| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Delaware | 85-4293042 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
| 401 N. Cattlemen Rd., Ste. 200 | 34232 | |
| (Zip Code) | ||
| (Address of principal executive offices) |
Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||
The Nasdaq Stock Market LLC | ||||
Warrants, each exercisable for one share of | The Nasdaq Stock Market LLC |
| Large accelerated filer☐ | Accelerated filer | ☐ | ||||
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| Emerging growth company | ☒ | |||||
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
| • | references to “Sponsor” are to ARC. |
our ability to complete our initial business combination, such as the TMTG Business Combination (as defined below);
our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;
our potential ability to obtain additional financing to complete our initial business combination;
the ability of ourTMTG to realize the benefits from the Business Combination;
our pool of prospective target businesses;
our public securities’ potential liquidityusers and trading;
the lack of a liquid market for our securities;
the use of proceeds not heldfuture arrangements with, or investments in, other entities or associations;
our financial performance.
| • | other factors detailed under the section entitled “Risk Factors” in this Report. |
| • | the outcome of any legal or regulatory proceedings that have been, or may be, instituted in the future by or against TMTG, or others, and the cost thereof; |
| • | other risks and uncertainties indicated elsewhere in this Report, including those under “Risk Factors” disclosed in this Report and other filings that have been made or will be made from time to time with the SEC by TMTG. |
| • | “anchor investors” |
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or its affiliates, (ix) Saba Capital Master Fund, Ltd., Saba Capital Master Fund II, Ltd., Saba Capital Master Fund III, LP and Saba Capital SPAC Opportunities, Ltd., and/or its affiliates, (x) D. E. Shaw Valence Portfolios, L.L.C. and (xi) Yakira Capital Management, Inc. (none of which are affiliated with any member of |
• | “ARC” means ARC Global Investments II, LLC. |
• | “Board” means the board of directors of TMTG. |
“ASU” are toMerger and the FASB Accounting Standards Update;
“board of directors,” “board” or “directors” are to the board of directors of the Company (as defined below);
“business combination” are to a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses;
“Class A common stock” are to the shares of Class A common stock of the Company, par value $0.0001 per share;
“Class B common stock” are to the shares of Class B common stock of the Company, par value $0.0001 per share;
“Closing” are to the consummation of theother transactions contemplated by the Merger Agreement (as defined below);
| • | “Closing” means the consummation of the Business Combination pursuant to the Merger Agreement. |
“common stock” are to the Class A common stock and the Class B common stock;
“Company,” “Digital World,” “DWAC,” “we” or “us” are to Digital World Acquisition Corp., a Delaware corporation;
“Continental” are to Continental Stock Transfer & Trust Company, trustee of our trust account and warrant agent of our public warrants (as defined below);
| • | “Combination Period” means the period from the closing of the initial public offering to September 8, 2024, the date by which Digital World had to consummate an initial business combination. |
| • | “Company” “TMTG” “we” “our” or “us” means “Trump Media & Technology Group Corp.” |
| • | “Company common stock” or “TMTG Common Stock” means the common stock, par value $0.0001 per share, of the Company following the Business Combination. |
| • | “Digital World Alternative Warrants” means the 3,050,000 Post IPO-Warrants issued to certain institutional investors in settlement of the terminated PIPE Investment. |
| • | “Digital World Board” means, with respect to the period prior to the Closing, the board of directors of Digital World. |
| • | “Digital World Class A common stock” means the shares of Class A common stock of Digital World, par value $0.0001 per share. |
| • | “Digital World Class B common stock” means the shares of Class B common stock of Digital World, par value $0.0001 per share, including the Founder Shares. |
| • | “Digital World common stock” means any of the Digital World Class A common stock or Digital World Class B common stock. |
| • | “Digital World IPO” “IPO” or “Initial Public Offering” means Digital World’s initial public offering that was consummated on September 8, 2021. |
| • | “Earnout Period” means the three (3) year period following the Closing to determine the contingent right to Earnout Shares. |
| • | “Earnout Shares” means the additional 40,000,000 shares of Company common stock from a contingent right based on the price performance of Company common stock during the three (3) year period following the Closing. |
| • | “Equity Incentive Plan” means the Digital World Acquisition Corp. 2024 Equity Incentive Plan, as such may be amended, supplemented or modified from time to time, which was adopted by TMTG and approved in accordance with the Incentive Plan Proposal and became effective as of Closing. |
“Extension” are to the extension of the deadline by which the Company must complete its business combination;
| • | “First Amendment to the Agreement” means the First Amendment to Agreement and Plan of Merger, dated May 11, 2022, by and among Digital World, Merger Sub, Private TMTG, the Sponsor (which has been replaced and succeeded by RejuveTotal LLC, a New Mexico limited liability company effective as of March 14, 2024) in the capacity as the representative of the stockholders of Digital World, and Private TMTG’s General Counsel in the capacity as the representative of the stockholders of Private TMTG. |
| • | “Founder Shares” means the shares of Digital World Class B common stock initially purchased by the Sponsor (which has been replaced and succeeded by RejuveTotal LLC, a New Mexico limited liability company effective as of March 14, 2024) in the private placement (as defined below) and the shares of Digital World Class A common stock that were issued upon the automatic conversion of the shares of Digital World Class B common stock at the time of our business combination as described herein (for the avoidance of doubt, such Digital World Class A common stock will not be “public shares” (as defined below)). |
“GAAP” are to the accounting principles generally accepted in the United States of America;
“IFRS” are to the International Financial Reporting Standards, as issued by the International Accounting Standards Board;
certain letter agreement dated September 2,
2021.“initial public offering” or “IPO” are to the initial public offering that was consummated by the Company on September 8, 2021;
“initial stockholders” are to our sponsor and any other holders of our founder shares prior to our initial public offering (or their permitted transferees), not including the anchor investors who purchase units in the offering;
“Investment Company Act” are tomeans the Investment Company Act of 1940, as amended;
| • | “Lock-Up Shares” means certain shares of TMTG Common Stock held by certain TMTG stockholders and certain of TMTG’s directors and officers, including (i) their shares of TMTG Common Stock held immediately following the Closing and (ii) any of their shares of TMTG Common Stock that resulted from converting securities held immediately following the Closing, that are subject to a lock-up agreement contractually restricting the holders from selling or transferring the shares and/or to lock-up restrictions applicable under the Amended Charter |
“Marcum” are to
| • | “Marcum” means Marcum LLP, Digital World’s former independent registered public accounting firm. |
| • | “Merger” means the merger of Merger Sub with and into Private TMTG, with Private TMTG continuing as the surviving corporation and as a wholly owned subsidiary of TMTG, in accordance with the terms of the Merger Agreement. |
| • | “Merger Agreement” means the Agreement and Plan of Merger, dated October 20, 2021, as amended by the First Amendment to the Agreement, the Second Amendment to the Agreement and the Third Amendment to the Agreement, and as it may further be amended or supplemented from time to time, by and among Digital World, Merger Sub, Private TMTG, the Sponsor (which has been replaced and succeeded by RejuveTotal LLC, a New Mexico limited liability company effective as of March 14, 2024) in the capacity as the representative of the stockholders of Digital World, and Private TMTG’s General Counsel in the capacity as the representative of the stockholders of Private TMTG. |
| • | “Merger Consideration” means the aggregate merger consideration paid to TMTG securityholders (other than holders of TMTG Convertible Notes) as of immediately prior to the Effective Time in an amount equal to $875,000,000. |
| • | “Merger Sub” means DWAC Merger Sub Inc., a Delaware corporation that, until the Closing, was a wholly owned subsidiary of Digital World. |
“Merger” are to the merger
“Merger Agreement” are to that certain Agreement and Plan of Merger, dated as of October 20, 2021, entered by and among the Company, Merger Sub, TMTG, and other parties named therein, as amended on May 11, 2022;
| • | “Order” means the cease-and-desist order entered into by the SEC against Digital World in connection with the Investigation. |
“Merger Sub” are to DWAC Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of the Company;
“Nasdaq” are to the Nasdaq Stock Market LLC;
“Outside Date” are to September 20, 2022, which was extended to June 8, 2023 as a result of the Extensions;
| • | “PIPE Investment” means that certain private placement originally entered into on December 4, 2021 pursuant to certain securities purchase agreements with certain institutional investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase shares of Digital World’s Series A Convertible Preferred Stock (the “Preferred Stock”) for a purchase price of $1,000 per share (the “PIPE”). The PIPE Investment was terminated in full on January 10, 2024. |
“placement shares” are toPlacement Shares” means the shares of ourDigital World Class A common stock included within the placement unitsPlacement Units purchased by our sponsorthe Sponsor in the private placement;
| • | “ |
| • | “Placement Warrants” means the warrants included within the Placement Units purchased by the Sponsor in the Private Placement. Each Placement Warrant entitles the holder thereof to purchase one share of TMTG Common Stock for $11.50 per share. |
| • | “Post-IPO Financing” means any financing transaction undertaken by Digital World following its IPO but prior to Closing, pursuant to which Digital World Convertible Notes, Digital World Alternative Financing Notes or Digital World Alternative Warrants were issued. |
| • | “Post-IPO Warrants” means any additional warrants issued or to be issued pursuant to the Warrant Agreement by Digital World after the IPO, including any Digital World Alternative Warrants. Each Post-IPO Warrant entitles the holder thereof to purchase one share of TMTG Common Stock for $11.50 per share and |
“private placement” are toPrivate Placement” means the private placement of 1,133,484 placement units that occurredconsummated simultaneously with the completionDigital World IPO in which Digital World issued to the Sponsor the Placement Units.
| • | “Proposals” means the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal. |
“public shares” are to shares ofDigital World Class A common stock sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafterincluded in the open market);
“public stockholders” are to the holders of our public shares, including our initial stockholdersPublic Units and management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” will only exist with respect to such public shares;
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“public warrants” are to the redeemable warrants sold as part of the units in our initial public offering (whether they were subscribed for in our initial public offering or purchased in the open market);
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“representative” are to EF Hutton, division of Benchmark Investments, LLC, who was the representative of the underwriters in our initial public offering;
“representative shares” are to the 143,750 shares of ourDigital World Class A common stock underlying the Public Warrants.
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| • | “Second Amendment to the Agreement” means the Second Amendment to Agreement and Plan of Merger, dated August 9, 2023, by and among Digital World, Merger Sub, Private TMTG, the Sponsor (which was replaced and succeeded by RejuveTotal LLC, a New Mexico limited liability company effective as of March 14, 2024) in the capacity as the representative of the stockholders of Digital World, and Private TMTG’s General Counsel in the capacity as the representative of the stockholders of Private TMTG. |
| • | “Third Amendment to the Agreement” means the Third Amendment to Agreement and Plan of Merger, dated September 29, 2023, by and among Digital World, Merger Sub, Private TMTG, the Sponsor (which was replaced and succeeded by RejuveTotal LLC, a New Mexico limited liability company effective as of March 14, 2024) in the capacity as the representative of the stockholders of Digital World, and Private TMTG’s General Counsel in the capacity as the representative of the stockholders of Private TMTG. |
“trust account” areDigital World Alternative Financing Notes, subject to the U.S.-based trust account which was established by the Company at the initial public offeringterms and had an amountconditions of $300,330,651 aseach such applicable note, has a price not lower than $8.00 per unit.
“underwriters” are to the underwriters of our initial public offering, for which the representative is acting as representative;
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“warrants” are to our redeemable warrants, which includes the public warrants as well as the placement warrants and any warrants issued upon conversion of Working Capital Loans (as defined below); and
“Working Capital Loans” are to funds that, in order to provide working capital or finance transaction costs in connection with a business combination, the sponsor, an affiliate of the sponsor or certain of our directors and officers may, but are not obligated to, loan the Company.
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We
Initial Public Offering
On September 8, 2021, we consummated our initial public offering of 28,750,000 units, including 3,750,000 units issuedfreely post their views to the underwriters upon full exerciseworld. In July 2023, a federal district court judge found that Biden White House personnel likely colluded with big tech companies to violate Americans’ First Amendment rights. The opinion expressed that “targeted suppression of conservative ideas is a perfect example of viewpoint discrimination of political speech.” Big tech companies’ transformation into the arbiters of public speech and organs of state-sponsored censorship contradicts American values. Their suppression of dissident speech constitutes the most serious threat today to a free and democratic debate. Thus, TMTG aims to safeguard public debate and open dialogue, and to provide a platform for all users to freely express themselves.
Simultaneouslyits ability, without relying on big tech companies. Partnering with pro-free-speech alternative technology firms, Private TMTG fully launched Truth Social for iOS in April 2022. Private TMTG debuted the closingTruth Social web application in May 2022, and the Truth Social Android App became available in the Samsung Galaxy and Google Play stores in October 2022. Private TMTG introduced direct messaging to all versions of Truth Social in 2022, released a “Groups” feature for users in May 2023 and announced the initial public offering, we completed the private salegeneral availability of Truth Social internationally in June 2023. Since its launch, Truth Social has experienced substantial growth, from zero to an aggregate of 1,133,484 placement units to our sponsor at a purchase price of $10.00 per placement unit, generating gross proceeds of $11,334,840.
A total of $293,250,000, comprised of $283,906,250 ofapproximately 9.0 million signups for Truth Social via iOS, Android and the proceeds from the initial public offering (which amount includes $10,062,500 of the underwriters’ deferred discount) and $9,343,750 of the proceeds of the sale of the placement units was placed in the trust account maintained by Continental, acting as trustee.
It is the job of our sponsor and management team to complete our initial business combination. Our management team is led by Eric Swider, our Interim Chief Executive Officer and director. We must complete our initial business combination by June 8, 2023 or seek further extensions. If our initial business combination is not consummated during the Combination Period, then our existence will terminate, and we will distribute all amounts in the trust account after deduction from the interest earned thereon amounts to pay tax obligations and up to $100,000 that may be used for our dissolution expenses.
