Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of
our financial condition and results of operations should be read in conjunction with our audited consolidated financial
statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data”
of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of
many factors, including those set forth under “Special Note Regarding Forward-Looking Statements” and elsewhere in
this Annual Report on Form 10-K.
Overview
We are a blank check company formed under
the laws of the State of Delaware on March 17, 2016 for the purpose of effecting a merger, share exchange, asset acquisition, stock
purchase, recapitalization, reorganization or other similar Business Combination with one or more businesses or entities. We intend
to utilize cash derived from the proceeds of our Initial Public Offering and the private placement of the Private Units, our securities,
debt or a combination of cash, securities and debt, in effecting our Business Combination.
Recent Developments
Proposed Business Combination with
Lottery.com
On February 21, 2021, we entered into a
business combination agreement (the “Merger Agreement”) with Trident Merger Sub II Corp. (“Merger Sub”)
and AutoLotto, Inc. (“Lottery.com”). Upon the closing (the “Closing”) of the business combination with
Lottery.com, Merger Sub will merge with and into Lottery.com, with Lottery.com as the surviving company, continuing as our wholly
owned subsidiary, following the transaction and the separate existence of Merger Sub shall cease. At the Closing, each share of
Lottery.com common stock issued and outstanding as of immediately prior to the Closing shall be converted into the right to receive
the Per Share Merger Consideration. “Per Share Merger Consideration” means the quotient obtained by dividing (a) 40,000,000
shares of our common stock by (b) the aggregate number of shares of Lottery.com common stock (including shares issued upon the
conversion or exercise of Lottery.com convertible securities) issued and outstanding as of immediately prior to the Closing (the
“Lottery.com Shares”). The Per Share Merger Consideration shall be reduced by the number of shares of our common stock
equal to the quotient of (i) the amount by which Net Indebtedness exceeds $10,000,000, as mutually agreed between us and Lottery.com
(each acting reasonably), divided by (ii) 11.00. “Net Indebtedness” means the amount equal to Lottery.com’s Indebtedness,
less cash and cash equivalents. For the avoidance of doubt, Lottery.com’s Indebtedness shall not include current liabilities
or any intercompany Indebtedness between or among Lottery.com and any of its subsidiaries.
The holders of the Lottery.com Shares (the
“Sellers”) will also be entitled to receive up to 6,000,000 additional shares of our common stock (the “Seller
Earnout Shares”) that may be issuable from time to time as set forth below. The aggregate value of the consideration to be
paid by us in the business combination (excluding the Seller Earnout Shares) is approximately $444 million (calculated as follows:
40,000,000 shares of our common stock to be issued to the Sellers, multiplied by $11.00). Upon the Closing, we will change
our name to “Lottery.com.”
If, at any time on or prior to December
31, 2021, the daily volume-weighted average price of shares of our common stock equals or exceeds $13.00 per share for 20 of any
30 consecutive trading days commencing after the Closing, each Seller shall receive its pro rata portion of 3,000,000 Seller Earnout
Shares and Vadim Komissarov, Ilya Ponomarev and Marat Rosenberg (the “Founder Holders”) shall receive an aggregate
of 2,000,000 shares of our common stock. If, at any time on or prior to December 31, 2022, the daily volume-weighted average price
of shares of our common stock equals or exceeds $16.00 per share for 20 of any 30 consecutive trading days commencing after the
Closing, each Seller shall receive its pro rata portion of 3,000,000 Seller Earnout Shares and the Founder Holders shall receive
an aggregate of 2,000,000 shares of our common stock. The Seller Earnout Shares then earned and issuable shall be issued to the
Sellers on a pro-rata basis based on the percentage of the Lottery.com Shares owned by them immediately prior to the Closing.
The parties agreed that immediately following
the Closing, our board of directors will consist of five directors, four of which will be designated by Lottery.com and one of
which will be designated by us, such appointment by us to be an independent director. The boards of directors of each of us and
Lottery.com have unanimously approved this business combination. The transaction will require the approval of our stockholders
and of Lottery.com, the effectiveness of a registration statement on Form S-4 to be filed with the Securities and Exchange Commission
(the “SEC”) in connection with the transaction, satisfaction of the conditions stated in the Merger Agreement and other
customary closing conditions.
Extensions of Time Period to Complete
a Business Combination
On November 26, 2019, we held our Annual Meeting of
the Stockholders (the “Annual Meeting”) at which the stockholders approved a proposal to amend our Amended and Restated Certificate
of Incorporation (the “Charter Amendment”) to extend the period of time for which we are required to complete a Business Combination
two times for an additional 90 days each time to June 1, 2020 (the termination date as so extended, the “Extended Termination Date”).
