TruGolf Holdings, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Deep Medicine Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Bright Vision Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Cautionary Note Regarding Forward-Looking Statements All statements other than statements of historical fact included in this Quarterly Report including, without limitation, statements under this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward- looking statements. When used in this Quarterly Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the U.S. Securities and Exchange Commission (the “SEC”). All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes thereto included in this Quarterly Report under “Item 1 Financial Statements”. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Overview We are a blank check company incorporated on July 8, 2020 as a Delaware corporation and formed for the purpose of effecting a business combination. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering (the “IPO”) and the private placement of the private placement units, the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of the IPO or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. Recent Developments On October 25, 2023, we instructed the trustee to liquidate the investments held in our trust account and instead hold the funds in the trust account in an interest bearing demand deposit account until the earlier of the consummation of our initial business combination or liquidation. On November 2, 2023, we executed a loan agreement with each of Greentree Financial Group, Inc. and Finuvia, LLC. Pursuant to the terms and conditions of the loan agreements, we shall issue Greentree Financial Group, Inc. and Finuvia, LLC up to $8,000,000 in principal amount of convertible notes and warrants to purchase 727,273 shares of our Class A common stock, after the closing of the business combination between us and TruGolf, pursuant to the Amended and Restated Agreement and Plan of Merger entered into on July 21, 2023 (the “TruGolf Business Combination”). For additional information, refer to our Current Report on Form 8-K as filed with the SEC on November 2, 2023. Extension of our Combination Period and Founder Conversion We initially had until October 29, 2022 (the “Initial Combination Period”) to complete a Business Combination. Our Initial Combination Period was extended until January 29, 2023 (the “First Extension”) pursuant to our second amended and restated certificate of incorporation, as amended (the “Charter”) and the two promissory notes in an aggregate principal amount of $1,265,000 issued on October 15, 2022 to two affiliates of the Sponsor. On December 23, 2022, we held a special meeting of stockholders in lieu of an annual meeting of stockholders (the “2022 Special Meeting”). At the 2022 Special Meeting, our stockholders approved amendments to the Charter to (i) extend the date by which we must consummate an initial business combination to July 29, 2023, or such earlier date as determined by the board of directors (the “Second Extension”), and (ii) provide for the right of a holder of Class B common stock to convert into Class A common stock on a one-for-one basis prior to the closing of an initial business combination. On the 2022 Special Meeting, the holders of 11,819,790 public shares properly exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result, approximately $121 million (approximately $10.24 per share) was removed from the trust account to pay such holders. In addition, on December 23, 2022, stockholders holding all of the issued and outstanding Class B common stock elected to convert their Class B common stock into Class A common stock on a one-for-one basis (the “Founder Conversion”). As a result, 3,162,500 shares of Class B common stock were cancelled, and 3,162,500 shares of Class A common stock were issued to such holders of the converting Class B common stock. Following the Founder Conversion and the redemptions in connection with the 2022 Special Meeting, as of June 30, 2023 and March 31, 2023, we had 4,613,410 shares of Class A common stock issued and outstanding, including 830,210 public shares. 17 On July 13, 2023, the Company held a special meeting of the Company’s stockholders (the “2023 Special Meeting”), at which the Company’s stockholders approved an amendment to the Charter to extend the date by which the Company must consummate its initial business combination from July 29, 2023 to January 29, 2024, or such earlier date as determined by the Company’s board of directors (the “Third Extension”). On the 2023 Special Meeting, our stockholders holding 255,446 public shares exercised their right to redeem such shares for a pro rata portion of the funds in our trust account. As a result, approximately $2,914,230 (approximately $11.41 per share) was removed from our trust account to pay such holders. Following the redemptions in connection with the 2023 Special Meeting, we had 4,357,964 shares of Class A common stock issued and outstanding, including 574,764 public shares as of September 30, 2023. Our Securities On February 15, 2023, we received approval from the Nasdaq Listing Qualifications Department of Nasdaq that our application to transfer the listing of the public shares and rights from the Nasdaq Global Market to the Nasdaq Capital Market was approved. The public shares and rights were transferred to the Nasdaq Capital Market at the opening of business