UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of | (IRS Employer |
PO Box |
(Address of principal executive offices and zip code) |
Registrant’s telephone number, including area code: |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
The | ||||
The | ||||
The |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | |
|
| Emerging growth company |
If an emerging growth company, indicate by the check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
As of May 17, 2024, there were
IRIS ACQUISITION CORP
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
Item 1. CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
IRIS ACQUISITION CORP
CONDENSED BALANCE SHEETS
March 31, 2024 | December 31, 2023 | |||||
| (Unaudited) |
| ||||
Assets | ||||||
Current assets | ||||||
Cash(1) | $ | | $ | | ||
| | |||||
Franchise tax receivable | | | ||||
Restricted cash - held in Trust Account | | — | ||||
Prepaid expenses and other current assets | |
| — | |||
Total current assets | | | ||||
Cash and Investments held in Trust Account | | | ||||
Total Assets | $ | | $ | | ||
|
|
| ||||
Liabilities, Common Stock Subject to Possible Redemption and Stockholders’ Deficit |
|
|
|
| ||
Current liabilities | ||||||
Accounts payable and accrued expenses | $ | | $ | | ||
Due to related party | | | ||||
Class A common stock pending redemption ( | | — | ||||
Income taxes payable | | | ||||
Excise tax payable | | | ||||
Derivative liability | — | | ||||
| | |||||
Promissory note - Liminatus | | | ||||
Total current liabilities | | | ||||
Deferred underwriting fee payable |
| |
| | ||
Warrant liability |
| |
| | ||
Total Liabilities | |
| | |||
|
|
|
| |||
Commitments and Contingencies (Note 8) |
|
|
|
| ||
Class A common stock subject to possible redemption, | | | ||||
|
| |||||
Stockholders’ Deficit |
|
| ||||
Preferred stock, $ |
|
| ||||
Class A common stock, $ |
| |
| | ||
Class B common stock, $ |
| — |
| — | ||
Additional paid-in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Total Stockholders’ Deficit |
| ( |
| ( | ||
Total Liabilities, Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | | $ | | ||
(1) As of March 31, 2024 and December 31, 2023, $
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
IRIS ACQUISITION CORP
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, | ||||||
| 2024 |
| 2023 | |||
Formation and operating costs | $ | | $ | | ||
Loss from operations | ( | ( | ||||
| ||||||
Other income (expense): | ||||||
Unrealized loss on change in fair value of warrant liabilities | ( | ( | ||||
Unrealized gain on change in fair value of derivative liability | | — | ||||
Interest income on marketable securities held in Trust Account | | | ||||
Interest expense | ( | — | ||||
Total other income (expense) | ( | ( | ||||
|
|
| ||||
Loss before provision for income taxes | ( | ( | ||||
Provision for income taxes | ( | ( | ||||
Net loss | $ | ( | $ | ( | ||
|
|
|
| |||
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption |
| |
| | ||
Basic and diluted net loss per share, Class A common stock subject to possible redemption | $ | ( | $ | ( | ||
Basic and diluted weighted average shares outstanding, Class B common stock |
| — |
| | ||
Basic and diluted net loss per share, Class B common stock | $ | — | $ | ( | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
IRIS ACQUISITION CORP
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2024
Class A Common Stock | Class B Common Stock | Additional | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Paid-in Capital |
| Deficit |
| Deficit | ||||||||
Balance as of January 1, 2024 | | | — | — | | ( | ( | ||||||||||||||
Remeasurement of Class A common stock to redemption amount |
| — | — | — | — |
| ( |
| — |
| ( | ||||||||||
Excise tax payable attributable to redemption of common stock | — | — | — | — | — | ( | ( | ||||||||||||||
Tax claim adjustment from redeeming stockholders | — | — | — | — | — | | | ||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||
Balance as of March 31, 2024 |
| | $ | | — | $ | — | $ | | $ | ( | $ | ( | ||||||||
THREE MONTHS ENDED MARCH 31, 2023
Class A Common Stock | Class B Common Stock | Additional | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Paid-in Capital |
| Deficit |
| Deficit | ||||||||
Balance as of January 1, 2023 | — | — |
| |
| |
| | ( | ( | |||||||||||
Remeasurement of Class A common stock to redemption amount | — | — | — | — | — | | | ||||||||||||||
Net loss |
| — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
Balance as of March 31, 2023 |
| — | $ | — | | $ | | $ | | $ | ( | $ | ( | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
IRIS ACQUISITION CORP
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31, | ||||||
| 2024 |
| 2023 | |||
Cash Flows from Operating Activities: |
|
| ||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
| ||
Unrealized loss on change in fair value of warrant liabilities | | | ||||
Unrealized gain on change in fair value of derivative liability | ( | — | ||||
Interest income on marketable securities held in Trust Account | ( | ( | ||||
Accretion of discount on related party loans | | — | ||||