Our stockholders were able to elect to redeem their shares in connection with the Annual Meeting for a pro rata portion of the amount
then on deposit in the trust account ($10.00 per share, plus any pro rata interest earned on the funds held in the trust account and not
previously released to us to pay franchise and income taxes). With respect to public shares not redeemed in connection with the Annual
Meeting, we agreed to make a cash contribution of $500,000 to the trust account for each 90-day extension. As of March 31, 2020, we had
contributed an aggregate of $1,000,015 to the trust account and extended the time to complete a Business Combination to June 1, 2020.
In connection with the approval of the
Charter Amendment, stockholders elected to redeem an aggregate of 13,081,434 shares of our common stock. As a result, an aggregate
of approximately $137,130,484 (or approximately $10.48 per share) was removed from our trust account to pay such stockholders,
and 13,224,816 shares of common stock were then issued and outstanding following such redemption.
On May 28, 2020, we held a Special Meeting
of the Stockholders at which the stockholders approved a proposal to amend our Amended and Restated Certificate of Incorporation
(the “Second Charter Amendment”) to extend the period of time for which we are required to complete a Business Combination
to September 1, 2020 (the “Second Extended Date”). We made a cash contribution of $962,476 to the trust account for
the three-month extension period. In addition, the stockholders elected to redeem an aggregate of 627,059 shares of our common
stock. As a result, an aggregate of $6,666,775 (or approximately $10.63 per share) was removed from our trust account to pay such
stockholders and 12,597,757 shares of common stock were then issued and outstanding following such redemption.
On August 28, 2020, we held a Special Meeting
of the Stockholders at which the stockholders approved a proposal to amend our Amended and Restated Certificate of Incorporation
(the “Third Charter Amendment”) to extend the period of time for which we are required to complete a Business Combination
to December 1, 2020 (the “Third Extended Date”). We made a cash contribution of $867,971 to the trust account for the
three-month extension period. In addition, the stockholders elected to redeem an aggregate of 630,037 shares of our common stock.
As a result, an aggregate of $6,781,851 (or approximately $10.76 per share) was removed from our trust account to pay such stockholders
and 11,967,720 shares of common stock were issued and outstanding following such redemption as of December 31, 2020.
On November 30, 2020, we held a Special
Meeting of Stockholders, pursuant to which the stockholders approved the extension to the Third Extended Date from December 1,
2020 to March 1, 2021, with an ability to further extend for an additional three months to June 1, 2021 (the “Fourth Extended
Date”) if approved by our board of directors. We agreed to contribute $0.05 for each Public Share outstanding that was not
redeemed for each month of the extension going forward. On December 1, 2020, we contributed an aggregate of $289,323 to the trust
account. On February 26, 2021, our board of directors approved the extension of the Fourth Extended Date to June 1, 2021
to permit sufficient time for us to consummate our proposed business combination with Lottery.com, including filing a registration
statement on Form S-4 that will include a proxy statement.
Results of Operations
We have neither engaged in any operations
nor generated any revenues to date. Our only activities from inception through December 31, 2020 were organizational activities
and those necessary to prepare for the Initial Public Offering and, after our Initial Public Offering, identifying a target company
for a Business Combination and activities in connection with the proposed acquisition of Lottery.com. Following the Initial Public
Offering, we do not expect to generate any operating revenues until after the completion of our Business Combination. We generate
non-operating income in the form of interest income on marketable securities held in the trust account. We incur expenses as a
result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence
expenses.
For the year ended December 31, 2020, we
had net loss of $809,047, which consists of interest income on marketable securities held in the trust account of $348,425, refund
of the tender bid of subsidiary of $11,180, and a provision for income taxes of $217,086, offset by operating costs of $1,385,738.
For the year ended December 31, 2019, we
had net income of $2,533,106, which consists of interest income on marketable securities held in the trust account of $4,324,060
offset by operating costs of $1,100,138 and a provision for income taxes of $690,816.
Liquidity and Capital Resources
As of December 31, 2020, we had marketable
securities held in the trust account of $63,405,336 (including approximately $1,537,000 of interest income). Interest income on
the balance in the trust account may be used to pay taxes. During the year ended December 31, 2020, we withdrew $490,865 of interest
earned on the trust account to pay our tax obligations.
For the year ended December 31, 2020, cash
used in operating activities was $1,848,754. Net loss of $809,047 was affected by interest earned on marketable securities held
in the trust account of $348,425 and a deferred tax benefit of $217,086, offset by changes in operating assets and liabilities
which provided $474,196 of cash for operating activities.
For the year ended December 31, 2019, cash
used in operating activities was $1,525,377. Net income of $2,533,106 was the result of interest earned on marketable securities
held in the trust account of $4,324,060 and a deferred tax provision of $851, principally offset by cash used in operating activities
and taxes payable. Changes in operating assets and liabilities provided $266,428 of cash for operating activities.
