Calidi Biotherapeutics(CLDI) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed financial statements, including balance sheets, statements of operations, changes in stockholders' deficit, cash flows, and comprehensive notes Condensed Balance Sheets The balance sheets reflect decreased operating cash and total liabilities, with Trust Account marketable securities slightly increasing from December 2021 to June 2022 Condensed Balance Sheet Highlights | Metric | June 30, 2022 | December 31, 2021 | Change | | :--------------------------------------- | :------------ | :---------------- | :----- | | Cash | $328,843 | $1,062,653 | $(733,810) | | Marketable securities in Trust Account | $230,183,554 | $230,004,784 | $178,770 | | Total Assets | $231,020,255 | $231,769,289 | $(749,034) | | Warrant Liability | $1,345,000 | $7,469,150 | $(6,124,150) | | Total Liabilities | $10,078,882 | $16,451,319 | $(6,372,437) | | Accumulated Deficit | $(9,242,756) | $(14,687,389) | $5,444,633 | | Total Stockholders' Deficit | $(9,242,181) | $(14,686,814) | $5,444,633 | Condensed Statements of Operations The company reported net income for the three and six months ended June 30, 2022, a significant improvement driven by fair value gains on warrant and forward purchase unit liabilities Condensed Statements of Operations Highlights | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | Inception Through June 30, 2021 | | :-------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :------------------------------ | | Operating costs | $361,622 | $83,303 | $890,480 | $83,303 | | Net income (loss) | $4,161,210 | $(83,303) | $5,623,403 | $(83,303) | | Basic and diluted net income per share, redeemable Class A common stock | $0.15 | — | $0.20 | — | | Basic and diluted net income per share, non-redeemable Class B common stock | $0.14 | $(0.02) | $0.19 | $(0.02) | | Change in fair value of warrant liability | $4,029,850 | — | $6,124,150 | — | | Change in fair value of forward purchase unit liability | $332,983 | — | $210,963 | — | | Interest income on marketable securities | $159,999 | — | $176,504 | — | Condensed Statements of Changes in Class A Common Stock Subject to Possible Redemption and Stockholders' Deficit This statement details changes in Class A common stock subject to redemption and stockholders' deficit, reflecting net income and remeasurement adjustments Changes in Stockholders' Deficit (Six Months Ended June 30, 2022) | Metric | Amount | | :-------------------------------------------------- | :------------- | | Balance – December 31, 2021 | $(14,686,814) | | Remeasurement of Class A common stock to redemption value | $(178,770) | | Net income | $5,623,403 | | Balance – June 30, 2022 | $(9,242,181) | Changes in Stockholders' Deficit (Inception Through June 30, 2021) | Metric | Amount | | :-------------------------------------------------- | :------------- | | Balance – March 24, 2021 (inception) | $0 | | Issuance of Class B common stock to Sponsor | $20,025 | | Issuance of Class B common stock to Metric | $4,975 | | Net loss | $(83,303) | | Balance – June 30, 2021 | $(58,303) | Condensed Statements of Cash Flows The cash flow statement shows significant net cash outflow from operating activities for the six months ended June 30, 2022, decreasing the overall cash balance Condensed Statements of Cash Flows Highlights | Metric | 6 Months Ended June 30, 2022 | Inception Through June 30, 2021 | | :------------------------------------ | :--------------------------- | :------------------------------ | | Net cash used in operating activities | $(733,810) | $(118,804) | | Net cash from financing activities | — | $213,804 | | Net Change in Cash | $(733,810) | $95,000 | | Cash – Ending | $328,843 | $95,000 | Notes to Interim Condensed Financial Statements These notes provide essential context and detailed explanations for the financial statements, covering the company's organization, accounting policies, and specific financial instruments NOTE 1. Organization and Plans of Business Operations The company, a SPAC, completed its IPO in September 2021, placing $230 million in a Trust Account, but faces liquidity challenges and going concern doubts despite Sponsor loan commitments - The Company is a blank check company (SPAC) formed on March 24, 2021, for the purpose of entering into a business combination[28] - The IPO was consummated on September 14, 2021, raising $230,000,000 from 23,000,000 Units at $10.00 per Unit, with proceeds placed in a Trust Account[30][31] - As of June 30, 2022, the Company had $328,843 in operating cash and working capital of $386,007, which is insufficient to sustain operations for one year, raising substantial doubt about its ability to continue as a going concern[33][35][36] NOTE 2. Summary of Significant Accounting Policies This note details the company's GAAP adherence, EGC status, and key accounting policies for cash, trust account investments, redeemable Class A common stock, and financial instrument fair value - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[39][40] - Cash held in the Trust Account ($230,183,554 as of June 30, 2022) is invested in