TMTG Business Combination
Merger and PIPE Agreements
As previously announced, we entered into the Merger Agreement on October 20, 2021, and an amendment to the Merger Agreement on May 11, 2022. Pursuant to the Merger Agreement, the parties agreed, subject to the terms and conditions of the Merger Agreement, to effect the TMTG Business Combination.
On December 4, 2021, in support of the TMTG Business Combination, Digital World entered into SPAs with certain PIPE Investors, pursuant to which the investors agreed to purchase an aggregate of 1,000,000 shares of the Series A Convertible Preferred Stock, for a purchase price of $1,000 per share of Series A Convertible Preferred Stock, for an aggregate commitment of $1,000,000,000 in a PIPE to be consummated concurrently with the closing of the TMTG Business Combination. The shares of Series A Convertible Preferred Stock have an initial conversion price per share of $33.60 and are initially convertible into an aggregate of 29,761,905 shares of common stock (subject to downward adjustment). The price is subject to further downward adjustment to a 40% discount to Digital World’s volume-weighted average closing price for the ten trading days following the day of the TMTG Business Combination, with a floor price of $10.00. The closing of the PIPE is conditioned on the closing of the TMTG Business Combination, effectiveness of an initial resale registration statement (the “Initial Resale Registration Statement”) and other closing conditions.
The PIPE Investors are also entitled to certain registration rights under a Registration Rights Agreement, pursuant to which Digital World is required to file an Initial Resale Registration Statement for all of the shares of
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common stock issuable upon conversion of the Series A Convertible Preferred Stock held by the PIPE Investors within 10 days following the filing of the Form S-4. The Registration Rights Agreement also provides that such Initial Resale Registration Statement shall be declared effective as of the closing date of the TMTG Business Combination, subject to certain exceptions, including, but not limited to, that in the event that Digital World has cleared all SEC comments on the Initial Resale Registration Statement but the Initial Resale Registration Statement is not permitted to be declared effectiveweb as of the date of this Report. However, investors should be aware that since its inception, Private TMTG and, following the closingClosing, TMTG has not relied on any specific key performance metric to make business or operating decisions. Consequently, it has not been maintaining internal controls and procedures for periodically collecting such information, if any. While many mature industry peers may gather and analyze certain metrics, given the early development stage of the Truth Social platform, TMTG’s management and board believe that such metrics are not critical in the near future for the business and operation of the platform. This stance is due to TMTG’s long-term commitment to implementing a robust business plan, which may involve introducing innovative features and potentially incorporating new technologies, such as advanced video streaming services on its platform. These initiatives may enhance the range of services and experiences TMTG can offer on its Truth Social platform.
In connectiontrademark examiner to successfully register the pending “Truth Social” and “TRUTHSOCIAL” trademarks with the PIPEUSPTO and in accordance with Section 4.3(b)(ii)otherwise protect TMTG’s intellectual property, the value of DWAC’s charter, the sponsor, as majority holder of DWAC’s Class B common stock, waived certain anti-dilution rights of the holders of Class B common stock (the “Class B Holders”) to any increase in the number of shares of Class A common stock issuable upon conversion of the Class B common stock. In exchange for such waiver,TMTG’s brand and in the event that the transactions contemplated by the SPAs are consummated in accordance with their terms, the Class B Holders will be entitled to receive (i) an aggregate of 744,048 shares of Class A common stock (the “Anti-dilution Shares”) and (ii) warrants to purchase an aggregate of 744,048 shares of Class A common stock at an exercise price per share of $33.60 for a term of five years. The warrants shall otherwise have terms, including but not limited to registration rights, that are substantially identical to the warrants previously issued to the Class B Holders and shall not contain any anti-dilution or reset provisions, except for standard adjustments for any stock splits, stock dividends, recapitalizations and similar events.
For more information about the PIPE and the terms of the Series A Convertible Preferred Stock, see our Current Report on Form 8-K filed with the SEC on December 6, 2021, and the proxy statement/prospectus included in the Form S-4 filed with the SEC on May 16, 2022, as itother intangible assets may be amended or supplemented from timediminished, TMTG may be forced to time.
Status of TMTG Business Combinationrebrand its offerings, and PIPETMTG’s business may be adversely affected
The Merger Agreement.”
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related matters and (ix) by the mutual and reasonable written consent of Digital World and TMTGFurther, in the event that that any required approval of the SEC or any other governmental authority cannot be obtained by the Outside Date, as such date may be extended.
In addition, the SPAs may be terminated, under certain circumstances, among others, upon the earlier to occur of (a) the mutual written agreement of the parties thereto, and (b) the termination (for any reason) of the Merger Agreement by any party to the same, or if the TMTG Business Combination is not consummated by the Outside Date. The Company have received termination notices from certain PIPE Investors, who originally agreed to purchase up to 251,500 shares of the Company’s Series A Convertible Preferred Stock.
Unless extended, the Merger Agreement may be terminated at any time in accordance with its terms, including by either Digital World or TMTG after September 20, 2022 (or after December 20, 2022 if extended by Digital World following the implementation of the Extension), and the shareholders may not have the chance to vote on the TMTG Business Combination if the Merger Agreement is terminated beforehand. Additionally, the SPAs with the PIPE Investors may be terminated by the PIPE Investors any time after September 20, 2022 if the TMTG Business Combination has not been consummated by such date.
Furthermore, unless waived by the parties,Canada, the Company is required to file and obtain effectiveness of the Initial Resale Registration Statement on or before the closing of the TMTG Business Combination, subject to Canada’s PIPEDA. PIPEDA provides Canadian residents with privacy protections and sets out rules for how companies may collect, use and disclose personal information in the course of commercial activities. Truth Social users may be restricted from accessing Truth Social from certain exceptions. The Initial Resale Registration Statement was filed on May 27, 2022 and has not been declared effective by the SEC. Digital World believes that the SEC will not declare the Initial Resale Registration Statement effective until after the closing date of the TMTG Business Combination, and in order to close the PIPE as currently contemplated by the SPAs, the PIPE Investors have to waive the closing condition that requires effectiveness of the Initial Resale Registration Statement as of the closing date of the TMTG Business Combination. The closing of the PIPE is conditioned on the closing of the TMTG Business Combination, effectiveness of an Initial Resale Registration Statementcountries, and other closing conditions.
countries may intermittently restrict access to Truth Social. It is possible that other governments may seek to restrict access to or block TMTG’s website or mobile applications, censor content available through TMTG’s products or impose other restrictions that may affect the parties will restructureaccessibility or usability of Truth Social for an extended period of time or indefinitely.
For more information about the TMTG Business Combination and the PIPE, see our Current Reports on Form 8-K filed with the SEC on December 6, 2021, October 21, 2021, October 26, 2021 and May 17, 2022, the proxy statement/prospectus included in the Form S-4 filed with the SEC on May 16, 2022, as it may be amended or supplemented from time to time, and the definitive proxy statement filed with the SEC on August 25, 2022.
Regulatory Approvals/Investigations
We are the subject of an investigation by the SEC pursuant to Section 8(e) of the Securities Act, with respect to the Form S-4 relating to the TMTG Business Combination. We and certain of our directors received subpoenas from the SEC seeking various documentsregulations regarding among other things, our due diligence regarding TMTG, communications regarding and due diligence of potential targets other than TMTG, and relationships and communications between and among us (and/or certain of our officers and directors)privacy, data protection, and other entities (including
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the sponsormatters. Many of these laws and certain advisors, including our underwriterregulations are subject to change and financial advisor in the IPO). In addition, weuncertain interpretation, and each member of our Board received grand jury subpoenas seeking certain of the same documents demanded in the above-referenced SEC subpoenas, along with requests relating to our S-1 filings, communications with or about multiple individuals, and information regarding Rocket One Capital. These subpoenas, and the underlying investigations by the Department of Justice and the SEC, can be expected to delay effectiveness of the Form S-4, which could materially delay, materially impede, or prevent the consummation of the TMTG Business Combination. Additionally, any resolution of the investigation could result in the impositionclaims, changes to TMTG’s business practices, increased cost of significant penalties, injunctions, prohibitions on the conduct of our business, damage to our reputation and other sanctions against us.
Additionally, we are not aware of any material regulatory approvalsoperations, or actions that are required for completion of the TMTG Business Combination other than the approvals from the SEC and Nasdaq, as well as the expirationdeclines in user growth or early termination of the waiting period under the Hart-Scott-Rodino Act, which has occurred. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained. This includes any potential review by a U.S. government entity, such as Committee on Foreign Investment in the United States (“CFIUS”), on account of certain foreign ownership restrictions on U.S. businesses.
CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-passive, non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings.
Patrick Orlando, the Company’s director and former Chief Executive Officer and a U.S. citizen, is the sole managing member of the sponsor. Other members of the sponsor include certain officers and directors of the Company. The sponsor is not controlled by a non-U.S. person. To the best of the Company’s knowledge, other than the members holding an approximate 17.2% minority interest in the sponsor, the sponsor does not have substantial ties with any non-U.S. persons. Approximately 82.8% of the total allocated membership interests in the sponsor are owned by U.S. persons on a look-through basis, and, to the best of our knowledge, none of the sponsor members who are U.S. persons have substantial ties with non-U.S. persons on a look-through basis. Of the approximately 17.2% of interests in the sponsor owned by non-U.S. persons on a look-through basis, approximately 8.0% of interests are owned by persons in Guatemala, approximately 4.4% of interests are owned by persons in El Salvador, approximately 4.2% of interests are owned by persons in Brazil, approximately 0.5% of interests are owned by persons in Peru and approximately 0.1% of interests are owned by persons in Mexico. The sponsor is expected to own no more than 8.1% of the combined company following the TMTG Business Combination.
We do not believe that either we or our sponsor constitute a “foreign person” under CFIUS rules and regulations. However, if CFIUS considers us to be a “foreign person” under such rules and regulations and TMTG a U.S. business that may affect national security, we could be subject to such foreign ownership restrictions and/or CFIUS review. If the TMTG Business Combination falls within the scope of foreign ownership restrictions, we may be unable to consummate the TMTG Business Combination. In addition, if the TMTG Business Combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with the TMTG Business Combination without notifying CFIUS and risk CFIUS intervention, before or after closing the TMTG Business Combination.
Although we do not believe we are a “foreign person,” CFIUS may take a different view and decide to block or delay the TMTG Business Combination, impose conditions to mitigate national security concerns with respect to the TMTG Business Combination, order us to divest all or a portion of a U.S. business of the combined
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company if we had proceeded without first obtaining CFIUS clearance, or impose penalties if CFIUS believes that the mandatory notification requirement applied. Additionally, the laws and regulations of other U.S. government entities may impose review or approval procedures on account of any foreign ownership by the sponsor. If we were to seek an initial business combination other than the TMTG Business Combination, the pool of potential targets with which we could complete an initial business combination may be limited as a result of any such regulatory restriction. Moreover, the process of any government review, whether by CFIUSengagement, or otherwise could be lengthy. Because we have only a limited time to complete the TMTG Business Combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public stockholders may only receive approximately $10.45 per share (which represents the amount in the trust account asharm TMTG’s business.”
On February 22, 2023, we received a notice from Nasdaq stating that the Company has not paid certain fees required by Listing Rule 5250(f) and that the Company will be delisted unless it appeals this determination. On March 28, 2023, the Company paid the required fees and received a notice from Nasdaq stating that the Company is in compliance with all applicable listing standards.
Our Search for Business Combination Opportunities
To date, our efforts have been limited to organizational activities, as well as activities related to our initial public offering and investigating potential business combinations. As of the date of this Report, the Company anticipates that the TMTG Business Combination will be consummated on or before the Outside Date. While we have entered into a Merger Agreement with TMTG, in the event we are unable to consummate the TMTG Business Combination, we will continue to pursue a business combination.
Business Strategy
While we may pursue an initial business combination target in any industry or geographic location, in the event the TMTG Business Combination is not consummated, we intend to focus our search on middle market and emerging growth technology-focused companies in the Americas, in SaaS and technology or FinTech and Financial Services. Most of these companies will ultimately need to consolidate to achieve the scale necessary to attain high revenue growth and attractive profitability. We believe that acquiring a leading emerging growth technology company will provide a platform to fund consolidation and fuel growth for our company. Segments we might explore include, but are not limited to, technology and technologically enabled industrial, supply chain, logistics, vehicles, security and manufacturing businesses. There is no restriction in the geographic location of targets we can pursue, although we intend to initially prioritize the Americas as the geographical focus.
Competitive Advantages
In the event the TMTG Business Combination is not consummated, we intend to capitalize on the following competitive advantages in our pursuit of a target company:
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Industry Opportunity
While we may acquire a business in any industry, in the event the TMTG Business Combination is not consummated, our focus will be in the industries referenced above. We believe that our target industries are attractive for a number of reasons:
SaaS and Technology
We believe we are currently in the midst of a secular shift in the SaaS sub-segment of the technology industry, which is driving rapid growth in both annual spending and the number of actionable acquisition targets requiring a public market solution. This is driven in part by large corporations, which are constantly upgrading legacy technology and expanding their SaaS toolkits. We believe another major driver are new corporations which heavily rely in SaaS solutions given their cost-efficiency and scalability. Specifically, we see great opportunity in companies that are constantly evolving.
Private technology companies are fundamentally changing the world at an unprecedented pace by establishing new markets, creating new experiences and disrupting legacy industries. Key technological advances and practices, such as cloud computing, data analytics and intelligence platforms, open-source software development, developer-focused software tools, and software-defined networking, storage and computing, are allowing technology companies to rapidly effect change in every major sector of the global economy. Agile private technology companies have embraced these advances and practices to create business models and address market needs that will enable them to reach significant financial scale and create stockholder value.
