Trugolf Holdings, Inc. quarterly report, Q1 FY2024

Business context and reporting period

This filing is Deep Medicine Acquisition Corp.’s unaudited Form 10-Q for the three months ended June 30, 2023, its fiscal first quarter. Although the request identifies TruGolf Holdings, Inc., the filing is for the SPAC, not TruGolf; it does not provide TruGolf’s standalone financial results.

Deep Medicine is a shell company formed to pursue a business combination and had not begun operating or generating revenue. It had signed a merger agreement with TruGolf, Inc. on March 31, 2023; the agreement was amended and restated on July 21, 2023.

Financial results and liquidity

At June 30, 2023, cash outside the Trust Account was $542,033; Trust Account cash and marketable securities were $9,471,338. Total assets were $10.01 million, total liabilities $7.72 million, and reported working-capital deficit $2.75 million. Current liabilities were $3.29 million, including $2.065 million in related-party loans and $1.15 million in accrued expenses. Deferred underwriting commissions were $4.43 million, payable only if a business combination closes. No interest expense or taxes paid in cash were reported. Profit margins are not meaningful because the SPAC had no revenue.

Material changes and transaction developments

• Operating expenses rose about $102,000 year over year, while net loss increased about $107,000; trust investment income was slightly lower.
• Cash declined from $595,536 at March 31. The quarter included $200,000 of related-party loan proceeds and a $200,000 deposit into the Trust Account. Management attributed higher accrued expenses in part to TruGolf merger and registration-statement legal work.
• The amended merger agreement sets TruGolf’s implied equity value at $80 million, subject to adjustments for closing debt, cash and unpaid transaction expenses. Merger consideration is payable in shares, with a post-closing true-up. Up to 4.5 million additional shares may be earned over three years based on revenue, share-price or franchise-location milestones.
• After quarter-end, stockholders approved extending the business-combination deadline to January 29, 2024. At the July 13, 2023 meeting, holders redeemed 255,446 public shares for approximately $2.91 million; afterward, 574,764 public shares remained. Six non-redemption agreements covered up to 514,773 shares, with the Sponsor agreeing to transfer up to 185,179 founder shares upon a completed combination.

Outlook, risks and controls

Management reported that the Company lacked adequate liquidity to sustain its business-combination search and that the conditions raised substantial doubt about its ability to continue as a going concern. It expected available cash to cover needs through a business combination or the deadline, but additional funding is not committed and is not assured. If it cannot complete a combination within the permitted period, it must cease operations and redeem public shares. The filing states the financial statements include no adjustments for this uncertainty.

The filing reports no material change to previously disclosed risk factors. It cites potential impacts from economic and market volatility, inflation, interest rates, supply-chain disruption, COVID-19 and geopolitical events. Disclosure controls were deemed ineffective due to inadequate segregation of duties and insufficient written accounting, IT and reporting procedures. Management described remediation efforts, including greater use of external accounting professionals, but gave no assurance they will be effective.

Important facts for investors to verify

• Confirm the intended filing: this is Deep Medicine Acquisition Corp.’s 10-Q, not TruGolf Holdings’ operating-company filing.
• Review the merger’s closing conditions, final consideration adjustments, dilution, earnout tests and any subsequent amendments or transaction status.
• Assess redemption levels, remaining Trust Account funds, and whether additional financing or sponsor support is available and committed.
• Evaluate the going-concern uncertainty and the January 29, 2024 business-combination deadline against any later extensions or developments.
• Track remediation of the disclosed material weakness in disclosure controls.