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. The following discussion
and analysis of the Company's financial condition and results of operations
should be read in conjunction with the unaudited condensed financial statements
and the notes thereto contained elsewhere in this Quarterly Report. Certain
capitalized terms used but not defined in the below discussion and elsewhere in
this Quarterly Report have the meanings ascribed to them in the footnotes to the
accompanying financial statements included as part of this Quarterly Report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that
are not historical facts and involve risks and uncertainties that could cause
actual results to differ materially from those expected and projected. All
statements other than statements of historical fact included 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 events 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:
? our ability to select an appropriate target business or businesses;
? our ability to complete our initial business combination;
? our expectations around the performance of the prospective target business or
businesses;
? our success in retaining or recruiting, or changes required in, our officers,
key employees or directors following our initial business combination;
our officers and directors allocating their time to other businesses and
? potentially having conflicts of interest with our business or in approving our
initial business combination, as a result of which they would then receive
expense reimbursements;
? our potential ability to obtain additional financing to complete our initial
business combination;
? our pool of prospective target businesses in the healthcare industry;
? our ability to consummate an initial business combination due to the continued
uncertainty resulting from the COVID-19 pandemic;
? the ability of our officers and directors to generate a number of potential
acquisition opportunities;
? our public securities' liquidity and trading;
? the trust account not being subject to claims of third parties; or
? our financial performance following our Initial Public Offering.
A number of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's Annual Report on Form 10-K, as amended, filed with the U.S. Securities
and Exchange Commission (the "SEC") as well as the Risk Factors section of the
proxy statement/ prospectus included in the registration statement for the
terminated Merger when it becomes available. The Company's securities filings
can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company 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.
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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.
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").
On March 9, 2022, the Company convened and then adjourned, without conducting
any other business, its special meeting of stockholders relating to the proposed
business combination with Memic and the other transactions contemplated by the
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 is 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.
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 June 30, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, and identifying a target company for an initial business
combination, including Memic. 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. 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 three months ended June 30, 2022, we had a net income of $2,386,239,
which consists of a change in fair value of warrant liabilities of $2,388,000
and interest earned on marketable securities held in the Trust Account of
$314,714, offset by general and administrative expenses of $288,273 and
provision for income taxes of $28,202.
For the six months ended June 30, 2022, we had a net income of $5,222,964, which
consists of a change in fair value of warrant liabilities of $5,837,332 and
interest earned on marketable securities held in the Trust Account of $371,914,
offset by general and administrative expenses of $958,080 and provision for
income taxes of $28,202.
For the three months ended June 30, 2021, we had a net income of $378,866, which
consists of a change in fair value of warrant liabilities of $1,159,999 and
interest earned on marketable securities held in the Trust Account of $2,792,
offset by general and administrative expenses of $783,925.
For the six months ended June 30, 2021, we had a net income of $6,832, which
consists of a change in fair value of warrant liabilities of $1,061,333 and
interest earned on marketable securities held in the Trust Account of $37,416,
offset by general and administrative expenses of $1,091,917.
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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. 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 six months ended June 30, 2022, cash used in operating activities was
$1,122,702. Net income of $5,222,964 was affected by a change in fair value of
warrant liabilities of $5,837,332 and interest earned on marketable securities
held in the Trust Account of $371,914. Changes in operating assets and
liabilities used $136,420 of cash for operating activities.
For the six months ended June 30, 2021, cash used in operating activities was
$692,054. Net income of $6,832 was affected by interest earned on investments
held in the Trust Account of $37,416 and change in fair value of warrant
liabilities of $1,061,333. Changes in operating assets and liabilities provided
$399,863 of cash from operating activities.
As of June 30, 2022, we had investments held in the Trust Account of $
250,288,209. Interest income on the balance in the Trust Account may be used by
us to pay taxes. During the six months ended June 30, 2022, we withdrew $91,000
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.
As of June 30, 2022, we had cash of $69,182. 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.
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. 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 $400,000 was funded by the Sponsor during the quarter ended June 30,
2022. The 2022 Promissory Note does not bear interest and matures upon closing
of the Company's 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 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 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 June 30, 2022 and
December 31, 2021, there was $500,000 and $0 outstanding under the Convertible
Promissory Note.
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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. 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 June 30, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay 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 six months ended June 30, 2022, the Company incurred $30,000 and
$60,000 in fees for these services, respectively. For the three and six months
ended June 30, 2021, the Company incurred $30,000 and $60,000 in fees for these
services, respectively. As of June 30, 2022 and December 31, 2021, there were
$180,000 and $120,000 included in accounts payable and accrued expenses in the
accompanying balance sheets, respectively.
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.
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 Business Combination Agreement was
terminated, as such, the incurred legal and investment advisory fees are no
longer due. These fees were never accrued on the Company's balance sheet,
therefore no reversal was required.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
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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 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 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. 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 condensed
balance sheets.
Net Income (Loss) per share of Common Stock
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. 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 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. 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. The Company is currently assessing the impact, if
any, that ASU 2020-06 would have on its financial position, results of
operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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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.
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