FinTech and Financial Services
The FinTech landscape has matured from a niche venture market to an expansive global industry comprised of numerous large-scale institutionalized businesses that consistently experience strong growth in revenue and profits. FinTech adoption by both consumers and businesses continues to benefit from robust secular tailwinds including the growth in digital commerce, the proliferation of mobile technology, the ubiquitous acceptance of digital payments, and continuous technological advancement, positioning the sector for long-term growth. In 2019, the EY Global FinTech Adoption Index estimated that 64% of digitally active consumers globally utilized FinTech products and that consumer awareness of FinTech is even higher.
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The number of technology company initial public offerings has also diminished. An average of 159 technology companies went public each year during the 1990s, according to the research firm Deal Logic. Since 2010, however, that yearly average plummeted to only 38, a 76% drop. That smaller initial public offering market has also been predominantly focused on so-called “unicorn” companies (meaning start-up, typically VC-backed companies, often focused on technology, with valuations of over $1 billion). The median market capitalization of a venture-backed initial public offering was about $660 million in 2012; in 2017 it was $1.1 billion, based on data from the University of Florida. We believe this means that very promising, but non-unicorn companies (such as we will likely target for our initial business combination) are in many instances missing out on the ability to do a traditional initial public offering.
Our management team believes that these factors present an intriguing paradox: a growing number of new companies have attracted more private capital. Yet once they flourish, they have a narrower exit route. In addition, that exit route is often reserved for larger companies, a substantial disadvantage for smaller private technology companies.
Ultimately, we believe this same paradox creates a long-term opportunity for stockholder return via an initial business combination with a smaller, high-performing private technology company or companies. Additionally, it provides a persuasive argument for such companies to join with us, as we believe they have fewer exit options than presently exist for unicorns.
Acquisition Criteria
Consistent with our strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. In the event the TMTG Business Combination is not consummated, we intend to use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines.
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These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that from time to time our management may deem relevant.
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Sourcing of Potential Initial Business Combination Targets
Certain members of our management team have developed a wide network of professional services contacts and business relationships. The members of our board of directors also have significant executive management and public company experience with technology related companies and bring additional relationships that further broaden our network.
This network has provided our management team with a flow of referrals that have resulted in numerous transactions. In the event that the TMTG Business Combination is not consummated, we believe that the network of contacts and relationships of our management team will provide us with an important source of acquisition opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment banks, consultants, accounting firms and large business enterprises.
Members of our management team and our independent directors directly or indirectly own founder shares and/or placement units and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
In addition, each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. In particular, Patrick Orlando, our director, serves as a director of Maquia Capital Acquisition Corporation, a special purpose acquisition corporation that initially focuses its search for a business combination with technology-focused middle market and emerging growth companies in North America, which also overlaps with the industry and geographic scope of our search. As of the date of this Report, Maquia Capital Acquisition Corporation had not entered into a business combination.
In addition, our sponsor and our officers and directors may sponsor or form other special purpose acquisition companies similar to ours or may pursue other business or investment ventures during the period in which we are seeking an initial business combination. Any such companies, businesses or investments may present additional conflicts of interest in pursuing an initial business combination. However, we do not believe that any such potential conflicts would materially affect our ability to complete our initial business combination.
Status as a Public Company
We believe our structure makes us an attractive business combination partner to target businesses such as TMTG. As a public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination with us. Following an initial business combination, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. A target business can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our shares of Class A common stock (or shares of a new holding company) or for a combination of our shares of Class A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers.
Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more expeditious and cost effective method to becoming a public company than the typical initial public offering. The typical initial public offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the
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initial public offering process, including underwriting discounts and commissions, marketing and road show efforts that may not be present to the same extent in connection with an initial business combination with us.
Furthermore, once a proposed initial business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business combination, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our structure and our management team’s backgrounds make us an attractive business partner, some potential target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed initial business combination, negatively.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
Financial Position
With funds available for an initial business combination in the amount of $300,330,651 as of December 31, 2022 before payment of $10,062,500 of deferred underwriting fees, before fees and expenses associated with our initial business combination (other than deferred underwriting fees), we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion
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of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires.
Effecting Our Initial Business Combination
We are not presently engaged in, and we will not engage in, any operations until we consummate our initial business combination. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the sale of the placement units, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to backstop agreements we may enter into 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. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
As in the case of the TMTG Business Combination, we may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. In addition, we intend to target businesses larger than we could acquire with the net proceeds of our initial public offering and the sale of the placement units, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously with the completion of our initial business combination. In the case of an initial business combination funded with assets other than the trust account assets, our proxy materials or tender offer documents disclosing the initial business combination would disclose the terms of the financing and, only if required by applicable law or stock exchange requirements, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately, or through loans in connection with our initial business combination.
Sources of Target Businesses
If the TMTG Business Combination is not consummated, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers and investment professionals, as a result of being solicited by us by calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read this Report and know what types of businesses we are targeting. Our officers and directors, as well as our sponsor and their affiliates, may also bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we expect to receive a number of deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors and our sponsor and their affiliates. We may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee, advisory fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to
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completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors be paid any finder’s fee, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation by the company prior to, or in connection with any services rendered for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). None of our sponsor, executive officers or directors, or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated initial business combination except as set forth herein. We have agreed to pay Benessere Enterprises Inc., an affiliate of our sponsor, a total of $15,000 per month for office space, utilities and secretarial and administrative support and to reimburse our sponsor for any out-of-pocket30th. expenses related to identifying, investigating and completing an initial business combination. On April 5, 2023, we entered into an Administrative Support Agreement with Renatus LLC (“Renatus”), an advisory group owned by Eric Swider, the Interim Chief Executive Officer and director of the Company, pursuant to which, the Company agrees to pay Renatus a monthly fee of $15,000 for office space, utilities and secretarial and administrative support commencing from April 5, 2023 until the earlier of the consummation by the Company of an initial business combination or the Company’s liquidation. Some of our officers and directors may enter into employment or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an initial business combination candidate.
TMTG is not affiliated with our sponsor or any of our officers or directors, but in the event we do not consummate the TMTG Business Combination, we are not prohibited from pursuing an initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors or making the initial business combination through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek to complete our initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
If any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. In particular, Patrick Orlando, our director, serves as a director of Maquia Capital Acquisition Corporation, a special purpose acquisition corporation that initially focuses its search for a business combination with technology-focused middle market and emerging growth companies in North America, which also overlaps with the industry and geographic scope of our search. As of the date of this Report, Maquia Capital Acquisition Corporation had not entered into a business combination. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
Selection of a Target Business and Structuring of our Initial Business Combination
Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses or a valuation based on the financial metrics of merger and acquisition transactions of comparable businesses. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an
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independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management will virtually have unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial business combination in which we will own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken into account for purposes of Nasdaq’s 80% fair market value test.
To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure shareholders that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective business target, we conduct a thorough due diligence review, which may encompass, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as well as a review of financial and other information that will be made available to us.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, if the TMTG Business Combination is not consummated, we intend to focus our search for an initial business combination in a single industry. By completing our initial business combination with only a single entity, our lack of diversification may:
subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and
cause us to depend on the marketing and sale of a single product or limited number of products or services.
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Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a prospective target business, including that of TMTG, when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’ management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure shareholders that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure shareholders that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following an initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure shareholders that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval of the TMTG Business Combination and, if the TMTG Business Combination is not consummated, of any future proposed initial business combination if it is required by applicable law or applicable stock exchange listing requirements, or we may decide to seek stockholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
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Under Nasdaq’s listing rules, stockholder approval would be required for our initial business combination if, for example:
we issue shares of Class A common stock that will be equal to or in excess of 20% of the number of shares of our Class A common stock then outstanding (other than in a public offering);
any of our directors, officers or substantial stockholders (as defined by Nasdaq rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in outstanding common stock or voting power of 5% or more; or
the issuance or potential issuance of common stock will result in our undergoing a change of control.
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Permitted Purchases of our Securities
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, officers, any other initial stockholders, advisors or their affiliates may purchase public shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination.
The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our sponsor, officers, directors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such stockholder has already submitted a proxy with respect to our initial business combination. Our sponsor, officers, directors or their affiliates will only purchase public shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our sponsor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. We expect that any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchases are subject to such reporting requirements.
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Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination, including the TMTG Business Combination, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and placement shares and any public shares held by them in connection with the completion of our initial business combination. Our anchor investors have entered into investment agreements with us and our sponsor, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares held by them in connection with the completion of our initial business combination.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares of Class A common stock upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination, as in the case of the TMTG Business Combination, or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Under Nasdaq rules, asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. If we structure an initial business combination with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed initial business combination. We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons. So long as we maintain a listing for our securities on Nasdaq, we will be required to comply with such rules.
If stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and
file proxy materials with the SEC.
In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, unless otherwise required by applicable law, regulation or stock exchange rules, we will complete our initial business combination only if a majority of the outstanding shares of common stock present and entitled to vote at the meeting to approve the initial business combination when a quorum is
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present are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the Company representing a majority of the voting power of all outstanding shares of capital stock of the Company entitled to vote at such meeting. Our initial stockholders will count toward this quorum and pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any founder shares and placement shares held by them and any public shares acquired by them (including in open market and privately negotiated transactions) in favor of our initial business combination. Our anchor investors have agreed to vote any founder shares held by them in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial stockholders’ founder shares and placement shares and our anchor investors’ founder shares, we would need 837,939, or 2.9%, of the 28,745,952 public shares to be voted in favor of an initial business combination (assuming only the minimum number of shares representing a quorum are voted) in order to have our initial business combination approved. In light of the units purchased by our anchor investors, if the anchor investors vote their public shares in favor of our initial business combination, no affirmative votes from other public stockholders would be required to approve our initial business combination. However, because our anchor investors are not obligated to continue owning any public shares following the closing and are not obligated to vote any public shares in favor of our initial business combination, we cannot assure shareholders that any of these anchor investors will be stockholders at the time our stockholders vote on our initial business combination, and, if they are stockholders, we cannot assure shareholders as to how such anchor investors will vote on any business combination. We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
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file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, we will not redeem any public shares unless our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
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Our amended and restated certificate of incorporation provides that we may not redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our initial public offering (4,312,500 shares of Class A common stock) (the “Excess Shares”). Such restriction shall also be applicable to our affiliates. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in our initial public offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with an initial business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Tendering Stock Certificates in Connection with Redemption Rights
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent up to two business days prior to the vote on the proposal to approve the initial business combination, or to deliver their shares to the transfer agent electronically using the DWAC System, at the holder’s option. The proxy materials that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have up to two days prior to the vote on the initial business combination to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker certain fee and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
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The foregoing is different from the procedures used by many special purpose acquisition companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial business combination, and a holder could simply vote against a proposed initial business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the initial business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the initial business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion of the initial business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the initial business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date of the stockholder meeting. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If the TMTG Business Combination is not completed, we may continue to try to complete an initial business combination with a different target until the end of the Combination Period.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated certificate of incorporation initially provided that we would have only 12 months (or up to 18 months if we extend the time for completion as permitted under our amended and restated certificate of incorporation) from the closing of our initial public offering to complete our initial business combination. On November 22, 2022, the Company held a special meeting of stockholders (the “Extension Meeting”) and stockholders approved to extend, upon the request of the sponsor and approval by the board, the Combination Period up to four times, each by an additional three months, for an aggregate of 12 additional months (which is from September 8, 2022 up to September 8, 2023) or such earlier date as determined by the Board. As of the date of this Report, the end of the Combination Period has been extended to June 8, 2023. If we are unable to complete our initial business combination by June 8, 2023 or seek further extensions, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten 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 and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by June 8, 2023 or seek further extensions.
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Our sponsor, officers, and directors have entered into a letter agreement with us, pursuant to which they will waive their rights to liquidating distributions from the trust account with respect to any founder shares and placement shares held by them if we fail to complete our initial business combination by June 8, 2023 or seek further extensions. However, if our sponsor, officers or directors acquire public shares, whether in or after our initial public offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the Combination Period.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination the Combination Period or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment 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 and not previously released to us to pay our taxes divided by the number of then outstanding public shares. However, we may not redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $989 of proceeds held outside the trust account, as of December 31, 2022, although we cannot assure shareholders that there will be sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay taxes, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our initial public offering and the sale of the placement units, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.45. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure shareholders that the actual per-share redemption amount received by stockholders will not be substantially less than $10.45. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure shareholders that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third-party refuses to execute an agreement waiving such claims to the monies held in the trust
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account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. Marcum LLP, our independent registered public accounting firm, and the underwriters of our IPO, will not execute agreements with us waiving such claims to the monies held in the trust account.
In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.20 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.20 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure shareholders that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the trust account are reduced below (i) $10.20 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot assure shareholders that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure shareholders that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.20 per public share.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. We had access to up to approximately $989 of cash held outside of the trust account, as of December 31, 2022, with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event
that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors.
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Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by June 8, 2023 (or a later date if we seek further extensions) may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by June 8, 2023 (or a later date if we seek further extensions) is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our initial business combination by June 8, 2023 or seek further extensions, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten 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 and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our initial business combination or liquidation and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.20 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed
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waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure shareholders we will be able to return $10.45 per share (which represents the amount in the trust account as of December 31, 2021 before deduction of any payment of tax obligations or up to $100,000 to be used for liquidation expenses from interest earned on the funds in the trust account) to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure shareholders that claims will not be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend any provisions of our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within the Combination Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, and (iii) the redemption of all of our public shares if we are unable to complete our business combination by June 8, 2023 or seek further extensions, subject to applicable law. In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the initial business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights as described above. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote.
Competition
In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies (including Maquia Capital Acquisition Corporation), private equity groups and leveraged buyout funds, and operating businesses seeking strategic business combinations. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Employees
We currently have three officers. These individuals are not obligated to devote any specific number of hours to our matters but they devote as much of their time as they deem necessary, in the exercise of their respective
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business judgement, to our affairs until we have completed our initial business combination. The amount of time they devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the initial business combination process we are in. We do not intend to have any full-time employees prior to the completion of our initial business combination. We do not have an employment agreement with any member of our management team.