on February 17, 2023 and continue to trade under the symbol “DMAQ” and “DMAQR,” respectively. The Nasdaq Capital Market operates in substantially the same manner as the Nasdaq Global Market, and listed companies must meet certain financial requirements and comply with Nasdaq’s corporate governance requirements. TruGolf Business Combination On March 31, 2023, we entered into an Agreement and Plan of Merger (the “Original Merger Agreement”) with DMAC Merger Sub Inc., a Nevada corporation and wholly-owned subsidiary of us (“Merger Sub”), the Sponsor, solely in the capacity as the representative from and after the effective time of the Merger (as defined in the Original Merger Agreement) for our stockholders (other than the stockholders of TruGolf (as defined below))(the “Sponsor’s Purchaser Representative”), TruGolf, Inc., a Nevada corporation (“TruGolf”), and Christopher Jones, solely in his capacity as the representative from and after the effective time of the Merger for the TruGolf stockholders (the “Seller Representative”). Pursuant to the Original Merger Agreement, subject to the terms and conditions set forth therein, (i) upon the consummation of the TruGolf Business Combination, Merger Sub will merge with and into TruGolf in the Merger, with TruGolf continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of the Company. In the Merger, (i) all shares of TruGolf common stock (together, “TruGolf Stock”) issued and outstanding immediately prior to the Effective Time will be converted into the right to receive the Merger Consideration (as defined in the Original Merger Agreement ); (ii) all convertible securities of TruGolf, if not exercised or converted prior to the Effective Time, shall be cancelled, retired and terminated and cease to represent a right to acquire, be exchanged for or convert into shares of TruGolf Stock. At the Closing, the combined public company will be renamed “TruGolf, Inc.” On July 21, 2023, we entered into an Amended and Restated Agreement and Plan of Merger (as may be amended and/or restated from time to time, the “Restated Merger Agreement”) with the Merger Sub, the Purchaser Representative and the Seller Representative, pursuant to which the Original Merger Agreement was amended and restated to provide, among other things, that (i) contingent earnout shares will be issued after the Closing, if and when earned, upon the Company meeting the milestones specified in the Restated Merger Agreement, rather than being issued at the closing of the merger and being placed into escrow subject to potential forfeiture; and (ii) the per share price of the Company’s common stock used in the calculation of the number of shares to be issued to the Sellers as merger consideration shall be $10.00, as opposed to the price at which the Company redeems the shares of common stock held by its public stockholders in connection with the closing of this business combination. The Restated Merger Agreement supersedes the Original Merger Agreement. Pursuant to the Restated Merger Agreement, subject to the terms and conditions set forth therein, at the closing of the transactions contemplated by the Restated Merger Agreement (the “Closing”), (i) each share of TruGolf Class A Common Stock outstanding as of immediately prior to the Closing will be converted into a right to receive a number of the Company’s Class A common stock and (ii) each share of TruGolf Class B Common Stock outstanding as of immediately prior to the Closing will be converted into a right to receive a number of the Company’s Class B Shares, equal to such shares respective pro rata share of the Merger Consideration, determined on the basis of a conversion ratio (the “Conversion Ratio”) derived from an implied equity value for TruGolf equal to $80,000,000, subject to adjustments for TruGolf’s closing debt, net of cash and unpaid transaction expenses (the “Merger Consideration”), and (iii) each outstanding option to acquire shares of TruGolf common stock (whether vested or unvested) will be assumed by the Company and automatically converted into an option to acquire shares of the Company’s common stock, with its price and number of shares equitably adjusted based on the Conversion Ratio. The Merger Consideration to be paid to TruGolf stockholders will be paid solely by the delivery of new shares of the Company’s Common Stock, with each valued at the price per share at which each share of the Company’s Common Stock is redeemed or converted pursuant to the Redemption. The Merger Consideration will be subject to a post-Closing true-up 90 days after the Closing. The Merger Consideration will be allocated among TruGolf stockholders, pro rata amongst them based on the number of shares of TruGolf common stock owned by such stockholder. Such consideration otherwise payable to TruGolf stockholders is subject to reduction for purchase price adjustments. 