Calidi Biotherapeutics(US:CLDI)2023-05-14 16:00PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the quarter Item 1. Financial Statements This section presents the unaudited condensed financial statements for First Light Acquisition Group, Inc. for the quarter ended March 31, 2023, detailing balance sheets, statements of operations, changes in stockholders' deficit, cash flows, and related notes - The company is a blank check company (SPAC) formed for the purpose of effecting a Business Combination, with all activity through March 31, 2023, relating to its formation, IPO, and target identification17134 - For the three months ended March 31, 2023, the company reported a net loss of approximately $2.2 million, primarily due to operating costs and losses from changes in fair value of liabilities105 - The company's liquidity needs have been met through Sponsor payments, IPO proceeds, Private Placement Warrants, and promissory notes, but it still faces a working capital deficit and 'going concern' doubts106120205262 Net (Loss) Income Comparison (Three Months Ended March 31) | Metric | 2023 Amount ($) | 2022 Amount ($) | | :------------ | :------------ | :---------- | | Net (Loss) Income | $(2,224,540) | $1,462,193 | Operating Cash and Working Capital Deficit | Metric | March 31, 2023 Amount ($) | December 31, 2022 Amount ($) | | :---------------------- | :------------- | :---------------- | | Operating Cash | $82,828 | $93,892 | | Working Capital Deficit | $6,346,675 | $4,134,242 | Condensed Balance Sheets This section provides a snapshot of the company's financial position, detailing total assets, liabilities, and stockholders' deficit at specific reporting dates Condensed Balance Sheet Highlights | Asset/Liability Category | March 31, 2023 (unaudited) Amount ($) | December 31, 2022 Amount ($) | | :----------------------- | :------------------------- | :---------------- | | Total Assets | $43,175,807 | $42,854,778 | | Total Liabilities | $8,152,716 | $5,607,147 | | Total Stockholders' Deficit | $(7,883,852) | $(5,205,476) | Condensed Statements of Operations This section presents the company's financial performance over specific periods, detailing revenues, expenses, and net income or loss Condensed Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2023 Amount ($) | 2022 Amount ($) | | :---------------------------------------------- | :------------ | :---------- | | Operating costs | $2,029,212 | $528,858 | | Loss from operations | $(2,029,212) | $(528,858) | | Unrealized gain on marketable securities | $27,986 | $2,266 | | Earnings on marketable securities | $425,850 | $16,505 | | Change in fair value of contingent interest liability | $(101,404) | — | | Change in fair value of warrant liability | $88,500 | $2,094,300 | | Change in fair value of forward purchase unit liability | $(554,443) | $(122,020) | | Net (loss) income | $(2,224,540) | $1,462,193 | | Basic and diluted net (loss) income per share, redeemable Class A common stock | $(0.16) | $0.05 | | Basic and diluted net (loss) income per share, non-redeemable Class B common stock | $(0.27) | $0.05 | Condensed Statements of Changes in Class A Common Stock Subject to Possible Redemption and Stockholders' Deficit This section details the changes in the company's equity, specifically focusing on Class A common stock subject to redemption and the overall stockholders' deficit Changes in Stockholders' Deficit (March 31, 2023) | Item | December 31, 2022 Amount ($) | Remeasurement of Class A common stock to redemption value Amount ($) | Net loss Amount ($) | March 31, 2023 (unaudited) Amount ($) | | :---------------------------------------------------------------- | :---------------- | :-------------------------------------------------------- | :------------ | :------------------------- | | Class A Subject to Possible Redemption Amount | $42,453,107 | $453,836 | — | $42,906,943 | | Accumulated Deficit | $(5,206,051) | $(453,836) | $(2,224,540) | $(7,884,427) | | Total Stockholders' Deficit | $(5,205,476) | $(453,836) | $(2,224,540) | $(7,883,852) | Condensed Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Statements of Cash Flows Highlights (Three Months Ended March 31) | Cash Flow Activity | 2023 Amount ($) | 2022 Amount ($) | | :---------------------------------- | :------------ | :---------- | | Net cash (used in) provided by operating activities | $192,286 | $(465,131) | | Net cash (used in) provided by investing activities | $(425,850) | — | | Net cash provided by (used in) financing activities | $222,500 | — | | Net Change in Cash | $(11,064) | $(465,131) | | Cash – Ending | $82,828 | $597,522 | Notes to Interim Condensed Financial Statements This section provides detailed explanations and additional information supporting the