenses of $3,040,714.

General and administrative expenses increased by $2,932,221 primarily due to an increase in expenses related to the Business Combination Agreement.

For the period from September 11, 2020 (inception) through December 31, 2020, we had a net loss of $711,389, which consists of general and administrative expenses of $108,493, change in fair value of warrant liabilities of $83,333 and transaction costs associated with the Initial Public Offering of $522,861, offset by interest income on investments held in the Trust Account of $3,298.

For the year ended December 31, 2022, we had a net income of $5,539,079, which consists of a change in fair value of warrant liabilities of $5,837,332 and interest income on cash and investments held in the trust account of $3,018,726, offset by general and administrative expenses of $2,746,125 and provision for income taxes of $570,854.

For the year ended December 31, 2021, we had a net income of $4,767,283, which consists of a change in fair value of warrant liabilities of $7,744,000 and interest income on cash and investments held in the trust account of $63,997, offset by general and administrative expenses of $3,040,714.

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 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.

Simultaneously with the closing of the initial public offering, we consummated the sale of 4,933,333 private placement warrants at a price of $1.50 per private placement warrant in the private placement, 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 warrants, 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 the year ended December 31, 2022, cash used in operating activities was $2,736,994.

Net income of $4,767,283 was affected by a change in fair value of warrant liabilities of $7,744,000 and interest earned on marketable securities held in the Trust Account of $63,998.

Net income of $5,539,079 was affected by a change in fair value of warrant liabilities of $5,837,332 and interest earned on cash and investments held in the trust account of $3,018,726.

Changes in operating assets and liabilities provided $579,985 of cash for operating activities.

For the period from September 11, 2020 (inception) through December 31, 2020, cash used in operating activities was $677,599.

Net loss of $711,389 was affected by formation cost paid by sponsor in exchange for issuance of founder shares of $878, interest earned on investments held in the Trust Account of $3,298, change in fair value of warrant liabilities of $83,333 and transaction costs associated with the Initial Public Offering of $522,861.

Changes in operating assets and liabilities used $569,984 of cash from operating activities.

As of December 31, 2021, we had cash held in the Trust Account of $250,007,295.

For the year ended December 31, 2021, cash used in operating activities was $1,738,114.

Net income of $4,767,283 was affected by a change in fair value of warrant liabilities of $7,744,000 and interest earned on cash and investments held in the trust account of $63,998.

Changes in operating assets and liabilities provided $1,302,600 of cash for operating activities.

As of December 31, 2022, we had investments held in the trust account of $19,827,884.

Interest income on the balance in the trust account may be used by us to pay taxes.

Through December 31, 2021, we withdrew $60,000 of interest earned from the Trust Account.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our initial business combination.

To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

During the year ended December 31, 2022, the Company withdrew $905,000 of interest income from the trust account to pay for taxes and $232,371,273 in connection with redemption of public shares in connection with the Extension Special Meeting.

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less income taxes payable), to complete our business combination.

To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As of December 31, 2022, we had cash of $153,563.

We intend to use the funds held outside the Trust Account primarily to perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.

We intend to use the funds held outside the trust account primarily to perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination, including the TriSalus 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 funds as may be required.

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The warrants would be identical to the private placement warrants.

On December 30, 2021, the Company issued an unsecured promissory note (the “2021 Promissory Note”) to the sponsor, pursuant to which the Company borrowed an aggregate principal amount of $544,000.

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, the Company issued an unsecured promissory note in principal amount of up to $400,000 to the Sponsor (the “2022 Promissory Note”), of which $75,000 was funded by the sponsor upon execution thereof.

The 2022 Promissory Note does not bear interest and matures upon closing of the Company’s initial business combination.

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 Company will be able to consummate an initial business combination by this time.

As of December 31, 2022 and 2021, there was $544,000 outstanding under the 2021 Promissory Note.

On January 28, 2022, we issued the 2022 Promissory Note, of which $400,000 was funded by the sponsor during the year ended December 31, 2022.

The 2022 Promissory Note does not bear interest and matures upon closing of our initial business combination.

As of December 31, 2022 and 2021, there was $400,000 and $0 outstanding under the 2022 Promissory Note, respectively.

On May 24, 2022, we issued the 2022 Convertible 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 with our initial business combination.

The 2022 Convertible Promissory Note is non-interest bearing and matures upon the closing of a business combination (in which case we will repay the 2022 Convertible Promissory Note note out of the proceeds of the trust account released to us) or upon our liquidation (in which case we may only repay the 2022 Convertible Promissory Note out of working capital funds held outside the trust account).

At the election of the sponsor, all or a portion of the unpaid principal amount of the 2022 Convertible Promissory Note may be converted into that number of warrants at a price of $1.50 per warrant, each exercisable for one share of Class A common stock.