Periodic Reporting and Financial Information
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential targets for our initial business combination, because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure shareholders that any particular target business identified by us as a potential business combination candidate will have financial statements prepared in accordance with GAAP or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.
In addition, Section 107
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We will remain an emerging growth company untilOn February 29, 2024, ARC, which was controlled by Mr. Patrick Orlando, Digital World’s former chairman of its board of directors and chief executive officer, filed the earlierDelaware Lawsuit in the Court of (1) (a) December 31, 2026, (b) the last dayChancery of the fiscal year in which we have total annual gross revenueState of at least $1.235 billion, or (c) the last dayDelaware (the “Chancery Court”). ARC’s complaint, among other matters, alleges impending violation of the fiscal yearDigital World Charter for failure to commit to issue the number of conversion shares to ARC and other holders of Digital World Class B Common Stock (the “Non-ARC Class B Shareholders”) that ARC claims it is owed upon the consummation of the Business Combination. As previously disclosed, on March 5, 2024, the Chancery Court held a hearing to decide ARC’s motion to expedite the case schedule, during which, the Vice Chancellor denied and declined to hold a merits hearing or issue an injunction before Digital World’s special meeting of stockholders held on March 22, 2024 (the “Special Meeting”). The Chancery Court ruled that Digital World’s proposal to place disputed shares into an escrow account upon the closing of the Business Combination was sufficient to preclude a possibility of irreparable harm related to the conversion of the ARC’s shares in which we are deemedconnection with the Business Combination into TMTG Common Stock. Additionally, the Chancery Court requested that the parties stipulate to the establishment of an escrow account for the placement of disputed shares following the Business Combination, to be a large accelerated filer,held pending conclusion of the action.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our commonclosing stock held by non-affiliatesprice for TMTG Common Stock equals or exceeds $250 million$12.00 per share for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing Date, and (iii) such date on which TMTG completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the TMTG stockholders having the right to exchange their shares of TMTG Common Stock for cash, securities or other property (the “Lock-Up Trading Restrictions”).
| Item 1A. | Risk Factors. |
As
we are a blank check company with no revenue or basis to evaluate our ability to select a suitable business target;
weTMTG may not be able to selectachieve further growth or sustain profitability.
since our Board approvedable to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs. Furthermore, if TMTG loses or terminates the Transactions, weservices of one or more of its key employees or if one or more of TMTG’s current or former executives or key employees joins a competitor or otherwise competes with TMTG, it could impair TMTG’s business and its ability to successfully implement TMTG’s business plan. Additionally, if TMTG is unable to hire qualified replacements for its executive and other key positions in a timely fashion, its ability to execute its business plan would be harmed. Even if TMTG can quickly hire qualified replacements, TMTG could experience operational disruptions and inefficiencies during any such transition. TMTG believes that its future success will depend on its continued ability to attract and retain highly skilled and qualified personnel.
the Company was in the past,number of users accessing its products and continues to be, subject to inquiries, exams, pending investigations, or enforcement matters. We are cooperating with a FINRA inquiry concerning events (specifically, a review of trading) that preceded the public announcement of the Merger Agreement. We are also cooperating with investigations by the SECservices and the Department of Justice. In addition, we and each member of our Board received grand jury subpoenas seeking certain of the same documents demanded in the SEC subpoenas. Any resolution of the inquiry or investigation, as well as proceedings by the SEC, FINRA, or other governmental or regulatory authorities,user engagement, which could result in the impositionloss of significant fines, penalties, injunctions, prohibitionsadvertisers and revenue.
|
we may not be successful in retainingdeveloping relationships with key participants in the mobile industry or recruiting required officers, key employeesin developing products or directors following our initialservices that operate effectively with these operating systems, networks, devices, web browsers and standards. In the event that it is difficult for TMTG’s users to access and use TMTG’s products and services, particularly on their mobile devices, TMTG’s user growth and engagement could be harmed, and its business combination;
our officers and directorsoperating results could be adversely affected.
we
| • | TMTG’s ability to establish and maintain relationships with platform partners that integrate with Truth Social; |
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during the pendency of the TMTG Business Combination, Digital World will not be able to maintain or grow TMTG’s revenue as anticipated, and TMTG’s financial results could be adversely affected. See “Risk Factors — Risks Related to TMTG’s Business — TMTG may be subject to greater risks than typical social media platforms because of the focus of its offerings and the involvement of President Trump. These risks include active discouragement of users, harassment of advertisers or content providers, increased risk of hacking of TMTG’s platform, lesser need for Truth Social if First Amendment speech is not suppressed, criticism of Truth Social for its moderation practices, and increased stockholder suits.”
| • | increases in marketing, sales, and other operating expenses that TMTG may incur to grow and expand TMTG’s operations and to remain competitive; |
we may issue our
the shareholdersthese sales may not be given the opportunity to choose the initial business target or to vote on the initial business combination;
trust account funds may not be protected against third party claims or bankruptcy;
an active market for our public securities may not develop and the shareholders will have limited liquidity and trading;
the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination;
our financial performance following a business combination with an entity may be negatively affected by their lack of an established record of revenue, cash flows and experienced management;
there may be more competition to find an attractive target for an initial business combination, which could increase the costs associated with completing our business combination;
changes in the market for directors and officers liability insurance couldoccur, also might make it more difficult for TMTG to sell equity securities in the future at a time and more expensiveat a price that it deems appropriate.
weother restrictions imposed by law. A total number of shares representing 7.5% of the fully diluted, and as converted, outstanding shares of TMTG Common Stock immediately following the Closing of the Merger, taking into account any additional shares that may attemptbe issued pursuant to simultaneously complete business combinations with multiple prospective targets, which may hinder our abilitythe Earnout Shares, are expected to complete our initial business combination and give risebe reserved for future issuance under the Equity Incentive Plan. TMTG is expected to increased costs and risks that could negatively impact our operations and profitability;
we may engagefile one or more registration statements on Form S-8 under the Securities Act to register shares of our underwritersTMTG Common Stock or onesecurities convertible into or exchangeable for shares of their respective affiliatesTMTG Common Stock issued pursuant to provide additional services to us after the initial public offering, whichEquity Incentive Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.
we may attempt to complete our initial business combination with a private company about which little information is available, whichinvestments or acquisitions may result in additional dilution to TMTG stockholders.
since our initial stockholders will lose their entire investmentthere is a current registration statement in us if our initial business combination is not completed (other thaneffect with respect to the shares of TMTG Common Stock underlying such Warrants.
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|
changes in laws or regulations or how such laws or regulations are interpreted or applied, or a failure to comply with any laws or regulations, maythe public market could adversely affect the market price of TMTG Common Stock and may result in volatility in the trading price of our business, including our ability to negotiate and complete our initial business combination, and results of operations;
securities. The Public Warrants expire five years after the valuecompletion of the founder shares following completionBusiness Combination or earlier upon redemption or liquidation.
resourcesincluding “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be wastedused to significantly dilute the ownership of a hostile acquirer;
in March 2022, the SEC issued proposed rules relating to certain activities of SPACs. CertainSection 203 of the procedures that we, a potential business combination target, or others may determine to undertake in connection with such proposals may increase our costs and the time needed to complete our initial business combination and may constrain the circumstances under which we could completeDGCL, an initial business combination. The need for compliance with such proposals may cause us to liquidate the funds in the trust account or liquidate the Company at an earlier time than we might otherwise choose;
if we are deemed to be an investment company for purposesanti-takeover law. In general, Section 203 of the Investment Company Act, we would be required to institute burdensome compliance requirementsDGCL which may prohibit certain business combinations with stockholders owning 15% or more of TMTG’s outstanding voting stock. These anti-takeover provisions and our activities would be severely restricted. As a result, in such circumstances, unless we are able to modify our activities so that we would not be deemed an investment company, we may abandon our efforts to complete an initial business combination and instead liquidate the Company;
to mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may at any time instruct the trustee to liquidate the investments held in the trust account and instead to hold the funds in the trust account in an interest bearing demand deposit account until the earlier of the consummation of our initial business combination or our liquidation. As a result, following the liquidation of investments in the trust account, we would likely receive less interest on the funds held in the trust account, which would likely reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company;
recent increases in inflation and interest rates in the United States and elsewhere couldother make it more difficult for usstockholders or potential acquirers to consummate an initial business combination;
military conflict in Ukraineobtain control of companies. Because of TMTG’s express opt out of these anti-takeover provisions, it may be easier for such persons or elsewhere mayentities to initiate actions that are opposed by the then-current TMTG Board and more difficult to delay or impede a merger, tender offer or proxy contest involving TMTG. The lack of the applicability of these provisions could lead to proxy contests and facilitate stockholders’ ability to elect directors of their choosing or cause TMTG to take other corporate actions desired by some but not all or a majority of stockholders. Any of these actions could cause the market price of TMTG’s Common Stock to decline or times of increased volatility. Nonetheless, TMTG may enter into a stockholder rights plan, commonly known as a “poison pill,” that may delay or prevent a change of control.
we
there is substantial doubt about our ability to continue as a “going concern”; and
we have identified a material weakness in our internal control over financial reporting assale or possibility of December 31, 2022. If we are unable to develop and maintain an effective system of internal control
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|
For the complete list of risks relating to our operations, the TMTG Business Combination and the PIPE, see the section titled “Risk Factors” contained in our (i) Registration Statement, (ii) Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 13, 2022, (iii) Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, June 30, 2022 and September 30, 2022, as filed with the SEC on May 19, 2022, August 23, 2022, and November 21, 2022, respectively, (iv) S-4 Registration Statement and (v) the definitive proxy statement filed with the SEC on August 25, 2022. Anysale of these factorsshares could resulthave the effect of increasing the volatility in a significantTMTG’s share price or material adverse effect on our resultsthe market price of operationsTMTG Common Stock could decline if the holders of currently restricted shares sell them or financial condition. Additional risks could arise that may also affect our business or abilityare perceived by the market as intending to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
| Item 1B. | Unresolved Staff Comments. |
| Item 1C. | Cybersecurity. |
| • | Identification and Reporting: The Company has implemented a comprehensive, cross-functional approach to assessing, identifying and managing material cybersecurity threats and incidents. The Company’s program includes controls and procedures to properly identify, classify and escalate certain cybersecurity incidents to provide management visibility and obtain direction from management as to the public disclosure and reporting of material incidents in a timely manner. Cybersecurity risks are discussed in weekly executive team meetings across functions. |
| • | Technical Safeguards: The Company implements technical safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, web applications firewalls, DDoS mitigation services, intrusion prevention and detection systems, anti-malware functionality, and software and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence. |
| • | Secure Software Development Life Cycle: The Company develops and deploys software using frameworks and techniques to build in security from the design phase through deployment and maintenance. Software and systems security are part of a comprehensive Software/Systems Development Life Cycle (SDLC) program to ensure security concerns are addressed throughout the process. |
| • | Incident Response and Recovery Planning: The Company has established and maintains comprehensive incident response, business continuity, and disaster recovery plans designed to address the Company’s response to a cybersecurity incident. The Company conducts regular tabletop exercises to test these plans and ensure personnel are familiar with their roles in a response scenario. |
| • | Third-Party Risk Management: The Company maintains a comprehensive, risk-based approach to identifying and overseeing material cybersecurity threats presented by third parties, including vendors, service providers, and other external users of the Company’s systems, as well as the systems of third parties that could adversely impact our business in the event of a material cybersecurity incident affecting those third-party systems, including any outside auditors or consultants who advise on the Company’s cybersecurity systems. |
| • | Education and Awareness: The Company provides regular, mandatory training for all levels of employees regarding cybersecurity threats as a means to equip the Company’s employees with effective tools to address cybersecurity threats, and to communicate the Company’s evolving information security policies, standards, processes, and practices. |
| Item 2. | Properties. |
| Item 3. | Legal Proceedings. |
We are also cooperating with
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Company’s underwriter and financial advisor in its initial public offering). According to the SEC’s request and subpoena, the investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of us or any person, entity, or security. Any resolution of the inquiry or investigation, as well as proceedings by the SEC FINRA, or other governmental or regulatory authorities, could result in the imposition of significant fines, penalties, injunctions, prohibitions on the conduct of our business, damage to our reputation and other sanctions against us, including restrictions on our activities.
The SEC also issued an order of examination pursuant to Section 8(e) of the Securities Act, with respect to certain statements, agreements and the timing thereof included in Digital World’s registration statements on Form S-1 in connection with its IPO and Form S-4 Registration Statement relating to the TransactionsBusiness Combination (the “Investigation”).
In addition,Business Combination, on March 25, 2024, Digital World paid the Company$18 million civil penalty to the SEC pursuant to the Order.
These subpoenas, andafter the underlying investigations by the SEC and the U.S. Department of Justice, can be expected to delay effectivenessBusiness Combination), (2) approve or disapprove of the creation of additional TMTG shares or share classes and anti-dilution protection for future issuances and (3) a $1.0 million expense reimbursement claim. In addition, UAV asserts that the Services Agreement is not S-4void ab initio Registration Statement,and claims that certain events following the July 30, 2021 notification support its assertion that such Services Agreement was not void.
| Item 4. | Mine Safety Disclosures. |
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PART II
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity |
March 26, 2024.
Public Warrants.
other factors or considerations the Board deems relevant.
None.
Performance Graph
None.
(f) Use of Proceeds from
For a descriptioncovered period, Digital World issued $2,832,000 in non-interest-bearing convertible promissory notes, payable upon the stockholders’ approval of the useBusiness Combination. The payment could be made in either (i) units or (ii) cash or units, at the holder's election. Any units issuable pursuant to the convertible promissory notes were to consist of proceeds generatedone share of Digital World common stock and one-half of a warrant, with an exercise price ranging between $8 and $10. Upon the consummation of the Business Combination, the number of shares of TMTG Common Stock issued to holders of such convertible promissory notes is equal to 303,200 and the number of private warrants issued is equal to 149,099. The convertible promissory notes were issued pursuant to the exemption from registration contained in our initial public offering and private placement, see Part II, Item 2Section 4(a)(2) of the Securities Act.
