United States securities and exchange commission logo
March 14, 2023
Raluca Dinu
Chief Executive Officer
GigCapital5, Inc.
1731 Embarcadero Rd., Suite 200
Palo Alto, CA 94303
Re: GigCapital5, Inc.
Registration
Statement on Form S-4
Filed February 14,
2023
File No. 333-269760
Dear Raluca Dinu:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Form S-4 filed on February 14, 2023
Cover Page
1. Please revise the
prospectus cover page to disclose the expected ownership percentages in
the combined company of
GigCapital5 s public stockholders, the Sponsor and its
affiliates, QT Imaging
stockholders and PIPE investors. To the extent applicable, disclose
the total expected
ownership of the Sponsor following the transaction, inclusive of any
investments the Sponsor
plans to make through financing transactions, such as the PIPE
investment.
2. Please disclose on the
cover page and in the prospectus summary whether the combined
company will be a
controlled company as defined under the relevant NYSE listing rules
and, if so, whether you
intend to rely on the exemptions as a controlled company. If
applicable, please
include risk factor disclosure that discusses the effect, risks and
Raluca Dinu
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Comapany
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uncertainties of being designated a controlled company, including but
not limited to, the
result that you may elect not to comply with certain corporate
governance requirements.
Questions and Answers about the Proposed Business Combination
Q: What Equity Stake will Current GigCapital5 Public Stockholders, the
Sponsor..., page 11
3. Please clarify, if true, that the sponsor will receive additional
securities pursuant to an
anti-dilution adjustment based on the company s additional financing
activities. If
applicable, please quantify the number and value of securities the
sponsor will receive. In
addition, disclose the ownership percentages in the company before and
after the
additional financing to highlight dilution to public stockholders.
Questions and Answers
Q. WHAT EQUITY STAKE WILL CURRENT GIGCAPITAL5 PUBLIC
SHAREHOLDERS..., page 11
4. With reference to the Merger Consideration Earnout Shares discussed on
page 28 of the
filing, please disclose these shares within the Additional Potential
Dilution section of your
tabular presentation at the top of page 12 or explain why such
disclosure is not necessary.
Address this comment as it relates to similar tabular presentations
throughout your filing.
Q: Do I have redemption rights?, page 16
5. Clarify, if true, that holders of your public warrants and holders of
warrants through your
units cannot exercise redemption rights with respect to the warrants.
Quantify the value of
warrants, based on recent trading prices, that may be retained by
redeeming stockholders
assuming maximum redemptions and identify any material resulting
risks.
Summary, page 27
6. Please revise to expand your descriptions of GigCapital5 and QT
Imaging in this section.
We note your disclosure on pages 58 and 97 that the audit opinions for
QT Imaging and
GigCapital5 include a paragraph related to substantial doubt about the
ability of QT
Imaging GigCapital5, respectively, to continue as a going concern.
Please revise to
provide prominent disclosure in the Summary. With respect to QT
Imaging, please
expand your disclosure to discuss the types of products and services
QT Imaging provides
and how it generates revenue.
7. Please balance your disclosure to include equally prominent disclosure
of the limitations
and challenges QT Imaging faces in implementing its business strategy
including, but not
limited to, the significant operating losses incurred since your
inception, failure to
demonstrate scale of deployment and manufacturing necessary to achieve
commercial
viability since receiving 510(k) premarket clearance in 2017, and the
limited applicability
of your lead product as a supplementary imaging device only instead of
as a replacement
for screening mammography.
Raluca Dinu
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8. We refer to your disclosure on pages F-17 and F-36 that the deferred
underwriting fees of
$9,200,000 are contingent on the completion of the business
combination, subject to the
terms of the underwriting agreement, including the performance of
additional services
after the IPO in connection with a proposed business combination.
Please revise to
include disclosure of the deferred underwriting fees in the Summary,
where appropriate.
GigCapital5 Conflicts of Interest, page 33
9. Please quantify the aggregate dollar amount and describe the nature of
what the sponsor
and its affiliates have at risk that depends on completion of a
business combination.
Include the current value of securities held, loans extended, fees
due, and out-of-pocket
expenses for which the sponsor and its affiliates are awaiting
reimbursement.
10. Please expand your disclosure regarding the sponsor s ownership
interest in the target
company. Disclose the approximate dollar value of the interest based
on the transaction
value and recent trading prices as compared to the price paid.
