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 Annual Report on Form 10-K.
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 "Cautionary Note Regarding
Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk Factors" and
elsewhere in this Annual Report on Form 10-K.
Overview
LAVA Medtech Acquisition Corp. was incorporated in Delaware on March 31, 2021.
The Company was formed for the purpose of entering into a merger, stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business transaction with one or more businesses that the Company has not yet
identified (a "Business Combination").
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2022 were organizational activities,
those necessary to prepare for the IPO, described below, and, after our IPO,
identifying a target company for an initial business combination. 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 investment 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 for due diligence expenses.
For the year ended December 31, 2022, we had a net income of $4,504,994, which
consisted of operating expenses of $1,560,762, provision for income tax of
$304,294, change in fair value warrant liabilities of $4,659,750, expense of
Delaware franchise taxes of $262,587, and income on investment held in trust
account of $1,699,739 and income held on cash in the bank of $10,561.
For the year ended December 31, 2021, we had a net income of $17,971,241, which
primarily consists of operating expenses of $204,237, change in fair value of
warrant liabilities of $18,344,700 and expense of Delaware franchise taxes of
$93,223, offset by interest earned on marketable securities held in the Trust
Account of $2,023 and transaction costs related to warrant liability of $97,174.
Liquidity and Capital Resources
The registration statement for our IPO was declared effective on October 26,
2021. On October 29, 2021, we consummated the IPO of 11,500,000 units, including
1,500,000 Units issued pursuant to the full exercise of the underwriters'
over-allotment option, with respect to the Class A common stock included in the
Units being offered at $10.00 per Unit generating gross proceeds of
$115,000,000. Simultaneously with the closing of the IPO, we consummated the
sale of 7,500,000 private placement warrants at a price of $1.00 per Private
Placement Warrant in a private placement to our sponsor, LAVA Medtech Sponsor
LP, generating gross proceeds of $7,500,000.
Following the closing of the IPO and exercise of the over-allotment,
$117,875,000 ($10.25 per Unit) from the net proceeds of the sale of the Units in
the IPO and the Private Placement Warrants was placed in a trust account and
will be invested in a money market fund that only invests in U.S Treasuries and
cash.
For the year ended December 31, 2022, cash used in operating activities was
$658,824. Changes in operating assets and liabilities provided $1,176,519 of
cash for operating activities. Net cash provided by investing activities was
$276,747, derived from cash being withdrawn from the Trust Account to pay
franchise and income taxes.
For the year ended December 31, 2021, cash used in operating activities was
$1,028,439. Net cash used in investing activities was $117,875,000 and net cash
provided by financing activities was $120,444,670 mainly reflecting the proceeds
of our IPO and subsequent deposit into the trust account.
At December 31, 2022, we had investments held in the trust account of
$119,299,973. We intend to use substantially all of the funds held in the trust
account, including any amounts representing interest income 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.
At December 31, 2022, we had cash of $1,159,154 outside of the trust account. We
intend to use the funds held outside the trust account primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, plants or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a business combination.
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If our estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a Business Combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our Business Combination. Moreover, we may need to
obtain additional financing either to complete our Business Combination or
because we become obligated to redeem a significant number of our Public Shares
upon consummation of our Business Combination, in which case we may issue
additional securities or incur debt in connection with such Business
Combination.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with the Financial Accounting Standards Board's ("FASB's") Accounting
Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an
Entity's Ability to Continue as a Going Concern," we have determined that if the
Company is unable to complete a Business Combination by April 29, 2023, then the
Company will cease all operations except for the purpose of liquidating. The
liquidity condition and the date for mandatory liquidation and subsequent
dissolution raises substantial doubt about the Company's ability to continue as
a going concern for a reasonable period of time, which is considered to be one
year from the issuance date of the financial statements. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2022. We do not participate in
transactions that create relationships with 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.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As such, our interim financial statements may
not be comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies under the Dodd-Frank Wall
Street Reform and Consumer Protection Act, (iii) comply with any requirement
that may be adopted by the PCAOB regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the financial statements (auditor discussion and analysis) and (iv)
disclose certain executive compensation related items such as the correlation
between executive compensation and performance and comparisons of executive
compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of our IPO or until we are no
longer an "emerging growth company," whichever is earlier.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
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. Actual results could materially differ from those
estimates.
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Accounting for Warrants
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the instruments' specific terms and
applicable authoritative guidance in ASC 480 and ASC 815, "Derivatives and
Hedging" ("ASC 815"). The assessment considers whether the instruments are
free-standing financial instruments pursuant to ASC 480, meet the definition of
a liability pursuant to ASC 480, and whether the instruments meet all of the
requirements for equity classification under ASC 815, including whether the
instruments are indexed to our own common shares and whether the instrument
holders could potentially require "net cash settlement" in a circumstance
outside of our control, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, was conducted at
the time of warrant issuance and as of each subsequent period end date while the
instruments are outstanding. Management has concluded that the Public Warrants
issued pursuant to the warrant agreement qualify for equity accounting treatment
and the Private Placement Warrants qualify for liability accounting treatment.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480,
"Distinguishing Liabilities from Equity." 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
features redemption rights that are 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' deficit. Our common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented as temporary equity, outside of the
stockholders' deficit section of our balance sheets. The Company recognizes
changes in redemption value immediately as they occur and adjusts the carrying
value of redeemable common stock to equal the redemption value at the end of
each reporting period. Increases or decreases in the carrying amount of
redeemable common stock are affected by charges against additional paid-in
capital and accumulated deficit.
Net Loss per Common Share
Net income (loss) per share is computed by dividing net income (loss) by the
weighted-average number of shares of common stock outstanding during the period,
excluding shares of common stock subject to forfeiture by the Sponsor. At
December 31, 2022, we did not have any dilutive securities and/or other
contracts that could, potentially, be exercised or converted into shares of
common stock and then share in our earnings. As a result, diluted income (loss)
per share is the same as basic income (loss) per share for the periods
presented.
Recent Accounting 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 financial statements.
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LAVA MEDTECH ACQUISITION CORP. 