(g) Purchases of EquityUnregistered Securities by the Issuer and Affiliated Purchasers
On November 22, 2022, we held the Extension Meeting and our stockholders approved, among other things, an amendment to our amended and restated certificate of incorporation to extend the period of time for the Company to consummate an initial business combination up to four times, each by an additional three months, for an aggregate of 12 additional months (which is from September 8, 2022 up to September 8, 2023) or such earlier date as determined by the Board. In connection with the Extension Meeting, stockholders holding 5,658 public shares exercised their right to redeem their shares for a pro rata portion of the funds in our trust account. As a result, approximately $58,916 (approximately $10.41 per share) was removed from the trust account to pay such holders. Following redemptions, we have 28,745,952 public shares outstanding.
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The following table contains monthly information about the repurchases of our equity securities for the three months ended December 31, 2022:
Period | (a) Total number of shares (or units) purchased | (b) Average price paid per share (or unit) | (c) Total number of shares (or units) purchased as part of publicly announced plans or programs | (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | ||||||||||||
October 1 – October 31, 2022 | — | — | — | — | ||||||||||||
November 1 – November 30, 2022 | 5,658 | $ | 10.41 | — | — | |||||||||||
December 1 – December 31, 2022 | — | — | — | — | ||||||||||||
| Item 6. | [Reserved] |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere, particularly in the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections of this Report.
We are
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) upon the Closing, Merger Sub will merge with and into TMTG, with TMTG continuing as the surviving corporation in the Merger and a wholly-owned subsidiaryissuance of the Company. In the Merger, (i) all shares of TMTG Stock issued and outstanding immediately prior to the Effective Time (other than those properly exercising any applicable dissenters rights under Delaware law) will be converted into the right to receive the Merger consideration; (ii) each outstanding option to acquire shares of TMTG Stock (whether vested or unvested) will be assumed by the Company and automatically converted into an option to acquire sharesDigital World Alternative Warrants in settlement of the Company’s common stock, with its price and numberterminated PIPE Investment. Each such warrant entitles the holder thereof to purchase one share of shares equitably adjusted based on the conversion ratio of the shares of TMTG Stock into the Merger consideration and (iii) each outstanding restricted stock unit of TMTG shall be converted into a restricted stock unit relating to shares of the Company’s common stock. At the Closing, the Company will change its name to “Trump Media & Technology Group Corp.”
Consummation of the TMTG Business Combination is subject to customary conditions of the respective parties, including regulatory approval and the approval of the Merger by our stockholders in accordance with our
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amended and restated certificate of incorporation and the completion of a redemption offer whereby we will be providing our public stockholders with the opportunity to redeem their shares of ourDigital World Class A common stock for cash equal to their pro rata share of$11.50 per share. Digital World issued the aggregate amount on deposit in our trust account. The Merger Agreement can be terminated by either party if any of the closing conditions have not been satisfied or waived by September 20, 2022, which has been extended to June 8, 2023 (the “Outside Date”), provided that the Company shall have the right to extend the Outside Date if it obtains an extension of the deadline by which it must complete its business combination (an “Extension”) for the shortest of (i) three months, (ii) the period ending on the last day for the Company to consummate a business combination after such Extension and (iii) such period as determined by the Company.
On December 4, 2021, in support of the TMTG Business Combination, the Company entered into certain SPAs with certain PIPE Investors, pursuant to which the PIPE Investors agreed to purchase up to an aggregate of 1,000,000 shares of the Company’s Series A Convertible Preferred Stock for a purchase price of $1,000 per share for an aggregate commitment of up to $1,000,000,000 in a PIPE to be consummatedDigital World Alternative Warrants concurrently with the TMTG Business Combination. The shares are currently convertible into 29,761,905 shares of the Company’s common stock, subject to upward adjustment. The PIPE is conditioned on the concurrent closing of the TMTG Business Combination and other customary closing conditions and is terminable by the PIPE Investors if the TMTG Business Combination has not closed by the Outside Date. Pursuant to the SPA, each of the PIPE Investors may terminate its respective SPA, among other things, if the closing of the PIPE has not occurred on or prior to September 20, 2022. As a result, the Company received termination notices from certain PIPE Investors, who originally agreed to purchase up to 251,500 shares of the Company’s Series A Convertible Preferred Stock. For more information on the TMTG Business Combination, and such warrants had substantially the PIPE Investment, see “Item 1. Business.”
same terms as the Public Warrants issued by Digital World in connection with its IPO, except that such Digital World Alternative Warrants may only be transferred to the applicable holder’s.
| (a) | are initially drawable for 20% of the applicable investor’s commitment amount and a final drawdown for the remaining 80% to occur upon the closing of the Business Combination, with the proceeds of such final drawdown to be deposited into a control account as indicated by Digital World (the “Control Account”). The proceeds from such final drawdown deposited into the Control Account shall remain therein and may not be withdrawn by Digital World until such time as (i) Digital World exercises the Alternative Notes Redemption Right using the proceeds in the Control Account, (ii) any portion of the applicable Digital World Alternative Financing Note has been converted, at which time such portion shall be released from the Control Account or (iii) if prior to the conversion, a resale registration statement of Digital World covering all common stock issued pursuant to the Digital World Alternative Financing Notes has been declared effective by the SEC; |
| (b) | are subject to specified events of default; and |
| (c) | have registration rights pursuant to the registration rights agreement entered into by Digital World and the parties thereto as of September 2, 2021. |
the Business Combination. On March 25, 2024 the Business Combination was consummated.
We have
$13,852,774. The increase in legal investigations expense is primarily due to the $18.0 million settlement with SEC. The increase in income on the trust assets is due to the increase in interest rates.
Factors That May Adversely Affect Our Resultsexpenses of Operations
Our results$8,916,023, legal investigations expense of operations$10,004,519 and our ability to complete an initial business combination may be adversely affectedincome taxes of 979,475, partially offset by various factors that could cause economic uncertainty and volatility inincome on the financial markets, manytrust assets of which are beyond our control. Our business could be impacted by, among other things, the pending legal proceedings against us, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the
35
ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.
Liquidity and Capital Resources
the Sponsor.
For the year ended December 31, 2021, cash used in operating activities was $1,114,081 and was primarily comprised of a net loss of $1,391,593.
$18,444,134.
As
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Inexpenses in connection with the Company’s assessmentcompleting an initial business combination. Mr. Swider, a current director of going concern considerations in accordance with Financial Accounting Standard Board’s Account Standards Update (“ASU”) 2014-15, “DisclosureTMTG, is a founder and partner of Uncertainties about an Entity’s Ability to Continue as a Going Concern” as stated above, the Company has until June 8, 2023 (or up to September 8, 2023 if the Company extends the maximum time to complete a Business Combination) to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolutionRenatus.
We
2023.
We do
The underwriters are entitled to a deferred fee of $0.35 per unit, or $10,062,500 in the aggregate. The deferred fee will become payable to the underwriters solely in the event that the Company completes a business combination, subject to the terms of the underwriting agreement.
December 31, 2023.
We account
The Company evaluates
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| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk. |
| Item 8. | Financial Statements and Supplementary Data. |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
None.
| Item 9A. | Controls and Procedures. |
reporting. A material weakness“material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interiman entity’s financial statements will not be prevented or detected on a timely basis.
| (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, |
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| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of 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 financial statements. |
| Item 9B. | Other Information. |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
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PART III
| Item 10. | Directors, Executive Officers and Corporate Governance |
Directors and Executive Officers
Name | Age |
| ||||
| Devin G. Nunes | 50 | ||||
| ||||||
| Phillip Juhan | 49 | ||||
| ||||||
| ||||||
| ||||||
| Sandro De Moraes | 49 | Chief Product Officer | |||
| Scott Glabe | 40 | General Counsel, Secretary | ||||
| Eric Swider | 51 | Director | ||||
| Donald J. Trump, Jr. | 46 | Director | ||||
| Kashyap “Kash” Patel | 44 | Director | ||||
| W. Kyle Green | 51 | Independent Director | ||||
| Robert Lighthizer | 76 | Independent Director | ||||
| Linda McMahon | 75 | Independent Director |
The experience of our directors and
the Chief Financial Officer of Town Sports International Holdings, Inc., a public company listed on the Nasdaq (CLUBQ) which owned and operated fitness clubs in the Northeast and mid-Atlantic regions of the United States, as well as in California, Florida, Puerto Rico, and Switzerland. During this time, Mr. Juhan led an organizational restructuring by optimizing the company’s portfolio of assets and recapitalizing the balance sheet, raising $100 million of fresh capital to position the company for a post-pandemic recovery. From August 2018 until his appointment as CFO in March 2020, Mr. Juhan was Vice President of Business Operations for Town Sports. Previously, Mr. Juhan worked in the Investment Banking Divisions of Prudential Financial (from June 2022 to May 2006) and the Bank of Montreal (from July 2007 to March 2014), where he led consumer focused research within the Financial Services (Real Estate, Gaming and Lodging) and Consumer (Broadlines Retail and Restaurants) sectors. Mr. Juhan attended the U.S. Air Force Academy where he earned the Western Athletic Conference Scholar Athlete Award while playing football for the Falcons. In 1998, he graduated magna cum laude from The Georgia Institute of Technology, earning a Bachelor of Science in Management with a concentration in Finance.
Katherine Chiles has served as our Chief Financial Officer since April 2023. She has experience in financial consolidations, financial statement preparation and analysis, financial planning and reporting (U.S. GAAP & IFRS), financial system implementation and administration, all aspects of accounts payable and accounts receivable, and payroll. She workedPresident Donald J. Trump as a financial analyst in a contract positionprivate citizen and receives payment for both ACTAVO, an infrastructure company servicing Ireland, the UK and the global events industry,such services from October 2017 to August 2018, and Fisher Phillips, a national labor and employment firm, from September 2016 to February 2017, where she was responsible for designing and automating financial reporting, ad hoc reporting, budgeting, forecasting, and projections. Prior to that, Ms. Chiles served as Director of Financial Operations for Battaglia Law Office, a law firm, from 2011 to 2015, where she managed all daily financial operations of the firm. From 2007 to 2011, Ms. Chiles worked as a senior financial analyst for Total System Services, a global payment solutions provider. Prior to that, Ms. Chiles held positions with ING Americas, a global financial institution, from April 2005 to May 2006, ProxyMed Inc., an electronic healthcare transaction processing services company, from August 2003 to March 2005, and OuterBounds Technologies, a software development company, from March 2003 to July 2003. Ms. Chiles graduated with a Bachelor of Science in Finance from Auburn University at Montgomery.
Alexander Cano has served as our President and Secretary since April 2023.Save America PAC. He haspreviously served as the Chief Operating Officerof Staff at the Department of Defense (DOD) from November 2020 to January 2021, where his responsibilities included implementing the Secretary’s mission leading 3 million plus personnel, operating a $740 billion budget, and managing $2 trillion in assets. Before the DOD, from January 2019 to October 2021, Mr. Patel served as Senior Director for Benessere Investment Group, an investment company, since JuneCounterterrorism (CT) on the National Security Council (NSC); acting principal deputy at the Office of the Director of National Intelligence (ODNI) from April 2021 to July 2021; and is responsibleNational Security Advisor and Senior Counsel for the daily operationsU.S. House of the firm and contributedRepresentatives Permanent Select Committee on Intelligence (HPSCI) from April 2017 to the development of the firm’s corporate strategy, as well as services to multiple special purpose acquisition companies.December 2018. Prior to that,HPSCI, Mr. Cano heldPatel was a career national security prosecutor at the positionDepartment of Vice
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President, Business Development & Sales StrategyW. Kyle Green is an attorney with over 20 years of experience in civil litigation and criminal prosecutions. Since 2007, Mr. Green has been Lead Counsel at the Law Office of W. Kyle Green L.L.C., where he represents both plaintiffs and defendants in various matters including civil and criminal litigation and commercial transactions. Previously, Mr. Green served as Assistant District Attorney for Global Media Fusion, an innovative global media agency, from October 2020 to June 2021,the Louisiana Third Judicial District Court between 2015 and 2018 where he was responsible for driving revenue by connecting powerful brands with globally syndicated television sponsorships.major felony prosecutions. From October 2018 through December 2019,2007 to 2015, Mr. CanoGreen served as the General ManagerCity Prosecutor for the Home Equity divisioncity of Bankrate,Ruston, Louisiana where he successfully prosecuted more than 20,000 criminal defendants. In 2006, the Governor of Louisiana appointed Mr. Green to the state’s Judiciary Commission where he oversaw alleged misconduct involving members of the judiciary until 2007. Mr. Green’s experience also includes time as the in-house counsel and later Vice President of Hogan Hardwood and Moulding, a consumer financial services company. Prior to Bankrate, Mr. Cano was a negotiation consultant with The Gap Partnership, a negotiation consultancy, from October 2016 to October 2018. Mr. Cano spent the first half of his career in media companies, such as Sony Pictures Television Internationallumber wholesale company, from 2003 to 2005, HBO2007, and as an attorney at the Law Firm of Coyle and Green, L.L.C. engaged in a civil and criminal legal practice from 20051998 to 2008, TiVo from 2008 to 2010 and DIRECTV from 2010 to 2014.2003. Mr. Cano received his B.S.B.A. in Finance from American University in Washington D.C.
Frank Andrews has served as our director since January 2023. He has been an independent media consultant since August 2004, and he has worked with many performing artists in the media space. He has been the founder of My Creative Waves Corp., a strategic consultancy offering guidance to drastically improve consumer experiences for both digital and traditional media for major consumer brands such as Macy’s, since 2014. He began his career working on Fortune 500 brands’ advertising campaigns with a subsequent focus as a producer on product videos, industrial productions and live international trade shows for brands, such as Canon and Sony, with featured artists like Cindy Lauper. Mr. AndrewsGreen received a Bachelor of Science degree in Management, magna cum laude, from Louisiana Tech University, and a Juris Doctor degree from Louisiana State University.