interim condensed financial statements NOTE 1. ORGANIZATION AND PLANS OF BUSINESS OPERATIONS First Light Acquisition Group, Inc. is a blank check company that completed its IPO in September 2021, extended its business combination deadline to June 14, 2023, and entered a merger agreement with Calidi Biotherapeutics, Inc., facing going concern doubts - The company was formed on March 24, 2021, as a blank check company to effect a Business Combination171 - The IPO closed on September 14, 2021, raising $230,000,000, which was placed in a Trust Account10199 - The completion window for a business combination was extended to June 14, 2023, with prior extensions funded by the Sponsor11173 - On January 9, 2023, the company entered into a Merger Agreement with Calidi Biotherapeutics, Inc. for a proposed business combination, with an equity value of Calidi at $250,000,000, subject to adjustments3738202 - The company's financial resources are insufficient to sustain operations for one year, leading to substantial doubt about its going concern ability, despite the Sponsor's commitment to extend Working Capital Loans1542107120 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details the company's significant accounting policies, covering interim financial statement presentation, estimates, emerging growth company status, cash, IPO costs, income taxes, Class A common stock redemption, earnings per share, fair value measurements, and derivative financial instruments - The unaudited condensed financial statements are prepared in accordance with GAAP for interim financial information and SEC rules, omitting certain disclosures for brevity16 - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new or revised financial accounting standards4374207 - Cash and cash equivalents include short-term investments with original maturities of three months or less; operating cash was $82,828 as of March 31, 20231875 - Class A common stock subject to possible redemption is classified as temporary equity and measured at redemption value; as of March 31, 2023, 4,128,024 shares were subject to possible redemption at $42,906,94318346 - Derivative financial instruments, including warrants and contingent interest, are recorded as liabilities at fair value, with changes recognized in the statement of operations81214228238 NOTE 3. INITIAL PUBLIC OFFERING The company completed its IPO on September 14, 2021, raising $230 million from 23 million units at $10.00 each, incurring $22.5 million in transaction costs, and the underwriter waived an $8.05 million deferred fee - The IPO was consummated on September 14, 2021, selling 23,000,000 Units at $10.00 per Unit, generating $230,000,000199217 - IPO transaction costs totaled $22,517,064, comprising underwriting discounts, offering costs, and excess fair value of Founder Shares5476236 - The underwriter waived its $8,050,000 deferred fee as of December 31, 202265122124200 NOTE 4. PRIVATE PLACEMENT The Sponsor and Metric purchased 3,397,155 Private Placement Warrants at $1.50 each, generating $5.1 million, exercisable at $11.50 per share, with transfer restrictions and non-redeemability for initial holders - 3,397,155 Private Placement Warrants were sold to the Sponsor and Metric at $1.50 per warrant, generating $5,095,73385104142199 - Private Placement Warrants are exercisable at $11.50 per share, are not transferable until 30 days post-Business Combination, and are non-redeemable if held by initial purchasers or permitted transferees85151250 NOTE 5. RELATED PARTY TRANSACTIONS Related party transactions include the Sponsor and Metric's purchase of Founder Shares (20% of post-IPO shares), promissory notes totaling $990,000 with accrued interest, and monthly administrative support fees - The Sponsor and Metric purchased 5,750,000 Founder Shares for $25,000, representing approximately 20% of the company's issued and outstanding shares after the IPO219242 - The company entered into promissory note agreements with the Sponsor and Metric for an aggregate of $490,000, which are non-interest bearing and payable upon a business combination or winding up88108 - The company has drawn $990,000 on promissory notes from various parties as of March 31, 2023, with accrued interest of $73,158 and a contingent interest liability of $134,269244264 - The company pays an affiliate of the Sponsor $10,000 per month for office space and administrative support121245 NOTE 6. STOCKHOLDERS' EQUITY This note outlines the company's authorized and outstanding shares, including no preferred stock, 4,128,024 redeemable Class A common shares, and 5,750,000 Class B common shares outstanding as of March 31, 2023 - The company is authorized to issue 1,000,000 shares of preferred stock, with none issued or outstanding as