11. We note that certain shareholders agreed to waive their redemption
rights. Please describe
any consideration provided in exchange for this agreement. Please also
revise your
disclosure summarizing the background of the business combination to
discuss the
negotiation of this agreement.
12. It appears that underwriting fees remain constant and are not adjusted
based on
redemptions. Revise your disclosure to disclose the effective
underwriting fee on a
percentage basis for shares at each redemption level presented in your
sensitivity analysis
related to dilution.
Key Agreements, page 35
13. Please revise to expand the description of your distribution agreement
with Innovador to
include the material terms of the agreement. For example, clarify
whether Innovador is
the exclusive distributor of QT Imaging products in the defined
territory, which party has
the right to set prices for such components or machines and whether QT
Imaging has to
pay any commissions.
PIPE Investment, page 37
14. We note that you have arranged to sell additional securities to raise
funds to satisfy the
minimum cash required to complete the business combination transaction
after returning
funds to redeeming stockholders. Please clarify the current status of
discussions and
negotiations regarding the contemplated PIPE Investment or convertible
note financing.
Revise the disclosure to discuss the key terms of any convertible
securities and to disclose
the potential impact of those securities on non-redeeming
shareholders, as applicable. To
the extent that negotiation and marketing processes for a PIPE are
ongoing, please
disclose material details of those processes, including who selected
the potential PIPE
investors, the relationships the PIPE investors have to GigCapital5,
the Sponsor, QT
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March 14, 2023
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Imaging and their affiliates, and the placement agent and how the
terms of the PIPE
transaction were determined, as applicable.
15. Please highlight material differences in the terms and price of
securities issued at the time
of the IPO as compared to private placements contemplated at the time
of the business
combination. Disclose if the SPAC s Sponsor, directors, officers or
their affiliates will
participate in the private placement.
As an "emerging growth company," we cannot be certain if the reduced disclosure
requirements..., page 117
16. Please revise your risk factor disclosure here to also state that as a
result of your election
not to opt out of the extended transition period, the financial
statements of the combined
company may not be comparable to companies that comply with new or
revised
accounting pronouncements as of public company effective dates.
Unaudited Pro Forma Condensed Combined Financial Statements , page 123
17. Please expand the Description of the Merger section to provide the
computation of the
Aggregate Closing Merger Consideration Value as defined on page 1 of
the filing. In
addition, please describe the Merger Consideration Earn-Out Shares as
discussed on pages
28 through 30 of the filing. With reference to the terms of the
earn-out agreement,
disclose the proposed accounting for such shares and clarify why these
shares are not
reflected in your pro forma financial statements. In addition, with
reference to the tabular
presentation on page 126 which presents the pro forma shares of the
combined Company
common stock issued and outstanding immediately after the Merger,
disclose and quantify
the Earn-Out shares that are excluded.
18. Please expand the Basis of Pro Forma Presentation to clarify how you
determined the
$10.18 redemption price.
19. You disclose on the bottom of page 125 that the four levels of
redemptions assumed in the
unaudited pro forma condensed combined balance sheet and statements of
operations are
based on the assumption that there are no adjustments for the
outstanding Public
Warrants, Private Placement Warrants or shares issued for the PIPE
Investment. We note
however that Note (B) reflects the issuance of 2,600,000 GigCapital5
common stock
under the PIPE Subscription Agreement. Please address this apparent
inconsistency.
20. Note (B) reflects the sale under a PIPE Subscription Agreement with the
PIPE Investors
of 2,600,000 shares of GigCapital5 Common Stock. With reference to your
disclosures
on page 37 that GigCapital5 may enter into PIPE Subscription Agreements,
please address
FirstName LastNameRaluca Dinu
the need to provide additional pro forma information that addresses
scenarios under which
Comapany NameGigCapital5,
you do Inc. Subscription Agreement. Refer to Article
11-02(a)(10) of
not enter into a PIPE
March Regulation S-X.
14, 2023 Page 4
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Comapany
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21. Note (I) references $4,140,600 of transactions expenses paid in
GigCapital5 Common
stock. However, we note that your forma unaudited balance sheet
includes an adjustment
(I) which increases additional paid in capital by $8,062,520 and
accumulated deficit by
$8,087,668. Please expand your note to reconcile and explain these
adjustments,
including how such amounts were determined.