Patrick Orlando hasserving as the Republican nominee to represent the state of Connecticut in the 2010 and 2012 U.S. Senate elections. Previously, from 2019 to 2020, Ms. McMahon also served as our director since September 2021Chair of the America First Action political action committee supporting President Trump’s 2020 reelection campaign and was the Chairmanas co-Founder and Chief Executive Officer, from September 2021 to March 2023. Mr. Orlando has been serving as Special Advisor for BurTech Acquisition Corp. (Nasdaq: BRKH), a special purpose acquisition corporation, and Nubia Brand International Corp. (Nasdaq: NUBI), a special purpose acquisition corporation, since December 2021 and January 2022, respectively. He has also been serving as Director and Special Advisor of Maquia Capital Acquisition Corp. (Nasdaq: MAQC), a special purpose acquisition corporation, since May 2021, as well as Chairman and Chief Executive Officer of Benessere Capital Acquisition Corp. (Nasdaq: BENE), a special purpose acquisition corporation, since September 2020. In addition, he also served as Chief Executive Officer of Yunhong International (Nasdaq: ZGYH), a publicly listed special acquisition purpose corporation, since January 2020. Mr. Orlando is Chief Executive Officer of Benessere Capital, LLC, an investment consulting and investment banking firm he founded in Miami in October 2012. At Benessere Capital, LLC, he has advised on fundraising, capital deployment, mergers and acquisitions, private placements, and products marketing. From March 2014 to August 2018, Mr. Orlando also served as the Chief Financial Officer of Sucro Can Sourcing LLC, a sugar trading company he co-founded, where he managed all financial matters including insurance and banking relationships. From November 2014 to August 2018, Mr. Orlando served as the Vice President of Sucro Can International LLC, a sugar processing company, where he focused on finance and processing technology. From March 2011 to March 2014, Mr. Orlando served as the Managing Director and the Head of Structuring and Derivatives of BT Capital Markets, LLC, a boutique investment bank in Miami, Florida, where he was involved in managing global derivatives and structuring activities. From September 2006 to March 2011, Mr. Orlando served in roles including Chief Technical Officer and Director of Pure Biofuels Corporation, a renewable fuel corporation headquartered in Houston, Texas with operations in Peru. From April 1998 to December 2003, Mr. Orlando served as the Director of Emerging Markets Fixed Income Derivatives of Deutsche Bank. Mr. Orlando earned degrees in Mechanical Engineering and Management Science from the Massachusetts Institute of Technology. We believe that Mr. Orlando is well-qualified to serve on our board of directors due to his extensive investing, science and engineering experience and in particular his experience as Chief Executive Officer and board member of other special purpose acquisition companies.
Edward Preble has served as our director since January 2023. He has been the founder and President of Alpamayo CPG and Private Label, a global sales consultancy, since January 2022. He was the head of internationals sales for Crider Foods, a value poultry company, from January 2017 to January 2022. Mr. Preble worked as2019, of Women’s Leadership LIVE, a Global Private Wealth Manager for Merrill Lynch, an investment management and wealth management company from February 2006that hosts events to March 2009. Mr. Preble began his career in 2001 as an
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International Advisor for Morgan Stanley and worked directly with institutional and ultra-high net worth families. He isinspire entrepreneurial women to launch their own businesses. Ms. McMahon received a member of Southeast United States Trade Organization, and USA Poultry. Mr. Preble received his Bachelor of Arts degree in FinanceFrench from East Carolina University and a Corporate Master’s Degree in Business Administrationalso holds Honorary Doctorates from Florida InternationalEast Carolina University and Sacred Heart University. We believe Mr. Preble is well qualified
Jeffrey Smithfraud relating to misrepresentations in the preparation of President Trump’s annual statements of financial condition in the years 2011 to 2021. In a decision dated November 3, 2022, the court ordered that an independent monitor be appointed to oversee compliance with the court’s order enjoining the defendants from, among other things, selling, transferring or otherwise disposing of certain assets of President Trump. In a decision dated September 26, 2023, the court found that the defendants were liable for persistent violations of New York Executive Law 63(12). Pursuant to that same order, the court also ordered that an independent receiver be appointed to oversee the dissolution of certain entities has servedowned by the defendants. In June 2023, a New York appeals court narrowed the fraud case, the trial for which commenced in October 2023 and closing oral arguments were concluded on January 11, 2024.
Number and Terms of Office of Officers and Directors
We have five directors. Our board of directors is divided into three classes, with only one class ofClasses I, II and III, each to serve a three year term, except for the initial term after the Closing, for which the Class I directors being elected in each year and each class (exceptwill be up for those directors appointed prior to ourreelection at the first annual meeting of stockholders) serving a three-year term. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one yearstockholders occurring after our first fiscal year end following our listing on Nasdaq. The term of office of the first class ofClosing, and for which the Class II directors which consists of Edward Preble and Jeffrey Smith will expire at our first annual meeting of stockholders. The term of office of the second class of directors, which consists of Eric Swider and Frank Andrews, will expirebe up for reelection at the second annual meeting of stockholders. The termstockholders occurring after the Closing. At each annual meeting of officestockholders, the successors to directors whose terms then expire will be elected to serve from the time of the third class of directors, consisting of Patrick Orlando, will expire atelection and qualification until the third annual meeting of stockholders.
Our officers are appointedfollowing the election. Directors will not be able to be removed during their term except for cause, and then only by the affirmative vote of the holders of not less than two thirds (2/3) of the outstanding shares of capital stock then entitled to vote at an election of directors. The directors are divided among the three classes as follows:
Nasdaq corporate governance requirements.
Our board of directors
42
Audit Committee
We have established an
Each member The chairperson of the audit committee is financially literate and our board of directors has determined that Mr. SmithW. Kyle Green. W. Kyle Green also qualifies as an “audit committee financial expert” as such term is defined in applicable SEC rules.
We have adopted an audit committee charter, which detailsItem 407(d)(5) of Regulation S-K and possesses financial sophistication, as defined under the principal functionsrules of Nasdaq.
is to discharge the appointment, compensation, retention, replacement, and oversightresponsibilities of the workBoard with respect to the TMTG’s accounting, financial, and other reporting and internal control practices and to oversee TMTG’s independent registered accounting firm. Specific responsibilities of TMTG’s audit committee include:
|
setting clear hiring policies for employees or former employees
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
reviewing related party transactions;
|
reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the FASB, the SEC or other regulatory authorities.
Compensation Committee
We have established a compensation committeeresponsibilities of the board of directors. Messrs. Preble, Andrewsdirectors to oversee its compensation policies, plans and Smith serve as members of our compensation committeeprograms and Mr. Preble chairsto review and determine the compensation committee. Under the Nasdaq listing standardsto be paid to TMTG’s executive officers, directors and applicable SEC rules, we are required to have at least two membersother senior management, as appropriate.
We have adopted a compensation committee charter, which details the principal functions of the compensation, including:
43
reviewing and approving on an annual basis the compensation if any is paid by us, of allTMTG’s other executive officers;
implementing
approving all special perquisites, special cash payments
| • | if required, producing a report on executive compensation to be included in TMTG’s Annual Report on Form 10-K and annual proxy statement; |
if required, producing a report on executive
reviewing,
Notwithstanding the foregoing, as indicated above, other than the payment to each of Renatus and Benessere Enterprises Inc., an affiliate of our sponsor, of $15,000 per month, for up to the Combination Period, for office space, utilities and secretarial and administrative support, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter also provides 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 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 directorrecommending that TMTG’s Board approve, nominees without the formation of a standing nominating committee. The directors who will participate in the consideration and recommendation of director nominees will be Messrs. Preble, Andrews and Smith. In accordance with Rule 5605 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 our boardTMTG’s Board;
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directorsadequacy of TMTG’s corporate governance practices and reporting;
44
Code of Ethics
We have and Business Conduct
|
None of our officers has received any cash compensation for services rendered to us. Commencing September 3, 2021, we have agreed to pay each of Renatus and Benessere Enterprises Inc., an affiliate of our sponsor, a total of $15,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. No compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers or directorsBusiness Conduct, or any affiliatewaivers of our sponsor, officers or directors, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activitiesits requirements, on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors or our or their affiliates. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders,its website to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paidrequired by the combined company to our directorsapplicable rules and exchange requirements.
| Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Nonequity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||
| Devin Nunes | 2022 | 750,000 | 750,000 | ||||||||||
| 2023 | 750,000 | 750,000 | |||||||||||
| Chief Executive Officer | |||||||||||||
| Phillip Juhan | 2022 | 312,500 | 312,500 | ||||||||||
| 2023 | 337,500 | 337,500 | |||||||||||
| Chief Financial Officer | |||||||||||||
| Andrew Northwall | 2022 | 365,000 | 365,000 | ||||||||||
| 2023 | 365,000 | 365,000 | |||||||||||
| Chief Operating Officer |
We do not intenddirectors periodically reviews the equity incentive compensation of Private TMTG’s NEOs and from time to take any actiontime may grant equity incentive awards to ensure that members of our management team maintain their positions with us afterthem. No stock options or other equity awards were granted to Private TMTG named executive officers (“NEOs”) during the consummation of our initial business combination, although it is possible that some orfiscal year ended December 31, 2023.
Name and Principal Position | All Other Compensation ($)(1) | Total ($) | ||||||
| Kash Patel | $ | 50,000 | $ | 50,000 | ||||
| (1) | Represents fees paid pursuant to the consulting agreements described above. |
| Name | All Other Compensation ($)(1) | Total ($) | |||||
Kashyap “Kash” Patel(1) | $ | 130,000 | $ | 130,000 | |||
| Daniel Scavino Jr. | $ | 240,000 | $ | 240,000 | |||
| (1) | Represents fees paid pursuant to and consistent with the consulting agreements. As described above, Mr. Patel is entitled to $120,000 annually, but received $130,000 in 2023 due to the consolidation of payments for two months of services, which payments were made in January 2023. |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
45
each of ourTMTG’s current executive officers and directors; and
all our executive officers and directorsof the TMTG, as a group.
In
March 26, 2024.
| Class A Common Stock | Class B Common Stock(2) | Approximate Percentage of Outstanding Common Stock | ||||||||||||||||||
Name and Address of Beneficial Owner(1) | Number of Shares Beneficially Owned | Approximate Percentage of Class | Number of Shares Beneficially Owned | Approximate Percentage of Class | ||||||||||||||||
Eric Swider | — | — | 7,500 | * | * | |||||||||||||||
Katherine Chiles | — | — | — | — | — | |||||||||||||||
Alexander Cano | — | — | — | — | — | |||||||||||||||
Frank Andrews | — | — | — | — | — | |||||||||||||||
Patrick Orlando(3) | 1,133,484 | 3.8 | % | 5,490,000 | 76.4 | % | 14.8 | % | ||||||||||||
Edward Preble | — | — | — | — | — | |||||||||||||||
Jeffrey Smith | — | — | — | — | — | |||||||||||||||
All directors and executive officers as a group (7 individuals) | 1,133,484 | 3.8 | % | 5,497,500 | 76.5 | % | 14.8 | % | ||||||||||||
Other 5% Stockholders | ||||||||||||||||||||
ARC Global Investments II LLC (the Sponsor)(3) | 1,133,484 | 3.8 | % | 5,490,000 | 76.4 | % | 14.8 | % | ||||||||||||
Name and Address of Beneficial Owner | Number of Shares | % of Outstanding Shares* | ||||||
| Directors and Executive Officers Post-Business Combination | ||||||||
Devin G. Nunes | 115,000 | * | ||||||
Phillip Juhan | 490,000 | * | ||||||
Andrew Northwall | 20,000 | * | ||||||
Vladimir Novachki | 45,000 | * | ||||||
Sandro De Moraes(1) | — | — | ||||||
Scott Glabe | 20,000 | * | ||||||
Eric Swider(2) | 153,153 | * | ||||||
Donald J. Trump, Jr. | — | — | ||||||
Kashyap “Kash” Patel | — | — | ||||||
W. Kyle Green | — | — | ||||||
Robert Lighthizer | — | — | ||||||
Linda McMahon | — | — | ||||||
| All Directors and Executive Officers of TMTG as a Group (12 Individuals) | * | * | ||||||
| Five Percent Holders: | ||||||||
President Donald J. Trump(3) | 78,750,000 | 57.6 | % | |||||
ARC Global Investments II LLC (4) | 9,547,101 | 6.9 | % | |||||
United Atlantic Ventures, LLC(5) | 7,525,000 | 5.5 | % | |||||
| * |
less than 1% |
| (1) |
Reflects 45 Public Shares purchased by Mr. De Moraes in the |
| (2) |
The shares reported as beneficially owned by Mr. Swider consist |
|
| (3) | Reflects the shares issued, directly or indirectly, to President Donald J. Trump pursuant to the terms of the Merger Agreement. The business address for President Donald J. Trump is c/o Trump Media & Technology Group Corp., 401 N. Cattlemen Rd., Ste. 200, Sarasota, Florida 34232. |
| (4) | The shares reported above are held in the name of ARC and consist of (a) 7,400,520 shares as a result of the conversion of ARC’s 5,490,000 Founder Shares as adjusted by the expected conversion ratio (1.348) applicable to the Digital World Class B common stock, (b) 1,700,226 shares (including Warrants exercisable within 60 days) as a result of the conversion of the Placement Units and (c) 446,355 shares (including Warrants exercisable within 60 days) as a result of the conversion of ARC’s Working Capital Units in connection with outstanding working capital loans made by ARC pursuant to Digital World Convertible Notes. Mr. Patrick Orlando was the managing member of ARC and has sole voting and dispositive power with respect to the shares held of record by ARC. By virtue of this relationship, Mr. Orlando may be deemed to share beneficial ownership of the securities held of record by |
Securities Authorized for Issuance under Equity Compensation
| (5) | Reflects the shares issued, directly or indirectly, to United Atlantic Ventures, LLC as a result of the conversion of its Private TMTG common stock into TMTG Common Stock. The address for United Atlantic Ventures, LLC is 900 SE 2nd St., Apt. 503, Fort Lauderdale, Florida 33301. |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
On January 20, 2021, our sponsor purchased 2,875,000 founder shares (which were subsequently subject to a three-for-one stock split, resulting in our sponsor holding 8,625,000 founder shares) for an aggregate purchase
46
price of $25,000, or approximately $0.0087 per share.