Changes in operating assets and liabilities: | ||||||
Franchise tax receivable | | — | ||||
Prepaid expenses and other current assets |
| ( |
| | ||
Due from Sponsor | — | ( | ||||
Franchise taxes payable |
| — |
| ( | ||
Income tax payable | ( | | ||||
Accounts payable and accrued expenses | | | ||||
Net cash used in operating activities |
| ( |
| ( | ||
Cash Flows from Investing Activities: | ||||||
Proceeds from Trust Account for tax payments | | | ||||
Advances to Trust Account | ( | ( | ||||
Net cash provided by investing activities | | | ||||
|
|
|
| |||
Cash Flows from Financing Activities: |
|
|
|
| ||
Redemption of Class A Common Stock | — | ( | ||||
Proceeds from related party loan |
| — |
| | ||
Repayment of related party loan | — | ( | ||||
Proceeds from promissory note - related party | — | | ||||
Proceeds from promissory note - Liminatus | | — | ||||
Net cash provided by (used in) financing activities |
| |
| ( | ||
|
|
| ||||
Net Change in Cash |
| |
| ( | ||
Cash, beginning of period |
| |
| | ||
Cash, end of period | $ | | $ | | ||
|
|
|
|
| ||
Supplemental disclosure of non - cash operating and financing activities: |
|
|
|
| ||
Remeasurement of Class A common stock subject to redemption value | $ | | $ | | ||
Pending redemptions of Class A common shares | $ | | $ | — | ||
Excise tax payable | $ | | $ | — | ||
Income taxes paid | $ | | $ | — | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Iris Acquisition Corp (the “Company”) formally known as Tribe Capital Growth Corp I (name of the Company changed on July 27, 2022), is a blank check company incorporated in Delaware on November 5, 2020. The Company was incorporated for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
As of March 31, 2024, the Company had not commenced any operations. All activity for the period from November 5, 2020 (inception) through March 31, 2024 relates to the Company’s formation and the initial public offering described below (the “IPO”), and subsequent to the IPO identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO and unrealized gains and losses and the change in fair value of its warrants.
The Company’s sponsor is Iris Acquisition Holdings LLC (formerly known as Tribe Arrow Holdings I LLC), a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s IPO was declared effective on March 4, 2021 (the “Effective Date”). On March 9, 2021, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the Company consummated the sale of
Transaction costs for the IPO amounting to $
Following the closing of the IPO on March 9, 2021, $
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) without a stockholder vote by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, in its sole discretion. The stockholders will be entitled to redeem their shares for a pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of income taxes payable), divided by the number of then outstanding public shares, subject to the limitations and on the conditions described herein. The amount in the Trust Account is initially approximately $
5
The shares of common stock subject to redemption are recorded at redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $
The Company has extended the time to complete the initial Business Combination to September 9, 2024 as described below (the “Combination Period”). However, if the Company is unable to complete the initial Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (which interest shall be net of income taxes payable and up to $
The Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to any Founder Shares and public shares they hold in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to their Founder Shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period, and (iv) vote any Founder Shares held by them and any public shares purchased during or after the IPO in favor of the initial Business Combination.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $
Business Combination Agreement
On November 30, 2022, Iris Acquisition Corp, a Delaware corporation (“we,” “our,” or “Iris”), Iris Parent Holding Corp., a Delaware corporation (“ParentCo”), Liminatus Pharma, LLC, a Delaware limited liability company (“Liminatus”), Liminatus Pharma Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of ParentCo (“Liminatus Merger Sub”), and SPAC Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of ParentCo (“SPAC Merger Sub” and together with Liminatus Merger Sub, the “Merger Subs”), entered into a business combination agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”): (a) Liminatus Merger Sub will merge with and into Liminatus (the “Liminatus Merger”), 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 (the “SPAC Merger” and, together with the Liminatus Merger, the “Mergers”), with Iris surviving the SPAC Merger (the “SPAC Surviving Subsidiary”) as a direct wholly-owned subsidiary of ParentCo (the transactions contemplated by the foregoing clauses (a) and (b) the “Business Combination,” and together with the other transactions contemplated by the Business Combination Agreement, the “Transactions”).