U.S. government securities or money market funds, pending a business combination or redemption[44] - Class A common stock subject to possible redemption is classified as temporary equity and adjusted to redemption value at each reporting period, with changes reflected in additional paid-in capital or accumulated deficit[46][47] - Warrants for the Company's common stock are accounted for as liabilities at fair value and re-valued at each reporting date, with changes recognized in the statements of operations[59] NOTE 3. Initial Public Offering The IPO, completed September 9, 2021, generated $230 million from 23 million Units at $10.00 each, with proceeds placed in the Trust Account and $22.5 million in transaction costs - The Company sold 23,000,000 Units in its IPO at $10.00 per Unit, generating gross proceeds of $230,000,000[63] - $230,000,000 of the IPO proceeds was placed in the Trust Account, with $2,081,180 available for working capital[64][65] - Total transaction costs for the IPO were $22,517,064, including underwriting discounts, deferred underwriting fees, and excess fair value of founder shares[65] NOTE 4. Private Placement Concurrently with the IPO, the company sold 3,397,155 Private Placement Warrants for $5.1 million to the Sponsor and Metric, with proceeds added to the Trust Account and expiration contingent on a business combination - The Company sold 3,397,155 Private Placement Warrants to the Sponsor and Metric for $1.50 per warrant, generating $5,095,733[66] - Proceeds from the Private Placement Warrants were added to the Trust Account[66] NOTE 5. Related Party Transactions Related party transactions include the Sponsor and Metric's purchase of 5,750,000 Founder Shares for $25,000, a repaid Sponsor promissory note, potential future Working Capital Loans, and a $10,000 monthly administrative support agreement - The Sponsor and Metric purchased 5,750,000 Founder Shares for an aggregate of $25,000, representing approximately 20% of outstanding shares post-IPO[67] - The Sponsor loaned the Company $188,804 via a non-interest bearing promissory note, which was repaid in full on September 14, 2021[72] - The Company has an optional agreement to pay an affiliate of the Sponsor $10,000 per month for administrative support[74] NOTE 6. Stockholders' Equity The company is authorized to issue preferred, Class A, and Class B common stock, with 23 million Class A and 5.75 million Class B shares outstanding as of June 30, 2022, where Class B converts to Class A upon a business combination - The Company is authorized to issue 1,000,000 shares of preferred stock (none outstanding), 300,000,000 shares of Class A common stock (23,000,000 subject to redemption outstanding), and 30,000,000 shares of Class B common stock (5,750,000 outstanding)[75][76][77] - Class B common stock (Founder Shares) will automatically convert into Class A common stock on a one-for-one basis upon consummation of a Business Combination, subject to adjustment[78] NOTE 7. Warrants This note details Public and Private Placement Warrant terms, including exercisability, registration, and redemption conditions, with Private Placement Warrants being non-redeemable while held by initial purchasers - Public Warrants become exercisable on the later of 12 months from IPO closing or 30 days after a Business Combination[79] - The Company may redeem Public Warrants at $0.01 per warrant if Class A common stock equals or exceeds $18.00 for 20 trading days within a 30-day period[83] - Private Placement Warrants are identical to Public Warrants but are not transferable/saleable until 30 days post-Business Combination and are non-redeemable while held by initial purchasers[87] - All 14,897,155 warrants (Public and Private) are accounted for as derivative liabilities at fair value, with changes recognized in the statement of operations[88][89] NOTE 8. Commitments and Contingencies The company has commitments for registration rights, an $8.05 million deferred underwriting fee payable upon a business combination, and a forward purchase agreement with Franklin Strategic Series for $50 million in Class A common stock and warrants - Holders of Founder Shares and Private Placement Warrants are entitled to registration rights[90] - A deferred underwriting fee of $8,050,000 is payable to the underwriter upon completion of a Business Combination[92] - The Company entered into a forward purchase agreement with Franklin Strategic Series to purchase 5,000,000 Class A common stock and 2,500,000 warrants for $50,000,000, contingent on closing an initial business combination[93] NOTE 9. Fair Value Measurements The company measures warrant and forward purchase unit liabilities at fair value using a three-tier hierarchy, with warrant liability at $1.345 million and forward purchase unit liability at $310,221 as of June 30, 2022, reflecting reclassification due to increased input observability Fair Value of Warrant and Forward Purchase Unit Liabilities | Liability | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :---------------- | | Warrant Liability | $1,345,000 | $7,469,150 | | Forward Purchase Unit Liability | $310,221 | $521,184 | - Public Warrants were transferred from Level 3 to Level 1, and Private Placement Warrants from Level 3 to Level 2, due to increased observability of valuation inputs[98] Changes in Fair Value of Derivative Warrant Liabilities (December 31, 2021 to June 30, 2022) | Metric | Public Warrants | Private Placement Warrants | Forward Purchase Units | | :------------------------------------------ | :-------------- | :------------------------- | :--------------------- | | Derivative warrant liabilities as of Dec 31, 2021 | $5,751,150 | $1,718,000 | $521,184 | | Change in fair value (Q1 2022) | $(1,612,300) | $(482,000) | $122,020 | | Derivative warrant liabilities as of Mar 31, 2022 | $4,138,850 | $1,236,000 | $643,204 | | Change in fair value (Q2 2022) | $(3,103,850) | $(926,000) | $(332,983) | | Derivative warrant liabilities as of Jun 30, 2022 | $1,035,000 | $310,000 | $310,221 | NOTE 10. Income Tax The company recorded no income tax benefits for net operating losses due to realization uncertainty and established a full valuation allowance against net deferred tax assets - No income tax benefits were recorded for net operating losses due to uncertainty of realization[103] - A full valuation allowance was recorded against net deferred tax assets as of June 30, 2022, and December 31, 2021[104] NOTE 11. Subsequent Events Subsequent to the balance sheet date, the company filed a preliminary proxy statement to extend the business combination deadline from September 14, 2022, to December 14, 2022, with potential for further extensions - The Company filed a preliminary proxy statement to extend the business combination deadline from September 14, 2022, to December 14, 2022, with options for up to three additional three-month extensions[106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, covering its SPAC status, fair value-driven operations, going concern issues, key accounting policies, and contractual obligations Overview The company, a blank check company, completed its IPO in September 2021, raising $230 million for a Trust Account, and must complete a business combination by September 2022 or liquidate - The Company is a blank check company formed to effect a business combination[110] - The IPO on September 14, 2021, generated $230 million, with proceeds placed in a Trust Account[111][113] - The Company has until September 14, 2022 (or March 14, 2023, with extensions) to consummate a Business Combination, or it will redeem public shares and liquidate[114] Results of Operations For the three and six months ended June 30, 2022, the company reported net income of approximately $4.2 million and $5.6 million, respectively, primarily due to fair value gains on warrant and forward purchase unit liabilities - Net income for the three months ended June 30, 2022, was approximately $4.2 million, primarily due to a $4.0 million gain on warrant liability and a $0.3 million gain on forward purchase unit liability[117] - Net income for the six months ended June 30, 2022, was approximately $5.6 million, driven by a $6.1 million gain on warrant liability and a $0.2 million gain on forward purchase unit liability[118] Going Concern As of June 30, 2022, the company had $328,843 in operating cash and $386,007 in working capital, raising substantial doubt about its ability to continue as a going concern despite Sponsor loan commitments - As of June 30, 2022, the Company had $328,843 in operating cash and $386,007 in working capital[119] - The Company lacks sufficient financial resources to sustain operations for one year, raising substantial doubt about its ability to continue as a going concern[121][122] - The Sponsor is committed to extending Working Capital Loans as needed, though no formal agreement exists[121] Off-Balance Sheet Arrangements As of June 30, 2022, the company had no off-balance sheet arrangements, such as relationships with unconsolidated entities or special purpose entities - The Company had no off-balance sheet arrangements as of June 30, 2022[123] Contractual Obligations The company's primary contractual obligations include a $10,000 monthly administrative fee to an affiliate of its Sponsor and an $8.05 million deferred underwriting discount, payable only upon a business combination - The Company has an agreement to pay an affiliate of its Sponsor $10,000 per month for office space and administrative support[124] - A deferred underwriting discount of $8,050,000 is payable to the underwriter only if the Company completes a Business Combination[125] Commitments and Contingencies The company has commitments related to registration rights for Founder Shares and Private Placement Warrants, and a forward purchase agreement with Franklin Strategic Series for $50 million in Class A common stock and warrants upon a business combination - Holders of Founder Shares and Private Placement Warrants are entitled to registration rights, requiring the Company to register such securities for resale[126] - The Company is committed to filing a registration statement for a secondary offering of forward purchase securities within 30 calendar days after the closing of an