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.
Overview
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.
We intend to effectuate our an initial business combination using cash from the
proceeds of the initial public offering and the sale of the private placement
warrants, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete an initial
business combination will be successful.
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.
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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. Business."
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,
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. 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, 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 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 $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 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. 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.
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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, 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. 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 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. 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
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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
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 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
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
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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. The public warrants for periods
where no observable traded price was available were also valued using a Monte
Carlo simulation Model. For periods subsequent to the detachment of the public
warrants from the units, the public warrant quoted market price was used as the
fair value as of each relevant date.
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 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. At all other times,
common stock is classified as stockholders' equity. Our Class A common stock
features certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. 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 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. Accretion associated with the redeemable shares of Class A common
stock is excluded from earnings per share as the redemption value approximates
fair value.
Recent Accounting Standards
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. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity's
own equity. ASU 2020-06 amends the diluted earnings per share guidance,
including the requirement to use the if-converted method for all convertible
instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a
full or modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. 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.
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