Commencing on September 3, 2021, we have agreed to pay Benessere Enterprises Inc.,Sponsor, an affiliate of our sponsor, a total of $15,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
On April 5, 2023, we entered into an Administrative Support Agreement with Renatus , an advisory group owned by Eric Swider, the Interim Chief Executive Officer and director of the Company, pursuant to which, the Company agrees to pay Renatus a monthly fee of $15,000 for office space, utilities and secretarial and administrative support commencing from April 5, 2023 until the earlier of the consummation by the Company of an initial business combination or the Company’s liquidation.
Our sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
Prior to the consummation of our initial public offering, our sponsor agreed to loan us up to $300,000 to be used for a portion of the expenses of our initial public offering. These loans were non-interest bearing, unsecured and were due at the earlier of September 30, 2021 or the closing of our initial public offering. As of September 30, 2021, $0 was outstanding under the note.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsorSponsor or certain of ourDigital World’s officers and directors may but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Upmake up to $30,000,000 of such loans may be convertible into units, $28,500,000 of which is subject to approvals from the stockholders of the Company and the PIPE Investors, atagainst Digital World Convertible Notes with a conversion price of $10.00$10 per unit atWorking Capital Unit.
Our sponsor purchased an aggregate of 1,133,484 placement units at a price of $10.00 per unit for an aggregate purchase price of $11,334,840. Each placement unit consists of one share of Class A common stock and one-half of one warrant. Each whole warrant is exercisable$1,000,000 to purchase one share of Class A common stock at $11.50 per share. There will be no redemption rights or liquidating distributions from the trust account with respect to the founder shares, the representative shares, the placement shares or the placement warrants, which will expire worthless if we do not consummate a business combination by JuneDigital World through September 8, 2023, or seek further
47
extensions. The placement units are identical toin the units sold in our initial public offering except that the placement units and their component securities will not be transferable, assignable or saleable until 30 days after the consummation of our initial business combination except to permitted transferees and (b) the placement warrants, so long as they are held by our sponsor or its permitted transferees will be entitled to registration right.
Our initial stockholders have agreed to waive their redemption rights with respect to their founder shares and placement shares (i) in connection with the consummationform of a business combination, (ii) in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination by June 8, 2023 or seek further extensions and (iii) if we fail to consummate a business combination within the Combination Period or if we liquidate prior to the expiration of the Combination Period. However, our initial stockholders will be entitled to redemption rights with respect to any public shares held by them if we fail to consummate a business combination or liquidate by June 8, 2023 or seek further extensions. In addition, the holders of the representative shares have agreed (i) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the trust account with respect to such shares if we fail to complete our initial business combination within the Combination Period.
Pursuant to a registration rights agreement we have entered into with our initial stockholders, we may be required to register certain securities for sale under the Securities Act. These holders (including the holders of representative shares), and holders of units issued upon conversion of working capital loans, if any, are entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by us. We will bear the costs and expenses of filing any such registration statements.
On September 8, 2022, the Company issued a promissory note in the aggregate principal amount of $2,875,000 to the sponsor of the Company in connection with the extension of the termination date for the Company’s initial business combination from September 8, 2022 to December 8, 2022, pursuant to which, the sponsor has agreed to loan to the Company $2,875,000 to deposit into the Company’s trust account.
Digital World Convertible Note. On April 21, 2023, the CompanyDigital World issued two promissory notesDigital World Convertible Notes (one for $625,700 and the other for $500,000) in the aggregate principal amount of $1,125,700 to the sponsorSponsor to pay costs and expenses in connection with completing an initial business combination. EachAs of September 30, 2023 there were $1,275,000 outstanding in Digital World Convertible Notes with a conversion price of $10 per Working Capital Unit (which exceeds the aggregate amount the Sponsor committed to provide).
ForAct of 1933, as amended.
the business of developing and operating media platforms for social media and digital video streaming, and of developing and operating products and services relating and incidental thereto or any other business being conducted by TMTG or any of its subsidiaries, as of the Closing Date, and (ii) three years, it will not, directly or indirectly (a) hire, engage, solicit, induce or encourage certain employees, independent contractors, consultants, or other certain personnel to leave TMTG; or (b) in any way interfere with or attempt to interfere with the relationship between such persons and TMTG.
48
interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Messrs. Preble, AndrewsGreen and SmithLighthizer and Ms. McMahon are “independent directors” 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.
| Item | Principal Accountant Fees and Services. |
The following is a summary of fees paid or to be paid to Marcum for services rendered.
Tax Fees
2022.
2022.
Our
xlix
Item 15. | Exhibit and Financial Statement Schedules. |
Page | ||||
Report of Independent Registered Public Accounting Firm (PCAOB ID#688) | F-1 | |||
| F-2 | ||||
| F-3 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
Item 16. | Form 10-K Summary. |
December 31, | ||||||||||||||||
2022 | 2021 | December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||||
ASSETS | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash | $ | 989 | $ | 327,731 | $ | 395,011 | $ | 989 | ||||||||
| Prepaid assets | 168,350 | 240,972 | — | 168,350 | ||||||||||||
| Total Current Assets | 169,339 | 568,703 | 395,011 | 169,339 | ||||||||||||
| Prepaid assets | — | 165,051 | ||||||||||||||
| Cash Held in Trust Account | 300,330,651 | 293,257,098 | 310,623,083 | 300,330,651 | ||||||||||||
| TOTAL ASSETS | $ | 300,499,990 | $ | 293,990,852 | $ | 311,018,094 | $ | 300,499,990 | ||||||||
| LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accrued expenses | $ | 17,166,842 | $ | 483,535 | $ | 47,104,743 | $ | 18,054,912 | ||||||||
| Note payable – Sponsor | 2,875,000 | — | ||||||||||||||
| Income taxes payable | 979,475 | — | ||||||||||||||
| Convertible note payable Sponsor | 3,883,945 | 2,875,000 | ||||||||||||||
| Convertible note payable | 500,000 | — | ||||||||||||||
| Income taxes - payable | 1,790,081 | 979,475 | ||||||||||||||
| Franchise tax payable | 400,000 | 200,000 | 458,226 | 400,000 | ||||||||||||
| Working capital loans | 625,700 | — | ||||||||||||||
Convertible working capital loans | 2,398,700 | 625,700 | ||||||||||||||
| Advances - related party | 425,835 | — | 41,000 | 525,835 | ||||||||||||
| Total Current Liabilities | 22,472,852 | 683,535 | 56,176,695 | 23,460,922 | ||||||||||||
| Deferred underwriter fee payable | 10,062,500 | 10,062,500 | 10,062,500 | 10,062,500 | ||||||||||||
| TOTAL LIABILITIES | 32,535,352 | 10,746,035 | 66,239,195 | 33,523,422 | ||||||||||||
| Commitments and Contingencies | ||||||||||||||||
| Class A common stock subject to possible redemption, $0.0001 par value, 200,000,000 shares authorized; 28,744,342 and 28,750,000 shares outstanding, at redemption value ($10.40 and $10.20 per share) | 298,951,176 | 293,250,000 | ||||||||||||||
Class A common stock subject to possible redemption, $0.0001 par value, 200,000,000 shares authorized; 28,715,597 and 28,744,342 shares issued and outstanding, at redemption value ($10.75 and $10.40 per share) | 308,645,005 | 298,951,176 | ||||||||||||||
| Stockholders’ Deficit | ||||||||||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | — | — | ||||||||||||||
| Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,277,234 issued and outstanding, excluding 28,744,342 and 28,750,000 shares subject to redemption | 127 | 127 | ||||||||||||||
| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 7,187,500 issued and outstanding | 719 | 719 | ||||||||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | ||||||||||||||||
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,277,234 issued and outstanding, excluding 28,715,597 and 28,744,342 shares subject to redemption | 127 | 127 | ||||||||||||||
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 7,158,025 and 7,187,500 issued and outstanding | 716 | 719 | ||||||||||||||
Additional paid-in capital | — | — | — | — | ||||||||||||
| Accumulated deficit | (30,987,384 | ) | (10,006,029 | ) | (63,866,949 | ) | (31,975,454 | ) | ||||||||
| Total Stockholders’ Deficit | (30,986,538 | ) | (10,005,183 | ) | (63,866,106 | ) | (31,974,608 | ) | ||||||||
| TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT | $ | 300,499,990 | $ | 293,990,852 | $ | 311,018,094 | $ | 300,499,990 | ||||||||
For the Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Formation and operating costs | $ | 12,240,732 | $ | 8,716,023 | ||||
| Legal investigations costs | 20,752,819 | 10,004,519 | ||||||
| Franchise tax expense | 282,500 | 200,000 | ||||||
| Loss from operating costs | (33,276,051 | ) | (18,920,542 | ) | ||||
| Other income and expenses: | ||||||||
| Insurance Recoveries | $ | 1,081,238 | — | |||||
| Interest earned on cash held in Trust Account | 13,852,774 | 4,257,469 | ||||||
| Total other income | 14,934,012 | 4,257,469 | ||||||
| Loss before income taxes | (18,342,039 | ) | (14,663,073 | ) | ||||
| Income tax expense | 3,548,602 | 979,475 | ||||||
| Net loss | $ | (21,890,641 | ) | $ | (15,642,548 | ) | ||
| Weighted average shares outstanding of Class A common stock | 30,018,099 | 30,026,614 | ||||||
| Basic and diluted net loss per Class A common stock | $ | (0.49 | ) | $ | (0.39 | ) | ||
| Weighted average shares outstanding of Class B common stock | 7,187,258 | 7,187,500 | ||||||
| Basic and diluted net loss per Class B common stock | $ | (0.99 | ) | $ | (0.53 | ) | ||
Class A Common Stock | Class B Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance - December 31, 2022 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (31,975,454 | ) | $ | (31,974,608 | ) | ||||||||||||||
| Net loss | (21,890,641 | ) | (21,890,641 | ) | ||||||||||||||||||||||||
| Surrender of shares | (29,475 | ) | (3 | ) | 3 | — | ||||||||||||||||||||||
| Remeasurement of Class A common stock to redemption value | (10,000,857 | ) | (10,000,857 | ) | ||||||||||||||||||||||||
| Balance - December 31, 2023 | 1,277,234 | $ | 127 | 7,158,025 | $ | 716 | $ | — | $ | (63,866,949 | ) | $ | (63,866,106 | ) | ||||||||||||||
Class A Common Stock | Class B Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance - December 31, 2021 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (10,572,814 | ) | $ | (10,571,968 | ) | ||||||||||||||
| Net loss | (15,642,548 | ) | (15,642,548 | ) | ||||||||||||||||||||||||
| Remeasurement of Class A common stock to redemption value | (5,760,092 | ) | (5,760,092 | ) | ||||||||||||||||||||||||
| Balance - December 31, 2022 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (31,975,454 | ) | $ | (31,974,608 | ) | ||||||||||||||
For the Year end December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (21,890,641 | ) | $ | (15,642,548 | ) | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on cash and marketable securities held in Trust Account | (13,831,960 | ) | (4,257,469 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued expenses | 29,549,831 | 17,026,986 | ||||||
| Income taxes payable | 810,606 | 979,475 | ||||||
| Prepaid insurance | 168,350 | 237,673 | ||||||
| Franchise tax payable | 58,226 | 200,000 | ||||||
| Net cash used in operating activities | (5,135,588 | ) | (1,455,883 | ) | ||||
| Cash flows from investing activities: | ||||||||
Investment of cash in Trust Account | — | (2,875,000 | ) | |||||
| Cash withdrawn from Trust Account for taxes | 3,232,500 | |||||||
| Cash withdrawn from Trust Account for redemptions | 307,028 | 58,916 | ||||||
| Net cash provided by (used in) investing activities | 3,539,528 | (2,816,084 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible Sponsor note | 1,008,945 | 2,875,000 | ||||||
| Proceeds from working capital loan | 1,773,000 | 503,441 | ||||||
| (Repayment of) Proceeds from advances – related party | (484,835 | ) | 625,700 | |||||
| Redemption of shares | (307,028 | ) | (58,916 | ) | ||||
| Net cash provided by financing activities | 1,990,082 | 3,945,225 | ||||||
| Net change in cash | 394,022 | (326,742 | ) | |||||
| Cash at beginning of period | 989 | 327,731 | ||||||
| Cash at end of period | $ | 395,011 | $ | 989 | ||||
| Supplemental disclosures | ||||||||
| Income taxes paid | $ | 2,737,997 | $ | — | ||||
| Interest paid | $ | — | $ | — | ||||
| Non-cash investing and financing activities: | ||||||||
| Class B common stock redemption | $ | 3 | $ | 0 | ||||
| Remeasurement of Class A common stock | $ | 10,000,857 | $ | 5,760,092 | ||||
| Issuance of Convertible note for legal services | $ | 500,000 | $ | 0 | ||||
For the Year ended December 31, | ||||||||
2022 | 2021 | |||||||
| Formation and operating costs | $ | 18,299,257 | $ | 1,191,593 | ||||
| Franchise tax expense | 200,000 | 200,000 | ||||||
| Loss from operation costs | (18,499,257 | ) | (1,391,593 | ) | ||||
| Other income and expenses: | ||||||||