22. Note (I) reflects the recording of the estimated QT Imaging
Transaction Expenses and
Unpaid GigCapital5 Transaction Expenses not reflected in the
historical statements and
the payment of $11,000,000 of such transaction expenses in cash with
an additional
$4,140,600 paid in GigCapital5 Common Stock. Please quantify the
transaction costs not
reflected in the historical financial statements of QT Imaging and
GigCapital5 and
reconcile such amount to Note (N) which reflects $14,865,854 in
estimated direct and
incremental transaction costs that will be incurred and expensed
through the Closing.
Please confirm that the costs reflected in Note (N) are additional
costs not already
reflected in the historical financial statements. In doing so, expand
Note (N) to to identify
the nature of the transaction costs incurred and the related entity
reporting these costs.
23. With reference to Note (J), please separately disclose the GigCapital5
Common Stock
issued for the conversion of the QT Imaging Convertible Note. With
reference to the
original conversion terms of the note, please address the accounting
implications for this
conversion, including the need to reflect a gain or loss on the
conversion. In this regard,
we note your tabular presentation on page 126 indicates that 320,172
GigCapital5
Common Stock will be issued for $2,349,131.
24. Notes (L) and (Q) reflect the reversal of stock-based compensation on
QT Imaging
Options and warrant expense, for other than In-The-Money Company
Warrants, both of
which are assumed to be cancelled as of January 1, 2021. We note that
these options and
warrants are being exchanged for GigCapital5 shares. With reference to
the original terms
of the QT Imaging options and warrants, please clarify whether the
terms of the options
and warrants were modified and if so, (i) discuss the accounting
implication of such
modification and (ii) reflect any necessary pro forma adjustments
related to
the modification. Reference the authoritative literature you relied
on.
25. Note (Q) excludes the In-the-Money Company Warrants. We also note your
tabular
presentation on page 126 assumes all In-the-Money Company Warrants
will be exercised
prior to the Merger. Please disclose how you how you determined which
warrants were
"in-the-money" and, if material, address the need to reflect the
proceeds from the exercise
of such warrants in your pro forma financial statements.
26. We note, as disclosed on page 347, that on September 26, 2022,
GigCapital5 issued the
Working Capital Note as an unsecured convertible promissory note to
the Sponsor, which
was subsequently amended and restated on October 26, 2022, November
28, 2022,
December 27, 2022 and January 26, 2023, for a collective principal
amount of $325,000 .
The Working Capital Note is convertible at the Sponsor s election
upon the
consummation of the initial business combination. Please address the
need to reflect these
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GigCapital5, Inc.
March 14, 2023
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notes as issued and then either (i) converted into units or (ii)
repaid in cash within your
pro forma financial statements. If there are varying scenarios related
to the
conversion/repayment of these notes, address these various scenarios.
See Article 11-
02(a)(10) of Regulation S-X.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations and Known Trends or Future Events, page 192
27. Please describe the results of operations of GigCapital5, inc. and QT
Imaging Inc. for
period from January 19, 2021 (Inception) through December 31, 2021 and
for fiscal year
ended December 31, 2021, respectively.
Information about QT Imaging, page 201
28. We refer to your description on page 201 and throughout the prospectus
of QT Imaging s
body imaging technology as safe. Please note that determinations
of safety and efficacy
are solely within the authority of the FDA; therefore, please revise
the prospectus to
remove all references and/or implications of safety and efficacy. With
respect to
references to QT Breast Scanner, please revise references to safety
to clarify that the
device received FDA clearance as a supplementary imaging device only
and is not a
replacement for screening mammography.
29. We note your disclosure on pages 237 and 246 that the QT Breast
Scanner is categorized
as a Class II medical device that received FDA s 510(k) market
clearance in 2017. Please
revise to include this disclosure under the Overview heading of this
section, where
applicable, and in the Prospectus Summary. We also refer to your
business strategy to
introduce a comprehensive body-safe imaging technology and medical
imaging for infants
in the future. Please disclose the current stage of development for
your QTScan and
Infant Scanner devices and when you expect to submit premarket
notification submissions
to the FDA.
30. Please clarify the meaning of scientific or technical terms the first
time they are used in
order to ensure that lay readers will understand the disclosure. For
example, please briefly
explain what you mean by B-mode reflection images, reflection
transducer, vasculature,
HHUS, dense breasts, cryoablation and articulating.