6
Liminatus is a clinical stage life sciences and pre-revenue company developing Guanylyl Cyclase C (“GCC”) chimeric antigen receptor (“CAR”)-T products and a GCC cancer vaccine, known as Ad5.F35-hGCC-PADRE (“Ad5hGCC-PADRE”), which it has licensed from Targeted Diagnostics & Therapeutics, Inc. (“TDT”). The Company is developing GCC CAR-T cell therapies to treat metastatic gastrointestinal cancers. The safety of Ad5hGCC-PADRE was established in a successful U.S. Food and Drug Administration (“FDA”) phase I clinical trial in November 2015 and the vaccine began an FDA phase IIa clinical trial in the fourth calendar quarter of 2019.
The aggregate consideration to be paid in the Transactions to the direct or indirect owners of Liminatus will consist of
Concurrently with the execution of the Business Combination Agreement, ParentCo and Iris have entered into an equity subscription agreement (the “PIPE Equity Subscription Agreement”) with one accredited investor (the “PIPE Investor”) pursuant to which the PIPE Investor has committed to purchase
Simultaneously with the PIPE Equity Subscription Agreement, ParentCo and Iris have entered into a convertible note subscription agreement (the “Convertible Note Subscription Agreement”) with one accredited investor (the “PIPE Subscriber”) pursuant to which the PIPE Subscriber has committed to subscribe for and purchase
From time to time, the Company has amended and restated the certificate of incorporation to change the date by which the Company must consummate a business combination, which is September 9, 2024.
From time to time, the parties to the Business Combination Agreement amended the Business Combination Agreement to extend the date by which the parties thereto can terminate the Business Combination Agreement, which is July 31, 2024. Concurrently with the amendments to the Business Combination Agreement, the PIPE Equity Subscription Agreement and Convertible Note Subscription Agreement have been amended to terminate the agreements on July 31, 2024.
On December 20, 2022, stockholders holding
On September 7, 2023, stockholders holding
On March 7, 2024 at a special meeting of stockholders of the Company, stockholders holding
7
Liquidity, Capital Resources and Going Concern
The Company consummated its IPO on March 9, 2021. As of March 31, 2024, the Company had $
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 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.
Management has determined that if the Company is unable to complete a Business Combination by September 9, 2024, 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 Business Combination Agreement provides that if the transaction is not closed by July 31, 2024, either party can terminate the Business Combination Agreement.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 17, 2024. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
8
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Class A ordinary shares subject to possible redemption and the valuation of the Private Placement Warrants required management to exercise significant judgement in its estimates.
Cash
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, the Company had operating cash (i.e,. cash held outside the Trust Account) of $
Cash and Investments held in Trust Account, and Restricted cash - held in Trust Account
As of March 31, 2024 and December 31, 2023, the Company had a total of $
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the federal depository insurance coverage of $250,000. As of March 31, 2024 and December 31, 2023, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Common Stock Subject to Possible Redemption
The Company accounts for its shares of common stock subject to possible redemption in accordance with the guidance in ASC 480. 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 a component of temporary equity. At all other times, shares of common stock are classified as stockholders’ equity. The Company’s 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 of $
9
Net Loss Per Common Stock
The Company complies with accounting and disclosure requirements of ASC Topic 260, Earnings Per Share. The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares. The Company has not considered the effect of the warrants sold in the IPO and the Private Placement to purchase an aggregate of
| Three Months Ended | Three Months Ended | ||||||||||
March 31, 2024 | March 31, 2023 | |||||||||||
| Class A |
| Class B |
| Class A |
| Class B | |||||
Basic and diluted net income | ||||||||||||
Numerator: | ||||||||||||
Net loss | ( | — | ( | ( | ||||||||
Denominator: | ||||||||||||
Basic and diluted weighted average shares outstanding | | — | | | ||||||||
Basic and diluted net loss per share | ( | | ( | ( | ||||||||
Debt Discount
The Company presents the debt discount in the balance sheets as a direct reduction from the carrying amount of debt and are amortized over the term of the related debt using the effective yield method. For the three months ended March 31, 2024 and March 31, 2023, the Company accreted the debt discount for $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), approximates the carrying amounts in the balance sheets, excluding the warrants, primarily due to their short-term nature.
Derivative Financial Instruments
The Company evaluates its 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 (“ASC 815”). 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 condensed 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. The Company has determined that the warrants are a derivative instrument.
The Company evaluates all of its financial instruments, including notes payable, to determine if such instruments contain features that qualify as embedded derivatives.
Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statement of operations each period. The Company has determined that the promissory note - related party included an embedded derivative for the redemption feature for the amount equal to
10
ASC Topic 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. The Company applies 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.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. Management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore maintained a full valuation allowance.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no tax accruals relating to uncertain tax positions.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
The Company files income tax returns in the U.S. federal jurisdiction and is subject to federal examination by the federal taxing authorities. The Company was incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.
11
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 will become effective for Annual periods beginning after December 15, 2024. The Company is still reviewing the impact of ASU 2023-09.
The Company’s 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.
Risks and Uncertainties
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
On December 27, 2022, the Treasury published Notice 2023-2, which provided clarification on some aspects of the application of the excise tax. The notice generally provides that if a publicly traded U.S. corporation completely liquidates and dissolves, distributions in such complete liquidation and other distributions by such corporation in the same taxable year in which the final distribution in complete liquidation and dissolution is made are not subject to the excise tax. Although such notice clarifies certain aspects of the excise tax, the interpretation and operation of aspects of the excise tax (including its application and operation with respect to SPACs) remain unclear and such interim operating rules are subject to change.
Because the application of this excise tax is not entirely clear, any redemption or other repurchase effected by us, in connection with a business combination, extension vote or otherwise, may be subject to this excise tax. Because any such excise tax would be payable by us and not by the redeeming holder, it could cause a reduction in the value of our Class A common stock, cash available with which to effectuate a business combination or cash available for distribution in a subsequent liquidation. Whether and to what extent we would be subject to the excise tax in connection with a business combination will depend on a number of factors, including (i) the structure of the business combination, (ii) the fair market value of the redemptions and repurchases in connection with the business combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with the business combination (or any other equity issuances within the same taxable year of the business combination) and (iv) the content of any subsequent regulations, clarifications, and other guidance issued by the Treasury. Further, the application of the excise tax in respect of distributions pursuant to a liquidation of a publicly traded U.S. corporation is uncertain and has not been addressed by the Treasury in regulations, and it is possible that the proceeds held in the trust account could be used to pay any excise tax owed by us in the event we are unable to complete a business combination in the required time and redeem 100% of our remaining Class A common stock in accordance with our amended and restated certificate of incorporation, in which case the amount that would otherwise be received by our public stockholders in connection with our liquidation would be reduced.
On September 7, 2023, the Company’s stockholders redeemed
On March 7, 2024 the Company stockholders holding
12
NOTE 3. INITIAL PUBLIC OFFERING
On March 9, 2021, the Company sold
The Company paid an underwriting fee at the closing of the IPO of $
All of the
The Class A common stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately as they occur. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital and accumulated deficit.
As of March 31, 2024 and December 31, 2023, the common stock reflected on the condensed balance sheets are reconciled in the following table:
Class A common stock subject to possible redemption as December 31, 2023 |
| | |
Less: Shares redeemed in March 2024 | ( | ||
Plus: Remeasurement of carrying value to redemption value | | ||
Class A common stock subject to possible redemption as March 31, 2024 | $ | |
Warrants — Each whole warrant entitles the holder to purchase
13
The warrants will become exercisable on the later of
The Company has agreed that as soon as practicable, but in no event later than (15) business days after the closing of the initial Business Combination, it will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (
Once the warrants become exercisable, the Company may call the warrants for redemption for cash:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the closing price of the common stock equals or exceeds $ |
If and when the warrants become redeemable by the Company for cash, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Sponsor and Cantor purchased an aggregate of
The Private Warrants are identical to the public warrants included as part of the Units sold in the IPO except that they will be non-redeemable and exercisable on a cashless basis for as long as the Private Warrants are held by the Sponsor or Cantor, the representative of the underwriters, or its permitted transferees. Additionally, for so long as the Private Warrants are held by Cantor or its designees or affiliates, they may not be exercised after
On November 30, 2022, the Sponsor entered into a Sponsor Forfeiture Agreement (the “Sponsor Forfeiture Agreement”) with the Company and Liminatus, pursuant to which, contingent upon Closing, the Sponsor agreed to forfeit all
14
NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
As of March 31, 2024 and December 31, 2023, the accounts payable and accrued liabilities of the Company consisted of the following:
| March 31, 2024 |
| ||||
(Unaudited) | December 31, 2023 | |||||
Accounts payable |
| | $ | | ||
Accrued legal expense |
| |