| Interest earned on cash held in Trust Account | 4,257,469 | 7,098 | ||||||
| Loss before income taxes | (14,241,788 | ) | (1,384,495 | ) | ||||
| Income tax expense | (979,475 | ) | — | |||||
| Net loss | $ | (15,221,263 | ) | $ | (1,384,495 | ) | ||
| Weighted average shares outstanding of Class A common stock | 30,026,769 | 9,404,134 | ||||||
| Basic and diluted net loss per Class A common stock | $ | (0.41 | ) | $ | (0.08 | ) | ||
| Weighted average shares outstanding of Class B common stock | 7,187,500 | 7,187,500 | ||||||
| Basic and diluted net loss per Class B common stock | $ | (0.41 | ) | $ | (0.08 | ) | ||
Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
| Balance - December 31, 2021 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (10,006,029 | ) | $ | (10,005,183 | ) | ||||||||||||||
| Net loss | (15,221,263 | ) | (15,221,263 | ) | ||||||||||||||||||||||||
| Remeasurement of Class A common stock to redemption value | (5,760,092 | ) | (5,760,092 | ) | ||||||||||||||||||||||||
| Balance - December 31, 2022 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (30,987,384 | ) | $ | (30,986,538 | ) | ||||||||||||||
Class A | Class B | Additional | Total | |||||||||||||||||||||||||
Common Stock | Common Stock | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance – December 31, 2020 | — | — | — | — | — | — | — | |||||||||||||||||||||
Issuance of Class B common stock to sponsor (1) (2) | — | $ | — | 7,187,500 | $ | 719 | $ | 24,281 | $ | — | $ | 25,000 | ||||||||||||||||
| Class A common stock accretion to redemption value | — | — | — | — | (12,796,508 | ) | (7,184,020 | ) | (19,980,528 | ) | ||||||||||||||||||
| Issuance of Class A common stock to investor , net of offering costs | 1,133,484 | 113 | — | — | 11,334,727 | — | 11,334,840 | |||||||||||||||||||||
| Issuance of Class A common stock to representative | 143,750 | 14 | — | — | 1,437,500 | (1,437,514 | ) | — | ||||||||||||||||||||
| Net loss | — | — | — | — | — | (1,384,495 | ) | (1,384,495 | ) | |||||||||||||||||||
Balance – December 31, 2021 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | — | $ | (10,006,029 | ) | $ | (10,005,183 | ) | |||||||||||||||
For the Year end December 31, | ||||||||
2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (15,221,263 | ) | $ | (1,384,495) | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on cash and marketable securities held in Trust Account | (4,257,469 | ) | (7,098 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued expenses and income taxes payable | 17,662,782 | 483,535 | ||||||
| Prepaid insurance | 237,673 | (406,023 | ) | |||||
| Franchise tax payable | 200,000 | 200,000 | ||||||
| Net cash used in operating activities | (1,378,277 | ) | (1,114,081 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Investment of cash in Trust Account | (2,875,000 | ) | (293,250,000 | ) | ||||
| Investments withdrawn from Trust Account for redemptions | 58,916 | — | ||||||
| Net cash used in investing activities | (2,816,084 | ) | (293,250,000 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of Units | — | 287,500,000 | ||||||
| Proceeds from sale of private placement warrants | — | 11,334,840 | ||||||
| Proceeds from Sponsor note | 2,875,000 | 223,557 | ||||||
| Repayment of Sponsor note | — | (223,557 | ) | |||||
| Due from Sponsor | — | (1,702,958 | ) | |||||
| Payment of due from Sponsor | — | 1,702,958 | ||||||
| Payment of offering costs | — | (4,168,028 | ) | |||||
| Proceeds from working capital loan | 625,700 | — | ||||||
| Proceeds from advances - related party | 425,835 | — | ||||||
Redemption of shares | (58,916 | ) | — | |||||
| Proceeds from issuance of Class B common stock to Sponsor | — | 25,000 | ||||||
| Net cash provided by financing activities | 3,867,619 | 294,691,812 | ||||||
| Net change in cash | (326,742 | ) | 327,731 | |||||
| Cash at beginning of period | 327,731 | — | ||||||
| Cash at end of period | $ | 989 | $ | 327,731 | ||||
Non-cash investing and financing activities: | ||||||||
| Deferred underwriting fee payable | — | 10,062,500 | ||||||
| Remeasurement of Class A common stock | $ | 5,760,092 | — | |||||
| ● | if the dollar volume-weighted average price (“VWAP”) of the Company’s common stock equals or exceeds $12.50 per share for any 20 trading days within any 30 trading day period, the Company shall issue to the TMTG Stockholders an aggregate of 15,000,000 Earnout Shares; |
| ● | if the VWAP of the Company’s common stock equals or exceeds $15.00 per share for any 20 trading days within any 30 trading day period, the Company shall issue to the TMTG Stockholders an aggregate of 15,000,000 Earnout Shares; and |
| ● | if the VWAP of the Company’s common stock equals or exceeds $17.50 per share for any 20 trading days within any 30 trading day period, the Company shall issue to the TMTG Stockholders an aggregate of 10,000,000 Earnout Shares. |
| Year Ended | Year Ended | |||||||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||||
| Redeemable | Non Redeemable | Redeemable | Non Redeemable | |||||||||||||
| Basic and diluted net income (loss) per share of common stock Numerator: | ||||||||||||||||
| Allocation of net income (loss), as adjusted | $ | (14,776,927 | ) | $ | (7,113,714 | ) | (11,799,077 | ) | $ | (3,843,471 | ) | |||||
| Denominator: Basic and diluted weighted average shares outstanding | 30,018,099 | 7,187,258 | 30,026,614 | 7,187,500 | ||||||||||||
| Basic and diluted net income (loss) per share of common stock | $ | (0.49 | ) | $ | (0.99 | ) | (0.39 | ) | $ | (0.53 | ) | |||||
| ● | “Digital World Convertible Notes” means up to $40,000,000 in non-interest bearing convertible promissory notes payable upon the stockholders’ approval of the Business Combination and, if applicable, the PIPE Investors’ approval, in either (i) Working Capital Units or (ii) cash or Working Capital Units, at the election of the holder. Up to $30,000,000 of such convertible promissory notes may be issued to the Sponsor or its affiliates or the Company’s officers or directors in connection with any loans made by them to the Company prior to Closing. Up to $10,000,000 of such convertible promissory notes may be issued to either third parties providing services or making loans to the Company or to the Sponsor or its affiliates or the Company’s officers or directors in connection with any loans made by them to the Company prior to Closing. |
| ● | “Working Capital Units” means any units issuable pursuant to the Digital World Convertible Notes. Each unit consists of one share of Digital World Class A common stock and one-half Warrant. Each unit issuable pursuant to the Digital World Convertible Notes, subject to the terms and conditions of each applicable note, shall not have a price lower than $8.00 per unit. |
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | at any time after the warrants become exercisable; |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; |
| ● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for any 20 trading days within a 30-trading day period commencing at any time after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and |
| ● | if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants. |
December 31, 2022 | December 31, 2021 | December 31, 2023 | December 31, 2022 | |||||||||||||
| Deferred tax assets: | ||||||||||||||||
| Net operating losses | $ | — | $ | 45,896 | $ | — | $ | — | ||||||||
| Start up costs | 329,058 | 283,512 | ||||||||||||||
| Legal settlement | 4,562,100 | — | ||||||||||||||
| Start-up costs | 8,716,458 | 5,190,046 | ||||||||||||||
| Total deferred tax assets | 329,058 | 329,408 | 13,278,558 | 5,190,046 | ||||||||||||
| Valuation Allowance | (329,058 | ) | (329,408 | ) | (13,278,558 | ) | (5,190,046 | ) | ||||||||
| Deferred tax asset, net of allowance | $ | — | $ | — | $ | — | $ | — | ||||||||
For the Year Ended December 31, 2022 | For the Year Ended December 31, 2021 | For the Year Ended December 31, 2023 | For the Year Ended December 31, 2022 | |||||||||||||
Federal | ||||||||||||||||
| Current | $ | 766,924 | $ | — | $ | (3,742,611 | ) | $ | (3,078,967 | ) | ||||||
| Deferred | 290 | (290,744 | ) | — | — | |||||||||||
| State and local | ||||||||||||||||
| Current | 212,551 | — | ||||||||||||||
| State and local Current | (796,963 | ) | (637,053 | ) | ||||||||||||
| Deferred | 60 | (38,664 | ) | — | — | |||||||||||
| Change in valuation allowance | (350 | ) | 329,408 | 8,088,176 | 4,695,494 | |||||||||||
| Income tax provision | $ | 979,475 | $ | — | $ | 3,548,602 | $ | 979,475 | ||||||||
For the Year Ended December 31, 2022 | For the Year Ended December 31, 2021 | |||||||
| Federal income taxes at 21% | 21.00 | % | 21.0 | % | ||||
| State tax, net of Federal benefit | 4.35 | % | 2.79 | % | ||||
| Merger costs | (31.07 | )% | 0 | |||||
| Prior year adjustment | (1.32 | )% | 0 | |||||
| State rate change | 0.14 | % | 0 | |||||
| Other | 0.02 | % | 0 | |||||
| Change in valuation allowance | 0.00 | % | (23.79 | )% | ||||
| Provision for income tax | (6.88 | )% | — | |||||
For the Year Ended December 31, 2023 | For the Year Ended December 31, 2022 | |||||||
| Federal income taxes at 21.00% | 21.00 | % | 21.00 | % | ||||
| State tax, net of Federal benefit | 4.35 | % | 4.35 | % | ||||
| Change in valuation allowance | (44.10 | )% | (32.03 | )% | ||||
| Other | (0.60 | )% | — | % | ||||
| Provision for income tax | (19.35 | )% | (6.68 | )% | ||||
| (a) | accrue interest at an annual rate of 8.00% and are payable on the earlier of (i) the date that is 12 months after the date on which the Company consummates the Business Combination, which interest is not payable to the extent the holder exercises the conversion right and (ii) the date that the winding up of the Company is effective (such date, the “Maturity Date”); |
| (b) | are convertible (i) at any time following the consummation of the Business Combination, but prior to the Maturity Date, redemption or otherwise the repayment in full of the Convertible Notes, at each holder’s option, in whole or in part, and subject to the terms and conditions of the Convertible Notes, including any required shareholders’ approval upon the consummation of the Business Combination and (ii) into that number of Digital World Class A common stock and warrants included in the units, each unit consisting of one share of Class A common stock of the Company and one-half of one warrant of the Company (the “Conversion Units”), equivalent to (A) the portion of the principal amount of the applicable Convertible Note (excluding any accrued interest, which shall not be payable with respect to the Convertible Note that was converted) being converted, divided by (B) $8.00 (the “Conversion Price”); |
| (c) | may be redeemed by Digital World, in whole or in part, commencing on the date on which all Digital World Class A common stock issuable to the holders has been registered with the Securities and Exchange Commission (the “SEC”), by providing a 10-day notice of such redemption (the “Redemption Right”), which Redemption Right is contingent upon the trading price of the Digital World Class A common stock exceeding 130% of the applicable conversion price on at least 3 trading days, whether consecutive or not, within the 15 consecutive trading days ending on the day immediately preceding the day on which a redemption notice is issued by Digital World; |
| (d) | are initially drawable for 20% of the applicable investor’s commitment amount and a final drawdown for the remaining 80% to occur upon the closing of the Business Combination , with the proceeds of such final drawdown to be deposited into a control account as indicated by the Company (the “Control Account”). The proceeds from such final drawdown deposited into the Control Account shall remain therein and may not be withdrawn by the Company until such time as (i) the Company exercises the Redemption Rights using the proceeds in the Control Account, (ii) any portion of the applicable Convertible Note has been converted, at which time such portion shall be released from the Control Account or (iii) if prior to the conversion, a resale registration statement of the Company covering all common stock issued pursuant to the Convertible Note has been declared effective by the Commission; |
| (e) | are subject to specified events of default; and |
| (f) | have registration rights pursuant to the registration rights agreement entered into by the Company and the parties thereto as of September 2, 2021. |
EXHIBIT INDEX
| 10.22 | ||
| 10.23 | ||
| 10.24 | ||
|
| |
| 10.27 | ||
| 10.28 | ||
| 10.29 | ||
| 10.30 | ||
| 10.31 | ||
| 10.32 | ||
| 10.33 | ||
| 10.34 | ||
| 10.35 | ||
| 10.36 | ||
| 10.37 | ||
| 10.38 | ||
| 14.1 | ||
| 16.1 | ||
| 16.2 | ||
| 31.1* | ||
32.1** | ||
32.2** | ||
Inline XBRL Instance | ||
| 101.SCH* | ||
| Inline XBRL Taxonomy Extension Schema Document. | ||
101.CAL* | ||
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||
| 101.DEF* | ||
| Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||
| 101.LAB* | ||
| Inline XBRL Taxonomy Extension Label Linkbase Document. | ||
| 101.PRE* | ||
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||
104* | ||
| Cover Page Interactive Data File | ||
| * | Filed herewith. |
| ** | Furnished |
| Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item | ||
| + | Indicates a management or compensatory plan. |
|
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SIGNATURES
DATE: April 1, 2024 | TRUMP MEDIA & TECHNOLOGY GROUP CORP. | ||||||
| By: | /s/ | |||||
| Name: | ||||||
| Title: | ||||||
| (Principal Executive Officer) | ||||||
| Name | Position | Date | ||
| ||||
| /s/ Devin Nunes | Chief Executive Officer | April 1, 2024 | ||
| Devin Nunes | (Principal Executive Officer) | |||
|
| |||
/s/
|
| |||
| Chief Financial Officer | April 1, 2024 | ||
| Philip Juhan | ( | |||
| /s/ W. Kyle Green | Director | April 1, 2024 | ||
| W. Kyle Green | ||||
| /s/ Robert Lighthizer | Director | April 1, 2024 | ||
| Robert Lighthizer | ||||
| /s/ Linda McMahon | Director | April | ||
|
| |||
| /s/ Eric Swider | Director | April | ||
| ||||
| Director | April | |||
| ||||
| /s/ Kashyap Patel | Director | April | ||
|
| |||