31. We note your disclosure on page 203 relating to the breast medical
imaging market, which
is segmented by the ionizing and non-ionizing breast imaging segments.
Please expand
your disclosure to discuss the adverse effects of various medical
imaging methods, such as
ionizing radiation, compression associated with mammography and heavy
metal injections
required for breast MRI. We refer to your disclosure on page 219 that
ionizing radiation
FirstName LastNameRaluca Dinu
exposure raises risk of cancer, including leukemia, breast cancer,
thyroid cancer and brain
Comapany NameGigCapital5,
cancer. Inc. whether any adverse effects have been
observed with various
Please also discuss
March ultrasound systems
14, 2023 Page 6 and technologies.
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Industry & Market Opportunity, page 203
32. You disclose on page 203 that the annual worldwide medical imaging
market is currently
estimated to be $40 billion with the United States accounting for $10
billion. Please revise
to disclose the estimated total addressable market for medical
screening for the detection
and diagnostics for cancer. Please also clarify, if true, that your
disclosure of the
estimated total addressable market of $4.6 billion for medical imaging
for breast cancer
detection and diagnostics refers to the worldwide market.
33. Please expand your disclosure to discuss the differences, if any,
between the type of
ultrasound technology used in QT Imaging s devices and Hand-Held
Ultrasound,
Automated Breast Ultrasound System, breast ultrasound tomography
systems,
photoacoustic imaging and photoacoustic tomography.
Future Market Opportunities, page 204
34. We note your disclosure on page 208 that the QT Breast Scanner has
current applicability
as a supplementary imaging device and is not intended to be
used as a replacement for
screening mammography. You also disclose on page 230 that
Mammography Quality
Standards Act and Program centers will be an attractive market for QT
Imaging once the
company has received primary clearance from the FDA for high-risk
young women.
Please revise your disclosure throughout the prospectus to clarify the
combined
company s business strategy to "seek expanded FDA clearance" of the
QT Breast Scanner
as an alternative to screening mammography.
QT Breast Scanner, page 205
35. We note your disclosure on pages 210 and 216 relating to the mini
study assessing the
ability of technology to identify masses in dense breasts and clinical
studies comparing the
image quality of the QTScans and MRIs, respectively. Please revise to
clarify the scope,
size and design of the clinical studies and whether the studies were
powered to show
statistical significance, as applicable.
Our People, page 206
36. We note your disclosure on page 226 of the fourteen granted patents
and five patent
applications associated with your Chief Product Officer. Please
clarify whether any of
these granted patents or patent applications are related to or
currently utilized in QT
Imaging s medical imaging technology platform.
Medical Advisory Board, page 230
37. We note your disclosure that QT Imaging intends to assemble a medical
advisory board
and also plans to develop key opinion leaders. If material, please
include disclosure that
describes how members of the medical advisory board and key opinion
leaders will be
selected and compensated, and whether there are any rules or
procedures governing such
Raluca Dinu
GigCapital5, Inc.
March 14, 2023
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members and key opinion leaders.
Comparison with currently available devices, page 233
38. We refer to your disclosure relating to large competitors with
currently available FDA-
cleared devices. You also disclose on page 61 that your competitors
employ newer
methods of medical imaging and early detection other than Hand-Held
Ultrasound,
Automatic Breast Ultrasound, mammography and MRIs. Please disclose
whether any of
your competitors employ non-ionizing breast imaging methods that have
obtained primary
screening clearances and can serve as replacements for screening
mammography and/or
offer 3D images.
Manufacturing, page 234
39. We note your disclosure on page 234 that QT Imaging devices consist of
custom designed
components and off-the-shelf components that are supplied by approved
vendors in the
United States. You also disclose on page 61 that QT Imaging is
dependent on a number
of key suppliers for components and sub-assemblies. Please clarify
whether QT Imaging
relies on any single and/or sole suppliers for certain components and
materials used in
manufacturing its products. If so, please expand your disclosure to
discuss your sources
and availability of raw materials and the names of any principal
suppliers. See Item
101(h)(4)(v) of Regulation S-K.
Intellectual Property, Patents & Trademarks, page 236
40. We note your disclosure relating to QT Imaging s patent portfolio.
Please revise to
identify the type of patent protection for each patent listed.