| | ||
Accrued financial reporting printing services |
| |
| | ||
Accrued expenses - other |
| |
| | ||
$ | | $ | | |||
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
In December 2020, the Sponsor paid $
On September 20, 2023, the Sponsor converted all of its Class B common stock on a
The Sponsor has agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A)
Promissory Note — Related Party
On May 27, 2022, the Sponsor agreed to loan the Company up to $
On October 10, 2022, the Company issued an unsecured promissory note in the aggregate principal amount up to $
On December 20, 2022, the Company issued an unsecured promissory note in the aggregate principal amount up to $
15
In accordance with ASC 815, the premium for the
In March 2023, during the United States banking crisis, the Company held cash in FRB and transferred $
On March 13, 2024, the December 2022 unsecured promissory note with the Sponsor was amended and restated to eliminate the
The total balance outstanding on the promissory notes - related party amounted to $
Related Party Loans
In addition, in order to fund working capital deficiencies or finance transaction costs in connection with an intended Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required on a non-interest bearing basis (“Working Capital Loans”). If the Company completes the initial Business Combination, the Company would repay the Working Capital Loans. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans, but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to
Administrative Support Agreement
On March 11, 2024, the Company entered into an administrative support agreement (the “Agreement”) with Arrow Capital Management LLC (“Arrow”). Pursuant to the Agreement, Arrow will provide certain office space, utilities and secretarial and administrative support (the “Services”) to the Company. In exchange for the Services, the Company will pay to Arrow $
NOTE 7. LOAN PAYABLE - LIMINATUS
On October 4, 2023, the Company issued an unsecured promissory note in the aggregate principal amount up to $
16
On February 28, 2024, the Liminatus unsecured promissory note was amended and restated to increase the aggregate principal amount to up to $
NOTE 8. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the (i) Founder Shares, which were issued in a private placement prior to the closing of the IPO, (ii) Private Warrants, which were issued in a private placement simultaneously with the closing of the IPO and the shares of Class A common stock underlying such Private Warrants and (iii) Private Warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of the Company’s securities held by them pursuant to a registration rights agreement to be signed prior to or on the Effective Date. The holders of these securities are entitled to make up to
Underwriting Agreement
The underwriters are entitled to a underwriting discount of
On October 11, 2023, the Company executed a Fee Reduction Agreement with the underwriters to reduce the deferred underwriting discount of $
NOTE 9. STOCKHOLDERS’ DEFICIT
Preferred stock—The Company is authorized to issue
Class A common stock—The Company is authorized to issue
Class B common stock—The Company is authorized to issue
Stockholders of record are entitled to
The Class B common stock are convertible at any time and from time to time at the option of the holder thereof and will automatically convert into Class A common stock upon the consummation of the initial Business Combination on a
17
initial Business Combination, excluding (i) any shares of Class A common stock redeemed by public stockholders in connection with the initial Business Combination and (ii) any Class A common stock or equity-linked securities exercisable for or convertible into Class A common stock issued, or to be issued, to any seller in the initial Business Combination and any Private Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans; provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
On September 20, 2023, the Sponsor converted all of its Class B common stock on a
NOTE 10. INCOME TAXES
The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was (
NOTE 11. RECURRING FAIR VALUE MEASUREMENTS
As of March 31, 2024 and December 31, 2023, the Company’s warrant liabilities were valued at $
All of the Company’s permitted investments are held in a money market fund. Fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets. The Company’s warrant liability for the Private Placement Warrants is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the Private Placement Warrant liability is classified within Level 3 of the fair value hierarchy. The Company’s warrant liability for the Public Warrants is based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. The fair value of the Public Warrant liability is classified within Level 1 of the fair value hierarchy.
18
The following table presents fair value information as of March 31, 2024 and December 31, 2023 of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
Amount at | ||||||||||||
Description |
| Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | ||||
March 31, 2024 (Unaudited) | ||||||||||||
Assets: | ||||||||||||
Cash held in Trust Account: |
| $ | | $ | |
| $ | — | $ | — | ||
Restricted cash - held in Trust Account | $ | | $ | | $ | — | $ | — | ||||
Liabilities: | ||||||||||||
Public Warrants | $ | | $ | | $ | — | $ | — | ||||
Private Warrants | $ | | $ | — | $ | — | $ | | ||||
December 31, 2023 | ||||||||||||
Assets: | ||||||||||||
Cash held in Trust Account: | $ | | $ | | $ | — | $ | — | ||||
Liabilities: | ||||||||||||
Public Warrants | $ | | $ | | $ | — | $ | — | ||||
Private Warrants | $ | | $ | — | $ | — | $ | | ||||
Derivative liability | $ | | $ | — | $ | — | $ | | ||||
Measurement - The Company established the initial fair value for the warrants on March 9, 2021, the date of the consummation of the IPO. On March 31, 2024 and December 31, 2023, the fair value was remeasured. In May 2021, the Public Warrants were separately traded in the open market and the valuation for the Public Warrants was based on unadjusted quoted prices at March 31, 2024 and December 31, 2023. For March 31, 2024 and December 31, 2023, the Company used a Monte Carlo simulation model to value the Private Placement Warrants.