We intend to use substantially all of the
funds held in the trust account to acquire a target business or businesses and to pay our expenses relating thereto, including
a deferred underwriting fee payable to our underwriters. To the extent that our capital stock or debt is used, in whole or in part,
as consideration to effect a Business Combination, the remaining proceeds held in the trust account as well as any other net proceeds
not expended will be used as working capital to finance the operations of the target business. Such working capital funds could
be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions
and for marketing, research and development of existing or new products.
As of December 31, 2020, we had cash of
$972,787 held outside the trust account. We intend to use the funds held outside the trust account primarily to identify and evaluate
target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements
of prospective target businesses, and structure, negotiate and complete a Business Combination.
On December 17, 2019, Viktoria Group, LLC,
a company owned by Vadim Komissarov, loaned us $180,000 to fund our working capital requirements and finance transaction expenses
in connection with a Business Combination. The loan was non-interest bearing and payable on December 2, 2020. We repaid the
loan on June 18, 2020.
On January 30, 2020, VK Consulting loaned
us $425,000 to fund our working capital requirements and finance transaction expenses in connection with a Business Combination.
The promissory note is non-interest bearing and currently payable on demand.
On February 7, 2020, May 15, 2020 and August
27, 2020, BGV Group Limited loaned us an aggregate of $3,400,000 to fund our working capital requirements and finance transaction
expenses in connection with a Business Combination. The promissory notes are non-interest bearing and currently payable on demand.
On November 27, 2020, one of our
affiliates loaned us an aggregate of $150,000 to fund the our working capital requirements and finance transaction expenses
in connection with a Business Combination. The loans are non-interest bearing and payable on May 27, 2021.
On November 30, 2020 and December 28, 2020,
one of our affiliates loaned us an aggregate of $1,100,000 to fund our working capital requirements and finance transaction
expenses in connection with a Business Combination. The loans are non-interest bearing and are currently payable on demand.
In order to fund working capital deficiencies
or finance transaction costs in connection with a Business Combination, certain of our initial stockholders, our officers and directors
may, but are not obligated to, loan us funds from time to time or at any time as may be required. If we complete a Business Combination,
we would repay such loaned amounts out of the proceeds of the trust account released to us. In the event that a Business Combination
does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amount, but no
proceeds from our trust account would be used to repay such loaned amounts. Up to $200,000 of such loans may be convertible into
Private Units at a price of $10.00 per unit at the option of the lender. The units would be identical to the Private Units. The
terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans.
We will need to raise additional capital
through loans or additional investments from our initial stockholders, officers or directors. Our initial stockholders, officers
or directors may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable
in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If
we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead
expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.
These conditions raise substantial doubt about our ability to continue as a going concern through June 1, 2021, the date that we will be required to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated.
These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification
of the liabilities that might be necessary should we be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements
as of December 31, 2020.
Contractual Obligations
We do not have any long-term debt, capital
lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay VK Consulting an aggregate
monthly fee of $7,500 for office space, secretarial and administrative services provided to us. We began incurring these
fees on May 30, 2018 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination
or our liquidation.
The underwriter is entitled to a deferred
fee of two and one-half percent (2.5%) of the gross proceeds of the Initial Public Offering, or $5,031,250. The deferred fee will
be paid in cash upon the closing of a Business Combination from the amounts held in the trust account, subject to the terms of
the underwriting agreement.
In addition, we have agreed to pay the
underwriter a warrant solicitation fee of five percent (5%) of the exercise price of each Public Warrant exercised during the period
commencing thirty days after the consummation of the Business Combination, including warrants acquired by security holders in the
open market, but excluding warrants exercised during the 30 day period following notice of a proposed redemption. The warrant solicitation
fee will be payable in cash. There is no limitation on the maximum warrant solicitation fee payable to the underwriter, except
to the extent it is limited by the number of Public Warrants outstanding.
Critical Accounting Policies
The preparation of consolidated financial
statements and related disclosures in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption
We account for our common stock subject
to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and 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 our control) is classified
as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain
redemption rights that are considered to be outside of our control and subject to 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 our consolidated balance sheets.
Net (Loss) Income Per Common Share
We apply the two-class method in calculating earnings
per share. Net (loss) income per common share, basic and diluted for common stock subject to possible redemption is calculated by dividing
the interest income earned on the trust account, net of applicable taxes, if any, by the weighted average number of shares of common stock
subject to possible redemption outstanding for the period. Net (loss) income per common share, basic and diluted for non-redeemable common
stock is calculated by dividing net loss less income attributable to common stock subject to possible redemption, by the weighted average
number of shares of non-redeemable common stock outstanding for the period presented.
Recent Accounting Standards
Management does not believe that any other
recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our consolidated
financial statements.
Item 7A. Quantitative and Qualitative
Disclosures about Market Risk.
