Business Context and Reporting Period
Deep Medicine Acquisition Corp. (DMAQ) filed this Form 8-K on November 2, 2023, announcing definitive loan agreements with Greentree Financial Group, Inc. and Finuvia, LLC in connection with DMAQ’s proposed business combination with TruGolf, Inc. Following closing, the combined company is expected to be named New TruGolf. This filing does not report operating results for TruGolf Holdings, Inc. or a comparable financial reporting period.
Transaction and Key Financial Terms
| Item | Terms |
|---|---|
| Convertible notes | Up to $8.0 million aggregate principal amount, issued in three tranches after the business combination closes. |
| Aggregate investment amounts | $2.11 million at the first closing, $2.16 million at the second closing, and $2.88 million at the third closing, subject to conditions. |
| Note maturity | Five years from each applicable closing date. |
| Interest | 10% per annum, payable quarterly. Certain stock-based interest payments may carry an effective rate of 15%. |
| Conversion price | Generally the lower of $10 per share or the lowest applicable post-closing 10-day VWAP, subject to adjustment and a $5.00 floor. |
| Warrants | Warrants to purchase 727,273 Class A common shares at an initial exercise price of $13.00 per share, exercisable for five years and subject to adjustment, including a $5.00 floor. |
| Registration obligations | New TruGolf must file a resale registration statement within 30 days after the business combination closing and seek effectiveness within 75 days thereafter. |
The filing provides no revenue, profit, cash flow, margin, balance-sheet debt, liquidity, or operating guidance metrics for TruGolf or DMAQ.
Material Changes and Financing Implications
- The transaction creates a new direct financial obligation for DMAQ and, following closing, New TruGolf.
- The financing may result in significant dilution through conversion of the notes, issuance of make-whole shares, stock-based interest payments, and warrant exercises.
- The notes and warrants include broad repricing protections if New TruGolf issues equity or equity-linked securities at a lower effective price.
- Conversions and warrant exercises are initially subject to Nasdaq’s 19.99% issuance limitation unless stockholder approval is obtained.
- The securities issued to the PIPE investors are initially unregistered and are being offered under the Section 4(a)(2) exemption.
Outlook, Conditions, and Risks
- The second and third financing tranches are discretionary for New TruGolf and contingent on satisfaction of transaction conditions and stockholder approval.
- New TruGolf intends to seek stockholder approval within 60 days after the business combination closing and must continue holding meetings every three months if approval is not initially obtained.
- Failure to timely file, obtain effectiveness of, or maintain the registration statement may result in liquidated damages of 2.0% of principal per month until cured.
- The business combination itself remains subject to stockholder approval, closing conditions, potential termination, and other risks described in the company’s SEC filings.
- Risks include redemption levels, liquidity and financial condition of TruGolf, the ability to realize anticipated transaction benefits, market and industry conditions, litigation, and potential dilution.
- The filing contains forward-looking statements but provides no quantified revenue, earnings, cash flow, or capital expenditure outlook.
Investor Verification Checklist
- Confirm whether the business combination with TruGolf closed and the exact post-closing corporate and ticker information.
- Verify which financing tranches were funded, the actual principal outstanding, and the applicable closing dates.
- Review the executed convertible notes and warrants for final interest, conversion, repricing, maturity, and anti-dilution provisions.
- Determine the potential share issuance under full note conversion, make-whole payments, stock-based interest, and warrant exercise.
- Check whether stockholder approval was obtained to remove the Nasdaq 19.99% cap.
- Confirm the filing and effectiveness status of the resale registration statement and any accrued liquidated damages.
- Review subsequent SEC filings for TruGolf’s actual revenue, profitability, cash flow, liquidity, debt, and going-concern disclosures.