of March 31, 2023223 - As of March 31, 2023, 4,128,024 shares of Class A common stock were subject to possible redemption, with no non-redeemable Class A shares issued and outstanding90 - 5,750,000 shares of Class B common stock were issued and outstanding as of March 31, 2023, which automatically convert to Class A common stock upon a Business Combination60246 NOTE 7. WARRANTS This note details the terms and accounting for the company's warrants, including exercisability, redemption conditions for Public Warrants, and their classification as liability instruments measured at fair value - Public Warrants become exercisable on the later of 12 months from IPO closing or 30 days after a Business Combination225 - The company may redeem Public Warrants if the Class A common stock price equals or exceeds $18.00 or $10.00, under specific conditions6292 - All 14,897,155 warrants (Public and Private Placement) are accounted for as liability-classified instruments at fair value, with re-measurement changes recognized in the statement of operations63128228254 NOTE 8. COMMITMENTS AND CONTINGENCIES This note details the company's commitments and contingencies, including registration rights for Founder Shares and Private Placement Warrants, the underwriter's waived $8.05 million deferred fee, and the non-obligation of Franklin Strategic Series in the forward purchase agreement - Holders of Founder Shares and Private Placement Warrants are entitled to registration rights for resale of their securities64123251 - The underwriter's deferred fee of $8,050,000 was waived as of December 31, 202265122124200 - Franklin Strategic Series, a party to the forward purchase agreement, is not obligated to purchase the forward purchase shares in connection with the Calidi Business Combination126231 NOTE 9. FAIR VALUE MEASUREMENTS This note details the fair value measurements of financial assets and liabilities using a three-tier hierarchy, classifying marketable securities and Public Warrants as Level 1, Private Placement Warrants as Level 2, and Forward Purchase Units and Contingent Interest Liabilities as Level 3 - Fair value is defined as the price received for an asset or paid to transfer a liability in an orderly transaction50 - The fair value hierarchy prioritizes inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)50 Fair Value Hierarchy of Financial Assets and Liabilities (March 31, 2023) | Item | Level 1 Amount ($) | Level 2 Amount ($) | Level 3 Amount ($) | | :--------------------------------------- | :------------ | :--------- | :--------- | | Marketable securities held in trust account | $42,906,943 | $— | $— | | Public Warrants | $517,500 | $— | $— | | Private Placement Warrants | $— | $139,000 | $— | | Forward Purchase Units | $— | $— | $880,677 | | Contingent Interest Liabilities | $— | $— | $134,269 | - The valuation of Forward Purchase Units and Contingent Interest Liability relies on Level 3 inputs, including the estimated probability of an acquisition occurring70101116129134258 NOTE 10. INCOME TAX The company recorded a $65,475 tax provision for the three months ended March 31, 2023, resulting in an effective tax rate of (3.03)%, primarily due to warrant fair value changes and a full valuation allowance on deferred tax assets - A tax provision of $65,475 was recorded for the three months ended March 31, 2023, with an effective tax rate of (3.03)%234 - The effective tax rate differs from the statutory rate of 21.0% primarily due to changes in the fair value of warrants and a full valuation allowance on deferred tax assets234258 - The company has recorded a full valuation allowance against net deferred tax assets due to a history of cumulative net losses and uncertainty in realizing future tax benefits258 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial condition and operational results, addressing its blank check company status, net loss, liquidity challenges, going concern uncertainty, contractual obligations, and critical accounting estimates - The company is a blank check company whose entire activity from inception through March 31, 2023, relates to its formation, IPO, and search for a Business Combination candidate119237 - For the three months ended March 31, 2023, the company reported a net loss of approximately $2.2 million, primarily due to operating costs and losses from changes in fair value of liabilities105 - The company's liquidity needs have been met through Sponsor payments, IPO proceeds, Private Placement Warrants, and promissory notes, but it still faces a working capital deficit and 'going concern' doubts106120205262 Special Note Regarding Forward-Looking Statements This section cautions readers that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from expectations259 - The company disclaims any obligation to update or revise forward-looking statements unless required by applicable securities law259 Overview This section provides a brief introduction to First Light Acquisition Group, Inc. as a blank check company and its primary activities since inception - First Light Acquisition Group, Inc. is a blank check company formed to effect a business combination119 - The company consummated its IPO on September 14, 2021, raising $230 million, and incurred offering costs of approximately $22.5 million236 - Proceeds from the IPO and Private Placement Warrants were placed in a Trust Account, to be invested in U.S. government securities until a business combination or redemption260 Results of Operations This section analyzes the company's financial performance for the reporting period, detailing key revenue and expense items contributing to net income or loss Net (Loss) Income Breakdown (Three Months Ended March 31, 2023) | Item | Amount ($) | | :-------------------------------------------- | :------------ | | Net loss | $(2.2) million | | Operating costs | $2.1 million | | Loss on change in fair value of forward purchase unit liability | $0.6 million | | Loss on change in fair value of contingent interest liability | $0.1 million | | Provision for income taxes | $0.1 million | | Gain on change in fair value of warrant liability | $0.1 million | | Earnings and unrealized gain on marketable securities | $0.5 million | Net Income Breakdown (Three Months Ended March 31, 2022) | Item | Amount ($) | | :-------------------------------------------- | :------------ | | Net income | $1.5 million | | Operating costs | $0.5 million | | Loss on change in fair value of forward purchase unit liability | $0.1 million | | Gain on change in fair value of warrant liability | $2.1 million | | Interest income and unrealized gain on marketable securities | Offset by | Going Concern This section addresses the company's ability to continue operations for the foreseeable future, given its financial resources and operational challenges - The company has incurred significant costs and lacks sufficient financial resources to sustain operations for one year, raising substantial doubt about its ability to continue as a going concern120107 - The Sponsor is committed to extending Working Capital Loans as needed, but the success of a Business Combination is not assured120 - Management is evaluating the impact of macro-economic factors like the Russia-Ukraine war, rising interest rates, and inflation on the company's financial position and search for a target120 Liquidity and Capital Resources The company's liquidity is supported by Sponsor payments, IPO proceeds, Private Placement Warrants, and promissory notes, yet it faces a $6.3 million working capital deficit with $82,828 operating cash as of March 31, 2023 - Liquidity needs have been satisfied through Sponsor payments ($25,000 for Class B common stock), IPO proceeds, Private Placement Warrants, and unsecured promissory notes205262 Operating Cash and Working Capital Deficit | Metric | March 31, 2023 Amount ($) | December 31, 2022 Amount ($) | | :---------------------- | :------------- | :---------------- | | Operating Cash | $82,828 | $93,892 | | Working Capital Deficit | $6,346,675 | $4,134,242 | - The company has drawn an aggregate of $990,000 on promissory notes as of March 31, 2023, with accrued interest of $73,158 and a contingent interest liability of $134,269264 Contractual Obligations The company has no long-term debt or lease obligations as of March 31, 2023, apart from a $10,000 monthly administrative fee to an affiliate, and the underwriter's $8.05 million deferred fee was waived - The company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities as of March 31, 2023121 - A monthly fee of $10,000 per month is paid to an affiliate of the sponsor for office space and administrative support, commencing September 13, 2021121 - The underwriter waived its right to the deferred fee of $8,050,000 as of December 31, 2022122124 Critical Accounting Estimates This section highlights critical accounting estimates, including the fair value valuation of Warrant Liability, Forward Purchase Units, and Contingent Interest Liability, which are classified as liability instruments and involve complex Level 3 inputs - Management's estimates and assumptions are critical in preparing financial statements, and actual results may differ materially127 - Warrant Liability, Forward Purchase Units, and Contingent Interest Liability are classified as liability instruments and measured at fair value, with changes recognized in the statement of operations128129134 - The valuation of Forward Purchase Units and Contingent Interest Liability are classified as Level 3 measurements, relying on unobservable inputs like the probability and timing of an acquisition129134 Recent Accounting Pronouncements The company is assessing the impact of ASU No. 2020-06, effective after December 15, 2023, which simplifies convertible instrument accounting, while other recent pronouncements are not expected to have a material effect - The company is assessing the impact of ASU No. 2020-06, effective for fiscal years beginning after December 15, 2023, which simplifies accounting for convertible instruments216 - Management does not believe other recent accounting pronouncements would materially affect the company's condensed financial statements83 Item 3. Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required for First Light Acquisition Group, Inc. as it qualifies as a smaller reporting company - This disclosure is not required for smaller reporting companies135 Item 4. Controls and Procedures As of March 31, 2023, the company's disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting related to derivatives and cash flow, with remediation efforts underway - Disclosure controls and procedures were not effective as of March 31, 2023, due to a material weakness in internal control over financial reporting137 - The material weakness is related to the accounting for derivatives and presentation of cash flows, attributed to a lack of sufficient trained professionals137 - Remediation activities include additional post-closing review procedures, consulting subject matter experts, and retaining additional consultants to enhance review processes for complex accounting standards138 PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, details on unregistered equity sales, and a list of exhibits filed with the report Item 1. Legal Proceedings No material changes in legal proceedings have occurred since the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes in legal proceedings since the Annual Report on Form 10-K for the year ended December 31, 2022140 Item 1A. Risk Factors No material changes to risk factors were reported, except for new concerns regarding adverse developments in the financial services industry, which could impact liquidity and financing for a business combination - No material changes in risk factors from the Annual Report on Form 10-K, except for new concerns regarding adverse developments in the financial services industry140 - Adverse developments in the financial services industry, such as bank failures, could lead to less favorable financing terms, tighter credit, and systemic limitations on liquidity, potentially impacting the company's ability to secure financing for a business combination141149 - The company's cash accounts exceed FDIC insurance limits, and while it did not have funds in recently closed banks (Silicon Valley Bank, First Republic Bank, Signature Bank), it cannot guarantee its banks won't face similar issues149 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the private placement of 3,397,155 Private Placement Warrants to the Sponsor and Metric, generating $5.1 million, with transfer restrictions and non-redeemability, issued under Section 4(a)(2) of the Securities Act - 3,397,155 Private Placement Warrants were sold to the Sponsor and Metric at $1.50 per warrant, generating $5,095,733142 - The Private Placement Warrants are identical to Public Warrants but are not transferable until 30 days after a Business Combination and are non-redeemable if held by initial purchasers or permitted transferees151 - The issuance of Private Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933142 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported in this period - No defaults upon senior securities153 Item 4. Mine Safety Disclosures No mine safety disclosures were reported in this period - No mine safety disclosures154 Item 5. Other Information No other information is reported in this section - No other information to report152 Item 6. Exhibits This section lists all exhibits filed with or incorporated by reference into this Quarterly Report on Form 10-Q, including organizational documents, merger agreements, and certifications - The exhibit index lists various documents, including the Amended and Restated Certificate of Incorporation, Merger Agreement, Sponsor Agreement, Registration Rights Agreement, and Voting and Lock-Up Agreements144 - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are included144 Signatures The report is duly signed by First Light Acquisition Group, Inc.'s Chief Executive Officer, Tom Vecchiolla, and Chief Financial Officer, Michael J. Alber, on May 15, 2023 - The report is signed by Tom Vecchiolla, Chief Executive Officer, and Michael J. Alber, Chief Financial Officer, on May 15, 2023148159