TruGolf Holdings, Inc. (formerly Deep Medicine Acquisition Corp.) — Form 10-Q
Reporting period: Quarter and nine months ended December 31, 2023. These results are for the pre-combination blank-check company, not TruGolf’s operating business. The statements are unaudited and use the predecessor’s March 31 fiscal year-end.
Business context and subsequent transaction
Before the combination, the company had not begun operating or generating revenue; its activity was pursuing a business combination. The merger with TruGolf closed January 31, 2024. The company changed its name to TruGolf Holdings, Inc., and its Class A stock began trading as TRUG on February 1, 2024. Its fiscal year-end changed to December 31.
Financial results and liquidity
| Metric | Three months ended Dec. 31 | Nine months ended Dec. 31 |
|---|---|---|
| Operating expenses, 2023 | $415,489 | $1,148,622 |
| Trust investment income, 2023 | $55,535 | $256,757 |
| Net income (loss), 2023 | ($359,954) | ($891,865) |
| Net income, 2022 comparable period | $577,351 | $257,372 |
- Revenue and margins: No operating revenue; operating margins are not meaningful for this pre-combination entity.
- Cash flow: Nine-month operating cash use was $417,660, versus $669,795 in 2022. Investing and financing cash flows each included $2.914 million related to July 2023 shareholder redemptions and were largely offsetting.
- Cash and assets: At December 31, cash outside the trust was $177,876; trust assets were $6.703 million; total assets were $6.881 million.
- Liabilities and liquidity: Current liabilities were $3.706 million, including $2.065 million of related-party loans and an $84,617 insurance-premium note. Total liabilities were $8.133 million, including $4.428 million of deferred underwriting commissions. Working capital deficit was $3.528 million; accumulated deficit was $7.789 million.
- Equity: $6.537 million of common stock was classified as subject to possible redemption, outside stockholders’ deficit.
Changes versus the prior comparable period
- The company shifted from net income to net loss in both the quarter and nine-month period. Trust investment income fell substantially year over year, while nine-month operating expenses declined to $1.149 million from $1.403 million.
- Cash outside the trust declined from $595,536 at March 31, 2023 to $177,876 at December 31, 2023. Trust assets fell from $9.161 million to $6.703 million, mainly reflecting redemptions.
- Accrued expenses increased, which management attributed primarily to legal and transaction costs for the TruGolf merger and related registration materials.
Outlook, risks and unusual items
- Management reported that the company lacked adequate liquidity to sustain its pre-combination activities and that conditions raised substantial doubt about its ability to continue as a going concern. The financial statements include no adjustments for this uncertainty.
- After the reporting date, the merger closed. TruGolf shareholders received 5,750,274 Class A shares and 1,716,860 Class B shares. The merger consideration is subject to a 90-day post-closing true-up; up to 4.5 million additional shares may be earned against specified revenue, stock-price or franchise-opening milestones for 2024–2026.
- Pre-combination financing agreements contemplated up to $11 million of convertible notes and warrants. A February 2, 2024 securities purchase agreement subsequently replaced those agreements and contemplated up to $15.5 million of senior convertible notes and warrants, subject to staged closings and conditions. The filing does not establish that the full amount was funded.
- Disclosure controls were assessed as ineffective due to inadequate segregation of accounting duties and insufficient written accounting, IT and financial-reporting procedures. Management described remediation efforts but gave no assurance they would be successful.
- Management cited general economic, market, inflation, interest-rate, supply-chain, pandemic and geopolitical uncertainties. No pending or contemplated legal proceedings were reported.
Important facts for investors to verify
- Post-combination financial statements, actual cash available after redemptions and transaction costs, and the amount and timing of PIPE funding.
- Final conversion, repayment and warrant terms of financing, and the resulting potential dilution.
- Post-closing true-up and the conditions, measurement and potential issuance of earnout shares.
- Remediation of the disclosed material weakness and effectiveness of controls in subsequent filings.
- TruGolf’s operating revenue, profitability, cash flows, debt and liquidity; this 10-Q does not report those operating-company results.