The key inputs into the Monte Carlo simulation model for the Warrants were as follows at initial measurement, March 31, 2024 and December 31, 2023:
| March 31, 2024 |
|
| ||
(Unaudited) | December 31, 2023 | ||||
Risk-free interest rate | | % | | % | |
Expected term (years) | | | |||
Expected volatility | | % | | % | |
Stock Price | | | |||
Exercise Price | | % | |
The change in the fair value of the warrant liabilities classified as Level 3 for the three months ended March 31, 2024 and the year ended December 31, 2023 is summarized as follows:
Fair value at January 1, 2023 |
| $ | |
Change in fair value | | ||
Fair value at March 31, 2023 | | ||
Change in fair value | ( | ||
Fair value at June 30, 2023 | | ||
Change in fair value | | ||
Fair value at September 30, 2023 | | ||
Change in fair value | ( | ||
Fair value at December 31, 2023 | | ||
Change in fair value | $ | | |
Fair value at March 31, 2024 | $ | |
19
NOTE 12. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events other than the below that would have required adjustment or disclosure in the financial statements. On May 2, 2024, the Company received a written notice from the Listing Qualifications Department of Nasdaq, notifying the Company that because it no longer meets the minimum 500,000 publicly held shares requirement for The Nasdaq Capital Market, pursuant to Listing Rule 5810(d)(2) of the Rules this deficiency now becomes an additional basis for delisting and the Company must address this deficiency. The Company timely requested a hearing before the Nasdaq Hearings Panel (the “Hearing”). On May 21, 2024, the Company received a response from the Nasdaq Hearings Panel granting the Company’s request for continued listing on the Nasdaq Capital Market. The Company has until September 3, 2024 to demonstrate compliance with all applicable requirements for initial listing on the Nasdaq Global Market.
Subsequent to March 31, 2024, the Company obtained additional advances under the Liminatus unsecured promissory note totaling $
Subsequent to March 31, 2024, $
On April 2, 2024, the Company paid $
On May 13, 2024, the Board approved the additional three month extension to consummate a business combination from June 9, 2024 to September 9, 2024.
20
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 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.report. 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. On November 30, 2022, we executed a Business Combination Agreement with Liminatus Pharma, LLC. 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.
In connection with the Special Meeting, stockholders holding 26,186,896 Public Shares properly exercised their right to redeem their shares (and did not withdraw their redemption) for cash at a redemption price of approximately $10.08 per share, for an aggregate redemption amount of $263,963,913. Following such redemptions, 1,413,104 Public Shares remained outstanding in the trust.
On April 26, 2023, Dr. Borade, an Audit Committee member, notified us of his intent to resign as a member of the Board effective April 26, 2023. Dr. Borade’s decision to resign was not the result of any dispute or disagreement with us on any matter relating to our operation, policies (including accounting or financial policies) or practices.
On May 30, 2023, the Board appointed Nicholas Fernandez to serve as a director.
21
On May 30, 2023, the Board held a meeting and extended the date by which we must consummate a Business Combination for a three month period from June 9, 2023 to September 9, 2023. Consistent with this extension by the Board, the parties to the Business Combination Agreement amended the Business Combination Agreement on June 1, 2023, to extend the date by which the parties thereto can terminate the Business Combination Agreement if the transaction has not closed by that date (the “Outside Date”) from June 7, 2023, to September 30, 2023.
On August 16, 2023, we filed a preliminary proxy statement with the SEC containing a proposal to stockholders to amend our amended and restated certificate of incorporation to, among other things, extend the date by which we must consummate a business combination from September 9, 2023, to March 9, 2024. On August 14, 2023, the parties to the Business Combination Agreement amended the Business Combination Agreement to extend the Outside Date from September 30, 2023 to March 9, 2024.