Following the consummation of our Initial Public Offering, the
net proceeds of our Initial Public Offering, including amounts in the trust account, have been invested in U.S. government treasury
bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries.
Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 8. Financial Statements and Supplementary Data.
Our financial statements and the notes thereto begin on page
F-1 of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15
under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based upon their evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Management’s Annual Report on
Internal Control over Financial Reporting
As required by SEC rules and regulations
implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes
in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,
(2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and
that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
(3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on the consolidated financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed
the effectiveness of our internal control over financial reporting at December 31, 2020. In making these assessments, management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control
— Integrated Framework (2013). Based on our assessments and those criteria, management determined that we maintained effective
internal control over financial reporting as of December 31, 2020.
This Annual Report on Form 10-K does not
include an attestation report of internal controls from our independent registered public accounting firm due to our status as
an emerging growth company under the JOBS Act.
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.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our current directors, director nominees
and executive officers are as follows:
Name Age Position
Marat Rosenberg 47 Chairman of the Board
Edward S. Verona 65 President
Oleksii Tymofiev 42 Chief Operating Officer
Michael Wilson 54 Secretary and Treasurer
Thomas Gallagher 71 Director
Gennadii Butkevych 61 Director
Ilya Ponomarev 44 Director
Marat Rosenberg has served as our
Chairman of the Board since November 18, 2020. Mr. Rosenberghas 25 years of experience in capital markets, investment and
management of multinational private and publicly traded companies focusing on finance, technology, energy and entertainment. Mr.
Rosenberg has participated in bringing over 50 companies public and has been both a fintech investor and operator. He is currently
the Managing Partner of HFG Partners, LLC. Between April 2019 and November 2020, Mr. Rosenberg was the Founder, President and Director
of Netfin Acquisition Corp (Nasdaq: NFIN), a $253 million SPAC that completed a business combination with Triterras Fintech Pte.
Ltd. (Nasdaq: TRIT), a leading fintech company that launched and operates one of the world’s largest commodity trading and
trade finance platforms. The business combination resulted in less than 3% of shares being submitted for redemption and approximately
$250 million retained in the trust account at closing. From January 2002 through April 2018, Mr. Rosenberg served as the Senior
Managing Director and Principal of Halter Financial Group (“HFG”), a leading merchant bank specializing in public listing
and financing for emerging market companies, where he oversaw the listing of the firm’s clients on US exchanges, including
China Biologic Products Holdings, Inc. (Nasdaq: CBPO), a biopharmaceutical products company that completed both a financing and
contemporaneous reverse take-over through an HFG affiliate in 2006 at approximately $1.90 per share, and began trading on Nasdaq
in December 2009 with a closing price of $93.75 on July 8, 2019. From May 2006 through December 2011, Mr. Rosenberg co-founded
and managed the Halter Global Opportunity Fund (through Halter Financial Investments, HFG’s investment business) and from
January 2006 through February 2012, Mr. Rosenberg was a Partner in the Pinnacle China Fund, both specializing in pre-IPO and PIPE
investments. In March 2004, Mr. Rosenberg co-founded the Halter USX China Index, partnering with Invesco Powershares to create
the PowerShares Golden Dragon China ETF (NASD: PGJ). Before HFG, from April 1999 to February 2001, Mr. Rosenberg established and
headed business development for Alladvantage, a dotcom that raised nearly $200 million in venture capital, and grew users to more
than 10 million in over 50 countries in its first 18 months of operation. Alladvantage’s Viewbar software was one of the
earliest desktop data tracking and artificial intelligence based ad targeting/behavioral marketing technologies and was also an
online financial platform that integrated with third-party online banks, payment systems and other online financial service providers
but which ceased such operations and liquidated much of its related assets following a withdrawn initial public offering in 2001
after the overall crash of Internet stocks beginning in March 2000. Mr. Rosenberg served as a Vice President with Citigroup Asset
Management’s Institutional Sales Group from September 1996 to April 1999. Mr. Rosenberg began his career in September 1995
as a Management Consultant in Andersen Consulting’s Strategy Practice, specializing in financial services and tech clients.
He holds a degree in Economics from the University of Pennsylvania. Mr. Rosenberg’s significant investment and financial
expertise make him well qualified to serve as a member of our board of directors.
Vadim Komissarov has served
as our director and Chief Financial Officer since April 29, 2016 and as our Chief Executive Officer since November 18, 2020. Mr.
Komissarov served as our President from our inception until he resigned from such capacity on November 18, 2020. Prior to April
29, 2016, Mr. Komissarov served as our Secretary and Treasurer. In March 2015, Mr. Komissarov founded VK Consulting, Inc., a financial
advisory services firm for which he is a director. Prior to that, from August 2014 until April 2015, Mr. Komissarov was an advisor
to UMW Technology and UMW corporation Sdn Bhd. From September 2009 until March 2014 he was the co-founder and head of investment
banking from Globex Capital, an investment banking and financial advisory firm. Mr. Komissarov started his investment banking career
in New York working for international banks, including Merrill Lynch and Bank of New York, handling private equity transactions
and ADR programs for Eastern European clients. Mr. Komissarov holds an MBA degree from NYU’s Stern School of Business. We
believe that Mr. Komissarov is well-qualified to serve on our board of directors due to his banking and investment experience.
