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. We recently began substantive
discussions and entered into a letter of intent for a proposed business
combination with a business combination target in the biotechnology industry;
however, our board of directors has not approved a business combination and we
cannot be certain these discussions will result in an agreement on a business
combination. 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.
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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 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
September 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 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 September 30, 2022, we had net income of
approximately $2,731,476, which consisted income of $579,989 for the forgiveness
of unrelated vendor payables, $1,261,428 gain on the change in fair value of
warrants and interest income on investments held in the Trust Account of
$36,037, unrealized gains on investments held in the Trust Account of
$1,256,457, which is partially offset by $258,685 of formation and operating
costs and $143,750 for the provision for income taxes.
For the three months ended September 30, 2021, we had net income of $6,761,973,
which consisted of a gain on the change in fair value of warrants $7,051,822 and
interest income on investments held in the Trust Account for $5,673, which is
partially offset by $295,522 of formation and operating costs, partially offset
by.
For the nine months ended September 30, 2022, we had net income of $10,259,891,
which consisted of a change in the fair value of warrant of $9,866,638,
unrealized gains on investments held in the Trust Account of $888,375 interest
income on investments held in the Trust Account of $203,947, and $579,989 for
the forgiveness of unrelated vendor payables, which is partially offset by
$1,135,308 of formation and operating costs and $143,750 for the provision for
income taxes.
For the nine months ended September 30, 2021, we had a net loss of $4,637,496,
which consisted of $1,088,776 of formation and operating costs, $606,622 in
expensed offering costs, and $298,825 in excess fair value of Private Warrants
over proceeds received, partially offset by a gain on the change in fair value
of warrants of $6,621,736 and interest income on investments held in the Trust
Account of $9,983.
Liquidity and Capital Resources
We consummated our IPO on March 9, 2021. As of September 30, 2022, we had
$130,665 in our operating bank account, negative working capital of
approximately $1,025,190, 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 September 30, 2022 and December 31, 2021, there were no Working
Capital Loans outstanding.
For the nine months ended September 30, 2022, net cash used in operating
activities was $1,045,563 which was due to a change in fair value of warrant
liability of $9,866,638 and interest earned on investments held in the Trust
Account of $203,947, and an unrealized gain on investments held in the Trust
Account of an unrealized loss on investments held in the Trust Account of
$888,375, which was partially offset by our net income of $10,259,891, and a
change in operating assets and liabilities of $91,977.
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For the nine months ended September 30, 2021, net cash used in operating
activities was $974,236, which was due to our net income of $4,637,496, change
in fair value of warrant liability of $6,621,736, change in operating assets and
liabilities of $114,540, and interest earned on investments held in the Trust
Account for $9,983; which was partially offset by offering costs of $606,622 and
excess of fair value of Private Warrants over proceeds received for $298,825.
For the nine months ended September 30, 2022, there no cash flows from investing
activities.
For the nine months ended September 30, 2021, there was $276,009,983 used in net
cash from investing activities which was a result of cash being deposited into
the Trust Account.
For the nine months ended September 30, 2022, net cash provided by financing
activities was $840,000 which was a result of the proceeds from the promissory
note from a related party for $840,000.
For the nine months ended September 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:
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 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
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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 condensed balance sheets.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, Derivatives and Hedging. Derivative instruments
are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified in the condensed 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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