Background to of the Business Combination, page 299
41. We note your disclosure on page 302 that GigCapital5 delivered letters
of intent to more
than ten potential business combination targets, other than QT
Imaging. Please expand
your disclosure of these potential business combination targets the
GigCapital5 Board
considered and discuss the Board s analysis in reaching its
conclusion not to pursue
potential business combination targets.
42. Please identify the individuals and/or parties who participated in the
meetings and
discussion described throughout this section. By way of example only, we
refer to your
disclosure on page 309 that the GigCapital5 Board discussed and
evaluated QT Imaging
with an international consulting company and investment bank research
analysis. Please
FirstName LastNameRaluca Dinu
revise your disclosure to identify this consulting company, investment
bank and any other
Comapany NameGigCapital5,
financial Inc.
advisors that provided additional services to GigCapital5 in
connection with the
March transaction and8whether any fees are conditioned on the completion of
the transaction.
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43. Please revise your disclosure in this section to describe how the
GigCapital5 Board
arrived at a valuation of $151 million for QT Imaging. Please address
in your revisions
the methodology employed in reaching the valuation. We note your
disclosure that
GigCapital5 presented an analysis of the valuation of QT Imaging
primarily based on
comparable valuations of ten publicly traded companies that were
selected with the
assistance of Northland Securities. Please revise to expand your
discussion of the
analysis, conclusions and underlying assumptions of such comparable
public company
valuations.
44. We note your disclosure that GigCapital5 sent an initial draft letter
of intent to QT
Imaging in which it proposed the terms of a business combination.
Please revise to clarify
how the transaction structure and consideration evolved during the
negotiations, including
the discussions, proposals and counter-proposals made during the
course of the
negotiations with respect to the material terms of the merger, such as
the calculation of the
proposed merger consideration, equity compensation and changes to the
earnout
provision. By way of example only, we refer to the discussions and
inquiries from Ms.
Donigan and the Chief Financial Officer of QT Imaging on page 306
relating to the
proposed merger consideration, organization and capitalization of the
combined company,
as well as equity compensation.
45. Please expand your disclosure of the selection criteria for comparable
valuations of
publicly traded peer companies referenced on page 191, including how
the criteria was
chosen (including, but not limited to, publicly traded companies with
less than $25 million
in revenue) and whether any companies meeting the selection criteria
were excluded from
the analysis. Disclose the valuations and multiples for each company
in the analysis, as
well as the financial data used to derive such multiples, and explain
how this analysis was
applied to determine the valuation for QT Imaging.
Material U.S. Federal Income Tax Considerations, page 314
46. Please revise to include a tax opinion covering the material tax
consequences of the
redemption and state that the disclosure in this section represents
the opinion of counsel.
Please also remove language stating that generally certain tax
consequences will apply
or assuming certain consequences. For further guidance see Staff Legal
Bulletin No. 19
for guidance.
QT Imaging Inc.- Notes to Consolidated Financial Statements
Revenue Recognition , page F-51
47. Please disclose the revenue disaggregation as required by ASC
606-10-55-90 and state
how you recognize training and maintenance sales.
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General
48. With a view toward disclosure, please tell us whether your sponsor is,
is controlled by, has
any members who are, or has substantial ties with, a non-U.S. person.
Please also tell us
whether anyone or any entity associated with or otherwise involved in
the transaction, is,
is controlled by, or has substantial ties with a non-U.S. person. If
so, please revise your
filing to include risk factor disclosure that addresses how this fact
could impact your
ability to complete your initial business combination. For instance,
discuss the risk to
investors that you may not be able to complete an initial business
combination with a
target company should the transaction be subject to review by a U.S.
government entity,
such as the Committee on Foreign Investment in the United States
(CFIUS), or ultimately
prohibited. Further, disclose that the time necessary for government
review of the
transaction or a decision to prohibit the transaction could prevent
you from completing an
initial business combination and require you to liquidate. Disclose
the consequences of
liquidation to investors, such as the losses of the investment
opportunity in a target
company, any price appreciation in the combined company, and the
warrants, which
would expire worthless.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Christie Wong at 202-551-3684 or Jeanne Baker at
202-551-3691 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Jane Park at 202-551-7439 or Celeste Murphy at 202-551-3257 with any
other questions.
Sincerely,
Division of
Corporation Finance
Office of
Industrial Applications and
Services
cc: Jeffrey C. Selman, Esq.