Edward S. Verona has served
as our President since November 18, 2020. Mr. Verona served as our Chairman of the Board from April 29, 2016 to November 18, 2020.
Mr. Verona has been a Senior Director of McLarty Associates, an international affairs advisory business since June 2014. Prior
to joining McLarty, Mr. Verona served for five years as President of the US-Russia Business Council (USRBC), where he led the Council’s
efforts to provide government relations services to American and Russian companies and facilitate American entry into the Russian
market. Before joining USRBC, Mr. Verona spent many years in the energy sector and in the U.S. Foreign Service, posted in former
Soviet states and in Latin America. He was Executive Director of the Moscow-based Petroleum Advisory Forum from December 1996 to
August 1998. From August 1998 to August 2003 he held various positions with Texaco and ChevronTexaco, including Head of Representation
for Texaco in Russia and Kazakhstan and Vice President for Government and Public Affairs for Latin America, based in Caracas, Venezuela.
Subsequently, he served as Vice President of ExxonMobil Russia from June 2006 to August 2008, with responsibility for government
and public affairs. Mr. Verona began his energy sector career working for Shell Oil Company in New York City, and first worked
on energy issues in Russia in 1996 as Executive Director of the Moscow-based Petroleum Advisory. He has served as Chairman of the
Kazakhstan Petroleum Association and as Chief Representative of Barrick Gold in Russia. Prior to joining Texaco, Mr. Verona served
for seven years in the US Foreign Service as Economic Officer in Mexico City, Brasilia, and Moscow. In 1980, he joined mining and
oil & gas equipment manufacturer Ingersoll-Rand as Special Representative posted in Bolivia, Ecuador, and Miami. Mr. Verona
graduated from the University of Arizona with a Bachelor’s degree in Political Science, and he received a Master’s
of International Management from the American Graduate School of Global Management (Thunderbird). He speaks Russian, Spanish, and
Portuguese.
Oleksii Tymofiev has served
as our Chief Operating Officer since February 15, 2018. He was our Chief Executive Officer from April 29, 2016 until February 15,
2018. Since August 2015, Mr. Tymofiev has been the Chief Executive Officer at Ukrteploenergo Ltd., where he has been responsible
for the development and implementation of a turnaround strategy at the company, which is an owner-operator of heat-and-power plants
in the Ukraine with over 4,000 employees and $200 million in revenue in 2015. From March 2010 until August 2015 he served in a
variety of positions with PJSC Smart Holding, an investment company, most recently as general director. Prior to Smart-Holding
Group, Mr. Timofieiev was Executive Board Member and Head of Investments and Equity Department at Naftogaz of Ukraine NJSC, the
state holding company operating in the field of oil and gas production and transportation. Mr. Timofieiev joined Neftogaz after
her served as Head of Legal department at another state oil & gas enterprise PJSC Ukrgazvydobuvannya, largest gas production
company of Ukraine. Mr. Timofieiev holds Ph.D. in Law from Frunze Simferopol State University (1998) and International Economic
Relations degree from Karazin Kharkiv National University (2010).
Michael Wilson has served as
our Secretary and Treasurer since April 29, 2016. Mr. Wilson has been self employed as a consultant since September 2015. Prior
to that, from February 2014 until July 2015, Mr. Wilson was responsible for finance and back-office operations in the capacity
of Chief Operating Officer of the Trout Group LLC, an investor relations and broker-dealer group. From March 2012 until December
2013, Mr. Wilson was engaged as principal to restructure the finances and operations of Pompei A.D. LLC, an international branding
and strategy firm with Fortune 500 clients. From September 2009 until November 2011, Mr. Wilson served as the Managing Director
for VEB Capital Americas, Inc. and President — US Office for Globex Capital. Previously, he served for nearly 3 years as
a Senior Managing Director for a private family equity investment group DEH Family Holdings that had business ranging from Real-Estate
to Technology. For 8 years prior to that, Mr. Wilson served as the Vice President of Strategy and Market Development for Active
International, a leading alternative asset trading company at which he developed funding structures around non-monetary transactions
and established the firm’s activities in South Korea and Russia. Prior to that, he served as Chief Financial Officer
of Entersoft, an OLTP monitoring software company. Mr. Wilson started his career in accounting at Coopers & Lybrand after completing
a dual concentration in Finance and Accounting from Northeastern University. Mr. Wilson completed his graduate work in Finance
and International business at NYU’s Stern Graduate School of Business.
