Filing Overview
Registrant: Deep Medicine Acquisition Corp. (DMAQ), a special purpose acquisition company; the filing concerns its proposed combination with TruGolf, Inc. The Form 8-K reports events occurring on March 31, 2023 and was signed April 6, 2023. The filing does not provide operating results for TruGolf Holdings, Inc. or a quarterly reporting period.
Business Combination
On March 31, 2023, DMAQ entered into an Agreement and Plan of Merger with DMAC Merger Sub Inc., TruGolf, Inc., Bright Vision Sponsor LLC and related representatives. Merger Sub will merge with TruGolf, with TruGolf surviving as a wholly owned subsidiary of DMAQ. Following closing, the combined public company is expected to be renamed “TruGolf, Inc.”
- Aggregate merger consideration is up to $125 million, subject to adjustments for TruGolf’s closing debt, cash and unpaid transaction expenses.
- The consideration consists of base consideration of $80 million and up to $45 million of restricted shares.
- Consideration is payable solely in newly issued DMAQ common stock, valued at the applicable redemption price in connection with DMAQ’s business combination.
- Up to 4.5 million shares will be placed in escrow and may be forfeited if specified revenue, stock-price or franchise-location milestones are not achieved.
Financial Metrics and Liquidity
The filing does not provide revenue, net income, earnings per share, cash flow, margins, debt balances, cash balances, or other historical financial metrics for DMAQ or TruGolf.
- Closing requires DMAQ to have at least $5.0 million of net tangible assets after redemptions and any PIPE investment.
- Closing also requires at least $10.0 million of cash, including remaining trust-account funds and PIPE proceeds, after redemptions and certain payments, but before specified unpaid expenses or liabilities of up to $1.6 million.
- A PIPE investment or backstop arrangement may be pursued, but the filing does not state that one has been completed or provide committed financing amounts.
Material Changes and Transaction Terms
- DMAQ and TruGolf must obtain approval from their respective stockholders, satisfy applicable regulatory and third-party consent requirements, and obtain SEC clearance of the proxy statement.
- DMAQ’s post-closing board is expected to have seven members, including four independent directors; four directors will be designated by TruGolf and three will be mutually agreed upon.
- TruGolf’s chief executive officer and chief financial officer are expected to serve in those roles for DMAQ after closing.
- DMAQ must adopt an equity incentive plan covering shares equal to 10% of the aggregate DMAQ common stock outstanding immediately after closing.
- Significant TruGolf stockholders agreed to voting, lock-up, non-competition and non-solicitation arrangements. The lock-up generally applies for up to six months, subject to specified early-release conditions.
Milestones, Outlook and Risks
The escrowed shares are divided into three tranches: 1.0 million shares tied primarily to 2024 milestones, 1.5 million shares tied primarily to 2025 milestones, and 2.0 million shares tied primarily to 2026 milestones. Revenue thresholds range from $30 million in 2024 to $100 million in 2026; additional release conditions include DMAQ share-price thresholds of $13, $15 and $17 and specified numbers of qualified franchise locations.
The merger is not assured. The agreement may be terminated, including if closing conditions are not satisfied by July 29, 2023, subject to potential extension, if required stockholder approvals are not obtained, if a governmental order prohibits the transaction, or for specified breaches or material adverse effects.
Key risks identified include failure to complete the transaction, redemptions by DMAQ public stockholders, inability to satisfy minimum cash and net tangible asset conditions, failure to realize anticipated benefits, limited financial information available for forecasting, litigation, regulatory approvals, TruGolf’s financial condition and liquidity, market size assumptions, and the achievement of projected revenue, stock-price and franchise-location milestones. The filing contains forward-looking statements and does not constitute an offer to sell securities or a proxy solicitation.
Investor Verification Checklist
- Verify the definitive proxy statement, audited financial statements and unaudited interim financial information for TruGolf.
- Confirm the final merger consideration, closing debt and cash adjustments, redemption price and post-closing capitalization.
- Determine whether a PIPE investment or other financing was completed and assess the effect of shareholder redemptions on liquidity.
- Review the escrow, forfeiture and earnout provisions, including the apparent reference to the Second Tranche in the 2026 franchise-location condition.
- Confirm whether all stockholder, regulatory and other closing conditions were satisfied and whether the merger was completed or terminated.