References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Iris Acquisition Corp. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"Sponsor" refer to Iris Acquisition Holdings LLC (formerly known as Tribe Arrow
Holdings I LLC). The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the condensed 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.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the United
States Securities Exchange Act of 1934 (the "Exchange Act") that are not
historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (the "SEC"). The Company's securities filings
can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
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 have not selected any specific
business combination target and we have not, nor has anyone on our behalf,
engaged in any substantive discussions directly or indirectly, with any business
combination target with respect to an initial business combination with us. We
intend to effectuate our initial 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 initial 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 the Company's IPO was declared
effective by the SEC on March 4, 2021 (the "Effective Date"). On March 9, 2021,
the Company consummated the IPO of 27,600,000 units (the "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 IPO, pursuant to the Warrant Purchase
Agreements, the Company completed the private sale of an aggregate of 5,013,333
Warrants (each a "Private Placement Warrant") to the Sponsor and Cantor
Fitzgerald & Co. at a purchase price of $1.50 per Private Placement Warrant. The
sale of the Private Placement Warrants generated gross proceeds to the Company
of $7,520,000.
Since completing the Company's IPO, the Company has reviewed, and continues to
review, a number of opportunities to enter into a Business Combination with an
operating business, but the Company is not able to determine at this time
whether it will complete a Business Combination with any of the target
businesses that it has reviewed or with any other target business. The Company
intends to effectuate its Business Combination using cash from the proceeds of
its IPO and the proceeds of the Private Placements, its capital stock, debt, or
a combination of cash, stock and debt.
On June 1, 2022, Tribe Capital Markets LLC ("Tribe") withdrew as a member of the
Sponsor. In connection with the withdrawal of Tribe as a member of the Sponsor:
(1) on July 26, 2022 the following actions occurred: (i) Arjun Sethi resigned in
his capacity as
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Chairman and Chief Executive Officer of Iris Acquisition Corp (formerly known as
Tribe Capital Growth Corp I), (ii) Henry Ward resigned from his role as an
independent director of the Company, (iii) Omar Chohan resigned from his role as
Chief Financial Officer of the Company, and (v) Ted Maidenberg resigned from his
role as Secretary of the Company; and (2) on July 27, 2022 the following actions
occurred (i) the Sponsor changed its name from Tribe Arrow Holdings I LLC, to
Iris Acquisition Holdings LLC, and (ii) the Company's 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 the Company and such individuals on any matter relating to
the Company's operations, policies, or practices.
Effective July 26, 2022, the board of directors of the Company appointed (i)
Sumit Mehta to serve as the Company's Chief Executive Officer, (ii) Lisha Parmar
to serve as the Company's Chief Financial Officer, and (iii) Omkar Halady to
serve as the Vice President of the Company. Also, Rohit Nanani was elevated from
member to Chairman of the board of directors of the Company.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the period from November 5, 2020 (inception) through
June 30, 2022 were organizational activities, those necessary to prepare for the
IPO, and identifying a target company for our initial Business Combination. We
generate non-operating interest income from cash and cash equivalents marketable
securities held in the Trust Account and changes in the value of warrant
liabilities. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing), as well as for due diligence
expenses. We will not be generating any operating revenues until the closing and
completion of our initial Business Combination.
For the three months ended June 30, 2022, we had net income of approximately
$3,712,688, which consisted of a $4,211,660 gain on the change in fair value of
warrants and interest income on investments held in the Trust Account of
$161,103, partially offset by unrealized losses on investments held in the Trust
Account of $368,082 and $291,993 of formation and operating costs.
For the three months ended June 30, 2021, we had a net loss of $161,064, which
consisted of approximately $395,233 of formation and operating costs, partially
offset by a gain on the change in fair value of warrants $229,859 and interest
income on investments held in the Trust Account for $4,310.
For the six months ended June 30, 2022, we had net income of $7,528,415, which
consisted of a change in the fair value of warrant of $8,605,210 and interest
income on investments held in the Trust Account of $167,910, partially offset by
$876,623 of formation and operating costs and unrealized losses on investments
held in the Trust Account of $368,082.
For the six months ended June 30, 2021, we had a net loss of $2,124,477, which
consisted of $793,254 of formation and operating costs, a loss on the change in
fair value of warrants of $430,086, $606,622 in expensed offering costs, and
$298,825 in excess fair value of Private Warrants over proceeds received,
partially offset by interest income on investments held in the Trust Account of
$4,310.
Liquidity and Capital Resources
We consummated our IPO on March 9, 2021. As of June 30, 2022 and December 31,
2021, we had $50,429 and $336,228 in our operating bank account, negative
working capital of approximately $1,395,091 and $758,467, 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 June 30, 2022 and December 31, 2021,
there were no Working Capital Loans outstanding.
For the six months ended June 30, 2022, net cash used in operating activities
was $585,799 which was due to a change in fair value of warrant liability of
$8,605,210 and interest earned on investments held in the Trust Account of
$167,910, which was partially offset by our net income of $7,528,415, a change
in operating assets and liabilities of $290,824 and an unrealized loss on
investments held in the Trust Account of $368,082.
For the six months ended June 30, 2021, net cash used in operating activities
was $859,128, which was due to our net loss of $2,124,477, change in operating
assets and liabilities of $65,874, and interest earned on investments held in
the Trust Account for $4,310; which was partially offset by offering costs of
$606,622, a change in fair value of warrant liability of $430,086, and excess of
fair value of Private Warrants over proceeds received for $298,825.
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For the six months ended June 30, 2022 there no cash flows from investing
activities.
For the six months ended June 30, 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 six months ended June 30, 2022, net cash provided by financing
activities was $300,000 which was a result of the proceeds from the promissory
note from a related party for $300,000.
For the six months ended June 30, 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 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
Public Shares 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.
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 March 8, 2023 (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 mandatory liquidation date.
Critical Accounting Policies
Management's discussion and analysis of our financial condition and results of
operations is based on our condensed financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of these condensed
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 condensed 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:
Marketable Securities Held in the Trust Account
Our portfolio of investments held in the Trust Account are invested in money
market funds meeting certain conditions under Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which invest
only in direct U.S. government treasury obligations. The investments held in the
Trust Account are classified as trading securities. Trading securities are
presented on the balance sheet at fair value at the end of each reporting
period. Gains and losses resulting from the change in fair value of these
securities are included in net gain on investments held in Trust Account in the
accompanying condensed statements of operations. The estimated fair values of
investments held in the Trust Account are determined using quoted market prices.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" under
the JOBS Act and are allowed to
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comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected to delay the adoption of
new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
condensed financial statements may not be comparable to companies that comply
with new or revised accounting pronouncements as of public company effective
dates.
As an "emerging growth company", we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting pursuant to Section 404, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the condensed financial statements
(auditor discussion and analysis), and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our IPO or until we are no longer an "emerging
growth company," whichever is earlier.
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 sheet.
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
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying condensed financial statements.
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