18 In addition to the Merger Consideration set forth above, the TruGolf stockholders will also have a contingent right to receive up to an aggregate of an additional 4.5 million Deep Medicine Class A Shares (the “Earnout Shares”), as additional consideration, with each share valued at $10 per share during the three (3) year period following the Closing. The Earnout Shares shall be earned, based on the combined company meeting criteria relating to (i) consolidated gross revenue, (ii) VWAP (as defined below) of Deep Medicine Class A Shares, or (iii) number of qualified franchise locations opened. The Earnout Shares shall be allocated into three tranches consisting of a first tranche of 1,000,000 Earnout Shares (the “First Tranche”), a second tranche of 1,500,000 Earnout Shares (the “Second Tranche”), and third tranche of 2,000,000 Earnout Shares (the “Third Tranche”). The Earnout Shares will be earned as set forth below: a) The First Tranche will be earned as follows: (i) in the event that the gross consolidated gross revenue of Deep Medicine and its subsidiaries (the “Gross Revenues”) for 2024 equals or exceeds Thirty Million Dollars ($30,000,000) but is less than Forty Two Million Dollars ($42,000,000), then the TruGolf stockholders shall be entitled to receive 50% of the First Tranche or (y) in the event that the Gross Revenues for 2024 equals or exceeds Forty Two Million Dollars ($42,000,000), then the TruGolf stockholders shall be entitled to receive 100% of the First Tranche; or (ii) in the event that the dollar volume-weighted average price (“VWAP”) of the Deep Medicine Class A Shares is at least $13.00 per share for at least twenty (20) out of thirty (30) trading days in the specified period, then the TruGolf stockholders shall be entitled to received100% of the First Tranche or, in the event that ten (10) or more Qualified Franchise Locations (as defined in the Restated Merger Agreement) are opened prior to the end of the calendar year 2024, then the TruGolf stockholders shall be entitled to received100% of the First Tranche. b) The Second Tranche will be earned as follows: (i) in the event that the Gross Revenues for 2025 equals or exceeds Fifty Million Dollars ($50,000,000) but is less than Sixty Five Million Dollars ($65,000,000), then the TruGolf stockholders shall be entitled to receive 50% of the Second Tranche or (y) in the event that the Gross Revenues for 2025 equals or exceeds Sixty Five Million Dollars ($65,000,000), then the TruGolf stockholders shall be entitled to receive 100% of the Second Tranche; or (ii) in the event that the VWAP of Deep Medicine Class A Shares is at least $15.00 per share for at least twenty (20) out of thirty (30) trading days in the specified period, then the TruGolf stockholders shall be entitled to receive 100% of the Second Tranche or, in the event that thirty (30) or more Qualified Franchise Locations are opened prior to the end of the calendar year 2025, then the TruGolf stockholders shall be entitled to receive 100% of the Second Tranche. c) The Third Tranche will be earned as follows: (i) in the event that the Gross Revenues for 2026 equals or exceeds Eighty Million Dollars ($80,000,000) but is less than One Hundred Million Dollars ($100,000,000), then the TruGolf stockholders shall be entitled to receive 50% of the Third Tranche or (y) in the event that the Gross Revenues for 2026 equals or exceeds One Hundred Million Dollars ($100,000,000), then the TruGolf stockholders shall be entitled to receive 100% of the Third Tranche; or (ii) in the event that the VWAP of Deep Medicine Class A Shares is at least $17.00 per share for at least twenty (20) out of thirty (30) trading days in the specified period, then the TruGolf stockholders shall be entitled to receive 100% of the Third Tranche or, in the event that fifty (50) or more Qualified Franchise Locations are opened prior to the end of the calendar year 2026, then the TruGolf stockholders shall be entitled to receive 100% of the Third Tranche. TruGolf intends to list its Class A common stock on Nasdaq under the symbol “TRUG”, upon the closing of the Business Combination. TruGolf will not have rights traded following consummation of the Business Combination. 19 Results of Operations We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for the IPO. Following the IPO, we have not and do not expect to generate any operating revenues until after completion of our initial business combination. We generated non-operating income in the form of interest income on cash and cash equivalents after the IPO in amount of $90,687 and $201,222 for the three and six months ended September 30, 2023, respectively, compared to $552,164 and $667,577 for the three and six months ended September 30, 2022, respectively. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements contained elsewhere in this Report. After the IPO, we incurred and expect to continue to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective business combination candidates. Our expenses have increased substantially after the closing of the IPO. For the three and six months ended September 30, 2023, we had a net loss of $270,346 and $531,911, respectively, which consisted of operating costs of $361,033 and $733,133, respectively, offset by interest earned on marketable securities held in the trust account of $90,687 and $201,222, respectively. For the three and six months ended September 30, 2022, we had a net loss of $165,559 and $319,979, respectively, which consisted of operating costs of $717,723 and $987,556, respectively, offset by interest earned on marketable securities held in the trust account of $552,164 and $667,577, respectively. Factors That May Adversely Affect our Results of Operations Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination. Liquidity and Capital Resources We had cash of $357,478 on our balance sheet as of September 30, 2023, compared to cash of $595,536 as of March 31, 2023, including $554,873 distributed from the trust account for the tax payments. As of September 30, 