Thomas Gallagher has served
as our director since April 29, 2016. Since 2009, Mr. Gallagher has been the Chairman of Exchequer Capital GmbH, a wealth advisory
firm. Mr. Gallagher serves as a director of a number of private companies, as well as serving as an Advisor to the Chairman, Eurasian
Bank, Kazakhstan on Private Banking, and to the Chairman, SkyBridge Capital AG in Zürich, Switzerland. He was the Head of
Alternative Investments, Valartis Asset Management from February 2008 to September 2008. Prior to that since 2003 he worked for
Moore Capital Management as Director of European Wealth Management in Alstra Capital Management, and a Director of the Fund Investment
Group. From 2000 to 2003, he was the founder in Oak Hill Platinum Partners, doing financial & institutional fundraising and
products consulting. Earlier in his career he worked as legislation Counsel in Joint Committee on Taxation of The Congress of the
United States and later worked at Counsel in Davis Polk & Wardwell; Milbank, Tweed, Hadley & McCloy; Gallagher & Blitz;
Chadborne & Parke; and O’Connor & Hannan. Mr. Gallagher has LL.M., Yale Law School, J.D., Magna Cum Laude, Loyola
Law School (N.O.), A.B., Villanova University. Mr. Gallagher’s significant investment and financial expertise make him well
qualified to serve as a member of our board of directors.
Gennadii Butkevych has served
as our director since February 15, 2018. Mr. Butkevych founded Agrotechbusines LLC in 1999 and has grown from a single grocery
kiosk to one of the largest chain of discount supermarkets in Ukraine. In 2013 Mr. Butkevych co-founded ATB Corporation and Agrotechbusines
LLC was merged into the new entity, becoming ATB-Market Company, and for which Mr. Butkevych serves as Director. ATB currently
has 920 locations in over 230 cities and towns in Ukraine. Orphanage No. 1 of Dnepr city has been sponsored by ATB Corporation
since January 14, 2014. Mr. Butkevych founded and is the honorary Chairman of the “Dnepr Open” amateur tennis tournament.
As the owner of the Equides Equestrian Club — the home of frequent inter-regional and international events — Mr. Butkevych
sponsors the Ukrainian horse riding national youth sports team. Mr. Butkevych is a graduate of Dnipropetrovsk Engineer and Architecture
Institute and holds an MS degree in Engineering. Mr. Butkevych’s significant investment and financial expertise make
him well qualified to serve as a member of our board of directors.
Ilya Ponomarev has served as our
director since our inception and served as our Chief Exective Officer from February 15, 2018 until November 18, 2020. From December
2007 to the present, Hon. Ponomarev serves as an opposition member of Russian Parliament — State Duma representing Novosibirsk
— the capital of Siberia, and is chairing Innovations and Venture Capital (formerly Hi-Tech development) subcommittee. Although
he was a member of parliament until 2016, after his lone vote against the war between Russia and Ukraine, he was not permitted
to return to Russia after traveling to the United States. In April 2015, the Russian parliament lifted Mr. Ponomarev’s diplomatic
immunity and allowed a prosecutor to bring charges of misappropriation of funds belonging to Skolkovo Foundation against Mr. Ponomarev,
in what was widely reported as a politically motivated prosecution. The case remains open and Mr. Ponomarev would be subject to
arrest if he returned to Russia. Prior to such time, Mr. Ponomarev held various positions in government offices and private companies,
including Vice president of Yukos Oil Company, a large Russian oil and gas company, and prior to that Director for CIS Business
Development and Marketing for Schlumberger Oilfield Services. Mr. Ponomarev holds BSc in Physics from Moscow State University and
Master of Public Administration from Russian State Social University. He is an author of a number of research papers and magazine
articles about new economy development, energy, regional policies, education and international relations. Mr. Ponomarev’s
significant investment and financial expertise make him well qualified to serve as a member of our board of directors.
Number and Terms of Office of Officers and Directors
Our board of directors has five members,
three of whom are “independent” under SEC and Nasdaq rules. Our board of directors is divided into three classes with
only one class of directors being elected in each year and each class serving a three-year term. The term of office of the first
class of directors, consisting of Vadim Komissarov and Thomas Gallagher, will expire at our first annual meeting of stockholders.
The term of office of the second class of directors, consisting of Marat Rosenberg and Gennadii Butkevych, will expire at the second
annual meeting. The term of office of the third class of directors, consisting of Ilya Ponomarev, will expire at our third annual
meeting of stockholders. We may not hold an annual meeting of stockholders until after we consummate our initial business combination.
Our officers are appointed by the board
of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors
is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers
may consist of a chairman of the board, vice chairman of the board, chief executive officer, president, chief financial officer,
vice president(s), secretary, treasurer and such other officers as may be determined by the board of directors.