initial business combination[127] - A forward purchase agreement with Franklin Strategic Series commits Franklin to purchase 5,000,000 Class A common stock and 2,500,000 warrants for $50,000,000 concurrently with the closing of an initial business combination[128] Critical Accounting Policies and Estimates Management identifies critical accounting policies involving significant judgment and estimates, including accounting for redeemable Class A common stock, net income per common stock using the two-class method, and fair value measurement of warrant liabilities - Class A common stock subject to possible redemption is classified as temporary equity and measured at redemption value[131] - Net income per common stock is calculated using the two-class method, allocating income/loss based on an 80% (Class A) to 20% (Class B) ratio[133] - Warrants are classified as derivative liabilities at fair value, subject to re-measurement at each balance sheet date, with changes recognized in the statement of operations[134][135] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that quantitative and qualitative disclosures about market risk are not required for the company as it qualifies as a smaller reporting company - Disclosure on quantitative and qualitative market risk is not required for smaller reporting companies[138] Item 4. Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of June 30, 2022, due to a material weakness in accounting for complex financial instruments Evaluation of Disclosure Controls and Procedures The CEO and CFO determined that the company's disclosure controls and procedures were not effective as of June 30, 2022, due to a material weakness in accounting for complex financial instruments - Disclosure controls and procedures were deemed not effective as of June 30, 2022[140] - The ineffectiveness is attributed to a material weakness in internal control over financial reporting related to accounting for complex financial instruments[140] Previously Identified Material Weakness A material weakness in disclosure controls and procedures was previously identified as of December 31, 2021 - A material weakness in disclosure controls and procedures was previously identified as of December 31, 2021[141] Remediation Activities The company is implementing a remediation plan to improve its processes for identifying and applying accounting requirements for complex financial instruments, involving additional analyses - The Company is implementing a remediation plan to enhance processes for identifying and applying accounting requirements for complex financial instruments[142] Changes in Internal Control over Financial Reporting No other material changes in internal control over financial reporting occurred during the quarter ended June 30, 2022, beyond the previously discussed material weakness - No other material changes in internal control over financial reporting occurred during the quarter ended June 30, 2022[143] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings as of the reporting date - There are no legal proceedings[145] Item 1A. Risk Factors This section refers to the Annual Report on Form 10-K for risk factors and highlights new risks related to the proposed extension of the business combination deadline and potential adverse effects from changes in SPAC regulations - Reference is made to Part I Item 1A. Risk Factors in the Annual Report on Form 10-K for the year ended December 31, 2021[146] - New risks include uncertainties regarding the approval and effectiveness of the extension request for the business combination deadline[147][149] - Changes in laws or regulations, particularly proposed SEC rules relating to SPACs, may adversely affect the company's ability to complete a business combination and increase associated costs and time[151][152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported the unregistered sale of 3,397,155 Private Placement Warrants to the Sponsor and Metric for $5.1 million, which occurred simultaneously with the IPO - On September 14, 2021, 3,397,155 Private Placement Warrants were sold to the Sponsor and Metric for $1.50 per warrant, generating $5,095,733[153] - The issuance was exempt from registration under Section 4(a)(2) of the Securities Act of 1933[153] - Private Placement Warrants are not transferable/saleable until 30 days after a Business Combination and are non-redeemable while held by initial purchasers[154] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There are no defaults upon senior securities[155] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures - There are no mine safety disclosures[156] Item 5. Other Information The company reported no other information - There is no other information to report[157] Item 6. Exhibits This section provides an index of exhibits filed with or incorporated by reference into the Form 10-Q, including the Amended and Restated Certificate of Incorporation, Bylaws, CEO/CFO certifications, and XBRL documents - The exhibit index includes the Amended and Restated Certificate of Incorporation, Bylaws, CEO/CFO certifications, and various Inline XBRL documents[159]