2023 and March 31, 2023, we had total current liabilities of $3,469,736 and $2,795,069, respectively, and total current assets of $7,005,273 and $9,776,747, respectively. As of September 30, 2023, we had working capital deficit of $3,112,258, a decrease in working capital by $933,133 as compared to March 31, 2023, primarily as a result of a decrease in cash and prepaid expenses and an increase in total current liabilities. The increase in accrued expenses as of September 30, 2023 was in connection with the legal fees for preparation of the TruGolf Merger Agreement and its amendment, and the preparation of the registration statement and prospectus related to TruGolf Business Combination. In addition, on October 15, 2022, we issued the First Sponsor Affiliate Notes in an aggregate principal amount of $1,265,000 to two affiliates of the Sponsor in connection with the First Extension. Due to the stockholders’ redemption in December 2022 in connection with the 2022 Special Meeting, and in July 2023 in connection with the 2023 Special Meeting, cash and marketable securities held in trust account decreased to $6,647,795 as of September 30, 2023, after $121,034,650 (approximately $10.24 per share) and $2,914,230 (approximately $11.41 per share) were removed from our trust account to pay such redeeming holders in connection with the Second Extension and the Third Extension, respectively. In addition, an aggregate of $300,000 was deposited in the aggregate into the trust account as of June 30, 2023 under the Second Sponsor Affiliate Note. 20 We expect to continue to incur significant costs in the pursuit of a business combination. We cannot assure you that our plans to complete the business combination will be successful. For the six months ended September 30, 2023, cash used in operating activities amounted to $322,675, mainly due to the net loss of $531,911, and the unrealized income earned on investment held in the trust account in amount of $201,222, offset by the decrease in prepaid expenses by $20,408 and the increase in accrued expenses by $380,050, plus $10,000 increase in accrued expenses to related parties. Comparatively, cash used in operating activities amounted to $362,426 during the six months ended September 30, 2022, mainly due to the net loss of $319,979, plus the decrease in accrued expenses to related parties by $10,000, offset by the decrease in prepaid expenses by $135,329 and the increase in accrued expenses by $499,801. Cash flow of $2,714,230 provided by investing activities during the six months ended September 30, 2023 was due to the release from the trust account in the amount of $2,914,230 (approximately $11.41 per share) to pay the redeeming stockholders in connection with the 2023 Special Meeting, offset by the investment of the investment of $200,000 in the trust account, which was a partial payment pursuant to the Second Sponsor Affiliate Note in connection with the Second Extension (under which a monthly payment of $50,000 should be deposited into the trust account after January 29, 2023). Cash flow of $2,629,613 used in financing activities during the six months ended September 30, 2023 was due to the proceeds from a third party loan of $84,617 to pay the premium for the Company’s director and officer insurance, and the proceeds from the Second Sponsor Affiliate Note totaled $200,000 as discussed above, offset by the cash of $2,914,230 removed from the trust account to pay the redeeming stockholders in July 2023 in connection with the 2023 Special Meeting. There was no cash flow from investing activities and financing activities during the six months ended September 30, 2022. As of September 30, 2023, we had cash and marketable securities held in the trust account of $6,647,795, after the $121,034,650 (approximately $10.24 per share) was removed from the trust account to pay the redeeming holders in connection with the 2022 Special Meeting, and the $2,914,230 (approximately $11.41 per share) was removed from the trust account to pay the redeeming holders in connection with the 2023 Special Meeting, substantially all of which has been invested in U.S. treasury bills with a maturity of 180 days or less. Interest income earned on the balance in the trust account may be available to us to pay taxes. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account to complete our initial business combination. In December 2022, we withdrew interest of $754,873 to pay franchise and income taxes. We estimate our annual franchise tax obligations, based on the number of shares of our common stock authorized and outstanding after the completion of the IPO, to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from the IPO held outside of the trust account or from interest earned on the funds held in our trust account and released to us for this purpose. Our annual income tax obligations depend on the amount of interest and other income earned on the amounts held in trust account. The interest earned on the amount in the trust account has been and we expect it will continue to be sufficient to pay our income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies. As of September 30, 2023, we had available cash of $357,478. We have used and will continue to use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us Working Capital Loans as may be required. If we complete our initial business combination, we would repay any Working Capital Loans. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay any such Working Capital Loans but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such Working Capital Loans may be convertible into private placement-equivalent units at a price of $10.00 per unit (which, for example, would result in the holders being issued 165,000 shares of Class A common stock if $1,500,000 of notes were so converted since the 150,000 rights included in such units would result in the issuance of 15,000 shares upon the closing of our business combination), at the option of the lender. Such units would be identical to the private placement units. The terms of such Working Capital Loans by our Sponsor or its affiliates, or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. 21 We do not believe we will need to raise additional funds following the IPO in order to meet the expenditures required for conducting the due diligence related to a proposed business combination and operating our business during this process. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination, including the proposed business combination, are less than the actual amount necessary to do so, or we are unable to complete the proposed business combination, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, have targeted and if the TruGolf Business Combination is not consummated, we will continue to target businesses larger than we could acquire with the net proceeds of the IPO and the sale of the private placement units, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations. Related Party Transactions We pay Weixuan Luo, our Chief Financial Officer, monthly fees of $5,000 for her services commencing on August 1, 2020. Upon completion of our initial Business Combination or our liquidation, we will cease paying these monthly fees. We will also issue to our officers and directors an aggregate of 300,000 post business combination shares within 10 days following the Business Combination with the same lock-up restrictions as the shares of Class B common stock initially purchased by the Sponsor in March 2021 (including the shares of the Company’s Class A common stock issued upon the conversion thereof, the “Founder Shares”) and same registration rights as our Founder Shares. Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf. As of September 30, 2023 and March 31, 2023, we had loans payable to the Sponsor and its affiliates in the amount of $2,065,000 and $1,865,000, respectively, as discussed below: Prior to the consummation of the IPO, our Sponsor agreed to loan us $500,000 to be used for a portion of the expenses of the IPO. The Sponsor Note is non-interest bearing, unsecured and due upon completion of our initial business combination. Under no circumstances shall any individual, including but not limited to any officer, director, employee or stockholder, be obligated personally for any obligations or liabilities of the Sponsor Note. On October 15, 2022, we issued the First Sponsor Affiliate Notes to two affiliates of the Sponsor in connection with the First Extension, from October 29, 2022 to January 29, 2023. The First Sponsor Affiliate Notes bear no interest and are repayable in full upon the earlier of (a) the date of the consummation of the initial business combination, or (b) the date of our liquidation. On October 19, 2022, an aggregate of $1,265,000 from the First Sponsor Affiliate Notes was deposited into the trust account, which amount will be included in the pro rata amount distributed to (i) holders of public shares upon our liquidation or (ii) holders of public shares who elect to have their shares redeemed in connection with the consummation of the initial business combination. 22 On February 9, 2023, we issued the Second Sponsor Affiliate Note to an affiliate of the Sponsor, in connection with the Second Extension, from January 29, 2023 to July 29, 2023. The Second Sponsor Affiliate Note bears no interest and is repayable in full upon the earlier of (a) the date of the consummation of the initial business combination, or (b) the date of our liquidation. Accordingly, an aggregate of $300,000 had been deposited into the trust account as of June 30, 2023. In July 2023, we and the Sponsor entered into certain non-redemption agreements (“Non-Redemption Agreements”) with each of six unaffiliated third parties, with respect to a maximum aggregate of 514,773 shares of our Class A common stock, in exchange for such third parties agreeing not to redeem (or shall use commercially reasonable efforts to request that the Company’s transfer agent reverse any previously submitted redemption demand) such shares in connection with the 2023 Special Meeting, and the Sponsor has agreed to transfer a maximum aggregate of 185,179 Founder Shares pursuant to the Non-Redemption Agreements upon the consummation of the Company’s initial business combination. . We also agreed that until the earlier of (a) the consummation of our initial business combination; and (b) the liquidation of the trust account, we will maintain the investment of funds held in the trust account in interest-bearing United States government securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, having a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government treasury obligations, or maintain such funds in cash in an interest-bearing demand deposit account at a bank. On November 2, 2023, the Company executed a Loan Agreement with each of Greentree Financial Group, Inc. and Finuvia, LLC (together, the “PIPE Investors”). Pursuant to the terms and conditions of the loan agreements, we shall issue the PIPE Investors up to $8,000,000 in principal amount of convertible notes (the “Convertible Notes”) and warrants (the “Warrants”) to purchase 727,273 shares of Class A common stock of the Company (the “New TruGolf”) after the closing of the Trugolf Business Combination. The Loan Agreement contemplates funding of the investment (the “Investment”) across three tranches: (i) The first closing amount of $2,110,000 in the aggregate, will be invested upon the closing of the Trugolf Business Combination and the satisfaction of other closing conditions, which will be the first closing date of the Investment (the “First Closing Date”), in exchange for Convertible Notes to be issued by the Company following the closing of Trugolf Business Combination in the principal amount of $2,400,000 reflecting a 10% original issue discount to the face amount thereof and $25,000 allowance for each PIPE Investor’s legal fees. Further, all of the Warrants shall also be issued on the First Closing Date; (ii) The second closing amount of $2,160,000, in the aggregate, will be invested within three business days from New TruGolf filing certain registration statement, which will be the second closing date of the Investment (the “Second Closing Date”), in exchange for Convertible Notes to be issued by New TruGolf in the principal amounts of $2,400,000, reflecting a 10% original issue discount to the face amount thereof; provided that all conditions to the PIPE Investors’ and New TruGolf’s obligations set forth in the transaction documents have been satisfied or waived prior to the Second Closing Date, and the respective obligations to consummate the Second Closing shall be contingent on certain stockholder approval and New TruGolf exercising its discretion to enter into the to second tranche of the Investment; and (iii) The third closing amount of $2,880,000, in the aggregate, will be invested within three business days of certain registration statement being declared effective, which will be the third closing date of the Investment (the “Third Closing Date”), in exchange for Convertible Notes to be issued by New TruGolf in the principal amount of $3,200,000, reflecting a 10% original issue discount to the face amount thereof; provided that all conditions to the PIPE Investors’ and New TruGolf’s obligations set forth in the transaction documents have been satisfied or waived prior to the Third Closing Date, and the respective obligations to consummate the Third Closing shall be contingent on certain stockholder approval and New TruGolf exercising its discretion to enter into the to third tranche of the Investment. Each Convertible Note will mature on the date that is five years from each respective closing date (the “Maturity Date”) and is convertible at any time at the holder’s option at a conversion price of the lower of $10 per share or the lowest of New TruGolf’s VWAP for the 10 consecutive trading days following the date of the closing of the Trugolf Business Combination, subject to adjustment and a floor price of $5.00 per share (the “Conversion Price”). New TruGolf may, at its option, at any time and from time to time, prepay all or any part of the principal balance of the Convertible Notes before the Maturity Date subject to certain notice requirements. If New TruGolf or any subsidiary thereof, as applicable, at any time while a Convertible Note is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Class A common stock of New TruGolf or securities entitling any person or entity to acquire shares of New TruGolf’s Class A common stock (upon conversion, exercise or otherwise), at an effective price per share less than the Conversion Price then the Conversion Price shall be reduced at the option of the PIPE Investor to the same base share price as the new investment. Additionally, on each date in which a conversion occurs, New TruGolf shall pay to the PIPE Investors in New TruGolf’s Class A common stock (the “Make-Whole Shares”) the sum of (A) all accrued interest on the Convertible Notes to date plus (B) all interest that would otherwise accrued on such principal amount of the Convertible Notes if such converted principal would be held to the Maturity Date (the “Make-Whole Amount”) at the Interest Conversion Rate (as defined below). However, New TruGolf shall have the ability to elect to pay the Make-Whole Amount in cash or in Make-Whole Shares at the Interest Conversion Rate if New New TruGolf’s Class A common stock’s VWAP is less than $6.00 per share for 5 consecutive trading days ending on the trading day that is immediately prior to the make-whole payment. 