Director Independence
Nasdaq listing standards require that within
one year of the listing of our securities on the Nasdaq Capital Market we have at least three independent directors and that a
majority of our board of directors be independent. An “independent director” is defined generally as a person other
than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion
of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying
out the responsibilities of a director. Our Board of Directors had determined that Thomas Gallagher, Marat Rosenberg and Gennadii
Butkevych are “independent director” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent
directors will have regularly scheduled meetings at which only independent directors are present.
We will only enter into a business combination
if it is approved by a majority of our independent directors. Additionally, we will only enter into transactions with our officers
and directors and their respective affiliates that are on terms no less favorable to us than could be obtained from independent
parties. Any related-party transactions must be approved by our audit committee and a majority of disinterested directors.
Audit Committee
We stablished an audit committee of the
board of directors at the closing of our initial public offering, which consists of Thomas Gallagher, Marat Rosenberg and Gennadii
Butkevych, each of whom is an independent director. Thomas Gallagher serves as chairman of the audit committee. The audit committee’s
duties, which are specified in our Audit Committee Charter, include, but are not limited to:
● discussing with management major risk assessment and risk management policies;
● reviewing and approving all related-party transactions;
● appointing or replacing the independent registered public accounting firm;
Financial Experts on Audit Committee
The audit committee will at all times be
composed exclusively of “independent directors” who are “financially literate” as defined under the Nasdaq
listing standards. The Nasdaq listing standards define “financially literate” as being able to read and understand
fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
In addition, we must certify to Nasdaq
that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting,
requisite professional certification in accounting, or other comparable experience or background that results in the individual’s
financial sophistication. The board of directors has determined that Thomas Gallagher qualifies as an “audit committee financial
expert,” as defined under rules and regulations of the SEC.
Compensation Committee
We established a compensation committee
of the board of directors at the closing of our initial public offering consisting of Thomas Gallagher, Marat Rosenberg and Gennadii
Butkevych, each of whom is an independent director. Marat Rosenberg serves as chairman of the compensation committee. We adopted
a compensation committee charter, which will detail the principal functions of the compensation committee, including:
● reviewing our executive compensation policies and plans;
The charter will also provide that the
compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or
other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser.
However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation
committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC.
Director Nominations
We do not have a standing nominating committee,
though we intend to form a corporate governance and nominating committee as and when required to do so by law or NASDAQ rules.
In accordance with Rule 5605(e)(2) of the NASDAQ rules, a majority of the independent directors may recommend a director nominee
for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry
out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee.
Thomas Gallagher, Marat Rosenberg and Gennadii Butkevych will participate in the consideration and recommendation of director nominees.
In accordance with Rule 5605(e)(1)(A) of the NASDAQ rules, all such directors are independent. As there is no standing nominating
committee, we do not have a nominating committee charter in place.
The board of directors will also consider
director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand
for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders
that wish to nominate a director for election to the Board should follow the procedures set forth in our bylaws.
We have not formally established any specific,
minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating
nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge
of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our
stockholders.
Compensation Committee Interlocks and Insider Participation
We may not have a compensation committee
in place prior to the completion of our initial business combination. Any executive compensation matters that arise prior to the
time we have a compensation committee in place will be determined by our independent directors. None of our directors who currently
serve as members of our compensation committee is, or has at any time in the past been, one of our officers or employees. None
of our executive officers currently serves, or in the past year has served, as a member of the compensation committee of any other
entity that has one or more executive officers serving on our board of directors. None of our executive officers currently serves,
or in the past year has served, as a member of the board of directors of any other entity that has one or more executive officers
serving on our compensation committee.
Code of Ethics
We adopted a code of ethics that applies
to all of our executive officers, directors and employees. The code of ethics codifies the business and ethical principles that
govern all aspects of our business.
Conflicts of Interest
Investors should be aware of the following
potential conflicts of interest:
In general, officers and directors of a
corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation
if:
● the corporation could financially undertake the opportunity;
● the opportunity is within the corporation’s line of business; and
Accordingly, as a result of multiple business
affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting
the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation provides that
the doctrine of corporate opportunity will not apply with respect to any of our officers or directors in circumstances where the
application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have. In order to minimize
potential conflicts of interest which may arise from multiple affiliations, our officers and directors (other than our independent
directors) have agreed to present to us for our consideration, prior to presentation to any other person or entity, any suitable
opportunity to acquire a target business, until the earlier of: (1) our consummation of an initial business combination or (2)
June 1, 2021. This agreement is, however, subject to any pre-existing fiduciary and contractual obligations such officer or director
may from time to time have to another entity. Accordingly, if any of them becomes aware of a business combination opportunity which
is suitable for an entity to which he or she has pre-existing fiduciary or contractual obligations, he or she will honor his or
her fiduciary or contractual obligations to present such business combination opportunity to such entity, and only present it to
us if such entity rejects the opportunity. We do not believe, however, that the pre-existing fiduciary duties or contractual obligations
of our officers and directors will materially undermine our ability to complete our business combination because in most cases
the affiliated companies are closely held entities controlled by the officer or director or the nature of the affiliated company’s
business is such that it is unlikely that a conflict will arise.