On September 7, 2023, we filed with the Secretary of State of the State of Delaware an amendment to our amended and restated certificate of incorporation to: (i) to change the date by which we must consummate a business combination to December 9, 2023 (the “Second Extension Amendment”) (subject to an additional three month extension at the discretion of the Board); (ii) to remove from the charter the limitation on share repurchases prior to the consummation of a business combination that would cause our net tangible assets to be less than $5,000,001 following such repurchases, and the limitation that we shall not consummate a business combination if it would cause our net tangible assets to be less than $5,000,001 either immediately prior or subsequent to the consummation of such business combination (the “NTA Amendment”); and (iii) to amend the charter to provide for the right of a holder of shares of the Class B common stock, par value $0.0001 per share, to convert such shares into shares of the Class A common stock on a one-for-one basis prior to the closing of a business combination (the “Founder Share Amendment and, together with the Extension Amendment and the NTA Amendment, the “Charter Amendments”).
Our stockholders approved the Charter Amendments at a special meeting of stockholders (the “Second Special Meeting”) on September 7, 2023. The date by which must consummate a business combination was subsequently extended to March 9, 2024.
In connection with the Second Special Meeting, stockholders holding 1,006,495 Public Shares properly exercised their right to redeem their shares for cash at a redemption price of $10.29 per share, subject to adjustment for applicable taxes, including, but not limited to, franchise tax, excise tax and income tax, for an aggregate redemption amount of $10,358,754. Following such redemptions, 406,609 Public Shares remained outstanding.
On September 20, 2023, the Sponsor converted all of its Class B common stock on a one-for-one basis into Class A common stock. The Sponsor will not have any redemption rights in connection with the Converted Shares, and the Converted Shares will be subject to the restrictions on transfer entered into by the Sponsor in connection with the IPO.
On February 7, 2024, we filed a preliminary proxy statement with the SEC containing a proposal to stockholders to amend our amended and restated certificate of incorporation to, among other things, extend the date by which we must consummate a business combination from to March 9, 2024, to June 9, 2024.
On March 7, 2024, we filed with the Secretary of State of the State of Delaware an amendment to our amended and restated certificate of incorporation to change the date by which we must consummate a business combination to June 9, 2024 (the “Third Extension Amendment”) (subject to an additional three month extension at the discretion of the Board). The Board approved the additional three month extension on May 13, 2024 extending the date to consummate a business combination to September 9, 2024.
Our stockholders approved the Third Extension Amendment at a special meeting of stockholders (the “Third Special Meeting”) on March 7, 2024. The date by which we must consummate a business combination was subsequently extended to September 9, 2024.
In connection with the Third Special Meeting, stockholders holding 119,572 shares properly exercised their right to redeem their shares for cash at a redemption price of $10.58 per share, for an aggregate redemption amount of $1,265,669. Following such redemptions, 7,187,037 shares remained outstanding.
On March 9, 2024, the parties to the Business Combination Agreement amended the Business Combination Agreement to extend the Outside Date to July 31, 2024. Additionally, on March 9, 2024, the parties to the Subscription Agreement and Convertible Note Subscription Agreement entered into an amendments to such agreements to extend the termination date of the respective agreements to July 31, 2024.
22
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 March 31, 2024 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 form 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 March 31, 2024, we had net loss of $858,231, which consisted of $178,734 loss on the change in fair value of warrants, $721,754 of formation and offering costs, $1,339 of interest expense and which are offset by interest income on investments held in the Trust Account of $47,241.
For the three months ended March 31, 2023, we had a net loss of $648,716, which primarily consisted of a loss on the change in fair value of warrants $109,635, interest income on investments held in the Trust Account for $84,697, partially offset by $616,492 of formation and operating costs.
Liquidity and Capital Resources
We consummated our IPO on March 9, 2021. As of March 31, 2024, we had $201,537 in our operating bank account, which includes $76,639 of restricted cash to be used for tax payments only in its operating bank account, negative working capital of approximately $5,438,233. 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 March 31, 2024 and December 31, 2023, there were no Working Capital Loans outstanding.
For the three months ended March 31, 2024, net cash used in operating activities was $903,722, which was due to our net loss of $858,231, unrealized gain on change in fair value of derivative liability of $2,202, interest earned on investments held in the Trust Account of $47,241, changes in operating assets and liabilities of $176,121, which were offset by unrealized loss on change in fair value of warrant liabilities of $178,734 and the accretion of discount on related party loans of 1,339.
For the three months ended March 31, 2023, net cash used in operating activities was $727,566, which was due to our net loss of $648,716, interest earned on investments held in the Trust Account of $84,697, changes in operating assets and liabilities of $103,788 offset by unrealized loss on change in fair value of warrant liabilities of $109,635.
For the three months ended March 31, 2024, there was cash provided by investing activities of $248,834,which was the result of proceeds from the Trust Account used for tax payments and redemptions in the amount of $294,519, which was offset by the advances to Trust account of $45,685.