23 Interest shall accrue on the aggregate unconverted and then outstanding principal amount of the Convertible Notes at a rate of 10% per annum, payable quarterly on January 1, April 1, July 1 and October 1. If New TruGolf’s Class A common stock’s VWAP is greater than or equal to $6.00 per share for five consecutive trading days prior to the interest payment date, the PIPE Investor may elect to receive interest payments in cash, or New TruGolf’s Class A common stock with an effective interest rate of 15% per annum and a conversion rate of 90% of the lowest VWAP for the 5 consecutive trading days ending on the trading day that is immediately prior to the date on which interest is paid in New TruGolf’s Class A common stock (adjusted for share splits, share dividends or similar events) (the “Interest Conversion Rate”). If New TruGolf’s Class A common stock’s VWAP is less than $6.00 per share for five consecutive trading days immediately prior to the interest payment date, New TruGolf may elect to pay the interest payments in cash or New TruGolf’s Class A common stock at the Interest Conversion Rate, in its sole discretion. As additional consideration for the purchase of the Convertible Notes, New TruGolf will issue to the PIPE Investors, on the First Closing Date, the Warrants to purchase 727,273 shares of New TruGolf’s Class A common stock (such shares, the “Warrant Shares”) at the exercise price of $13.00 per Warrant Share (the “Exercise Price”). If New TruGolf or any subsidiary thereof, as applicable, at any time while the Warrants are outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any New TruGolf’s Class A common stock or securities entitling any person or entity to acquire shares of New TruGolf’s Class A common stock (upon conversion, exercise or otherwise), at an effective price per share less than the then Exercise Price then the Exercise Price shall be reduced at the option of the PIPE Investor to the same base share price as the new investment. Further, subject to a floor price of $5.00, as adjusted, the Exercise Price shall be adjusted to one hundred thirty percent (130%) of the lowest VWAP for the 10 consecutive trading days following the date of the closing of the Trugolf Business Combination. The Warrants are exercisable for a period of five years and will be subject to cashless exercise if on or after 90 days from the Warrants’ issue date, there is no effective registration statement registering, or the prospectus contained therein is not available for the resale of the Warrant Shares by the PIPE Investors. In conjunction with the Investment, the parties shall enter into a registration rights agreement (the “Registration Rights Agreement”). In accordance with the terms and conditions of the Registration Rights Agreement, New TruGolf shall prepare and file with the SEC, to the extent permitted under the applicable law and by the Commission, within 30 days from the Closing of the Trugolf Business Combination to New TruGolf’s Class A common stock underlying all of the Convertible Notes and Warrants issuable hereunder, assuming the full conversion of the Convertible Notes into shares of New TruGolf’s Class A common stock and the payment of all interest on the Convertible Notes in shares of New TruGolf’s Class A common stock at the “floor” price set forth in the Notes and the Warrant. Going Concern The Company expects to incur significant costs in pursuit of its acquisition plans and will not generate any operating revenues until after the completion of its initial business combination. In addition, the Company expects to have negative cash flows from operations as it pursues an initial business combination target. In connection with the Company’s assessment of going concern considerations in accordance with FASB ASU Topic 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern” the Company does not currently have adequate liquidity to sustain operations, which consist solely of pursuing a business combination. The Company may raise additional capital through loans or additional investments from the Sponsor or its stockholders, officers, directors, or third parties. The Company’s officers and directors and the Sponsor may, but are not obligated to (except as described above), loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Based on the foregoing, the Company believes it will have sufficient cash to meet its needs through the earlier of consummation of a Business combination or the deadline to complete a business combination pursuant to the Company’s Charter (unless otherwise amended by stockholders). While the Company expects to have sufficient access to additional sources of capital if necessary, there is no current commitment on the part of any financing source to provide additional capital and no assurances can be provided that such additional capital will ultimately be available. These conditions raise substantial doubt about the Company’s ability to continue as a going concern until the consummation of a business combination or for a period of time within one year after the date that these financial statements are issued. There is no assurance that the Company’s plans to raise additional capital (to the extent ultimately necessary) or to consummate a business combination will be successful or successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As is customary for a special purpose acquisition company, if the Company is not able to consummate a business combination during the Combination Period, it will cease all operations and redeem the Public Shares. Management plans to continue its efforts to consummate a business combination during the Combination Period. Off-Balance Sheet Financing Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets. 24 Contractual Obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay our Chief Financial Officer monthly fee of $5,000 for accounting, administrative and support services. We will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation. The underwriters of the initial public offering are entitled to a deferred fee of $0.35 per unit, or $4,427,500 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement. Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.