As of December 31, 2022 and 2021, there was $1,341,000 and $0 outstanding under the 2022 Convertible Promissory Note.

On December 16, 2022, we issued the 2022 Extension Note in the principal amount of up to $468,821 to the sponsor pursuant to which the sponsor agreed to loan to us and deposit into the trust account the Extension Funds for the public shares that were not redeemed in connection with the Extension.

The 2022 Extension Note does not bear interest and is repayable in full upon the date of the consummation of an initial business combination.

As of December 31, 2022 and 2021, there was $39,068 and $0 outstanding under the 2022 Extension Note, respectively.

On December 16, 2022, we issued the 2022 Promissory Note III, an unsecured promissory note in the principal amount of up to $1,000,000 to the sponsor for working capital purposes, which may be drawn down from time to time upon our request.

The 2022 Promissory Note III does not bear interest and the principal amount will not be payable if we fail to complete our initial business combination within the required time period as set forth our amendment and restated certificate of incorporation, as amended from time to time.

As of December 31, 2022 and 2021, there was no outstanding balance under 2022 Promissory Note III, respectively.

In connection with our assessment of going concern considerations in accordance with FSB ASU Topic 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have until June 22, 2023, to consummate an initial business combination.

It is uncertain that we will be able 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 of the Company.

Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern.

No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after December 22, 2022.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2021.

We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination

not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern.

Management plans to consummate a business combination prior to the mandatory liquidation date.

No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after June 22, 2023.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay 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.

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 an initial business combination, subject to the terms of the underwriting agreement.

As of December 31, 2021, the Company incurred legal fees of $508,525 and investment advisory fees of $400,000, which are contingent upon the consummation of the Merger.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.

Upon completion of an initial business combination or our liquidation, we will cease paying these monthly fees.

For the year ended December 31, 2022, we incurred $120,000 in fees for these services.

For the year ended December 31, 2021, we incurred $120,000 in fees for these services.

As of December 31, 2022 and 2021, there were $240,000 and $120,000 included in accounts payable and accrued expenses in the consolidated balance sheets to the financial statements and the notes thereto contained elsewhere in this Report, respectively.

The underwriters of the initial public offering 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 we complete an initial business combination, subject to the terms of the underwriting agreement.

On November 11, 2022, the Company and Raymond James, the underwriter for the IPO, amended that certain Underwriting Agreement, dated December 17, 2020, pursuant to which, in the event that the TriSalus Business Combination is consummated, the underwriter agreed to waive its right to the deferred underwriting fees and commissions that would have otherwise been payable upon the consummation of the business combination.

We incurred legal fees of $508,525 and investment advisory fees of $400,000, which were contingent upon the consummation of the proposed business combination with Memic.

On March 12, 2022, the Memic Business Combination Agreement was terminated, as such, the incurred legal and investment advisory fees are no longer due.

These fees were never accrued on our balance sheet;

therefore, no reversal was required.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.

Actual results could materially differ from those estimates.

We have identified the following critical accounting policies:

We have identified the following critical accounting estimates:

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, 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 financial statements is the determination of the fair value of the warrant liabilities.

Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.

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 sheet date until exercised, and any change in fair value is recognized in the statement of operations.

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

We evaluate all of our 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 Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and

ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The Company accounts for the public warrants and private placement warrants in accordance with the guidance contained in ASC Topic 815-40, “Contracts in Entity’s Own Equity”, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities.

Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period.

This liability is subject to re-measurement at each balance sheets date until exercised, and any change in fair value is recognized in the statements of operations.

The private placement warrants were initially and subsequently valued using a Monte Carlo Simulation Model.

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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 as a liability instrument and is measured at fair value.

We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC 480.

Shares of Class A common stock subject to mandatory redemption is classified as 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 of uncertain events not solely within our control) is classified as temporary equity.

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Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of our balance sheets.

Net Income (Loss) per Common Share

Net income (loss) per common stock is computed by dividing net income (loss) 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.

Net Income per Common Share

Net income per common stock is computed by dividing net income by the weighted average number of common stock outstanding for the period.

We have 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.

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Recent Accounting Standards

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments.

In August 2020, the FASB issued ASU Topic 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) to simplify accounting for certain financial instruments.

ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

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ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021.

The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

We are currently assessing the impact, if any, that ASU 2020-06 would have on our financial position, results of operations or cash flows.

We have not adopted this guidance as of December 31, 2022.

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 financial statements.

Factors That May Adversely Affect Our Results of Operations

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 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.

Quantitative and Qualitative Disclosures about Market Risk.

Not required for smaller reporting companies.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.

Financial Statements and Supplementary Data.

This information appears following Item 15 of this Report and is included herein by reference.

Reference is made to pages F-1 through F-25 comprising a portion of this Report, which are incorporated herein by reference.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis