The following discussion and analysis should be read in conjunction with the
financial statements and related notes included elsewhere in this Annual Report
on Form 10-K. This discussion contains forward-looking statements reflecting our
current expectations, estimates and assumptions concerning events and financial
trends that may affect our future operating results or financial position.
Actual results and the timing of events may differ materially from those
contained in these forward-looking statements due to a number of factors,
including those discussed in the sections entitled "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements" appearing elsewhere in
this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated on November 5, 2020 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate the business
combination using cash from the proceeds of our initial public offering and the
private placement of the private placement warrants, the proceeds of the sale of
our shares in connection with our business combination (pursuant to forward
purchase agreements or backstop agreements we may enter into following the
consummation of our initial public offering 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. The registration statement for our
initial public offering was declared effective by the SEC on March 4, 2021. On
March 9, 2021, we consummated the initial public offering of 27,600,000 Units at
a price of $10.00 per Unit, for total gross proceeds of $276,000,000. Each Unit
consists of one share of Class A common stock, $0.0001 par value, and one-fourth
of one redeemable warrant entitling its holder to purchase one share of common
stock at a price of $11.50 per share.
Simultaneously with the closing of the initial public offering, we completed the
private sale of an aggregate of 5,013,333 private placement warrants to our
sponsor and Cantor at a purchase price of $1.50 per private placement warrant
pursuant to warrant purchase agreements. The sale of the private placement
warrants generated gross proceeds to us of $7,520,000.
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On June 1, 2022, Tribe withdrew as a member of our sponsor. In connection with
the withdrawal of Tribe as a member of our sponsor: (1) on July 26, 2022, the
following actions occurred: (i) Arjun Sethi resigned in his capacity as our
Chairman and Chief Executive Officer, (ii) Henry Ward resigned from his role as
an independent director, (iii) Omar Chohan resigned from his role as Chief
Financial Officer, and (iv) Ted Maidenberg resigned from his role as our
Secretary; and (2) on July 27, 2022, the following actions occurred (i) our
sponsor changed its name from Tribe Arrow Holdings I LLC, to Iris Acquisition
Holdings LLC, and (ii) our strategy to identify a target business was revised as
described in Item 8.01 of its Form 8-K filed on July 27, 2022. The director and
officer departures were not the result of any disagreement between us and such
individuals on any matter relating to our operations, policies, or practices.
Effective July 26, 2022, the Board appointed: (i) Sumit Mehta to serve as our
Chief Executive Officer, (ii) Lisha Parmar to serve as our Chief Financial
Officer, and (iii) Omkar Halady to serve as our Vice President. Also, Rohit
Nanani was elevated from member to Chairman of the Board.
On August 30, 2022, the Board appointed Manish Shah to serve as a director until
our next annual meeting of stockholders. Mr. Shah has been appointed to the
Audit Committee and Compensation Committee of the Board. On November 14, 2022,
Duriya Farooqui resigned from the Board, effective December 15, 2022. On January
18, 2023, the Board appointed Dr. Shashibhushan Borade to serve as a director
until our next annual meeting of stockholders. Dr. Borade was appointed to the
Audit Committee of the Board.
Significant Events and transactions
We entered into the Business Combination Agreement on November 30, 2022.
Pursuant to the Business Combination Agreement, and assuming the satisfaction or
waiver of various closing conditions, including approval of the business
combination by our stockholders, (a) Liminatus Merger Sub will merge with and
into Liminatus, with Liminatus surviving the Liminatus Merger as a direct
wholly-owned subsidiary of ParentCo, and (b) simultaneously with the Liminatus
Merger, SPAC Merger Sub will merge with and into Iris, with Iris surviving the
SPAC Merger as a direct wholly-owned subsidiary of ParentCo.
Concurrently with the execution of the Business Combination Agreement, we and
ParentCo entered into the PIPE Equity Subscription Agreement with the PIPE
Investor pursuant to which the PIPE Investor has committed to purchase the PIPE
Shares for an aggregate purchase price of $15,000,000. The obligations to
consummate the transaction contemplated by the PIPE Equity Subscription
Agreement are conditioned upon, among other things, customary closing conditions
and the consummation of the transactions contemplated by the Business
Combination Agreement.
Simultaneously with the PIPE Equity Subscription Agreement, we and ParentCo
entered into the Convertible Note Subscription Agreement with the PIPE
Subscriber pursuant to which the PIPE Subscriber has committed to subscribe for
and purchase the Convertible Notes of and from ParentCo in an aggregate
principal amount of $25,000,000 due three years after the closing of the
business combination, with an initial conversion price of $11.50 per share of
ParentCo common stock, which is subject to future downward adjustment based upon
the market price of the publicly traded ParentCo common stock. The obligations
to consummate the transactions contemplated by the Convertible Note Subscription
Agreement are conditioned upon, among other things, customary closing conditions
and the consummation of the transactions contemplated by the Business
Combination Agreement.
Concurrently with the execution of the Business Combination Agreement, we,
Liminatus and our sponsor, entered into the Sponsor Support Agreement, pursuant
to which our sponsor agreed to, among other things, (i) appear at the
Stockholder Meeting and vote all of its shares of Class B common stock it holds
or has the power to vote (including any acquired in future) in favor of the
Business Combination Agreement and the transactions contemplated thereby, (ii)
be bound by certain transfer restrictions with respect to its shares of Class B
common stock, and (iii) not redeem any of its shares of Class B common stock in
each case, on the terms and subject to the conditions set forth in the Sponsor
Support Agreement.
Concurrently with the execution of the Business Combination Agreement, ParentCo
entered into the Lock-Up Agreement with our sponsor, and certain Liminatus
members with respect to the shares of ParentCo common stock that will be issued
as consideration under the Business Combination Agreement. The Lock-Up Agreement
includes, among other things, that certain Liminatus members will not be able to
transfer any shares of ParentCo common stock beneficially owned or otherwise
held by them for a certain period.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from November 5, 2020 (inception) through September 30, 2022
were organizational activities, those necessary to prepare for our initial
public offering, and identify a target company for its initial business
combination. We generate non-operating interest income from permitted cash and
cash equivalents and
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marketable securities held in the Trust Account. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing), as well as for due diligence. We will not generate any operating
revenues until the closing and completion of its initial business combination.
For the year ended December 31, 2022, we had net income of approximately
$10,249,254, which consisted of income of $579,989 for the forgiveness of
unrelated vendor payables, $9,586,864 gain on the change in fair value of
warrants and interest income on investments held in the Trust Account of
$3,074,691, which is offset by $2,452,467 of formation and offering costs.
December 31, 2021, we had net income of $4,369,659, which consisted of a gain on
the change in fair value of warrants $7,792,536, interest income on investments
held in the Trust Account for $16,842, the excess of fair value of private
placement warrants over proceeds received for $298,825, and offering costs of
$606,622, which are partially offset by $2,534,272 of formation and operating
costs.
Liquidity and Capital Resources
We consummated our IPO on March 9, 2021. As of December 31, 2022, we had
$280,640 in our operating bank account, negative working capital of
approximately $2,783,636, which excludes franchise taxes payable which may be
paid from interest earned on the Trust Account. In order to fund working capital
deficiencies or finance transaction costs in connection with a business
combination, our Sponsor or an affiliate of the Sponsor or certain of our
officers and directors may, but are not obligated to, provide us working capital
loans. As of December 31, 2022 and December 31, 2021, there were no working
capital loans outstanding.
For the year ended December 31, 2022, net cash used in operating activities was
$1,095,588, which was the result of a lack of income from operations and the
payment of operating costs.
For the year ended December 31, 2021, net cash used in operating activities was
$1,215,879, which was due to our net income of $4,369,659, change in fair value
of warrant liability of $7,792,536, change in operating assets and liabilities
of $1,318,393, and interest earned on investments held in the Trust Account for
$16,842; which was partially offset by offering costs of $606,622 and excess of
fair value of private placement warrants over proceeds received for $298,825.
For the year ended December 31, 2022, there was cash provided by investing
activities of $263,963,913, which was the result of net proceeds from investment
held in the Trust Account.
For the year ended December 31, 2021, there was $276,000,000 used in net cash
from investing activities which was a result of cash being deposited into the
Trust Account.
For the year ended December 31, 2022, net cash used in financing activities was
$262,923,913 which was a result of Class A common stock that was redeemed in
December 2022, which was offset by proceeds from the promissory note from a
related party for $1,040,000.
For the year ended December 31, 2021, net cash provided by financing activities
was $277,552,107, which was a result of proceeds from the sale of Units, net of
offering costs for $275,552,107, proceeds from the issuance of private placement
warrants for $7,520,000 partially offset by the payment of the underwriter
discount for $5,520,000.
In connection with the Company's assessment of going concern considerations in
accordance with FASB Accounting Standards Update ("ASU") 2014-15, Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern,
management has determined that the Company has and will continue to incur
significant costs in pursuit of its acquisition plans which raises substantial
doubt about the Company's ability to continue as a going concern. 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
shares of common stock upon consummation of our initial business combination, in
which case we may issue additional securities or incur debt in connection with
such 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 Accounts. 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.
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In connection with the Company's assessment of going concern considerations in
accordance with FASB ASC 205-40, Presentation of Financial Statements-Going
Concern, management has determined that if the Company is unable to complete a
business combination by June 9, 2023 (subject to an additional three month
extension at the discretion of our Board) (the "Combination Period"), then the
Company will cease all operations except for the purpose of liquidating. The
date for mandatory liquidation and subsequent dissolution as well as the
Company's working capital deficit raise substantial doubt about the Company's
ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets or liabilities should the Company be required to
liquidate after the Combination Period. The Company intends to complete a
business combination before the termination date of the Business Combination
Agreement, which is June 7, 2023.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in our financial statements. On an ongoing basis, we
evaluate our estimates and judgments, including those related to fair value of
financial instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the
following as our critical accounting policies:
Common Stock Subject to Possible Redemption
We account for shares of common stock subject to possible redemption in
accordance with the guidance in FASB Accounting Standards Codification ("ASC")
Topic 480, Distinguishing Liabilities from Equity. Common stock subject to
mandatory redemption (if any) is classified as a liability instrument and is
measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company's control) is classified as temporary equity. At all
other times, shares of common stock are classified as a component of
stockholders' equity. Our common stock features certain redemption rights that
are considered to be outside of the Company's control and subject to the
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of the balance sheets.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, Derivatives and Hedging. Derivative instruments
are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified in the balance sheet as current
or non-current based on whether or not net-cash settlement or conversion of the
instrument could be required within 12 months of the balance sheet date. We have
determined the warrants are a derivative instrument.
ASC 470-20, Debt with Conversion and Other Options, addresses the allocation of
proceeds from the issuance of convertible debt into its equity and debt
components. We apply this guidance to allocate IPO proceeds from the Units
between Class A common stock and warrants, using the residual method by
allocating IPO proceeds first to fair value of the warrants and then the Class A
common stock.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06 Debt with Conversion and Other
Options (Subtopic 47020) and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40) ("ASU 2020-06"), which simplifies the accounting for
convertible instruments. The guidance removes certain accounting models which
separate the embedded conversion features from the host contract for convertible
instruments. Either a modified retrospective method of transition or a fully
retrospective method of transition is permissible for the adoption of this
standard. Update 2020-06 is effective for fiscal years beginning after December
15, 2023, including interim periods within those fiscal years. Early adoption is
permitted, but no earlier than fiscal years beginning after December 15, 2020.
The Company is currently evaluating the effect that the updated standard will
have on the financial statements.
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