For the three months ended March 31, 2023, there was cash provided by investing activities of $688,551, which was the result of proceeds from Investment held in the Trust Account in the amount of $752,141, which was offset by advances to the Trust Account for $63,590.
For the three months ended March 31, 2024, net cash provided by financing activities was $700,000 which was a result of the proceeds from Liminatus promissory note of $700,000.
For the three months ended March 31, 2023, net cash used in financing activities was $196,288 which was a result of adjustments to Class A Common Stock that was redeemed in December 2022 for the amount of $305,008, which was offset by proceeds from the promissory note from a related party for $108,720.
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
23
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.
Management has determined that if the Company is unable to complete a Business Combination by September 9, 2024 (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.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, costs and expenses and related disclosures.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. The critical accounting estimates, assumptions, judgements and the related policies that we believe have the most significant impact on our financial statements are described below:
Fair Value of Warrants
In determining the fair value of the Company’s Private Placement Warrants our third party valuation firm uses the most observable inputs available. The valuation approach for our utilizes Monte Carlo simulation model. Some of the inputs used in the model include the expected common stock price volatility, risk-free interest rate, expected business combination date and probability of completing the business combination. Several of these inputs are known and several use judgement. For instance, the probability of completing the business combination is derived by taking a sample of other special purpose acquisition companies and calculating the implied probability of completion for each company in the sample set. Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact the Company’s valuation of its Private Placement Warrants as of each valuation date and may have a material impact on the valuation of these warrants.
Fair Value of Derivative Liability
In determining the fair value of the Company’s derivative liability, our third party valuation firm uses the most observable inputs available. The valuation approach for our derivative liability utilizes probability weighted expected return model. Some of the inputs used in the model include the risk-free interest rate, expected business combination date and probability of completing the business combination. Several of these inputs are known and several use judgement. For instance, the probability of completing the business combination is derived by taking a sample of other special purpose acquisition companies and calculating the implied probability of completion for each company in the sample set. Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact the Company’s valuation as of each valuation date and may have a material impact on the valuation of the derivative liability.
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.
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.
24
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of March 31, 2024, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of March 31, 2024, our disclosure controls and procedures were not effective.
Specifically, management’s determination was based on the following material weakness which existed as of December 31, 2023. Our internal controls did not detect an error in the classification related to complex financial instruments and complete and accurate financial statements. Also, there are not controls in place to ensure the timely filings of tax returns. The Company has begun to develop a remediation which is more fully described below.
After identifying the material weakness, we have commenced our remediation efforts by taking the following steps:
| ● | We have expanded and improved our review process for complex securities and related accounting standards. |
| ● | We have increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. |
| ● | We are establishing additional monitoring and oversight controls designed to ensure the accuracy and completeness of our financial statements and related disclosures. |
| ● | We plan to hire consultants to prepare and complete the filing of our tax returns. |
A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim condensed financial statements will not be prevented or detected on a timely basis. Notwithstanding the determination that our internal control over financial reporting was not effective, as of March 31, 2024 based on the material weakness described above, we believe that our condensed financial statements contained in this quarterly report fairly present our financial position, results of operations and cash flows for the years covered hereby in all material respects.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There is no material litigation, arbitration or governmental proceeding currently pending against us or any of our officers or directors in their capacity as such, and we and our officers and directors have not been subject to any such proceeding in the 12 months preceding the date of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in the Company’s annual report on Form 10-K as filed with the SEC on April 17, 2024 and in the other reports the Company has filed, and will in the future file, with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K as filed with the SEC on April 17, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the first quarter of 2024,
or any “
26
Item 6. Exhibits, Financial Statement Schedules.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
| Description of Exhibit |
2.1 | ||
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | Second Amendment to the Amended and Restated Certificate of Incorporation. | |
3.5 | ||
3.6 | ||
10.1 | ||
10.2 | First Amended and Restated Promissory Note, dated as of February 28, 2024 | |
10.3 | ||
10.4 | ||
10.5 | ||
31.1** |
| |
31.2** |
| |
32.1** |
| |
32.2** |
| |
101.INS |
| XBRL Instance Document |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
*Filed herewith.
**Furnished herewith.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Iris Acquisition Corp | ||
| ||
Date: May 22, 2024 | By: | /s/ Sumit Mehta |
Name: Sumit Mehta | ||
Title: Chief Executive Officer | ||
(Principal Executive Officer) | ||
| ||
Date: May 22, 2024 | By: | /s/ Lisha Parmar |
Name: Lisha Parmar | ||
Title: Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
28