The following table summarizes the current
material pre-existing fiduciary or contractual obligations of our officers, directors and director nominees:
Name of Individual Name of Affiliated Company Entity’s Business Affiliation
Vadim Komissarov VK Consulting, Inc. Financial Advisory Services Director
Thomas Gallagher Exchequer Capital GmbH Wealth Advisory Services Chairman
Our insiders, officers and directors, have
agreed to vote any shares of common stock held by them in favor of our initial business combination. In addition, they have agreed
to waive their respective rights to receive any amounts held in the trust account with respect to their insider shares and private
shares if we are unable to complete our initial business combination within the required time frame. If they purchase shares of
common stock in the open market, however, they would be entitled to receive their pro rata share of the amounts held in the trust
account if we are unable to complete our initial business combination within the required time frame, but have agreed not to convert
such shares in connection with the consummation of our initial business combination.
All ongoing and future transactions between
us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable
to us than are available from unaffiliated third parties. Such transactions will require prior approval by our audit committee
and a majority of our uninterested “independent” directors, or the members of our board who do not have an interest
in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter
into any such transaction unless our audit committee and a majority of our disinterested “independent” directors determine
that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a
transaction from unaffiliated third parties.
To further minimize conflicts of interest,
we have agreed not to consummate our initial business combination with an entity that is affiliated with any of our officers, directors
or insiders, unless we have obtained (i) an opinion from an independent investment banking firm that the business combination is
fair to our unaffiliated stockholders from a financial point of view and (ii) the approval of a majority of our disinterested and
independent directors (if we have any at that time). In no event will our insiders or any of the members of our management team
be paid any finder’s fee, consulting fee or other similar compensation prior to, or for any services they render in order
to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is).
Limitation on Liability and Indemnification of Directors
and Officers
Our amended and restated certificate of
incorporation provides that our directors and officers will be indemnified by us to the fullest extent authorized by Delaware law
as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that
our directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, unless
they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit
from their actions as directors. Notwithstanding the foregoing, as set forth in our amended and restated certificate of incorporation,
such indemnification will not extend to any claims our insiders may make to us to cover any loss that they may sustain as a result
of their agreement to pay debts and obligations to target businesses or vendors or other entities that are owed money by us for
services rendered or contracted for or products sold to us.
Our bylaws also will permit us to secure
insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether
Delaware law would permit indemnification. We will purchase a policy of directors’ and officers’ liability insurance
that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances
and insures us against our obligations to indemnify the directors and officers.
These provisions may discourage stockholders
from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of
reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent
we pay the costs of settlement and damage awards against directors and officers pursuant to these provisions. We believe that these
provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced directors and
officers.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended, or the Exchange Act, requires our executive officers, directors and persons who beneficially own more
than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of our common stock and other equity securities. These executive officers, directors,
and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed
by such reporting persons.
Based solely on our review of such forms
furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable
to our executive officers, directors and greater than 10% beneficial owners were filed in a timely manner.
Item 11. Executive Compensation.
Employment Agreements
We have not entered into any employment
agreements with our executive officers and have not made any agreements to provide benefits upon termination of employment.
Executive Officers and Director Compensation
Executive Compensation
No executive officer or director has received
any cash compensation for services rendered to us. Beginning at the closing of our initial public offering through the completion
of our initial business combination with a target business, we will pay to VK Consulting, Inc., a company owned by Vadim Komissarov,
one of our officers, a fee of $7,500 per month for providing us with office space and certain office and secretarial services.
However, pursuant to the terms of such agreement, we may delay payment of such monthly fee upon a determination by our audit committee
that we lack sufficient funds held outside the trust to pay actual or anticipated expenses in connection with our initial business
combination. Any such unpaid amount will accrue without interest and be due and payable no later than the date of the consummation
of our initial business combination. Other than the $7,500 per month administrative fee, no compensation or fees of any kind, including
finder’s fees, consulting fees and other similar fees, will be paid to our insiders or any of the members of our management
team, for services rendered prior to or in connection with the consummation of our initial business combination (regardless of
the type of transaction that it is). However, such individuals will receive reimbursement for any out-of-pocket expenses incurred
by them in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence
on suitable target businesses and business combinations as well as traveling to and from the offices, plants or similar locations
of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable
by us; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the trust account and
the interest income earned on the amounts held in the trust account, such expenses would not be reimbursed by us unless we consummate
an initial business combination.
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth as of March